Cellphone Cases Classified in HTS as Articles of Plastic, Not Containers, Says CIT
Cellphone cases imported by OtterBox are classifiable as articles of plastic under chapter 39 of the HTS, and not under an expansive heading in chapter 42 covering various types of containers, said the Court of International Trade in a May 26 decision released on June 2 (here). Overturning the classification and duty rate assessed by CBP at liquidation, the court also ruled that CBP owes OtterBox refunds on post-importation payments of duties on assists provided in connection with the cellphone cases.
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The ruling stemmed from a dispute over the classification of OtterBox’s Commuter Series and Defender Series cases. Each type of cellphone case is made of hard plastic pieces and silicone, with the exception of an instruction booklet and wiping cloth included with the Commuter series to install the screen protector.
CBP had classified the cellphone cases, which were imported between April and July 2012, under heading 4202, which includes “trunks, suitcases, vanity cases, attache cases, briefcases, school satchels, spectacle cases, binocular cases, camera cases, musical instrument cases, gun cases, holsters and similar containers.” Specifically, CBP classified them in the “other” category under subheading 4202.99.9000, dutiable at 20%, arguing they fell under the heading 4202 as “similar containers.” OtterBox said they should have instead been classified under subheading 3926.90.9980 as “other articles of plastics and articles of other materials of headings 3901 to 3914: Other: Other: Other,” dutiable at 5.3%.
CIT looked to a 2005 case from the U.S. Court of Appeals for the Federal Circuit to decide whether classification under heading 4202 was appropriate. In a dispute over whether leather folios imported by Avenues in Leather were classifiable as “similar containers,” the Federal Circuit said the examples listed in heading 4202 shared four characteristics: organizing, storing, protecting and carrying. As such, “similar containers” in heading 4202 must also have those capabilities, said CAFC.
CIT found OtterBox’s cases only protect cellphone cases, but don’t organize, store or carry them. Organizing generally requires multiple items to be organized, but the OtterBox cases only hold a single cellphone, said CIT. They aren’t used to carry cellphones, instead being put in a person’s pocket along with the phone, it said. And while storing involves setting something aside for future use, cellphone cases are designed so that the cellphone can be used in the present, while the cellphone is inside the case, said the court. On the other hand, most cases under heading 4202 also share another characteristic -- the inability to use the items inside the container – which goes against the fundamental characteristics of cellphone cases, said CIT.
Instead, the court found the cellphone cases classifiable under heading 3926 as articles of plastic. With classification in headings 3901 to 3914 inapplicable because the cellphone cases aren’t primary forms of plastics, and headings 3915 to 3925 inapposite because cellphone cases aren’t one of the specific items listed in those categories, CIT ruled OtterBox’s cellphone cases should be classified in a residual heading for plastic articles, 3926.
Post-Importation Assist Payments Subject to Classification Decisions
The government also argued that duties paid post-importation on the value of assists associated with the disputed entries should not be part of the case because they were voluntary payments, not a “charge or extraction,” and were not specifically protested. OtterBox had made the payments after it had filed a prior disclosure with CBP for failing to disclose assists, sending three post-importation payments to cover the extra duties while it got signed up for CBP’s reconciliation program.
CIT ruled that the post-importation payments are part of the case and the excess payments should be refunded. The post-importation payments were not voluntary remittances made as part of the prior disclosure, said CIT. Instead, they were separate overpayments of duties caused by CBP’s incorrect classification, it said. Protests filed to challenge the classification of an entry cover the entire transaction value of the merchandise, including the value of any assists, said CIT.