Proposed Ruling Revocation Rooted in Dishonest CBP Testing, Best Key Says

CBP Rules Yarn ‘Metallic,’ Then Finds Only Polyester

In 2011, CBP ruled in N187601 (here) that a yarn manufactured in China by Best Key is classifiable under heading 5605 as a metalized yarn. To make the yarn, the company mixes “nanometal powders” of aluminum and zinc into a polyester slurry before the yarn is made. The yarn is then extruded. The nanometals give the resulting yarn antibacterial, antimicrobial, and anti-ultraviolet properties.

Yet in April 2012, despite its earlier finding that Best Key’s product was metallic yarn, CBP ruled in N196161 (here) that a shirt made from Best Key’s metallic yarn was classifiable as a garment made from man-made fibers. The ruling acknowledged Best Key’s request for classification under a provision for shirts made of “other textile materials” given the fabric’s metal content, but said CBP’s “laboratory analysis has determined that the fabric of [the shirt] is composed wholly of polyester yarns.” This was in spite of Best Key’s submission of the results of an independent test that showed aluminum and titanium accounted for about 0.6 percent of the fabric by weight.

FOIA Request Reveals ‘Results-Oriented’ Testing, Says Best Key

Suspicious of how CBP arrived at its conclusions, Best Key submitted a Freedom of Information Act request for copies of the CBP lab reports. “We were startled by what we saw,” said John Peterson, counsel for Best Key and author of its comments. “Not only did the lab reports show the presence of the metal, its test reports matched those of Best Key’s independent laboratory.”

Official reports of communications obtained through the FOIA request showed the omission was intentional, Best Key said. In one report, an analyst voiced concerns that saying the fabric was “composed wholly of polyester” would run contrary to CBP’s 2011 ruling that the yarn was metallic. A CBP import specialist directed the analyst to disregard the earlier ruling while writing the lab report, and write that the fabric was only polyester. The import specialist said the purpose of the lab test was in any case to request revocation of the 2011 ruling, the analyst reported.

Not only did the laboratory personnel “deliberately [disregard] published ruling precedent which was binding on them,” Best Key said, but the import specialist’s direction to say the fabric was entirely polyester also shows that the misrepresentation in the lab reports was intentional. “Customs was not interested in obtaining objective evidence of the presence of metal, but rather in a result-oriented exercise designed to allow a national import specialist to argue for the revocation of a ruling,” it said.

According to other documents obtained in the FOIA request, the import specialist later directed the lab analyst not to answer all the questions originally asked of the lab, including whether the fabric had metal content. “To answer those questions truthfully would expose the initial fabrication, of course,” Best Key said.

“Without ascribing motivations, it is clear that, at a minimum, this behavior by Customs personnel is extremely disturbing and calls into question the integrity of the rulings process and of the conduct of the customs laboratory,” Best Key said. Although CBP is now proposing revocation of the ruling on Best Key shirts based on the allegedly flawed testing, the damage has already been done, said John Peterson. “My client, of course, having developed a revolutionary new metalized yarn which could help apparel producers achieve lower duty rates, has lost millions of dollars in the past year and a half because of the April 2012 ruling backed by the false lab report, which has scared customers off.”

Best Key Says Revocation Would Reward Misconduct

In the April 24 Customs Bulletin, CBP proposed revocation of both rulings. The yarn would be reclassified from subheading 5605.00.9000 (Metalized yarn, whether or not gimped, being textile yarn, combined with metal in the form of thread, strip, or powder or covered with metal; Other), dutiable at 13.2%, to subheading 5402.47.90 (Synthetic filament yarn (other than sewing thread), not put up for retail sale, including synthetic monofilament of less than 67 decitex: Other, of polyesters: Other), dutiable at 8%. The shirt would be reclassified from subheading 6110.30.3053, (Sweaters, pullovers, sweatshirts, waistcoats (vests) and similar articles, knitted or crocheted: of man-made fibers: other: other: other: other: men’s or boys’: other), dutiable at 32%, to subheading 6110.90.90 (a knitted or crocheted pullover of “other” textile materials (i.e., not of polyester)), dutiable at 6%. Garments made from the yarn would no longer be considered to be made from metallic yarn.

Whether CBP revokes the ruling on Best Key’s yarn will hinge on questions of whether metallic yarns need to have a minimum amount of metal, and whether the manufacturing process and form of Best Key’s yarn turns it into something different. CBP said in its proposed revocation that the use of nanometals mixed in with the yarn differs from the commercial meaning of metallic yarn, which usually consists of fabric yarns with metal coatings. CBP also questions the low amount of metal in Best Key’s yarn, despite acknowledging that HTS heading 5605 for metallic yarn includes no minimum metal content requirement.

But according to Best Key, its proposed tariff subheading in heading 5605 is an eo nomine provision, so the unique nanometal process used to manufacture the yarn is irrelevant. “Absent contrary Congressional intent -- not in evidence here -- an eo nomine provision for [an] article covers all forms of the article, whether or not known to commerce at the time the tariff was drafted.” And Best Key’s yarn meets all of heading 5605’s requirements: it is a textile yarn, would be classified as such if not for its metal content, and the metal is combined into the yarn in one of the ways mentioned in the heading (threat, strip or powder). “There is no reason to interpret the heading as requiring particular levels of metal content, to require the contained metal to perform certain functions, or to limit the methods in which a metalized yarn may be produced,” Best Key said.

And given the circumstances under which CBP proposed revocation, doing so would condone the flawed and potentially dishonest testing conducted for the earlier shirt ruling, Best Key said. “To pursue a revocation of [ruling] N187601, as Customs Headquarters has done, is not only to forgive the irregular action of the [national import specialist] and laboratory personnel, but to reward it.” Given that heading 5605 is an eo nomine provision, revocation would be illegal, Best Key argued. But because of the history of CBP personnel seeking to have the ruling revoked “through false premises, and this misconduct having been brought to the attention of senior Customs officials, we can only state that in proceeding with the revocation -- after admitting the presence of metal in the yarns -- is arbitrary and capricious as well,” it said.

CBP declined comment, saying only that “the matter is currently under review.”

Email ITTNews@warren-news.com for a copy of Best Key's comments.