On December 2, 2021, U.S. Customs and Border Patrol (CBP) issued CSMS #50264295 providing guidance on requests for liquidation extensions and protest processing related to pending litigation in the Court of International Trade (CIT) challenging the lawfulness of Section 301 List 3 and/or List 4a duties on goods from China.

Regarding requests for liquidation extensions, CBP noted that it will “deny requests filed under 19 U.S.C. § 1504(b)(2) for an extension of time for liquidation of entries based solely on the pending CIT litigation.” As noted under 19 U.S.C. § 1504(b)(2), the Secretary of the Treasury may extend the liquidation period of an entry if “the importer of record or drawback claimant, as the case may be, requests such extension and shows good cause therefor.” As determined by CBP, the pending litigation in the CIT regarding the Section 301 duties, as well as any other case stayed under this lead case, will not be considered sufficient enough to show good cause for extension.

CBP also provided additional guidance with regards to protest processing. The agency noted that, in an effort to facilitate administrative processing, it would designate these specific protests in “Suspended” status under the “Other” category. This is due to the fact that the agency will not be acting on these protests at the time. Notably, CBP stated that protests listed under the “Other” category are not acknowledged as valid and the decision to categorize them as such is “merely an administrative convenience for CBP.” The guidance issued under CSMS #50264295 does not pertain to any entries filed under List 1 (noted by subheading 9903.88.01), List 2 (noted by subheading 9903.88.02), submissions regarding exclusions requests submitted to the U.S. Trade Representative, and/or any submissions not contesting the lawfulness and validity of List 3 and/or List 4a Section 301 duties.

The CBP guidance can be found here.

For more information on CBP and Section 301 tariffs, contact our team and see previous posts below.

CIT issues Preliminary Injunction Temporarily Restraining Liquidation of Section 301 Import Entries | International Trade Law (cmtradelaw.com)

Senate Confirms Chris Magnus as Customs and Border Protection’s Next Commissioner | International Trade Law (cmtradelaw.com)

On December 2, 2021, the United States, the European Union (“EU”), the United Kingdom (“UK”) and other allies took coordinated action to designate various individuals, entities, and aircraft connected to human rights abuses by Belarussian President Alexander Lukashenko and his regime. This builds on asset freezing actions by the U.S., UK, EU, and Canada earlier this year (which we discuss here).

Click here to continue reading the full version of this alert.

 

On December 9, 2021, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and the U.S. Department of State’s Directorate of Defense Trade Controls (DDTC) both issued final rules adding export restrictions on Cambodia.

BIS amended the Export Administration Regulations (EAR) to implement more restrictive export controls for Cambodia to ensure that items subject to the EAR are not available to Cambodia’s military and military intelligence services without prior review by the U.S. Government, and also added Cambodia to the list of countries subject to a more stringent review policy for license applications involving national security-controlled items.

Specifically, BIS made four changes to the EAR restricting exports to Cambodia as follows:

(1) updating the controls applicable to Cambodia related to National Security-controlled items;

(2) making Cambodia subject to the Military End User (MEU) list;

(3) making Cambodia subject to the Military Intelligence End Use List (MIEU) list; and

(4) adding Cambodia to Country Group D:5.

DDTC amended § 126.1(d)(2) of the International Traffic in Arms Regulations (ITAR) to add Cambodia to the list of proscribed countries. This change institutes a policy of denial to licenses and approvals for exports of defense articles or defense services to Cambodia, see additional information at § 126.1(o).

These country policy amendments were made in response to serious concerns about the deepening influence of China’s military presence in Cambodia and a concern that this presence presents a threat to regional security. Additionally, the changes were made in response to credible evidence of growing corruption and human rights abuses by the Government of Cambodia.

The Federal Register notices are available here and here.

On December 7, 2021, the Senate confirmed Tucson, Arizona police chief Chris Magnus as the next U.S. Customs and Border Protection (CBP) commissioner with a vote of 50-47 in favor of Magnus. Magnus is CBP’s first Senate-confirmed leader since 2019 – with his predecessor Mark Morgan serving until January 2021 and Troy Miller currently serving as acting commissioner. As commissioner, Magnus will oversee the 60,000-person agency and all of its work related to trade, border security, and travel. Previously, he served as Tucson’s police chief and also has experience working for police departments in Michigan, North Dakota, and California.

Forced labor continues to an issue of particular interest for both the Senate and Magnus. Senator Ron Wyden (D-OR), chairman of the Senate Finance Committee, stated on October 19, 2021 in the hearing on the nomination of Chris Magnus that the use of forced labor in China and elsewhere is “{o}ne such issue that’s posing a serious danger to our country’s values and American jobs.” Similarly, in that same hearing, Magnus also addressed forced labor and transparency as a top issue, committing CBP to providing “public summary data describing the number of allegations received, open investigations, suspended or inactive investigations, and other relevant information on a regular basis,” per the Government Accountability Office’s recommendation.

Another major topic of concern for Magnus is the current global supply chain blockage. In his October hearing, Magnus stated that he would aim to “ensure that {CBP} has the appropriate staffing at ports, and that CBP is working closely with port authorities, carriers, brokers, labor groups, and other key partners in the trade community to meet the increasing cargo screening and clearance demands” in order to tackle the supply chain crisis. In addition, he also stressed that he would prioritize the continued modernization of technology resources, including the Automated Commercial Environment (ACE) system used by CBP and others in the trade sphere.

The on the record questions and answers for the hearing on the nomination of Chris Magnus from October 19 is available here.

For more information on CBP and actions addressing human rights and forced labor abuses, contact our team and see previous posts below.

House passes bill barring imports of goods produced in the Xinjiang Autonomous Region of China | International Trade Law (cmtradelaw.com)

CBP Issues Forced Labor Withhold Release Orders on Malaysian Gloves and Mexican Tomatoes | International Trade Law (cmtradelaw.com)

On December 8, 2021, the U.S. House of Representatives passed a bill called the Uyghur Forced Labor Prevention Act (with a 428-1 vote) that bans the importation of goods produced using forced labor by Uyghers and other minority Muslim populations in the Xinjiang Autonomous Region of China. A similar measure has already passed in the Senate.

The bill bans the entry of goods manufactured or produced in Xinjiang unless Customs and Border Protection (1) determines that the goods were not manufactured by convict labor, forced labor, or indentured labor under penal sanctions; and (2) reports such a determination to Congress and to the public.

It also requires that the President periodically report to Congress a list of foreign entities and individuals knowingly facilitating (1) the forced labor of Uyghurs, Kazakhs, Kyrgyz, and members of other Muslim minority groups in Xinjiang; and (2) efforts to contravene U.S. laws regarding the importation of forced labor goods from Xinjiang. The President shall impose property-blocking sanctions on the listed individuals and entities and impose visa-blocking sanctions on the listed individuals.

The bill includes a provision that requires securities issuers to file annual or quarterly reports with the Securities Exchange Commission that shall disclose certain information related to Xinjiang, including instances where the issuer knowingly (1) engaged in activities with an entity helping to create mass surveillance systems in Xinjiang, (2) engaged in activities with an entity running or building detention facilities for Muslim minority groups in Xinjiang, or (3) conducted a transaction with any person sanctioned for the detention or abuse of Uyghurs or other Muslim minority groups in Xinjiang. After being notified of such a disclosure, the President shall determine whether to investigate if sanctions or criminal charges are warranted.

 

In ruling NY N322142 (October 25, 2021), Customs and Border Protection (CBP) discussed the classification of an artificial pumpkin decoration from China. The product, described as the “Hvst [sic] Flora Wooden Decor,” consists of three fabric pumpkins surrounded by green artificial foliage. The foliage itself contains leaves and stems of plastic. The pumpkins and foliage all come assembled inside of a medium density fiberboard (MDF) wooden wagon – which has the words “Gather Together” across the side and includes a metal pull handle. In addition, the decorations come in two versions. In the first version, the wagon is gray in color, the larger pumpkin in the middle is orange, and the surrounding two smaller pumpkins are in white. Alternatively, in the second version the wagon is orange, the large middle pumpkin is a darker share of blue-green, and the two surrounding smaller pumpkins are orange. In both versions the pumpkins are made of a polyester textile fabric with a polyethylene stem. The stems are glued onto the fabric pumpkin bases.

In their analysis, CBP found that the artificial pumpkins impart the good’s essential character, per General Rule of Interpretation (GRI) 3(b). In addition, based on the stems being glued onto the man-made fabric bodies, CBP noted that the product falls within heading 6702, and that the polyester fabric imparts the essential character to the pumpkins, per GRI 6 and 3(b). As such, CBP determined that the applicable subheading of the artificial pumpkin decoration is 6702.90.3500, Harmonized Tariff Schedule of the United States (HTSUS), which provides for “[a]rtificial flowers, foliage and fruit and parts thereof; articles made of artificial flowers, foliage or fruit: [o]f other materials: [o]ther: [o]f man-made fibers.” The general rate of duty is 9% ad valorem.

 

On November 15, 2021, President Joe Biden signed into law the Infrastructure Investment and Jobs Act (IIJA), which will lead to roughly $500 billion in new spending in the span of five years on new infrastructure projects. Notably, the IIJA also includes a revenue provision that revives excises taxes on chemicals under Sections 4661, 4662, 4671, and 4672 of the Internal Revenue Code (IRC) of 1986. These excises taxes were originally established in 1980 by the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), but later expired in 1995.

Section 80201 of the IIJA amends Section 4661 of the IRC of 1986 to reestablish the chemical superfund excise taxes for 42 different chemicals. These excise taxes range from $0.48 per ton to $9.74 per ton – double of what they were before under the CERCLA. The sales taxes, which will be effective starting July 1, 2022, will apply to all manufactures, producers, or importers of said items that are sold for consumption, use, or warehousing in the U.S. Notably, under Section 4662 of the IRC, there are also several tax exceptions for the taxes assessed on the 42 listed chemicals. A complete list of the 42 chemicals as well as their corresponding tax amount per ton, applicable HTSUS codes, and HTSUS descriptions is provided below.

In addition, Section 80201 of the IIJA also amends Sections 4671 and 4672 of the IRC, which impose a tax on the sale and/or use of certain imported chemical substances. Historically, there were 50 taxable substances; however, the Secretary of the Treasury may publish an updated list of the taxable substances under Section 4672 of the IRC by January 1, 2022.

Further, the Act also modifies the definition of a taxable substance under Section 4671 by lowering the percentage threshold for the chemical to qualify as a taxable substance. While a chemical needed to constitute more than 50% weight (or 50% value) of the materials used in the product to qualify as a taxable substance, the Act now lowers the threshold to 20%. Should an importer fail to report to the IRS the data needed to determine the tax on their chemical in a timely manner, the tax levied would be 10% of the appraised value of the taxable substance rather than the tax rate set under Section 4661.

The Infrastructure Investment and Jobs Act is available here.

For more information on chemical excise taxes and the IIJA, contact our team and see previous posts below.

Chemical Name Listed in Infrastructure Investment and Jobs Act Tax amount per ton HTSUS HTSUS Description
Acetylene $9.74 2901.29.5000 Acyclic hydrocarbons: Unsaturated: Other: Other
Benzene  $9.74 2707.10.0000 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the nonaromatic constituents: Benzene
2902.20.0000 Organic chemical: Cyclic hydrocarbons: Benzene
Butane  $9.74 2711.13.0010 Petroleum gases and other gaseous hydrocarbons: Liquefied: Butanes: Butanes with a purity of 90 liquid volume percent or more, but less than 95 liquid volume percent in liquefied state
2711.13.0020 Petroleum gases and other gaseous hydrocarbons: Liquefied: Butanes: Other
2711.29.0020 Petroleum gases and other gaseous hydrocarbons: In gaseous state: Butanes: Butanes with a purity of 90 liquid volume percent or more, but less than 95 liquid volume percent
    2711.29.0025 Petroleum gases and other gaseous hydrocarbons: In gaseous state: Butanes: Other
Butylene  $9.74 2711.14.0030 Petroleum gases and other gaseous hydrocarbons: Liquefied: Ethylene, propylene, butylene and butadiene: Butylene
Butadiene  $9.74 2711.14.0040 Petroleum gases and other gaseous hydrocarbons: Liquefied: Ethylene, propylene, butylene and butadiene: Butadiene
Ethylene $9.74 2711.14.0010 Petroleum gases and other gaseous hydrocarbons: Liquefied: Ethylene, propylene, butylene and butadiene: Ethylene
Methane  $6.88 2711.19.0020 Petroleum gases and other gaseous hydrocarbons: Liquefied: Other: Other
2711.29.0060 Petroleum gases and other gaseous hydrocarbons: In gaseous state: Other: Other
Naphthalene $9.74 2707.40.0000 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the nonaromatic constituents: Naphthalene
Propylene $9.74 2711.14.0020 Petroleum gases and other gaseous hydrocarbons: Liquefied: Ethylene, propylene, butylene and butadiene: Propylene
2901.22.0000 Acyclic hydrocarbons: Unsaturated: Propene (Propylene)
Toluene $9.74 2707.20.0000 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the nonaromatic constituents: Toluene
2902.30.0000 Cyclic hydrocarbons: Toluene
Xylene $9.74 2707.30.0010 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the nonaromatic constituents: Xylenes: m-Xylene
2707.30.0020 Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the nonaromatic constituents: Xylenes: o-Xylene
2707.30.0030: Oils and other products of the distillation of high temperature coal tar; similar products in which the weight of the aromatic constituents exceeds that of the nonaromatic constituents: Xylenes: p-Xylene
2902.41.0000 Cyclic hydrocarbons: Xylenes: o-Xylene
2902.42.0000 Cyclic hydrocarbons: Xylenes: m-Xylene
2902.43.0000 Cyclic hydrocarbons: Xylenes: p-Xylene
2902.44.0000 Cyclic hydrocarbons: Xylenes: Mixed xylene isomers
Ammonia  $5.28 2814.10.0000 Ammonia, anhydrous or in aqueous solution: Anhydrous ammonia
2814.20.0000 Ammonia, anhydrous or in aqueous solution: Ammonia in aqueous solution
Antimony  $8.90 2825.80.0000 Antimony oxides
Antimony trioxide  $7.50 2825.80.0000 Antimony oxides
Arsenic  $8.90 2804.80.0000 Arsenic
2811.19.1000 Other inorganic acids and other inorganic oxygen compounds of nonmetals: Other inorganic acid: Other: Arsenic acid
Arsenic trioxide  $6.82 2811.29.1000 Other inorganic acids and other inorganic oxygen compounds of nonmetals: Other inorganic acids: Other: Arsenic trioxide
Barium sulfide  $4.60 2833.27.0000 Sulfates; alums; peroxosulfates (persulfates): Other sulfates: Of barium
Bromine  $8.90 2801.30.2000 Fluorine, chlorine, bromine and iodine: Fluorine; bromine: Bromine
Cadmium  $8.90 2825.90.7500 Hydrazine and hydroxylamine and their inorganic salts; other inorganic bases; other metal oxides, hydroxides and peroxides: Other: Cadmium oxide
2830.90.2000 Sulfides; polysulfides, whether or not chemically defined: Other: Cadmium sulfide
Chlorine  $5.40 2801.10.0000 Fluorine, chlorine, bromine and iodine: Chlorine
Chromium  $8.90 2833.29.4000 Sulfates; alums; peroxosulfates (persulfates): Other Sulfates: Other: Of Chromium
2849.90.2000 Carbides, whether or not chemically defined: Other: Of chromium
Chromite  $3.04 6815.91.0070 Articles of stone or of other mineral substances (including carbon fibers, articles of carbon fibers and articles of peat), not elsewhere specified or included: Other articles: Other articles: Other
Potassium dichromate  $3.38 2841.50.1000 Salts of oxometallic or peroxometallic acids: Other chromates and dichromates; peroxochromates: Potassium dichromate
Sodium dichromate  $3.74 2841.30.0000 Salts of oxometallic or peroxometallic acids: Sodium dichromate
Cobalt  $8.90 2822.00.0000 Cobalt oxides and hydroxides; commercial cobalt oxides
2827.39.6000 Chlorides, chloride oxides and chloride hydroxides; bromides and bromide oxides; iodides and iodide oxides: Other chlorides: Other: Cobalt
Cupric sulfate (aka copper sulfate)  $3.74 2833.25.0000 Sulfates; alums; peroxosulfates (persulfates): Other sulfates: Of copper
Cupric oxide  $7.18 2825.50.1000 Hydrazine and hydroxylamine and their inorganic salts; other inorganic bases; other metal oxides, hydroxides and peroxides: Copper oxides and hydroxides: Cupric oxide
Cuprous oxide  $7.94 2825.50.2000 Hydrazine and hydroxylamine and their inorganic salts; other inorganic bases; other metal oxides, hydroxides and peroxides: Copper oxides and hydroxides: Cuprous oxide
Hydrochloric acid  $0.58 2806.10.0000 Hydrogen chloride (Hydrochloric acid); chlorosulfuric acid: Hydrogen chloride (Hydrochloric acid)
Hydrogen fluoride  $8.46 2811.11.0000 Other inorganic acids and other inorganic oxygen compounds of nonmetals: Other inorganic acids: Hydrogen fluoride (Hydrofluoric acid)
Lead oxide  $8.28 2824.10.0000 Lead oxides; red lead and orange lead: Lead monoxide (litharge, massicot)
2824.90.1000 Lead oxides; red lead and orange lead: Other: Lead suboxide (leady litharge)
2824.90.2000 Lead oxides; red lead and orange lead: Other: Red lead and orange lead
2824.90.5000 Lead oxides; red lead and orange lead: Other: Other
Mercury  $8.90 2805.40.0000 Alkali or alkaline-earth metals; rare-earth metals, scandium and yttrium, whether or not intermixed or interalloyed; mercury: Mercury
Nickel  $8.90 2825.40.0000 Hydrazine and hydroxylamine and their inorganic salts; other inorganic bases; other metal oxides, hydroxides and peroxides: Nickel oxides and hydroxides
2827.35.0000 Chlorides, chloride oxides and chloride hydroxides; bromides and bromide oxides; iodides and iodide oxides: Other chlorides: Of nickel
2833.24.0000 Sulfates; alums; peroxosulfates (persulfates): Other sulfates: Of nickel
Phosphorus  $8.90 2804.70.0000 Hydrogen, rare gases and other nonmetals: Phosphorus
Stannous chloride (aka tin (II) chloride)  $5.70 2827.39.2500 Chlorides, chloride oxides and chloride hydroxides; bromides and bromide oxides; iodides and iodide oxides: Of Tin
Stannic chloride (aka tin (IV) chloride or tin tetrachloride)  $4.24 2827.39.2500 Chlorides, chloride oxides and chloride hydroxides; bromides and bromide oxides; iodides and iodide oxides: Of Tin
Zinc chloride  $4.44 2827.39.6500 Chlorides, chloride oxides and chloride hydroxides; bromides and bromide oxides; iodides and iodide oxides: Other chlorides: Other: Of Zinc
Zinc sulfate  $3.80 2833.29.4500 Sulfates; alums; peroxosulfates (persulfates): Other Sulfates: Other: Of Zinc
Potassium hydroxide  $0.44 2815.20.0050 Sodium hydroxide (Caustic soda); potassium hydroxide (Caustic potash); peroxides of sodium or potassium: Potassium hydroxide (Caustic potash): In solid form
2815.20.0090 Sodium hydroxide (Caustic soda); potassium hydroxide (Caustic potash); peroxides of sodium or potassium: Potassium hydroxide (Caustic potash): Other
Sodium hydroxide  $0.56 2815.11.000 Sodium hydroxide (Caustic soda); potassium hydroxide (Caustic potash); peroxides of sodium or potassium: Sodium hydroxide (Caustic soda): Solid
2815.12.0000 Sodium hydroxide (Caustic soda); potassium hydroxide (Caustic potash); peroxides of sodium or potassium: Sodium hydroxide (Caustic soda): In aqueous solution (Soda lye or liquid soda)
Sulfuric acid  $0.52 2807.00.0000 Sulfuric acid; oleum
Nitric acid  $0.48 2808.00.0010 Nitric acid; sulfonitric acids: Nitric acid

 

 

A recent survey of top decision-makers by Crowell & Moring finds that nearly 80% of responding companies have identified and adopted environmental performance goals beyond what regulations require. Fewer than half of those surveyed measure their company’s performance against those goals—and in some cases are experiencing challenges implementing them.

The survey of 225 respondents, including in-house counsel and compliance, ESG, and sustainability professionals, is detailed in a new report, “ESG Survey: Environmental Performance and the Stakes for Your Business.”

The report finds that 44% of respondents say their organizations are measuring their carbon footprint, and 13% are measuring their environmental impact on ethnically and racially diverse communities on an ongoing basis. Both are likely to be key areas of focus of the current U.S. administration’s regulatory and enforcement activities.

The potential gap between setting environmental performance goals and measuring progress against them may not only hinder a company’s efforts, but can expose a company to increased risks from a rising tide of regulatory enforcement and litigation from advocacy groups, consumers, and investors. And given the intensifying competitive pressure to advance effective ESG programs, such a gap may also cause companies to fall behind their industry peers.

Other top findings in the report include:

  • In-house lawyers less bullish: Nearly 90% of ESG and sustainability professionals surveyed said their organizations have identified and adopted environmental performance goals beyond required compliance, compared to 49% of in-house counsel.
  • Customers drive change: Half of the survey respondents said that brand image and reputation among customers are driving their companies to adopt environmental goals.
  • Companies are talking: From advertisements to PR, companies are sharing environmental performance data beyond required disclosures, but in-house legal departments may not always be aware of it.
  • A majority of companies do not assess their carbon footprint: Among respondents, 56% said their companies do not measure their carbon footprint. Of those that do, less than half measure Scope 3 emissions, which are indirect and often emerge from suppliers.
  • Measurement questions persist: Less than half of respondents say their companies are measuring in key areas, such as product recycling, water use, and electronic waste.
  • Leadership on board: Most respondents (82%) feel their boards of directors are adequately focused on the environment.

Find the full report at Crowell & Moring’s ESG Resource Center. And register for the webinar “ESG Survey: Environmental Performance and the Stakes for Your Business,” to be held December 9 at 12:30 pm ET.

In ruling NY N321763 (October 21, 2021), Customs and Border Protection (CBP) discussed the classification and country of origin of . The merchandise is described as carbonated vodka sodas – specifically Absolute Vodka Lime & Cucumber; Absolut Vodka Soda Grapefruit & Rosemary; and Absolut Soda Raspberry & Lemongrass. The vodka sodas are ready to drink products in cans that do not need to be mixed with any other beverage prior to consumption. They contain water, vodka, natural extracts and essences, and carbon dioxide. The production of the vodka itself begins in Sweden with an alcohol by volume of 60%. It is then exported to Canada in bulk, where the bulk vodka is diluted with water, natural extracts and essences, and carbon dioxide in order to form the bulk finished product. At this portion, the alcohol by volume content is of approximately 5%. The bulk finished product then undergoes a canning process whereby it is filtered and sealed in 35 ml cans. The cans are pasteurized to form the vodka sodas ready for export to the U.S.

Beginning with its classification, CBP looked towards the Harmonized Commodity Description and Coding System Explanatory Notes (EN) – which serves as the official interpretation of the Harmonized System at the international level. CBP noted that the EN to heading 2208 provides the following:

(A)  Spirits produced by distilling wine, cider or other fermented beverages or fermented grain or other vegetable products, without adding flavouring; they retain, wholly or partly, the secondary constituents (esters, aldehydes, acids, higher alcohols, etc.) which give the spirits their peculiar individual flavours and aromas.

Because flavoring was added to the vodka sodas in Canada, pursuant to the language of the EN, the vodka sodas cannot be classified as “Spirits.” As such, CBP determined that the applicable subheading for the three vodka soda products is 2208.90.8000, Harmonized Tariff System of the United States (HTSUS), which provides for “Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80 percent vol.; spirits, liqueurs and other spirituous beverages: Other: Other: Other.” The general rate of duty is 21.1 cents per liter.

Regarding the country of origin marking, CBP referred to sections 102.1 through 102.18 and 102.20 of the USMCA, which determine the country of origin for marking purposes with respect to goods imported from Canada and Mexico. Section 102.11 provides a hierarchy for determining the country of origin for marking purposes, which establishes origin in the country in which:

  • (a)(1) The good is wholly obtained or produced;
  • (a)(2) The good is produced exclusively from domestic materials; or
  • (a)(3) Each foreign material incorporated in that good undergoes an applicable change in tariff classification set out in section 102.20 and satisfies any other applicable requirements of that section, and all other requirements of these rules are satisfied.

CBP found that Sections 102.11(a)(1) and 102.11(a)(2) did not apply to the vodka sodas because neither were wholly obtained or produced exclusively from “domestic” – in this case Canadian – materials. As such, CBP turned to Section 102.11(a)(3) and found that the tariff shift rule was met. This was due to the fact that the foreign materials – the vodka and the natural extracts and essences – are classified under subheadings 2208.60 and 3302.10, respectively. As such, CBP determined that the country of origin for marking purposes of the vodka sodas was Canada.

In ruling NY N322379 (October 25, 2021), Customs and Border Protection (CBP) discussed the classification of decorative LED lanterns from China. There are four distinct decorative lanterns. The first lantern measures approximately 13” in diameter and is 22” tall. It is constructed of thin rattan rods that form an inner core and crisscross around the outside to form an open-work lattice that allows light to shine through. The lantern is rounded towards the middle and tapers towards the opening at the top. The second lantern measures approximately 18” tall and is also constructed of thin rattan rods that form a birdcage-like appearance. The rods are held in place by an iron frame. In addition, this lantern also features a metal handle. A plastic, battery-operated light is positioned in the base of both of these first two lanterns.

The third lantern comes with an inner structure made of Paulownia woods and an outer lattice work of interwoven Poplar strips. This lantern features a jute handle as well as a plastic, battery operated light positioned at the bottom of the lantern. Alternatively, the fourth lantern is constructed of Paulownia wood with an outer lattice work of interwoven Paulownia strips. It comes with a rope handle, and, like the third lantern, has a plastic, battery operated light positioned at the bottom. Batteries are not included in any of the four lanterns.

In their analysis, CBP determined that the lanterns do not meet the definition of lamps or light fixture since they are used for a decorative effect. As such, decorations are excluded from Heading 9405 by Note 1(1) of Chapter 94. Next, CBP noted that the lanterns meet the definition of a composite good – within the meaning of General Rule of Interpretation (GRI) 3(b) – due to their multiple materials. The agency notes that GRI 3(b) states, in pertinent part:

(b) Mixtures, composite goods consisting of 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.

Establishing that the lanterns are composite goods, CBP turned to define what gives them their essential character. CBP determined that the essential character of the lanterns is imparted by the external interwoven elements – in this case the rattan rods for the first two lanterns and the wooden strips for the second two lanterns. Notably, while both the rattan rods and the Poplar and Paulownia wooden strips meet the definition of plaiting material in Chapter 46, Harmonized Tariff Schedule of the United States (HTSUS), they note that the rattan rods are considered wickerwork due to their round cross-section. However, the Poplar strips and Paulownia pieces are not. As such, for the first two rattan lanterns, CBP determined that the applicable subheading is 4602.12.3500, HTSUS, which provides for “Basketwork, wickerwork and other articles, made directly to shape from plaiting materials or made up from articles of heading 4601:  Of vegetable materials:  Of rattan:  Other:  Wickerwork.” The rate of duty is free. Alternatively, CBP determined that the applicable subheading for the Poplar and Paulownia lanterns is 4602.19.4500, which provides for “Basketwork, wickerwork and other articles, made directly to shape from plaiting materials or made up from articles of heading 4601:  Of vegetable materials:  Other:  Other:  Of willow or wood:  Other.” The rate of duty is 6.6% ad valorem.

Additionally, pursuant to U.S. Note 20 to Subchapter III, Chapter 99, HTSUS, Chinese products under subheadings 4602.12.3500 and 4602.19.4500, HTSUS, unless specifically excluded, are subject to an additional 25% ad valorem duty rate. As such, the chapter subheading 9903.88.03 must be reported in addition to subheadings 4602.12.3500 and 4602.19.4500, HTSUS.