CIT Rejects Customs' Classification of Cosmetic Sets as "Fatally Flawed"

On January 3, 2012, the United States Court of International Trade (CIT) issued a judgment in Estee Lauder, Inc. v. U.S., holding that cosmetic sets were classifiable as "sets put up for a retail sale" under GRI 3(b) because the items packaged in the set met the particular need of putting on makeup. The Court further determined that the essential character of the set was supplied by the makeup, and under GRIs 1, 3(b), and 6, the set was classifiable under 3304.20.00, HTSUS. 

Customs argued that cosmetic sets should not be classified under GRI 3(b) "because the merchandise at issue is classifiable pursuant to GRI 1, [therefore] the classification inquiry ends and there is no need to resort to the remaining successive GRI's to classify the merchandise." The Court rejected Customs' position stating: "The government's facile reading of the GRIs would make the terms of GRI 3(b)'s "retail sets" language inapplicable under any situation. If the government's argument prevailed, the court cannot think of any situation where a group of goods put up as a set for retail sale could not be required to be classified separately "pursuant to GRI 1". 

As to the Customs' argument that the sets should not be classified under GRI 3(b) because the items in the set, especially the cosmetic case, did not meet the "particular need or carry out a specific activity" criterion in Explanatory Notes to GRI 3(b) because the cosmetic case "lacked the physical characteristics necessary to allow it to interact with the cosmetic components to carry out the specific activity of applying makeup," the Court stated that requiring set goods to be mutually complementary or adapted to one another effectively joined the Explanatory Notes requirements for composite goods to the Explanatory Notes describing retail sets, which was unsupported in the statute or the Explanatory Notes."

The Court noted that Customs has routinely rejected the GRI 3(b) classification of cosmetic sets based upon a "fatally flawed analysis" in rulings that "rely largely on Customs' own reasoning but little on the statute or the Explanatory Notes." 

Finally, CIT declined to adopt CBP's position that the size of a set container can by itself negate a set's qualification under GRI 3(b). The Court rejected Customs' argument that cosmetic sets could not be classified as a GRI 3(b) set because the included case was too large to closely carry all the items in the set, as lacking a rational basis in the language of the statute or the Explanatory Notes. 

CIT explained that the Statute in GRI 3(b) provides that a set is classified according to the heading of the good that provides its essential character. "If a set container provides the set with its essential character, then the entire set should be classified under the heading for the container. If not, then the set should be classified according to that other item that provides the essential character." In this case, the essential character of the set was provided by the makeup components rather than the cosmetic case, thus warranting classification under 3304.20.00, HTSUS.