Tuesday, March 26, 2013

When are Pants Not Pants?

This has been an interesting issue for a while now. It started when the Court of Appeals for the Federal Circuit declared that hockey pants with built-in pads were not classifiable as wearing apparel, but as hockey equipment. That was in a case called Bauer Nike Hockey USA, Inc. v. United States, back in 2004. At that time, I was pretty certain that a lot of sports-specific clothing was going to end up classifiable as sports equipment on the basic premise that it is not easily or comfortably worn in other settings and is necessary or appropriate for participation in the sport.

Unfortunately, the Federal Circuit had other ideas. In Lemans Corp. v. United States, the Federal Circuit held that motocross jackets were not sports equipment because, unlike the hockey pants in Bauer Nike, they did not incorporate protective pads or guards.

Recently, the Court of International Trade had to wrestle with the classification of football pants and jerseys in Riddell, Inc. v. United States. The pants at issue contained four interior sleeves designed to hold thigh pads and knee pads. However, at the time of importation, the pads were not included in the garments. The pants were cut to accommodate other pads including an athletic cup. The jerseys were designed to accommodate shoulder pads and to hold the pads snugly to the body. But, when imported, the jerseys contained no padding. Based on Bauer Nike (and arguably on Lemans), Riddell argued that these articles should be classified as football equipment in 9506.99.20, which is duty free. The alternative classifications carry rates of duty ranging from 14.9% to 32%.

First, we should make it very clear that this case can be decided on the basis of General Rule of Interpretation 1. We would be wrong to jump to a discussion of whether "football equipment" is  more less specific than, for example, "other garments." It is more specific, but that is not relevant. What matters here is that Note 1(t) to Section XI precludes articles of Chapter 95 from classification in Chapters 61 and 62. Similarly, Note 1(e) to Chapter 95, precludes the classification of wearing apparel in that chapter. Consequently, the sections are mutually exclusive with respect to this merchandise and, if the goods are football equipment, they must be classified in Chapter 95.

The only binding definition of "sports equipment" that can be applied to "football equipment" comes from the Federal Circuit's decision in Bauer Nike. In that case, the Federal Circuit held that sports equipment is merchandise that is "necessary, useful or appropriate" to that sport. In Lemans, the Federal Circuit further narrowed the definition by stating that "sports equipment" is not "apparel-like" in nature and is almost exclusively for the protection of the participant. Examples include fencing masks, knee pads, and shin guards. As nicely summarized by the Court of International Trade:

"[S]ports equipment" is defined as non-apparel-like merchandise that is necessary, useful or appropriate for a sport, and if the merchandise is worn by a user, those articles are almost exclusively protective in nature and would complement, or be worn in addition to apparel worn for a particular sport.

According to the Court of International Trade, Riddell's imported merchandise does not meet the definition of football equipment. Specifically, the merchandise is apparel-like in nature and is not almost exclusively protective in nature. Football pads themselves would likely meet this definition, but not the garments imported without the pads. Further, the garments are not "parts" or "accessories" of the pads.

This, of course, creates the opportunity to test the definition further by asking whether the inclusion of the pads in the garments at the time of entry (or even just in the same shipment) might have produced a different result. Given that hockey pants are reasonably apparel-like but included significant padding, similarly configured football pants might also be classified as sports equipment. This also raises questions about other kinds of sports-specific apparel that contains permanent or removable task-specific padding that performs an important protective function. Would that include soccer goalie shirts, which incorporate elbow padding? What about bike shorts and bibs, which are remarkably uncomfortable to wear off the bike, usually include no amenities such as pockets or a fly, and contain a large and expensive protective pad? These are cases that should be carefully considered, especially given the high rates of duty applicable to apparel.

In the end, Bauer Nike remains valid case law and articles similar in nature to hockey pants may be classifiable as sports equipment. If you are an importer of sport-specific equipment, it makes sense to try and apply this decision to your product.

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