CAFC Says Extra Batteries for Dell Laptops Not Part of Duty-Free Set
The U.S. Court of Appeals for the Federal Circuit has affirmed the Court of International Trade's decision in Dell Products LP, v. U.S., that for tariff purposes, goods put up in sets for retail sale refers to goods that are offered to customers as a set for purchase rather than to a collection of goods that are assembled into a set after the customer has purchased them, in which case, the goods would be classified separately.
(Dell offered laptop1 computers for sale with a primary battery, a power cord and adapter, and operational manuals. Dell offered retail customers the option to purchase other accessories including a secondary battery as an additional power source that enabled longer unplugged operation of the laptop computer than would be possible with the primary battery.)
CBP Said Extra Batteries Not Part of Laptop Retail Set
In this case, the secondary batteries were packaged together with laptop computers in a Foreign Trade Zone. On withdrawing the merchandise from the FTZ, Dell made entry classifying the secondary batteries with the Dell laptop computer as duty-free portable digital automatic data processing machines under HTS 8471.30.00.
U.S. Customs and Border Protection disagreed and classified the secondary batteries as other storage batteries under HTS 8507.80.80 at a 3.4% duty rate, determining that the secondary batteries were not “put up in sets for retail sale” with the laptop computers under General Rule of Interpretation 3(b) (GRI 3(b)) of the Harmonized Tariff Schedule and that the secondary batteries therefore should be classified separately from the laptop computers.
Dell Argued Batteries Were in Laptop’s Shipment Package, Qualify as Part of Set
Dell appealed to the CIT, contending that its secondary batteries qualify as part of a “retail set” because they were included in the shipping box that was sent from the FTZ to the customer. Dell argues that goods packaged together for shipment should be treated in the same way as goods packaged together for sale, as long as those goods are packaged together upon entry into the U.S. (or upon departure from the FTZ).
CIT Ruled Articles Must be Offered for Sale/Displayed Together to be Part of Set
The CIT interpreted GRI 3(b) to require distinct articles to be “offered together for retail sale or displayed or shown together for retail sale” before they could be classified together for tariff purposes. CIT found the batteries in this case are not offered or displayed together for retail sale with the computer, but are offered individually. The CIT concluded that the batteries are simply one of many optional, complementary items that may be purchased at the same time as a laptop and therefore are not "put up together" with other components of the retail set.
CAFC Affirms Extra Batteries Were Not Put Up in Sets, to be Classified Separately
The CAFC states it agrees with the CIT that the phrase “goods put up in sets for retail sale” in GRI 3(b) refers to goods that are offered to customers as a set for purchase, not to a collection of goods that are assembled after purchase. The CAFC states that there is no indication that “put up” for sale means packaged for delivery to the customer. Rather, a set of goods that is packaged for retail sale is offered to customers as a single unit of merchandise, it is not a collection of goods that happen to be packaged together to be transported to the customer, regardless of whether they had any prior connection.
If distinct articles are put up in sets for retail sale, GRI 3(b) provides that those articles are classified collectively according to the material or component that gives them their essential character. However, if those articles are not put up in sets for retail sale, GRI 1 provides that each article will be classified separately. Therefore, the CAFC upholds the CIT's judgment to separately classify Dell’s secondary batteries as “other storage batteries.”
1CAFC interchangeably uses the terms "laptop computers" and "notebook computers".
(See ITT's Online Archives or 06/17/11 news, 10061680, for BP summary of the CIT ruling that the secondary battery is not part of a duty-free set.)
(Appeal Number 2010-1451, dated 04/29/11)