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FOR IMMEDIATE RELEASE: May 25, 2011

SCHUMER: UNWARRANTED TARIFF COULD FORCE ORLEANS & MADISON COUNTY BUSINESSES TO SHUT THEIR DOORS, PUTTING DOZENS OUT OF WORK – URGES US CUSTOMS TO REVERSE DECISION IMPOSING STEEP TARIFFS ON WORN CLOTHING FROM CANADA


Out of the Blue, U.S. Customs Has Slapped a 32% Tariff On Breutex LLC’s and Rick’s Rags’ Raw Material Imports

Breutex and Rick’s Now Owe Import Duties on Previously Duty-Free Imports Due to CBP Reclassification, While Canadian Competitors Have Free Access to U.S. Markets

Schumer Calls on Customs to Lift Unjustified Tariff Immediately, Before Extra Costs Force Companies to Lay Off Workers or Shut Down

Today, U.S. Senator Charles E. Schumer wrote a letter to U.S. Customs and Border Protection (CBP) urging corrective action on behalf of two upstate New York rag manufacturing companies, Breutex LLC and Rick’s Rags, that are being hit with a 32% duty on imported worn clothing from Canada. The bulk worn clothing imports are being classified by CBP as wearable apparel, which carries a 32% tariff.  Worn clothing imported in bulk normally enters the United States duty-free. In 2007, Schumer worked successfully with Customs to correct the same tariff misclassification problem.  Recently, a 32% tariff has been put back in place by CBP despite the fact the companies continue to import worn clothing in bulk from Canada which they then process into rags for sale in the United States. Schumer wants Customs to correct the misclassification, as the duty threatens to drive both companies out of business and put Upstate New Yorkers out of work.

“It is simply unfair for CBP to slap a crushing 32% tariff on Breutex and Rick’s Rags imports out of the clear blue sky, especially after this battle has already been fought and won in favor of New York rag manufacturing companies," said Schumer. "For years both Breutex and Rick’s have employed Upstate New Yorkers by taking unusable worn clothing and making it into rags, fulfilling a unique service and acting as an economic engine in the region. This unwarranted tariff classification decision could shut the entire operation down, as every penny extra they must pay on raw materials drastically eats into their profitability and threatens to drive them to lay off workers or go out of business.”

Breutex and Rick’s Rags buy worn clothing in bulk from Canada, and recycle, cut and process the worn clothing into wiping rags, towels, and cloths for various industrial sectors like furniture refinishing, automotive detailing, industrial cleaning, hotels & restaurants, and more. U.S. Customs and Border Protection recently reclassified these materials under a catch-all apparel category (6110.30.3059) which carries 32 percent rate of duty.  The additional, unanticipated duty costs for raw materials threaten the economic viability of these small businesses, and Schumer urged CBP to immediately correct this misclassification, to ensure that Breutex and Rick’s are not force to lay off workers or go out of business. 

Breutex LLC, employs between 8 to 15 employees at their Medina rag manufacturing and cutting facility. Breutex purchases their raw material from Weisman Exports in Canada, the costs of which have increased by 32% due to this unjustified tariff. Schumer states that every extra penny that Breutex must pay on raw materials drastically minimizes their profitability and threatens to drive them to lay off workers or go out of business. 

Established in 1984, Rick’s Rags in Canastota produces over 30 different grades of cleaning rags for industrial and residential use.  The company has 16 full time employees. A large part of the company’s bulk raw material comes from recycling several tons of waste material that would otherwise be landfilled. Rick’s Rags has seen a great deal of growth in recent years, but the recently imposed 32% import duty is eating into their profits. Rick’s Rags also uses Weisman Exports in Canada as their supplier, and joins Breutex in pursuing the removal of this unjustified tariff.

Schumer also notes that while Breutex’s and Rick’s rag materials imports are now subject to a 32% duty, their Canadian competitors have free access to the U.S. market because there is no U.S. duty on imported cut and finished rags from Canada. This means that Breutex’s and Rick’s Canadian competitors can sell their rags in the U.S. without a duty, but these U.S. companies are being charged 32% to import raw materials from Canada.

A copy of Senator Schumer’s letter to Commissioner Alan Bersin appears below:

The Honorable Alan Bersin
Commissioner, U.S. Customs and Border Protection
1300 Pennsylvania Avenue, NW
Washington, DC 20229
 
Dear Commissioner Bersin,
 
I write today to express my concern regarding a tariff classification issue that threatens to drive two New York companies out of business.  The companies – Breutex, based in Medina, and Rick’s Rags, based in Canastota – import worn clothing from Canada which they then process into rags for sale in the United States.  After years of importing rag materials under HTS subheading 6309.00.0010, with a zero rate of duty, CBP recently reclassified these materials under a catch-all apparel category (6110.30.3059) with a whopping 32 percent rate of duty.  The additional, unanticipated duty costs for raw materials threaten the economic viability of these small businesses, and I respectfully request that CBP work with Breutex and Rick’s to ensure that this tariff classification issue does not force them to lay off workers or go out of business. 
 
Moreover, while Breutex’s and Rick’s rag materials imports are now subject to a 32 percent duty – the highest ad valorem rate of all the rates applicable to the hundreds of categories of textiles and clothing – their Canadian competitors have free access to the U.S. market.  Specifically, it is my understanding that there is no U.S. duty on rags imported from Canada.  So Canadian companies can sell their rags into the United States duty-free, but U.S. companies are being forced to pay a 32 percent duty just to import the worn clothing they turn into rags.  Breutex and Rick’s Rags already face significant competition from duty-free imports from Canada; continued imposition of an unwarranted 32 percent duty will drive these small American businesses to lay off workers or go out of business. 
 
Breutex and Rick’s employ over two dozen workers in Western and Central New York, regions still struggling with high unemployment levels.  CBP’s reclassification of Breutex’s and Rick’s worn clothing imports, after agents looked at perhaps a few worn garments pulled from thousand-pound bales each containing thousands of individual worn garments, is putting these two small U.S. businesses and their workers at risk.  I respectfully request that CBP work with Breutex and Rick’s to expeditiously resolve the tariff classification issue.  Perhaps viewing Breutex’s and Rick’s facilities and production processes – from unpacking the thousand pound bales, to cutting the materials into rags and wiping cloths – would help CBP with proper classification of the worn clothing imports.    
 
Thank you for your attention to this request.  I look forward to working with you on this issue. 
 
Sincerely,
 
Charles E. Schumer
United States Senator 

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