Motorola, Inc. v. U.S., Slip Op. 04-102.
| Decision Date | 13 August 2004 |
| Docket Number | Court No. 01-00126.,Slip Op. 04-102. |
| Parties | MOTOROLA, INC., Plaintiff, v. UNITED STATES, Defendant. |
| Court | U.S. Court of International Trade |
Katten Muchin Zavis Rosenman, Chicago, IL (Michael E. Roll, Kathleen M. Murphy, James L. Sawyer and John P. Smirnow) 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; 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, of counsel.
Plaintiff, Motorola, Inc. ("Motorola"), moves pursuant to USCIT R. 56 for summary judgment on the ground that there is no genuine issue as to any material facts. Motorola contends that the merchandise at issue are classifiable as hybrid integrated circuits as a matter of law. Defendant cross-moves for summary judgment seeking an order dismissing the case.
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(a) (2000).
On a motion for summary judgment, the Court must determine whether there are any genuine issues of fact that are material to the resolution of the action. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute is genuine if it might affect the outcome of the suit under the governing law. See id. Accordingly, the Court may not decide or try factual issues upon a motion for summary judgment. See Phone-Mate, Inc. v. United States, 12 CIT 575, 577, 690 F.Supp. 1048, 1050 (1988). When genuine issues of material fact are not in dispute, summary judgment is appropriate if a moving party is entitled to judgment as a matter of law. See USCIT R. 56; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
I. Background
The merchandise subject to this action ("subject merchandise") was entered through the port of Chicago between January and June of 1998. See Compl. ¶ 2. The subject merchandise are circuits used in cell phone battery packs for Motorola cell phones. See Mem. Supp. Pl.'s Mot. Summ. J. ("Motorola's Mem.") at 3. The United States Customs Service1 ("Customs") liquidated the subject merchandise under subheading 8536.30.80 of the United States Harmonized Tariff Schedule ("HTSUS") subject to a duty rate of 3.2 percent ad valorem. See Compl. ¶ 22. The subject merchandise are used in either nickel or lithium chemistry battery packs. See Motorola's Mem. at 3. Plaintiff filed a timely protest and application for further review with Customs challenging the classification of the subject merchandise under HTSUS 8536.30.80. See Compl. ¶ 4. Customs issued Head Quarter Ruling ("HQ") 961050 on May 1, 2000, and found that the subject merchandise are classifiable under subheading 8536.30.80 of the HTSUS, as other electrical apparatus for protecting electrical circuits. See Motorola's Mem. Ex. 4 at 6. In reaching its decision, Customs noted that the subject merchandise are not classifiable under subheading 8542.40.00 because Motorola's "flex circuits are not constructed with a film layer directly on the substrate and in the mass."2 See id. at 5. On March 29, 2001, Customs denied Motorola's protest in full. See Compl. ¶ 5.
The HTSUS sections relevant to the Court's discussion are set forth below:
8536 Electrical apparatus for switching or protecting electrical circuits, or for making
connections to or in electrical circuits (for example, switches, relays, fuses, surge
suppressors, plugs, sockets, lamp-holders, junction boxes), for a voltage not exceeding
1,000 V (con.)
8536.30 Other apparatus for protecting electrical circuits
8536.30.40 Motor overload protectors ...................................3.2%
8536.30.80 Other .......................................................3.2%
8542 Electrical integrated circuits and microassemblies; parts thereof
8542.40.00 Hybrid integrated circuits ....................................... free
II. Customs Properly Classified Subject Merchandise Under Heading 8536
Motorola contends that Customs improperly classified the subject merchandise under HTSUS heading 8536. See Motorola's Mem. at 28. Specifically, Motorola argues that the subject merchandise should have been classified under heading 8542. See id. Under rule one of the General Rules of Interpretation ("GRI 1"), "classification is determined according to the terms of the headings and any relative section or chapter notes." Id. Motorola points out that "headings 8541 and 8542 shall take precedence over any other heading in the tariff schedule which might cover them by reference to, in particular, their function." Id. () (emphasis omitted). Accordingly, "if the [subject merchandise] are classifiable in HTSUS heading 8542, they cannot be classified in heading 8536." Id.
Motorola contends that the subject merchandise are defined in Note 5 of the HTSUS as "electronic integrated circuits and microassemblies." See id. at 29. Motorola asserts that the Explanatory Note set out the following four elements for classifying an article as a "hybrid integrated circuit": (1) an active element obtained by semiconductor technology; (2) a passive element obtained by thin or thick film technology; (3) a single insulating substrate; and (4) the active and passive elements must be indivisibly combined on the substrate. See id. (citing Explanatory Note at 1,700). Although Motorola concedes that the components theoretically can be removed from the substrate, Motorola maintains that it does not remove the components from the substrate once they are attached. See id. at 30. Customs' expert did not contradict evidence that Motorola intends for the elements to be permanently attached to the substrate. See id. at 30-31. Based on this intention, Motorola asserts that Customs "needs more than speculation or hypotheticals to create an issue of fact." Id. at 31.
Motorola also argues that Customs' HQ 916050 is not entitled to judicial deference because courts "retain an independent responsibility to decide the legal issue regarding the proper meaning and scope of tariff terms." Id. at 7. Motorola asserts that judicial deference is only appropriate "if a statute is ambiguous and Congress has left it to the agency to determine the meaning of the ambiguity." Pl.'s Opp'n Def.'s Cross-Mot. Summ. J. & Reply Def.'s Opp'n Pl.'s Mot. Summ. J. ("Motorola's Reply") at 1. Motorola argues that the plain language of the statutes at issue is clear and unambiguous and, therefore, no judicial deference is warranted. See id. at 1-2. In addition, Motorola asserts that when classification rulings, such as HQ 916050, are at issue the Court "need only defer to them if it finds them persuasive." Motorola's Mem. at 8 (citing Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944)).
Customs replies that the subject merchandise does not fall within the definition of hybrid integrated circuits and, therefore, was properly classified under heading 8536 of the HTSUS. See Def.'s Mem Sup. Cross-Mot. Summ. J. & Opp'n Pl.'s Mot. Summ. J. ("Customs' Mem.") at 13-22. The parties agree that the subject merchandise contain three of the four elements set forth in the definition of hybrid integrated circuits in Note 5(b)(ii) of Chapter 85. See id. at 16. The Explanatory Note provides that "indivisible" means that "though some of the elements could theoretically be removed and replaced, this would be a long and delicate task which would be uneconomical under normal manufacturing conditions." Id. at 18 (quoting Explanatory Note). Here, the evidence indicates that separating the elements from the substrate is economical and not a long and delicate task. See id. Accordingly, Customs maintains that classification under heading 8542 is not appropriate.
Customs additionally argues that to meet the definition of hybrid integrated circuits the subject merchandise must contain passive elements that are produced at the same time as the substrate. See id. Customs asserts that "[i]t is incontestable that none of the components on the [subject merchandise] in issue were produced at the same time as the substrate." Id. Rather, the substrate was purchased by Motorola from an unrelated supplier and then the components were soldered onto the substrate by Motorola. See id. at 18-19. Motorola's expert stated that elements on the subject merchandise were indivisibly combined on the substrate, even though commercially available machinery exists that could remove and replace defective components. See id. at 19. Motorola, however, discards defective subject merchandise because it is more economical than incurring the time and expense to fix such merchandise. See id. Customs contends that "[w]hile Motorola may have made a business decision not to remove and replace components that are found to be defective on these particular assemblies, that does not render them `indivisibly combined' for purposes of tariff classification." Id. at 20. Customs maintains that the test for whether components are "indivisibly combined" is objective and "not subject to the whims of an individual importer or manufacturer." Id. The test for whether the indivisible element has been met "is whether removing and replacing elements on the circuit would be a long and delicate task that would render the procedure uneconomical under normal manufacturing conditions." Id. at 21. Motorola did not establish...
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