Customs Overviews

By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP 

In This Issue:



Last month we reported on a false claim act litigation in which the claimant used import data culled by an information service from manifest data to make part of its case.

The Customs Regulations make vessel manifests and some statistical information available to members of the press. The term “press” is interpreted broadly to include commercial operations that provide manifest information to the public for a fee. Members who Google their name may find that there are companies who are prepared to provide specific information about their shipments,

The fact that the troll used trade data to get information on the importer’s foreign purchases is a reminder to members to make sure that they have taken advantage of Section 103.31(c) of the Customs Regulations. The regulation provides that an importer or consignee may request confidential treatment of its name and address as shown on the inbound manifest—including identifying marks and numbers. In addition, an importer may request confidential treatment of the name and address of the shipper or shippers.

This is done by sending a letter to the Disclosure Law Officer at CBP’s Headquarters Office. Once granted, this confidential treatment will remain in effect for two years unless a renewal certification is filed 60 days prior to the expiration of the certification.

Once a request is submitted, you should continue to monitor information services to ensure that misspellings by shippers have not led to disclosure of your shipment information. Accordingly, when making the request for confidential treatment you should include any and all variations of your name that shippers might use. In that connection, USFIA will ask CBP to eliminate the cap (10) on the name variations now allowed.


The following is a brief description of recent classification rulings issued by U.S. Customs and Border Protection (CBP).

The first involves a plastic bag. In HQ H027717 (August 17, 2016) the importer challenged a New York ruling that the bag was classified as a tote in subheading 4202.92.45 (20%). The importer argued that the bag was classified as a handbag at a lower duty right. 

The Headquarters Office disagreed and confirmed the New York ruling that the bag is classified as a tote. The decision is based mostly on size. Generally, a bag that has at least one side of 12 inches will not be treated as a handbag but as a tote and classified in heading 4202.92.

It is important to note that classification as a handbag rather than a tote is favorable in the case of plastic bags but unfavorable in the case of leather bags. There is no difference in duty in the case of textile bags.

The classification of hangers imported with apparel is addressed in HQ H266818 (May 23, 2016). The Headquarters Office held that the hangers are classified with the garments rather than in Chapter 39. The NIS Division agreed that the hangers at issue were substantial. The question was suitability for reuse and commercial viability for reuse.  

The importer argued that hangers sold to a retailer that accepts or requires reusable hangers and/or hangers obtained from a source that has a ruling indicating that its hangers are eligible for duty-free treatment as instruments of international traffic are per se suitable for reuse and in fact likely reused. In some cases, the retailers had favorable rulings based on their reuse of the hangers. 

The ruling points out that the importer’s retailer customers who obtained rulings classifying their hangers in Chapter 39 provided documentation establishing that a substantial portion of the hangers were forwarded to a hanger supply company and sorted, sanitized and sold to garment vendors for use in packing, etc. The ruling goes on to hold that the importer may not rely on the rulings. Apparently, it is CBP’s view that the retailers return hangers they import to hanger supply companies but do not return hangers obtained from importers. Is this is reasonable?

The ruling also notes that CBP requires documentation verifying resale of the relevant hanger styles after their original use. Obviously, only the retailer can provide this information. Requiring this approach means that importers may not claim classification in Chapter 39, as they will not be able to verify actual resale of the hanger styles. Surely, this is not the result CBP intends.

A fair reading of this ruling puts importers who are not retailers at a disadvantage.


There were no recalls of apparel articles in November. 

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 Overview:


In November 2014, USFIA reported on a False Claims Act (FCA) case involving an importer of pipefittings. The litigation was commenced by Customs Fraud Investigations LLC (CFI). Plaintiff alleged that the importer failed to mark its foreign-made pipefittings in an attempt to hide their origin and to avoid paying marking duties on the products.

The case was thrown out by the court because CFI had provided no basis for what the court described as wholly conclusory allegations that the importer had falsified its customs documents knowingly to avoid paying any required marking duties. CFI had argued that by failing to mark the pipefittings with the country of origin and by not disclosing that fact CBP, the importer avoided the obligation to pay marking duties. The decision has a rather incomplete analysis of the customs issues, for example, the assessment of marking duties is ascertained by CBP and an importer whose products are not marked properly is not automatically obliged to pay a marking duty. The interesting, and troublesome, aspect of this case is that the plaintiff is what is referred to as a troll i.e., an entity whose sole purpose is to bring claims based upon Federal or State legislation. Another example of a troll is an entity that pursues Prop 65 claims.

The government declined to intervene in the case. It is usually very difficult for a troll to prevail when this happens. However, the government did appear in the appeal as an amicus in support of the troll. Unfortunately, the dismissal has been reversed and the claim reinstated.

The appellate court found that FCA liability may attach as a result of avoiding marking duties, which it characterized as a knowing concealment of a failure to pay.

The appeals court described the violation in the following terms. The importer knew its goods were not marked properly and, therefore, knew that the imports should not have been released from government custody. Had the importer informed the government of this state of affairs, the goods would not have been allowed into the country. By staying silent, the importer made a choice—to pay the 10 percent marking duty owed on its goods, if its scheme was discovered, instead of paying to have the goods marked properly, re-exported, or destroyed. Thus, the importer knowingly concealed information from the government by not informing customs officials that the imports were not marked properly. Once the imports cleared customs, the importer knew it owed marking duties that accrued on importation but did not pay them. This, in the court’s view, gives rise to reverse false claims liability for the unpaid marking duties.

The court accepted allegations based on a statistical analysis of trade data (presumably “Piers” or a similar service) showing the origin of the imported pipe fittings and a review of pictures found in eBay listings. Neither customs filings nor pipefittings were examined.

The decision sends the case back to the district court for further proceedings, essentially to determine whether in fact the imports were not marked. There was a dissent on the validity of the statistical analysis but the decision was unanimous on the question of whether the perceived avoidance of marking duties was an FCA violation.

This litigation highlights a growing source of concern for importers. CFI and others of the same ilk can create significant problems by making these allegations. The government will usually conduct an investigation into the troll’s allegations to determine whether it should intervene in the litigation. The legal and other fees associated with dealing with the government investigation will be significant.

Finally, the fact that the troll used trade data to get information on the importer’s foreign purchase should be a strong incentive to members to make sure that they have taken advantage of Section 103.31(c) of the Customs Regulations. The regulation provides that an importer or consignee may request confidential treatment of its name and address as shown on the inbound manifest—including identifying marks and numbers. Also, an importer may request confidential treatment of the name and address of the shipper or shippers. 


U.S. Customs and Border Protection (CBP) announced that the NIS Division has completed its relocation in New York. Ruling requests should be sent to the following address: Director, National Commodity Specialist Division, Regulations and Rulings, Office of Trade, 201 Varick Street, Suite 501, New York, N.Y., 10014. 81 Federal Register 74918 (October 28, 2016). 


CBP published a notice of proposed rulemaking pursuant to which the notice of liquidation, suspension of liquidation, and extension of liquidation will be posted electronically on the CBP website. 81 Federal Register 71019 October 14, 2016.

The electronic posting would replace the paper notice of liquidation “posted” at the customshouse, a process that dates to the age of sailing ships. CBP will eliminate the paper courtesy notice of liquidation but will retain the electronic courtesy notice.

Liquidation notices would be posted to the CBP website and would be searchable by entry number, importer number, filer, etc. The date of liquidation will be the day of electronic posting. The notice would be retained on the website for a minimum of 15 months. Thereafter, access to liquidation data would be available with the assistance of CBP or for electronic filers using the ACE portal.

CBP indicates that it will post deemed liquidations within a reasonable period of time. This information that is not readily available now.

The proposed change appears at first blush to be an improvement. In our experience, few importers or brokers rely on the “posted” notice of liquidation. In fact, CBP estimates that there are as few as 2,500 trips to a customshouse to review notices of liquidation. This is an infinitesimal number considering the number of the importers and entries filed.

Comments on the proposal must be filed on or before November 14, 2016.  USFIA will file comments and solicits member input.


There were no recalls of apparel articles in October. 

By John Pellegrini, USFIA Customs Counsel, McGuireWoods LLP

In This Issue:


United States Customs and Border Protection (CBP) has yet to provide updated guidance on the manner in which importers can take advantage of the increase in the de minimis value from $200 to $800. These shipments are exempt from duty and formal customs processing. The underlying statute limits the exemption to “articles imported by one person on one day.” In addition, the statute provides that the benefit “shall not be granted any case in which merchandise covered by a single order or contract is forwarded in separate lots to secure the benefit of this subdivision (2).”

CBP previously has ruled on the treatment of packages addressed to individuals but exported by the seller in a single consolidated shipment. In HQ 114113 (October 26, 1998), packages for individuals, consolidated in a single shipment, were ruled eligible for informal duty-free treatment when the individual packages were assigned a house airway bill number and entry was made on the basis of the HAWB. Where entry was made on the basis of a master airway bill, the value limit was applied to the total value of the consolidated shipment.

We understand that some believe they may use Foreign Trade Zones or ship through Canada (presumably bulk shipments would be repackaged for individual shipment in Canada or the FTZ) in order to take advantage of the de minimis rule.

Given that CBP has yet to provide any new guidance and in view of the 1998 ruling cited reviewed above, prudence suggests that members proceed cautiously.


CBP addressed the classification of footwear displays as usual packaging, classified with the footwear, or as a separate article in HQ H264893 (May 18, 2016).

The display at issue consists of a master carton formed by a cardboard base, sides, and a lid, which contains shoes individually boxed in shoeboxes. The pre-filled displays are loaded onto a pallet and shrink wrapped for shipment. Prior to placement on the sales floor, the shrink wrap, cardboard sides, and lid are removed and the stacked rows and columns of shoe boxes are ready for sale.

Generally, packaging that is either reusable or unusual is not classified with its contents. The issue here was whether the display is properly to be considered an unusual container.

CBP, noting industry sources that indicated that the display is typical of those used in the footwear marketplace particularly in warehouse clubs, concluded that the packaging was not unusual. The ruling also notes that the display made up the outer shipping container for the footwear. Accordingly, the display was held to be classified with the footwear, rather than as a separate article.

Similar displays are used in the textile and apparel industry. However, given the reference to footwear industry sources, it is not unreasonable to view the decision as limited to footwear.


CBP may be taking another close look at first sale.

Recently, CBP has taken a firm position that “flash title” may be a sufficient basis on which to deny first sale treatment. “Flash title” occurs when the terms of sale are the same for the seller, middleman, and/or the importer. CBP appears to be looking for a clear indication that the middleman took title and risk of loss for at least a brief period of time. This seems like a change from CBP’s previous position that flash title would not defeat a first sale claim when the transaction was otherwise acceptable.


You will recall that trade legislation passed in 2015 had serious errors with respect to the treatment of recreational performance outerwear. The errors were corrected in the 2016 legislation.

The corrections go into effect August 22, 2016. As of this writing, the ITC has not updated the tariff and we do not expect them to do so until very close to the effective date.

Keep in mind, that this is a change in classification only, and not a change in duty rate. The purpose of the classification changes is to make it easier to negotiate lower rates in any future trade agreement negotiations.


CBP has announced that effective August 29, 2016, ACE will be the sole method for filing electronic protests. As of that date, CBP will no longer accept electronic filing through ABI. 81 Federal Register 49685 (July 28, 2016).

This change has no impact on filing paper protests.


There were two recalls of textile and apparel articles in July. Baby swaddles and sleeping bags were recalled because the shoulder snaps on the articles can break or detach, posing a choking hazard to young children. Oven mitts were recalled because they lack thermal protection, posing a burn hazard to consumers.

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 Issue:


The Department of Labor has published the 2016 update to its list of goods produced by child or forced labor. 81 Federal Register 67393 (September 30, 2016). The notice includes the web address of the list.

The following countries are listed as using child and/or forced labor in the production of fiber, textiles or garments (an asterisk indicates that forced labor is involved):

  • Argentina
  • Azerbaijan
  • Bangladesh
  • Benin*
  • Brazil*
  • Burkina Faso*
  • Cambodia
  • China*
  • Egypt
  • Ethiopia*
  • India*
  • Kazakhstan
  • Malaysia*
  • Mali
  • Nepal*
  • Pakistan*
  • Thailand*
  • Turkmenistan*
  • Uzbekistan*
  • Vietnam*
  • Zambia

Given the increased attention that Customs and Border Protection (CBP) is directing to forced labor issues, members would be wise to emphasize these issues to suppliers located in countries identified as employing forced labor in the textile sector.


Although the Headquarters Office can sometimes take considerable time to issue a ruling, the National Import Specialist Division could be relied upon to respond within 30 days. That appears to have changed and whether the change is permanent or temporary is unclear.

While our experience is based upon an admittedly small sample, responses to ruling requests have been taking in excess of 60 days. Our impression is that it is not necessarily that the NIS is taking longer to issue a ruling response but that the review process is slower and the process of assigning ruling requests is also slower. In one situation, we learned that a ruling submitted in late spring was not assigned to an NIS until July. We understand that there are two main reasons for the delays: 1) loss of personnel in the office responsible for processing ruling requests and 2) disruption resulting from the move of the offices. This suggests that the delays are temporary.

Nevertheless, if members are having similar problems, please let us know since it may make sense for USFIA to engage CBP in discussions around the issue.


It is no secret that CBP is placing increased emphasis on enforcement. This is manifest in the following circumstances.

The importer has undergone an audit which is complete. The audit report raises a series of valuation questions that are the subject of a request for internal advice. The request is presently before the Headquarters Office. Nevertheless, the port issues a pre-penalty notice. The only violation is based on the valuation issues addressed in the pending request for internal advice. The port advises that it was directed to issue the pre-penalty notice by the Headquarters Office.

In essence, the pre-penalty notice is based upon “violations” that do not exist. It seems to me that there are no violations until such time as the Headquarters Office decides that the port and/or the auditors are correct on the valuation questions. If the importer was correct, where is the violation?            


The following is a brief description of two recent classification decisions, both of which appear in the Customs Bulletin for September 21, 2016.

The first decision, HQ H275674 (August 17, 2016) involves five articles of children's luggage, a rolling pullman case, two backpacks, a tote bag, and an insulated lunch bag. All of the bags are made up of an exterior surface of man-made fiber textile and each has a front panel of PVC decorated with one or more cartoon or movie characters. The textile material accounts for the greatest part of the surface area.

In NY M82559 (May 2, 2006) and NY M84189 (June 16, 2006), the NIS Division classified the bags as consisting of textile materials. The Headquarters Office decided to review the decisions and determined that classification should be as of plastics materials.

The change in classification is based upon an essential character analysis. Thus, despite the fact that the textile materials account for the majority of the external surface area, Headquarters concluded that the PVC panels were relatively more important. The principal reason given is that the bags were made for use by children, who would be more interested in the characters depicted on the PVC panels rather than the structural integrity of the luggage. Accordingly, CBP concluded that classification was as of plastic materials, not textile materials. The change is classification increased the duty rate for the pullman case, the backpacks and the tote bag to 20% from 17.6%, but reduced the rate to 3.4% from 7% for the insulated lunch bag.

The second ruling, HQ H237738 (August 17, 2016) addresses the classification of graduated compression hosiery. The hosiery provides graduated compression with the strongest being applied to the foot and ankle area, gradually decreasing as the stocking rises up the leg. The hosiery is prescribed by physician's to prevent or treat various disorders of the legs and feet. NY H235286 (December 7, 2012) found classification in subheading 6115.30.90 (14.6%).

The issue was whether the stockings are classified in subheading 6115.10 as graduated compression hosiery or rather under subheading 6115.30 as woman's full-length or knee-high length hosiery. Classification as graduated compression hosiery was based primarily on a review of the applicable Explanatory Note. A key element of the decision was that use of the hosiery was prescribed by physicians and specially fitted to the patient by certified healthcare personnel. The ruling finds classification in subheading 6115.10.05 (Free).


NY N278154 (August 26, 2016) addresses the acceptability of an origin label consisting of a fabric label that hangs about three inches below the rear center neckline from two braided yarns sewn into the neckline hem.

New York ruled that the label was not acceptable as not sufficiently permanent. The decision is based upon T.D. 54640(6) (1958).

T.D. holds that wearing apparel origin must be disclosed by means of a fabric or film label properly affixed on the inside center of the neck midway between the shoulder seams. It also states that button tags, string tags, other hang tags, paper labels and other similar methods of marking are not acceptable.


There were no recalls of apparel articles in September - the second consecutive month.

In This Issue:


The Office of the United States Trade Representative (USTR) has announced the results of its review of the petition to add certain travel goods to the list of articles eligible for duty-free treatment under the Generalized System of Preferences (GSP). The petition has been approved but only for lesser-developed developing countries (e.g., Bangladesh, Cambodia, Bangladesh, and Haiti) and AGOA countries. The decision for the balance of the GSP-eligible countries was deferred. The travel goods covered are those classified in the following subheadings and statistical reporting numbers: 4202.11.00, 4202.12.40, 4202.21.60, 4202.21.90, 4202.22.15, 4202.22.45, 4202.31.60, 4202.32.40, 4202.32.80, 4202.92.15, 4202.92.20, 4202.92.45, 4202.99.90, 4202.12.2020, 24202.12.2050, 4202.12.8030, 4202.12.8070, 4202.22.8050, 4202.32.9550, 4202.32.9560, 4202.91.0030, 4202.91.0090, 4202.92.3020, 4202.92.3031, 4202.92.3091, 4202.92.9026, and 4202.92.9060.

The decision, which is effective July 1, 2016, appears on the USTR website and will be published in the Federal Register shortly.


HQ H110416 (February 29, 2016) appears in the Customs Bulletin for June 8, 2016. It does not yet appear in CROSS. The ruling modifies two New York rulings, N086592 December 7, 2009 and N086736 December 9, 2009. Both New York rulings classify garment sets consisting of a jacket and pants under the provisions for the individual pieces. In May 2010, the importer sought reconsideration arguing that the garments are classified as suits.

The garment sets consist of a jacket and pants. In each style, the jacket has at least four panels. The components of each style are of the same fabric construction, style, color, and composition. They are also of corresponding sizes. The garments clearly satisfy the definition of a suit. Neither of the New York rulings provides an indication of why the suits were not classified as suits. In any event, six years later, the Headquarters Office agrees with the importer. 


Those of you who have tried to find the Valuation Encyclopedia in recent months found that it is not available. We understand that it is being updated and expect that it will be available in a “relatively” short period of time. 


U.S. Customs and Border Protection (CBP) has announced that effective June 30, 2016, ports will no longer be required send requests for liquidated damage claims relating to Importer Security Filing errors to Headquarters for review. The "three-strike "approach to these claims against will end, as well.


There was one recall of textile and apparel articles in June. Children’s sleepwear was recalled for failure to satisfy applicable flammability standards.

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.