Zomax Optical Media, Inc. v. U.S.
| Decision Date | 01 April 2005 |
| Docket Number | Slip Op. 05-44.,Court No. 00-03-00104. |
| Parties | ZOMAX OPTICAL MEDIA, INC., Plaintiff, v. UNITED STATES, Defendant. |
| Court | U.S. Court of International Trade |
Neville Peterson LLP (John M. Peterson, New York City, and Curtis W. Knauss, Westfield, NJ), for Plaintiff.
Peter D. Keisler, Assistant Attorney General; John J. Mahon, Acting Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Amy M. Rubin); Sheryl A. French, Office of the Assistant Chief Counsel, International Trade Litigation, Bureau of Customs and Border Protection, U.S. Department of Homeland Security, for Defendant, of counsel.
In this action, plaintiff Zomax Incorporated (formerly known as Zomax Optical Media, Inc.) challenges the decision of the U.S. Customs Service ("Customs")1 denying Zomax's protest concerning the tariff classification of certain digital mastering equipment imported by Zomax and used for the manufacturing of CDs and DVDs.
Zomax maintains that Customs improperly classified its merchandise as "[o]ther drawing, marking-out or mathematical calculating instruments" under subheading 9017.20 of the Harmonized Tariff Schedule of the United States ("HTSUS") (1997),2 assessing duties at a rate of 5.1% ad valorem. See generally Memorandum in Support of Plaintiff's Motion for Summary Judgment ("Pl.'s Brief"); Plaintiff's Reply to Defendant's Opposition to Summary Judgment ("Pl.'s Reply Brief").3 Zomax argues that the merchandise is instead properly classified as a "[m]achine[] for the manufacturing of video laser discs," under subheading 8479.89.85 of the HTSUS, and thus should be duty-free.
Pending before the court is Zomax's motion for summary judgment.4 The Government opposes the motion, asserting, inter alia, that Zomax has failed to meet its burden of proof, and that its proposed classification is impermissible. See generally Defendant's Memorandum in Opposition to Plaintiff's Motion for Summary Judgment ("Def.'s Brief") at 3-4.
For the reasons set forth below, the merchandise at issue in this action is properly classified as a "[m]achine[] for the manufacturing of video laser discs," under subheading 8479.89.85 of the HTSUS. Zomax's motion for summary judgment is therefore granted.
Customs classification decisions are reviewed through a two-step analysis — first, construing the relevant tariff headings (a question of law); and, second, determining under which of those headings the merchandise at issue is properly classified (a question of fact). Bausch & Lomb, Inc. v. United States, 148 F.3d 1363 (Fed.Cir.1998) (citing Univ. Elecs., Inc. v. United States, 112 F.3d 488, 491 (Fed.Cir.1997)). Summary judgment is thus appropriate where, as here, "there is no genuine dispute as to the underlying factual issue of what exactly the merchandise is." Bausch & Lomb, 148 F.3d at 1365 (emphasis added); see also USCIT Rule 56(c).
"Mere denials or conclusory statements are not sufficient" to put a material fact into dispute. Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1390-91 (Fed.Cir.1987); USCIT Rule 56(e). Indeed, a factual dispute is genuine only "if the evidence is such that the [trier of fact] could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
In short, Id. at 249-50, 106 S.Ct. 2505 (emphasis added) (citations omitted). Thus, at the summary judgment stage, the question presented is "whether there is the need for a trial — whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Id. at 250, 106 S.Ct. 2505 (emphasis added).
This case is an odd one, for a number of reasons. Most striking is the peculiar procedural posture.5 In the typical customs classification case, the court's analysis consists largely of reviewing the competing classifications proposed by the respective parties.6 But this case is very different.
Here, even the Government does not contend that Customs' classification under subheading 9017.20 is proper. Indeed, the Government not only does not defend that classification, it has expressly disavowed it. See, e.g., Pl.'s Brief at 2, 7, 30-31; Def.'s Brief at 7 n. 7; Pl.'s Reply Brief at 1, 6, 10. Yet the Government has declined to proffer any proposed alternative classification. See, e.g., Pl.'s Brief at 8; Def.'s Brief at 7 n. 7; Pl.'s Reply Brief at 1, 10.7
Further, although the Government takes pains to emphasize that it is "not formally cross-moving for summary judgment," it requests that summary judgment be granted sua sponte in its favor. Def.'s Brief at 5 (emphasis added), 7. The Government also suggests, in passing, that Zomax's case be dismissed for "fail[ure] to plead or demonstrate a cause of action for which relief may be granted." Def.'s Brief at 7 n. 7.; USCIT Rule 12(b)(5).8
However, to do as the Government urges — either to grant summary judgment sua sponte in its favor, or to dismiss the case — would, in effect, grant a judicial imprimatur to the classification of the merchandise at issue under an HTSUS provision that even Customs believes is improper. This the court cannot do. See 28 U.S.C. § 2643(b) (); Jarvis Clark Co., 733 F.2d at 878 ().
Finally, the parties agree that no purpose would be served by a trial in this action. See, e.g., Def.'s Brief at 7 (citing Zomax's discovery responses). The matter is thus ripe for disposition.
The realities of modern merchandise and modern modes of cargo shipping can pose significant challenges for importers. One such challenge has arisen in situations where merchandise is imported in an unassembled or disassembled state, in multiple containers. Where such merchandise is capable of being transported in one conveyance, the importer will often have the shipment delivered to a carrier in the exporting country as one shipment, under one bill of lading or waybill, with the intention that the merchandise be transported to the U.S. as a single shipment. However, after taking possession of the merchandise, the carrier may divide the shipment into different lots, which may arrive in the U.S. at different times, often days apart. See generally Single Entry for Split Shipments, 68 Fed.Reg. 8713, 8714 (Feb. 25, 2003) (Dep't Treasury).
These so-called "split shipments" are a routine occurrence, particularly in the context of air-shipped cargo, due to practical considerations including limited cargo space, the need for proper weight distribution, and the offloading of cargo for safety concerns. But, while split shipments are a straightforward matter of logistics for carriers, they often created legal uncertainty and unpredictability for importers. Id. The confusion stemmed from the interplay of agency regulations concerning the entry of goods, and various customs doctrines governing the classification of goods, as well as the fact that customs classification decisions are made annually for literally millions of entries at dozens of ports scattered across the country.
For example, as in this case, Customs at some ports invoked the "condition as imported" rule to require the separate classification of shipments that were split by the carrier. In contrast, at other ports (such as Los Angeles International Airport ("LAX") and the John F. Kennedy Airport ("JFK") in New York), Customs treated split shipments as a single entry for purposes of classification. The financial repercussions for an importer could be significant where treatment as separate entries resulted in a different classification (and a higher rate of duty) than treatment of the merchandise as a single entry, as the importer had intended.
Sensitive to importers' concerns, Congress resolved the inconsistency and clarified the situation by enacting 19 U.S.C. § 1484(j)(2), providing a framework to help ensure that split shipments are consistently classified as importers intend.9 In effect, Congress merely provided uniformity to a practice that was already in place in at least two of the busiest airports in the nation.10 In both of these airports, Customs had already established a system for handling split shipments. To comply with this system, the carrier was required to include each split portion on the cargo manifest. See Single Entry for Split Shipments, 68 Fed.Reg. 8717. Thus, Congress' action amounted to a ratification of the agency's ad hoc practice and an express authorization to the agency to consistently treat split shipments in accordance with importers' intentions.
Zomax purchased the digital video mastering system here at issue in 1997, from Nimbus Technology & Engineering, of the United Kingdom.11 The system is used to manufacture "master" video laser discs of various formats (including DVDs, CD-roms, CD videos, and Video-CDs, among others), which can be played on suitable players, and which, in turn, are used to produce the discs available in retail and wholesale outlets.12
The merchandise at issue was marketed, ordered, purchased, and sold as a single operating unit, at a single price, under a single commercial invoice covering the entire system.13 For reasons of transportation necessity, the system was shipped from Great Britain to the U.S. in 46 separate cartons. All 46...
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