Chapter 3. The Harmonized Tariff Schedule of the United States and Tariff Classification

• Author: Heather Pinnock, joe Shankle
• Pages: 39-61

CHAPTER 3

The Harmonized Tariff Schedule

of the United States and Tariff

Classification

HEATHER PINNOCK

JOE SHANKLE1

INTRODUCTION H

“How much is it going to cost me to import my merchandise into the United

States?” That’s the “bottom line.” Since duty rates are based on the classification

of imported merchandise, the single most important factor in determining the

import duty assessed on an importer’s merchandise is, frequently, its classification

under the Harmonized Tariff Schedule of the United States (HTSUS). Using “rea-

sonable care” when classifying a good under the HTSUS not only is essential to

determining the correct rate of duty, but is an obligation imposed on you by the

Customs Modernization Act.2 The failure to use reasonable care in the classifica-

tion of your merchandise may result in monetary penalties as well as delayed

clearance of your cargo. The HTSUS, in addition to setting the applicable rate of

duty, is also the source for determining some import restrictions, i.e., quotas, that

may apply to your imported merchandise.

The purpose of this chapter is to introduce you to the HTSUS and enable

you to develop an understanding of the tariff classification of imported merchan-

dise. Along the way, you should develop an appreciation of how to formulate

arguments to present to U.S. Customs and Border Protection (CBP) in support

of the HTSUS subheading in which you believe your merchandise is properly

classified.

THE HARMONIZED TARIFF SCHEDULE H

OF THE UNITED STATES

The HTSUS is the implementation by the United States of the uniform method of

classifying goods developed by the World Customs Organization’s Harmonized

System Convention. In theory, if merchandise is classified under the HTSUS, that

same classification should apply to the merchandise when it is imported into most

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other countries. Of course, each country that uses the international “Harmonized

System” may interpret it slightly differently.

As a part of the United States Code, the HTSUS3 is U.S. statutory law that

must be complied with when importing merchandise into the United States.

Because it is U.S. law, the HTSUS is subject to interpretation by CBP, with the

initial judicial review before the U.S. Court of International Trade (CIT). The CIT

is a unique federal court whose jurisdiction is limited to international matters,

including the resolution of classification disputes between importers and CBP.

Appellate review of CIT decisions pertaining to customs matters, including class-

ification, is handled by the U.S. Court of Appeals for the Federal Circuit.

The HTSUS comprises a Table of Contents, the General Rules of Interpreta-

tion, the Additional U.S. Rules of Interpretation, the General Notes, the General

Statistical Notes, the Tariff Provisions, an Appendix, and an Index. It is advisable

to carefully examine the entire HTSUS. You can view and download the HTSUS

at the U.S. International Trade Commission (ITC) Web site, http://www.usitc

.gov.

The General Notes

While our primary focus is to help you understand how to classify imported

merchandise, we would be remiss if we did not fully explain the HTSUS, because

the HTSUS is more than just a tariff schedule. A significant aspect of the HTSUS

is the General Notes. The General Notes provide importers with a wealth of

information about the importation of merchandise. They must be referenced if

you are to be considered as exercising “reasonable care” in the importation of

your merchandise. General Note 2, for example, identifies the “customs territory

of the United States” as only “the States, the District of Columbia and Puerto

Rico.”4 The HTSUS is, therefore, only applicable to merchandise imported into

those areas and not, for instance, into a U.S. possession. General Note 3 addresses

the “Rates of Duty” and identifies, among other matters, when the lower Column

 “general” and “special” rates of duty apply, as opposed to the generally very

high Column 2 rates of duty.5 General Note 3 also sets forth significant other

information essential for the proper interpretation of the HTSUS.

One of the most significant aspects of the General Notes, significant because it

may provide opportunities to reduce your import duties and fees, are the descrip-

tions of the application of U.S. tariff preference legislation, such as the General-

ized System of Preferences,6 the Andean Trade Preference Act,7 and the Afri-

can Growth and Opportunity Act,8 as well as U.S. trade agreements, such as the

North American Free Trade Agreement,9 the U.S.-Jordan Free Trade Area Imple-

mentation Act,0 the U.S.-Chile Free Trade Agreement, and the U.S.- Australia

Free Trade Agreement,2 just to mention a few.3 If your merchandise qualifies for

preferential treatment pursuant to U.S. legislation or meets the criteria of one of

the U.S. free trade agreements, your duty savings can be significant.

The General Notes, while legally binding in the United States, are not part

of the international Harmonized System. You will not, therefore, find the U.S.

General Notes in the tariff schedules of other countries.

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