CBP Ruling Revocation Proposal on 50/50 Fiber Blends Seen as Major Shift in Classification Policy

CBP's proposed ruling revocation on garments with 50/50 blends of fiber (see 1904050037) seems to indicate a big shift in the way the agency classifies garments and other finished textile goods, according to industry experts. The proposal is a "significant change in policy," Sandler Travis lawyer Elise Shibles said in a May 2 email. The proposal "could significantly impact a wide range of imported goods, including their duty rates, qualification for free trade agreements, and sourcing supply chains," she and trade consultant Tom Gould said in a post on the firm's website.

CBP's proposal involves garments made with 50/50 fiber blends and the basis for classifying such garments. Generally, 50/50 garments have been classified in the tariff subheading of for component material that falls last within that garment's heading, Shibles said. In the rulings being revoked, "CBP ruled for the classification that came numerically last within the subheading that described the article," said David Trumbull, a customs consultant and principal of Agathon Associates, in a May 1 blog post.

"Now CBP has taken a fresh look at the General Rules of Interpretation and is proposing to reverse those rulings and change the way articles of 50/50 composition are classified," Trumball said. Under the proposal, the tariff classification of the fibers in the 50/50 blend are first considered (e.g., cotton of chapter 52 versus man-made filaments of chapter 54), then the entire garment is classified according to whichever of those constituent fibers in the 50/50 blend is classified last in numerical order.

Trumball said in a May 3 email that "as best I can tell it is a question of the meaning of Subheading Note 2(a) to Section XI which refers back to the rules for classifying fiber, yarn, and fabric. Historically most of us has understood it as direction to classify in the manner that you would for fabric (i.e., last in order of candidates), among the candidates for classification of that sort of garment."

Still, some of the impact may be limited due to current importing practices, McGuireWoods lawyer John Pellegrini said in an update for the U.S. Fashion Industry Association. "Fortunately, this does not have a major impact since most textile and apparel importers prudently avoid 50/50 blends if [at] all possible," he said. "We do not believe that the recognition of these Section XI rules has any real impact on classification decisions based upon essential character, such as the classification of reversible garments, unless of course one of the shell fabrics is a 50/50 blend."

Shibles said that in some cases under this revised policy, the classification would remain the same. That's because "the fibers may be listed in the same order for the end product as they are for the raw material (e.g. 50 cotton / 50 polyester men’s woven shorts would remain the same)," she said. "In other cases, classification will change. We see some of the changes in the proposed revocation, but I am certain the impact is much broader than the immediate 6 rulings."

There's also a question of whether other countries could adopt a similar approach, Shibles said. "The tariff notes at issue are shared internationally with all countries that use the harmonized tariff system," she said. "We have consulted with other countries and found that they do not follow the revised interpretation proposed by CBP. Another issue is that this interpretation impacts the eligibility of certain goods for trade preferences. For instance, the NAFTA Tariff Preference Level (TPLs) eligibility is based on quota category. Quota category is determined by the classification of the good. Changing the classification in this way modifies the quota category. NAFTA (and now USMCA) reciprocal TPLs were negotiated based on the volume of trade to be covered. This sets up the US to apply TPL in a non-reciprocal manner, a potential violation of the treaty."