Kyocera Indus. Ceramics Corp. v. United States, No. 02-00705 (Ct. Int'l Trade 2006)

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Slip Op. 06 - 187 UNITED STATES COURT OF INTERNATIONAL TRADE - - - - - - - - - - - - - - - - - - -X KYOCERA INDUSTRIAL CERAMICS CORPORA- : TION, : Plaintiff, : v. Court No. 02-00705 : UNITED STATES, : Defendant. : - - - - - - - - - - - - - - - - - - -X Opinion [Upon cross-motions as to classification of certain ceramic substrates for electronic integrated circuits, summary judgment for the defendant.] Decided: December 21, 2006 DeKieffer & Horgan (J. Kevin Horgan and A. David Lafer) for the plaintiff. Peter D. Keisler, Assistant Attorney General; Barbara S. Williams, Attorney in Charge, International Trade Field Office, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (Jack S. Rockafellow); and Office of Assistant Chief Counsel, International Trade Litigation, U.S. Bureau of Customs and Border Protection (Michael W. Heydrich), of counsel, for the defendant. AQUILINO, Senior Judge: Defendant s motion to dismiss plaintiff s amended complaint for lack of subject-matter jurisdiction having been denied by the court in slip opinion 03-148, Court No. 02-00705 Page 2 27 CIT 1703, 293 F.Supp.2d 1360 (2003), reh g denied (Nov. 18, 2004), familiarity with which is presumed, the parties have now interposed cross-motions for summary judgment as to the correct classification of certain imported ceramic substrates for electronic integrated circuits ( IC substrates ) that underlie this action. I As recited in slip opinion 03-148, paragraph 7 of the amended complaint avers that, [p]rior to March 10, 1999, blank IC substrates imported by KICC[1] were classified under HTSUS subheading 8542.90, as parts of integrated circuits, based on HQ 088157 (July 2, 1992), i.e., the Diacon Ruling, which classified ceramic pieces used as bases for integrated circuits under HTSUS 8542.90, a duty-free classification. The classification determination made in the Diacon Ruling was followed by KICC and Customs until Customs issued NY D88010 (March 10, 1999), which classified blank IC substrates of porcelain under HTSUS 6914.10.8000 as Other ceramic articles: Of porcelain or china: . . . Other, dutiable at 9% ad valorem. 27 CIT Certain at 1706, numbered 293 F.Supp.2d protests covered entries prior to that day in 1999. at by 1362 this (footnote omitted). pleading encompass Moreover, plaintiff s papers in opposition to defendant s motion to dismiss contained a copy 1 This is counsel s choice of reference to their plaintiff client. Court No. 02-00705 Page 3 of the following declaration to the Customs Service sworn to soon thereafter by KICC s erstwhile import/export specialist: 2. In 1992, I became aware of a new ruling, HQ 088157 (July 2, 1992) (i.e., the Diacon Ruling ), which affected the tariff classification of blank ceramic substrates imported by KICC. The Diacon Ruling held that ceramic pieces used as mounting bases for electronic integrated circuits were properly classified under subheading 8542.90 of the . . . HTSUS[] as parts of integrated circuits. 3. Upon learning of the Diacon Ruling, I transmitted a copy . . . to all of KICC s customs brokers in the ports then being used by KICC to import ceramic substrates. I instructed the brokers to classify all of KICC s ceramic substrates for integrated circuits in accordance with the Diacon Ruling. 4. At the same time I advised KICC s customs brokers to attach a copy of the Diacon Ruling to each ceramic substrates entry packet submitted to USCS. 5. When KICC underwent a National Customs Survey Audit by the USCS in 1993-95, the auditors reviewed the tariff classification of KICC s imports, including the tariff classification of blank ceramic substrates. The auditors did not object to any of KICC s classifications. 6. On several occasions during my tenure with KICC, I discussed with employees of USCS the implications of the Diacon Ruling for the tariff classification of ceramic substrates imported by KICC. During these conversations, the USCS employees never objected to the classification of ceramic substrates in accordance with the Diacon Ruling.[2] 2 Plaintiff s Memorandum in Support of Motion for Summary Judgment, Exhibit 5; 27 CIT at 1706-07, 293 F.Supp.2d at 1363 (footnote omitted). The acronym USCS refers to the Customs Service, as it was then still known. Court No. 02-00705 Page 4 A The plaintiff takes the position that Customs issued a new ruling modifying the Diacon Ruling but has not published notice of that ruling in the Customs Bulletin. Complaint, para. 15. First Amended Hence, this new ruling is ineffective upon a reading of 19 U.S.C. §1625(c), which provides: A proposed interpretive ruling or decision which would (1) modify (other than to correct a clerical error) or revoke a prior interpretive ruling or decision which has been in effect for at least 60 days; or (2) have the effect of modifying the treatment previously accorded by . . . Customs . . . to substantially identical transactions; shall be published in the Customs Bulletin. The Secretary shall give interested parties an opportunity to submit, during not less than the 30-day period after the date of such publication, comments on the correctness of the proposed ruling or decision. After consideration of any comments received, the Secretary shall publish a final ruling or decision in the Customs Bulletin within 30 days after the closing of the comment period. The final ruling or decision shall become effective 60 days after the date of its publication. The focus of plaintiff s subsection (c)(1). complaints has been on foregoing Plaintiff s subsequently-filed memorandum in Court No. 02-00705 Page 5 support of its motion for summary judgment, pages 9-10, added that subsection (c)(2) required Customs to publish notice in the Customs Bulletin before implementing a ruling modifying the tariff treatment of Kyocera s blank ceramic substrates because the ruling had the effect of modifying the treatment accorded to substantially identical transactions involving the importation of blank ceramic substrates by Kyocera during the preceding seven years. This additional claim caused the defendant to file a motion to strike it from this action or to stay proceedings herein and remand it for initial administrative determination. This court granted the alternative relief prayed for. Whereupon Customs and Border Protection, as it has now become known, issued HRL 967539 (April 25, 2005), concluding that there is insufficient evidence to substantiate that KICC had a treatment. KICC s treatment claim is hereby denied. (1) According to the plaintiff, the Diacon Ruling required that all ceramic substrates for integrated circuits be classified under HTSUS 8542.90 3 and the subsequent rulings constituted a modification of the Diacon Ruling by limiting its application . Plaintiff s Memorandum, p. 19. 3 That it pertained to all ceramic First Amended Complaint, para. 15. Court No. 02-00705 Page 6 substrates for integrated circuits, however, cannot be gleaned from the text of the ruling. to be read therein. Indeed, the word substrate is not Appended as exhibits 9-12 to plaintiff s summary-judgment memorandum are the protest that resulted in the Diacon Ruling; an April 30, 1992 Memo re Meeting with Laboratories & Scientific Services Related to Diacon Ruling; a Memo from Laboratories & Scientific Services to Chief, Metals and Machinery Branch Related to Diacon Ruling; and a September 19, 1990 Letter from Sandler, Travis & Rosenberg Related to Diacon Ruling. These exhibits do contain the phrases ceramic substrates or chip carriers , ceramic substrate, a housing for an electronic integrated circuit , ceramic substrate or chip carriers , and alternatively referred to as . . . [ ]ceramic substrates , respectively. But compare HQ 088157, wherein the word substrate does not once appear. Be the exact content of that Diacon Ruling as it is, the defendant flatly reject[s] the conclusion that the [subject imports] or that earlier entries of substantially similar merchandise were substantially identical to the ceramic pieces at issue in the Diacon Ruling. In contrast, [it] direct[s] the Court s attention to the drawings and accompanying description in the Diacon Patent, which demonstrate that the ceramic pieces Court No. 02-00705 Page 7 described as substrate therein are each used to house an individual IC chip [], and are not used themselves, as is Kyocera s substrate, in making IC chips. Defendant s Memorandum in Opposition, p. 3 (internal citation omitted; boldface in original). noted, do refer nonetheless to support the Plaintiff s exhibits, which, as imports defendant s in Diacon position as that, substrates , whatever their nomenclature, they were used for housing IC chips, not in making such chips, which is the function of the ceramic pieces at bar. The exhibits cited also contain phrases such as [t]he ceramic substrates or chip carriers are the housings for semiconductor devices or integrated circuits ; [i]t is a ceramic substrate, a housing for an electronic integrated circuit ; the ceramic base does not come into contact with the electrical circuit ; and used exclusively in the semiconductor industry in leaded chip carriers, flatpacks, hybrid packages, etc. . . . which house electronic integrated circuit chips. A substrate is defined in The Free On-line Dictionary of Computing, http://foldoc.org/, © 1993-2005 Denis Howe, as [t]he body or base layer of an integrated circuit, onto which other layers are deposited to form the circuit. . . . It is used as the electrical ground for the circuit. Court No. 02-00705 Page 8 The aforementioned Memo from Laboratories & Scientific Services to Chief, Metals and Machinery Branch Related to Diacon Ruling states that the ceramic base does not come into contact with the electrical circuit and does not appear to serve any electrical insulating function. In contrast thereto, plaintiff s proffered Statement of Material Facts as to Which There is No Genuine Issue to Be Tried explains: 1. . . . The substrates are used in the United States solely or principally as bases in the production of integrated circuits []. . . . * * * 4. At the time of importation, these substrates are dedicated to their use as IC substrates. There is no other regular commercial application for these articles. 5. In general, Kyocera s customers for blank ceramic substrates are laser houses that will . . . generally sell the scored substrates to IC manufacturers who will, in the case of thick-film substrates, use screen printing to place resistors and electrical interconnects for multiple IC s on the substrate. In the case of thin film substrates, resistors and interconnects are achieved through vacuum deposition or sputtering. Additional components (e.g., monolithic integrated circuits, transistors, diodes) are then affixed to the substrate. The result is a square or rectangle consisting of multiple hybrid integrated circuits on a conjoined substrate. Footnotes omitted. Court No. 02-00705 Page 9 Due to the material differences between the subject imports at issue in each case, this court cannot and therefore does not conclude that the Diacon Ruling applied to all ceramic substrates for integrated circuits . It was not modified or revoked by the later 1999 or 2002 rulings, and the procedures of 19 U.S.C. §1625(c)(1) did not govern plaintiff s imports. (2) With regard to plaintiff s alternative claim of treatment , in Arbor Foods, Inc. v. United States, 30 CIT ___, ___, Slip Op. 06-74, p. 16 (May 17, 2006), the court held that, [t]o establish a violation of § 1625(c)(2), [a party] must show that: (1) an interpretive ruling or decision (2) effectively modifie[d] (3) a treatment previously accorded by Customs to (4) substantially identical transactions , and (5) that interpretive ruling or decision has not been subjected to the notice-andcomment process outlined in § 1625(c)(2). Precision Specialty Metals, Inc. v. United States, 24 CIT 1016, 1040, 116 F.Supp.2d 1350, 1374 (2000). That is, in order to prevail on its subsection 1625(c)(2) claim, KICC has the evidentiary burden of showing that the 1999 Ruling effectively modified a treatment previously accorded by Customs to substantially §177.12(c)(1)(iv). identical transactions. See 19 C.F.R. To quote again from Arbor Foods, [b]ecause § 1625(c) does not define treatment, the agency and the reviewing court give[] the undefined Court No. 02-00705 Page 10 term its ordinary meaning. . . . In Precision Specialty Metals, the court held that treatment refers to the actions of Customs and that § 1625(c) allows importers to order their behavior based on Customs prior actions. . . . Customs, however, narrowed the scope of actions that constitute treatment under § 1625(c). In 19 C.F.R. § 177.12(c), Customs stated that [it] will give no weight whatsoever to informal entries or transactions which [it], in the interest of commercial facilitation and accommodation, processes expeditiously and without examination or Customs officer review. 19 C.F.R. § 177.12(c)(1)(ii) (2006). The Federal Circuit subsequently held that this was a permissible construction of § 1625(c) that warrants deference and that entries liquidated under Customs bypass procedures are not considered treatments for the purposes of § 1625(c). . . . 30 CIT at ___, Slip Op. 06-74, p. 17 (case citations omitted). Here, the plaintiff claims that it was not required to comply with these later-adopted regulations when section 1625 in its protest filed in October 2000 . Memorandum, p. 18. it invoked Plaintiff s However, the court of appeals has held in Motorola, Inc. v. United States, 436 F.3d 1357, 1366 (Fed.Cir. 2006), that [i]t makes no difference to our analysis that the regulation was promulgated in 2002, after the controversy arose and after this litigation began. So long as an agency s interpretation of a statute is not a post hoc rationalization . . . seeking to defend past agency action against attack, Auer v. Robbins, 519 U.S. 452, 462 . . . (1997), or wholly unsupported by regulations, rulings or administrative practice, Smiley v. Citibank (S.Dak.), N.A., 517 U.S. 735, 741 . . . (1996)(quoting Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 212 . . . (1988)), Chevron deference is Court No. 02-00705 Page 11 due even if the adoption of the agency s interpretation postdates the events to which the interpretation is applied. Subsection 177.12(c)(1)(i) of 19 C.F.R. provides that, to substantiate a claim of treatment , there must be evidence to establish that (A) There was an actual determination by a Customs officer regarding the facts and issues involved in the claimed treatment; and subsection (c)(1)(iv) adds that the evidentiary burden as regards the existence of the previous treatment is on the person claiming that treatment. The evidence of previous treatment by Customs must include a list of all materially identical transactions by entry number (or other Customs assigned number), the quantity and value of merchandise covered by each transaction (where applicable), the ports of entry, the dates of final action by Customs, and, if known, the name and location of the Customs officer who made the determination on which the claimed treatment is based. In addition, in cases in which an entry is liquidated without any Customs review (for example, the entry is liquidated automatically as entered), the person claiming a previous treatment must be prepared to submit to Customs written or other appropriate evidence of the earlier actual determination of a Customs officer that the person relied on in preparing the entry and that is consistent with the liquidation of the entry. Although the plaintiff discounts the need to follow these regulations, it argues compliance in that KICC inform[ed] Customs of its reliance on the Diacon Ruling on multiple Court No. 02-00705 Page 12 occasions orally and in documentary form by including the Diacon Ruling in its entry packages. p. 19. Plaintiff s Reply Memorandum, The plaintiff asserts that it should not be penalized because [the Customs officer] was not paying attention despite [KICC s] repeated efforts to inform him of that fact. 20. The requirement is actual determination, Id. at however, not attempted notice by an importer. Additionally, subsection evidence the plaintiff 177.12(c)(1)(i)(A), is clearly supra, establish[ed] claims in in satisfaction that the the of requisite declarations designated exhibits 5 and 6, and executed by Michael G. Lubitz and Penny A. Evans, KICC s Import/Export Specialist during the period 1991 1995 and the company s Manager of the Import/Export Department from 1990 through 1994, respectively. In addition to the representations quoted from the Lubitz declaration, supra, the Evans declaration states: 2. In 1992, I was advised by Joyce Bryant of USCS s Otay Mesa office that a new ruling, HQ 088157 (July 2, 1992)(i.e., the Diacon Ruling ), was issued that affected the tariff classification of blank ceramic substrates imported [by] Kyocera []. The Diacon Ruling held that ceramic pieces used as mounting bases for electronic integrated circuits were properly classified under subheading 8542.90 of the [HTSUS] as parts of integrated circuits. Court No. 02-00705 Page 13 While there may well have been no objection on the part of Customs, determination that was that would 177.12(c)(1)(i)(A). not the satisfy equivalent the of standard a of positive subsection With regard to the foregoing paragraph from the Evans declaration, in its Diacon Ruling Customs cites Kyocera Int l, Inc. v. United States, 2 CIT 91, 527 F.Supp. 337 (1981), aff d, 69 CCPA 168, 681 F.2d 796 (1982), for support of its classification decision. That matter dealt with imports described as ceramic articles which, [a]fter completion of assembly and processing . . . function as a package or housing for an associated integrated circuit chip . F.Supp. at 337, 338. apply to certain 2 CIT at 91, 92, 527 Therefore, the Diacon Ruling could or would KICC ceramic imports, and incorrect for Customs officers to so react. it would not be But, there is no support on the record, adduced from plaintiff s declarations or otherwise, that [t]here was an actual determination by a Customs officer regarding the facts and issues involved in the claimed treatment herein. Counsel have also filed Plaintiff s Supplemental Statement of Material Facts as to Which There is No Genuine Issue to Be Tried. Among other things, it represents that, [p]rior to Court No. 02-00705 the issuance of Page 14 NY D88010 on March 10, 1999, blank ceramic substrates imported by Kyocera were consistently classified under HTSUS subheading 8542.90. The declaration of Gregory Onses and list of entries attached thereto are presented to prove this point. However, as long as evidence is absent that such classi- fication was the result of an actual determination by a Customs officer and those elements spelled out by 19 §177.12(c)(1)(iv), the presentment is not conclusive. C.F.R. Moreover, the court notes in passing that the attached list of Blank Substrates Totals by Line Item fails to reveal the ports of entry, the dates of final action by Customs, and the name(s) and location(s) of Service officer(s) who made any determination(s) on which the claimed treatment is based. The list also fails to prove that its imports were materially identical transactions . In sum, the evidence submitted, such as it is, does not establish that Customs approved the classification of [subject] blank ceramic substrates as parts of ICs , plaintiff s motion for summary judgment. suggest that the imports at issue were as claimed in There is nothing to processed after an examination by Customs or after Service-officer review of the Court No. 02-00705 Page 15 kind contemplated by 19 C.F.R. §177.12(c)(1)(i)(A), supra, and there certainly meaning of is not subsection adequate factual evidence 177.12(c)(1)(iv). This within court the thus concludes that the plaintiff has failed to satisfy the burden required to prevail on its treatment claim under 19 U.S.C. §1625(c)(2). II Independent of any legal consequence of the Diacon Ruling for the merchandise still at bar4, the plaintiff continues to press for classification under HTSUS chapter 85, heading 8542, as follows: 8542 Electronic integrated circuits and microassemblies; parts thereof: * 8542.90.00 * * Parts That is, plaintiff s protests of classification under HTSUS subheading 4 6914.10.80 ( Other ceramic articles: Included in plaintiff s entries were magnetic head sliders in disc drives for processing machines, the classification of which herein. See Slip Op. 03-148, 27 CIT at 1704 and 1361 n. 3. Of porcelain or substrates for automatic data is not at issue 293 F.Supp.2d at Court No. 02-00705 Page 16 china: . . . Other ) led Customs to issue HQ 964811 (May 1, 2002), which opted for subheading 6909.11.40, to wit: 6909 Ceramic wares for laboratory, chemical or other technical uses; . . . 6909.11 Of porcelain or china: * * 6909.11.40 * Other A Each side is of the view that this action is ripe for summary judgment. See, e.g., Defendant s Plaintiff s Reply Memorandum, p. 1. Memorandum, p. 7; Upon review of all of the papers filed in support of, and in opposition to, the parties cross-motions, the court cannot conclude that there is any genuine issue of material fact that cannot be resolved without a trial. Cf. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Indeed, a classification decision, ultimately, is a question of law based on two underlying steps. Universal Elecs., Inc. v. United States, 112 F.3d 488, 491 (Fed.Cir. 1997). First, the court must define the terms in the relevant classification headings, then it has to determine under which of them the subject imports more correctly land. Id. When defining the terms in a tariff heading, the court proceeds de novo, for Court No. 02-00705 [i]t is Page 17 emphatically the province and duty of the judicial department to say what the law is. Id. at 492, quoting Marbury v. Madison, 5 U.S. 137, 177 (1803). Although our review is de novo, we accord deference to a Customs classification ruling in proportion to its power to persuade under the principles of Skidmore v. Swift & Co., 323 U.S. 134 . . . (1944). Cummins Inc. v. United States, 454 F.3d 1361, 1363 (Fed.Cir. 2006)(case citations omitted). HTSUS General Rule of Interpretation ( GRI ) 1 is that, for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes of the HTSUS. And the heading which provides the most specific description shall be preferred to headings providing a more general description. GRI 3(a). Additional U.S. Rule of Interpretation 1(c) states that a provision for parts of an article covers products solely or principally used as a part of such articles but a provision for parts . . . shall not prevail over a specific provision for such part . . .. (1) Accordingly, if the ceramic substrates at issue herein are parts of electronic integrated circuits at the time of their importation, they should be classified under subheading Court No. 02-00705 Page 18 8542.90.00, supra, it being more specific. On the other hand, if the subject imports are not parts thereof , heading 6909 must be considered. Cf. Bauerhin Technologies Ltd. Partnership v. United States, 110 F.3d 774, 779 (Fed.Cir. 1997)( a provision for a part must prevail over a mere basket provision ). Here, the meaning of subheading 8542.90.00 focuses on the word parts . The question of whether something is a part or a material has been considered in numerous prior cases. In Baxter Healthcare Corp. v. United States, 182 F.3d 1333 (Fed.Cir. 1999), for example, the court considered whether Oxyphan®, which was imported in ten-kilometer spools, was a part or a material for purposes of the HTSUS. The exact length of the Oxyphan® required for each finished item was not fixed with certainty at the time of entry. Post-importation, it was cut, tied in groups, and wrapped around a steel bellow. The court relied on the following two-prong analysis: . . . First, the item must be dedicated solely or principally for use in those articles and must not have substantial other independent commercial uses. See Bauerhin, 110 F.3d at 779. . . . Second, if the item as imported can be made into multiple parts of articles, the item must identify and fix with certainty the individual parts that are to be made from it. See The Harding Co. v. United States, 23 C.C.P.A. 250, 253 (1936). 182 F.3d at 1338-39 (emphasis in original). Court No. 02-00705 At bar, Page 19 the defendant admits that at the time of importation, the principal commercial use of Kyocera s articles is as IC substrates, and that as so used, the substrates are dedicated to that use. Defendant s Statement of Material Facts, para. 4. of Material Facts, para. 4. Response to Plaintiff s Cf. Plaintiff s Statement Therefore, the focus now is on the second element of the Baxter test. In that case, the court found that the rolls of Oxyphan® were not parts [b]ecause the individual parts are not identifiable or fixed at the time of import, thereby failing the fix with certainty the individual parts that are to be made from it standard. See 182 F.3d at 1339. Cf. Benteler Industries, Inc. v. United States, 17 CIT 1349, 1356, 840 F.Supp. 912, 918 (1993)(a laser cutting process eliminated need for physical markings yet the number of parts was fixed with certainty prior to importation). In Ludvig Svensson (U.S.) Inc. v. United States, 23 CIT 573, 62 F.Supp.2d 1171 (1999), the function and composition of screens for greenhouses that were of high technology, design and planning were found to not have been altered by postimportation processing, which included screens together, and adding tape and hooks. cutting, sewing two That processing was Court No. 02-00705 found to be Page 20 minor, attributable to installation. In E.M. Chemicals v. United States, 13 CIT 849, 728 F.Supp. 723 (1989), aff d, 920 F.2d 910 (Fed.Cir. 1990), liquid crystals that had been processed sufficiently to dedicate their use in LCDs and whose post-importation treatment consisted of adding a twist agent and then placing the mixture between two panels was found to be assembly. Additionally in that case, although the size of the display to which the liquid crystals would be ultimately dedicated was not known at the time of importation, their character was found to be fixed with certainty at that time due to advanced manufactured state. Courts have considered the extent of post-importation processing in other cases. United States, 10 CIT See, e.g., Heraeus-Amersil, Inc. v. 258, 640 F.Supp. 1331 (1986)(post- importation cutting of contact tape and positioning and welding to certain strength requirements an assembly process, not further processing); The Servco Co. v. United States, 68 Cust.Ct. 83, C.D. 4341 (1972), aff d, 60 CCPA 137, C.A.D. 1098, 477 F.2d 579 (1973)(imports in the shape and form of pipes and tubes not parts due to substantial post-importation processing necessary before they could be drill collars). Court No. 02-00705 Page 21 (2) In a case such as this, the court must review the underlying agency analysis to determine whether it is eligible to claim respect. 221 (2001). United States v. Mead Corp., 533 U.S. 218, The level of respect the court can afford a Customs ruling depends upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control. Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). Additionally, [b]y statute, Customs classification decision is presumed to be correct. 28 U.S.C. ' 2639(a)(1). . . . The presumption of correctness [] carries force on any factual components of a classification decision, such as whether the subject imports fall within the scope of the tariff provision, because facts must be proven via evidence. Universal Elecs., Inc. v. United States, 112 F.3d at 491-92 (internal quotations omitted; emphasis in original). In HQ 964811 (May 1, 2002), relying on Baxter Healthcare Corp., supra, Customs provided KICC with the following rationale for its decision to deny classification of its blank Court No. 02-00705 Page 22 ceramic substrates as parts of electronic integrated circuits and microassemblies under HTSUS subheading 8542.90: As the instant articles are eventually cut into multiple parts, the protestant relies on Benteler Indus., Inc. v. U.S., 840 F.Supp. 912 (CIT 1993), for the proposition that the laser cutting process used on the substrates negates the need for markings. In Benteler, measurements for cutting the steel tubing sections used in car doors were programmed into the laser-cutting machine. We find this argument unpersuasive. In that case, the court held that an indiscernible number of articles could not be made from the steel tubing sections upon entry. See id[.] at 918. The number of beams to be cut from the sections was known prior to importation, and the sections were color-coded and number-coded, as the design of each section was specific to a particular door type and door structure. See id. That is not the case here. The number of individual substrates, and thus integrated circuits, to be made on the blank ceramic substrates is not discernible upon importation. The blanks are sold to laser houses, where various integrated circuits are fabricated according to customer specifications. Moreover, the premise that small articles imported in one piece should be classified as if already cut apart when all that remains to be done is the cutting, see United States v. Buss, 5 Ct. Cust. App. 110, T.D. 34138 (1914), is not relevant here because what remains to be done to the substrates is far more than mere cutting. The laser houses first must fabricate integrated circuits, which involves a series of etching and implantation steps on the whole piece of ceramic before it can be cut into individual parts. . . . These steps exceed the minimal processes performed on the screens in Ludvig Svensson . . .. Without the post-importation processing, or any other identifying characteristic, the ceramic pieces, Court No. 02-00705 Page 23 like the rolls of Oxyphan in Baxter . . . cannot be distinguished at importation as parts of electronic integrated circuits or microassemblies. The identity of the substrates as parts of electronic integrated circuits or microassemblies is not fixed with certainty because the substrates are blank; there are no circuit elements. Accordingly, neither type of blank ceramic substrate [is] classifiable under subheading 8542.90, HTSUS. In its motion for summary judgment, the plaintiff counters that it is clear that the absence of visible markings on the IC substrates to indicate individual parts does not preclude classification of the merchandise as parts. As the Court of International Trade recognized in Benteler, . . . where the imported merchandise is to be cut using a laser cutting machine programmed to cut the merchandise, visible markings on the imported merchandise are unnecessary. Plaintiff s Memorandum, p. 14. HQ 964811, however, discusses Benteler in determining that the substrates are not parts and clearly distinguishes that case where [t]he number of beams to be cut from the sections was known prior to importation , and the sections were appropriately coded. Emphasis added. Although the plaintiff would interpret Customs use of the word discernible to signify visible markings for cutting lines, it is clear to this court that that agency usage is akin to fixed , as used in Baxter and Benteler, supra, and in keeping Court No. 02-00705 Page 24 with the established rule regarding parts as discussed hereinabove. Given that Kyocera generally did not know at the time of importation (1) the sizes of individual integrated circuits [] into which any of the subject substrates would ultimately be cut ; (2) the number of resistors, transistors, diodes, and/or capacitors which were intended to be placed on each of the ICs ; (3) the specific intended design of the interconnects [] to be placed on each of the ICs ; (4) the electric or electronic articles which would incorporate the ICs ;5 or whether any bipolar substrates or metal-oxide semi-conductor ICs are made on any of the subject substrates,6 the court cannot conclude that HQ 964811 is unfounded and therefore not eligible to claim respect within the meaning of Skidmore, supra. (3) Should the court defer to HQ 964811, it still must ensure that correct . the Customs choice of tariff classification Jarvis Clark Co. v. United States, 733 F.2d 873, 876-78, reh g denied, 739 F.2d 628 (Fed.Cir. 1984). 5 is While, as Defendant s Statement of Undisputed Material Facts, paras. 1 to 4. 6 See id., paras. 5, 6. Court No. 02-00705 Page 25 quoted above, that ruling letter concludes that the identity of the substrates as parts of electronic integrated circuits or microassemblies is not fixed with certainty because the substrates are blank; there are no circuit elements, further discussion is warranted. When pre-importation processing leaves a good in such an advanced manufactured state or of such high technology, design and planning that it is dedicated for one purpose, its See generally E.M. identity can be said to have been set. Chemicals and Ludvig Svensson (U.S.) Inc., supra. For post- importation processing to be substantial, it must alter the function or composition of the [import] . Ludvig Svensson (U.S.) Inc. v. United States, 23 CIT at 583, 62 F.Supp.2d at 1180. Here, it is undisputed that, pre-importation, KICC s imports are fabricated in such a manner as to engender technical properties that are required for use as IC substrates. See Plaintiff s Statement of Material Facts as to Which There is No Genuine Issue to Be Tried, paras. 2 and 27; Defendant s Response to Plaintiff s Statement, paras. 2 and 2. In fact, it is reasonably clear that ceramic products can be highly developed 7 2 . Plaintiff s statement has consecutive paragraphs numbered Court No. 02-00705 Page 26 where their manufacturing process includes preparation of the paste, shaping, drying, firing, and finishing. See, e.g., World Customs Description Organization, Harmonized Commodity and Coding System, 3 Explanatory Notes 995-96 (2d ed. 1996). Ludvig Svensson (U.S.) Inc., E.M. Chemicals and Baxter Healthcare Corp. all manufactured state. dealt with imports in an advanced In the first two of those cases, the court found that the imports were merely assembled post-importation. In Baxter, the court found that cutting lengths of the imported Oxyphan®, tying them together, wrapping them around a cylinder 22 times and enclosing them in a manifold was significant postimportation processing. In this action, at the times of importation of the substrates, KICC did not know the IC finished size, materials therein, or ultimate use thereof. See Defendant s Statement of Undisputed Material Facts, paras. 1-8. some 60 companies, manufacturers, where, typically in turn, The blanks were sold to laser houses rather such houses would than score IC the substrates, create required holes, and then generally sell them further processed to IC manufacturers. If this, in fact, was what first See id., paras. 9-12. happened to plaintiff s Court No. 02-00705 products upon Page 27 entry, it cannot be said that they were not subjected to substantial further processing, as discussed and defined in the cases cited. It was that processing which transformed the imported ceramic ware for technical use into part of an electronic integrated circuit. required to conclude that plaintiff s Ergo, this court is products were and are properly classified under HTSUS subheading 6909.11.40, supra. III In view of the foregoing, plaintiff s summary judgment as filed must be denied. motion for Judgment will enter accordingly. Decided: New York, New York December 21, 2006 /s/ Thomas J. Aquilino, Jr.____ Senior Judge

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