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Court Rules on Classification of Cosmetic Sets, Calls CBP’s Previous Analyses “Flawed”

Friday, January 06, 2012
Sandler, Travis & Rosenberg Trade Report

The Court of International Trade ruled in Estee Lauder Inc. v. U.S. Jan. 3 that certain cosmetic sets are “put up for retail sale” and properly classified under HTSUS 3304.20.00 (duty-free). U.S. Customs and Border Protection had classified the goods in the set separately under several subheadings and argued that if they are classifiable as a set they should be classified under HTSUS 4202.12.20 because the cosmetic cases give the sets their essential character.

Classification of Cosmetic Sets. The cosmetic sets at issue contain lipstick, lip pencil, lip gloss, eye pencil, mascara, eye shadow, nail lacquer, blush, a cosmetic case, a makeup brush case, cosmetic brushes and an applicator. The cosmetic case contains all these items except the brushes, which are packed in the makeup brush case. Both cases are packed in a separate carton. The cosmetic case contains a “vacform” plastic insert into which the makeup products are fitted to protect them during shipment and allow them to be self-displayed at retail. The cosmetic case is significantly larger than the cosmetics it contains and conceivably could carry anything that is smaller than the case itself. It is suited for use on a flat surface and is not a piece of luggage. The cosmetics are either promotional sizes or are contained in promotional packaging.

The CIT finds that the cosmetic sets are “put up . . . for retail sale” as those terms are used in General Rule of Interpretation 3(b) because the items packaged in the set meet the particular need of putting on makeup. In addition, the makeup contained in the sets gives them their essential character. The court concludes that the sets are properly classified as eye makeup preparations under HTSUS 3304.20.00 because while the eye and lip makeup items predominate in the sets by number, entry papers show that the eye makeup items cost significantly more than the lip makeup items.

Previous CBP Analyses “Flawed,” Court Says. The court states that because the essential character of the sets is given by the makeup components, the fact that the sets are imported in cases that could be separately classifiable does not prevent the classification of the sets as such. CBP had argued that the cosmetic cases lack the physical characteristics necessary to allow them to interact with the cosmetic components to carry out the specific activity of applying makeup and that the goods are not a set because there are no loops or compartments to hold and organize the items nor a built-in mirror to use for the purpose of applying makeup. However, the CIT states that this analysis conflates the GRI 3(b) requirements for composite goods consisting of different materials or components (i.e., whether the items are mutually complementary or adapted to one another) with the requirements for the GRI 3(b) retail sets analysis (i.e., whether the goods meet a particular need or carry out a specific activity). Unfortunately, the court adds, this “fatally flawed analysis” has been “bootstrapped into a line of rulings that rely largely on Customs’ own reasoning but little on the statute or Explanatory Notes.”

The CIT also rejects CBP’s argument that the items at issue cannot be classified as a GRI 3(b) set because the cases are too large to closely carry all the items. CBP’s informed compliance publication on sets concludes that a container must be specifically designed to hold and intended to be used together with the items it contains to form a GRI 3(b) set, but the court states that these requirements are not based on the statutory text and instead appear to be derived from CBP rulings relying on the flawed “conflation” analysis described above. The court adds that CBP’s restriction on the size of set containers to only those that are “not appreciably larger” than their contents “lacks a rational basis in the language of the statute or the Explanatory Notes” and that CBP has provided no practical guidance on the definition of “appreciably.” These restrictive interpretations have “resulted in the arbitrary application of what could (or should) be a relatively simple rule.”

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