The Harmonized Tariff Schedule of the United States and Tariff Classification

• Author: Brandi B. Frederick, Geoffrey M. Goodale
• Pages: 41-65

CHAPTER 3

The Harmonized Tariff Schedule

of the United States and Tariff

Classification1

BRANDI B. FREDERICK, GEOFFREY M. GOODALE2

H INTRODUCTION

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

States?” That’s the “bottom line.” The classification of imported merchandise

determines the duty rate; thus, the single most important factor in determining

the duty assessed on an importer’s merchandise is most often its classification

under the Harmonized Tariff Schedule of the United States (HTSUS). The Cus-

toms Modernization and Informed Compliance Act requires importers to use

“reasonable care” when classifying a good under the HTSUS.3 The failure to use

reasonable care in the classification of your merchandise may result in monetary

penalties as well as delayed clearance of your cargo. In addition to setting appli-

cable duty rates, the HTSUS is also the source for determining whether certain

import restrictions (i.e., quotas) apply to your imported merchandise.

This chapter will introduce you to the HTSUS and explain how to determine

the proper tariff classif ication of imported merchandise. It will also provide a

guide by which you can devise arguments to present to U.S. Customs and Bor-

der Protection (CBP) supporting the HTSUS subheading used to classify your

merchandise.

H THE HARMONIZED SYSTEM AND THE HARMONIZED TARIFF

SCHEDULE OF THE UNITED STATES

The HTSUS is predicated on the Harmonized Commodity Description and Cod-

ing System (Harmonized System), an internationally standardized system of

names and numbers to classify traded products developed and maintained by the

World Customs Organization (WCO). Governed by the International Convention

on the Harmonized Commodity Description and Coding System (Harmonized

System Convention), which was enacted in 988 under the auspices of the Cus-

toms Cooperation Council (the WCO’s predecessor), the Harmonized System

comprises about 5,000 commodity groups, each identified by a six-digit code,

that are arranged in a legal and logical structure.4 The official inter pretation of

41

bre53031_03_c03_p041-066.indd 41 3/2/16 12:17 PM

42 CHAPTER 3

the Harmonized System, which is used by over 200 countries and estimated to be

utilized in connection with more than 98 percent of merchandise in international

trade, is set forth in the Harmonized System’s Explanatory Notes.5 Through its

Harmonized System Committee, the WCO seeks to secure uniform interpreta-

tion of the Har monized System by the contracting parties to the Harmonized

System Convention, although each country has reasonable flexibility to interpret

the Harmonized System in slightly different ways.6

The HTSUS7 is part of the United States Code and is therefore statutory law,

subject to interpretation by CBP. The initial judicial review of Customs determi-

nations is before the U.S. Court of Inter national Trade (CIT). The CIT is a federal

court with jurisdiction limited to disputes involving customs and international

trade, including resolution of classification disputes between importers and CBP.

Appeals of CIT decisions per taining to customs matters, including classification,

are to the U.S. Court of Appeals for the Federal Circuit.

The HTSUS includes a Table of Contents, the General Rules of Inter preta-

tion, the Additional U.S. Rules of Inter pretation, the General Notes, the General

Statistical Notes, the Tariff Provisions, an Appendix, and an Index. Importers

should review and be familiar with the entire HTSUS, which can be accessed

and downloaded from the U.S. International Trade Commission (ITC) website at

http://hts.usitc.gov/current.

The General Notes

The primary focus of this chapter is to help you understand how to classify

imported merchandise, but we would be remiss if we did not fully explain the

HTSUS, which is more than just a tariff schedule. The General Notes are a signifi-

cant aspect of the HTSUS. The General Notes provide importers with a wealth

of infor mation about importing merchandise. One aspect of exercising “reason-

able care” includes referencing the General Notes. For example, General Note 2

defines the “customs territory of the United States” as “the States, the District of

Columbia and Puerto Rico.”8 Therefore, the HTSUS only applies to merchandise

imported into those areas and not others, such as U.S. possessions. General Note

3 explains the “Rates of Duty” applicable to imported goods, including when the

Column  “general” and “special” rates of duty apply, as well as when the higher

Column 2 rates of duty apply.9 General Note 3 also sets forth significant other

information (for example, exemptions,0 commingled goods, and abbreviations2)

essential for the proper interpretation of the HTSUS.

The General Notes also explain application of U.S. tariff preference legisla-

tion, which may provide significant reductions in import duties and fees, such as

the Generalized System of Preferences3 and the African Growth and Opportunity

Act,4 as well as U.S. trade agreements, such as the North American Free Trade

Agreement,5 the U.S.-Jordan Free Trade Area Implementation Act,6 the U.S.-Chile

Free Trade Agreement,7 and the U.S.-Australia Free Trade Agreement,8 just to

mention a few.9 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.

bre53031_03_c03_p041-066.indd 42 3/2/16 12:17 PM