Multiple branches of government can be a real pain sometimes.
In the ongoing WTO EC - IT Products dispute (DS375, and also DS376 and DS377 brought by Japan and Chinese Taipei), the U.S. (that is, USTR) argued that the EC's reclassification of certain monitors in a way that led to higher duties was inconsistent with GATT Article II. Here's a brief snippet of the claim from the U.S. first written submission:
55. Certain flat panel display devices were included in the ITA. Specifically, Attachment B of the ITA provides that participants shall “bind and eliminate” customs duties with respect to: Flat panel display devices (including LCD, Electro Luminescence, Plasma, Vacuum-Fluorescence and other technologies) for products falling within this agreement, and parts thereof.70
56. “Automatic data processing machines,” such as computers, “fall within” the ITA.71 Thus, this commitment includes flat panel display devices “for” computers – that is, flat panel computer displays such as LCD monitors. ...
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58. FPDs [Flat Panel Displays] entered the EC duty-free for years after the ITA was concluded and implemented, as required by the EC’s tariff concessions under the ITA. Then,... the EC changed course and over a period of three years, from 2004 to 2007, adopted a series of measures that resulted in the end of lasting duty-free treatment for virtually all LCD flat panel display devices exported to the EC. ...
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121. Based on the ordinary meaning in context of the terms in the EC’s Schedule, LCD monitors are “flat panel display devices...for products falling within this agreement.” A flat panel display device is “[a] video display with a shallow physical depth, based on technology other than the CRT (cathode-ray tube). Such displays are typically used in laptop computers. Common types of flat-panel displays are the electroluminescent display, the gas discharge display, and the LCD display.”166 In the ITA, the parenthetical following the terms “flat panel display devices” specifically identifies LCD flat panel display devices167 as one example of a flat panel display device. Computers (“automatic data processing machines”) are among the “products falling within” the ITA.168 LCD monitors “for” computers are therefore among the devices covered by the EC’s commitment with respect to flat panel display devices. Therefore, under the headnote, the EC and its member States are obliged to accord duty-free treatment to flat panel display devices for ITA products, and in particular LCD monitors, wherever they are classified.
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122. Following implementation of the ITA, flat panel display devices such as LCD monitors imported into the EC were generally classified in CN line 8528 51 00 and its predecessor lines, and entered duty-free.169 CN 8528 51 00 covers monitors “[o]f a kind solely or principally used in an automatic data processing system of heading 8471”. However, as a result of several regulations and a CNEN adopted between 2004 and 2007, the EC and its member States began classifying certain FPDs under what is now CN code 8528 59 90170 and applying duties of 14% to these devices.
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FN. 169 The EC renumbered CN 8471 60 90 to 8471 6 169 0 80, and later transposed the heading to CN 8528 51 00 as part of HS2007 implementation.
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124. According to the EC, despite the fact that the LCD monitors in question were “mainly used” as computer monitors, the mere possibility that they could be connected to a source other than an computer meant that they were not covered by the ITA and therefore were not entitled to duty-free treatment. ...
125. In regulations and amendments to the CNENs issued by the EC in late 2005 and 2006, the EC took further steps to exclude flat panel display devices from duty-free treatment in the EC. In these measures, the EC identified particular characteristics shared by approximately half of all LCD flat panel display devices – in particular, the presence of a DVI connector – as the basis for excluding the device. ......
127. Several EC member States have issued BTIs reclassifying flat panel display devices as “video monitors” due to the presence of DVI. ...
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140. As explained above, the EC and its member States have acted inconsistently with Article II:1(b) by imposing ordinary customs duties on “flat panel display devices” for ITA products in excess of the bound rate established in their Schedule. Consequently, consistent with the approach adopted by the Appellate Body in, for example, Argentina – Footwear, the measures also result in duty treatment less favorable than that provided in the EC Schedule, contrary to Article II:1(a) of GATT 1994.
That's a lot of details to digest, and perhaps not a perfectly clear extract. In a nutshell, under the WTO Information Technology Agreement (ITA) the EC had been giving certain flat panel display monitors (including LCD monitors) duty-free treatment as computer monitors. These monitors could be used for more than just computers, though, and the EC later reclassified them as video monitors, which were subject to a duty. The U.S. alleged a violation of GATT Article II, arguing that the reclassification as video monitors was improper. (The WTO panel ruling in this case should be out soon.)
Moving to another branch of government, the Court of International Trade (CIT) recently (March 1) issued the following decision in the BenQ Am. Corp. v. United States case on a similar classification issue:
In this action, Plaintiff BenQ America Corporation challenges the decision of the Bureau of Customs and Border Protection denying BenQ’s protest concerning the tariff classification of certain liquid crystal display (“LCD”) monitors imported from the People’s Republic of China in mid-May 2004.
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The Government maintains that Customs properly classified the merchandise at issue – Dell™ 2001FP Flat Panel Color Monitors – as “video monitors” under heading 8528 of the Harmonized Tariff Schedule of the United States (“HTSUS”), assessing duties at the rate of five percent ad valorem.
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BenQ contends that the monitors instead should have been classified as display units for automatic data processing (“ADP”) machines under HTSUS heading 8471, duty-free.
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According to a study commissioned by BenQ, which surveyed purchasers of the monitor at issue (and a somewhat earlier model), “[a] very large majority (86.6 percent) of survey respondents . . . purchas[ed] the monitors . . . for use principally as a display unit for computer uses,” and “[a]n overwhelming majority (more than 99 percent of survey respondents)” were using the monitors with a computer.
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[However,] as designed, manufactured, and imported, the monitors at issue are equipped to receive signals from both computers and other non-computer devices.
... Asserting that the “principal function” of the imported merchandise is “as a computer monitor,” BenQ contends that the merchandise should be classified under HTSUS heading 8471 (“Automatic data processing machines and units thereof”), duty-free, as BenQ claimed at the time of importation. ... In contrast, the Government maintains that Customs correctly classified the monitors under heading 8528 (“Reception apparatus for television . . .; video monitors and video projectors: Video monitors”), dutiable at the rate of five percent ad valorem, and that Customs’ denial of BenQ’s protest should therefore be sustained.
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As set forth below, however, under Chapter 84 Note 5 (read in tandem with the relevant Explanatory Notes), the pivotal issue is instead whether the imported merchandise can “perform[ ] a specific function other than data processing” – or, stated differently, whether the monitors “are capable of accepting a signal only from the central processing unit [“CPU”]” of a computer (or whether they can also accept non-computer signals).
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The imported monitors are thus classified under HTSUS heading 8528 under a straightforward GRI 1 analysis.
... the imported monitors cannot be classified as display “units” of “automatic data processing machines” under HTSUS heading 8471. See section III.B, supra. By the same token, it is undisputed that the monitors are video monitors. See section III.A, supra. As such, they are classifiable as “video monitors” under the broad eo nomine heading 8528, and thus were properly classified thereunder. See section III.A, supra. All that remains now is to ascertain the proper subheading.
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Customs classified the monitors under subheading 8528.21.70, which covers “Reception apparatus for television, . . . ; video monitors . . . : Video monitors: Color: With a flat panel screen: Other: Other.” See Subheading 8528.21.70, HTSUS. Here, there is no claim by BenQ that some other subheading of heading 8528 more specifically describes the imported merchandise. An independent review of the potential subheadings confirms that, in fact, there is none. The monitors were thus properly classified under subheading 8528.21.70 of the HTSUS.
Again, sorry for the mangled extract, but if I'm reading this correctly, the CIT thinks that LCD monitors are properly classified as video monitors, rather than computer monitors (that is, "ADP" monitors).
Sifting through the customs classification reasoning in the CIT decision and the U.S. WTO submissions is a challenge for me. Customs classification is not something I look at very often. At first glance, though, it seems to me that the CIT position on classification is the opposite of what the U.S. argued to the WTO. Maybe there's some way to reconcile the positions, but I don't see it.
Aside from the customs issues, what also interests me is whether the two proceedings will refer to each other. Looking quickly through the various WTO submissions available online, I did not see a reference to the U.S. litigation. But perhaps with the release of this CIT decision, it will begin to play a role.
ADDED:
Lawrence Friedman of the Customs Law Blog talks here about practical considerations resulting from a recent shuffle in the U.S. tariff schedule, which appears to bring the monitors in question back to duty-free status.
