Customs Overviews

By USFIA Customs Counsel, John Pellegrini 

In this Memo: 

  • Duty Deferral
  • Adaptive Clothing
  • FTC - “Made in USA”
  • CPSC Developments

DUTY DEFERRAL

Treasury has published a notice covering the temporary deferral of the deposit of estimated duties. 85 Federal Register 22349 (April 22, 2020). The details are essentially those found in CSMS #42421561 and CSMS# 42421561, which are codified in new Section 24.1a of the Customs Regulations.  


In deciding whether to take advantage of the deferral, the following should be kept in mind.

  1. At present, deferral is limited to entries filed in March and April and is not available for products subject to ADD, CVD, 301 or other additional duties.
  2. Entries covering eligible and ineligible items do not qualify. Separate entries are necessary.  Post-entry adjustments are not allowed.
  3. An importer must demonstrate significant financial hardship to qualify. This requires a comparison to 2019. CBP has said that new businesses who do not have a history should contact it. CBP will consider specific circumstances that do not fit the basic requirement.
  4. If you have made payment for an eligible entry, you are not eligible for a refund.  
  5. You must follow the specific instructions CBP has issued for ACH debit authorizations. Importers should not request their financial institutions to prevent payment to CBP. This will result in bounced payments, subjecting the importer to the possibility of liquidated damages.

ADAPTIVE CLOTHING

Apparel designed and intended for use by the otherwise-abled is eligible for duty-free treatment in subheading 9816.17.96, covering articles specifically designed for the use or benefit of physically handicapped individuals.  Two recent rulings illustrate CBP's narrow interpretation of the provision.

The first ruling, HQ H304676 (March 26, 2020), addresses the classification of knit tops with openings and slits that allow access for medical ports and feeding tubes, which in some cases are not apparent.  CBP finds that classification in the Chapter 98 provision is warranted for three of the four styles reviewed.  The style for which 9816 treatment was denied is described as "fashionable" and the abdominal opening as possibly a "fashion statement".

The second ruling, NY N310389 (April 2, 2020), addresses the classification of extra extra wide width adaptive footwear. The importer sought classification in subheading 9817.00.96, arguing that the footwear is manufactured in extra wide sizes to accommodate swollen feet resulting from arthritis or other medical issues. CBP disagreed indicating that it did not believe that the design features distinguish the footwear from ordinary footwear worn by the general public.  

Generally, CBP will consider classification in 9816.00.76 when the features that indicate design for the handicapped are substantial and the garment is unlikely to be worn by the general public. CBP will also look at whether the importer is known as being in the business of providing apparel for the chronically disabled. The importer in the first ruling is a national general merchandise retailer.  CBP decided that retailer’s website listing adaptive clothing among its lines of business was sufficient for this purpose. 

FTC – “MADE IN USA”

The Federal Trade Commission has published a proposed consent order for comment. 85 Federal Register 19483 (April 7, 2020).  The order asserts that a retailer described certain home goods as of domestic origin. In fact, in many cases the materials and some components used to make the products and the products themselves are wholly imported or incorporate significant imported materials and components.    


The proposed order includes a judgment of $1 M.  This is another indication that the FTC is paying closer attention to "Made in USA" claims.

CPSC DEVELOPMENTS

There were no recalls of textile articles in April.  


The Customs Overview is a newsletter of Customs legal, administrative and other developments affecting importers of textiles and wearing apparel prepared as a service for United States Fashion Industry Association members and other interested parties. Matters reported on or summarized herein may not be construed as legal advice on specific situations.

By USFIA Customs Counsel, John Pellegrini 
 
In This Memo: 
  • Classification Decision
  • Value Decision
  • Ruling Requests
  • CPSC Developments

CLASSIFICATION DECISION
The Customs Bulletin for March 11, 2020 publishes HQ H262218 (Proposed). The ruling would revoke NY N258826 (November 24, 2014) concerning the classification of arm sleeves. The subject arm sleeves are composed of an 85/15 polyester/spandex knit fabric. The sleeves are designed to provide compression support during training, fitness exercise and other sports related activities.  The New York ruling classified the arm sleeves in subheading 6117.80.95 (14.6%) (4A), as other made up clothing accessories.
 
The proposed ruling is a response to a request for reconsideration in which the importer argues in part that the sleeves are properly classified as festive articles. This argument is based in part on the fact that many of the arm sleeves bear the logo of a sports team. CBP rejects the argument but agrees that classification in heading 6117 is inappropriate.

CBP points out that classification in subheading 6117 is limited to articles related to or that exhibit some connection to the primary clothing article and must be intended for sole use as an accessory. Since in CBP's view, the arm sleeves are not clearly intended for use as an accessory to a specific type of clothing, classification in heading 6117 is inappropriate. Accordingly, CBP finds classification in subheading 6307.90.98 (7%)(4A).
 
 
VALUE DECISION
HQ H307697 (February 25, 2020) addresses the value of assists consisting of components acquired from both domestic and foreign sources. The components are provided to foreign manufacturers at no cost and obviously constitute an assist, regardless of origin.

The importer proposed valuing the assist based on a moving average inventory methodology. Essentially, a moving average for each separate component is calculated based upon the quantity purchased from all sources. The average cost of each component is recalculated after each inventory purchase. The calculation is the total cost of the components purchased divided by the number of components in stock.  

CBP accepted this methodology.  A prerequisite for allowing use of this methodology rather than the actual cost of each foreign-source component is a showing that inventory is commingled, and it is not be possible to identify the specific cost of a particular component.
 
 
RULING REQUESTS
CBP has announced that the NIS Division is accepting binding ruling requests.  However, you should expect delays if the ruling is submitted on paper or if a sample is necessary. CBP encourages importers to submit rulings electronically and to provide a picture of the article in question as part of the request.

A template for submitting rulings electronically as available on CBP's website, hhtps://erulings.cbp.gov/s/.
 
CBP requests that responses to 28’s, etc., also be filed electronically.
 

CPSC DEVELOPMENTS
There was one recall of textile articles in March. The recall covers children’s pajamas and robes that fail to meet the federal flammability standard for children’s sleepwear, posing a risk of burn injuries to children.


The Customs Overview is a newsletter of Customs legal, administrative and other developments affecting importers of textiles and wearing apparel prepared as a service for United States Fashion Industry Association members and other interested parties. Matters reported on or summarized herein may not be construed as legal advice on specific situations. 

By USFIA Customs Counsel, John Pellegrini 

In This Memo: 

  • Classification Decisions 
  • E-Commerce
  • 50/50
  • MTB Process
  • CPSC Developments

CLASSIFICATION DECISIONS.  

HQ H304295 (November 13, 2019) addresses the classification of knit apparel described as pajama sets. The garments are in chief weight MMF.  The top has a drawstring cowl neck and a kangaroo pouch.  The pants have a drawstring waist and are loose fitting. At liquidation, the garments were not classified as sleepwear and the importer protested.

The importer notes that its name is "Pajamagram" and that everything it sells is designed, marketed and sold as sleepwear and that the garments are advertised as the "world’s softest pajamas".  The importer asserts that previous website descriptions indicating that the garments can be worn during the day or night, in and out of the house, etc., do not negate the principal use and marketing of the garments as sleepwear. 

CBP disagreed.  It notes that the subject garments are not characterized by a sense of privacy typical of sleepwear.  The knit fabric is not sheer or revealing and the garments do not have the visual appearance of sleepwear.  CBP notes that a drawstring cowl neck is unlikely to be comfortable when worn during sleep and is not typically a feature found on a sleep garment.  Instead, these garments are loose, casual clothes that are designed to be worn for comfort.  CBP finds that the garments are very likely to give the ultimate consumer the idea that they are items of general apparel, since nothing precludes them from being worn in and about the house and in the presence of guests.  The fact that the garments were frequently advertised and marketed as loungewear did not help.

CBP denied the protest finding that the tops fall in 6110.30.30 (32%)(4A) and the pants in 6104.69.20 (28.2%)(4A).

The classification of non-woven disposable apparel is the subject of HQ H299918 (November 25, 2019). The apparel consists of coveralls, lab coats, smocks, work shirts and work pants, each of spun bond polypropylene, some coated with polyethylene. CBP classified the garments in subheading 6210.10.90, as other garments. The importer protested seeking classification in subheading 6210.10.50, as non-woman disposable apparel designed for use in hospitals, clinics laboratories and contaminated areas. The Headquarters Office agrees with the importer.

The decision is based upon a review of several factors.  These include the polypropylene material that provides strength, splash and particle resistance against many hazards; and design features such as closures with cover flaps, elastic wrists and ankles, elasticized hoods and/or booties.  In addition, the marketing, advertising and sales efforts were directed at industries where protective clothing is a necessity.     

The garments are found to be classified in subheading 6210.10.50 (Free) (4A).


E-COMMERCE.  

The White House issued an executive order January 31, 2020 designed to interdict the importation of counterfeit goods and contraband by or on behalf of E-commerce sites. The order is designed to stem the spread of narcotics and eliminate the importation of counterfeits. The approach focuses on express carriers and international mail.

The following are the principal elements of the order.

1. A requirement that CBP issue a notice of proposed rulemaking to establish criteria that importers must satisfy to obtain an IOR. The criteria will include authority for CBP to deny the right to any person debarred or suspended by CBP.  You will recall that in August 2019 CBP published a notice of proposed rulemaking to amend its regulations by requiring customs brokers to collect certain information from importers in order to verify the identity of the importers, including non-resident importers.

2. Express carriers as well as brokers would be required to notify CBP of the name of any debarred or suspended person who attempts to reestablish business activities requiring an IOR using a different name or address.  The order states: "It is the policy of the United States Government that express consignment operators, carriers, hub facilities, international posts, customs brokers, and other entities, including e-commerce platform operators, should not facilitate importation involving persons who are suspended or debarred by CBP." 

3.  The order requires periodic publication of seizures that have occurred in the express consignment area. 

4.  The question of whether fees currently collected by CBP are sufficient to cover the additional cost associated with dealing with these issues will be addressed by CBP and DHS by the end of July.


50/50.  

CBP has dropped the 50/50 proposal.  

USFIA’s comments acknowledge that the proposed changes are correct but urge that the final ruling make the point that the change does not affect the classification of garments with components made of different fabrics where essential character is the relevant consideration.

CBP offers no explanation for the decision, which appears in Customs Bulletin for December 11, 2019.


MTB PROCESS.  

The International Trade Commission has published a notice that petitions for duty suspensions and reductions are available on its website, mtbps.usitc.gov.  85 Federal Register 1327 (January 10, 2020).  Comments on the petitions must be filed before 5:15 pm, EST, February 24, 2020.


CPSC DEVELOPMENTS.  

There was a single recall of a textile article in January.  The recall covers children’s lounge pants that fail to meet the flammability standard for children’s sleepwear, which requires that sleepwear be either snug-fitting or flame resistant. 


The Customs Overview is a newsletter of Customs legal, administrative and other developments affecting importers of textiles and wearing apparel prepared as a service for United States Fashion Industry Association members and other interested parties.  Matters reported on or summarized herein may not be construed as legal advice on specific situations. 

By USFIA Customs Counsel, John Pellegrini 

In This Memo: 

  • Origin Decision 
  • Classification Decision
  • Entry Summary
  • FTC - Fiber Names
  • Lacey Act – De Minimis
  • CPSC Developments

ORIGIN DECISION 

HQ H304835 (February 6, 2020) addresses the origin of two knit undergarments, a seamless brief, and a seamless thong.  Each of the garments was knit in China and finished in Vietnam.

The importer indicates that the brief exhibits self-start waistbands, back gusset seams, a change in knit pattern for the crotch portion, and elasticized leg openings. The thong features self-start waistbands, back gusset seams, a change in knit pattern for the crotch portion, and elasticized leg openings.  

CBP decides that the country of origin of the thong is China because it is considered knit to shape in China.  CBP’s examination of a sample of the knit piece made in China finds clear, continuous lines of demarcation for subsequent cutting. That is not the case with respect to the brief which is not considered knit to shape and consists of two or more component parts (elastic and body parts).  Although the importer’s descriptions appear identical as to changes in knit pattern, CBP did not see lines of demarcation in the brief.

The ruling is a strong reminder that CBP’s position is that that knit panels in which the final shape is indicated by “clear, continuous, lines of demarcation” are considered “knit to shape.”  HQ 961828 (July 27, 1998).

CLASSIFICATION DECISIONS

The classification of a PVC tote bag is the subject of HQ H288634 (January 24, 2020).  The bag is described as having a PVC outer surface and a polyester inner lining. A zipper located four inches above the base, when unzipped, expands the height of the bag by four inches giving it a height of 14 inches.  The bag has an inner pocket to hold small loose items and a divider separating the main component into two smaller sections.

CBP classified the bag in subheading 4202.92.45, travel, sports and similar bags. The importer asserts classification as a handbag in subheading 4202.22.15.

The importer argues that the primary purpose of the bag, when zipped, is as an everyday handbag. The importer went on to argue that women will carry one bag to work, noting that although the bag is large enough to carry one pair of shoes, in addition to smaller items typically found in a handbag it is not large enough to carry food, books or clothing.

CBP applied established criteria to classify tote bags, the first of which is size. Bags having at least one side exceeding 12 inches typically are classified as totes. This bag, when unzipped has two sides exceeding 12 inches in length.  Although the bag exhibits some characteristics of a handbag such as an inner lining, it is large enough to carry a pair of shoes and according to CBP if that is the case it is large enough to carry other sundry items such as books or clothing.

CBP concluded that if the bag is a handbag when zipped, it is certainly a tote bag when unzipped.  Given that possibility, CBP indicates that it cannot discern the bag’s essential character as handbag or tote, and, under GRI 3(b), it is classified under the subheading occurring last in the schedule, 4202.92.45 (20%).

ENTRY SUMMARY

There has been some confusion as to whether the Entry Summary accommodates multiple Chapter 99 subheadings. This can occur when an article is covered by an MTB and is subject to 301 duties. CSMS #19-39587850 August 31, 2019) makes it clear that multiple such headings are allowed. It states:

When submitting an entry summary in which a heading or subheading in Chapter 98 and/or 99 is claimed on imported merchandise, the following instructions will apply for the order of reporting the HTS on an entry summary line.

HTS SEQUENCE:
1.Chapter 98 (if applicable)
2.Chapter 99 number(s) for additional duties
3.For trade remedies,
first report the Chapter 99 HTS for Section 301,
followed by the Chapter 99 HTS for Section 232 or 201 duties (if applicable),
followed by the Chapter 99 HTS for Section 201 or 232 quota (if applicable).
4. Chapter 99 number(s) for REPLACEMENT duty or other use (i.e., MTB or other provisions)

FTC – FIBER NAMES

The Federal Trade Commission (“FTC”) has proposed amending the rules under the Textile Fiber Products Identification Act to incorporate the most recent ISO 2076 standard for generic fiber names. 85 Federal Register 8781 (February 18, 2020).

The FTC proposes to incorporate the most recent version of the relevant standard, ISO 2076:2013(E), “Textiles—Man-made fibres—Generic names,” Sixth edition, November 15, 2013 (ISO 2076:2013(E)), in 16 CFR § 303.7. The updated 2013 standard adds seven generic fiber names not defined in the 2010 standard: “Chitin,” “ceramic,” “polybenzimidazol,” “polycarbamide,” “polypropylene/polyamide bicomponent,” “protein,” and “trivinyl.”

Comments on the proposal are due March 19, 2020.

LACEY ACT – DE MINIMIS

The Lacey Act requires that importers submit a declaration at the time of importation of certain plants and plant products. The declaration is required for release.  APHIS is amending its regulations to establish an exception to the declaration requirement for products containing a minimal amount of plant materials.  85 Federal Register 12207 (March 2, 2020).  The change is effective April 1, 2020.

The exception applies to products containing plant material that represents not more than five percent of the total weight of the individual product unit, provided that the total weight of the plant material in an entry of such products (at the 10-digit subheading level) does not exceed 2.9 kilograms.

The exception does not apply to products which are covered by CITES or considered threatened or endangered under the Endangered Species Act. The exception will appear at 7 CFR § 374-4 (b) and (c).

Full details on the Lacey Act can be found here.  

CPSC DEVELOPMENTS

There were two recalls of textile articles in February.  The recalls cover: 1)  children’s lounge pants that fail to meet the flammability standard for children’s sleepwear, which requires that sleepwear be either snug-fitting or flame resistant; and 2) children’s nightgowns that fail to meet the federal flammability standard for children’s sleepwear, posing a risk of burn injuries to children. 


 The Customs Overview is a newsletter of Customs legal, administrative and other developments affecting importers of textiles and wearing apparel prepared as a service for United States Fashion Industry Association members and other interested parties. Matters reported on or summarized herein may not be construed as legal advice on specific situations. 

By John Pellegrini, USFIA Customs Counsel

In This Memo: 

  • Heading 6106
  • Classification Decision
  • Forced Labor – De Miminis
  • E-Commerce Pilot
  • CPSC Developments

HEADING 6106. 

You may recall that HQ H270389 (Proposed) would amend three rulings addressing the classification of women’s knit upper body garments with partial openings and no means of closure. The change is described as to make it clear that a means of closure is not necessary for garments with partial openings of heading 6106. The proposed ruling does not change the classification of the garments, heading 6110, since the proposed ruling indicates that the garments incorporate other features that preclude classification in heading 6106.

A closer examination of the proposed ruling reveals that it is potentially far more consequential, particularly for cotton knits.  USFIA has filed comments urging CBP to drop the proposed ruling.

USFIA's comments point out that the trade understands that garments with partial openings are classified in heading 6106 when they have a means of closure.  A change in this policy without any explanation is puzzling.  USFIA also points out that the presence of a means of closure indicates that the garment is not too revealing and eliminates any subjectivity on this point.

Ironically, the proposed ruling overlooks an error in one of the rulings to be modified, N019202, which states that classification in 6106 requires sleeves.  ICP, Apparel Terminology (June 2008) is clear that 6106 garments may be sleeveless.  Since the lack of sleeves is the sole reason classification in 6106 is precluded – the lack of a closure being no longer relevant, it appears that 6106, not 6110, is the correct classification.

USFIA anticipates that this issue will not be resolved in the short term. Remember, the ruling is not final and if it becomes final the change will not be effective for 60 days after publication in the Customs Bulletin.  


CLASSIFICATION DECISION.  

The following is a brief description of classification decisions recently published by CBP.  

HQ H300642 (September 16, 2019) concerns the classification of a quilted garment that the importer asserted was water resistant.  The port rate advanced the garment and the importer protested.

The port decision on classification was based on a lab test that looked at the quilted fabric that made up the garment’s outer shell. The port did not request a swatch of non-quilted fabric. Obviously, the quilted swatch did not pass the water resistance test.

The importer provided a swatch of fabric that had not been quilted with its protest.  The Customs Lab confirmed that the swatch met the water resistance requirements.

The Headquarters Office approved the protest. More importantly, it pointed out that rulings going back to 1994 require that when a garment is quilted, the importer should be given an opportunity to provide a swatch that has not been quilted to determine whether the fabric meets the water resistance requirements.


FORCED LABOR – DE MINIMIS.  

One of the troublesome issues with potential forced labor claims is the absence of a de minimis escape.  This is a particular problem in the textile and apparel industry since the complete supply chain is enormous by any measure.

A single example will suffice. There is a forced labor determination covering rayon fibers. Digging into the background, it appears that the sole input sourced from a forced labor facility is salt.   The salt is used in the production of a chemical which is used to create the slurry that breaks down cellulosic fibers, a very preliminary step in the manufacture of the rayon fibers.  It is obvious that something of this nature could occur in the manufacture of any textile or apparel product without the knowledge of the importer, the factory or, indeed, the fiber source.

CBP brought to our attention a ruling which provides some, but not much relief, in this area.  The ruling is HQ 115676 (May 24, 2002).  The ruling covers plastic beauty accessories manufactured in a non-penal facility.  However, the finished product and its packaging was to be sent to a prison where it will be packaged. The packaging represents only 15 percent of the cost of the finished, packaged product.  

The statutory prohibition applies to products manufactured wholly or in part by convict or forced labor.  Here the products (plastic beauty accessories as well as its packaging) were not manufactured by convict or forced labor.  They were merely packed by forced labor.  CBP ruled that the packaging operation carried out in a prison did not mean that the import was "manufactured in part" by forced labor.  It held that the merchandise was not prohibited. 


E-COMMERCE PILOT. 

CBP has published notice covering modifications to the pilot data collection program for E-Commerce shipments announced in November.  The modifications are published at 84 Federal Register 67279 (December 9, 2019). 

The changes are in two areas. The first change extends the pilot program to cover both ocean shipments as well as international mail shipments. Note that shipments destined for a foreign trade zone continue to be excluded from the scope of the pilot.

The second modification relates to misconduct. The initial language is changed to clarify that pilot participants who are unable to provide data elements contemplated by the test will not be subject to civil or criminal penalties, administrative sanctions or liquidated damages solely for such inability. However, the revised language clarifies that test participants who repeatedly provide false, inaccurate or misleading data will be subject to such sanctions at CBP's discretion.    

Finally, CBP extended the pilot to run through August 2021.


CPSC DEVELOPMENTS.  

There was a single recall of a textile article in December.  The recall covers stone washed denim pants.  Small stones can be present in the pockets or waistband of the pants as a result of the stone washing process. The stones pose an aspiration or choking hazard to young children.


The Customs Overview is a newsletter of Customs legal, administrative and other developments affecting importers of textiles and wearing apparel prepared as a service for United States Fashion Industry Association members and other interested parties.  Matters reported on or summarized herein may not be construed as legal advice on specific situations.