Tariff classification: Trust the process

No matter where you import goods in the world there are some basic principles that we must get right each and every time. Those include value, country of origin and the classification of your product. Let’s take a moment to understand some of the basic details when it comes to managing this inside of your company.

Tariff classification under the Harmonized System often appears difficult and complex. From time to time, trying to “globalize” your product brings some additional and necessary research to the process of classifying your goods.

Having your product correctly identified does take some skill as it relates to knowing the details and how to manage through the proper level of granularity. Over the past years, we have offered to our customers a basic education on the overview of the HTS schedule as well as some common examples that cause many of us to ask “where exactly does this fit?” For example, is a tomato a fruit or a vegetable? So how should it be classified? (By the way, it’s a fruit!) People oftentimes do get the classification incorrect, however, these instances do create a new opportunity to learn about the complexity of the tariff classification. 

Tariff classification impacts the amount of duty and taxes that government agencies involve with your goods, as well as many of the Free Trade Agreements or SPI (Special Program Indicators) that are used in our day to day activities.

The classification of a product will be determined based on the language of the headings and the applicable section and chapter notes of the HTS classifications. That's it. End of story. 

So now that we’ve reviewed the basics, what process steps should be in place? 

    1. Gather the facts about your product
    2. Review the section and chapter titles to narrow your search
    3. Identify all the headings that describe your product
    4. Apply the section and chapter notes to eliminate the incorrect headings
    5. Search for rulings, court decisions, and Explanatory Notes to finalize your analysis
    6. Document what you did for later reference and as proof of reasonable care

When changes happen to the HTS, reviewing your processes in place will provide benefits, however - identifying the changes in advance can go a long way to managing the international classification of your good(s).

Understanding these changes will have a positive impact on your systems for product management as well as with your suppliers and/or end-use customers to avoid any disputes that can occur.

And when in doubt, don’t forget to Trust the Process!