ITC Investigates CBP's Request to Make Certain Festive Apparel, Etc. Duty Free

The ITC is proposing that the President implement CBP's requested changes, with one further clarifying change. Written comments are due by October 22, 2010.

Certain Utilitarian Festive Articles Are Excluded from Chapter 95 Duty-Free Treatment

Proclamation 8097 amended the Harmonized Tariff Schedule for a number of World Customs Organization-recommended changes, effective February 3, 2007. One of the amendments added a new Note 1(v) to HTS Chapter 95, to exclude tableware, kitchenware, toilet articles, carpets, and other textile floor coverings, apparel, bed linen, table linen, toilet linen, kitchen linen and similar articles having a utilitarian function, from classification in Chapter 95 as duty-free festive articles.

ITC Proposes to Recommend Chapter 98 Changes to Make Certain Utilitarian Festive Items Duty-Free

CBP has requested certain amendments to HTS Chapter 98, Subchapter XVII, in order to provide duty-free treatment to certain utilitarian articles with festive designs and/or motifs, in accordance with the judicial decisions of Michael Simon Design, Inc. v. United States.² The ITC is proposing to recommend these changes to the President, with one clarifying amendment.

The proposed recommended changes are as follows (the ITC's proposed clarifying amendment is underlined) :

Add new 9817.95.02. Replace duty-free 9817.95.05 with the following new duty-free subheading:

9817.95.02: Utilitarian articles each incorporating a symbol and/or motif that is closely associated with Christmas, Easter, Halloween, Thanksgiving or similar festive occasion, the foregoing articles used or displayed principally during that festive occasion and not typically at any other time, under the terms of U.S. Note 9 to this subchapter.

(The ITC states that its clarifying change would replace CBP's recommended text "a festive occasion (for example, Christmas, Easter, Halloween, or Thanksgiving,)" with the underlined language above. The ITC states that this change is needed in order to clarify the intended scope of the heading and conform to normal HTS language.)

Add new U.S. Note. Add the following new U.S. Note 9 to HTS Chapter 98, Subchapter XVII:

Heading 9817.95.02 applies only to tableware, kitchenware (except baking pans, cookie cutters, cookie stamps and presses³) and toilet articles of chapter 39, 69 or 70; carpets and other textile floor coverings of chapter 57; apparel and accessories of chapter 61 or 62; and made-up textile articles of chapter 63.

Consolidate 9817.95.01. Consolidate the text of 9917.95.01 and 9917.95.05 to read as follows:

Utilitarian articles (including but not limited to Seder plates, blessing cups, menorahs or kinaras) of a kind used in the home in the performance of specific religious or cultural ritual celebrations for religious or cultural holidays, or religious festive occasions (provided for in subheading 3924.10, 3926.90, 6307.90, 6911.10, 6912.00, 7013.22, 7013.28, 7013.41, 7013.49, 9405.20, 9405.40 or 9405.50).

Uncertainty Over Effective Date of Amendments

In its request, CBP states that these proposed amendments would ensure that utilitarian or functional articles (except baking pans, cookie cutters, cookie stamps and presses³) with festive designs and/or motifs entered on or after February 3, 2007, are classified in accordance with HTS Chapter 95, Note 1(v), while also ensuring rate neutral, duty-free treatment for this merchandise in accordance with the decision of the courts.

However, ITC sources state that the Office of U.S. Trade Representative is looking into the issue of the amendments' effective date. It is not yet known if the changes will be retroactive for unliquidated and/or protested entries, or for all entries, etc. There is also the chance that retroactivity for some entries would require an act of Congress.

The ITC states in its notice that the changes that may result from its investigation are not intended to alter current tariff rates. These changes are instead intended to ensure that existing tariff treatment continues to be applicable following the implementation of new U.S. tariff provisions, taking into account HTS changes that were proclaimed as of February 3, 2007, and related judicial decisions and CBP rulings.

¹Section 1205(a) of the Omnibus Trade and Competitiveness Act of 1988 provides that the ITC shall keep the HTS under continuous review and periodically recommend to the President, through an investigation, such modifications in the HTS as the ITC considers necessary or appropriate to accomplish certain general objectives.

²In Michael Simon Design, Inc. v. United States, the Court of International Trade ruled that certain imports of sweaters, blouses, and shirts decorated with certain Christmas or Halloween motifs were classified as "festive articles" under HTS heading 9505 and the Court of Appeals for the Federal Circuit affirmed that decision. '

(See ITT's Online Archives or 08/05/10 news, 10080513, for BP summary of CBP's request letter.

See ITT’s Online Archives or 09/21/06 news, 06092110, for BP summary of CIT ruling that these articles are to be classified as “festive articles.” See ITT’s Online Archives or 09/18/07 news, 07091825, for BP summary of CAFC affirming CIT’s ruling.

See ITT’s Online Archives or 06/21/10 news, 10062175, for BP summary of the CAFC’s decision that the 2007 proclamation implementing the new note was not reviewable. See ITT’s Online Archives or 07/24/09 news, 09072410, for BP summary of the CIT’s decision rejecting a challenge to the note.)

³Pending litigation in the CIT. CBP’s position is that the utilitarian or functional articles described as baking pans, cookie cutters, cookie stamps and presses, that are used in preparation for a festive occasion and not used or displayed during a festive occasion, are not festive articles within the scope of heading 9505.

(ITC Investigation No. 1205-9, FR Pub 09/20/10)