CIT Rules Extra Battery for Customized Notebook is Not Part of Duty-Free Set
In Dell Products LP, v. U.S., the Court of International Trade agreed with U.S. Customs and Border Protection that secondary batteries were properly considered other storage batteries under Harmonized Tariff Schedule subheading 8507.80.80 at 3.4% ad valorem and not duty-free as portable digital automatic data processing machines under HTS 8471.30.00, the classification that applied to the notebook computers with which the batteries were packaged.
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The secondary batteries manufactured for Dell notebook computers acted as an additional power source that enabled longer unplugged operation of the notebook computer than would be possible with the primary battery. Dell offered retail customers purchasing a notebook computer with a primary battery the option of other accessories including a secondary battery.
In this action, the secondary batteries were packaged together with notebook computers in the Foreign Trade Zone. On withdrawing the merchandise from the FTZ, Dell made entry classifying the secondary batteries with the Dell notebook computer under HTS 8471.30.00, duty free. Customs and Border Protection disagreed and upon liquidation, classified the secondary batteries as other batteries under HTS 8507.80.80 at 3.4% ad valorem.
Dell asserted that secondary batteries were properly classified together with the Dell notebook computers with which they were packaged, under Heading 8471 for two reasons. Dell argued first that the secondary batteries were “functional units” of the notebook computer or, in the alternative, a component of a “retail set” under General Rules of Interpretation 3(b).
In support of the first argument, Dell contended that the secondary batteries were essential for the intended use of the notebook computer. The CIT disagreed, however, stating that a portable computing function was completely served by the combination of the primary battery encased in the computer along with a power adapter.
In response to Dell’s argument that the batteries were a component of a “retail set”, the CIT stated that simply marketing or offering items together does not create a “retail set” for GRI 3(b) purposes. Rather, the court stated that a consumer’s customized order of individual, complementary items, (i.e. items that were never “put up” together as a pre-determined combination), is not transformed into a GRI 3(b) “retail set” upon entry, merely by virtue of having been ordered and subsequently packaged in an FTZ.
The language of GRI 3(b) indicates that a “retail set” is an identifiable collection of goods comprising a set that is put up for purpose of retail sale. In this case, the secondary batteries were never put up for sale as part of a fixed grouping of goods; they were simply offered for sale individually.
Accordingly, the secondary batteries could not be classified either as part of a GRI 3(b) retail set, nor as a functional unit of the notebook computer.
Slip Op 10-66 (dated 06/10/10)