Members of international trade community know that harmonized tariff schedule is construed according to the principles of General Rules of Interpretation (GRIs). GRI 1 states that “classification shall be determined according to the terms of the headings and any relative section or chapter notes.” (emphasis supplied). In recent Customs Bulletin, CBP decided to apply “relative” requirement loosely. The departure from “relative” requirement under GRI 1 took place in the context of reclassification of polyurethane coated gloves. Specifically, CBP attempted to reconcile the differences between gloves provided under Chapter 39 and Chapter 61:
- 3926.20.10 provides for “other articles of plastics …: … clothing accessories (including gloves …): … gloves: …
- 6116.10.55 provides for “gloves … knitted or crocheted: Impregnated, coated or covered with plastics …
Finding that “terms of the heading” do not provide adequate explanation, CBP turned to other legally binding instrument under GRI 1: section and chapter notes. CBP turned to Legal Note 1 to Section XI (the Section for Chapter 61) and Note 2 to Chapter 39. This was a legitimate inquiry because these section and chapter notes are all relative to the headings that were analyzed. But, CBP came across difficulty in reconciling these provisions because one provision stated that it does not cover goods of other provision, and vice versa. See HQ H220278 (2013) (Chapter 39 does not cover goods of Section XI under Note 2 to the chapter; Section XI does not cover plastic articles of Chapter 39 under Legal Note 1 to the section). This means that section notes, chapter notes, as well as, heading notes are not very helpful in reconciling the differences. In other words, GRI 1 does not seem to be very helpful.
Normally, when GRI 1 is not helpful, one should go to other GRIs. For example, GRI 3 would be useful for products that are classifiable under two or more headings. Yet, in HQ H220278 CBP insisted on GRI 1 somehow omitting “relative” clause. Id. (stating “[t]hus, the classification of the instant gloves, which are knit gloves coated, covered or dipped in plastic, is governed, at GRI 1, by the legal notes to Chapters 39, 59 and
Section XI.) Other route would be the inquiry into common and commercial meaning of the terms. See Sabritas v. US, 998 F. Supp. 1123, 1126-1127 (CIT, 1998) (“The definition and scope of terms in a provision of the HTSUS is to be determined by the wording of the statute and any relative section or chapter notes. [citation omitted]. However, if a tariff term is not clearly defined by the HTSUS, and if legislative history is not determinative of its meaning, its correct meaning is resolved by ascertaining its common and commercial meaning. [citation omitted]”). But CBP decided to reach out to Note 2 to Chapter 59 instead. The product in question was not classifiable under Chapter 59, making the chapter notes in Chapter 59 inapplicable. Since the product is not classifiable under Chapter 59, the Chapter 59 notes are not relative. If Chapter 59 notes are not relative, the classification analysis is outside of General Rules of Interpretation 1. The CBP analysis, therefore, begs the question as to why did CBP applied Note 2 to Chapter 59.
Fortunately, CBP attempted to answer this question: “Although these notes would appear to conflict, Note 2 to Chapter 59, HTSUS, clarifies the scope of Chapter 39.” HQ H220278 (2013) (emphasis supplied). “Clarification” attempt placed CBP on a path of crafting a new doctrine that may have erosive effect on the GRI 1 requirement that only “relative” section and chapter notes are legally binding. A new doctrinal path announced by CBP in HQ H220278 (2013) can be stated as follows: Whenever competing terms of the heading do not provide sufficient information to determine which term is appropriate, and when section and chapter notes for these headings are in conflict, one may look into chapter and heading notes that are not relative in order to seek clarification for the relative terms.