Usr Optonix, Inc. v. U.S.

• Decision Date: 18 February 2005
• Docket Number: SLIP OP. 05-27.,Court No. 98-08-02723.
• Citation: 362 F.Supp.2d 1365
• Parties: USR OPTONIX, INC., Plaintiff, v. UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

362 F.Supp.2d 1365

USR OPTONIX, INC., Plaintiff, v. UNITED STATES, Defendant.

SLIP OP. 05-27.

Court No. 98-08-02723.

United States Court of International Trade.

February 18, 2005.

Neville Peterson LLP (John M. Peterson and Curtis W. Knauss) for plaintiff.

Peter D. Keisler, Assistant Attorney General, Barbara S. Williams, Attorney in Charge, International Trade Field Office, and James A. Curley, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice; Beth C. Brotman, Office of Assistant Chief

Counsel, United States Bureau of Customs and Border Protection, for defendant, of counsel.

OPINION AND ORDER

STANCEU, Judge.

Plaintiff USR Optonix, Inc. ("Optonix") challenges the determinations of tariff classification that the United States Customs Service ("Customs") applied to two products imported during a period beginning in November 1994 and concluding in May 1997.¹ Optonix moves for summary judgment with respect to the classification of both products; defendant United States cross-moves for summary judgment in its favor, also with respect to both products. The court exercises jurisdiction pursuant to 28 U.S.C. § 1581(a) (2000).

The first product at issue, designated as "P22-RE1," is a white powder consisting by weight of at least 99 percent yttrium oxide (Y₂O₃). The remaining 1 percent or less of the product consists of europium oxide. The product is represented by the formula "Y₂O₃:Eu" and also is identified as "Yttrium Oxide: Europium Doped." The second product, "P22-HCR2," is a red powder comprised by weight of at least 90 percent yttrium oxygen sulfide (Y₂O₂S), 10 percent or less europium oxygen sulfide (Eu₂O₂S), and 1 percent or less ferrous oxide (Fe₂O₃). Each product is used as a material in the production of phosphorescent coatings that are applied in the manufacturing of cathode ray tubes.

The court awards summary judgment to defendant on the issue of the tariff classification of P22-RE1. The court concludes that there are no genuine issues of fact material to that tariff classification and that the tariff classification determined by Customs was correct, entitling defendant to judgment as a matter of law. The motions of both parties for summary judgment on the tariff classification of P22-HCR2 are denied because of the existence of one or more genuine issues of material fact.

I. BACKGROUND

Upon liquidation, Customs classified the entries of P22-RE1 that were made prior to 1995 in subheading 2846.90.50, Harmonized Tariff Schedule of the United States ("HTSUS"), subject to duty at 3.7 percent ad valorem. The version of the provision that was in effect at the time of the pre-1995 entries of P22-RE1 read as follows:

                2846   Compounds, inorganic or organic
                       of rare-earth metals, of yttrium
                       or of scandium, or of mixtures of
                       these metals
                                 * * *
                2846.90   Other
                                 * * *
                2846.90.50     Other ............. 3.7%
                

Customs classified entries of P22-RE1 made in 1995 and thereafter in subheading 2846.90.80, HTSUS, the provision that superceded the former subheading 2846.90.50, HTSUS. The article description for heading 2846 and the duty applicable to the subheading at issue, 3.7 percent ad valorem, remained unchanged.

Upon liquidation, Customs classified entries of P22-HCR2 in subheading 3206.50.00, HTSUS. At the time the entries were made, this tariff provision read, in relevant part, as follows:

                3206   ... inorganic products of a kind
                       used as luminophores, whether or
                       not chemically defined
                                 * * *
                3206.50.00   Inorganic products of a
                             kind used as luminophores ....... 10.0%
                

HTSUS, 1994.²

Plaintiff protested the classification determinations that Customs made upon liquidation. Following denial of the protests, plaintiff commenced this action.

A. Contentions of the Parties on the Classification of P22-RE1

Defendant maintains that Customs was correct in determining upon liquidation to classify P22-RE1 in subheading 2846.90.50, HTSUS, and subsequently in subheading 2846.90.80, HTSUS. In challenging that determination, plaintiff's principal argument is that P22-RE1 is excluded from the scope of heading 2846 because it is a mixture of two compounds (i.e., yttrium oxide and europium oxide) and therefore is not itself a "compound" within the meaning of the article description for the heading ("Compounds, inorganic or organic, of rare-earth metals, of yttrium or of scandium, or of mixtures of these metals"). On the basis of this assertion, plaintiff advocates classification in subheading 3824.90.39, HTSUS, free of duty. That provision pertains to "mixtures of two or more inorganic compounds"; the superior heading (heading 3824, HTSUS) is a "basket" heading that includes, inter alia, "chemical products and preparations of the chemical or allied industries ... not elsewhere specified or included."

Plaintiff claims an alternative classification in subheading 2846.90.20, HTSUS, the article description for which is "[m]ixtures of rare-earth oxides or of rare-earth chlorides." Plaintiff argues that, should the court determine that P22-RE1 falls within the scope of heading 2846, the court should rule that P22-RE1 is classified in subheading 2846.90.20 based on its assertion that both yttrium oxide and europium oxide are rare-earth oxides.

Defendant argues that P22-RE1 is correctly classified in subheading 2846.90.80, HTSUS, (and in the predecessor subheading 2846.90.50, HTSUS, prior to 1995) because heading 2846, in defendant's view, includes mixtures of oxides of yttrium and europium. As confirmation that the scope of the heading includes mixtures as well as compounds, defendant points to the article description for another eight-digit subheading within the heading, subheading 2846.90.20, HTSUS, which, as noted above, reads "[m]ixtures of rare-earth oxides or of rare-earth chlorides." Defendant also directs the court's attention to Explanatory Note 32.06, which contains a reference identifying headings 2843 to 2846 as appropriate for the classification of a mixture of yttrium oxide and europium oxide. Further, defendant points to the first paragraph of Explanatory Note 28.46 in support of its contention that heading 2846 includes mixtures of oxides of the metals mentioned in the article description for the heading; plaintiff relies on this same paragraph to support its argument that mixtures such as P22-RE1 are excluded from heading 2846 because they are not "compounds of mixtures" but instead are mixtures of compounds made intentionally for special purposes.

Concerning plaintiff's alternative classification of subheading 2846.90.20, HTSUS, which pertains to "mixtures of rare-earth oxides," defendant contends that yttrium is not a rare-earth metal for tariff classification purposes and, consequently, that yttrium oxide is not a rare-earth oxide within the meaning of subheading 2846.90.20, HTSUS.

B. Contentions of the Parties on the Classification of P22-HCR2

Plaintiff argues that P22-HCR2 is not classifiable in subheading 3206.50.00, HTSUS, ("Inorganic products of a kind used as luminophores") because it is not a finished product capable of use as a luminophore in the condition in which it is imported. Plaintiff asserts that the product requires further processing consisting of reduction of particle size and blending with other products to obtain the characteristics desired by the manufacturer of the cathode ray tube. Plaintiff submits that the correct classification is subheading 3824.90.39, HTSUS, which is free of duty. As noted previously, that subheading pertains to "mixtures of two or more inorganic compounds," with the superior heading pertaining to "chemical products and preparations of the chemical or allied industries ... not elsewhere specified or included." At an early point in this litigation, plaintiff argued in the alternative that P22-HCR2 should be classified in subheading 2846.90.20, HTSUS ("mixtures of rare-earth oxides ...").

Defendant responds that P22-HCR2 falls within the definition of "inorganic products of a kind used as luminophores" despite the further processing alleged by plaintiff to be required. In rebuttal of plaintiff's argument for alternative classification in subheading 2846.90.20, HTSUS ("mixtures of rare-earth oxides"), defendant maintains that the product is excluded from that provision because it is not comprised of a mixture of oxides of rare-earth metals.

II. APPLICABLE LEGAL STANDARDS

A. Standard of Review

The court proceeds de novo in actions brought to contest the denial of a protest under section 515 of the Tariff Act of 1930. See 28 U.S.C. § 2640(a)(1). In a classification action, plaintiff has the burden of establishing that the government's classification of the product was incorrect but does not bear a burden of establishing the correct tariff classification; instead, the correct tariff classification is to be determined by the court. See Jarvis Clark Co. v. United States, 733 F.2d 873, 878, reh'g denied, 739 F.2d 628 (Fed.Cir.1984).

Customs classification decisions are entitled to a presumption of correctness by 28 U.S.C. § 2639(a)(1), but the presumption does not apply if the court is presented with a question of law by a proper motion for summary judgment. See Universal Elecs., Inc. v. United States, 112 F.3d 488, 492 (Fed.Cir.1997). The court affords deference to a classification decision by Customs to the extent that the decision has the power to persuade. See United States v. Mead Corp., 533 U.S. 218, 235, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001); Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 89 L.Ed. 124 (1944).

B. The General Rules of Interpretation and the Explanatory Notes

The General Rules of Interpretation, HTSUS, govern the determination of tariff classification. See N. Am. Processing Co. v. United States, 236 F.3d 695, 698 (Fed.Cir.2001). General Rule of Interpretation ("GRI") 1, HTSUS, requires...