US Says Importer Flubs 'Principal Use' Analysis of Cables in Customs Spat
Importer Cyber Power Systems erred in analyzing whether its cables fit under Harmonized Tariff Schedule subheading 8544.42.90, which provides for cables "of a kind used for telecommunications," by only looking to the "device and industry in which" its cables are used, the U.S. argued (Cyber Power Systems (USA) v. United States, CIT # 21-00200).
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Filing a reply brief at the Court of International Trade on Dec. 19, the government argued that Cyber Power advances the "faulty premise" that the subheading covers cables of a kind used "in" telecommunications and that the term "telecommunications" means "any technology that deals with telecommunications."
The U.S. argued that the "subheading covers cables of a kind used 'for' telecommunications, which compels an analysis of the cables’ principal use." While Cyber Power "wholly ignores the cable's principal use" and merely focuses on the device and industry in which they are used, the principal use of the cables "is to power" optical network terminal devices, "not transmit information."
The case concerns cables used to connect battery backup units or power adapters to a broadband service provider's optical network terminal. In the case, the U.S. is contesting CBP's classification of the cables under duty-free subheading 8544.42.20, while the importer supports CBP's initial subheading and opposes the government's preferred subheading of 8544.42.49, which carries a 2.6% duty rate and is subject to Section 301 China tariffs (see 2508070060).
In its brief supporting its cross-motion for judgment, the U.S. argued that the definition of "telecommunications" advanced by Cyber Power is "inconsistent with a plain reading of the tariff provision and seeks to replace the term 'telecommunications' with 'telecommunications apparatus.'"
Cyber Power said the term "telecommunications" means "technology that deals with telecommunication," claiming that such definition would include the subject cables, since they "assist in running an [optical network terminal] and deal with assisting in communications."
The government said the "technology" that deals with telecommunication here is the optical network terminal, "not the subject cables, which provide, as their purpose, electricity to the device." The subject cables aid in any ongoing telecommunications operation "only insofar as they power the device." What the importer is really trying to do is have the term "telecommunications devices" replaced for the "actual statutory provision at issue," which is wrong, since the HTS "elsewhere specifies 'telecommunications apparatus,'" the brief said.