CLA-2 OT: RR: CTF: TCM H266818 HvB
Mr. James T. Madden
New York Field Office, Office of Regulatory Audit
Office of International Trade
U.S. Customs and Border Protection
One Penn Plaza, 11th Floor
New York, NY 10119
RE: Request for Internal Advice; Tariff Classification of Hangers
Dear Field Director Madden:
This letter is in response to a request from your office on July 8, 2015 for internal advice in accordance with 19 C.F.R. § 177.11, concerning importations made by American Marketing Enterprises Inc., (AME), filed on its behalf by counsel. At issue is U.S. Customs and Border Protection’s (CBP) classification under the Harmonized Tariff Schedule of the United States (HTSUS) of entries of hangers. This issue arise from a Textile Referral Audit conducted by CBP’s New York Office of Regulatory Audit in 2012, and regards the issue of whether AME was correct to classify certain styles of hangers imported with garments separately under subheading 3923.90.0080, HTSUS, or whether the hangers should be treated as ordinary packing materials, which would entail them being classified with the garment on which they were packed at importation.
FACTS:
AME operates as a wholesaler of women’s, children’s, and infant’s clothing. The clothing AME imports is imported with hangers. The hangers themselves are the subject of this request for internal advice. AME imports garments with approximately 88 different hanger styles. These styles are broken down into three categories which are as follows:
Category I: hangers eligible to be classified separately from the garment under subheading 3923.90.0080, HTSUSA (Annotated). The following eight hanger styles are under this category: 484, 485, 6008, 6010, 6012, 6110, CT-17, and CPT-15.
Category II: Hangers deemed substantial and classifiable separately from the garment under subheading 3923.90.0080, HTSUSA, if evidence of reuse is available.
Category III: Hangers that are imported in combinations, a top and bottom hanger holding a garment set, or two tops, where two tops are marketed as a unit. Where the combination consists of hanger styles in different categories, the unit is treated as belonging to the lowest category. The assumption is that if one of the combinations is reused, the other will be as well.
Pursuant to the Port’s request for internal advice, this ruling will address only Category II and Category III hangers.
ISSUE:
Whether the subject hangers, which are of a kind normally used for packing the entered clothing, are classified in subheading 3923.90.0080, HTSUSA (Annotated), or whether they are not clearly suited for repetitive use, and are classified alongside the garments they are entered with, and are dutiable at the garment’s duty rate.
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the General Rules of Interpretation (GRIs). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative section or chapter notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs 2 through 6 may then be applied in order.
The HTSUS provisions under consideration are as follows:
3923 Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics:
3923.90.00 Other
GRI 5(b), HTSUS, provides as follows:
(b) Subject to the provisions of rule 5(a) above packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.
Title 19, United States Code, section 1322(a) (19 U.S.C. § 1322(a)), provides, in pertinent part, that "[v]ehicles and other instruments of international traffic...shall be excepted from the application of the customs laws to such extent and subject to such terms and conditions as may be prescribed in regulations..."
The CBP Regulations issued under the authority of § 1322(a) are contained in section 10.41 et seq. (19 CFR § 10.41a). Pursuant to 19 CFR § 10.41 a (a)(1), the Commissioner of CBP is authorized to designate as IITs such additional articles not specifically noted in that section. Once designated as such, the instruments may be released without entry or payment of duty. To qualify as an IIT within the meaning of 19 U.S.C. § 1322(a) and the regulations promulgated pursuant thereto (19 CFR § 10.41 et seq.), an article must be used as a container or holder. The article must be substantial, and clearly suitable for repetitive use.
CBP has traditionally taken the position that plastic hangers are ordinary packaging for garments, and thus, when they are imported together, they are classifiable with the garments, unless in accordance with GRI 5(b) they are clearly suited for repetitive use. In this case, actual reuse of the imported hangers is not necessary, and is not required, as long as the hangers are of a type suitable for repetitive use. The phrase “suitable for repetitive use” does not mean merely that the specific hangers are strong enough to be used repetitively, but also that there exists a commercial viability for that repetitive use. Once it is determined that the particular hanger style is suitable for repetitive use, there is no need for any importer to provide evidence that hangers of that style are actually reused, and the benefit of separate classification is afforded to all importers of those hangers, even if the hangers are never actually reused.
In HQ 964963, HQ 964964 and HQ 964948, all dated June 19, 2001, CBP ruled that certain plastic hangers that were of substantial enough construction and were used in hanger recovery systems for the repeated international transport of garments, were suitable for repetitive use for the conveyance of goods within the meaning of GRI 5(b). Accordingly, CBP concluded that these hangers could be classified separately in subheading 3923.90.00, HTSUS, even when imported with garments. Documents were provided to verify the claim that a substantial portion of the hangers that were the subject of those rulings were forwarded to a hanger supply company and then sorted, sanitized, and sold to garment vendors for use in packing, shipping, and transporting other garments.
In HQ 964963, CBP noted that actual reuse of the hangers is not necessary as long as the hangers are substantial and are of the class or kind of goods used repetitively for the conveyance of garments.
In support of its argument that its hangers are clearly suitable for repetitive use, AME submitted the following:
Rulings issued to AME’s customers stating that their hangers are classifiable separately from the garments. [HQ 961973]
Documents which state that AME’s customers accept recycled hangers [Emphasis added].
The hanger source (i.e. the entity from which the hangers were procured) has a ruling that its hangers are eligible for treatment as instruments of international traffic (IIT).
However, as regards number one above, that ruling was issued to the department store Sears, Roebuck & Company, and it found that certain styles of hangers used by that company could be classified separately from the garments with which they were imported. However, that ruling in no way states that all of the hangers used by Sears at the time met this criterion, or that this treatment will be afforded to all hanger styles imported by Sears in the future. The Category II hangers at issue here are not mentioned in HQ 961973. That this ruling exists does not constitute evidence that the subject Category II hangers imported by AME are suitable for reuse.
As regards number two above, a customer’s stated opinion as to the classification of hangers it accepts, or its stated openness to accepting reused hangers is in no way indicative of the fact that all of the hangers they receive are actually clearly suitable for repetitive use. Also, it is worth noting that the term “reused” and the term “recycled” are not synonymous. This office will infer that what Counsel meant to say was that the subject hangers are “reused.” None of the supporting documentation that AME provided are evidence that these companies exclusively deal with hangers that are deemed suitable for reuse. Ordinarily, when requesting evidence of suitability for reuse, CBP has traditionally asked for documentation verifying re-sales of the relevant styles of hangers, after their original use, to garment vendors for use in packing, shipping, and transportation of garments. See NY N255930, dated August 20, 2014. However, this type of evidence was not provided by AME to support its claim. This letter by AME’s customer does not support their claim that the Category II hanger styles at issue are clearly suitable for repetitive use.
Finally, as regards number three above, that a manufacturer of hangers received a ruling that some of its hangers are treated as IITs for tariff classification purposes in no way evidences that all of the subject hangers may be treated as such. As noted above, there are approximately 88 styles of hangers that were originally considered by CBP. Evidence that some of those styles are treated as IITs in no way means all of the styles will be treated as IITs. The onus is on the importer to provide that evidence. For example, an importer could provide evidence that the hangers are made entirely of durable molded plastic and are specially designed by the manufacturer for international transit and multiple international reuse cycles, or that the style number was previously considered by CBP in a ruling to be an IIT, or that the hangers were specifically constructed and tested to be used multiple times during its useful life, or finally, that the hanger meet or exceed the VICS hanger guidelines and were specifically constructed and tested to be clearly suitable for repetitive use. AME did not satisfy that burden.
There is one exception, however. Hanger style number CT-12 was reviewed by CBP in HQ H079697, dated October 26, 2009. There CBP noted that style CT-12, along with a few other styles not at issue here, were of durable enough construction that they were clearly suitable repetitive use.
As regards the Category III hangers, AME argues that there are instances where hangers are imported in combinations, for example a top and a bottom hanger holding a garment set. The price for the combined article is stated as a unit, and the hangers are not priced separately. AME argues that on occasions where the combined article contains hanger styles in different categories (i.e. one style that qualifies for classification separately form the garment and one that does not), the hangers can be classified separately from the garment. AME offers no justification for this position. Yet, in this scenario, the hanger combinations would be subject to the terms of General Note 3(f) which regards comingled goods. Under the terms of this note, AME is free to document which hangers in a given combination are suitable for repetitive use, if applicable, and classify them separately from the garment. If the company is unable to do so, the hangers will be subject to the highest rate of duty applicable, which in almost all cases would be the duty rate of the garments that they are accompanying.
HOLDING:
By application of GRI 1 and GRI 6, the subject hanger style CT-12, is classified in subheading 3923.90.0080, HTSUSA, which provides for, “Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics: Other: Other.” The column one, general rate of duty is 3% ad valorem.
By application of GRI 1 and GRI 6, the remaining styles of hangers are classified with the garments with which they are imported.
Sixty days from the date of this decision, the Office of International Trade, Regulations and Rulings, will make this decision available for CBP personnel, and to the public on the CBP Home Page at http://www.cbp.gov by means of the Freedom of Information Act, and other methods of publication.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division