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back to index backAMERItalk August,  2005

Demystifying U.S. Import Classification

Classification is a topic that can confuse even the most experienced international trade professional.

An importer's interpretation of the ultimate use of a product may differ from its use as identified within the rules and regulations established by U.S. Customs and Border Protection (CBP). To further complicate matters, the importer is responsible for interpreting the rules and applying them correctly.

This article addresses basic questions surrounding U.S. import classification, followed by a list of resources to ensure best practices for applying classification determinations.

1. What is classification, how is it determined, and why is it necessary?

All articles imported into the Customs Territory of the United States (the 50 states, District of Columbia, and Puerto Rico) are subject to classification. It is the process by which an imported item is categorized in accordance with the Harmonized Tariff Schedule of the United States (HTSUS). The HTSUS originates from the Harmonized Commodity Description and Coding System, or more commonly, the Harmonized System (HS). It was developed by the World Customs Organization to facilitate international trade, is utilized by 177 countries, and encompasses a core” coding process sectioned by branches of industry and commerce which range from raw materials to finished goods. This process is common to all countries out to the 6-digit level, however, each country has the opportunity to modify or expand their existing tariff to allow for product classification subdivisions based upon specific tariff or statistical needs. The U.S. tariff item classification is a ten digit number. For example, a classification for a Men's cotton jacket is 6201.92.2051. The MFN duty rate applicable to the classification is 9.4%.

An accurate product classification is dependent upon proper utilization of the HTSUS, as well as, the application of specific rules known as the General Rules of Interpretation (GRI's). In conjunction with the GRI's, appropriate Section and Chapter notes should be reviewed before selecting the 10-digit tariff item and corresponding duty rate that most properly applies to the merchandise under consideration.

The classification of an imported item enables CBP and other government agencies to assess correct duties, collect accurate statistics, and determine whether or not specified legal requirements are being met upon each entry transaction.

2. Who is responsible to determine the U.S. HTS classification?

According to the Customs Modernization Act of 1993, it is the responsibility of the importer to use what is termed as reasonable care” to enter, classify and value their goods upon importation into the United States.

3. What happens if a product is misclassified and what can an importer do to avoid this?

CBP will conduct random and targeted audits to determine if an importer is compliant with established rules and regulations associated with the classification of imported goods. A misclassification may result in overpayment or underpayment of duties. If that misclassification is found to be negligence, gross negligence, or fraud, violations could result in monetary fines and penalties, seizure of goods and, possibly, criminal charges.

To avoid a potential misclassification, importers will utilize a customs broker or third party vendor for assistance in classifying their goods. An importer also has the option to solicit the help of CBP directly and request a binding tariff classification ruling, however, a binding tariff classification ruling is final. The importer must utilize the classification provided by CBP on all import transactions pertaining to that commodity regardless if they agree with the decision.

Precise product classification is critical to a successful import compliance program. Whatever option is chosen, the importer should have a clearly defined process and provide each party with adequate descriptive information including but not limited to, a sample or picture of the item, engineering drafts or records, screen prints of/or direct access to part information systems, as well as access to appropriate internal engineering personnel.

Available Resources:

U.S. Customs and Border Protection

American Association of Exporters and Importers

National Customs Brokers & Freight Forwarders Association


Source: J.P. Morgan Chase Vastera newsletter - GAI

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