Before Lourie, Circuit Judge, Archer, Senior Circuit Judge, and Rader, Circuit Judge.
The opinion of the court was delivered by: Rader, Circuit Judge.
Appealed from: United States Court of International Trade judge Richard W. Goldberg
On summary judgment, the United States Court of International Trade upheld the United States Customs Service's (Customs') classification of certain disk drives and controllers imported by International Business Machines Corporation (IBM). See 968 F. Supp. 736 (Ct. Int'l Trade 1997). Because Customs incorrectly classified the merchandise as "[o]ffice machines not specially provided for," rather than "[p]arts of automatic data-processing machines and units thereof," this court reverses.
In the 1980s, IBM imported disk drives ("Direct Access Storage Drives," model nos. 7777-B01 and 9335-B01) and controllers for those drives ("Device Function Controllers," model nos. 7777-A01, 9335-A01, and 9335-A02). Both the drives and controllers are components of the IBM model 9335 Direct Access Storage System, which in turn provides fixed-disk storage for an automatic data processing system, the IBM A/S 400. The Direct Access Storage System consists of one controller and from one to four drives, all contained within a rack enclosure. The picture below illustrates how the controllers and drives slide into the rack mechanism: *fn1
In operation, the controller directs the drives to store and retrieve data in response to requests by the IBM A/S 400. Neither the controllers nor the drives are stand-alone peripheral devices. Instead they operate solely in the 9335 Direct Access Storage System. Moreover, neither operates without the other.
IBM imports the individual drives and controllers separately. Among other things, each drive contains three 14-inch magnetic hard disks and 12 read/write heads. Each controller contains a microprocessor, as well as both random-access read/write and read-only memory. In addition, both devices have their own "power supplies" (voltage transformers), cooling equipment, and various data input and output ports. Although each controller and drive has a flat-bottomed housing, they are specifically designed for mounting on slide rails within the rack enclosure. Thus, after importation the controllers and drives are fitted with cables and the slide assemblies required to slide-mount them in the rack enclosure.
From April 1985 until December 1986, Customs consistently liquidated the subject drives and controllers - all at the Port of Minneapolis, Minnesota - as "[p]arts of automatic data-processing machines," duty-free under Item 676.54, TSUS. Thereafter, however, for subject merchandise that entered at the Port of Minneapolis and at Logan Airport in Boston, Customs liquidated the subject drives and controllers as "[o]ffice machines not specially provided for," under Item 676.30, TSUS, at a duty rate of 3.7% ad valorem.
IBM timely filed protests of liquidation at the higher rate, which Customs denied. In 1994, IBM sought review in the Court of International Trade. In that court, IBM contended that Customs had an "established and uniform practice" of classifying the subject drives and controllers as "[p]arts of automatic data-processing machines." Therefore, IBM maintained, Customs could only reclassify them if it first supplied notice under 19 U.S.C. § 1315(d) (1988). Regardless of the notice requirement, IBM also argued that Customs had incorrectly classified the merchandise. On cross-motions for summary judgment, the Court of International Trade found no established practice and determined that Customs had properly classified the imports as "[o]ffice machines not specially provided for." IBM appeals. Because this court determines that Customs improperly classified the imports, it need not consider whether the Court of International Trade properly determined that Customs had no "established and uniform practice."
At the time of entry of the imports, the Tariff Schedules of the United States, Schedule 6, Part 4, Subpart G ("Office Machines") provided:
Typewriters not incorporating a calculating mechanism:
676.05 Non-automatic with hand-operated keyboard
Addressing, numbering, dating, and check-writing machines: