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HQ 950839

February 13, 1992

CLA-2 CO:R:C:T 950839 SK


Robert Stack
Siegel, Mandell & Davidson, P.C.
One Astor Plaza
1515 Broadway, 43rd Floor
New York, N.Y. 10036

RE: Classification of boxer style sleep shorts; relief denied for detrimental reliance on HRL 089247 (7/18/91) pursuant to 19 CFR 177.9(d)(3); reliance not reasonable when plaintiff on notice of possible change in applicable textile category

Dear Mr. Stack:

This is in reply to your letter of December 10, 1991, on behalf of Roytex, Inc., in which you claim that your client had relied to its detriment on Headquarters Ruling Letter (HRL) 089247, dated July 18, 1991. You request that HRL 089247, dated July 18, 1991, be modified to reflect the new statistical breakout and textile category pertaining to sleepwear which went into effect July 1, 1991. You also request that the implementation of the aforementioned modification be delayed for a 90 day period.

The subject merchandise is referred to as Style No. 560005. It is comprised of 100% cotton seersucker fabric. This style contains a fake fly front, elasticized waistband and short legs with approximately four and one-half inch inseams and seventeen inch outseams in a size medium. Style No. 560005 is not marketed as underwear and it is displayed with a matching kimono, although it is not sold as a set.

In HRL 089247, Customs classified two samples of men's woven cotton sleepwear bottoms under subheading 6207.91.3000, HTSUSA, which provides for, inter alia, men's underpants, briefs and similar articles: other: of cotton, other, textile category 352, dutiable at a rate of 6.5% ad valorem. Both samples were made from printed, 100% cotton woven fabric and each featured side slash pockets and a fully elasticized waist with drawstring. Style SO 1175 had long pant legs, and Style SO 1174 was a pair of shorts. Neither style had a fly front opening.

The classification of the subject merchandise in HRL 089247 was in apparent contradiction to a new statistical change to heading 6207, HTSUSA, effective July 1, 1991, which affected sleepbottoms and classified them in a "sleepwear" breakout under textile category 351. Public notice of these changes was issued by Customs on July 12, 1991. We note that Customs Headquarters issued four ruling letters immediately prior to HRL 089247, in which similar apparel was classified under the new statistical breakout in textile category 351. The classification of the sleepshorts in HRL 089247 under statistical subheading 6207.91.3000, HTSUSA, in category 352, was in error.

In your submission you state that Roytex relied to its detriment on HRL 089247 when it placed its order for Style 560005 and booked quota under category 352 with its vendor. You assert that because HRL 089247 had neither been revoked nor modified at the time Roytex offered the production contract to a Hong Kong producer in early October, Roytex was not put on notice of the change in the sleepshorts' quota status. You further claim that Roytex' reliance on HRL 089247 was in good faith as there was nothing to indicate that quota for these articles had changed since the July 18 ruling. On November 25, 1991, Roytex learned of the change in quota category affecting sleepshorts by way of the classification ruling they had requested for the importation of the sleepshorts currently at issue. On November 26, Roytex was informed that their Hong Kong producer had already secured a 352 quota as per Roytex' instruction based on HRL 089247.

Upon review of the information submitted in support of Roytex' detrimental reliance claim, it is Customs' position that Roytex has not substantiated its claim that its reliance on HRL 089247 was reasonable pursuant to 19 CFR 177.9(d)(3) which reads:

Generally, a ruling letter modifying or revoking an earlier ruling will be effective on the date it is issued. However, the Customs Service may, upon application or on its own initiative, delay the effective date of such a ruling for a period of up to 90 days from the date of issuance. Such a delay may be granted with respect to the party to whom the ruling letter was issued or to any other party, provided such a party can demonstrate to the satisfaction of the Customs Service that they reasonably relied on the earlier ruling to their detriment.

There is no dispute as to whether HRL 089247 was erroneous; HRL 089247 failed to recognize a new statistical breakout and has subsequently been modified by HRL 950966 dated January 27, 1992 (see attached copy). Your client, however, has not been able to establish that its reliance on HRL 089247 was reasonable in light of several facts that have come to Customs' attention. First, we find that Roytex was effectively put on notice prior to October, 1991, as to the proper quota/visa category applicable to the subject merchandise. This is evidenced by correspondence sent by you to Roytex on June 7, 1991, advising your client that Customs has "revoked a two-year precedent and classified sleeppants composed of cotton flannel fabric under the 'pajamas' provision [of the tariff schedule], subject to category 351." You also notified Roytex that in another Headquarters Ruling Letter a sleepshort imported with a kimono as a set was classified as being similar to sleepwear subject to category 652 (underwear quota). You notified Roytex that "Customs HQ is currently attempting to finalize its position on this merchandise, as these rulings are in conflict."

It is our opinion that the above correspondence served to put Roytex on notice as to the proper textile category for sleepshorts. This holding is further substantiated by the fact that Customs has been notified by the Hong Kong Economic & Trade Office that your client specializes in the production of nightwear and underwear. It is reasonable to conclude that Roytex would be familiar with current trade issues in this area and would be likely to know of any changes directly affecting the importation of sleepwear and underwear.

Even assuming that Roytex was only put on notice of the change in textile category, as it asserts, on November 25, 1991, there are still several disturbing factors which lead this office to the conclusion that reliance on HRL 089247 was not reasonable.

In your submission you state that Roytex offered production of the sleepshorts to a Hong Kong vendor through Eastex Corp., its agent, in early October, 1991. No purchase order confirming this date was ever submitted to Customs. Instead, two purchase orders, both referenced 9209(1), were submitted bearing conflicting dates. In your December 19, 1991, submission to this office, you submitted Exhibit B which states that purchase order 9209(1), for 24,000 pieces of men's 100% cotton seersucker shorts, was dated August 28, 1991. Then, in your January 29, 1992, fax submission to this office, you included a purchase order, also referenced as 9209(1), dated December 2, 1991. Not
only are there inconsistencies as to the actual date of the purchase order, but we do not have any purchase order corresponding with the date you assert that the production was offered. The December 2nd purchase order is dated a full week after Roytex claims to have learned of the new textile category applicable to its sleepshorts. Roytex asserts that it relied to its detriment on a ruling issued in July and that it learned of the correct textile category in late November. This office does not consider such reliance reasonable when the purchase order for the subject merchandise was issued a week after Roytex was, by its own admission, on notice of the new statistical breakout and Roytex was aware that it had booked incorrect quota. This appears to be an assumed risk. Moreover, copies of the Hong Kong export licenses for style 560005, dated December 24, 1991 and January 10, 1992, were issued for textile category 352, for men's cotton woven undershorts (underwear). Apparently there had been no effort on Roytex' part to provide the Hong Kong Economic & Trade Office with the correct status of these garments (i.e., that they were sleepshorts, and not underwear).

At the time Roytex made entry at the Los Angeles port, no notice was given to Customs authorities that the status of the goods' classification was currently under review at Headquarters. Customs has been apprised that Roytex' broker released the sleepshorts on January 27, 1992, as underwear. A redelivery notice will be issued asking for the goods to be entered as sleepshorts.

No evidence has been submitted to suggest that Roytex was irrevocably bound to this transaction once it learned of the correct textile category. You have stated that this transaction did not involve a letter of credit, nor have you provided any additional proof that you could not cancel the transaction.

After reviewing the information submitted, it is Customs' opinion that Roytex has not demonstrated that it was reasonable in its reliance on HRL 089247 as evidenced primarily by your correspondence of June 7, 1991, which served to put Roytex on notice of the changes to the textile category applicable to sleepwear and by Roytex' behavior after November 25, 1991, the date Roytex admits to being on notice of said changes. Accordingly, your client's petition for relief is denied. This action is in accordance with 19 CFR 177.9(d)(3).

Any questions concerning this letter should be directed to the Textile Classification Branch, Office of Regulations and Rulings, at (202) 566-8181.


John Durant, Director

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