Home / Topics / 09. HARMONIZED TARIFF SCHEDULE (Part 1)

How to Read the Tariffs? | G.R.I. How to Interpret the Tariff?

Open Sources: Harmonized Tariff Schedule of the United States By Chapter http://www.usitc.gov/tata/hts/bychapter/index.htm

As in the previous, classification is simply finding the correct tariff number and duty rate on an imported article. Proper classification of merchandise requires (1) KNOWLEDGE OF THE ARTICLE ITSELF and (2) EXCELLENT KNOWLEDGE OF the Harmonized Tariff Schedule (HTS).

The United States Harmonized Tariff Schedule (HTSUS, USHTS, or HTS for short) is the official document used by US Customs to determine tariff classifications, import duty rates, quotas, and all other product specific import details.

This article is intended to provide a general understanding of the structure of the Harmonized Tariff Schedule and the method used to determine a product?s classification.

Published with approval from http://www.itintl.com/rss/. http://www.itintl.com/customs-tariffs/US_Import_Tariff.php Informed Trade International is an import/export compliance community devoted to US Customs import and export practices.

How to Determine Import Tariffs on International Freight?

US import duty and taxes for international freight can be determined by using the United States Harmonized Tariff Schedule. This exceptionally large book breaks down into categories virtually every product and commodity imported into the United States. Variations of the HTS are used around the world in a cooperative effort to regulate global trade.

There are three primary purposes behind the USHTS:

1. The US Harmonized Tariff Schedule is used to assess import duties and taxes on imports. The US Customs Service is the second largest source of revenue for the US Government, second only to the Internal Revenue Service.

2. The HTS is used to track import and export statistics for the US Department of Census. Each month hundreds of billions of dollars in goods and services are imported and exported from the United States. The Tariff Schedule is designed so that the Federal Government can effectively track the import and export of individual product groups into and out of the United States.

3. Lastly, the USHTS is a tool to enforce the United States political agenda. By raising and lowering duty rates and import restrictions from specific countries or around the world, the United States can exercise a certain amount of economic influence.

How to Read the Tariffs?

The Harmonized Tariff Schedule is broken into two major parts ? notes and classification.

The notes portion of the HTS comprises approximately one fourth to one fifth of the Tariff Schedule. It contains rules of classification, details on region-specific trade programs (NAFTA and the CBERA), recognized countries and abbreviations, and a list of recent changes to name a few. For purposes of this article we will focus primarily on the rules of classifications.

Reading the HTS ? Notes

Each chapter of the HTS contains notes on classifying products within that chapter. It is very important to thoroughly review these chapter notes before continuing with the classification process. Often times, these notes will list specific articles that can or can not be classified within that chapter. The notes can contain lists of acceptable definitions, clarifications to chapter headings, and other important information.

Reading the HTS ? Headings and Subheadings

A Harmonized Tariff Classification is a 10 digit number used to identify a specific product.

Here?s a sample from Chapter 82 of the HTS (TOOLS, IMPLEMENTS, CUTLERY, SPOONS AND FORKS, OF BASE METAL; PARTS THEREOF OF BASE METAL)

8201.10.00.00 is a handtool of a kind used in agriculture, horticulture or forestry; and more specifically and spade or shovel.

The first two digits (82) of this classification are a reference to the appropriate chapter. The first four digits combined (8201) comprise the article's heading within that chapter, while the last six digits (10.00.00) break that heading down into subheadings.

In our example, this product is broken down in the following manner:

Chapter 82: TOOLS, IMPLEMENTS, CUTLERY, SPOONS AND FORKS, OF BASE METAL; PARTS THEREOF OF BASE METAL

Heading 8201: Handtools of the following kinds and base metal parts thereof: spades, shovels, mattocks, picks, hoes, forks and rakes; axes, bill hooks and similar hewing tools; secateurs and pruners of any kind; scythes, sickles, hay knives, hedge shears, timber wedges and other tools of a kind used in agriculture, horticulture or forestry

Subheading 8201.10.00.00: Spades and shovels, and parts thereof

Reading the HTS ? Unit of Quantity
This is the US Customs acceptable measure of quantity for a product. This measurement must be reflected on your commercial invoice.

Reading the HTS ? Rates of Duty
The Rates of Duty Column determines the amount of duty you will have to pay on an imported product.
Typically these rates of duty are expressed in a quantity/cost rate (e.g. $0.04/kg) or as a percentage of the value of the good (e.g. 2.5% of the value).

Notice that the Rate of Duty Column is divided into three interior columns. These columns are interpreted as follows:

  1. General (aka Column 1): The typical rate of duty from the majority of the world?s countries.
  2. Special: Special duty rates assigned to specific countries or import scenarios.
  3. Column 2: The special rate of duty assigned to trade restricted countries. Cuba, North Korea, etc.

General Rules of Interpretation: How to Interpret the Tariff?

The General Rules of Interpretation (GRI?s) outline the method used to determine a product?s classification. They also address special scenarios wherein a final classification may be difficult to determine. The General Rules of Interpretation below have been taken verbatim from the HTS (current as of 11/1/04).

Classification of goods in the tariff schedule shall be governed by the following principles:

1. The table of contents, alphabetical index, and titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions:

2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this rule), entered unassembled or disassembled. (b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of rule 3.

3. When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows: (a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods. (b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable. (c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.

5. In addition to the foregoing provisions, the following rules shall apply in respect of the goods referred to therein: (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and entered with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This rule does not, however, apply to containers which give the whole its essential character; (b) Subject to the provisions of rule 5(a) above, packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.

6. For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this rule, the relative section, chapter and subchapter notes also apply, unless the context otherwise requires.

 
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