UNITED STATES COURT OF INTERNATIONAL TRADE

Slip Op. 24-57

Before the United States Court of International Trade (“CIT”) in Kent Displays, Inc. v. United States, Court No. 20-00156 (May 9, 2024) were cross-motions for summary judgment in relation to certain type of dashboards that were subject to additional duties of 25 percent ad valorem under Section 301 of the Trade Act of 1974. The merchandise is described as flexible pressure sensitive liquid crystal flat panel display devices used as a surface for electronic writing, which were entered by plaintiff’s broker as being exempt from retaliatory 301 tariffs.

Plaintiff had previously entered the merchandise in question duty-free under HTSUS subheading 9013.80.7000. Although this heading was subject to Section 301 duties, plaintiff claimed that the subject merchandise received an exclusion from the retaliatory 301 duties from the United States Trade Representative (“USTR”) under HTSUS subheading 9903.88.19. Kent Displays requested that CBP reliquidate the subject entry and refund the Section 301 duty paid by Kent Displays. Thus, plaintiff moved for summary judgment challenging the United States Customs and Border Protection’s (“CBP” or “Customs”) denial of its protests. The government opposed plaintiff’s motion and cross-moved for summary judgment on the basis that the merchandise in question was not properly classified under HTSUS subheading 9013.80.7000.

On March 2, 2020, CBP denied Kent Displays’ protest because the “merchandise in the instant shipment is an electrical device with an individual function that is more properly classified under HTSUS 8543.70.9960,” and that “[n]o correction has been made to [HTSUS] 8543.70.9960 as the result would be adverse to [Kent Displays].” Id. At the time of entry, this subheading was subject to 2.6 percent ad valorem duty and no additional Section 301 duties. Customs, however, argued that the subject merchandise was instead classified under HTSUS subheading 8543.70.9960.

According to plaintiff, (1) only the denial of the exclusion (and classification in subheading 9903.88.01) was protested, and (2) Kent Displays reasonably relied on CBP’s prior tariff treatment of imported Dashboards. The plaintiff argued that by court order Customs should reliquidate its entry with the “benefit of Section 301 Product Exclusion 9903.88.19[]” Id. at 10, based on the fact that when plaintiff protested the classification of its entry, it only protested CBP’s failure to classify its merchandise as entitled to the Section 301 duty exclusion provided for in subheading 9903.88.19 HTSUS. As a result, Kent Displays reasoned that CBP could not change the classification of this type of dashboards. Rather, CBP could only decide whether the entry was entitled to exclusion from Section 301 duties.

The Court found plaintiff’s arguments unpersuasive. Citing Cyber Power Sys. (USA) v. United States, 586 F. Supp. 3d 1325, 1331-32 (Ct. Int’l Trade 2022) where the CIT found that the filing of a timely protest rendered CBP’s liquidation of the imported goods not final, Judge Claire R. Kelly agreed with the government that the liquidation was never finalized due to Plaintiff’s protest, which forestalled the final liquidation of the entry. In fact, the Cyber Power decision was cited by both parties. Plaintiff asserted that “CBP does not have the right to challenge the classification of the involved goods after the voluntary re-liquidation period expired.” The Court disagreed, however. It reasoned that that Cyber Power, in this case, does not apply since the case stands for the proposition that the Government lacked statutory authority to assert a counterclaim against an importer challenging the denial of a protest to seek reliquidation from CBP under HTSUS classification. Here, the Court found, there is no counterclaim to help draw an analogy as plaintiff suggested. To defendant’s favor, the Court reiterated its agreement with the government that  according to Cyber Power, “a timely protest suspends finality for all parties,” which in turn, allows CBP to consider the classification of the Dashboard in evaluating Kent Displays’ request for an exclusion denying the protest. The Court noted that the Cyber Power decision specifically refrained from ruling on whether CBP could re-classify merchandise in a subheading different from the one asserted in a protest or as entered. 586 F. Supp. 3d at 1332 n.12 (“Because CBP did not reclassify the Subject Cables after reviewing the Protest, the court cannot address CBP’s authority to do so here”).

As it pertained to plaintiff’s equitable considerations to argue that classification of its merchandise in subheading 9013.80.7000 HTSUS cannot later be changed by either CBP or the CIT. Defendant countered that Kent Displays offered no legal basis to support plaintiff’s reasonable reliance. Defendant asserted that eligibility for Section 301 duty exclusions is governed by “the 10-digit HTSUS provision and the product description set forth in the exclusion.” The court found equitable arguments unpersuasive provide legal authority to support the argument that this Court is precluded from ruling on the proper classification of the Dashboard.

As to the proper classification of the dashboards, the Court, citing Jarvis Clark Co.,733 F.2d at 878, held that it has the task of “find[ing] the correct result in classifying imported merchandise either independently or by comparison or competing HTSUS headings proposed by the parties. Kent Displays conceded that should the Court reject its argument that the classification in subheading 9013.80.7000, HTSUS, was final, that the Dashboards are classifiable under subheading 8543.70.9960, HTSUS. The Court agreed and held that the dashboards are classifiable under subheading 8543.70.9960, HTSUS dutiable at a rate of 2.6 percent and not subject to Section 301 duties.

The Court decided between two headings presented by the parties. The first was heading 9013, “Liquid crystal devices not constituting articles provided for more specifically in other headings; lasers, other than laser diodes; other optical appliances and instruments, not specified or included elsewhere in this chapter; parts and accessories thereof” HTSUS Ch. 90 Rev. 7. The second was heading 8543: “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter; parts thereof:”16 HTSUS Ch. 85 Rev. 7. Following its duty to consider other chapters in the HTSUS regardless of whether the parties submit them, the Court concluded that there are various potentially applicable chapters. For instance, the Court considered the applicability of Chapter 95, consisting of “Toys, games and sports requisites; parts and accessories thereof,” the “Miscellaneous manufactured articles” of Chapter 96, or a different heading in Chapter 90. As it pertains to Chapter 95, the Court concluded that the only relevant heading might be 9504, including, inter alia, “Video game consoles and machines.” HTSUS Ch. 95 Rev. 7. The Court held that under the General Rule of Interpretation (“GRI”) 1, Chapters 95 ad 96. Moreover, applying the Explanatory Note to Chapter 90, the CIT held that the type of displays at issue fall outside the scope of Heading 9013, HTSUS Considering that the dashboards at issue are a finished product incorporating elements and characteristics that render it more than an LCD, featuring plastic housing, a battery, and an electronic switch with a liquid crystal writing film component, the Court rejected plaintiff’s proposed classification under subheading 9013.80.7000, HTSUS. Instead, the Court considered that the dashboards’ function to electronically erase its display to be important and within the scope of heading 8543, HTSUS as an electronic apparatus, with individual function to write and erase without requiring paper. See EN 85.43 (2018). More specifically, the Court held that heading 8543.70.9960, HTSUS was the correct classification of the subject merchandise with a dutiable rate of 2.6 percent free of Section 301 duties. In turn, Plaintiff’s argument concerning the applicability of Section 301 duty exclusion to the Dashboards became moot. The court granted the governments summary motion, denied plaintiff’s cross-motion, and ordered the entry to be reliquidated under subheading 8543.70.9960, HTSUS.