BOR-4-07:OT:RR:BSTC:CCI H071185 ALS
Mr. Arthur W. Bodek
Ms. Tracey Topper Gonzalez
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, LLP
399 Park Avenue, 25th Floor
New York, New York 10022-4877
RE: Substantial Containers or Holders; Harmonized Tariff Schedule of the United States (HTSUS) subheading 9803.00.50; HTSUS, U.S. Note 1(a), Chapter 98, Subchapter III; HTSUS, General Rule of Interpretation [GRI] 5(b); Plastic Garment Hangers
Dear Mr. Bodek and Ms. Gonzalez:
This is in response to your correspondence, dated July 27, 2009, with accompanying samples, in which you requested a ruling on behalf of your client, Tommy Hilfiger USA, Inc, on whether certain plastic hangers may be entered under Harmonized Tariff Schedule of the United States Annotated (HTSUS) subheading 9803.00.50 as substantial containers or holders, subject to the entry requirements pertaining thereto. Our ruling is set forth below.
FACTS:
A foreign-made clothing hanger of plastic that was not previously imported will be imported together with a garment that is held by the hanger. The hanger is of substantial construction. Because of its construction and intended use as a garment holder, the hanger would be eligible to be designated as an instrument of international traffic under 19 USC 1322(a), as implemented by 19 CFR 10.41a. After importation, the garment will be sold at retail, without the hanger. The hanger, along with other like hangers, will be collected at the time of retail sale and subsequently exported to be re-used to hold another garment for import into the United States.
ISSUE:
Whether a substantially constructed, re-usable, foreign-made garment hanger that would be eligible to be designated as an instrument of international traffic on its first importation into the United States while holding a garment may be entered free of duty by means of a consumption entry and classified under subheading 9803.00.50, HTSUS.
LAW AND ANALYSIS:
Subheading 9803.00.50, HTSUS, in relevant part, provides for duty-free treatment of:
Substantial …holders, if of foreign production and previously imported and duty (if any) thereon paid or of a class specified by the Secretary of the Treasury as instruments of International Traffic.
Designation as an instrument of international traffic is governed by 19 U.S.C. § 1322(a). The statute is implemented by 19 CFR 10.41a. Ruling HQ H050604 (March 18, 2009), held that in order to be designated as an instrument of international traffic, an article must be used as a container or holder, be of substantial construction, suitable for and capable of repeated use and used in significant numbers in international traffic. That ruling designated substantially identical garment hangers as instruments of international traffic. In addition, in Ruling HQ 114360 (June 18, 1998), CBP addressed the application of the second class of articles enumerated within subheading 9803.00.50, HTSUS (holders of foreign construction and previously imported and duty (if any) therein paid) to substantially identical garment hangers and concluded that those hangers were entitled to be entered for consumption under the subheading. U.S. note 4, subchapter III, chapter 98, HTSUS, provides that an article that is designated as an instrument of international traffic is exempt from formal entry procedures. That is, an article that is designated as an instrument of international traffic is imported under the procedures set in U.S. note 4 and the provisions in 19 CFR 10.41a.
The focus here is with respect to a first importation of a foreign-made hanger. The predecessor to subheading 9803.00.50, HTSUS, was former item 808.00, TSUS. The purpose of former item 808.00, TSUS, was explained in the 1960 Tariff
Classification Study published by the then U.S. Tariff Commission (now known as the U.S. International Trade Commission). With respect to former item 808.00, TSUS, the Commission explained at page 690-691 of the Explanatory Notes and Background Materials, 1960 (reprinted as CIE 1/64, January 2, 2964):
In this connection, it is intended that this subpart embrace,…, all containers or holders which, under the existing provisions in paragraph 322(a) which might be designated as instruments of international traffic, and that, as a consequence, section 322(a) would cease to apply to such articles.
… Item 808.00 is narrower than the practices relating to instruments of international traffic in that, under this item, foreign… holders would be dutiable on their first importation, whereas, under such practices,… holders which are instruments of international traffic are exempt from duty on every importation…. The principal and important relief provided by the practice based on section 322(a) of the tariff act, as amended, is the exemption from the requirement of making entry of returned foreign… holders and not the relief from duty accorded on the initial importation of foreign… holders. In the circumstances, headnote 3 has been added to subpart C so as to permit any… holder provided for in this subpart to be admitted without entry when returned empty if readily identifiable as meeting the conditions of free entry as set forth in this subpart.
Former item 808.00 narrowed the former instrument of international traffic practices and was intended to require a formal consumption entry on a foreign holder’s first importation and pay any applicable duty unless the holder was designated and imported as an instrument of international traffic. The provisions of former headnote 3 to subpart C, Part 1, Schedule 8, TSUS, are repeated in current chapter note 3, subchapter III, chapter 98, HTSUS. That repetition indicates that Congress intended no change when it replaced the TSUS with the HTSUS. The regulations in 19 CFR 10.41a implement U.S. note 3. Thus, the duty-free treatment under subheading 9803.00.50, HTSUS, applies to foreign holders only on their return after an initial entry under the provisions of chapters 1-97 or if the articles are designated as instruments of international traffic. If those holders are imported as instruments of international traffic, no entry is required. However, in order to satisfy the second part of the subheading it is not enough for the goods to be claimed as an an instrument of international traffic at entry. Rather what is required is that the goods have been previously imported as an instrument of international traffic pursuant to the procedures set forth in section 10.41 of the regulations. Since this has not been done in this case, the holder is not eligible for treatment under subheading 9803.00.50, HTSUS.
HOLDING:
The foreign-made garment hanger on which duty has not previously been paid and which has not previously been imported as an instrument of international traffic is not eligible for duty-free treatment under subheading 9803.00.50, HTSUS.
Sincerely,
Myles B. Harmon
Director
Commercial and Trade Facilitation Division