USA: Tariff classification basics

This article by Jennifer Diaz and Sharath Patil of MSI's Florida specialist law member Diaz Trade Law provides a basic overview of the complex process of classification, practice tips on meeting the reasonable care standard, how to effectively classify goods imported into the U.S., and additional resources to assist in the classification process.

Product classification is an internationally shared process among all trading countries. In the U.S., products are classified according to the Harmonized Tariff Schedule of the U.S. (HTSUS). When entering goods into the U.S., the HTSUS designated 10-digit HTS code is required and used to determine the applicable duty rate. The HTS is declared by the importer and used to assess tariffs, determine eligible free trade agreements, generate trade statistics, and monitor quota or controlled goods. U.S. Customs and Border Protection (CBP) requires an importer of record, among other responsibilities, to exercise reasonable care to determine the classification of a good, pay the correct duties, and appropriately avail itself of duty saving opportunities like free trade agreements, China tariff exclusions, and other duties. Failing to meet the reasonable care standard exposes an importer to potentially high penalties under 19 U.S.C. 1592 and can subject an importer to detention or seizure of goods. Practice Tip: Importers often misclassify their products, partly because the HTS system is complex, and partly because some importers mistakenly believe the duty to correctly classify goods lies solely with their customs broker. Misclassification is a key rationale for CBP enforcement. HTSUS The HTSUS is divided into 22 sections, with commodities arranged primarily according to usage and economic activity. Within these sections are 99 chapters arranged according to levels of processing, with primary commodities—such as food products and animals—classified in the earlier chapters and more technically complex products—such as automobiles, machinery—classified later. Practice Tip: Experts use the following resources to help determine the correct HTS: • HTSUS • Explanatory Notes (EN) • General Notes • General Rules of Interpretation (GRI) • Customs Rulings Online Search Systems such CROSS or CBP Binding Rulings Read the full article (pdf) >>