## United States Court of Appeals for the Federal Circuit

06-1068

BROTHER INTERNATIONAL CORP., Plaintiff-Appellant,

v.

UNITED STATES, Defendant-Appellee.

Sandra Liss Friedman , Barnes, Richardson & Colburn, of New York, New York, argued for plaintiff-appellant. With her on the brief was Helena Dorothy Sullivan

. Bruce N. Stratvert , Attorney, International Trade Field Office, Commercial Litigation Branch, Civil Division, United States Department of Justice, of New York, New York, argued for defendant-appellee. With him on the brief were Peter D. Keisler , Assistant Attorney General, and David M. Cohen , Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, and Barbara S. Williams , Attorney in Charge, Internati onal Trade Field Office, United States Department of Justice, of New York, New York. Of counsel on the brief was Yelena Slepak , Attorney, Office of Assistant Chief C ounsel, United States Customs and Border Protection, of New York, New York.

Appealed from: United States Court of International Trade Judge Gregory W. Carman

## United States Court of Appeals for the Federal Circuit

06-1068 BROTHER INTERNATIONAL, CORP., Plaintiff-Appellant,

v.

UNITED STATES, Defendant-Appellee.

__________________________ DECIDED: September 18, 2006

__________________________ Before NEWMAN, SCHALL, and DYK, Circuit Judges

. SCHALL, Circuit Judge

. Brother International Corp. (“Brother”) appeals the decision of the United States Court of International Trade in Brother lnternational Co rp. v. United States , 368 F. Supp. 2d 1345 (Ct. Int’l Trade 2005). In its decision, the Court of In ternational Trade sustained the denial by the United Stat es Customs Service, now or ganized as the United States Bureau of Customs and Bo rder Protection (“Customs”), of two protests by Brother. In its protests, Brother sought relief under sect ion 520 of the Tariff Ac t of 1930, 19 U.S.C. § 1520(c)(1), for a misclassification, based on an alleged mistake of fact, of goods previously entered into the United States by Brother. Section 1520(c)(1) allows the reliquidation of goods previous ly entered into the United Stat es that were misclassifiedbased upon a mistake of fact. The court det ermined that Brother was not entitled to relief under section 1520(c)(1) because, alth ough the m i sclass i fication at issue did arise from a mistake of fact, it also involved a m i stake of law. We hol d, however , that the court erred in its determination that the misc lassification of Brother’s goods involved a mistake of law, as well as a mistake of fact. We t herefore reverse the Court of International Trade’s decision and remand t he case to the court for a further remand to Customs, so that Customs ma y reliquidate t he goods at the correct duty and refund to Brother the excess dut ies previously paid as a result of the misclassification. BACKGROUND
I. When an importer imports merchandis e in t o the Unit ed States, it makes an “entry” by filing documentat ion with Custo m s, which allo ws Cu stoms to assess the duties due on the merchandis e

. See 19 U. S.C. § 1484 (2000). At the time of entry, the importer must deposit the esti mated duties with Customs. See id. § 1505( a). Customs later reviews the entry and makes its determi nation about whether the amount of duty deposited is correct—that is, Cu stoms “liquidates” the entry. Se e 19 C.F.R. §§ 159.0- .12 (2006). Liquidation of an ent ry is “final and conc lusive . . . unless a protest is filed . . . or unless a civil action contesting the deni al of a protest . . . is commenced in the United States Court of Internat ional Trade. . . .” 19 U.S.C. § 1514(a) (2000). Entries that are not liquidated within one year of entry are “deemed liquidated,” unless one of several exc eptions applies. See id. § 1504(a), (b). Once an entry has been liquidated, an importer may lodge a protest wit h Customs. See 19 U. S.C. § 1515 (2000). If Custom s denies a pr otest, an importer may

06-1068 2appeal to the Court of In ternational Trade. See id. ; 19 C.F.R. § 174. 31 (2006). Howev e r, even if a valid protest is not fi led, pursuant to 19 U.S.C. § 1520(c)(1), 1 Customs may reliquidate an entry to correct a mistake of fact. See 19 U.S.C. § 1520(c)(1) (2000). S e ction 1520(c)(1) pr ovides in relevant part as follows: (c) Reliquidation of entry . . . . Notwithstanding a vali d protest was not fil ed the Cus t oms Service may, in accordanc e with regulations prescribed by the Secretary, reliquidate an entry . . . to correct – (1) a . . . mistake of fact . . . not amounting t o an error in the construction of a law, adverse to the importer and manif e st from the record or established by docu mentary evidence, in an entry, liquidation, or other cu stoms transaction, when t he . . . mistake . . . is brought to the att ention of the Customs Se rvice within one year after the date of the liqui dation or exaction. . . . Id. This court has recognized that a mist ake of fact under 19 U.S.C. § 1520(c) (1) occurs when a person misunderstands the facts: A mistake of fact is any mistake ex cept a mistake of law. It has been defined as a mistake which takes pl ace when som e fact which indeed exists is unknown, or a fact which is thought to exist, in reality does not exist. A mistake of fact exists w here a person understands the facts to be other than they are, whereas a mist ake of law exists where a person knows the facts as they really are but has a mistaken belief as to the legal consequences of those facts. Ford Motor Co. v. United States , 157 F.3d 849, 859 (Fed. Cir. 1998) (citing Hambro Auto. Corp. v. United States , 603 F.2d 850, 853- 54 (CCPA 1979)); see also Executone Info. Sys. v. United States , 96 F.3d 1383, 1386 (Fed. Cir. 1996). In G & R Produce Co. v. United States , we recogniz ed that a mistake of fa ct that results in a misapprehension

1 Section 1520(c)(1) was repealed on De cember 3, 2004. Pub. L. No. 108- 429, § 2105, 118 Stat. 2598 (2004); see also 19 U.S.C.A. § 1520 (West 2005). This case inv o lv es events t hat occurred in 1997, pr ior to the statute’s r epeal. When referring to the statute, we speak in the present tense.

06-1068 3of a classification does not amount to a mistake in law. 381 F.3d 1328, 1333 (Fed. Cir. 2004) (“This mistake of fact doe s not amount to an error in the construction of a law because it resulted in the mi sapprehension of subheading 08 05.30.40, HTSUS, and the erroneous classification of Persian limes. If that were the case, section 1520(c)(1) would be meaningles s because all mistakes of fact covered by section 1520(c)(1) result in an erroneous liquidation.”); see also Degussa Can. Ltd. v. United States , 87 F.3d 1301, 1304 (Fed. Cir. 1996) (stating that a mistake of fact “is a factual error that, if the correct fact had been known, would have resu lted in a different classification”).
II. Brother’s multifunction centers (“MFCs”), wh ich are office equi pment, entered the United States between June 24, 1996, and February 5, 1997; they were liquidated between O c tober 11, 1996, and Ma y 23, 1997. The MFCs at issue in this case are model numbers MFC-4550, MFC-4550DS, MF C-6550MC, and M F C-7550M C , whic h a l l “employ a printing mechanism that uses las e r technology.” Prior to importation, Mitchell von Poederoyen, a national acc ount manager for Brother ’s cus t oms broker, FedEx Trade Net w orks, classified the MFCs u nder subheading 9009.12.0000 of the Harmonized Tariff Schedule of the United States (“HTSUS”), the category for a photocopying apparatus. As a result, Cu stoms liquidated the entries at 3.7% ad valorem , the correct amount for that classification. In July of 1997, Brother requested a tariff classification ruling for the MFC-4550 machine. See Brothe r Int’l Corp. , 368 F. Supp. 2d at 1346. In its rulin g in response to the request, Customs described the MFC-4550 as “a multi-function machine in one common housing that can perform, printi ng, copying, scanning, fax and PC fa x

06-1068 4functions” and found t hat “the printing function . . . dictates the principal function of [the] machine.” See id. Based upon this finding, Cu stoms concluded that the MFC-4550 should be classified under s ubheading 8471.60 6200, HTSUS, “which prov ides for other laser print e r units” and is a duty free provision. See id. Brother then request e d reliquidation of the rest of the MFCs pursuant to 19 U.S.C. § 1520(c)(1). Se e id. After Customs denied the request, Brot her timely protested. See id. Customs denied t he protest on the ground that Br other was not entitled to re lief under section 1520(c)(1) because the original misclassific a tion was due to a mistake of law. See id. at 1346-47. Brother timely filed its summons in the Court of Internati onal Tr ade challenging Customs’s decision. See id. at 1347.
III. The Court of International Trade held a bench trial on February 9, 2005, on the issue of whether Brother ’s misclassification of the MFCs at issue was due t o a mistak e of fact or a mi stake of law. Id. 2 Following the trial, t he court rendered its decision sustaining Customs’s denial of Brother’s protest. The Court of International Trade first expl ained that “a mistake of fact occurs in instances where either (1) t he facts exist, but are unk nown, or (2) the facts do not exis t as believ e d. A mistake of law occurs when the facts are known but the legal signific anc e of those facts is not appreciated.” Id. (citations omitted) (citing G & R Produce , 381 F.3d at 1333). The cour t recognized that “[w]hen a mistake of fact occurs,

2 The Court of International Tr ade denie d earlier summary judgment motions by Brother and Customs, finding t hat there were genuine iss ues of material fact, namely the extent of the knowled ge that Mr. von Poederoyen possessed about the physical characteristics of the M F Cs at the time of classification. Brother lnt’l Corp. v

. United States , 342 F. Supp. 2d 1295, 1301 (Ct. Int’l Trade 2004).

06-1068 5courts have recogniz ed that 19 U.S.C. § 1520(c)(1) provides a liberal scope of correction for the aggrieved party.” Id. (citing G & R Produce , 381 F.3d at 1332-33). It concluded that “if a mistake is a mix of fact and la w, then statutory relief is precluded.” Id. (citing Ford Motor , 157 F.3d at 857). Next, the Court of International Tr ade found that MFC- 4550 and MFC-4550DS units were “five-in-one” MFCs consisting of a laser printer, copier, facsimile, scanner and PC fax and that the MFC-6550MC and MFC-7550MC were “six-in-one” MFCs consisting of a laser printer, copier, facsim ile, scanner, PC fax, and answering machine. Id. at 1348. The court also found that the invoice description for the entries reads “multifunctional c opier/printer/fax.” Id. The court accepted Brot her’s argument that the printer was the essential character of the MFCs and that Brother’s broker, Mr. von Poederoyen, was not aware of that fa ct at the time of importation. Id. at 1348-49. Instead, he thought that they we re three-functions-in-one mach ines (copier, printer, and fax )

. Id. The court reasoned that, as far as t he MFC units were concerned, Mr. von Poederoyen classified them based upon HT SUS General Rules of Interpretation (“GRI”) 3(c) because the principal f unction could not be deter mined. Id. at 1350. 3 The court

3 HTSUS GRI 3 states in relevant part: When . . . goods are, prima facie , classifiable under two or more headings, classification shall be effected as follows: (a) The heading which pr ovides the most specific description shall be preferred to headings providing a mo re general desc r iption. However, when two or more headings each refer to part only of the materials or substances contained in mixed or co mposite goods or to part only of the items in a set put up for retail sale, those headings ar e to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods cons isti ng of different materials or made up of different components, and goods put up in sets for retail sale, whic h cannot be classified by reference to 3( a), shall be classified as if they

06-1068 6also reasoned that Mr. von Poederoyen reli ed upon Customs Ruling NY 897540 (May 9, 1994) (“the Lanier Ruling”) to reinfo rce his classification decision. Id. 4 The court recogniz ed that there was a mi stake of fact under s e c t ion 1520(c)(1) because Brother’s broker, Mr. von Poederoyen, believed that all of the functions of the MFCs wer e equally important and so he did not know the facts as they really were. Id. at 1351. T he court concluded, however, that there was also a mistake of law because a decision to classify merchandise under a par ticular provision of the HTSUS is a determination of law and “Mr. von Poederoyen consciously em ployed the legal analysis of the GRI in determining clas s i fication of the MFCs.” Id. at 1351-52. The court reasoned f u rther that “[ t]he broker’s relianc e on the Lani er Ruling also amounted to a construction of the law.” Id. at 1352. It concluded th at “[ b]ecause this Court holds that [Brother] made a mist ake of law, judgment shall be rendered in favor [Customs].” Id. The court denied Brother’s moti on for rehearing. Brother lnt’l Corp. v. United States , No. 00-000006, slip op. (Ct. Int’l Trade Aug. 25, 2005). Brother now appeals the Court of International Trade’s decis i on. We h a ve jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).

(Cont’d. . . .) consisted of the material or component which gives them their essential character, i n sofar as this criterion is applicable. (c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading whic h occurs last in numer ical order among those which equally merit consideration. HTSUS GRI 3(c) (1997); see Brother Int’l Corp. , 368 F. Supp. 2d at 1350 n.8.

4 In the Lanier Ruling, Customs ruled that the proper classification of the Lanier Cor poration’s multifunc tional fax/copier/printer under GRI 3(c) was tariff item 9009.12.0000. See Br other Int’l Corp. , 368 F. Supp. 2d at 1350 n.9.

06-1068 7DISCUSSI ON
I. This court reviews the Court of Internat ional Trade’s interpretation of a statute, which is a matter of law, de nov o. Texport Oil Co. v. United St ates , 185 F.3d 1291, 1294 (Fed. Cir. 1999). Following a trial, w e re view the Court of International Trade’s findings of fact for clear error. Ford Motor Co. v. United States , 286 F.3d 1335, 134 0 (Fed. Cir. 2002). Under that standard, we a ccept the Court of International Trade’s findings unless we ar e left with a definite a nd firm conviction that a mistake has bee n committed. Id.
II. Brother contends that its error of fact cl assifying the MFCs is remediable un der section 1520(c)(1). Specifica lly , it argues that the error by its customs broker does not fit the definition of mistake of law bec ause “Mr. von Poederoyen conducted an entirely correct legal analys is predi cated upon the wrong facts.” According to Brother, the correct facts relating to the MFC units t hat were enter ed were not known to Mr. von Poederoyen. Customs responds that Brother’s mistake in c l assif y ing its MF Cs is not remediable under section § 1520(c)(1) because the determination of the classification

was an error of law. Custom s takes the position that inasmu ch a s the mistake made b y Brother in classifying its MFCs was a mistak e based on the construction of the tariff, it was a mistake of law.
III. We agree with the Court of In ternational T r ade that this case involves a m i stake of fact. See Brother , 368 F. Supp. 2d at 1348-51. Br ot her’s broker was not aware of

06-1068 8the facts as they existed. As the court found, Mr. von Poeder oyen did not know that the printer was the essential character of t he MCFs, which was a mistake of fact. Id. at 1351. That is, the broker was not aware of the facts as t hey existed. T hat clearly constitutes a mistake of fac t. See Ford , 157 F.3d at 859. The Court of International Trade erred, however, in ruling that t he mistake was also one of law. It was the factual erro r—namely, facts not known about the MFCs

— that caused the misclassification. The fa ct that Mr. von Poederoyen “conscious ly employed t he legal analysis” in determining classification do es not alter this result. See Brother , 368 F. Supp. 2d at 1348-51. As we hav e explained, a mistake of fact that leads to a misclassific a tion is still a mistake of fact. Se e G & R Produce , 381 F.3d at 1333. It was not the later legal interpretation, based on the mistaken fact, that resulted in the misclassification. Thus, the Court of International Trade erred. The result of the court’s error was that Brother was incorrect ly denied the remedy of reliquidation under 19 U.S.C. § 1520(c)(1). CONCLUS ION We reverse the Court of International Trade’s decis ion and remand the case to the court for a further remand to Customs, so that Customs may re liquidate t h e goods at the correct duty and refund to Brother the exce ss duties previously paid as a result of the misclassification.

REVERSED and REMANDED

06-1068 9