OT:RR:CTF:VS H125982 BGK
Port Director
U.S. Customs and Border Protection
301 E. Ocean Blvd., Suite 700
Long Beach, California 90802
Re: Protest No. 2704-10-101519; headphones for airplanes; Agreement on Trade in Civil Aircraft
Dear Port Director:
This is in response to the Application for Further Review of Protest No. 2704-10-101519, which pertains to the eligibility of certain headphones for duty-free treatment under the Agreement on Trade in Civil Aircraft (the Agreement), also known in the Harmonized Tariff Schedule of the United States (HTSUS) as the Civil Aircraft Agreement (CAA). We note that the protest was timely filed on July 28, 2010, which is within 180 days after the first entry was liquidated on January 29, 2010. See 19 U.S.C. § 1514(c)(3). We spoke with a staff member at the Federal Aviation Administration (FAA) regarding FAA certification, on both December 13, 2010 and June 16, 2011, and with counsel for the importer, on December 20, 2010. A meeting was held with the protestant and their counsel on April 14, 2011, and an additional submission was received thereafter.
FACTS:
The headphones are used with FAA certified in-flight entertainment systems that are in place on aircraft worldwide. The importer states that in most cases the headphones are designed for, and are only sold for, use in civil aircraft. The style and features of the headphones vary by the airline’s specifications. The headphones plug into the passenger’s arm rest and connect to the in-flight entertainment system and in flight communication system. The importer, AVID Airline Products Corp. (AVID), has filed a blanket certification, dated January 23, 2009, which states that the headphones are used in civil aircraft and are certified by an accepted airworthiness authority (the FAA or an FAA accepted substitute). AVID also states that blanket certifications regarding eligibility have been in place for over 15 years. Additionally, AVID claims that the headphones are only sold for use in civil aircraft, and in most cases, are designed specifically for civil aircraft.
AVID has submitted a Supplemental Type Certificate issued by the FAA to a company that produces one of the in-flight entertainment systems that are compatible with AVID’s headphones. The FAA states that the headphones themselves are not eligible to be certified. AVID has also submitted a variety of sample 300 ohm headphones and the specification sheets from multiple airlines, which provide the technical, electrical, and aesthetic specifications for the headphones to be used with their in-flight entertainment systems. All the specifications require an impedance of 300 ohm for the headphones.
AVID entered the headphones under subheading 8518.30.20, HTSUS, and U.S. Customs and Border Protection (CBP) does not dispute this classification. The importer also entered the headphones using Special Program Indicator (SPI), “C”. SPI “C” is the HTSUS SPI for merchandise for which preferential treatment under the CAA is being claimed. See General Note 3(c)(i), HTSUS. CBP determined that the headphones did not meet the requirements of the CAA, and therefore, liquidated the entries without preferential treatment beginning on January 13, 2009. AVID also claims that it has imported headphones under the CAA for approximately 25 years, and they have been consistently liquidated duty-free.
ISSUES:
I. Are the headphones eligible for preferential tariff treatment under the CAA?
II. If not, did an established and uniform practice exist such that CBP was required to provide notice of a change in practice pursuant to 19 U.S.C. § 1315(d)?
III. In the alternative, did previous treatment exist with regard to substantially identical transactions such that CBP is required to publish the protest review decision in the Customs Bulletin pursuant to 19 U.S.C. § 1625(c)(2)?
LAW AND ANALYSIS:
I. Are the headphones eligible for preferential tariff treatment under the CAA?
The Agreement on Trade in Civil Aircraft was implemented by Title VI, "Civil Aircraft Agreement" of the Trade Agreements Act of 1979 (Sec. 601, Pub. L. 96 39, 93 Stat. 144, 96th Cong., 1st Sess. 1979), effective January 1, 1980, and became headnote 3 to schedule 6, part 6, Tariff Schedules of the United States (TSUS). Headnote 3 to schedule 6, part 6, TSUS, became General Note (GN) 3(c)(iv) when the HTSUS was enacted, and became GN 6, HTSUS, with minimal changes in 1995. GN 6, HTSUS, was then amended by section 12 of the Miscellaneous Trade and Technical Corrections Act of 1996, Pub. L. 104-295, 110 Stat. 3514 (Oct. 11, 1996). Subsection (a) of GN 6, HTSUS, provides:
(a) Whenever a product is entered under a provision for which the rate of duty “Free (C)” appears in the “Special” subcolumn and a claim for such rate of duty is made, the importer--
(i) shall maintain such supporting documentation as the Secretary of the Treasury may require; and
(ii) shall be deemed to certify that the imported article is a civil aircraft, or has been imported for use in a civil aircraft and will be so used.
In order to be considered a “civil aircraft” under GN 6(a)(ii), the product must meet the description of “civil aircraft”, as laid out in GN 6(b)(i), HTSUS:
For purposes of the tariff schedule, the term “civil aircraft” means any aircraft, aircraft engine, or ground flight simulator (including parts, components, and subassemblies thereof) - -
(A) that is used as original or replacement equipment in the design, development, testing, evaluation, manufacture, repair, maintenance, rebuilding, modification, or conversion of aircraft; and
(B) (1) that is manufactured or operated pursuant to a certificate issued by the Administrator of the Federal Aviation Administration under [49 U.S.C. § 44704], or pursuant to the approval of the airworthiness authority in the country of exportation, if such approval is recognized by the FAA as an acceptable substitute for such an FAA certificate; . . .
The regulations implementing GN 6, HTSUS, are enumerated in 19 C.F.R. § 10.183, and the documentation requirements are in subsection 10.183(e).
In accordance with GN 6(a), HTSUS, the headphones were imported under subheading 8518.30.20, HTSUS, which is designated with the SPI “C”. This classification is not disputed by CBP. The issue in this case is whether the imported headphones meet the requirements of GN 6(b)(i), HTSUS, as “civil aircraft,” or “ for use in a civil aircraft and will be so used” under GN 6(a)(ii).
“Civil Aircraft”
AVID claims the headphones may be considered “civil aircraft” as described in GN 6(b)(i), HTSUS. AVID argues that CBP has previously held that individual parts of certified civil aircraft are a part of that certification. In support of this argument AVID cites C.S.D. 80-242 (Headquarters Ruling Letter (HRL) 712568), dated March 28 1980. In HRL 712568, the final aircraft was certified by the FAA, but the individual parts and
subassemblies were not individually certified. Customs stated “[i]t is our understanding that when a certain model aircraft is FAA approved for airworthiness or for test flying, the type of aircraft parts used in that aircraft are so listed and form part of that approval.” HRL 712568. However, unlike the aircraft subassemblies in HRL 712568, the headphones at issue were not part of the aircraft or certified in-flight entertainment system when either received certification, and are thus not certified as part of the plane.
FAA Type Certificates are for aircraft, aircraft engines, propellers or other appliances reasonably required by the FAA to apply for certificates. See 49 U.S.C. § 44704(a). Supplemental Type Certificates are for “. . . a change to an aircraft, aircraft engine, propeller or appliance.” 49 U.S.C. § 44704(b). In-flight entertainment systems require supplemental type certificates, but the headphones at issue may not receive FAA certification on their own and are not submitted to the FAA as part of the in-flight entertainment system. Therefore, the headphones themselves are not considered to be certified by the FAA.
AVID also cites rulings in which individual parts of an airplane were determined to be parts of aircraft. AVID cites C.S.D. 83-44 (HRL 066654), dated April 30, 1981, in which subassemblies used in passenger entertainment systems were classified in a provision for parts of aircraft under the TSUS. Similarly, in HRL 953562, dated October 7, 1993, Customs discussed an airplane lavatory’s FAA requirements in determining that the lavatory should be properly classified as “Other parts of airplanes or helicopters”, subheading 8803.30.00, HTSUS. In both these rulings, Customs cited “. . . the broad statement of Congressional purpose in enacting the [CAA], to promote a more free and unencumbered trade in civil aircraft[,]” in support of the decision to classify these subassemblies as “parts”. HRL 953562; and HRL 066654. However, although these rulings classified the imported articles as “parts”, the rulings did not find this alone to be sufficient to qualify an article for preferential treatment under the CAA. In holding the subassemblies were “parts”, Customs stated the goods would be duty-free, “. . . if certified for use in civil aircraft.” HRL 066654. The rulings did not hold that the parts were FAA certified due to their classification status as “parts.” In this case, the headphones are not classified in a subheading for parts of airplanes.
AVID further argues that the headphones are manufactured and sold pursuant to specifications issued by the airlines and should thus meet the definition of “civil aircraft” as an aircraft part. In order to meet the definition of “civil aircraft”, an aircraft part must be “. . . manufactured or operated pursuant to a certificate issued by the [FAA]. . ..” See GN 6(b)(i)(B), HTSUS; 10 C.F.R. § 10.183(a)(2); and HRL 223408, dated December 26, 1991 (Stating that although the regulations technically allow for foreign military aircraft to claim preferential treatment, the products will still not qualify because the FAA does not certify military aircraft). As discussed above, the headphones themselves may not be certified.
Next, AVID argues that the language in GN 6(b)(i)(B)(1), “. . . pursuant to a certificate issued by the Administrator of the Federal Aviation Administration. . .”, means that the headphones themselves need not be certified by the FAA because they are operated in connection with an FAA-certified in-flight entertainment system. The headphones are manufactured and sold pursuant to specifications issued by the airlines for headphones with a specific impedance of 300 ohm. In comparison, a standard set of Apple™ headphones has an impedance of 32 ohm. The specifications for the headphones are dictated by the airline such that they will be compatible with the in-flight entertainment system in use.
In interpreting what is meant by “. . . pursuant to a certificate. . .” in GN 6, HTSUS, we must initially review the text of the statutory provision. See United States v. Alvarez-Sanchez, 511 U.S. 350 (1994) (“When interpreting a statute, we look first and foremost to its text.”). “If the statute is clear and unambiguous ‘that is the end of the matter, for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.’ . . . The traditional deference courts pay to agency interpretation is not to be applied to alter the clearly expressed intent of Congress.” Board of Governors, FRS v. Dimension Financial Corp., 474 U.S. 361, (1986), quoting Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-43, (1984). Next, the court will apply the ordinary meaning of a term if it is not defined by the statute. See United States v. Daas, 198 F.3d 1167, 1174 (9th Cir. 1999). But if a statute is ambiguous with respect to a particular issue, an agency shall consult a statute’s legislative history to discern Congressional intent. Id.
The Miscellaneous Trade and Technical Corrections Act of 1996, through which GN 6, HTSUS, was promulgated, provides no assistance in the interpretation of GN 6, HTSUS, as the remainder of the Act deals with other miscellaneous issues. Next, we look to the plain meaning of “pursuant to”, which as defined by the Oxford English Dictionary means “Following upon, consequent and in conformance to; in accordance with.” Oxford English Dictionary Online (3rd ed. 2007). Under this definition, “pursuant to” could mean the particular imported article must be manufactured or operated under a certificate, or that use in connection with a certified article is sufficient. Therefore, this provision of the statute is ambiguous, and we must look to the legislative history. Senate Report No. 104-393 states the following with regard to the modification of the definition of “civil aircraft” in GN 6, HTSUS:
. . . Finally, the provision modifies the definition of “civil aircraft” to include aircraft, aircraft engines, and flight simulators (including parts, components, and subassemblies thereof) that are (1) certified by the FAA or an airworthiness authority recognized by the FAA, or (2) purchased for use by the Department of Defense or the Coast Guard, if such aircraft, aircraft engines, and flight simulators (or parts, components, or subassemblies thereof) are manufactured or operated pursuant to a certificate issued or recognized by the FAA.
S. Rep. No. 104-393, at 10 (1996), reprinted in 1996 U.S.C.C.A.N. 4036, 4045 (emphasis added). Although the language of GN 6, HTSUS, broadened the definition of “civil aircraft” from the Trade Agreements Act of 1979, the “pursuant to” language pertains to Department of Defense or Coast Guard items, originally excluded by the Trade Agreements Act of 1979. See Trade Agreements Act of 1979, Sec. 601, Pub. L. 96 39, 93 Stat. 144, 96th Cong., 1st Sess. 1979 (Jan. 1, 1980) (“For purposes of the schedules, the term “civil aircraft” means all aircraft other than aircraft purchased for use by the Department of Defense or the United States Coast Guard.”).
Additionally, when the Trade Agreements Act of 1979 was passed, the language of headnote 3 to schedule 6, part 6, TSUS, along with the legislative history, clearly required the imported article to be certified by the FAA, or another appropriate airworthiness authority. See Trade Agreements Act of 1979, Sec. 601, Pub. L. 96 39, 93 Stat. 144, 96th Cong., 1st Sess. 1979 (Jan. 1, 1980) (“3. Certified for Use in Civil Aircraft. (a) Whenever the term ‘certified for use in civil aircraft’ is used in an item description in the schedules, the importer shall file a written statement . . . that the article has been approved for such use by the [FAA]. . ..”). Senate Report No. 96-249, pertaining to the Trade Agreements Act of 1979, defines articles covered by the CAA as “. . . airplanes and parts certified for use in civil aircraft . . ..” S. Rep. No. 96-249, at 25 (1979), reprinted in 1979 U.S.C.C.A.N. 381, 411. The Report further emphasizes this point in the Introduction to the Agreement: “[p]arts will be eligible for duty-free entry under the amendments in Title VI only if they are certified for use in civil aircraft at the time of entry.” Id. at 185, 1979 U.S.C.C.A.N. at 571.
The legislative history to the Miscellaneous Trade and Technical Corrections Act of 1996 shows no intention to change this essential requirement from the Trade Agreements Act of 1979, except to allow articles sold to the Department of Defense or Coast Guard to receive duty-free treatment under the CAA. Therefore, “pursuant to” does not broaden the scope of the FAA certification requirement except as to articles that are not certified due to their status of sale to the Department of Defense or Coast Guard. Therefore, we do not agree with AVID that “pursuant to” means the headsets need only be operated in connection with the certified in-flight entertainment system.
Additionally, AVID argues that the headsets must be considered parts of the aircraft or in-flight entertainment system for purposes of the CAA because they are listed in the Annex to the Agreement and contain an SPI “C” next to the subheading in the HTSUS, even though it is not possible for headsets to be certified by the FAA. We
do not agree. In discussions with the FAA, we have learned that pilot’s headphones not only may be certified, but should be certified by the FAA, and these pilot headphones are included in the Annex under the same provision as the headphones at issue.
As the headphones imported by AVID are not certified by the FAA, they do not meet the definition of “civil aircraft” provided in GN 6(b).
Imported for use in Civil Aircraft and will be so used
The next issue is whether the headphones may receive preferential tariff treatment under 6(a)(ii) as products “. . . imported for use in a civil aircraft and will be so used.” Although the second half of GN 6(a)(ii) is not limited by the remainder of the General Note, pertaining to the definition of “civil aircraft” or the regulations, we find it is still limited by the Agreement itself. See generally United Tech. Corp. v. United States, 315 F.3d 1320 (Fed. Cir. 2003).
In United Technologies, the court examined GN 3(c)(iv), HTSUS. GN 3(c)(iv) provided for, in pertinent part:
the importer shall file a written statement, . . . stating that the imported article has been imported for use in civil aircraft, that it will be so used and that the article has been approved for such use by the Administrator of the Federal Aviation Authority. . ..
(Emphasis added.) While the main difference between GN 3(c)(iv) and GN 6 is that articles imported for use in civil aircraft to be so used were also required to be approved for such use by the FAA in GN 3(c)(iv), which is not included in GN 6(a), the court focused on the words “for use in civil aircraft.” In construing this language to determine whether certain parts installed in test engines, not aircraft, were eligible for GN 3(c)(iv) treatment, the court looked to the Agreement.
Although Article 1 of the Agreement states that it applies to aircraft and aircraft parts “whether used as original or replacement equipment in the manufacture, repair, maintenance, rebuilding, modification or conversion of civil aircraft” and Article 2 repeats similar language, that language now exists in GN 6(b) in defining “civil aircraft,” not GN 6(a). Therefore, while the headphones are incorporated in the aircraft during flights, instead of during the events enumerated in Articles 1 and 2 of the Agreement, we find this does not prevent them from qualifying for preferential treatment under GN 6(a) as they are entered under a provision for which the SPI “C” is present and the headphones are 300 ohm, which is the specific ohm for the certified in-flight entertainment systems where the headphones are used.
HOLDING:
The protest should be granted. The headphones are entered under a provision for which the SPI “C” is present and are imported for use in civil aircraft, and so used.
In accordance with the Protest/Petition Processing Handbook (CIS HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the CBP Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with this decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division