CIT Rules Cosmetics Kits Are “Sets,” May Apply to Other Goods w/ Containers
The Court of International Trade has ruled that Estée Lauder cosmetic kits are properly classified as “retail sets” and not by their individual components, as all the components meet the particular need and specific activity of putting on makeup. The court also ruled that the makeup components, and not the carrying cases or other items, provide the set’s essential character. The CIT found that CBP has been using a “fatally flawed” interpretation of relevant statutes, which has resulted in the routine rejection of products from being classified as sets simply because of their container.
Estée Lauder Argued Its Cosmetic Kits Are Duty-Free as “Sets” Under HTS 3304
Estée Lauder’s “Blockbuster sets” are promotional cosmetic kits imported and sold in a glossy metallic gold-colored carton containing: (i) a cosmetic case carrying lipstick, lip pencil, lip gloss, eye pencil, mascara, eyeshadow, nail lacquer, and blush; and (ii) a makeup brush case carrying cosmetic brushes and an applicator. As entered, the items were classified separately under HTS headings 3304, 4202, 9603, and 9616.
The government argued that, pursuant to GRI 11, the sets should be classified according to each individual component. However, Estée Lauder contended that the cosmetic kits are sets because they meet the requirements of GRI 3(b)2 and should be classified under subheading 3304.20.00 (free) because the eye makeup components give the sets their essential character.
CIT Agreed, Ruled Kits Are Classifiable as HTS 3304 Eye Makeup Sets
The CIT ruled that Estée Lauder’s cosmetic kits are properly classified as sets of eye makeup under subheading 3304.20.00, for the following reasons:
Kit items used for specific activity. The kits cannot be classified pursuant to GRI 1 because no single HTS heading describes all the items in the kits. Instead, the kits should be analyzed under GRI 3(b), which allows retail sets packaged and sold as a unit, but containing multiple components, to be classified as one item rather than as individual components. The CIT found that the cosmetic kits are “retail sets” because their components are put together to be sold to customers to create different makeup looks. While each item by itself has an identifiable individual use, the CIT stated the items are intended to work together to meet the “particular need or specific activity” of applying makeup and should therefore be classified as a set.
Eye makeup confers essential character, not carrying cases. The essential character of the sets derives from their makeup components (at least eight of which are classified in heading 3304) because without the makeup, the particular need of putting on makeup could not be met. Each of the various makeup types (eye, lip, face, nail) could conceivably provide the essential character to the makeup collection. However, because the eye and lip makeup predominate by number and the eye makeup costs significantly more than the lip makeup, the sets should be classified according to the subheading for eye makeup.
Cases merely provide storage for sets. As the makeup components give the essential character of the sets, and not the cases, the fact that the sets are imported in cases that could be classified separately does not prevent their classification as “sets.” The cases’ physical characteristics do not overcome the fact that their purpose is to facilitate the storage and use of the items that enable the set to fulfill the specific activity (applying makeup) that makes it a set.
CBP Has Used Flawed Reasoning on Sets in Multiple Rulings
The government argued that the case and cosmetic components do not compromise a set because they are not “mutually complementary” or “adapted to one another.” However, the CIT rejected this reasoning, stating it combines the GRI 3(b) requirements for composite goods (mutually complementary, adapted) with those for retail sets (meet a particular need or specific activity). The CIT stated that such “fatally flawed analysis” has been “bootstrapped into a line of rulings that rely largely on Customs’ own reasoning but little on the statute or Explanatory Notes.” As a result, U.S. Customs and Border Protection has rejected and prevented the classification of other products as sets in multiple rulings.
The government had also argued that because the cosmetics case is too large to “closely carry” all the items in the set, it cannot be classified as a set. However, the CIT stated that there is nothing in the statute that requires a set’s container to be closely fitted to its contents and again found that CBP lacked a rational basis in the statute or Explanatory Notes for such a restriction. The CIT stated CBP’s analysis has resulted in the arbitrary application of what should be a relatively simple rule – that a set be classified according to the heading of the good that provides its essential character (in this case, the makeup).
Attorneys Advise Importers Denied “Set” Treatment to Protect their Rights
Estée Lauder’s attorneys have stated that while the CIT’s decision can be the subject of an appeal, they advise importers who have been denied set treatment by CBP due to the presence of a container, bag, etc. to consult with their trade advisor/representative to protect their rights.