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HQ 965175




October 11, 2001

CLA-2 RR:CR:TE 965175 GGD

CATEGORY: CLASSIFICATION

TARIFF NO.: 6307.90.9989

Port Director
U.S. Customs Service
Los Angeles-Long Beach Seaport
Shoreline Building
301 East Ocean Blvd., 14th Floor
Long Beach, CA 90802

RE: Decision on Application for Further Review of Protest No. 2704-01-100118, filed January 10, 2001, Concerning the Classification of Insulated Bags for Food or Beverages; NY C84821 Revoked by Operation of Law

Dear Madam:

This is a decision on a protest timely filed on January 10, 2001, against your decision in the classification and liquidation of certain insulated bags made in China that were entered in August 2000 and are designed to store and carry food or beverages.

FACTS:

You classified the merchandise under subheading 6307.90.9989, Harmonized Tariff Schedule of the United States Annotated (HTSUSA), the provision for "Other made up [textile] articles, including dress patterns: Other: Other: Other, Other: Other," with a general column one duty rate of 7 percent ad valorem.

The protestant claims that the goods should be classified in subheading 3924.10.5000, HTSUSA, the provision for "Tableware, kitchenware, other household articles...of plastics: Tableware and kitchenware: Other," with a general column one duty rate of 3.4 percent ad valorem.

The two articles at issue, described as an insulated lunch bag and an insulated cooler bag, are identified by styles LNBIR and SPKCR, respectively. Each article is a portable, soft-sided, insulated bag that is primarily designed to store and preserve food
and/or beverages. Style LNBIR measures approximately 10 inches in height by 7-1/2 inches in width by 4-1/2 inches in depth. Style SPKCR measures approximately 9 inches in height by 6 inches in width by 6 inches in depth. Each of the bags has an outermost surface composed of polyvinyl chloride (PVC) plastic sheeting, that is embossed to give the appearance of a textile fabric. Customs examination of the bags reveals that the plastic sheeting is only the outward-facing surface of a layer composed of polyester textile fabric that has been coated or laminated with the compact PVC plastic. Such plastic/textile combinations form a textile material which, on its own, is classifiable under heading 5903, HTSUSA. Each bag has an adjustable carrying strap, a fold down lid, a PVC plastic lining, and a layer of plastic foam insulation material between the outer layer and the lining.

ISSUE:

Whether the insulated lunch bag and cooler bag are classified under heading 3924, HTSUSA, as other household articles of plastics; or under heading 6307, HTSUSA, as other made up [textile] articles with outer surface of fabric-backed plastics.

LAW AND ANALYSIS:

Classification under the HTSUSA is made in accordance with the General Rules of Interpretation (GRI). GRI 1 provides that the classification of goods shall be determined according to the terms of the headings of the tariff schedule and any relative Section or Chapter Notes. In the event that the goods cannot be classified solely on the basis of GRI 1, and if the headings and legal notes do not otherwise require, the remaining GRI may then be applied. The Explanatory Notes (EN) to the Harmonized Commodity Description and Coding System, which represent the official interpretation of the tariff at the international level, facilitate classification under the HTSUS by offering guidance in understanding the scope of the headings and GRI.

Through its broker, the protestant essentially contends that there are no textile materials present in the insulated bags at issue and that, in any case, a binding ruling which has not been revoked or modified and which was included in the entry package, takes precedence over subsequent classification determinations by Customs with regard to substantially identical merchandise. In New York Ruling Letter (NY) C84821, dated March 12, 1998, issued pursuant to a different broker's request on the importer's behalf, insulated bags identified as styles LNBI, LNBIV, and SPKC, were classified in subheading 3924.10.5000, HTSUSA. The ruling fails to note the presence of any
textile materials in the outer layer or shell of the bags. It is stated, however, that those bags were substantially identical to the bags at issue here (styles LNBIR and SPKCR), which possess an outer layer of fabric-backed compact PVC plastic.

The classification of portable, soft-sided, insulated cooler bags with outer surface of plastics (not backed with textile fabric), was examined by the Court of Appeals for the Federal Circuit (CAFC) in SGI, Incorporated v. United States, 122 F.3d 1468 (Fed. Cir. 1997). The CAFC held that the appropriate classification for the cooler bags at bar was subheading 3924.10.5000, HTSUSA, noting that the provision encompassed exemplars (such as salt, pepper, mustard, and ketchup dispensers) that were ejusdem generis with the coolers because their purpose was to contain food and beverages.

This office concluded that the CAFC's decision in SGI should be implemented and issued instructions to that effect to Customs field personnel on November 7, 1997, and on March 18, 1998. The March 1998 instructions were also approved for dissemination to members of the importing community, and expressly extended the principles of the SGI decision to insulated containers with outer surfaces composed in whole or in part of textile materials. The instructions noted, however, that since insulated bags with outer surfaces of textile materials were not the same in all material respects as the coolers subject to the SGI decision, they were to be classified in subheading 6307.90.9989, HTSUSA. The importing community was advised to be aware that visa and quota requirements could be applied to such cooler bags, that textile categories could be subdivided into parts, and that current information as to the status of any import restraints or requirements should be obtained from local Customs offices.

Shortly after the March 12, 1998 issuance of NY C84821, more information affecting the importation of insulated cooler bags did become available to importers. In March 1998, a decision was made by the International Trade Commission (ITC) to amend the HTSUS with respect to the classification of cooler bags. In order to capture and continue the quota treatment of bags migrating from heading 4202, HTSUS, as a result of the SGI case, the ITC inserted new tariff breakouts under subheading 6307.90.99, HTSUS, providing for "Cooler bags with an outer surface of textile materials." Effective April 1, 1998, new statistical breakouts under subheading 6307.90.99, HTSUS, were provided for cooler bags with outer surface of cotton (6307.90.9905), with outer surface of man-made fibers (6307.90.9907), and with outer surface of other textile materials (6307.90.9909). Textile categories 369, 670, and 870, were also applied to the new breakouts for cooler bags with outer surface of cotton, of man-made fibers, and of other textile materials, respectively. Cooler bags with an outer layer composed of fabric-backed compact plastics, with the plastic surface facing outward, remained properly classified in subheading 6307.90.9989, HTSUSA, a
provision not subject to quota/visa requirements. An instruction concerning bags with this specific outer surface composition was issued on September 10, 1998, and was approved for dissemination to members of the importing community.

NY C84821 has not been modified or revoked by publishing a notice of proposed action in the Customs Bulletin, providing the opportunity for public comment, and by publishing a final modifying or revoking notice. It is Customs position, however, that such publication and issuance requirements are inapplicable in circumstances in which a Customs position is modified, revoked or otherwise materially affected by operation of law, by publication pursuant to other legal authority or by other appropriate action taken by Customs in furtherance of an order, instruction or other policy decision of another governmental agency or entity pursuant to statutory or delegated authority. Such circumstances include the adoption or amendment of a statutory provision, including any change to the HTSUS. As noted above, the ITC amended a statutory provision within the HTSUS to provide for "Cooler bags with an outer surface of textile materials," and placed this merchandise in new tariff breakouts under subheading 6307.90.99, HTSUS. This policy decision by another governmental agency obviates Customs publication and issuance requirements. NY C84821 was therefore revoked by operation of law.

Prior to filing its entry of the subject merchandise on August 21, 2000, the protestant had numerous additional opportunities to carry out its responsibility to obtain current information regarding the importation of insulated cooler bags. In Headquarters Ruling Letter (HQ) 961940, dated September 30, 1998, this office classified in subheading 6307.90.9989, HTSUSA, three styles of cooler bags, each with an outer layer composed of textile fabric which - like the bags at issue here - had been coated, covered or laminated with a layer of compact PVC plastic. The plastic surface of the material faced outward and was embossed to simulate the appearance of a woven fabric. In that ruling, this office thoroughly discussed the GRI, the pertinent explanatory and legal notes to Chapter 39, HTSUSA, and the legal notes to Chapter 56, Chapter 59, and Section XI, HTSUSA, which collectively provided the basis for finding that each bag's outer layer constituted a fabric of heading 5903, and that each bag itself was a textile article of Section XI, HTSUSA. For additional rulings regarding the classification of substantially similar merchandise, see HQ 961944, HQ 961240, HQ 962023, all dated September 25, 1998, and HQ 961712, dated November 12, 1998.

Information was also provided on March 31, 1999, when in the Customs Bulletin, Volume 33, Number 13, Customs published a final notice of the revocations of HQ 960997, HQ 961357, and HQ 960938. Notice of the proposed revocations had been published in the Customs Bulletin, Volume 33, Number 5, dated February 3, 1999. Like the goods at issue here, the bags subject to the three revoked rulings had been erroneously classified in subheading 3924.10.5000, HTSUSA. Each was subsequently
found to possess an outer layer composed of a textile fabric that had been coated, covered or laminated with compact plastics, with the plastic surface facing outward. Those bags were reclassified in subheading 6307.90.9989, HTSUSA, pursuant to the analysis contained in HQ 960242, HQ 960243, and HQ 960296, all dated March 17, 1999. For additional rulings classifying substantially similar merchandise, see HQ 961963, HQ 961945, HQ 962120, all dated April 7, 1999, and HQ 963602, dated October 18, 1999.

Despite the availability of published information regarding the classification of merchandise substantially identical to the imported merchandise, protestant cites, for support, to NY E82430, dated January 18, 2000, and NY E86021, dated September 20, 1999, each of which classifies a cooler bag in subheading 3924.10.5000, HTSUSA. Neither of the rulings, however, pertains to the classification of a bag with an outer layer of fabric-backed compact plastics. The outer surface of the bag subject to NY E86021 is described as being composed of 40 percent nylon and 60 percent plastic. In NY E82430, the description clearly states that "the bag has an outer surface of plastic not backed with textile." [Emphasis added.]

With regard to the protestant's selective reliance on certain rulings, we note that in Sunderland of Scotland, Incorporated v. United States, Slip Op. 01-112, decided August 29, 2001, the Court of International Trade (CIT) found in favor of Customs which, in NY 876026, dated September 4, 1992, had classified certain styles of pullovers in a provision for water resistant garments. When laboratory testing revealed that the styles of subsequent entries did not meet the test for water resistance, the goods were reclassified and the importer was advised to classify the styles as "Other" than water resistant or to provide proof to the contrary. The CIT noted that in HQ 955909, dated April 25, 1994, this office had declined a request to revoke NY 876026, but had also stated:

There is no reason to hold these laboratory results suspect, nor has this office been provided with any information which would serve as grounds for a reversal of the holding in NYRL 876026....In situations where a Customs laboratory test has been performed on merchandise purporting to be "identical" to merchandise the subject of a prior ruling, where the lab test reveals that the merchandise...of the subsequent transaction is not the same, the classification of these goods will be based on the lab's findings and the original ruling will not control. To hold otherwise would increase the likelihood of importers relying on previously issued rulings which are no longer representative of the merchandise currently being imported. The opportunity for abuse in this situation is considerable. [Emphasis added.]

Although in this case, the reason that NY C84821 upon which the importer relies does not control is that it has been revoked by operation of law, we find that the reference to misplaced reliance in Sunderland warrants mention here.

The protestant should be aware that, on November 18, 1999, the ITC instituted Investigation No. 1205-5, which proposed changes to the HTS resulting from the work of the World Customs Organization and the Harmonized System Committee to update and clarify the Harmonized System nomenclature. Effective January 1, 2002, the adoption of modifications to the text of heading 42.02 will result in insertion of the term "insulated food or beverage bags" immediately following the term "traveling bags." This modification will require that all cooler bags currently classified under headings 6307 or 3924, be classified only under heading 4202, in subheading 4202.92.05 (outer surface of textile materials) or subheading 4202.92.10 (outer surface of other materials such as plastics or fabric-backed compact plastics), HTSUSA. A new eighth paragraph will be inserted in the EN to heading 42.02 stating that "The expression 'insulated food or beverage bags' covers reusable insulated bags used to maintain the temperature of foods and beverages during transport or temporary storage." Proposed changes to the HTS are available in the Office of the Secretary, Room 112, United States International Trade Commission, 500 E Street, S.W., Washington, D.C. 20436 (telephone: 202-205-2000), and are posted on the Commission's web site at www.usitc.gov.

HOLDING:

The insulated lunch bag and cooler bag, identified by style LNBIR and SPKCR, respectively, are classified in subheading 6307.90.9989, HTSUSA, the provision for "Other made up [textile] articles, including dress patterns: Other: Other: Other, Other: Other." The general column one duty rate is 7 percent ad valorem.

Pursuant to the March 1998 amendment of a statutory provision within the HTSUS to provide for "Cooler bags with an outer surface of textile materials," and the provision of new tariff breakouts under subheading 6307.90.99, HTSUS, effective April 1, 1998, NY C84821, dated March 12, 1998, was revoked by operation of law.

The protest should be DENIED. In accordance with Section 3A(11)(b) of Customs Directive 099 3550-065, dated August 4, 1993, Subject: Revised Protest Directive, you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any additional Applications for Further Review currently being held in abeyance and involving merchandise and issues similar to those of the instant case should be disposed of by your office in a manner consistent with the analysis and holding above. Any reliquidation of the entry or entries in accordance with the decision must be accomplished prior to mailing of the decision.

No later than 60 days from the date of this letter, the Office of Regulations and Rulings will make the decision available to Customs personnel, and to the public on the Customs Home Page on the World Wide Web at www.customs.gov, by means of the Freedom of Information Act, and by other methods of public distribution.

Sincerely,


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