New guidance has been issued for US importers who are looking to save costs by classifying clothes hangers separately from apparel, with implementing a programme to trace and document the origin of the hangers among the advice.
Classifying hangers independently from clothing can offer cost savings but importers should use caution in utilising this method, says Elise Shibles of international trade law firm Sandler Travis & Rosenberg.
US Customs and Border Protection has ruled that some plastic hangers can be classified separately from garments under HTSUS 3923.90.0080, which carries a 3% duty rate. This is typically much lower than the duty rate for less substantial and less expensive hangers that are classified as packaging material and thus subject to the same duty rate as the garments they accompany, she explains.
The duty rate for these sturdier hangers imported from China is currently 13%, due to the Section 301 additional tariff imposed in late 2018, and will increase to 28% on 2 March if the US and China are unable to reach agreement on certain trade issues by that date. However, even a 28% duty rate may be lower than the rates applicable to hangers classified with their associated garments, Shibles adds.
As a result, Shibles says, importers may have a financial incentive to classify hangers separate from garments. However, she warns those doing so should immediately take the following steps:
- Do not assume the hangers are of the same origin as the garments; instead, implement a programme to trace and document the origin of the hangers. Importing garments from Asia while asserting a non-China origin for the hangers is likely to raise the risk of review by CBP to ensure any applicable Section 301 tariff is being paid.
- Perform a cost/benefit analysis on the duty rate for the garments, the duty rate for the hangers, and the cost of utilising different types of hangers to reduce duty impact. However, do not simply change your practice and classify the sturdier hangers with the garments without actually changing to the less substantial type of hangers.
Shibles adds using sturdy hangers and classifying them separately from apparel can still offer cost savings despite the Section 301 tariff if strategically implemented.
“Importers who are not currently taking advantage of this opportunity should consider doing so,” she says.