Recently I answered a query from the President of the Walmart Global Team on the classification and rate of duty

applicable to Halloween costumes as follows: The classification of Halloween costumes has long been a point of dispute between domestic manufacturers and importers and various Court orders and Cross Rulings are available on this subject. In general Courts have held wearing apparel to be garments that are well made and designed for repetitive or prolonged use whereas to fit the definition of Halloween costumes, the costumes should be flimsy as opposed to well made and designed to be worn once on the festive occasion and it should be aberrant or out of place to wear it outside the festive season. Textile imports from China are now no longer under quotas and hence this is a multi billion dollar import industry where this decision has wide ramifications as costumes are free of duty when classified under Chapter 95 as toys and festive articles. Numerous importers have tagged the name Halloween on to the description of the apparel imported by them and applied for rulings in their favor which have failed the tests of flimsiness and suitability for every day use. In case of doubt, samples can be sent for rulings but the principles have been quite well laid down now by the Courts. Costumes for girls role play have to be examined on a case by case basis following the principles laid down in the Halloween costume matter but each item has to be verified against the above mentioned tests for correct classification. There is an excellent Informed Compliance CBP publication dated June 2008 as amended which explains many of the concepts involved in classification of these articles. See http://www.cbp.gov/linkhandler/cgov/trade/legal/informed_compliance_pubs/icp077.ctt/icp077.pdf Relevant extracts are as follows: The appeals process has been exhausted and the CAFCs decision in Rubies Costume Co. v. United States, 337 F. 3d 1350 (Aug. 1, 2003) became final on October 31, 2003. Therefore, all flimsy, non-durable textile costumes that are not recognized as ordinary articles of apparel are classified under 9505.90.6000, HTSUSA (flimsy); all textile costumes that exceed the flimsy, non-durable standards, or are recognized as ordinary articles of apparel are classified in Chapters 61 or 62, HTSUSA (well-made). WHAT IS A COSTUME? A costume is usually composed of an article of wearing apparel, with or without other accessory items such as hats, false ears, noses, wigs, etc. However, a costume may also consist of a single item or collection of accessory items used to create an image. For example, gossamer wings; or a devil's horns, tail and pitchfork, create an image, without a garment, and are considered costumes of heading 9505, HTSUSA. A costume is worn on the person to create an image of: A specific character (e.g., Dracula) In making a decision that a textile costume is flimsy and non-durable and classified in subheading 9505.90.6000, HTSUSA, or wellmade and classified in Chapters 61 or 62, CBP separately identifies features in each article. These features generally fall into four areas: Styling, Construction, Finishing Touches, Embellishments. It is important to consider the garment as a whole. This is accomplished by considering whether or not it is reasonable to conclude that the article is a normal article of wearing apparel. Normal articles of apparel are usually designed for multiple wear and cleaning. Thus, it is necessary to assess the type of fabric used and the appropriateness of finishing elements for that fabric. With respect to longevity of the article, it is important to keep in mind that raw edges are not appropriate for fabrics that may fray easily. However, certain fabrics, such as netting, tightly knit/woven fabrics, or treated fabrics, may be very durable even with a raw edge. On occasion, a raw edge is intended to enhance the styling features on a costume. If the costume is comparable to a normal article of wearing apparel, it is classified in Chapter 61 or 62, HTSUSA. A flimsy textile costume has little or no styling; for example: a one panel yoke, collar, or belt that has no stiffener, facing, or lining. A well-made textile costume has styling; for example: two layers of fabric, ruffles, pleats etc. Typically, a flimsy textile costume neck has two or more components sewn together with a single straight stitch leaving raw edges, or an overlock stitched edge that is visible when worn. A flimsy textile costume waist is usually constructed with a single straight stitch that has wide or loose stitches. A well-made textile costume waist includes, for example, tunnel waists (fabric folded over and sewn to create an open channel to allow the elastic to be pulledthrough), elastic with overlock stitching, or elastic sewn on separately, thus reinforcing the waist. A flimsy costume typically has loose stitching at the seams. A well-made costume typically has seams that are joined with secure overlock stitching or straight stitching with a tight and uniform gauge. A flimsy textile costume generally has thin elastic (e.g., inch in width) sewn on with a single straight stitch or overlock stitch. An example of a well-made textile costume with high quality finishing touches would include thick, durable elastics and button closures with finished buttonholes. Textile costumes that are well-made are classified in Chapters 61 or 62, HTSUSA. Outfits of subheading 9503.00.0080, HTSUSA, are for role-play and are frequently referred to in the trade as dress-up sets. CBP has stated that outfits or dress-up sets classifiable in heading 9503, HTSUSA, are limited to a combination of articles, most of which are toys that are illustrative of the recreation or work of a person or profession. e.g. Nurse: complete with stethoscope and thermometer Most dress-up sets consist principally of toy items packaged on occasion with an item of textile and/or a hat. However, textile costumes cannot be part of an outfit of subheading 9503.00.0080, HTSUSA Retail sets that contain two textile costume garments classifiable under two different HTSUSA numbers in Chapters 61 or 62 cannot be classified as a set. Every item in the retail package must be separately classified. On December 8, 1993, Title VI, (Customs Modernization), of the North American Free Trade Agreement Implementation Act (Pub. L.103182, 107 Stat. 2057) (Title VI), became effective. Title VI amended many sections of the Tariff Act of 1930, as amended, and related laws. Two new concepts which emerge from the law are informed compliance and shared responsibility. These concepts are

premised on the idea that in order to maximize voluntary compliance with customs laws and regulations, the trade community needs to be clearly and completely informed of its legal obligations. Accordingly, the law imposes a greater obligation on U.S. Customs and Border Protection (CBP) to provide the public with improved information concerning the trade communitys responsibilities and rights under the customs and related laws. In addition, both the public and CBP share responsibility in carrying out import requirements. In the Notice to Informed Compliance Publications, CBP states that these publications are intended to provide information and guidance to the trade community and reflect the position on or interpretation of the applicable laws or regulations by the CBP as of the date of publication. But it does not replace or supersede those laws or regulations and only the latest official version of the laws or regulations is authoritative. The Explanatory Notes to Chapter 95, HTSUS. Id. The Explanatory Notes pertaining to heading 9505, HTSUS, indicate that the heading includes: (A)Festive, carnival or other entertainment articles, which in view of their intended use are generally made of non-durable material. They include: (3) Articles of fancy dress, e.g., masks, false ears and noses, wigs, false beards and moustaches (not being articles of postiche4-heading 67.045) and paper hats. However, the heading excludes fancy dress of textile materials, of chapters 61 or 62. The United States Court of Appeals,Federal Circuit inter alia held that Note 1(e) excludes fancy dress, of textiles, of chapter 61 or 62 from Chapter 95, HTSUS. The relevant provision of the HTSUS, however, does not define the critical phrase fancy dress, of textiles, of chapter 61 or 62. Customs therefore had to interpret the phrase in order to distinguish between costumes of Chapter 95 (festive articles) and fancy dress of Chapter 61 or 62 (wearing apparel). See HQ 961447. Customs determined that fancy dress of chapter 61 or 62 refers to elaborate or substantial costumes such as expensive, well-constructed ballroom gowns, safari outfits, certain types of uniforms, and other adult garments. Id. Customs concluded that, while the imports have some characteristics of textile apparel, the flimsy and non-durable textile costumes whose principal intended use is for a one time festive occasion are distinct from wearing apparel which courts have held to be used for decency, comfort, adornment or protection. They also held that although the examples in the Explanatory Notes are probative and sometimes illuminating, we shall not employ their limiting characteristics, to the extent there are any, to narrow the language of the classification heading itself. Nothing from the pertinent subheading 9505.90.6000-Festive, carnival or other entertainment articles: Other: Other-limits 9505.90.6000 only to accessories. Absent a clearer showing of congressional intent, we refuse to import incidental characteristics of the examples in the Explanatory Notes into the headings of the HTSUS. See Marubeni Am. Corp. v. United States, 35 F.3d 530, 535 n. 3 (Fed.Cir.1994) (Explanatory Notes are only instructive and are not dispositive or binding.). Given that the imports are articles that have enormous make believe or festive value at a particular time, either on Halloween or at a costume party where the wearer desires to mimic another, we conclude that the subject merchandise is classifiable as festive articles under subheading 9505.90.6000, HTSUS. See Midwest of Cannon Falls, Inc. v. United States, 122 F.3d 1423, 1429 (Fed.Cir.1997) (In sum, all of the items at issue are used in celebration of and for entertainment on a joyous holiday, and they are all prima facie classifiable as festive articles' under heading 9505.). The fact that the imported textile costumes provide[ ] at least minimal decency and send[ ] the world a message about the wearer through their appearance or use does not undermine Customs's interpretation. Nor do we believe that [t]he fact that such garments may fail to constitute clothing worn by most on a daily basis militates in favor of classifying the imported textile costumes as wearing apparel. Affording the classification ruling the deference it is due under Skidmore, we see no reason to disturb Customs's determination. When the imported textile costumes are of a flimsy nature and construction, lacking in durability and generally not recognized as normal articles of wearing apparel, it is neither illogical nor unreasonable to conclude that the subject merchandise is classifiable as festive articles. However one Judge wrote a dissenting opinion arguing inter alia that there is no suggestion in the Explanatory Note or elsewhere in the HTSUS that costumes made of textiles are normally characterized as fancy dress of textile materials, but become akin to masks, false ears and noses, wigs, false beards and moustaches if Customs concludes that they are not as durable or well-finished as most imported wearing apparel. Customs' position in this case is not persuasive and therefore not entitled to deference. See http://caselaw.findlaw.com/us-federal-circuit/1483274.html In short, the Court of Appeals upheld Customs' view by stating that fancy dress is not defined and Halloween costumes do not meet the definition of fancy dress as commonly understood to include only to elaborate or substantial costumes such as expensive, wellconstructed ballroom gowns, safari outfits, certain types of uniforms, and other adult garments" and therefore Halloween costumes are not hit by the exclusion in The Explanatory Notes pertaining to heading 9505. I would also like to add that for argument's sake even if we were to give equal weightage to the dissenting opinion classifying it under Chapter 61 or 62 as opposed to the majority opinion that classified it under 95 and if we assume for a moment that all three possible classifications have equal probability of being right, in that case Rule 3(c) of the General Rules of Interpretation would appear to clinch the issue in favor of classification under Chapter 95 because it states that when goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. As we all know 95 occurs last in the numerical order 61,62,95. Skidmore v. Swift & Co., 323 U.S. 134 (1944) was a United States Supreme Court decision that held that an administrative agency's interpretative rules will be given deference according to their persuasiveness and the United States Court of Appeals, Federal Circuit relied on this while accepting the US Customs' classification of Halloween costumes under Chapter 95 reversing the decision of the United States Court of International Trade. What I find rather interesting here is that it was the US Government that filed an appeal against the order of the United States Court of International Trade though that Order was actually in favor of revenue in the sense that it would have enabled Customs to collect duty on Halloween costumes under Chapters 61 or 62. Revenue collection is one of the functions of the Customs and in many countries, Customs will not appeal a Court order that grants it the right to classify a particular item under a classification that results in a higher rate of duty. But as this case demonstrates, that is not the case with US Customs which is certainly a good sign. Disclaimer: None of this is to be construed as legal advice and in specific cases importers are advised to seek rulings from the CBP under 19 CFR Part 177 or advice from a licensed customs broker, attorney or consultant.

Joe Valentine October 2012 Senior Global Trade Compliance Professional/Consultant joeevalentine@gmail.com (919) 923 4280