Classifying clothes hangers separately from apparel can offer cost savings but importers should use caution in utilizing this method, according to Sandler, Travis & Rosenberg’s Elise Shibles.
U.S. Customs and Border Protection has ruled that some plastic hangers can be classified separately from garments under HTSUS 3923.90.0080, which carries a three percent 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.
The duty rate for these sturdier hangers imported from China is currently 13 percent, due to the Section 301 additional tariff imposed in late 2018, and will increase to 28 percent on March 2 if the U.S. and China are unable to reach agreement on certain trade issues by that date. However, even a 28 percent duty rate may be lower than the rates applicable to hangers classified with their associated garments.
As a result, Shibles says, importers may have a financial incentive to classify hangers separate from garments. However, 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 program 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 utilizing 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 says utilizing 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.
For more information, please contact Elise Shibles at (415) 490-1403.