CLA-2 OT:RR:CTF:TCM H280405 SKK
Mr. James T. Madden
New York Field Office
Office of Regulatory Audit
Office of Trade
U.S. Customs and Border Protection
One World Trade Center, Suite 50.800
New York, N.Y. 10007
Re: Modification of Internal Advice (HQ H266818, dated May 23, 2016); Tariff classification; GRI 5(b); Suitability for reuse; Plastic hangers.
Dear Field Director Madden:
This ruling is initiated by a letter, dated September 29, 2016, submitted by counsel on behalf of American Marketing Enterprises, Inc. (AME), requesting reconsideration of an Internal Advice (IA) ruling referenced Headquarters Ruling Letter (HQ) H266818, dated May 23, 2016, and issued to the U.S. Customs and Border Protection (CBP) New York Field Office. The ruling pertains to the tariff classification under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) of approximately 36 styles of plastic hangers imported together with garments, although, as per counsel’s request, only those hangers identified as “Category II” styles are at issue in this request for reconsideration. No samples were submitted to this office. Counsel requested a meeting on this reconsideration request; a telephone discussion was held with counsel on December 8, 2016.
FACTS:
AME operates as a wholesaler of women’s, children’s, and infant’s clothing. The clothing AME imports is imported with hangers.
At issue in this request for reconsideration is the classification under the HTSUS of specific styles of hangers imported by AME that were the subject of an IA request made by CBP’s New York Field Office and Office of Regulatory Audit pursuant to 19 CFR 177.11. The classification issue concerned whether AME correctly classified certain styles of hangers, imported with garments, separately from the garments under subheading 3923.90.0080, HTSUSA as articles for the conveyance or packing of goods, of plastics, or whether the hangers should be treated as ordinary packing materials which would result in their classification with the garment with which they were packed at importation.
In HQ H266818, CBP conceded that the Category II hangers were “substantial,” but noted that they would only be classifiable separately from the garments with which they were imported “if evidence of reuse is available.” In that ruling, CBP held that the Category II hanger styles at issue, with the exception of style CT-12, were classifiable by application of General Rule of Interpretation (GRI) 1 and GRI 6 with the garments with which they were imported in that AME had failed to provide substantiating evidence that the specific hangers at issue were clearly suitable for repetitive use. CBP noted that style CT-12 was classifiable in subheading 3923.90.0080, HTSUSA, as, “Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics: Other: Other,” as that hanger style had previously been classified in HQ H079697, dated October 26, 2009.
As per counsel’s request, this reconsideration of HQ H266818 is limited to the HTSUS classification of those hangers identified as “Category II” hangers under the following style numbers: 467; 472; 476 (SH115); 496 (KH496)(SH112); 498/9408; 1002; 1100; 1104; 6108 (SH6108); 6110 (SH6110); 6112; 6114; 6610/KH9410; CB-11; KH9408; KMB10; KMB12; KMB17; KMTN12; KMTN15; KMTN19; WP6508; WP6510; WP6512; WP6708; WP6710,and; WP6798.
ISSUE:
Whether the subject hangers are clearly suitable for repetitive use and therefore classifiable separately from the garments they are imported with under subheading 3923.90.0080, HTSUSA, or whether the subject hangers are classifiable under the same HTSUS provision as the garments with which they are entered?
LAW AND ANALYSIS:
Classification under the HTSUS is made in accordance with the GRIs. GRI 1 provides that the classification of goods must 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 Category II hangers at issue are classifiable either with the garments with which the subject hangers are imported, or classified separately from the garments, under 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.”
GRI 5(b), HTSUS, provides:
“(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.” Section 1322(a) of title 19 of the United States Code (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 § 10.41 et seq). Pursuant to 19 CFR § 10.41a (a)(1), the Commissioner of CBP is authorized to designate as instruments of international traffic (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. Based on the foregoing, to qualify as an instrument of international transit (IIT) within the meaning of 19 U.S.C.
§ 1322(a) and 19 CFR § 10.41a, an article must be used as a container or holder, it must be substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic.
In Holly Stores, Inc. v. U.S., 697 F.2d 1387, 1388 (Fed. Cir. 1982), aff’g 534 F. Supp. 818 (Ct. Int’l Trade 1981), the court stated with respect to former General Headnote 6(b): "‘Reuse’" in this context has been consistently interpreted to mean practical, commercial reuse, not incidental reuse. Fontana Hollywood Corp. v. United States, 64 Cust. Ct. 204, C.D. 3981 (1970), relying on Tariff Classification Study, Seventh Supplemental Report (Aug 14, 1963) at 99.” The court in Holly Stores rejected the concept of reuse with respect to the hangers at issue in that case based upon the lower court’s finding that approximately only one percent of the subject hangers were reused, and that those uses were noncommercial. The court did accept as determinative the fact that the hangers were of fairly durable construction and that it would be physically possible to reuse them.
In applying the legal standards set forth above, CBP has long held that plastic hangers are ordinary packaging for garments and, when imported with garments, they are classifiable with the garments unless, in accordance with GRI 5(b), they are clearly suitable for repetitive use. In this regard, CBP has also held that actual reuse of hangers is not required, so long as it is demonstrated that the subject hangers are clearly suitable for repetitive use. Once it is determined that a particular hanger style is
clearly suitable for repetitive use, there is no need for an 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. See HQ’s 964963, 964964, and HQ 964948, dated June 19, 2001.
Based on the foregoing, the “Category II” hangers which are the subject of HQ H266818 are presumed classifiable in the same HTSUS provision as the garments with which they are entered unless the importer establishes that the subject hangers are clearly suitable for repetitive use, in which case the hangers are classifiable separately under 3923.90.00, HTSUS, which provides for “[A]rticles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics: Other… .” Counsel submits the following in support of his request for reconsideration of HQ H266818:
Counsel requests confirmation that CBP Headquarters received, prior to issuance of H266818, all the submissions that AME previously submitted to CBP auditors and the port.
Counsel states that the subject Category II hangers are sufficiently substantial for reuse, and notes CBP conceded this fact in HQ H266818.
Counsel maintains that as AME’s hangers are sold to retailers who have represented to CBP that their hangers are returned for reuse, and AME sources its hangers from suppliers who have represented to CBP that their hangers are reused, AME should be able to rely on rulings issued to third parties to substantiate that AME’s hangers are suitable for reuse and classifiable in Chapter 39, HTS.
Counsel maintains that reliance on other rulings should not be restricted to instances where the same hanger styles are at issue in that most rulings do not list hanger style numbers.
Counsel claims reliance on HQ H258772, dated June 22, 2016, which revoked New York Ruling Letter N255930, dated August 20, 2014, noting that four Category II hanger styles at issue in HQ H266818 (i.e., KMTN12, KMTN15, KMTNR17, and KMTN19) were classified in HQ H258772 under subheading 3923.90.0080, HTSUSA.
Regarding counsel’s first inquiry, CBP confirms that its Headquarters office was, in fact, in receipt of all of AME’s noted submissions prior to issuance of HQ H266818.
Regarding counsel’s second assertion, we agree that the subject Category II hangers are sufficiently substantial for reuse. However, as CBP noted in HQ H266818,
“…‘suitable for repetitive use’ does not merely mean that the specific hangers are strong enough to be used repetitively, but also that there exists a commercial viability for that repetitive use.”
We do not agree with counsel’s argument that AME should be permitted to substantiate its claim that its Category II hangers are clearly suitable for repetitive use by relying on rulings issued to third parties where it has not been established that the hangers at issue in those rulings are substantially similar in form and commercial treatment. Specifically, counsel seeks to substantiate its claim for classification in Chapter 39, HTS, by relying on HQ 961973, dated August 13, 1999, which was issued to AME’s retail customer, Sears, Roebuck & Company. It is noted that counsel has submitted this argument previously to CBP and we maintain the position taken in HQ H266818 in which we determined that HQ 961973:
“… in no way states that all of the hanger styles imported 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.”
Similarly, counsel’s argument that AME should be able to rely on CBP rulings issued to its hanger sources that establish that the sources may engage in reuse and recycling of certain hangers does not establish that the subject Category II hangers are similarly suitable for reuse. In this regard, we maintain the position stated in HQ H266818 that a source’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… . 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 asking for suitability of 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 April 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.”
Regarding counsel’s statement that reliance on other rulings should not be restricted to those rulings containing specific hanger styles as most rulings do not list specific style numbers, we note that while rulings that include style numbers would be beneficial to help identify which rulings may be relied upon by parties other than the ruling requester, there are other means of substantiating a claim that a hanger is clearly suitable for repetitive use. HQ H266818 provided examples of documentation that could be provided to support a claim of suitability for repetitive use. In that ruling CBP noted that
“…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 meets or exceed the VICS.”
In this regard, we note that although meeting or exceeding Voluntary Interindustry Commerce Standards (VICS) will be considered in the totality of evidence presented as to whether a particular hanger is suitable for reuse, this criterion in and of itself is not determinative of classification. As noted in NY N255930, VICS:
“…were developed by the VICS Association in order to improve the efficiency
and effectiveness of the retail industry supply chain. The goal was to create a
standard so that garment and apparel makers could supply floor-ready items
on standard garment hangers, eliminating the costs of transferring the garments
from international shipping containers to the hangers used to display garments
for sale on the retail selling floor. VICS compliant hangers include more flimsily
constructed hangers such as those for intimate apparel and for infants’ clothing
which, though standard in size and construction, nevertheless are not suitable
for commercial reuse for international shipment and are dutiable with the
garments with which they are imported. Therefore, evidence of VICS compliance
is not sufficient evidence of commercial reuse. Evidence that these hangers are
suitable for reuse would include invoices or other documentation verifying re- sales of these styles of hangers, after their original use, to garment vendors for use in packing, shipping and transportation of garments.”
Lastly, regarding counsel’s contention that Category II styles numbers KMTN12, KMTN15, KMTNR17, and KMTN19 are classifiable under subheading 3923.90.0080, HTSUSA, as these styles were classified under that provision in HQ H258772, dated June 22, 2016, which revoked New York Ruling Letter N255930, dated August 20, 2014, we agree that reliance on that ruling is justified, but that clarification of the impacted style numbers is necessary. Of the styles at issue in HQ H258772, five were also at issue in HQ H266818: KMB10; KMB12; KMTN12, KMTN15, and KMTN19. We note that style number KMTN17 was not included in Category II. Therefore, Category II hanger styles KMB10; KMB12; KMTN12, KMTN15, and KMTN19 are classifiable under subheading 3923.90.0080, HTSUSA, as per HQ H258772.
For the reasons set forth above, HQ H266818 is affirmed regarding the classification of Category II hangers with the noted exception of style numbers KMB10, KMB12, KMTN12, KMTN15, and KMTN19 which are classifiable, as per HQ H258772, under subheading 3923.90.00, HTSUS, as “Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics: Other: Other.”
HOLDING:
By application of GRI 1 and GRI 6, the subject Category II hangers identified as styles 467, 472, 476 (SH115), 496, (KH496)(SH112), 498/9408, 1002, 1100, 1104, 6108 (SH6108), 6110 (SH6110), 6112, 6114, 6610/KH9410, CB-11, KH9408, KMB17, WP6508, WP6510, WP6512, WP6708, WP6710,and WP6798, are classifiable with the garments with which they are imported.
Category II hanger styles KMB10, KMB12, KMTN12, KMTN15, and KMTN19 were classified in HQ H258772 under 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.
EFFECT ON OTHER RULINGS:
HQ H266818, dated May 23, 2016, is modified regarding the classification of five Category II hanger style numbers, identified as KMB10, KMB12, KMTN12, KMTN15, and KMTN19, as these specific styles were subsequently classified in HQ H258772, dated June 22, 2016, under subheading 3923.90.00, HTSUS. For this reason, the modification of HQ H266818 is not subject to the notice and comment requirements of section 625(c)(1), Tariff Act of 1930 (19 U.S.C. 1625 (c)(1)), as amended by section 623 of Title VI (Customs Modernization) of the North American Free Trade Agreement Implementation Act (Pub. L. 103-182, 107 Stat. 2057).
It is noted that the remaining Category II hanger style numbers at issue in HQ H266818 remain classifiable as ordinary packing materials, and are classifiable with the garment with which they are packed at importation.
You are directed to mail this decision to the Internal Advice applicant within 60 calendar days from the date of this letter. On that date, the Office of Trade, Regulations and Rulings, will make the decision available to the public on the CBP website located at www.cbp.gov.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division