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.

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.