Defining OtterBox for Tariffs

by Dennis Crouch

A substantial portion of the Federal Circuit’s appellate involve customs disputes stemming from the Court of International Trade (CIT).  Usual disputes center on the proper tariff classification of goods being imported into the US.  The Harmonized Tariff Schedule of the United States (HTSUS) is the primary code-book that includes thousands of classifications  and a tariff rate (typically ad valorem).

In the new decision of Otter Producs  v. US (Fed. Cir. 2016), the Federal Circuit was simply asked the question of whether OtterBox phone cases being imported from China should be classified under HTSUS 4202.99.00 as “similar containers” or instead under 3926.90.9980 as “Other articles of plastics.”  The US Customs argued for the first classification – associated with a 20% ad valorem tax – while Otter preferred the second and its 5.3% rate.

As in patent law infringement analysis, the basic process is to look at the classification statements and determine whether the product in question fits within that description.  A major distinction, however, is the reality that every product must fit somewhere. That means that the process focused on the best fit rather than the yes/no analysis used in infringement cases.

The tariff schedule (HTSUS) was passed by congress and thus is interpreted as a statute.  And, as with patent claim construction, the court sees the tariff interpretation as the first step in Customs’ classification determinations and one that is a question of law reviewed de novo on appeal.  Once the tariff provision is interpreted, the court then goes to the second step of figuring out whether the product in question fits the interpreted tariff.  Of course, (as with claim construction) that process has to be somewhat iterative because needs of tariff interpretation (or claim interpretation) are driven by any unique features of the product.

In interpreting the statute, the Federal Circuit has taken the approach of construing HTSUS terms according to “common and commercial meanings, which we presume are the same.”  Although not required by the statute, the court has also taken to relying upon the explanatory notes in the World Customs Organization tariff schedule to aid its interpretation.

In OtterBox, the US proposes that that the the proper classification fit within the category 4202 that includes “Trunks, suitcases, … , binocular cases, camera cases, musical instrument cases … and similar containers; traveling bags, insulated food or beverage bags, toiletry bags, knapsacks and backpacks, handbags, shopping bags, wallets, purses, map cases, cigarette cases, tobacco pouches, tool bags, sports bags, bottle cases, jewelry boxes, powder cases, cutlery cases and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber or of paperboard, or wholly or mainly covered with such materials or with paper … .”  OtterBox proposes a broader category of “3926 Other articles of plastics …”

In siding with OtterBox, the federal circuit stepped through Heading 4202 and found, inter alia, that the OtterBox cases would only fit as “similar containers,” but that they were not really similar.  The important distinction is that OtterBox cases are designed so that the device is fully functional while in the case – that is not true for any of the cases listed in the heading.

The case is a good one to read for those interested in the court’s jurisprudence beyond their usual patent cases.