CAFC Affirms Ruling on iPad Cases as Cases, Not Accessories
The U.S. Court of Appeals for the Federal Circuit on June 2 affirmed a lower court ruling that found plastic Apple iPad 2 “smart cover” cases are classifiable in the tariff schedule as articles of plastic, not as accessories for automatic data processing machines, despite their additional function as a stand.
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The Court of International Trade had in March 2019 ruled against Apple’s arguments that the cases are not subject to the general exclusion for cases from classification as accessories in heading 8473 (see 1903190017). That duty-free heading covers “parts and accessories (other than covers, carrying cases and the like suitable for use solely or principally with machines of headings 8469 to 8472.” Instead, CIT found the cases classifiable as articles of plastic of heading 3926, with a 5.3% duty rate.
Apple contended that, as the smart covers can be folded into stands, the exclusion for covers and carrying cases doesn’t apply. It cited the Explanatory Note to heading 8473, which says the heading: “excludes covers, carrying cases and felt pads: these are classified in their appropriate headings. It also excludes articles of furniture (e.g. cupboards or tables) whether or not specifically designed for office use (heading 94.03). However, stands for machines of headings 84.69 to 84.72 not normally usable except with the machines in question, remain in this heading.”
According to Apple, the cases fall under the exception for stands for a machine of heading 8469 to 8472. The Federal Circuit agreed with the trade court that Apple’s reading of the Explanatory Note was all wrong, and went even further to say that, even if Apple was right, the Explanatory Note is irrelevant.
Apple’s “argument misunderstands the purpose of Explanatory Notes,” CAFC said. “Explanatory Notes cannot create an exception to an HTSUS heading.” While they are “generally useful as guides to the scope of unclear HTSUS headings,” the notes are “not legally binding,” it said. The Explanatory Notes “cannot be used to ‘narrow’ or amend or create ambiguity” in the language of a Harmonized Tariff Schedule heading, CAFC said.
Apple’s reading of the Explanatory Note also fails to correctly apply key principles of legal interpretation, particularly the “rule of the last antecedent,” CAFC said. The Explanatory Note divides its list of products excluded from classification in heading 8473 into two sentences, the first for cases and the second for furniture. The next sentence can be read only to modify its “last antecedent” -- the phrase it immediately follows -- in this instance, the exemption for furniture. That means only stands that are articles of furniture are still classifiable in heading 8473. Apple’s iPad cases aren’t furniture, and don’t qualify, CAFC said.
(Apple Inc. v. U.S., CAFC # 2019-1869, dated 07/02/20, Judges Newman, Dyk and Wallach)
(Attorneys: Catherine Stetson of Hogan Lovells for plaintiff-appellant Apple; Beverly Farrell for defendant-appellee U.S. government)