DIS Vintage - Dat Rate of Duty
I live near Chicago and spent a significant portion of my adult life living or working in the city. There is an increasingly rare kind of Chicagoan that represents the accent many Americans associate with the city. That accent is often, and incorrectly, summarized as the "Dees and dems and dose." It has been used as a tool of sketch comedy for ages. Including in Bill Swerski's Super Fans.
I am reminded of the Super Fans because I just re-read DIS Vantage LLC v. United States. Every time I see "DIS Vintage," the 12-year old idiot that inhabits a portion of my brain insists on saying "Dat's not vintage, Dis vintage."
The serious question presented in this case is the classification of bales of used apparel. We initially discussed this case last year in this post. The question left to be decided is whether the merchandise is commingled and, therefore, subject to the highest rate of duty applicable to merchandise present in the mixture.
It is worth pausing here for a moment. General Note 3 to the Harmonized Tariff Schedule does not often come up. It answers the question of what classification and rate of duty is applicable to different products that are imported commingled. You might think this is resolved by GRI 3(b), which states that mixtures are to be classified based on the one material that imparts the essential character. Where there is no essential character, the last HTSUS item in numerical order applies.
General Note 3(f) covers the specific circumstance of merchandise that is imported in commingled forms such that the actual contents are not known. The rule applies: "Whenever goods subject to different rates of duty are so packed together or mingled that the quantity or value of each class of goods cannot be readily ascertained by customs officers" without physical segregation of the shipment. If CBP can ascertain the quantity or value of the various merchandise by sampling, documents, or commercially acceptable testing, the goods are not commingled. Unless an exception applies, commingled goods are subject to the highest rate of duty found in the goods.
This is different from a retail set because commingled goods need not be used for a single purpose and need not be classifiable in separate headings. It is also not a mixture that constitutes a good. This rule comes into play where goods subject to different rates are irretrievably mixed together in a way that makes it impossible to apply the correct rates to the merchandise present in the commingled mass. The product has an indeterminant mixture of known contents. For example, in N245010 (Sep. 9, 2013), CBP confronted recovered petroleum products in various states (e.g., crude, processed, slop) from multiple countries of origin that were collected from a refinery that was being decommissioned. The importer suggested that the oils be classified as a GRI 3(b) mixture pursuant to essential character. CBP distinguished GRI 3(b) from General Note 3(f) this way:
[T]he recovered oils are not "goods" or "mixtures or combinations" pursuant to (GRI) 3(b) because they are not combined in any fashion or formula with a commercial use (See HQ ruling 954435). There is no chemical reaction and the basic properties of each component remain essentially unchanged. Each component retains its original classification and country of origin. Each component remains classifiable in its own specific provision under the heading covering crude oils (heading 2709) or light, distillate and residual fuel oils (heading 2710). Pursuant to General Note 3(f), HTSUS, whenever goods subject to different rates of duty are so mingled that the quantity or value of each class of goods cannot be readily ascertained by customs officers by sampling, packing lists or testing, the commingled goods shall be subject to the highest rate of duty applicable to any part thereof.
I am curious about how often this comes up. If you use this rule for your imports, drop a comment with a description of the merchandise.
Back to DIS Vintage.
Forty-one samples of clothing apparently taken from a bale of imported material were presented to the Court for review. The question presented was whether all of the clothing could be classified as "worn," meaning it showed signs of appreciable wear. If they were all worn, then the merchandise would not be commingled because it would all have the same classification and rate of duty.
Appreciable wear is "noticeable damage or impairment caused by use." As mentioned above, I sometimes behave like a 12-year-old idiot. Other times, I am surprised by how much I act like a grumpy old man. [Side note, yesterday was my 58th birthday, meaning I may have to come to grips with the "old" part and should struggle to be less grumpy.] That brings me to the phenomenon of pre-ripped skinny jeans. All I am wondering is how CBP is going to decide what to do when a bale of "distressed" jeans shows up with a consignee that is a retailer.
Moving on . . . . The parties agreed that 16 samples to show appreciable signs of wear. The Court had to decide what to make of the remaining 25. Of those, the Court found 16 to be "worn" and nine to show no appreciable signs of wear. That means the bale of clothing was commingled and, pursuant to General Note 3, subject to the highest rate of duty applicable to any one kind of merchandise present. In this case, that was 16.6%.
End of story, except for the surprise appearance of Jeff Bridges and Chris Cooper in this scene from Seabiscuit.