Customs Overviews

In This Issue:


The following is a brief description of recent Customs and Border Protection (CBP) Headquarters Office classification decisions. The first two appear in the Customs Bulletin for July 19, 2017.

The classification of polyester flower leis is the subject of HQ H251022 (May 26, 2017). NY N48019 (January 7, 2009) ruled that the products are classified in subheading 7117.90.90 (11%) as imitation jewelry. The Headquarters Office disagreed.

The NY ruling overlooks a note to Chapter 71, which provides that the chapter does not cover textiles and textile articles. CBP determined that the correct classification lies in subheading 6702.90.35 (9%), which, inter alia, covers articles of artificial flowers.

In HQ H285546 (Proposed), Headquarters addressed the classification of an unfinished quilted cotton pillow shell. As imported, the article consists of two quilted panels joined by a gusset. The panels are backed with a non-woven fabric and filled with polyester batting. The three layers are quilted together. After importation, the unfilled main chamber will be stuffed, sewn closed and finished.

NY classified the article in HTS subheading 9404.90 .10 (5.3%), as articles of bedding such as cushions and pillows, stuffed or entirely filled with any material.

Inasmuch as the imported pillows was not stuffed, the Headquarters Office concluded that it was not classified as bedding in Chapter 94. It found that the proper classification to be subheading 6307.90.89 (7%), as other made-up articles.

The classification of a knit bonded fabric intended for use in performance outerwear is addressed in HQ H273313 (May8, 2017). The fabric consists of a layer of wool fabric knit in Australia and sent to China. In China, a polyester interlock fabric is added and then laminated to the wool fabric by means of an adhesive. The wool fabric costs more and weighs more than the polyester fabric

CBP looked at the fabric as a composite good whose essential character was imparted by the wool fabric that is both more expensive and heavier. CBP classified the fabric in subheading 6006.10.00 (10%).

Products imported after having been exported for repair or alteration are eligible for reduced-duty treatment under subheading 9802.00.50. However, that treatment does not extend to products that are "finished" abroad. HQ H287693 (July5, 2017) illustrates the difference.

The important article was yarn that had been dyed in Taiwan. The yarn was originally produced in Egypt and imported into the United States duty free as a QIZ-eligible product. The importer argued that the dying was a mere alteration. CBP disagreed.

According to the ruling, dyeing yarn in the greige state is a finishing operation and is more than a mere alteration. 


The recent White House showcase of products considered domestic in origin (including four apparel items including NASA space suits, cowboy hats, and military outerwear) has resulted in news coverage and articles on the issue. Many of them are superficial and incorrectly describe rules that govern use of the "Made in USA” label.

The major shortcoming is that the failure to recognize that in the case of textiles and apparel there is specific legislation that governs use of the statement.

The Textile Products Identification Act requires that all covered products, even those that are domestically made, be marked with the country of origin. In the case of products made in the United States with imported components, such as fabric, the fact that imported fabric is used must be indicated.

In FTC rule requires that "virtually all" of the materials be domestic in origin, and allows an unqualified "Assembled in USA” label, even if the product consists of important materials. That label is not available to textiles and apparel, but is available to footwear.

In addition, state law, particularly California, comes into play here. California law prohibits a claim of domestic origin when the foreign content exceeds approximately 10% of an article's cost.

Litigation in which New Balance is alleged to violate California law because it labels some shoes as “Made in USA” while acknowledging that this means at least 70 percent domestic content, likely will result in an important decision on the California law and its interaction with federal law. Unlike other cases brought under the California statute, the New Balance plaintiffs are represented by a national law firm, which a cynic could read as suggesting that the individual consumer plaintiffs are not the real parties of interest.


There was one recall of apparel items in July. A women’s silk scarf with metal tassels was recalled because it does not meet the federal flammability standard for clothing textiles, posing a risk of burn injuries to consumers.

In This Issue:


 Two recent Headquarters Office rulings on First Sale suggest U.S. Customs & Border Protection (CBP) may be taking a somewhat less liberal view on the consequences of “flash title.” The existence of flash title can lead to the conclusion that there was only a single sale for export—from the middleman to the importer.

In the first ruling, HQ H273886 (April 5, 2017), the transaction involved related parties manufacturer, middleman, and importer. The terms of sale, if indicated on the POs and invoices, were either FOB Origin or FOB Port of Export, i.e., flash title.

The documentation of the transaction between the importer and the middleman were less than optimal. Further, the ruling looked at a transaction involving a third-party manufacturer. As you might expect, the documentation in the third-party transaction was much more extensive. CBP granted first sale as to third-party transactions but denied it in the related party transactions.

The take away here is that related party transactions must be documented to the same degree as third-party transactions. This is particularly the case where title passes from the manufacture to the middleman and from the middleman to the importer at the same time.

CBP granted first sale treatment in HQ H278748 (March 17, 2017). Here, as in the previous ruling, title passed from the source of the goods to the middleman and from the middleman to the importer under the same terms. Nevertheless, CBP held that there was a bona fide sale between the middleman and the source of the goods and granted first sale treatment.

The difference between the two rulings is the level of detail in the transaction documents. In the second ruling, the documentation was extensive. As described in the ruling, the documentation submitted illustrates the flow of the order process from one party to the next and the flow of the payment process. CBP described each as following a “reasonable and expected pattern.”

Based on these rulings, it appears to us that the existence of “flash title” does not necessarily eliminate first sale, but it does make it somewhat more difficult to persuade CBP that first sale is appropriate. This is particularly the case if there is any anomaly in any of the documentation and if the level of detail is lacking in the transaction between the source of the goods and the middleman.


Given the increased focus on “Made in USA" and “Buy American,” a recent CBP origin decision warrants a quick review.

The decision, HQ H284685 (May 31, 2017), appears in the Federal Register for June 7, 2017 and in the Customs Bulletin for June 21, 2017. It involves the origin of surgical and isolation gowns produced in the Dominican Republic.

The gowns are produced using fabric originating from China, India, or Vietnam. The imported fabric is cut, ultra-sonically welded, or sewn to create a gown, and knit cuffs are sewn to the arms. Obviously, the country of origin is the Dominican Republic.

Under Federal Acquisition Regulations, products that originate in a trade agreement country may be eligible for treatment as “American” for some by “Buy American” purposes. This treatment is limited. The rule of origin is the basic rule of origin and not the free trade agreement rule of origin.


A new Oregon law prohibits the sale in that state of products made with any “covered animal species.” None of the law’s exceptions apply to commercial apparel, accessories, or footwear. The law, which is the result of a ballot initiative, went into effect July 1, 2017.

The measure defines “covered animal species” as any species of elephant, rhinoceros, whale, tiger, lion, leopard, cheetah, jaguar, pangolin, sea turtle, ray and, with the exception of spiny dogfish, shark. 


CBP has issued instructions on resubmitting protests for post-importation preference claims rejected as non-protestable. CSMS #17-000333 (June 8, 2017).

The resubmission must be filed within 180 days of the issuance of the February 15, 2017, memorandum, i.e., on or about August 14, 2017. If the original protest was rejected as non-protestable, importers may request re-liquidation of the entry through a new protest or in a letter. The protest or letter should include the following:

  • Statement that this is a resubmission of a previous preference claim that was rejected as non-protestable.
  • A copy of the original protest showing that it was rejected as non-protestable.
  • Certificate of origin (or data elements) for the tariff-shift model FTAs that are subject to section 514: Australia FTA and Singapore FTA
  • Affidavit in lieu of a certificate of origin for: Bahrain FTA, Israel FTA, Jordan FTA, and Morocco FTA.

Re-submission may be electronically through the ACE Protest Module via the ACE Portal or paper to the CBP Port of Entry.

This process does not apply to preference programs that by law have a post-importation provision: These include CAFTA, Chile, Columbia TPA, Korea TPA, NAFTA, Oman FTA, Panama FTA, and Peru TPA.


The Federal Trade Commission (FTC) has announced a change in the regulations promulgated under the Textile Products Identification Act. 82 Federal Register 29251 (June 28, 2017).

The proposed change deletes a requirement that the owner of a registered trademark that uses the mark in lieu of an RN, must furnish a copy of the registration to the FTC. In addition, the change deletes the requirement that only trademarks that are so-called house marks may be used for this purpose. It is not clear whether a company could use multiple trademarks.

The section showing the proposed changes follows:

303.19 Name or other identification required to appear on labels.

(a) The name required by the Act to be used on labels shall be the name under which the person is doing business. Where a person has a word trademark, registered in the United States Patent Office, such word trademark may be used on labels in lieu of the name otherwise required:. No trademark, trade names, or other names except those provided for above shall be used for required identification purposes.


There were five recalls of apparel items in June. The recalled items were: 1) children’s playwear because the buttons can detach from the garment, posing a choking hazard to young children; 2) two children’s robes that fail to meet flammability standards for children’s sleepwear and pose a risk of burn injuries to children; 3) a women’s silk scarf that does not meet the federal flammability standard for clothing textiles, posing a risk of burn injuries to consumers; 4) infant coveralls because the snap at the crotch can detach, posing a choking hazard to infants.

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.

In This Issue:


In HQ H280295 (April 6, 2017), Customs and Border Protection (CBP) addressed the question of whether a small amount of non-originating elastomeric yarn prevented 98/2, cotton/elastane denim jeans from qualifying for duty free treatment under the US-Morocco FTA.

The jeans were cut and sewn in Morocco from fabric woven in Morocco. The yarns were produced there from imported cotton fibers and elastane. The elastane represented less than 7 percent of the weight of the component fabric. The importer argued that the elastane is de minimis. CBP disagreed.

The relevant de minimis provision provides that the presence of elastomeric yarn in the component of the good that determine the tariff classification of the good, here the fabric, is originating only if the yarns are wholly formed in the territory of Morocco or the United States. On the face of it, it appears that the importer’s argument should hold the day. However, there is a separate note, which states that in the case of the textile repair, a good that is a yarn, fabric, or a group of fibers, the term "component that determines the tariff classification of the good" means all of the fibers in the yarn, fabric or group of fibers. CBP ruled, based on this provision, that the denim jeans did not qualify as originating goods under the terms of the FTA. 


The following is a brief summary of recent classification Rulings. The first two are proposed and appear in the Customs Bulletin for April 12, 2017.

HQ H243928 addresses the classification of a cotton woven sleep sack. The article is 33×86 inches and sewn together on three sides. One end of the sack has a 1.5 inch pocket, which is formed by a folded length of material sewn on three sides and which can be used to accommodate a pillow. The top near the pillow insert is not sewn down, which allows a person to easily slip into and out of the sleep sack. The importer explains that the sleep sack has a variety of uses, as a sleeping bag liner and a standalone product in warm climates. It will be familiar to those whose travel takes them to places of dubious hygiene.

A number of rulings, some of them quite old (1992), classified the sleep sack as bed linens in heading 6302.

CBP now takes the position that the sleep sacks are not properly considered linens for the reason that they are not primarily used in beds. For that reason, CBP finds classification in subheading 6307.98.90 (7%).

The classification of polyester flower leis is the subject of HQ H251022. NY N48019 (January 7, 2009) ruled that the products are classified in subheading 7117.90.90 (11%) as imitation jewelry.

The NY ruling ignores a note to Chapter 71, which provides that the chapter does not cover textiles and textile articles. CBP determined that the correct classification lies in subheading 6702.90.35 (9%), which, inter alia, covers articles of artificial flowers

The third ruling, HQ H264916 (March 7, 2017), addresses a request for reconsideration of NY N260728 (February 11, 2015). That ruling classified certain women's knit pants in subheading 6104.62.20 (14.9%). The importer asserted classification as sleepwear.

The ruling explains that CBP policy is to examine the physical characteristics of the garments in question and in some cases to consider extrinsic evidence such as marketing. In this case, the ruling observes that the pants are not characterized by a sense of privacy as is typical of sleepwear. It goes on to indicate that the material is not sheer or revealing. It then concludes that nothing precludes use of the garments in a social environment outside the home. Finally, CBP notes that the advertising material and commercial documentation show that the pants are advertised as "lounge pants" as part of the importer’s "sleep and lounge collection” - enough said.


A federal district court in Illinois has dismissed a class action accusing a pet food manufacturer of deception in claiming its pet food products were "Made in USA" when some of the vitamins and minerals were imported. The basis for the dismissal was that the consumer had failed to establish that he was damaged.

The plaintiff referred to himself as "a patriotic American who prefers to purchase goods made in the United States rather than imported goods, and who is willing to pay a premium for American-made goods.” The court did not agree that this was a sufficient basis to establish actual damages, which are necessary to proceed on a deceptive business practices claim.

The court did indicate, however, that the imported vitamins and minerals were important ingredients, particularly in view of advertising that emphasizes the importance of "added vitamins for well-being." This may form the basis for an FTC complaint but is insufficient to proceed under a deceptive business practices claim.


There were three recalls of apparel items in April.

The following items were recalled: 1) children’s zipper hooded sweatshirts because the zipper pull can detach from the sweatshirt, posing choking and laceration hazards to children; 2) women’s overhead and zip-up sweaters that fail to meet federal flammability standards for clothing textiles, posing a risk of burn injuries; and, 3) infant booties because the non-slip rubber grips on the bottom of the booties can detach, posing a choking hazard.

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, McGuireWoods LLP

In This Memo:

  • Gray Market Developments
  • Extension of Liquidation
  • Preference Programs
  • MTB Developments
  • Classification Decision
  • CPSC Developments 


Two recent litigations, one in the Court of International Trade, address the legitimacy of gray market goods, genuine goods imported without the permission of the U.S. trademark owner. Both litigations involve imported batteries.

Trademark owners have two forms of relief from gray market goods. 

The first form of relief authorizes CBP to exclude merchandise bearing a registered U.S. trademark when it is imported without the consent of the U.S. trademark owner, provided that (i) the trademark owner has recorded its trademark with CBP, and (ii) the owner of the trademark is a U.S. company and the foreign goods were not manufactured abroad by a party under common ownership or control with it. In this case, goods may be excluded without making a claim or being required to show physical and/or material differences between the goods that the U.S. trademark owner has authorized to be sold in the United States and their gray market counterparts.

The second form of relief, referred to as the “Lever Rule,” excludes from entry any merchandise bearing a registered U.S. trademark when such merchandise is imported without the consent of the U.S. trademark owner, provided that: (i) the trademark owner has recorded its trademark with CBP, and (ii) the trademark owner demonstrates that the imported goods are physically and materially different than the authorized goods sold in the United States. 

The first of the two cases was brought in the Federal District Court in Chicago. The litigation asserts that the importation of batteries that, according to the plaintiff trademark owner, are different from the batteries it sells in the United States is unlawful. The imported batteries are different from those sold in the United States largely in terms of their packaging, warrantees, and similar consumer-related elements rather than the physical nature of the batteries.

The CIT litigation challenges CBP's decision to grant Lever treatment to the batteries. Generally, the plaintiff in the CIT litigation argues that CBP should not have granted Lever treatment to the batteries without an opportunity for public comment. Further, the complaint alleges that the trademark owner sells batteries in the United States that do not exhibit the warranties, safety information, and consumer warnings that it claims distinguish batteries intended for domestic consumption from the imported batteries.


In International Fidelity Insurance Co. v. United States, Slip Op. 17-64, (May 30, 2017), the United States Court of International Trade held that U.S. Customs and Border Protection (CBP) acted reasonably when it extended liquidation twice while determining whether imported from Mexico qualified for duty-free treatment under NAFTA. Plaintiff argued that the decision to extend liquidation was an abuse of discretion. The CIT disagreed.

CBP has pretty much unfettered discretional authority to extend liquidation. The CIT recognized the existence of a "narrow limitation" of that authority.  The court will not invoke the limitation unless the extensions are necessary because of substantial gaps in or near inactivity on the government’s part. Here, the court characterized the government’s activity as “continual, if not consistent,” enough to avoid the limitation.


As you may be aware, a limited number of Harmonized Tariff Schedule (HTS) subheadings do not have corresponding free trade agreement (FTA) tariff change rules. This is because the tariff change rules were negotiated while an earlier version of the HTS was in place.

A schedule of the up-to-date/out-of-date status of the rules for each FTA is available here.

Until the rules are updated, the certificate of origin should indicate both the current HTS subheading and the previously corresponding subheading.


The International Trade Commission (ITC) has announced that it intends to re-open its on-line Miscellaneous Tariff Bill (MTB) portal to allow members of the public to submit additional, limited public comments on certain petitions for duty suspensions and tariff reductions. The re-opening will commence June 12, 2017 at 8:45 a.m. for a period of 10 days, and will close June 21, 2017 at 5:15 p.m.  82 Federal Register 24142 (May 25, 2017).

The re-opening is for the limited purpose of allowing additional comments on Category VI petitions (i.e., petitions that the ITC does not recommend for inclusion in a miscellaneous tariff bill by Congress). The ITC’s recommendation will appear in the preliminary report to Congress expected to be issued June 9, 2017. The comments permitted are limited to those that address the decision to place a petition into Category VI. 


The Customs Bulletin for May 3, 2017 published HQ H271286 (April 4, 2017). The ruling revokes two New York rulings, NY N266884 (August 13, 2015) and NY N266899 (August 19, 2015). Both involve the classification of reusable diaper covers as diapers.

The first of the two rulings covers a diaper cover with a lining and a detachable interior pouch. The outer shell is a 92/8, cotton/spandex knit fabric. The lining is a cotton jersey fabric. The New York ruling held that the cover was classified in subheading 9619.00.21, Harmonized Tariff Schedule of the United States (HTS) (3.6%). The interior pouch, which is made of nylon, was held classifiable in subheading 9619.00.05 (5%). The interior pouch is imported separately.

NY N266899 deals with a similar product consisting of an outer shell and lining. The outer shell is a 95/5, polyester/wool fabric and the lining is 92/8, cotton/spandex. The product has plastic snaps in all four corners to secure an insert that is not imported with the article. The product was classified in subheading 9619.00.74 (16%).

The Headquarters Office ruled that neither of the articles was classified as a diaper. This is based primarily on the definition of diapers, which contemplates some degree of absorptive capacity. Since the diaper covers and liners are not designed to be absorbent in and of themselves, they were deemed no more than diaper covers and therefore not classified in the provision for diapers.

The article covered in the first of the two rulings was held classifiable in subheading 6111.20.60 (8.1%), as babies’ garments and accessories of cotton. The article described in the second ruling, which had a cover of man-made fiber, was classified in subheading 6111.30.50 (16%).

The importer sought review of the first ruling arguing for classification in subheading 9619.00.31 (8.1%). I am not at all sure why. The second ruling was reviewed by CBP on its own motion. 


There was one recall of apparel items in May.

Women’s scarves that failed to meet federal flammability standard for clothing textiles, posing a risk of burn injuries to consumers, were recalled. The scarves are a 70/30, silk/polyester blend.

In This Memo:


The Executive Order, Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws,dated March 31, 2017, purports to address customs collection and enforcement efforts. There is not much here that is not found in the Trade Facilitation and Enforcement Act of 2015.

Nevertheless, it does bear watching. Perhaps the only "new" element is that Justice Department and Federal prosecutors are directed to accord a high priority to prosecuting significant offenses related to violations of trade laws. 

“JUMP TEAMS” 2016. 

U.S. Customs & Border Protection (CBP) has shared the results of the Fiscal 2016 Textile Production Verification Team visits with USFIA.

The teams visited approximately 150 factories in Nicaragua, Peru, Ghana, Kenya, El Salvador, Lesotho, the Dominican Republic, and Morocco. None of the factories visited showed evidence of transshipment but 13 were categorized as high risk for transshipment.

The visits also looked at compliance with preference program requirements.  Seven factories were found to have violated CAFTA program requirements. One factory was found to have violated Peru FTA requirements and two to have violated Morocco FTA requirements. No factories were found to have violated AGOA requirements. Seven factories were determined to have insufficient documentation to support AGOA claims.  The same criticism was lodged against two factories claiming CAFTA status, 14 claiming Peru TPA and seven claiming Morocco PTA status. 


CBP has issued new guidance on the use of post-injury claims for a preference program eligibility. CSMS #17-000110 (February 28, 2017). 

Under the new guidance an initial preference claim may be made subsequent to entry, including by means of a protest, PEA, or PSC, unless the preference program requires that a post-importation claim be under section 520(d). 

The 520(d) procedure, which is available in some preference programs only, requires that the claim be made within a year of entry and may be filed after liquidation. The following preference programs have a 520(d) provision, CAFTA, NAFTA, Chile, Oman, Columbia, Panama, Korea, and Peru. If the preference program has a 520(d) provision, it is the only means of making a post-entry claim. 

This does not mean that a preference claim made at entry but denied at liquidation may not be protested; it may. In addition, the denial of a timely 520(d) claim may be protested.

Post-entry claims by means of a PEA, PSC or protest are available for all other preference programs, including GSP AGOA, Jordan FTA, Israel FTA, and Morocco FTA.

Members whose protests were rejected, as opposed to having been denied because raising an initial preference claim at protest is not acceptable, may resubmit the protest.  The protest must be resubmitted prior to August 14, 2017.


CBP addressed the classification of a hobo bag in HQ H268949 (January 30, 2017). The result may lead to confusion.

The issue was whether the bag was classified as a handbag or as a travel, sports or similar bag, i.e., as a tote. Classification as a tote is favorable if the surface is leather, neutral if the surface is textile and unfavorable if the surface is plastic.

The subject bag has an outer surface of plastic sheeting. The bag closes at the top with a zipper and, as is typical of the hobo style, has a crescent shape. The bag measures 14.15 inches in length, 6 inches in width and 9.5 inches in height at its center and 13 inches on either side of its crescent shape.

The bag has one top strap measuring 12 inches. The strap is designed to allow the bag to be carried by hand or hung over the shoulder.  According to the ruling, the bag is made of soft flexible material and tends to slump or slouch when set down. This is described as being characteristic of the hobo style.  The bag has an inner zippered pocket and four exterior pockets. 

Generally, CBP has distinguished totes from handbags on the grounds of size and the ability to carry larger items such as food, books or clothing. In terms of size, a tote must have at least one side that exceeds 12 inches. The subject bag satisfied that requirement. However, CBP concluded that the bag could not hold the larger items required for classification as a tote. This is based upon the short strap that, according to the ruling, causes the bag to become tight across the top opening, making it difficult to maneuver the contents and close the zipper because of obstruction.  It goes on to find that the bag cannot carry the larger items and that classification as a handbag is appropriate.

The ruling seems to add a higher degree of subjectivity to classifying totes. How long a strap is required?


The International Trade Commission (ITC) has issued an order excluding certain bed linens made in Pakistan.  82 Federal Register 15067 March 24 2017. The excluded merchandise consists of bedsheets manufactured in Pakistan. The basis for the exclusion is the fact that the sheets were falsely advertised as to their thread count.  The actual thread counts were 407 and 252, much lower than the advertised counts of 650 and 800.

The ITC's decision is based upon Section 337, Tariff Act of 1930. Section 337 is typically associated with intellectual property violations, primarily patent violations. However, the Section addresses all forms of unfair competition that are a cause of injury to domestic industry.


There were four recalls of apparel articles in March.

The recalls included: 1) infant girls hooded jackets with metal snaps on the jackets that can detach, posing a choking hazard to children; 2) children’s waterproof bibs because the waterproof plastic backing can separate from the terry cloth fabric, creating a suffocation hazard to children; 3) children’s robes and pajama sets that fail to meet federal flammability standards for children’s sleepwear, posing a risk of burn injuries to children; and 4) infant caps because a button on the top of the cap can detach, posing a choking hazard

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.