If you work at a business that is contemplating or currently involved in the import of goods to the United States, then you will become unavoidably familiar with the complex system used for classification of your goods for import or export. The United States uses the Harmonized Tarriff System or HTS to assign a 10 digit code that designates exactly what you are importing/exporting to or from the USA. These digits represent a classification hierarchy for your goods which is shared by many nations. The US HTS codes for instance, takes the first six digits from the international HS code and then adds additional digits for further classification.
The United States International Trade Commission publishes and maintains the HTS and provides technical information on its structure and ongoing modifications. Enforcement is handled by the Bureau of Customs and Border Protection (CBP) of the Department of Homeland Security. These agencies are solely authorized to interpret the HTS, to issue legally binding rulings or advice on the tariff classification of imports and their treatment upon entry into the United States, and to administer customs laws. Failure to categorize properly can lead a number of problems such as:
- Non-compliance penalties
- Border delays
- Seizure of goods
- Denial of import privileges
Using the HTS Correctly Makes Everything Smooth… Sort Of
From a business standpoint, proper use of the HTS system is a dollars and cents issue. If you don’t pick the correct classifications, you could either pay more in duty or underpay, which will lead to re-payment and possible fines. Over time, these kinds of mistakes add up and cost U.S. companies millions of dollars every year.
Here’s an example:
Understanding the nuances of the HTS and its multi-faceted hierarchy has made more than a few customs brokers go grey at an early age. Yet many companies with a simple product line or very few products may choose to navigate supply chain import on their own. Here are a few general tips to keep in mind when dealing with product classification.
Know Your Product
It is surprising how many companies think product classification is purely an administrative activity. In fact it is critically important to opt for product knowledge when assigning people to the task of goods classification. It is important to understand that Classification can be determined by a number of factors, including composition, form, and use. Whomever is doing product classification needs to know details of materials and product construction in order to obtain the most favorable tariff classification. At the very least they need access to product experts or drawings, and they do need the expertise to ask the right questions.
Read the Spec Carefully
While the HTS is more than 3000 pages long, a careful reading and rereading of the spec is not only suggested, it is really required. This includes the table of contents, headings, notes and even punctuation standards used in the document convey a great deal of information.
Use Free Tools to Help
There are a number of free tools out there to help you search down codes or additional rulings that may pertain to your situation. Here are a few.
• Ports directory – This link provides a list of Customs ports of entry by state. There are many individuals who can assist with classification of your imports.
• Customs Rulings – This is a searchable database that provides links to official Memoranda of Customs Rulings for individual products. The product you have may have been classified in this manner, saving a lot of time and effort.
• eRulings – This is a link to obtain eRulings, or official Customs rulings by email. There is a list of information and paperwork that you need to get together and provide to Customs which this will help you with.
Get Help If You Need it
At JM Rodgers we understand that not all companies with import/export needs have the time or background to fully understand relevant Customs laws. Documents like the Harmonized Tariff Schedule can be difficult to navigate without prior knowledge or a basic understanding of the CBP’s system.
If you’d like a professional to review your classifications, call JMR today.