Apple iPad Cases Classifiable as Plastic Articles, Not iPad Accessories, CIT Says
Plastic Apple iPad 2 “Smart Cover” cases are classifiable in the tariff schedule as articles of plastic, not as accessories for automatic data processing machines, the Court of International Trade said in a decision released to the public March 19. Apple had argued for its classification as an accessory because it also functions as a stand, but CIT agreed with a CBP ruling that found the cases are explicitly excluded from classification in Harmonized Tariff Schedule of the United States heading 8473.
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That duty-free heading covers “parts and accessories (other than covers, carrying cases and the like suitable for use solely or principally with machines of headings 8469 to 8472.” CBP found in ruling HQ H216396 that, though the iPad is classifiable in heading 8471, the Smart Cover falls in the category of “covers, carrying cases and the like” and can’t be classified in heading 8473. Instead, as an article of plastic, the Smart Cover was dutiable at 5.3%, CBP said.
In its court challenge, Apple pointed to the Explanatory Note for heading 8473, which says the heading “excludes covers, carrying cases and felt pads: these are classified in their appropriate headings. It also excludes articles of furniture (e.g. cupboards or tables) whether or not specifically designed for office use (heading 94.03). However, stands for machines of headings 84.69 to 84.72 not normally usable except with the machines in question, remain in this heading.”
Apple contended that, as the Smart Covers can be folded into “stands for machines of headings 84.69 to 84.72,” the exclusion for covers and carrying cases doesn’t apply. But the trade court disagreed. The language on stands only apples to the preceding sentence excluding articles of furniture. Otherwise, that sentence would have been unnecessary; the World Customs Organization could have just said covers, cases and articles of furniture are excluded, except if they’re stands.
Instead, the goods are classifiable according to the material which gives them their essential character. For the Smart Covers, that’s either the plastic shell or the textile microfiber interior surface that covers the screen when the case is closed. The plastic outer layer protects the screen, aligns with sensors that detect when the cover is open or closed, and is folded to create the two different positions that prop up the iPad 2, imparting essential character. The plastic cases are classifiable in heading 3926, CIT said.
As for leather Smart Covers, which Apple also included in its complaint, CIT said it had no jurisdiction to hear the challenge because CBP classified them in a duty-free provision of heading 4205, and Apple was not harmed by the classification. Apple said that “although it incurred no duty upon liquidation, it nevertheless suffered an injury in fact as a result of needing to expend additional administrative costs to process, enter, and submit separate entry paperwork for the leather and plastic Smart Covers,” according to CIT. But those “bases for injury are broad and non-specific in nature and invoke unsubstantiated and speculative future economic harm,” CIT said.
(Apple, Inc. v. U.S., Slip Op. 19-32, CIT # 13-00239, dated 03/11/19, public version 03/19/19, Judge Kelly)
(Attorneys: David Sanders of Cassidy Levy for plaintiff Apple; Beverly Farrell for defendant U.S. government)