Importer Sues Customs, Claims Rate of Duty Is Too Low!

"The court remains unaware of any other suit brought against the government on the claim that the plaintiff or its property should be assessed a higher rate of tax or duty," wrote R. Kenton Musgrave, Senior Judge, U.S. Court of International Trade in the an opinion (Slip Op. 14-22 Best Key Textiles Co., Ltd., Plaintiff, v. Unites States, Defendant), dated February 25, 2014.

Plaintiff Best Key Textiles argued that U.S. Customs and Border Protection acted in an arbitrary and capricious manner when it revoked a Binding Ruling Letter relating to a certain yarn which had been requested by Best Key Textiles. The original New York Ruling Letter (NY N1876001) dated October 25, 2011, stated that a yarn, produced from polyester chips melted into a slurry to which aluminum or zinc powder and titanium dioxide is added, and subsequently "fired" through a spinneret to create yarn, is properly classified under heading 5605 as "metalized" yarn dutiable at 13.2%. The Headquarters Ruling Letter (HQ H202560) dated September 17, 2013, revoked the 2011 letter and stated that the yarn is properly classified as a polyester yarn dutiable at 8%. The court denied plaintiff's motion (CLICK HERE FOR RULING.

So, why would Best Key Textiles go to court (in fact, this is not their first attempt at overturning the Customs revocation in court) to obtain a classification that results in a higher rate of duty? The answer lies in the complexity of the tens of thousand of tariff classification and how the classification of a component of an article can affect the classification of the article itself. In this case, Best Key Textiles' interest appears to lie not in the classification of the yarn, but, rather, in the classification of imported garments made from the yarn. HQ H202560 stands and the yarn is classified as polyester, making imported garments made of that yarn dutiable at rates as high as 32%. Had Best Key Textiles succeeded in overturning that revocation, thus restoring the earlier ruling that the yarn is classified as "metalized" yarn, imported garments made of that yarn would be dutiable at rates around 6%.