Changes to Harmonized Tariff Schedule

I.    Changes to Harmonized Tariff Schedule of the United States for Recreational Performance Outerwear and Performance Footwear

The trade legislation that was recently signed into law by the President contains changes to the Harmonized Tariff Schedule of the United States for certain performance outerwear and footwear products.

Specifically, the legislation established new tariff classifications for recreational performance outerwear. The term “recreational performance outerwear” is defined to include trousers (such as ski or snowboard pants), coveralls and bib overalls, jackets, and windbreakers, that are water resistant and/or treated with plastics, have critically sealed seams, and have five or more of eleven listed features (such as insulation, pockets with certain closures, venting, weatherproof closure, or odor control technology). The specific classifications and applicable duty rates vary depending on fabric construction and other criteria. We understand that these classifications were established to take advantage of future duty reductions.

The changes will go into effect on December 26, 2015 and will apply to imports on or after that date. Importers of recreational performance outerwear should work with their customs broker or counsel to determine the new classifications for their products well in advance of that date.

In addition, the legislation established new tariff classifications and a new general rate of duty for certain protective active footwear. The term “protective active footwear” is defined to mean footwear valued over $24 per pair, designed for outdoor activities (such as hiking, trekking, running, or trail running shoes), that provide water protection through the use of a coated or laminated fabric (such as a GORE-TEX fabric).

The new classifications provide for a general rate of duty of 20 percent, much lower than the previously applicable 37.5 percent rate for a category that also included completely unrelated merchandise such as oil rigging and fire-fighting boots. These changes became effective on July 14, 2015 and apply to imports on or after that date.

II.    Reauthorization and Extension of Trade Preference Programs

The trade legislation has extended the African Growth and Opportunity Act (AGOA) and a similar program for Haiti (the so-called HOPE Act) through September 30, 2025. AGOA provides for duty-free treatment of qualifying imports from 49 sub-Saharan countries. The HOPE Act provides for duty-free treatment of qualifying textile and apparel products from Haiti.

In addition, the legislation reauthorized through December 31, 2017, and with retroactive application, the Generalized System of Preferences (GSP) that had expired on July 31, 2013. The GSP program provides for duty-free treatment of qualifying imports from a large number of developing countries.

Retroactive GSP benefits will only be applicable to goods and countries that are GSP-eligible as of July 29, 2015. Thus, importers will not be able to claim duty refunds retroactively for prior qualifying imports from Russia or Bangladesh.

Importers have until January 25, 2016 to submit to U.S. Customs and Border Protection claims for duty refunds on eligible imports during the period the GSP program was not in effect. Importers of qualifying products from eligible countries should work with their customs broker or counsel well in advance of that date to prepare and submit duty refund claims.

Finally, the legislation allows for certain textile and leather travel goods (such as backpacks and sports bags) to be designated for duty-free treatment under the GSP.

III.    Miscellaneous Tariff Bill

A coalition of more than 50 business and trade associations urged lawmakers in July to use an upcoming House/Senate conference on customs enforcement legislation to reform the long-stalled Miscellaneous Tariff Bill (MTB) process.

The version of the customs legislation (H.R. 644) that has been passed by the Senate contains a provision that aims to reform the MTB process by allowing businesses seeking tariff relief to petition the U.S. International Trade Commission, instead of having to introduce individual bills through members of Congress. This change was intended to address the Republican concern that the MTBs constitute “earmarks.” However, the same provision is not in the version of the legislation that was passed by the House – one of a number of differences requiring the conference.

It remains to be seen whether reform of the MTB process will be part of legislation that is ultimately passed by both Houses of Congress. We understand that House Ways and Means Committee Chair Paul Ryan does not believe that the reform currently contained in the legislation passed by the Senate is sufficient to address the Republican concerns.