It's a scary time for Halloween costume importers and retailers.

        For years, imported costumes made from cloth - including the most popular characters sought by children, such as Spiderman or Cinderella - moved freely through U.S. borders without being subject to tariffs and import quotas.

        Now, these goods, known as nondurable costumes, are at the center of a legal battle that's sending shivers through the Halloween costume industry.

        Consumers will see few price changes in costumes this year because Halloween costume prices were set in February and most costumes were imported before the duties were imposed.

        The real shock will come next Halloween if a federal appeals court upholds a lower court ruling that these goods should be treated like regular apparel, subjecting them to duties of up to 30 percent.

        Local costume retailer Cappel's has already seen increases on imported costumes, which make up about half of its collection.

        Ray Cappel, a co-owner and buyer for the company, wondered whether importers would find a way around the tariff, which is imposed on Chinese labor only.

        “Going into Halloween 2003, will costumes start coming from other countries to skirt around China?” Mr. Cappel said.

        Either way, he foresaw no major changes in business. “Everybody's in the same boat on this,” he said.

        Prices will rise gradually to prevent “sticker shock” if the duty is not repealed, he said.

        Jonn Schenz, owner of Schenz Theatrical Supply in Camp Washington, said costume prices are down this year because of a lack of interest in Halloween last year.

        “Halloween last year was lousy because of 9-11. A lot of the retailers were stuck with merchandise. We had merchandise in house and so our Halloween orders were down,” he said.

        In February, a judge from the U.S. Court of International Trade reclassified costumes made of nondurable cloth as “fancy dress” apparel, subjecting them to tighter rules.

        For years, the U.S. Customs Service had defined nondurable Halloween costumes as “flimsy festive articles,” allowing them to enter duty- and quota-free.

        The Justice Department appealed, and a ruling is expected next year.

        “The whole thing is kind of crazy when you look at the nuts and bolts of it because costumes are not fancy dress,” Mr. Cappel said.

        Laura Baverman contributed to this report.

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