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Textile and Apparel Duty Rates Could Be Significantly Affected by Proposed Classification Change

A recent U.S. Customs and Border Protection proposal to change the way the classification of certain apparel and textile products is analysed could significantly impact a wide range of imported goods, including their duty rates, qualification for free trade agreements and sourcing supply chains. Importers have until 3 May to submit comments on this proposal.

Textile and apparel products of 50/50 different materials, with neither material providing the essential character for classification purposes, have always been classified within the finished good HTSUS heading for the fibre content that is last in numerical order. For example, trousers of 50 percent rayon and 50 percent linen could be classified as rayon trousers or linen trousers, and since the HTSUS heading for linen trousers is last in numerical order the trousers are classified as linen.

However, CBP’s proposal (relating to ruling HQ H293468 on the classification of shorts, sweaters, shirts, tunics and dust skirts) asserts that classification should be based on the order of the headings of the raw materials. In the case of 50 percent rayon and 50 percent linen trousers, the rayon raw materials (fibre, yarn, fabric) are classified in Chapters 54 and 55 and the linen raw materials are classified in Chapter 53. Under CBP’s proposal, these trousers would be classified as rayon trousers instead of linen trousers.

The proposed change would therefore require companies to classify not only the finished goods to be imported but also the materials within those goods. While this change in classification analysis would most immediately impact goods made of 50/50 different fibre content, it could also have a broad-reaching impact on (i) reversible garments of different materials; (ii) textile and apparel goods of at least two components, neither of which exceeds 60 percent of the surface area; and (iii) textile and apparel sets of at least two articles of different materials.

In addition, qualification for many FTAs is directly connected to the component of a garment that determines classification. If that component is changed by the proposed classification logic, those garments may no longer qualify for FTA duty preferences, which could seriously impact supply chains.

Content provided by Picture: HKTDC Research
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