The Court of International Trade today issued a decision holding that various types of wearing apparel, bearing Christmas or other holiday designs, are classifiable under Harmonized Tariff Schedule (HTS) Heading 9505 as "festive articles", and entitled to duty free treatment. The decision holds out the possibility that importers may be able to realize some significant duty savings on holiday motif apparel — at least if the apparel is imported prior to January 1, 2007.

     In Michael Simon Designs Inc. v. United States, Slip Op. 06-128, the plaintiff imported various styles of sweaters which were classified under the appropriate wearing apparel provisions, and subjected to duty accordingly. The importer asserted that, to the extent the sweaters bore motifs which were closely associated with particular holidays, they qualified to enter the United States free of duty under HTS Heading 9505. The government argued that the sweaters did not meet the requirements for classification as "festive" articles.

Effect of Modification to Explanatory Notes

      The government argued that the recent change to the Explanatory Notes to Harmonized System Heading 9505, which indicated that goods having a utilitarian purpose should not be classified as festive articles, should govern the classification of these goods. The government argued that the EN amendment should enhance the "deference" which the Court should give to the government's classification position.

     The Court rejected this argument, holding that the Explanatory Notes have no binding effect; furthermore, they provided no basis for deference to Customs' position. The Court held that the classification of these products was governed by binding United States judicial precedent holding that utilitarian articles could be festive, as well as the provisions of the HTS headings in effect as of the dates the goods were imported.

Which Apparel Motifs Are "Festive"?

     Turning to the specific merchandise at bar, Customs held that various sweaters featuring motifs which were clearly associated with a particular holiday, which were marketed and sold at that holiday, and whose use outside the holiday season would be considered "aberrant", should be classified as festive articles of HTS Heading 9505.

     The Court found sweaters with the following motifs to be classifiable as "festive"-

(1) "Silent Night" sweaters with beaded Nativity scenes;

(2) "Silent night" shells with beaded "starry night" scenes;

(3) Sweaters with "angel" motifs;

(4) Halloween sweaters with "jack-o-lanterns", bat, candy corn and black cat motifs;

(5) Halloween sweaters with witch, devil, jack-o-lantern, candy corn and spider web motifs, identified as "Trick or Treat" sweaters;

(6) "Christmas Tree" motif sweaters;

(7) A "spider" motif sweater, shown by the evidence to be closely associated with Halloween and sold exclusively during the Halloween season;

(8) "Bat" motif sweaters shown to be exclusively sold during Halloween; and

(9) "Ghost" motif sweaters shown to be primarily sold and used during Halloween.

     The Court found that certain styles having a "black cat" motif could not be classified as festive articles, because the cat motifs were not sufficiently associated only with Halloween, and were not intrinsically used or sold only at Halloween. The Court found that these goods were not potentially classifiable as "festive" goods.

     The Court found that the sweaters were all also classifiable prima facie as wearing apparel, but held that the Explanatory Notes to the HTS precluded their classification as apparel, if they were also classifiable as festive goods.

Likely Impact of Decision

     While we expect the government to appeal the decision, we think it is legally correct. Importers of similar merchandise should be able to secure duty savings on goods of this type imported at least through the end of 2006. Effective January 1, 2007 new changes to the Harmonized System nomenclature are scheduled to take effect and these will change the tariff terms, making festive apparel no longer classified in HTS Heading 9505.

     Another significant aspect of this decision is to confirm that the recent amendments to the Explanatory Notes do not affect the classification of festive goods imported under the current language of the HTS. As you will recall, Customs had previously "limited" the Federal Circuit's Park B. Smith decision on the basis of the EN changes. The Michael Simon Designs case indicates that there was no legal basis for such limitation.

      Importers of "festive" motif apparel should be able to recovery duties with respect to past entries. As you know, protests must be filed within 180 days after an entry is liquidated. Customs generally liquidates entries about 11-12 months after the date of importation. This means that, as a practical matter, importers should be able to file protests with respect to goods imported during the past 18 months.

     Please contact us at (212) 635-2730 OR (202) 861-2959 if we can furnish any additional information or assistance with regard to this interesting new decision. Best regards.

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