Simon Marketing, Inc. v. U.S., Slip Op. 05-118.

• Decision Date: 01 September 2005
• Docket Number: Slip Op. 05-118.,Court No. 00-00332.
• Citation: 395 F.Supp.2d 1280
• Parties: SIMON MARKETING, INC. and Perseco System Services, L.P., Plaintiffs, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

395 F.Supp.2d 1280

SIMON MARKETING, INC. and Perseco System Services, L.P., Plaintiffs, v. UNITED STATES, Defendant.

Slip Op. 05-118.

Court No. 00-00332.

United States Court of International Trade.

September 1, 2005.

Neville Peterson LLP (Michael K. Tomenga, Lawrence J. Bogard, George W.

Thompson, and Laura Martino), Washington, DC, for Simon Marketing, Inc. and Perseco System Services, L.P., plaintiffs.

Peter D. Keisler, Assistant Attorney General; Barbara S. Williams, Attorney-in-Charge; International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice (Mikki Graves Walser); Michael W. Heydrich, Office of the Assistant Chief Counsel for International Trade Litigation, Bureau of Customs and Border Protection, for United States, defendant, of counsel.

OPINION

TSOUCALAS, Senior Judge:

Before the Court is a motion and cross-motion for summary judgment pursuant to USCIT R. 56 arguing there are no genuine issues as to any material facts. Plaintiffs, Simon Marketing, Inc. and Perseco System Services, L.P. ("Simon") challenge the classification of its merchandise under the 1998 Earmonized Tariff Schedule of the United States ("HTSUS") by the Bureau of Customs and Border Protection¹ ("Customs"). Simon contends that the merchandise is properly classified as "other toys" under HTSUS subheading 9503.90.00, which is duty free. Customs cross-moves for summary judgment stating that the Court should sustain its classification under HTSUS subheading 9102.91.20 as a "watch," with a duty rate of 3.9 percent ad valorem on the movement and case and 5.3 percent ad valorem on the battery.

JURISDICTION

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

STANDARD OF REVIEW

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).

DISCUSSION

I. Factual Background

This dispute is ripe for summary judgment and the relevant facts are outlined below. Simon entered the merchandise subject to this action in October 1998. See Mem. P. & A. Supp. Pls.' R. 56. Mot. Summ. J. ("Simon's Mem.") at 2; Def.'s Mem. Opp'n Pls.' Mot. Summ. J. Supp. Def.'s Cross-Mot. Summ. J. ("Customs' Mem.") at 2. The subject merchandise is one of three promotional articles known as the "Pop Topper," which was sold at McDonald's in conjunction with the release of the movie "A Bug's Life."² See Customs' Mem. at 2; Pls.' Am. Statement Material Facts Not Dispute ("Simon's Facts") ¶ ¶ 11 & 15. The Pop Topper was sold separately from the Happy Meals program and could be purchased for $1.99. See Simon's Facts ¶ 15. The Pop Topper measures two and a half inches by two and a fourth inches and is shaped to represent an old-fashioned soda bottle cap. See Simon's Facts ¶ 13; Customs' Mem. at 2-3. A dark red cap is latched and hinged to an inner green main body piece, which fits securely under the cap. See Simon's Facts ¶ 13; Customs' Mem. at 2-3. The inside face of the green body piece depicts two one-dimensional characters thematically tied to "A Bug's Life" around a quarter-inch by half-inch opto-electronic digital display that tells the date or the time. See Simon's Facts ¶ 13; Customs' Mem. at 2-3. The Pop Topper also has a split ring and chain allowing it to be attached to other articles, such as backpacks or belt loops. See Simon's Mem. at 5; Customs' Mem. at 2-3.

Customs classified the merchandise under HTSUS subheading 9102.91.20, as "other watches, electronically operated, with opto-electronic display only" with a duty rate of 3.9 percent ad valorem on the watch and 5.3 percent ad valorem on the battery. See Customs' Mem. at 3-4. On November 3, 1998, Customs issued Headquarters Ruling Letter N.Y. D84205 ("NY D84205") holding that the subject merchandise was classifiable under subheading 9102.91.20. See Customs' Mem. Ex. B. In reaching its decision, Customs stated that while the watch case is "thematically tied to a movie and could be said to have a toy-like motif, the items themselves do not evoke the same response as a toy." Id. Customs further stated that "[w]ithin the watch industry, humorous motifs are a common occurrence." Id.

Simon filed a timely protest and application for further review challenging Customs' classification and sought reliquidation of the merchandise under subheading 9503.90.00 as "other toys." See Compl. ¶ 25; see also Headquarters Ruling Letter 963793 ("HQ 963793") (May 18, 2000) at Customs' Mem. Ex. C. Both Simon's protest and application for further review were denied because Simon incorrectly completed the protest form indicating that it had not received an adverse administration decision from Customs when in fact N.Y. D84205 had already been issued. See Customs' Mem. Ex. C. Simon then commenced this action on January 31, 2002. See Compl. Parties then filed their respective motions for summary judgment. On May 20, 2005, the Court heard oral arguments from the parties.

The HTSUS sections relevant to the Court's discussion are set forth below:

9101 Wrist watches, pocket watches and other watches, including stop watches with case of precious metal or of metal clad with precious metal

. . . . .

9102 Wrist watches, pocket watches and other watches, including stop watches, other than those of heading 9101:

. . . . .

Other:

9102.91 Electronically operated:

9102.91.20 With opto-electronic display only ... 3.9% on the movement and case + 5.3% on the battery

9503 Other toys; reduced-size ("scale") models and similar recreational models working or not; puzzles of all kinds; parts and accessories thereof:

. . . . .

9503.90.00 Other ... Free

II. Contentions of the Parties

A. Simon's Contentions

Simon argues that Customs wrongly liquidated the Pop Topper as "other watches" under HTSUS subheading 9102.91.20 rather than its appropriate classification as "other toys" under subheading 9503.90.00. See Simon's Mem. at 6. Simon contends that based on Rule 1 of the General Rules of Interpretation ("GRI"), the Additional United States Rules of Interpretation ("ARI"), and the Harmonized Commodity Description and Coding System, Explanatory Notes, (2nd ed. 1996) ("Explanatory Notes"), the Pop Topper should be classified under heading 9503 because it was designed specifically for amusement and therefore within the common meaning of term "toys." See id. at 6-19. Simon argues that the Pop Topper's principal use is that of amusement rather than utility. See id. at 10 & 12-17; Pls.' Mem. P. & A. Opp'n Def.'s Cross-Mot. Summ. J. Reply Def.'s Opp'n Pl.'s Mot. Summ. J. ("Simon's Reply") at 9. Thus, the Pop Topper should have been classified as a "toy" even though it has the capacity to measure time. See Simon's Mem. at 12-17. Simon emphasizes the effort spent in producing the amusement value of the Pop Topper because it "stimulate[s] the imagination and [has] manipulation features that entice children into active play." Simon's Mem at 13. Simon notes that the battery is permanently sealed inside the Pop Topper, thereby limiting its ability to function as a watch for a finite period of time. See Simon's Mem. at 13-14; Simon's Reply at 9-13. Moreover, the cost of a replacement battery is more than the price of the article indicating that "the timekeeping function was unimportant." See Simon's Mem. at 14; see also Simon's Reply at 25-26 ("[I]t is not economically practical to use the Pop Topper as a watch beyond the relatively short life span of its battery."). Since the Pop Topper's utilitarian value is incidental to its amusement value, it should have been classified under heading 9503. See Simon's Mem. at 12-14.

Relying on the Explanatory Notes to Chapters 91 and 95 of the HTSUS, Simon argues that the Pop Topper falls within the type of articles considered "toy watches" under heading 9503. See id. at 17-19. Simon asserts that the Explanatory Notes to Chapter 91 exclude watches without movement but do not "exhaust the universe of excludable toy watches." Id. at 18. Therefore, an article capable of measuring time but designed principally for another purpose is excluded from classification under Chapter 91. See Simon's Reply at 5. Since the Pop Topper was designed mainly for amusement and not utility, it is a type of "toy watch" supported by the Explanatory Notes for classification under Chapter 95. See id. at 5-6.

Simon argues, in the alternative, that if the Pop Topper is prima facie classifiable under both headings 9503 and 9102, then GRI 3³ requires classification under heading 9503 as the most specific provision. See Simon's Mem. at 21-28. Finally, Simon asserts that Customs ruling N.Y. D84205 warrants no deference by the Court. See id. at 29-30. NY D84205 warrants no deference because it was not adopted after a public notice and comment period and is inconsistent with Customs' previous classifications of similar articles. See id.

B. Customs' Contentions

Customs replies that its classification decisions, N.Y. D84205, and HQ 963793, are entitled to respect pursuant to Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89 L.Ed. 124 (1944). See Customs' Mem. at 6-10. Moreover, Customs asserts that its classification of the Pop Topper is consistent with its prior treatment of similar merchandise. See id. Customs argues that based...