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.


Comments

Post a Comment

Popular posts from this blog

CAFC Decision in Double Invoicing Case

The Federal Circuit has issued a decision on the merits in United States v. Inn Foods, Inc.  There had been a previous decision on jurisdiction, which was followed by a trial at the Court of International Trade and then this appeal on the substance. The initial issue is whether Inn Foods' invoicing practice amounts to fraud.  Inn Foods had been receiving an invoice from growers in Mexico that had a relatively low sales prices on it.  Subsequent to entry, Inn Foods created a second invoice at something more similar to market value, retaining the original invoice number, and paid at that higher amount.   Superficially, this looks like a standard-issue double-invoicing scheme.  But, in the age of reconciliation, is it really more like a provisional pricing mechanism?  It might have been possible to make that argument had Inn Foods adjusted its entries accordingly.  It didn't and the loss of revenue was approximately $624,000.  Based on testimony and evidence indicating both knowl
Read more

Target on Finality

Image
In the last post , about the Federal Circuit’s very important decision on due process and allegations of evasion of antidumping duties, I made a snarky, offhand comment that the government believes “liquidation is magic.” That was in the context of the government arguing that Customs’ liquidation of entries mooted an appeal, thereby taking away the importer’s right to further judicial review. I said that knowing full well that I still needed to write this post summarizing Target Corp. v. United States in which Target made what I want to be a valid and righteous argument that Customs’ improper liquidation of entries at a favorable rate of antidumping duty prevents the Court of International Trade from ordering Customs to collect the legally applicable duties. But it turns out that while liquidation is an important legal step, in at least one unusual circumstance it is not sufficiently powerful to overcome the full force of an Article III court. Understanding this case requires a lot
Read more

CAFC: EAPA Process Really Does Violate Due Process

Image
Hot on the heels of my complaining about how the EAPA law and process is stacked against importers, the Court of Appeals for the Federal Circuit has issued an important decision that will have a major impact on how those cases work. If you are unfamiliar with evasion cases under the Enforce and Protect Act and how Customs and Border Protection handles them, go back and look at these two posts: Part 1 , Part 2. Royal Brush Manufacturing, Inc. v. United States , is the decision in an evasion case against Royal Brush involving pencils allegedly transshipped from China through the Philippines. Customs determined that there was evasion of an antidumping duty order based in part on evidence that was not disclosed to Royal. Specifically, Customs sent a representative to the facility in the Philippines to photograph the interior and provide a report. Customs refused to disclose all the photographs to Royal. Moreover, CBP's report concluded that the facility did not have sufficient capacit
Read more