CLA-2- OT:RR:CTF:TCM H047562 TNA
Mr. Karl Kruger
DHL Global Forwarding
2660 20th Street
Port Huron, MI 48060
RE: Request for Reconsideration of NY N038881; Classification of PODI Footwear
Dear Mr. Kruger:
This is in response to a request for reconsideration, dated November 24, 2008, made on behalf of your client, PODI, of New York Ruling Letter N038881, dated October 17, 2008, regarding the classification of certain footwear under the Harmonized Tariff Schedule of the United States (HTSUS).
FACTS:
The product at issue is a set of footwear containing a right and a left shoe base. The base consists of a rubber sole with a man-made liner zipper and a textile liner that completely covers the top part of the shoe and is located where the upper of a shoe is normally located. The zipper goes around the shoe where the welt would be if the shoe were welt footwear. In addition to the zipper, the liner/upper of the base has strategically placed hook and loop (Velcro) sections whose placement corresponds to Velcro sections on the underside of the various uppers. The set comes with five different types of uppers, each made of a different material, and each featuring different colors and designs. Some of the uppers are made of plastic, others of textile, others of leather. There is one set of footwear for men and boys, and a different set of footwear for women and girls. Within these sets, the choice of colors and patterns is gender specific and the size of the base is suitable for either men or women. Consumers receive the set of shoe bases in one plastic bag, and the uppers in another plastic bag that are both sold together in a nylon mesh backpack that is a part of PODI’s marketing.
In NY N038881, U.S. Customs and Border Protection (“CBP”) classified the footwear under Subheading 6404.19.35, HTSUS, as other footwear with outer soles of rubber and plastics. CPB classified the backpack separately under subheading 4202.92.30, HTSUS.
The classification of the backpack is not being challenged here. In its request for reconsideration, PODI asks that CBP classify only the shoe base under Heading 6404, HTSUS, which provides for “footwear with outer soles of rubber, plastics, leather or composition leather and uppers of textile materials.” The company argues that the interchangeable uppers should be classified separately under Heading 6406, HTSUS, as parts of footwear. PODI has provided CBP with a sample of its footwear.
ISSUE:
Whether the merchandise at issue should be classified as a composite good according to the material of the uppers in headings 6402, 6403, or 6404, HTSUS, or whether the merchandise should be classified as a set in heading 6406, HTSUS, which describes the uppers as parts of footwear?
LAW AND ANALYSIS:
Classification under the Harmonized Tariff Schedule of the United States Annotated (HTSUSA) is made in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied in order.
When goods cannot be classified by applying GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRIs are applied. GRI 2(a) applies to incomplete or unfinished and unassembled or disassembled goods. The classification of goods consisting of more than one material or substance shall be according to the principles of GRI 3.
GRI 3 states that when, by application of 2(b) or for any other reason, goods are prima facie classifiable under two or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings which provide a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, these headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
When goods cannot be classified according to GRI 3(a), CBP continues its analysis by examining GRI 3(b), which states that:
Mixtures, composite goods consisting or different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.
When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified according to GRI 3(c), under the heading which occurs last in numerical order among those which equally merit consideration.
The Harmonized Commodity Description and Coding System Explanatory Notes (“ENs”) constitute the official interpretation of the Harmonized System at the international level. While neither legally binding nor dispositive, the ENs provide a commentary on the scope of each heading of the HTSUS and are generally indicative of the proper interpretation of these headings. See T.D. 89-80, 54 Fed. Reg. 35127, 35128 (August 23, 1989).
Explanatory Note X to Rule 3(b) states that:
For the purposes of this rule, the term “goods put up in sets for retail sale” shall be taken to mean goods which:
consist of at least two different articles which are, prima facie, classifiable in different headings….
Consist of products or articles put up together to meet a particular need or carry out a specific activity; and
Are put up in a manner suitable for sale directly to consumers without repacking…
Explanatory Note IX to GRI 3(b) states that:
For the purposes of this Rule, composite goods made up of different components shall be taken to mean not only those in which the components are attached to each other to form a practically inseparable whole, but also those with separable components, provided these components are adapted one to the other and are mutually complementary, and that together they form a whole which would not normally be offered for sale in separate parts… As a general rule, the components of these composite goods are put up in a common packing.
With respect to determining the essential character of a composite good, EN VIII to GRI 3(b) provides the following guidance:
The factor which determines essential character will vary as between different kinds of goods. It may, for example, be determined by the nature of the material or component, its bulk, quantity, weight or value, or by the role of a constituent material in relation to the use of the goods.
The HTSUS provisions under consideration are as follows:
6402 Other footwear with outer soles and uppers of rubber or plastics:
Other footwear
6402.91 Covering the ankle
Other
Other
Other
6402.91.90 Valued over $12/pair
6403 Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of leather:
Other footwear:
6403.99 Other
Other
Other
Other
For Other Persons:
6403.99.90 Valued at over $2.50 a pair
6404 Footwear with outer soles of rubber, plastics, leather or composition leather and uppers of textile materials:
Footwear with outer soles of rubber or plastics:
6404.19 Other:
6404.19.35 Other:
6406 Parts of footwear (including uppers whether or not attached to soles other than outer soles); removable insoles, heel cushions and similar articles; gaiters, leggings and similar articles, and parts thereof.
6406.10 Uppers and parts thereof, other than stiffeners:
Other:
6406.10.60 Of rubber or plastics
Other
6406.10.90 Of man made fibers
PODI’s footwear is made up of different components classified in different headings. The classification of goods consisting of more than one material or substance utilizes the principles of GRI 3.
GRI 3(b) governs the classification of composite goods and sets made up of different components. PODI argues that its merchandise should be classified as a set. The rubber base and the interchangeable uppers are prima facie classifiable in different headings, and both will be packaged together for retail sale. However, the merchandise does not meet a particular need or activity. The ability to color-coordinate its footwear with consumers’ clothing is too broad an activity to fall within the meaning of Explanatory Note X(b). To change the look of their footwear, consumers can simply wear a different pair of shoes. The ability to obtain a different look is not a particular need or specific activity, and the merchandise cannot be classified as a set.
However, the base and the upper are designed to be worn together, forming a completed shoe. The interchangeable uppers are intended for use only with the base, and the base shoe is not intended to be worn without one of the interchangeable uppers attached to it. Both the base and the uppers are also imported together. While PODI’s website sells the uppers by themselves, it is clear that these uppers are for replacement purposes once the consumer has already purchased the base and the first set of uppers, because the uppers cannot be worn by themselves. Therefore, PODI’s merchandise consists goods with separable components that are adapted one to the other and are mutually complementary, and together they form a whole which would not normally be offered for sale in separate parts. The parts are also put up in a common packing. As a result, PODI’s footwear is a composite good that can be classified as if it consisted of the material or component which gives it its essential character, in accordance with GRI 3(b).
There have been several court decisions on "essential character" for purposes of GRI 3(b). These cases have looked to the role of the constituent materials or components in relation to the use of the goods to determine essential character. See Structural Industries v. United States, 360 F. Supp. 2d 1330, 1337-1338 (CIT 2005); Conair Corp. v. United States, 29 C.I.T. 888 (2005); Home Depot USA, Inc. v. United States, 427 F. Supp. 2d 1278, 1295-1356 (CIT 2006), aff’d 491 F.3d 1334 (Fed. Cir. 2007).
In addition, HQ 958323, dated October 4, 1995, examined merchandise that consisted of a jacket with interchangeable collars made of different materials and a handkerchief that could be pinned onto the left pocket. Both the collars and the handkerchief were constructed to fit only the jacket, and the jacket was constructed with exactly enough buttons to accommodate them. In that case, CBP found that the jacket, and not the interchangeable collars or the handkerchief, constituted the item’s essential character.
In the present case, the base shoe can be worn on its own, much like a water shoe. The uppers, on the other hand, constitute only the decorative portion of the composite good. The courts have looked at the essential character of composite goods and have found that the decorative portion alone does not imbue the item with its essential character. In its request for reconsideration, PODI argues that the interchangeable uppers give the footwear its essential character. PODI states that the uppers “can be changed at the will of the wearer to match the clothing or the whim of the customer.” This statement, combined with CBP’s discussion above that the base can be considered a shoe on its own, supports our conclusion that the interchangeable uppers are decorative rather than functional. CBP has long determined composite goods’ essential character based on the goods’ functional parts rather than their decorative parts. See, e.g., NY D80504; NY G86016; NY L88643, following Better Home Plastics Corp. v. United States, 20 C.I.T. 221 (“the plastic liner can serve its intended function without the outer curtain and contributes to the overall appearance of the set. The outer curtain, in contrast, merely furthers the sets decorative aspect. The court therefore concludes the essential character of the set is derived from the plastic liner.”) Even in a case like Home Depot, U.S.A., Inc. v. United States, which examined lighting fixtures and classified them according to glass components that served a decorative purpose, the classification there was not purely based on decorative aspects but rather the fact that the glass served a large functional purpose as well. Home Depot, U.S.A., Inc. v. United States, 30 C.I.T. 445. As a result, CBP considers the base to be the essential character of the footwear. PODI argues that the entire good should be classified according to the interchangeable uppers, but because the uppers do not impart the goods’ essential character, they cannot control the goods’ classification.
As stated, the base of the shoe provides the merchandise with its essential character. Each base, worn with one of the uppers supplied, is footwear under headings 6402, 6403, or 6404, HTSUS, based on the material of the upper, either of plastic, leather or textile. However, with regard to the entire good, base and interchangeable uppers, packaged together, the headings in consideration are all equally specific in relation to the good. Thus, CBP classifies the footwear according to GRI 3(c), which provides for classification in the heading which occurs last in numerical order among those which equally merit consideration. As a result, PODI’s footwear is classified in heading 6404, HTSUS.
Therefore, PODI’s footwear is classified under heading 6404, HTSUS. The applicable subheading is 6404.19.35, HTSUS, which provides for footwear with outer soles of rubber/plastics and uppers of textile materials: footwear of the slip-on type, not having a foxing or foxing-like band and not protective: other.
HOLDING:
Under the authority of GRI 3, PODI’s footwear is provided for in heading 6404, HTSUS, specifically under subheading 6404.19.35, HTSUS, which provides for footwear with outer soles of rubber/plastics and uppers of textile materials: footwear of the slip-on type, not having a foxing or foxing-like band and not protective: other: for men. The applicable duty rate is 37.5%.
Duty rates are provided for your convenience and are subject to change. The text of the most recent HTSUS and the accompanying duty rates are provided on the internet at www.usitc.gov/tata/hts/.
EFFECT ON OTHER RULINGS:
NY N038881, dated November 24, 2008, is AFFIRMED.
Sincerely,
Myles B. Harmon, Director
Commercial and Trade Facilitation Division