Celebrity-Worn Haute Couture Dresses Can’t Avoid Customs Duties

US Customs recently decided that no specialty provisions existed to avoid the payment of customs duties, or severely reduce them, on haute couture garments imported by Christian Dior Couture® (CDC).  

According to US Customs, a determination was sought acknowledging that the garments could either qualify

(a) for duty free treatment enter under an A.T.A. carnet as samples

(b) under a Temporary Importation Bond (TIB) as articles not for sale or sale on approval to be repaired, altered or processed, or

(c) for unused merchandise drawback.

Each of these types of treatment would have resulted in preferred duty treatment.

The facts presented with respect to the use of the garments were as follows:

“Christian Dior Couture imports haute couture garments so that they may be furnished to celebrities at no cost to wear at high-profile events, such as the Academy Awards ceremony. The garments serve an important form of advertising for the company because they allow the company to increase its brand awareness and showcase the latest fashions and increase sales.  Once entered into the United States, each piece is fitted to the particular person wearing the haute couture piece so that it may properly display the intended design. Such fittings include hemming, shortening, and/or otherwise altering for the measurements of the person displaying the piece. Only one of each piece will be imported. After exhibition at the event for which the piece was imported, the piece is returned to the company’s U.S. office, and shipped back to the company’s office in Paris, France. During this time, the company does not sell the garments, but retains ownership. The haute couture pieces generally spend no more than a week in the United States.”[1]

Despite these details, Customs claimed that while it did meet the test of being for purposes of soliciting orders, it also served to provide a celebrity with a garment to use to a high-profile event, which is precisely the environment that they are meant to be worn in and in the manner intended.  These therefore, constituted a normal use of the garment, and when you factored in the reality that there was no intention of soliciting orders for the item while being worn, the haute couture did not qualify for entry under an A.T.A. Carnet.

As for qualifying under a TIB, CDC needed the garments to qualify as articles being repaired, altered or processed here in the US and for which would be exported within 1 year from the date of importation.  From CDC’s description of the use of the garments however, it was clear to Customs that the main purpose for importation was something other than for an alteration, repair or processing, and for this reason, it didn’t qualify under a TIB.

Regarding drawback, to qualify for this the garments needed to be exported in the same condition as imported within 3 years from the date of importation, having not been used in the US.  Customs reasoned however, that since the pieces of haute couture were furnished to celebrities for use at a high profile event, that the garments were in fact “used,” and therefore not eligible for duty drawback either.  This is because Customs description of “use” turns on the article being “employed for the purpose for which it was built, which in this case, include[d] celebrities wearing and exhibiting the haute couture pieces at events.” [2]

While there is a special provision does allow women’s wearing apparel to enter duty free for purposes of soliciting orders, it cannot be removed from the importer's establishment for reproducing, copying, painting, sketching, or for any other use by others, nor be used in the importer's establishment for such purposes except by the importer or his employees.

Questions/comments?  Post below or email me at clark.deanna@gmail.com

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[1] Customs ruling HQ H251771, 12/16/2014.

[2] Id. Citing HQ h240038 (6/16/14).

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Advantages of The Foreign Trade Zone

I received an invitation through the Long Island Importers and Exporters Association to take a tour of Long Island’s Foreign Trade Zone (FTZ), known as the “Town of Islip/Foreign Trade Zone 52.”

Created in 1934, the FTZ program was established to stimulate domestic economic growth and development through the promotion of American competitiveness by encouraging companies to maintain and expand their operations in the United States.

The FTZ program encourages U.S.-based operations by removing certain disincentives associated with domestic manufacturing.

What is an FTZ?

FTZs are secure areas under U.S. Customs and Border Protection supervision that are generally considered outside CBP territory upon activation. Located in or near US Customs ports of entry, they are the United States’ version of what are known internationally as free-trade zones.

Under zone procedures, the usual formal US Customs entry procedures and payments of duties are not required on the foreign merchandise unless and until it “enters” the territory of the U.S. for domestic consumption, at which point the importer generally has the choice of paying duties at the rate of either the original foreign materials or the finished product (in the event the original goods have now been assembled into a completed different product).

The duty on a product manufactured abroad and imported into the U.S. is assessed on the finished product rather than on its individual parts, materials, or components. The U.S. based manufacturer finds itself at a disadvantage compared with its foreign competitor when it must pay a higher rate on parts, materials, or components imported for use in a manufacturing process.

The FTZ program seeks to correct this imbalance by treating products made in the zone, for the purpose of tariff assessment, as if it were manufactured abroad. At the same time, the United States benefits because the zone manufacturer uses U.S. labor, services, and inputs.

Another benefit is that domestic goods moved into an FTZ for export may be considered exported upon admission to the zone for purposes of excise tax rebates and drawback. Goods may also be exported from the zone free of duty and excise tax after being reworked or merely being warehoused there temporarily.

US Customs is responsible for the transfer of merchandise into and out of the FTZ and for matters involving the collection of revenue. The local US Customs Port Director, in whose port a zone is located, is charged with the oversight of zone activity and enforcement as the local representative of the Foreign-Trade Zones Board. The Port Director controls the admission of merchandise into the zone, the handling and disposition of merchandise in the zone, and the removal of merchandise from the zone.
For more information, you can click here and/or contact these offices below directly:

U.S. Department of Commerce
Foreign-Trade Zones Board
1401 Constitution Avenue, NW, Room 2111
Washington, D.C. 20230
Main Phone: (202) 482-2862
(Foreign-Trade Zones Board )

CBP Regulations, 19 CFR Part 146, govern the transfer of merchandise to and from foreign-trade zones. For answers to specific questions contact the Port Director of the CBP port where the zone is located or CBP headquarters at:

U.S. Customs and Border Protection
Office of Field Operations
Cargo and Conveyance Security
1300 Pennsylvania Avenue, NW, Room 5.2C
Washington, D.C. 20229

Questions/comments? Post below or email me at clark.deanna@gmail.com