Motorola, Inc. v. U.S.

• Decision Date: 13 November 2006
• Docket Number: Slip Op. 06-165. Court No. 01-00126.
• Citation: 462 F.Supp.2d 1367
• Parties: MOTOROLA, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

462 F.Supp.2d 1367

MOTOROLA, INC., Plaintiff, v. UNITED STATES, Defendant.

Slip Op. 06-165. Court No. 01-00126.

United States Court of International Trade.

November 13, 2006.

COPYRIGHT MATERIAL OMITTED

Pisani & Roll, (Michael E. Roll)(Mark S. Zolno, of counsel) for Motorola, Inc., Plaintiff.

Peter D. Keisler, Assistant Attorney General; Barbara S. Williams, Attorney-in-Charge, International Trade Field Office, Amy M. Rubin, Commercial Litigation Branch, Civil Division, United States Department of Justice; of counsel, Chi S. Choy, Office of the Assistant Chief Counsel, International Trade Litigation, United States Bureau of Customs and Border Protection, for the United States, Defendant.

OPINION

TSOUCALAS, Senior Judge.

This case is before the Court pursuant to a remand ordered by the United States Court of Appeals for the Federal Circuit ("CAFC") in Motorola, Inc. v. United States, 436 F.3d 1357 (Fed.Cir.2006)("Motorola II"). Therein, the CAFC mandated that this Court determine "whether either the 900 `bypass' entries or the PRLs [preclassification ruling letters] constituted `treatment' within the meaning of section 1625(c)(2), as interpreted in light of 19 C.F.R. § 177.12(c)(1)(ii)." Id. at 1368. Thus, on remand, this Court will address whether the "entries at issue in this case were processed without review or examination by Customs, and thus fall within the scope of the regulation. ..." Id. at 1367. For the reasons set forth below, the Court enters judgment for the United States ("Customs" or "Defendant").

JURISDICTION

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(a) (2000).

DISCUSSION

I. Background

The facts of this case have been set forth in the prior decisions of the CAFC and this Court. See Motorola II, 436 F.3d 1357; Motorola, Inc. v. United States, 28 CIT ___, ___, 350 F.Supp.2d 1057 (2004)("Motorola I").¹ The facts and procedural history relevant to the instant inquiry are as follows.

The merchandise initially at issue in Motorola I, was eight models of circuits used in battery packs for Motorola cellular phones, entered between January and June of 1998. See Motorola II, 436 F.3d at 1358. Motorola, Inc. ("Plaintiff' or "Motorola") declared these entries to be duty free, classifiable as "hybrid integrated circuits" under subheading 8542.40.00 of the Harmonized Tariff Schedule of the United States ("HTSUS"). See id. In October 2000, the United States Customs Service² rejected Motorola's proposed classification and liquidated the merchandise under HTSUS subheading 8536.30.80, subject to a duty rate of 3.2 percent ad valorem. Id. Customs based this decision on Headquarters Ruling ("HQ") 961050, issued on May 1, 2000, in response to an earlier protest by Motorola concerning different circuits.³ See id. HQ 961050 reflected that certain Motorola circuits were classifiable under HTSUS subheading 8536.30.80. See HQ 961050 (May 1, 2000). At the time HQ 961050 was issued, Motorola had entered the contested circuits under HTSUS subheading 8542.40.00. See Motorola II, 436 F.3d at 1358. Customs, however, had not yet liquidated those entries, and thus was able to liquidate them under HTSUS subheading 8536.30.80. Plaintiff protested the classification, and Customs denied in full. Id. Thereafter, Motorola filed an action in this Court, the decision of which was appealed to the CAFC. Id.

In Motorola II, the Federal Circuit affirmed this Court's finding that the contested circuits are classifiable under HTSUS subheading 8536.30.80, not under 8542.40.00. See id. at 1368. The CAFC also affirmed this Court's holding that four of the eight contested circuits were not "substantially identical" to the circuit models that Customs liquidated on bypass. Id.

This remand, however, concerns more than 900 entries of circuits entered duty free through Customs' bypass procedure, and entries made pursuant to the two preclassification ruling letters ("PRLs"). The liquidation of these entries is relevant because Plaintiff contends that Customs violated the notice and comment provisions of 19 U.S.C. § 1625(c) (2000) ("the statute") when it issued HQ 961050. See Pl.'s Mem. Law Remand ("Pl.'s Mem.") at 1-3. This statute requires that Customs publish for notice and comment, any interpretative ruling or decision that would "have the effect of modifying the treatment previously accorded by the Customs Service to substantially identical transactions[.]" 19 U.S.C. § 1625(c).

In 1992 and 1994, Customs issued two PRLs to Motorola. A PRL is a letter from Customs to the requesting party, advising the party of how the merchandise specified therein, will be classified upon entry. See Motorola II, 436 F.3d at 1362; See also 19 C.F.R. § 177.1, 177.2(a)(2006). In both letters sent to Motorola, Customs classified each part number specified in the PRL request under HTSUS subheading 8542.20.00, the predecessor to the current subheading 8542.40.00. Both subheading 8542.20.00 and its successor, provide for duty free entry into the United States. See Motorola II, 436 F.3d at 1362.

Then, between 1995 and 1997, Motorola made over 900 entries of circuits ("bypass entries") pursuant to Customs' bypass procedures. See id. Customs liquidated the majority of these entries duty free under HTSUS subheading 8542.40.00. See id.

Motorola contends that the issuance of the two PRLs, and the liquidation of the bypass entries each established a "treatment" that could only be modified in accordance with the notice and comment provisions of § 1625(c)(2). See Pl.'s Mem. at 3-10. On remand, the remaining issue, then, is whether the particular bypass entries at issue, or the goods imported pursuant to the PRLs were subject to "treatment" by Customs.

II. The Liquidation of the Bypass Entries at Issue Does Not Constitute Treatment Within the Meaning of 19 U.S.C. § 1625(c)(2) and 19 C.F.R. § 177.12(c)(1)(ii)

First at issue is whether the entries liquidated under Customs' bypass procedures were subject to "treatment" for purposes of 19 U.S.C. § 1625(c). In Motorola II, the CAFC vacated this Court's finding that the term "treatment" in § 1625(c)(2) was unambiguous, and thus, not entitled to Chevron deference. See Motorola II, 436 F.3d at 1365-68. Instead, the CAFC found that the word treatment is ambiguous, and that 19 C.F.R. § 177.12(c)(1)(ii) ("the regulation") contains a permissible construction of the statute, entitled to Chevron deference. Id. As result, on remand, this Court revisits its analysis of treatment in light of § 177.12(c)(1)(ii). Id. at 1367.

As will be discussed infra, whether treatment has occurred depends upon the degree of review or examination by Customs. Accordingly, the CAFC directed that this Court address "whether, the particular bypass entries at issue ... were processed without review or examination by Customs, and thus f[e]ll within the scope of the regulation, or whether the goods were examined or the entries otherwise reviewed in a manner that would take them out of the reach of the regulation." Id.

A. Contentions of the Parties

Motorola contends that the liquidation of the bypass entries qualifies as treatment under § 177.12(c)(2)(ii). See Pl.'s Mem. at 4. Specifically, it argues that Customs reviewed Motorola's bypass entries, and that the "Customs' Rule 30(b)(6) agent . . . confirmed that Customs actually reviewed entries put on bypass...." Id. at 5 (emphasis in original). Motorola maintains that Customs has a "detailed procedure" for determining which entries are placed on bypass status. Inherent in this decision, Plaintiff claims, is a review of the entries in order to select which entries will be processed through bypass.⁴ Id. at 5-6.

Customs responds that Motorola has failed to demonstrate that its bypass entries establish a treatment. See Def.'s :esp. Pl. Mem. Law Remand ("Def.'s Mem.") at 4-44. It sets forth several arguments as to why Plaintiff's proffered evidence does not support a finding that the entries at issue were reviewed. See id. For all that Motorola offers in support of its position, Customs' conclusion is the same: although Motorola's evidence may tend to show that there may have been some sort of review-like function of bypass entries, it is not the type of review that constitutes treatment, and there is no evidence that the particular entries at issue were actually reviewed.⁵ The Court finds Customs' arguments to be convincing.

B. Analysis

a. Statutory and Regulatory Framework

The starting point of the Court's analysis is § 1625(c). This provision provides that:

A proposed interpretive ruling or decision which would —

(1) modify (other than to correct a clerical error) or revoke a prior interpretative ruling or decision which has been in effect for at least 60 days; or

(2) have the effect of modifying the treatment previously accorded by the Customs Service to substantially identical transactions;

shall be published in the Customs Bulletin. The Secretary shall give interested parties an opportunity to submit, during not less than the 30-day period after the date of such publication, comments on the correctness of the proposed ruling or decision. After consideration of any comments received, the Secretary shall publish a final ruling or decision the Customs Bulletin within 30 days after the closing of the comment period. The final ruling or decision shall become effective 60 days after the date of its publication.

19 U.S.C. § 1625(c). Relevant to the instant matter, is the interpretation and application of subsection (c)(2) of the statute. To establish a violation of § 1625(c)(2), Plaintiff must show that: (1) an interpretative ruling or decision; (2) effectively modified; (3) a "treatment" previously accorded by Customs to "substantially identical transactions;" and (4) the interpretative ruling or decision had not been subject to the notice and comment process set forth in § 1625(c)(2).⁶ See id.; See also Arbor Foods, Inc. v. United States, 30 CIT ___, 2006 WL...