Friday, March 05, 2010

Monitor Classifications

BenQ America Corp. v. United States seeks to resolve the interesting question of how to differentiate between general purpose video monitors and monitors of data processing applications. The former products are classifiable in Heading 8528 while the latter are classifiable in 8471. At least they were in 2004 when this merchandise was entered. The tariff schedule has now changed.

Under the relevant version of the tariff schedule, monitors that were capable of receiving data signals only from the central processing unit of an automatic data processing machine, were deemed to be units of ADP systems in 8471. Other monitors that were capable of receiving signals from other sources, such as DVD players, were deemed to be video monitors of 8528. BenQ made a noble effort to apply a principal use, principal function argument based on the fact that 99% of the monitors were used in conjunction with a computer. The Court, however, did a careful and thorough analysis of the relevant legal notes and the commentary in the Explanatory Notes and rejected the argument. Instead, it found a bright line and applied it resulting in a victory for the United States.

Today, ADP monitors have been moved out of 8471 and expressly plunked down in 8528. Ignoring CRT-based monitors, the relevant language now reads:

8528 Monitors and projectors, not incorporating television (con.) reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus (con.):

Other monitors:

8528.51.00 00 Of a kind solely or principally used in an automatic data processing system of heading 8471 . . . . . Free

Guess what that means? The current language is based on principal use. BenQ's data showed 99% of actual use with ADP systems and 87% of purchasers intending to use the monitors with ADP systems. While the use of the specific item in question is of limited evidentiary value (because the legal question is the principal use of the class or kind of merchandise), this data [Note: I refuse to say "these data"] is indicative of a principal use with ADP equipment. So today, BenQ might win the fight.

4 comments:

Anonymous said...

Thanks for the interesting comment. Although these codes may have changed for classification purposes within the HS2007, the issue remains if the question is to interpret concessions in the Goods Schedules of WTO Members that are still based on the old HS1996 headings.

See the WorldTradeLaw bolg at http://worldtradelaw.typepad.com/ielpblog/2010/03/customs-classification-at-the-cit-and-the-wto.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+ielpblog+(International+Economic+Law+and+Policy+Blog)

Larry said...

Interesting point. As a general rule, I tend to think that the day to day activity at Customs is pretty isolated from what is going on internationally. I may be wrong, but I doubt there was any serious attention to the fact that there was a conflicting position being taken in relation to ITA implementation. Generally, the Federal Circuit has not been interested in legal arguments based on the text of WTO agreements. As the Federal Circuit has said, the WTO does not trump US statutory law. The CIT has been more accepting of classification arguments based on the Explanatory Notes and the international treatment of merchandise.

Anonymous said...

Thanks, Larry. Would be curious to read your views on the classification arguments submitted by the parties on the WTO dispute indicated in the WorldTradeLaw blog, and which involves three products: multifunctional machines, flat panel displays and certain set-top boxes that connect to the internet. In a certain way, that dispute is like a time machine as the classification/concession issues revolve around codes from the HS96, some of them no longer exist, like HS96 9009.12 (but still exists in WTO Schedules of concession). All the parties' submissions are available on line.

Lowell DeFrance said...

I finally got a chance to read this opinion. I was very disappointed in the reasoning the first half of the opinion. It seems to be an exercise of grasping at straws and insincere logic.

Using the fact that monitors where not listed as one of the enumerated computer peripherals in the chapter notes as the bases to find that the TV classification id inclusive while the monitor classification then must be exclusive seems quite a specious stretch.

I can use my computer without a printer but I can't use it without a monitor. The fact that keyboard mouse and printer are mentioned and monitor is not does make me think the omission was intentional.

I think this was done to avoid a Carborundum analysis. When I see two equal classifications that are based on actual use I have been trained by previous jurisprudence to scream out Carborundum factors.

Reliance on the Explanatory notes are fine in my opinion. I wish the courts would rely them more often to align the courts decision with that our other trading partners. One the big problem with the harmonized tariff schedule is that its not so harmonized. Each country seems to have its own way to look at, what should be, the same tariff schedule.

But I think you have a good question is this a trend? Is it a way to throw the Carborundum factors under the bus in favor of the once mostly passed over Explanatory Notes?