The CBP’s classification and duty change for women’s footwear

📘  Terms to know:

De minimis: A threshold that, when exceeded, exempts imports from duty and/or tax/VAT and differs by country.

Importer of record (IOR): A term for the person responsible for products being imported to a country. The IOR is responsible for ensuring the imported goods comply with local laws and regulations, filing a completed duty entry and associated documents required by the CBP (Customs Border Protection), and paying the import duties and taxes.

If you’re located in the United States (US) or sell goods into the US and sell or purchase foreign women’s shoes, boy do we have news for you. Depending on the cost and style of the shoes you are importing into the US, the price may have just gone up for you.. on duty that is.

 Keep in mind that all imports are duty free unless they exceed the US’ duty de minimis: $800 USD.

Customs Border Protection (CBP) has changed the duty on girls’ and women’s closed-toe, closed-heel, below-the-ankle shoes with embroidery or sequins, raising it from 9% to 20%. Why? Well, CBP has introduced ruling HQ H302976 which revokes previous rulings on the matter. Want to hear that in plain English?

This blog will discuss the change in simple terms, explaining the following:

• Why did the duty on women’s shoes change?
• Who does the duty change affect?
• How to handle the duty change

Why did the duty on women’s shoes change?

There has been a debate amongst CBP officials regarding one simple question about the nature of the category of shoes discussed in this blog: Athletic or non-athletic?

You see, the US’ duty rate for athletic shoes is 20% and the duty rate for non-athletic shoes is 9%, according to the Harmonized Tariff System of the US (HTSUS). The HTSUS is the US version of the Harmonized System used to classify goods and assign duty rates. The HTS code for non-athletic shoes is 6404.19.90; whereas the HTS code for athletic footwear is 6404.11.90.

There has been some back and forth on this issue for a while. Let’s look at the process of this duty change and the reasoning behind it in the form of a timeline:

December 2020

CBP decided that women’s closed-toe-and-heel shoes with embroidery and sequins were typically not used for athletics, but used for fashion purposes instead. Therefore, they decided to re-classify them as non-athletic shoes from athletic shoes, decreasing the duty from 20% to 9% effective February 14th, 2021. What a great Valentine’s Day gift!

The following image shows an example of the types of shoes examined to make the ruling:

January 2022

However, the January 2022 ruling has made it so both shoes in the above image are considered athletic and classified as such.

On January 26, 2022, CBP decided that embroidery, sequins, and other fashionable embellishments, while not ideal for athletic use, do not preclude the shoe from being able to serve as an athletic shoe. In other words, while a women’s closed-toe-and-heel shoe that has been embroidered or decorated with sequins may make athletic activities like running or power walking uncomfortable, they do not completely prevent the person wearing them from partaking in athletic activity. Thus, the CBP has rendered this category of shoe as athletic and has subjected them to 20% duty (up from 9%), effective March 27th, 2022.

From this timeline, it is clear that the 9% duty for girls’ and women’s closed-toe, closed-heel, below-the-ankle sneakers or other footwear with embroidery or sequins was short-lived, 406 days to be exact!

Who does the duty change affect?

The duty rate increase affects the importer of record for imports of shoes belonging to the above-mentioned category (girls’ and women’s closed-toe, closed-heel, below-the-ankle shoes with embroidery or sequins) where the value exceeds the US duty de minimis of $800. Importers who fit these criteria will incur 20% duty on these imports as opposed to the short-lived 9% duty rate.

For example, if you are an individual in the US and you order a pair of $900 designer close-toe-and-heel flats, you will incur 20% duty ($180) upon delivery. Similarly, if you are the retailer selling these shoes to a consumer in the US and you absorb the duty, you will be subject to the $180 duty charge.

How to handle the duty change

Here are tips on handling the duty increase:

• If you are a seller outside of the US who ships shoes of the above-mentioned category exceeding the US de minimis and you do not collect the duty at checkout, ensure your customers are aware of the change so that it does not shock them and lead to an abandoned or rejected package.
  • A good way to do this is to show the full landed cost (which includes duty) at checkout.
• If you are an individual in the US shopping for this category of shoes from a foreign website where your order total exceeds $800 USD and you do not see the duty charge at checkout, get in contact with the website’s support team to inquire about who is responsible for paying duty.

At the end of the day, the duty applies and if you are the seller you will need to decide if you want to absorb the cost or pass it along to the consumer, as well as how you will inform them about the cost. If you are the consumer, being aware of the new cost is important. However, the main tip for sellers is to be transparent with your customers, and the main tip for consumers is to be savvy and inquisitive toward the support team of the website from which you are shopping.

Resources

• CBP Ruling on Women’s Footwear Duty