OT:RR:BSTC:CCR H300587 AMW
Ms. Lynne W. Wendt, Esquire
Wendt & Temples, LLC
401 Westpark Court
Peachtree City, Georgia 30269
RE: Instruments of International Traffic; 19 U.S.C. § 1322(a); 19 C.F.R. § 10.41a; Subheading 9803.00.50, HTSUS; Plastic Garment Hangers; Revocation of HQ H058876 (May 14, 2009) and HQ H079697 (Oct. 26, 2009)
Dear Ms. Wendt:
This is in response to your correspondence, dated August 22, 2018, and follow-up information submitted on September 30, 2018, on behalf of Braiform Enterprises, LLC (“Braiform”). In your submission, you requested a ruling regarding whether certain styles of plastic garment hangers qualify as “instruments of international traffic” (“IITs”) within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a and may be released without entry or the payment of duty. Our ruling is set forth below.
Pursuant to section 625(c)(1), Tariff Act of 1930 (19 U.S.C. § 1625(c)(1)), as amended by section 623 of Title VI, a notice was published in the Customs Bulletin, Vol. 53, No. 13, on May 1, 2019, proposing to revoke HQ H058876, dated May 14, 2009, and any treatment accorded to substantially similar transactions. One comment supporting the proposed action and two comments opposing the proposed action were received. A discussion of the comments and CBP’s reasoning are found in the “Law and Analysis” section below.
FACTS:
Braiform is a producer and provider of hanging and packaging solutions to garment manufacturers and retailers. U.S. Customs and Border Protection (“CBP”) has previously designated 40 different styles of Braiform plastic garment hangers as IITs. See HQ H058876 (May 14, 2009). You have requested that CBP issue an IIT designation for approximately 40 new hanger styles, which are designed to “enhance functionality, garment retention and retail display.”
Each of the subject hangers is made of Polypropylene or Polystyrene plastic and consists of a molded, one-piece construction. The subject styles include hangers of various sizes for children and adults. The styles include hangers for tops, bottoms, and intimate garments. Many of the hangers have recessed spaces on their hooks intended to carry a size cap. Most styles possess plastic hooks, although your request also includes several modular hangers without hooks, which attach to hangers with hooks to combine multiple garments. You have provided a complete list of the subject hangers, including product identification numbers, descriptions, and photographs. You have also provided samples of several of the hangers and technical specifications for the remaining hangers.
Your submission indicates that the primary purpose of the subject hangers is to display garments in a retail setting:
Braiform clients set high standards for the hangers in the program as the quality of the hanger is the most significant impact on the presentation of the garments to the customer. Garments must stay on the hangers while they are being displayed, and the hangers must hold the garment in such a way that it can be fully viewed by the customer. The hangers must also have an attractive design.
You state that the subject hangers will be used exclusively by [ ] (“Retailer”) and will join Braiform’s existing closed-loop hanger “Re-Use Program.” Under this program, Braiform sells hangers to Retailer’s foreign manufacturers, who place garments on the hangers and fold the combined garments and hangers into cartons for shipment. The garments on hangers are then sold to Retailer and are transported to the United States. After arriving in the United States, the garments on hangers are distributed to Retailer’s stores, where they are hung for display. After the garments are sold, Retailer employees retain the hangers and place them into a collection box. The hanger collection boxes are taken to a central site where the hangers are loaded into a larger box called the “Hanger Big Box” (“HBB”). The HBBs are transported to a Braiform facility for re-use processing, which includes sorting, inspection, and removal of damaged hangers. You state that Retailer returns approximately 80% of its hangers for reuse.
Below are images you provided that depict how the garments on hangers typically arrive at Retailer’s locations in the United States. As shown in the pictures, the garments and hangers are combined, folded, and flat packed into a cardboard carton and are either placed without support or are anchored to the cardboard box via a loop embedded into the side of the box.
ISSUE:
Whether the subject plastic garment hangers are instruments of international traffic pursuant to 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a.
LAW AND ANALYSIS:
Pursuant to 19 U.S.C. § 1322(a), “[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 relevant CBP regulations implementing this statute are found at 19 C.F.R. § 10.41a, which authorizes the CBP Commissioner to designate as IITs such additional articles not specifically noted in that section. Once designated as such, an IIT may be released without entry or payment of duty.
Subheading 9803.00.50, Harmonized Tariff Schedule of the United States (“HTSUS”) provides, in pertinent part, for the duty free treatment of:
Substantial containers and holders, if products of the United States . . . , or if of foreign production and previously imported and duty (if any) thereon paid, or if of a class specified by the Secretary of the Treasury as instruments of international traffic, repair components for containers of foreign production which are instruments of international traffic, and accessories and equipment for such containers, whether the accessories and equipment are imported with a container to be reexported separately or with another container, or imported separately to be reexported with a container . . . (footnote and emphasis supplied).
Subchapter III to Chapter 98 of the HTSUS only applies to:
(a) Substantial containers or holders which are subject to tariff treatment as imported articles and are:
(i) Imported empty and not within the purview of a provision which
specifically exempts them from duty; or
(ii) Imported containing or holding articles, and which are not of a kind normally sold therewith or are entered separately therefrom; and
(b) Certain repair components, accessories and equipment.
See U.S. Note 1, et seq., Subchapter III to Chapter 98, HTSUS.
CBP has held in its published rulings that in order to qualify as an IIT pursuant to 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a(a)(1), an article must be used as a container or holder in international traffic. See 19 C.F.R. 10.41a (“in use or to be used in the shipment of merchandise in international traffic”); see also, e.g., HQ H016491 (Oct. 1, 2007); HQ 114150 (Dec. 12, 1997); and HQ 107545 (May 7, 1985). Next, the article must be substantial, suitable for and capable of repeated use, and used in significant numbers in international traffic. See, e.g., HQ H016491 (Oct. 1, 2007); HQ 114150 (Dec. 12, 1997); HQ 107545 (May 7, 1985); Treas. Dec. 71-159, Cust. B. & Dec. 296 (June 18, 1971); 99 Treas. Dec. 533, No. 56247 (Aug. 26, 1964). CBP has interpreted “reuse” in this context to mean commercial shipping or transportation purposes, not incidental reuse. See, e.g., HQ 116032 (Oct. 30, 2003) (incorporating the analysis of reuse as outlined with respect to General Headnote 6(b), TSUS in Holly Stores, Inc. v. United States, 697 F.2d 1387, 1388 (Fed. Cir. 1982), aff’g 534 F. Supp. 818 (Ct. Int’l Trade 1981)). We have, furthermore, held that “repeated use” means “more than twice.” See, e.g., HQ 108658 (Nov. 21, 1986). CBP has previously designated certain plastic garment hangers as IITs pursuant to this framework. See HQ H217477 (Dec. 11, 2012); HQ H183436 (Jan. 19, 2012); HQ H117917 (Oct. 13, 2010); HQ H079697 (Oct. 26, 2009); HQ H064655 (June 16, 2009); HQ H058876 (May 14, 2009); HQ H050604 (Mar. 18, 2009); HQ H042107 (Nov. 24, 2008); and HQ 115684 (Aug. 5, 2002).
Although no statutory or regulatory definition exists for the terms “holder” or “hanger” in the IIT context, we find that the plain meaning of the term “hanger” and prior precedent indicate that a garment hanger must physically suspend the underlying garment during transportation to satisfy the requirement that it act as a holder in international traffic. Merriam-Webster Dictionary, for example, defines “clothes hanger” as, “a curved piece of metal, plastic, or wood that is used for hanging clothing.” The word “hang,” in turn, is defined as follows: “to fasten to some elevated point without support from below.” As such, it is clear that a garment hanger must physically suspend (i.e., hang) clothing in order to be used as a holder. As discussed in response to the comments below, we find that it is insufficient for a hanger to be horizontally affixed within a cardboard carton during transportation.
This determination is in line with prior CBP rulings. In HQ H282408 (Apr. 12, 2017) we found that metal locking fixtures attached to secure moving parts on modular assemblies during shipment, which are not attached to the pallet carrying the machine, are not IITs even where they protect the machine from shock and vibration during transportation. In doing so, we held that instead of “holding” the underlying machines, the locking fixtures “simply secure parts of the . . . machine to itself.” Similarly, even if unsecured plastic hangers are combined with the underlying garments to reinforce the garment’s form during transportation, the hangers merely secure the garment to itself, but serve no holding function. This also comports with our analysis in HQ H286142 (July 6, 2017) in which we declined to grant IIT status to “engine hooks” used to load engines on and off of steel engine racks for transportation, but did not attach to the racks in which the engines were transported, on the basis that such hooks “neither contain nor hold anything.”
The subject garment hangers cannot be classified as IITs because they do not hold the garments during transportation. According to your follow-up submission, manufacturers typically use Braiform’s hangers “to hang the garments, then packs [sic] the garments, mostly in cartons, for transport.” The photographs you provided further show that the subject hangers are combined with the corresponding garments and folded into cardboard boxes for shipment to Retailer’s stores. We also understand that the hangers are periodically affixed to the inside of a carton via a rod or loop. Instead of being suspended by the subject hangers during transportation, the movement of the subject garments through international traffic is effected by the cartons into which they are placed, instead functioning more as packing material during transit. And, although your submission specifies that the subject hangers’ design will improve the retail display of garments, you have provided no evidence that the hangers have been specially designed for use in hanging garments in international traffic. See HQ H266818 (May 23, 2016) (“The onus is on the importer to provide that evidence. For example, an importer could provide evidence that the hangers are made of durable molded plastic and are specially designed by the manufacturer for international transit”) (emphasis added).
Finally, based on the additional information now supplied to us, it is clear that, as is the case with the subject hanger models, the Braiform hanger models previously designated as IITs in HQ H058876 (May 14, 2009) are also not used to contain or hold garments during shipment. In granting IIT status to these hangers, we described their role during transportation as follows: “the apparel is hung on the appropriate hangers for transportation to the U.S. After receipt in the U.S., the apparel is removed from its packaging while still hanging and moved to display racks on the retail floor.” HQ H058876 (May 14, 2009) (emphasis added). Nevertheless, your follow-up submission indicates that the word “hang” as used in HQ H058876 imprecisely referred to the mere combination of hangers and garments. Instead of suspending garments during transportation, you state that the hangers are packed “mostly in cartons” for transportation. In addition, photographs you have provided clearly show Braiform’s current IIT hangers being folded into boxes for transportation rather than being used to vertically suspend garments.
With regard to the three comments received by CBP, two commenters, including the original requestor, opposed the revocation of ruling HQ H058876. One commenter supported the revocation. One comment was received from the requester in HQ H079697 (Oct. 26, 2009), which identified the transaction in that ruling as substantially similar to the ruling revoked in HQ H058876; we therefore are revoking ruling HQ H079697 as well.
One commenter states that flat-packed garment hangers, whether anchored to the inside of a box or free-floating within the box, are IIT holders based on the plain meaning of the term. In doing so, the commenter provides several conflicting definitions for the term “hold,” including: “to have or maintain in the grasp”; “to support in a particular position or keep from falling or moving”; or “to enclose and keep in a container or within bounds.” We note that these definitions are not uniform, with some supporting the interpretation that a clothes hanger should be affixed vertically (i.e., “to support in a particular position to keep from falling or moving”). As such, we interpret the term “hold” with reference to the form and function of other items defined or designated as IITs pursuant to 19 C.F.R. § 10.41a. This regulation specifically designates as IITs, “[l]ift vans, cargo vans, shipping tanks, skids, pallets, caul boards, and cores for textile fabrics, arriving (whether loaded or empty) in use or to be used in the shipment of merchandise in international traffic….” The items listed in 19 C.F.R. § 10.41a are all intended for use in containing or holding merchandise during their movement through international traffic, with any related use as packing material or retail display being of ancillary importance. As such, to be used as a “holder” in the IIT context, we find that a clothes hanger must be used in accordance with its plain meaning (i.e., to physically hang garments as outlined above) while transporting merchandise through international traffic.
In addition, two commenters cite Holly Stores, Inc. v. United States, 534 F. Supp. 818 (Ct. Int’l Trade 1981), aff’d 697 F.2d 1387, 1388 (Fed. Cir. 1982), to argue that the subject hangers function as holders even when used in a lay-flat position. Specifically, the commenters note that the U.S. Court of International Trade (“CIT”) decision refers to certain plastic hangers as “shipping holders,” including those combined with garments in a lay-flat position. See Holly Stores, 534 F. Supp. at 821. To begin with, we note that the Holly Stores decisions are not binding because neither the CIT nor the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) considered whether plastic garment hangers qualified for IIT designation. Instead, both decisions analyzed whether certain garment hangers could be classified separately from the underlying garments under General Headnote 6(b), Tariff Schedule of the United States (“TSUS”). See, Holly Stores, 534 F. Supp. at 821. The CIT’s analysis of GRI 6(b), TSUS is also not dispositive because this provision has since been superseded by General Rule of Interpretation (“GRI”) 5(b), HTSUS, which relates to the separate classification of certain “packing materials and packing containers.” See JVC Co. of Am. V. United States, 234 F.3d 1348, 1355 (Fed. Cir. 2000) (citing H.R. Conf. Rep. No. 100-576, at 549-50 (1988)) (“in light of the significant number and nature of changes in nomenclature from the TSUS to the HTSUS, decisions by the Customs Service and the courts interpreting the TSUS are not deemed to be dispositive in interpreting the HTSUS”).
Even to the extent Holly Stores is relevant in interpreting GRI 5(b), this analysis is distinct from the present matter. GRI 5(b) specifies that “packing materials and packing containers” entered with the underlying product should be classified with that product so long as the packing containers and materials are “of a kind normally used for packing such goods” and are “not suitable for repetitive use.” However, the distinction between “packing” containers controlled by GRI 5(b) and IITs is a significant one. The term “packing” can be defined as “material (such as a covering or stuffing) used to protect packed goods (as for shipping).” In keeping with this definition, prior CBP rulings interpreting GRI 5(b) have largely related to products intended to be packed with the underlying merchandise, often into a cardboard box or another container, for the purpose of protecting merchandise in transit or at retail. See, e.g., HQ 083436 (Dec. 22, 1989) (canvas cases used to hold personal weighing scales); HQ 086611 (May 17, 1990) (textile drawstring pouches used to protect liquor bottles); and HQ H81389 (June 4, 2001) (form-fitted leather zippered cases used to carry house slippers). In contrast, IIT designation, as outlined above, is typically reserved for items that primarily operate to convey merchandise through international traffic, such as lift vans, cargo vans, shipping tanks, skids, pallets, caul boards, and cores for textile fabrics as outlined in 19 C.F.R. § 10.41a. In this context, it is clear that plastic garment hangers, when used in a lay-flat position, are more similar to packing material as contemplated under GRI 5(b) than instruments of international traffic outlined in 19 C.F.R. § 10.41a.
In addition, two commenters argue that the subject plastic garment hangers, when flat packed with the underlying garments, should be considered holders because they ostensibly protect garments from creasing and wrinkling during transportation. To support this assertion, the commenters again reference the CIT’s non-dispositive decision in Holly Stores, in which the court found that certain flat-packed plastic hangers prevent the creasing and wrinkling of garments during transportation. See Holly Stores, 534 F. Supp. 818 at 826, fn. 11. Here, we note that consideration of an item’s protective function is not a criterion for designation as an IIT holder, but is again more germane to the determination of whether an item represents packing materials or packing containers as controlled by GRI 5(b). See, e.g., HQ H264893 (May 18, 2016) (discussing certain cardboard pallets as packing material where they “protect shoeboxes from being crushed during transport and display”). Further, as outlined above, prior CBP IIT rulings support the proposition that items used to stabilize or maintain merchandise during transportation do not automatically qualify for IIT designation where they provide no holding function. For instance, in HQ H282408, we found that metal locking fixtures attached to secure a machine to itself, but did not attach to the steel pallet carrying the machine, are not IITs even where they protect the machine from shock and vibration during transportation.
Furthermore, the CIT’s decision in Holly Stores does not even support a finding that flat-packed hangers prevent creasing and wrinkling in all instances. The CIT’s decision involves two classes of hangers: (1) plastic hangers flat packed in combination with light-weight garments such as blouses and tops, and (2) metal hangers covered in plastic used to physically hang items such as blazers, heavy coats, and suits in transit. See Holly Stores, 534 F. Supp. 818 at 821. Accordingly, the distinction between lighter garments flat packed with hangers and heavier garments that are hung vertically indicates that physical suspension is a more suitable method of preserving the form and function of many garments during transportation. CBP understands, furthermore, that the subject garment hangers, as well as those in the previously issued rulings, are not exclusively used to transport light garments such as tops and blouses. Instead, the subject ruling request and supplemental information indicate that the subject hangers will also be used in combination with a variety of heavier garments, including blue jeans, jackets, sweaters, and vests.
Two commenters state that hangers and garments are periodically affixed to the inside of a carton during transportation (e.g., by operation of an internal rod or loop). The commenters argue that this arrangement provides protection from shifting or damage similar to the support provided if the garments were hung vertically from a pole or rope. First, CBP’s review of apparel industry sources indicates that this is not uniformly true. One industry source notes, for example, that flat packing garments made from delicate fabrics, as opposed to hanging them vertically, “can cause crushing and creasing requiring reworking (pressing or steaming) before the retailer can display them for sale.” In addition, granting IIT status to plastic garment hangers anchored inside a non-IIT cardboard box would be nearly impossible for CBP to administer as neither this comment nor the underlying request articulates which types of hanger/garment pairings are typically affixed horizontally during transportation or whether this practice varies between venders.
One commenter also notes that, in some circumstances, garments may be hung vertically within cardboard boxing. This comment did not specify which type of garments this process is used for or when this might occur, however. As such, we find this comment is outside the scope of the present ruling.
One commenter also argues that plastic garment hangers are analogous to plastic spacers used to separate imported axle housings during shipment, which we granted IIT status in HQ 113999 (July 2, 1997), and paper “air bags” used to fill gaps between pallets, which we granted IIT status in HQ 112474 (Feb. 22, 1993). We find that these rulings are inapplicable in the present matter. Unlike the IIT locking fixtures analyzed in HQ H282408 or engine hooks discussed in HQ H286142, both of which we determined not to be holders, the axle housings and air bags act as holders by applying pressure between the merchandise and external objects (i.e., pallets or other axles). In contrast, the photographs of the subject merchandise provided above show that the flat-packed garment hangers leave ample room for the garments to shift while in transit.
One commenter argues that by revoking HQ H058876, CBP will negatively affect importers of other IIT-designated merchandise. Specifically, the commenter asserts that CBP has long held that “not all IIT-designated merchandise must actually be ‘in use’ at the time of importation.” The commenter cites HQ H036108 (Aug. 27, 2008), in which CBP granted IIT designation to pallet boxes imported empty into the United States, claiming that CBP did not analyze whether the pallets were “carrying,” “holding,” or “supporting” items during international traffic. This is a misreading of HQ H036108. The ruling specifically states that, although the subject pallet boxes are imported empty, they are used to export automotive parts to Mexico, which is a clear use of the pallet boxes in international traffic. Indeed, it has long been CBP’s position that the term “international traffic,” as found in § 10.41a(a)(1), applies to a container or other such instrument brought empty into the United States for use in an exportation planned at or before the time of importation. See HQ H115672 (May 14, 2002).
One commenter identifies several additional rulings in which we classified plastic garment hangers as IITs and states that the subject companies ship the subject hangers in the same manner as Braiform. Because these rulings do not specifically discuss the manner of shipment, and because this commenter is unrelated to the requesters in these rulings, we have not specifically revoked these rulings. We note, however, that any person involved in a substantially identical transaction should have notified CBP during the comment period. This commenter also argues that using the subject hangers to display merchandise at the point of sale constitutes diversion. Because this ruling does not discuss diversion, we find this comment outside the scope of our ruling. This commenter also urges CBP to require country of origin labeling for the subject hangers; this comment is also outside the scope of our ruling.
Based on the analysis above, the plastic garment hangers described in the instant request as well as those subject to CBP rulings HQ H058876 and HQ H079697 do not qualify for IIT designation because they are not used as holders in international traffic. This ruling therefore revokes HQ H058876 and HQ H079697, which granted IIT status to several similar models of hangers, to the extent that those hangers are not used to hang garments in international traffic.
HOLDING:
The subject plastic garment hangers are not “instruments of international traffic” within the meaning of 19 U.S.C. § 1322(a) and 19 C.F.R. § 10.41a to the extent that they are not used to vertically suspend garments in international traffic.
EFFECT ON OTHER RULINGS:
HQ H058876, dated May 14, 2009, and HQ H079697, dated October 26, 2009, are REVOKED.
In accordance with 19 U.S.C. § 1625(c), this ruling will become effective 60 days after its publication in the Customs Bulletin.
Sincerely,
Craig T. Clark
Director
Border Security and Trade Compliance Division
Cc: Ms. Margaret R. Polito, Esq.
Neville Peterson LLP
17 State Street, 19th Floor
New York, NY 10004