Introduction to Classification

Transcription

1 Introduction to Classification Using the Harmonized Tariff Schedule & Schedule B System

2 Importer/Exporter Responsibilities It is the importer & exporters responsibility to be aware of and comply to, all existing and future regulations of any and all U.S. government agencies controlling imports/exports in the U.S. Every effort is made to ensure that the information presented is current and accurate. I assume no liability or responsibility for the application of the information presented, or any changes, updates, additions or corrections that may exist at the time of presentation. This training is not intended as legal advice or legal guidance. You should consult with an attorney to obtain legal advice. No portion of this material may be copied or distributed without the express written permission from Mike Allocca.

3 Agencies CBP - U.S. Customs & Border Protection - responsible for interpreting and enforcing the Harmonized Tariff Schedule USITC - United States International Trade Commission publishes and maintain the Harmonized Tariff Schedule US Congress - enacted the HTS and made effective 1/1/89. Duty rates are established by U.S. Congress BIS Bureau of Industry & Security Responsible for enforcing & Implementing the Export administration regulations.

4 Why is Tariff Classification Important? Rate of duty Eligibility for duty-preference programs Country of origin marking Schedule B number Retaliatory trade measures Quotas (tariff-rate and absolute) AD/CVD scope (sort of)

5 Harmonized System HS- Harmonized System Exports Schedule B Number 9,000 Imports HTS Number 18,000

6 Harmonized Tariff System Chapter first 2 digits are the chapter Heading first 4 digits are the heading Subheading first 6 digits are the subheading

7 Harmonized Tariff System Legal The first 8 digits are for legal purposes Statistical All 10 digits are statistical

8 Heading 6307

9 Tools to use to classify 1) You must use the GRI- General Rules of interpretation mandatory by law 2) You must read the chapter/section notes mandatory by law 3) Strongly recommend you use the CROSS- not mandatory but should be 4) Strongly recommend you consider purchasing the (EN) Explanatory Notes Copyright to 2009 the Mike Allocca. WCO not mandatory but should be

10 HTS On-Line Search System

11 CROSS (Snapshots) -

12 Three pieces of information needed First - What is the product? Second - What is it made of? Third - What is it used for?

13 General Rules of Interpretation Must be consulted when classifying merchandise under the HTSUS Provide a rule of decision where more than one provision may potentially apply

14 GRI- General Rules of Interpretation You must use the GRI in order of 1-6. Classification must first be based upon the 4-digit heading. You can only compare 4-digit headings to other 4-digit headings.

15 Other Classification Rules Additional U.S. Rules of Interpretation Additional U.S. Section and Chapter Notes Explanatory Notes World Customs Organization s official interpretation of the HTS Provides commentary on the scope of each heading and subheading Not legally binding

16 Heading exercise How would you classify an electric toothbrush? 8509 Electromechanical domestic appliances, with self-contained electric motor 9603 Brooms, brushes, etc Tooth brushes, including dental plate brushes

17 General Rules of Interpretation GRI 1 The table of contents, alphabetical index and section/chapter/sub-chapter titles are for ease of reference only; Using a 4-digit heading, is it specifically provided for? You must read the chapter and section notes prior to making a final classification

18 GRI 1 (example) Live horses 0101???

19 GRI 1 (example)

20 GRI 1 (example)

21 GRI 1 (example)

22 GRI 2 (a) Articles that are incomplete or unfinished, and/or entered unassembled or disassembled; Will be classified as the complete article. So long as it has the essential character of the complete/finished article.

23 GRI 2(a) example How would you classify an unassembled telephone answering machine? sound recording or reproducing apparatus Reception apparatus for radio broadcasting, whether or not combined, in the same housing, with sound recording or reproducing apparatus or a clock:

24 GRI 2 (b) Mixtures or combinations consisting of two or more materials/substances; As long as the mixture is not elsewhere specified or included then; Classify according to essential character and if possible primary substance.

25 GRI 2(b) example How would you classify a ski boot made primarily of 90% rubber & plastic. Also made with 10% steel? 6402 other footwear with outer soles and uppers of rubber or plastic Articles and equipment for general physical exercise, gymnastics, athletics, other sports (including table-tennis) or outdoor games etc.

26 What if? If a product can be classifiable under two or more headings, goto GRI 3.

27 GRI 3(a) If a product can be classifiable under two or more headings; You must classify using the heading that provides the most specific description.

28 GRI 3 (a) example How would you classify a canoe? 8903 Yachts and other vessels for pleasure or sports; row boats and canoes: 8907 other floating structures

29 GRI 3(b) If you have a mixture, product made up of different components, or sets for retail sale; Classify according to the component which gives the mixture, product or set it s essential character.

30 GRI 3(b) Sets Must meet all of the following criteria: consist of at least two different articles which are, prima facie, classifiable in different headings. consist of products or articles put up together to meet a particular need or carry out a specific activity; and put up in a manner suitable for sale directly to users without repacking (e.g., in boxes or cases or on boards).

31 GRI 3(b) example How would you classify a vitamin supplement consisting of vitamin A(10%), Vitamin B1(60%) and vitamin C (30%); Vitamin A Vitamin B Vitamin C

32 GRI 3 (c) When goods can t be classified according to GRI 3(a) or GRI 3(b); Then classify according to the heading, which occurs last in numerical order (within that same heading). Making sure it is among goods which equally merit consideration.

33 GRI 3(c) example How would you classify a vitamin supplement consisting of equal amounts of Vitamin A, Vitamin B1 and Vitamin C? Vitamin A Vitamin B Vitamin C

34 GRI (4) If you unable to classify according to the other GRI s; Then classify according to the heading to which they are most similar (akin). This should be used very infrequently as GRI 1-3 should cover most goods.

35 GRI (4) example How would you classify special fireworks 1.4 G of class D? Fireworks, signaling flares, rain rockets, fog signals and other pyrotechnic article; Display or special Fireworks (class 1.3G) Class 1.4G (class C) Other

36 GRI 5 (a) Containers/cases are classified with the article your importing if: 1) Specifically shaped or fitted for that article (s) 2) Suitable for long-term use and 3) Entered with the articles and 4) When normally sold with the article

37 GRI 5 (a) examples Examples such as camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers etc. fall under GRI 5 (a) This rule does not apply to containers which give the article/product its essential character. I.e. glass bowl containing candies. You would classify under the glass bowl heading and classify the candies separately.

38 GRI 5 (b) Packaging containers or materials not normally intended to be reused, are classified with the articles in which they are imported; I.e. cardboard boxes, shrink wrap, metal bands, Styrofoam peanuts etc..

39 GRI 5 (b) This rule does not apply to packaging materials or containers that are clearly suitable for repetitive use; I.e. metal/steel or iron containers for compressed or liquefied gas. These containers would be classified separately from the product they hold.

40 GRI (6) GRI s 1-5 are to be reapplied when classifying at the subheading level (6-10 digit level); Only subheadings at the same level, within the same heading are comparable. Must read the section, chapter, subchapter notes that apply.

41 Exporting The Schedule B has 98 chapters. Use the Schedule B number on your EEI/AES record to export. GRI s apply exactly the same to exports.

42 Chapter 98 Exporting When re-exporting items under repair/warranty that were previously imported use chapter 98. Importing When importing an item that will be here temporarily, samples, & special classifications use chapter 98.

43 Common Errors to Avoid You do not have a list of each product along with the proper classification. Always using the same HS number for every product. Base classification decisions on duty instead of GRI. Don t read the chapter or section notes. Don t update your list annually. Don t use the CROSS. Don t obtain binding rulings.

44 Five ways to get help 1. Try to classify it yourself on 2. Work together with a customs broker to assist in classification 3. Use the Customs CROSS system for similar products 4. Get a binding ruling from US Customs 5. Hire a trade expert/consultant to assist in classification

45 Thank You Allocca Enterprises, Inc. Mike Allocca