Presenter
Korrie Thomas
Director, Compliance Houston
•
Joined BDP in 2011
•
27 years of trade experience
Agenda
The Basics What, Why, Who
General Rules of Interpretation
Structure of the HTS
What is Classification?
Determination of the appropriate HTS numerical code to:
identify the proper rate of duty
all statistical data
Applies for every product even
Why Classify?
Classification linked to Partner Government Agency (PGA)
requirements.
Determines revenue to U.S. Government in the form of
Customs Duty.
Provides information for statistical reporting to Department
Importers
Customs (via Ruling Requests)
Custom Brokers (in tandem with importers)
Attorneys
Consultants
The legal liability lies with the importer but also with any expert they may have employed or relied upon for guidance.
Accuracy of any classification is only as good as the information received about the commodity.
Things to Consider
HTS Classification
Country of Origin
Normal Trade Relations (NTR)
Special Programs (C/O related)
GSP/AGOA
Caribbean Basin Initiative Free Trade Agreements
Special Programs (Non C/O related)
Pharmaceuticals Civil aviation
Anti-Dumping
Binding Rulings
Reasonable Care
Established under the Mod Act
transferred legal responsibility from Customs to the importer of
record for:
proper classification
valuation
Applies to all parties in the transaction
Provide proper documentation to back up
Getting Started: Questions to Ask
What is the product called?
Synonyms
Generic name
What does it do?
How does it work?
How is it used?
In what industry is it used?
Commercial Industrial Home
Detailed description
Illustrative materials
Samples Sketches Diagrams Brochures
Breakdown by percentage
Principle use of goods
Commercial, scientific, or common designations.
Any other pertinent information
Tools for Classifying Goods
Support is available from:
HTS
Customs Personnel
Customs Bulletins
Ruling Module/CROSS Website
Explanatory Notes
Common Classification Problems
Shipments arrive without purchase orders
Classification on documents missing or inaccurate
Delays occur while classification being researched
General Rules of Interpretation
Govern classification in the tariff schedule
Hierarchy based
Most fall under the first three rules
US does not use rule 4
Rule 5 deals with packaging
GRI 1
The table of contents, alphabetical index, and titles of
sections, chapters and sub-chapters are provided for
ease of reference only;
for legal purposes
, classification shall be determined
according to the terms of the headings and any
relative section or chapter notes and, provided such
headings or notes do not otherwise require,
GRI 2
(a) Any reference in a heading to an article shall be taken to include a
reference to that article incomplete or unfinished, provided that, as
entered, the incomplete or unfinished article has the essential
character of the complete or finished article. It shall also include a
reference to that article complete or finished (or falling to be classified
as complete or finished by virtue of this rule), entered unassembled or
disassembled.
(b) Any reference in a heading to a material or substance shall be taken to
include a reference to mixtures or combinations of that material or
substance with other materials or substances. Any reference to goods
of a given material or substance shall be taken to include a reference
to goods consisting wholly or partly of such material or substance. The
classification of goods consisting of more than one material or
GRI 3
When, by application of rule 2(b) or for any other reason, goods are, prima facie,
classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to
headings providing a more general description. However, when two or more
headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or
component which gives them their essential character, insofar as this criterion is applicable.
(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
GRI 4 (not used in the US)
Goods which cannot be classified in accordance with the
above rules shall be classified under the heading
GRI 5
In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein:
(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and entered with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to
containers which give the whole its essential character;
(b) Subject to the provisions of rule 5(a) above, packing materials and packing
containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this
provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.
GRI 6
For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related sub-heading notes and, mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.
Additional Rules of Interpretation
One rule which provides guidance on use provisions for purposes of classification.
Additional U.S. Rule of Interpretation are found only in the U.S. version of the HTS 1. In the absence of special language or context which otherwise requires--
(a) a tariff classification controlled by use (other than actual use) is to be determined in accordance with the use in the United States at, or immediately prior to, the date of importation, of goods of that class or kind to which the imported goods belong, and the controlling use is the principal use;
(b) a tariff classification controlled by the actual use to which the imported goods are put in the
United States is satisfied only if such use is intended at the time of importation, the goods are so used and proof thereof is furnished within 3 years after the date the goods are entered;
(c) a provision for parts of an article covers products solely or principally used as a part of such articles but a provision for "parts" or "parts and accessories" shall not prevail over a specific provision for such part or accessory; and
(d) the principles of section XI regarding mixtures of two or more textile materials shall apply to the classification of goods in any provision in which a textile material is named.
Treatment of Parts and Accessories
Classified in own heading (
Eo Nomine
)
Classified with the article if heading so provides
Eo Nomine Parts
8407
Spark-ignition Engines
8408
Diesel Engines
8413, 8414
Pumps
8481
Valves
8482
Bearings
8483
Transmissions
8484
Gaskets
8501
Motors, generators
8508
Electro-mechanical hand tools
8511
Electrical ignitions/Starting equip
8535
Switches
8536
Motor Starters
Use the General Rules of Interpretation, in order
Consult Legal Notes, Section and Chapter notes
Stick to headings, the same sub-description may appear under
more than one heading
Have substantive back-up for all classifications used or for any
changes made by either you or by customs;
Review at least annually; develop communication protocols with
your customs broker.
Legal Notes
Define the scope
Direct user to the appropriate location in the tariff
Provide exclusion details
Provides specific inclusions
Provides definitions and terms used
The Harmonized Tariff
International
21 Sections, by industry
97 Chapters by general description
5000+ headings, sub-headings
United States
22 Sections, by industry
99 Chapters by general description
The Structure of the US HTS
Chapters 1-97: Commodity Provisions
Chapter 98: Special Classification Provisions
Chapter 99
Temporary Legislation
Temporary Modifications
Contents of the US HTS
Title Pages
Table of Contents
General Rules of Interpretation (GRI)
General Notes (GN)
General Statistical Notes (GSN)
Statistical requirements
Statistical annotations
Statistical reporting number
Abbreviations
Reporting of exports
Chemical Appendix
Pharmaceutical Appendix
Intermediate Chemicals for Dyes
Appendix
Statistical Annex A (Schedule C,
Country and Territory Designations for
U.S. Foreign Statistics)
Statistical Annex B (International
Standard Country Codes-ISO)
Statistical Annex C (Schedule D, U.S.
Customs Districts and Port Codes
for U.S. Foreign Statistics)
Finding a Tariff Number
Section Title Page (Section Notes) XI
Chapter Title Page
(Chapter Notes) 61 Heading Descriptions 6106 Subheading Descriptions (International Level) 6106.20
U.S. Subheading – National Level
(Tariff Assessment)
6106.20.10
U.S. Statistical Subdivision
Example
Flashlights are classified under HTSUS 8513.10.2000
“Portable electric lamps designed to function by their own
source of energy…”
Chapter
85
Heading
8513
Subheading
8513.10
Rate Subheading
8513.10.20
Statistical Subheading
8513.10.2000
Section, Chapter & Subheading Notes
Also called legal notes
Have same legal weight as headings and subheadings
Have international status
Duty Rate Types
Unconditionally Free
Ad Valorem
Specific duty rate
(19CFR) Regulations Chapter 10
Articles conditionally free, subject to a reduced duty rate
Special Programs
Free Trade Agreements
Other Preferential Trade Programs
Instruments of International Trade
Returned Articles
Temporary Imports
Actual Use
Review this portion of the CBP Regulations to ensure that you have met all of the documentary requirements for any duty free or reduced duty program you are utilizing.
Special Programs
Generalized System of Preferences (GSP)
A, A*,A+
African Growth and Opportunity Act
D
Caribbean Basin Economic Recovery Act
E, E*
Andean Trade Preference Act
J, J*, J+
Dominican Republic/Central America (DR/CAFTA)
P, P+
Caribbean Basin Trade Partnership
R
Free Trade Agreements
Australia FTA
AU
Morocco FTA
MA
Singapore FTA
SG
Peru FTA
PE
Oman FTA
OM
Korea FT
KR
Colombia FTA
CO
Panama FTA
PA
Bahrain FTA
BH
NAFTA – Canada
CA
NAFTA – Mexico
MX
Chile FTA
CL
Israel FTA
IL
Jordan FTA
JO
CAFTA-DR
P
Other Preferential Trade Programs
There are other duty free/reduced duty programs that have nothing to
do with the country of origin.
Agreement on Trade in Pharmaceutical Products (K)
Immediate Chemicals for Dyes (L)
Automotive Products Trade Act (B)
Instruments of International Trade
Special IIT bond
Final thoughts…
Classification is an art, not a science
It is subject to interpretation, court cases, and precedent
classification expertise is built over time
Customs’ compliance expectation is 94-97% accuracy
It is easy to have a “misclassification”
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Contact information
•
Korrie Thomas
•
Phone: 281-775-8338 Mobile: 832-259-9301
•
Email:
•
15333 JFK Blvd, Suite 700, Houston, TX 77032
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