Federal Circuit Upholds iPad Covers Classification as Plastic Articles

Last year, the Court of International Trade decided that plastic iPad Smart Cases, which function as both protective covers and stands are properly classified in HTSUS Heading 3926. Apple, on the other hand, wanted these covers classified in the duty-free provision covering accessories of computers in Heading 8473. We discussed the CIT decision here. Apple appealed and now the Court of Appeals for the Federal Circuit has affirmed the CIT.

There is not a lot new in the CAFC decision, but it does a really good job of setting out the legal process of tariff classification and the analysis that produced the result. So, if you are new to this stuff, read the decision.

The nub of the issue is what to do with the Explanatory Notes of Heading 8473 and how to interpret the relevant note. The heading covers "Parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with the machines of headings 8470 to 8472." The relevant language from the Explanatory Notes provides that:
[This] heading excludes covers, carrying cases and felt pads; these are classified in their appropriate headings. It also excludes articles of furniture (e.g., cupboards and tables) whether or not specially designed for office use (heading 94.03). However, stands for machines of headings 84.70 to 84.72 not normally usable except with the machines in question, remain in this heading.

Apple's not unreasonable position was that the Smart Case is a stand for the iPad. This image shows how that makes sense.

According to the last sentence of the Explanatory Note quoted above, if this cover is a stand and is not normally usable with other devices, then it is not excluded from 8473. Or so Apple argued.

The Court of Appeals took a different view. It focused on the existence of the word "However" in the start of that sentence. That means the last sentence is not an independent idea. Rather, it modifies (or is in contrast to) something else. Using the well-established (at least among lawyers) rule of the last antecedent, the Court determined that the final sentence modifies the second sentence. Therefore, the only "stands" that are to remain in 8473 are furniture and only furniture stands that have no use other than with the machine in question (i.e., the iPad). Because the Smart Case is a cover and is not furniture, it is excluded by the first sentence.

The Court made an additional important point about the use of the Explanatory Notes in general. It is easy enough to fall back on the ENs as the definitive final statement on the scope of HS Headings. That is a mistake. First, as the Court of Appeals noted here, the Explanatory Notes provide generally useful guidance on the interpretation of the headings but are not binding. Moreover, the EN cannot introduce ambiguity into a clear heading and cannot add a limitation into a heading that is not limited. Here, the heading expressly excludes covers and cases. Apple was trying to use the Explanatory Notes to add a limitation on what covers and cases are to be excluded. In other words, the language of the heading (as with any statute) is always the starting point.

With respect to the correct classification, the Court of Appeals noted that the Smart Case is composed of various materials include a plastic exterior and a microfiber interior. Consequently, it applied General Rule of Interpretation 3(b) to classify the case as a composite good. As neither party challenged the CIT determination that the plastic provides the essential character, the Court affirmed the classification as 3926.90.99.


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