READING HTS IN INTERNATIONAL SHIPPING

HTS is the uniform in international shipping for entire world.
Schedule A for international shipping IMPORTS.
Schedule B for international shipping EXPORTS.
In international shipping duty rates are different in different countries. However international shipping HTS numbering system is recognized worldwide and the same HTS numbers used for importing goods in the USA, France, Russia etc.

International shipping HTS is grouped by articles of similar quantity and it has:

It starts from basic and row international shipping materials (live animals etc) and then goes to plant, fish... machinery... i.e. IF CHAPTER HAS HIGHER NUMBER, THEN THE ITEM IS MORE ADVANCED FROM ITS NATURAL STATE.

Each chapter is divided in:

United States used 10 digits #. Most countries used 8 digits #. The last two # in the USA are for statistical purpose.

BEFORE YOU DO ANYTHING WITH HTS YOU HAVE TO CHECK CHAPTER'S NOTES AND SECTION'S NOTES before look up any HTS#. Reading those chapter's and section's notes will either answer questions right or wrong.
Those notes will say:
- This chapter DOES NOT COVER ..., or
- This chapter COVERS ..., or
- It gives you definition of how you classify something.

 

GENERAL RULES INTERPRETATION (G.R.I.) IN INTERNATIONAL SHIPPING

Since different things in international shipping can be named differently there is going to be a SET OF STANDARDS ON HOW YOU CLASSIFY ITEMS AND HOW YOU CALL IT. (Example: You have a knife with a little compass on it. Is that knife or compass?)

There must be an international shipping uniform way of the finding of way how to classify items, as well as method of the classification.

ALL THESE RULES ARE ESTABLISHED IN G.R.I. - General Rules of Interpretation for international shipping. (And then it is expended in General Notes of Clarification - G.N.C.)

G.R.I. addresses the Essential Characters. The Essential Characters is the attribute that best serves or describes that item and distinguish it from something else, also called HIERARCHY OF CLASSIFICATION, since it is set hierarchal.

HIERARCHY OF CLASSIFICATION:

1. Eo Nominee (lat.) - means BY NAME. What is that call?
What you called it. What is it called. What is more specific description of that product when you call it.

2. Part of - Is that part of something?
Most important that the part of of something MUST BE UNIQUE for that product.
Example: International shipping bicycle's pedal is unique for the bicycle. However, an electric motor can be part of multiply types of international shipping machines and should be looked under Electric motors.

3. Article of - Has to do on composition what component make up this product.

4. Used - How is it used.
Example: Use an internationally shipping hammer for door stop. But it is still an international shipping hammer. Then go to #1 BY NAME. However, a circuit board: it can be used for video games; or PC; or dishwasher machines etc. I.e. each has a separate heading separated by USE.

Try define HTS# to a category above. However, if it does not go to those 3 category above, then go to USED.

*If Customs questions about the Use, you must have 3 years of proof of that Use, with documents on it.

5. Similar to (or Similitude) - if not all above can be used then go to something "Similar to".

 

Rules of interpretation in international shipping:

A. RULE OF ENTIRETY
It basically says: If you are international shipping a disassemble bicycle in a box, it is still a bicycle. Not an international shipping bicycle parts.

Example:

5,000 watch movements
+
5,000 cases
--------------------------------
For Customs it is 5,000 clocks

and

5,000 watch movements
+
10,000 cases
--------------------------------
For Customs it is 5,000 clocks
+ 5,000 cases

International shipping parts shipped together disassembled in the same international shipment will be considered as entire item.

This rule may work as a benefit for shippers (importers):
Example:

50 cameras
+
50 regular lenses - 5% duty
+
50 special expensive zoom lenses - 25% duty

 

You may declare it as cameras with zoom lenses attached plus 50 lenses.

Even though it is NOT physically attached, but it is attached "on paper". Importer pays saves on duty since he pays lower rate on the zoom lenses, then he normally pays.

In the real life Japanese send trucks without the body attached (bed of the trucks) and declare it as unfinished international shipping trucks. Then they have a very low rate of duty, because labor will be in the USA and therefore duty free.

B. RULE OF PREDOMINATE FEATURE (applied with #2. Part of.)

Essential Character is a some predominate feature used to classify items.

Example: International shipping brass door knob made from 70% of steel and 30% of brass. Then it has the unique feature - BRASS. Then it must be classified as BRASS DOOR KNOB.

You have something EQUAL: Nails made from 50% of iron and 50% of steel. It is just a nail.

if there is equal headings and neither of the equal headings give you any unique character of the item, then YOU MUST TAKE THE HARMONIZED TARIFF THAT APPEARS LAST IN THE BOOK.

Exemption is international shipping TEXTILE.
International shipping textile goes NOT by % (percentage), but by the WEIGHT OF WOOL OF AGAINST WEIGHT OF COMPOSED COTTON. Which has grater composition of wool.

C. RULE Di Minimus (lat.) - 7% (applied with #2. Part of.)

If an international shipping item has a small part of something, which is really small and it is really does not matter, YOU CAN IGNORE IT, UNLESS IT IS SPECIFICALLY NOTED ON THERE.

Di Minimus set up to 7% (especially for NAFTA). That means all parts up to 7% will not be considered for classification.

D. RULE for PACKING (or Packaging) in international shipping

Packing in international shipping is classified with the items, UNLESS the packing is SUBSTANTIAL and REUSABLE.

If it is SUBSTANTIAL and REUSABLE then it must be classified as international shipping articles and packing SEPARATELY.
Example: International shipping toothpicks in Faberge's egg or liqueur in a crystal bottle. You must separate it.

However, if packing for international shipping is UNIQUE and made exactly for the product, then you will classify this packing with this international shipping product. Example: An international shipping camera case. It is molded to the camera and fits to the camera only. It will be classified as the camera itself.

E. Meddling rule (something is joined together. International shipping of nuts and bolt for example)

If different items or something goes together, then you must classify that with HIGHER CUSTOM'S RATE.
Example: Bolts - 5% duty and nuts - 10%. Then all will be classified for 10%

Exemption: If cost prohibited to take it apart, then you can take it TO THE NEXT LOWER LEVEL OF DUTY.

STATISTICAL NOTES. SETS:

Many international shipping items goes as SETS It marked with "X"- a set. The definition of set is: Two or more different articles.
Example: 12 international shipping golf balls are not a set, but 12 golf balls and... something related to golf games IS a set and will be classified as a GOLF SET.

 

DUTY RATES IN INTERNATIONAL SHIPPING

iN international shipping Castoms Duty rate depends on:

  1. HTS#
  2. Country of Origin

But VALUE depends on Country of EXPORT.

Notice: DUTY and TAXES are totally DIFFERENT THINGS!
Duty = Imported articles ONLY.
TAXES = Imported or Domestic.
Example: International shipping vodka is taxable. No matter it is made in the USA, Russia or Sweden.

There are DIFFERENT TYPES OF DUTY RATES in international shipping:

  1. % OF VALUE - AD VALOREM rate, which is the type of rate most often applied, is percentage of the value of the international shipping merchandise, such as 5% ad valorem.
  2. BY SPECIFIC UNIT (LBS, KILOS, Unit etc.) - rate is a specific amount per unit of weight or other quantity, such as 5 cents per dozen etc.
  3. A COMPOUND rate is a combination of both an AD VALOREM and a SPECIFIC rate, such as 3 cents per pound plus 10% ad valorem.
  4. Duty FREE - that category is growing. NAFTA and other agreements to increase trade.

TIP 1. Before you looking up item's HTS# on the exam:

Before you even go to the HTS# itself UNLESS THE QUESTION GIVES YOU ALL THE SAME ITEMS IN THE SAME CHAPTER (if all 5 answers in the same chapter: 0809.1; 0809.2; 0809.3; 0809.4 and 0809.5. Then you should probably go to HTS# itself) ALWAYS GO TO THE CHAPTER NOTES FIRST. Most likely the answer will be in the Chapter Notes, but not in the HTS# itself.

TIP 2.Headings & Subheadings in international shipping

If items meet headings, then stay in the heading and look for subheadings.

------HEADING----------------------------------------------------------------

------SUBHEADING------------------------------------------------------------

------SUBHEADING----------------------------------------------------

------SUBHEADING---------------------------------------------

------HEADING-----------------------------------------------------------------

------SUBHEADING------------------------------------------------------------

 

Reading General Rules of Interpretation in international shipping. GRI:

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

1. The table of contents (1), alphabetical index(2), and titles of sections, chapters and sub-chapters(3) are provided for ease of reference only (MEANS NO LEGAL STATUS) - The answer to the exam's question: "Which of the following international shipping items DOES NOT HAVE ANY LEGAL STATUS or FOLLOWING ITEMS HAS LEGAL STATUS, EXCEPT... ; 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 international shipping article incomplete or unfinished, provided that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. - See "Bicycle parts in a box". RULE OF ENTIRETY. It shall also include a reference to that the international shipping 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 an international shipping material or substance shall be taken to include a reference to mixtures or combinations of that international shipping material or substance with other materials or substances. - See "Brass doorknob. 70% iron & 30% brass." RULE OF PREDOMINATE FEATURE or DI MINIMUS. Go to HIGHER % or ignore up to 7%, unless it is specifically noted on there. Any reference to goods of a given international shipping material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of international shipping 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, international shipping 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 - Eo Nominee. BY NAME. "Is that a Shirt or it is a Women Shirt, or a Men's Shirt?" 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 international shipping 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 international shipping goods, even if one of them gives a more complete or precise description of the international shipping goods.
 
  (b) Mixtures, composite international shipping 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 - "Brass doorknob. 70% iron & 30% brass." Essential Character. RULE OF PREDOMINATE FEATURE or DI MINIMUS, insofar as this criterion is applicable.
 
  (c) When international shipping 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. - You have something EQUAL: Nails made from 50% of iron and 50% of steel. It is just a nail. If there is equal headings and neither of the equal headings give you any unique character of the item, then YOU MUST TAKE THE HARMONIZED TARIFF THAT APPEARS LAST IN THE BOOK.
 
4. International shipping 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.
-
Similar to (or Similitude). If not all above (1-4) can be used then go to something "Similar to".
 
5. In addition to the foregoing provisions, the following rules shall apply in respect of the international shipping 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. - RULE for PACKING. "A camera case". If packing is UNIQUE and made exactly for the product, then you will classify this packing with this product. This rule does not, however, apply to containers which give the whole its essential character - However, if packing is UNIQUE... RULE for PACKING. "Crystal bottle, Faberge egg.;
 
  (b) Subject to the provisions of rule 5(a) above, packing materials and packing containers entered with the international shipping 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. - However, if packing is UNIQUE... RULE for PACKING. "Crystal bottle, Faberge egg.
 
6. For legal purposes, the classification of international shipping 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. - TIP 2. Headings & Subheadings
 
     

IMPORTANT: In international shipping most answers in the exam questions related to Harmonized Codes are answered in GENERAL NOTES or CHAPTER NOTES. Most of the time you do not have to go in the HTS numbers itself. Example: CHAPTER NOTES#1 SAYS: This chapter covers all live animals except: (a) Fish and crustaceans, mollusks and other aquatic invertebrates, of heading 0301, 0306 or 0307; (b) Cultures of microorganisms and other products of heading 3002; and (c) Animals of heading 9508.
Then the answer can be IT IS NOT COVER...

 

Reading General Notes of Clarification (G.N.C.) in international shipping 

#1. ... All international shipping goods provided for in this schedule and imported into the customs territory of the United States ... are subject to duty or exempt from it... Means that EVERYTHING SUBJECT TO ONE OF THOSE CLASSIFICATIONS: DUTIABLE or DUTY FREE.
       
#2. Customs Territory of the United States... includes only the States (1), the District of Columbia (2) and Puerto Rico (3). - Exam question.
       
#3. Rates of Duty. The rates of duty in the "Rates of Duty" columns designated 1 ("General" and "Special") and 2 of the tariff schedule apply to international shipping goods imported into the customs territory of the United States as hereinafter provided in this note:
  (a) Rate of Duty Column 1.

(i) Except as provided in subparagraph (iv) of this paragraph, the rates of duty in column 1 are rates which are applicable to all products other than those of countries enumerated in paragraph (b) of this note. (Exemptions in 3(b): CUBA, LAOS and NORTH KOREA. It goes to column 2): Column 1 is divided into two subcolumns, "General" and "Special", which are applicable as provided below.

(ii) The "General" subcolumn sets forth the general or normal trade relations (NTR) (Column 1 is for Normal Trade Relations) rates which are applicable to products of those countries described in subparagraph (i) above which are not entitled to special tariff treatment as set forth below.

(iii) The "Special" subcolumn reflects rates of duty under one or more special tariff treatment programs described in paragraph (c) of this note and identified in parentheses immediately following the duty rate specified in such subcolumn. These rates apply to those international shipping products which are properly classified under a provision for which a special rate is indicated and for which all of the legal requirements for eligibility for such program or programs have been met. Where an international shipping product is eligible for special treatment under more than one program, the lowest rate of duty provided for any applicable program shall be imposed. Where no special rate of duty is provided for a provision, or where the country from which a product otherwise eligible for special treatment was imported is not designated as a beneficiary country under a program appearing with the appropriate provision, the rates of duty in the "General" subcolumn of column 1 shall apply.

(iv) Products of Insular Possessions. http://www.macmeekin.com/Library/AAA/Docs/US/Terr-general/GN3(a).htm
- This is regarding programs connected to U.S. insular areas outside the U.S. customs territory (I.E. COUNTRIES WHICH BELONGS TO THE USA, BUT GOVERN THEMSELVES) where merchandise can be assembled and entered into the USA under special duty rates. GUAM, SAMOA, CNMI, US Virgin Islands etc). There is no special codes for that but you must check it out.
...(B) In determining whether international shipping goods produced or manufactured in any such insular possession contain foreign materials to the value of more than 70 percent, no material shall be considered foreign which either-- (1) at the time such goods are entered, or (2) at the time such material is imported into the insular possession, may be imported into the customs territory from a foreign country, and entered free of duty; except that no international shipping goods containing material to which (2) of this subparagraph applies shall be exempt from duty under subparagraph (A) unless adequate documentation is supplied to show that the international shipping material has been incorporated into such goods during the 18-month period after the date on which such international shipping material is imported into the insular possession.
- Most important here that NO MORE THEN 70% OF MATERIALS CAN BE FOREIGN.

*****

(b) Rate of Duty Column 2. 1/ Notwithstanding any of the foregoing provisions of this note, the rates of duty shown in column 2 shall apply to international shipping products, whether imported directly or indirectly, of the following countries and areas pursuant to section 401 of the Tariff Classification Act of 1962, to section 231 or 257(e)(2) of the Trade Expansion Act of 1962, to section 404(a) of the Trade Act of 1974 or to any other applicable section of law, or to action taken by the President thereunder:

Cuba Laos North Korea

That means if CUBA (1), LAOS (2) or NORTH KOREA (3), then you automatically go to the Column 2. If ANY OTHER COUNTRIES, then it will be either in Column 1a or 1b.

*****

The Government of the United States develops Special Programs with countries that need help. Different programs have different rules. Under ?C it lists different rules and letters.

C covers also GENERAL SYSTEM OF PREFERENCES. A, A* or A+
- "A" means that EVERY COUNTRY qualify for special duty rate for this HTS#.
- "A* or A+" means that CERTAIN COUNTIES ARE EXCLUDED or special duty rate for this HTS#. You must look at General
Notes as well as Chapter Notes to see those exclusions. (Actually there are just 3 letters related to those programs: A, E & J.

(c) Products Eligible for Special Tariff Treatment.

   

(i) Programs under which special tariff treatment may be provided, and the corresponding symbols for such programs as they are indicated in the "Special" subcolumn, are as follows:

     

 

Generalized System of Preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A, A* or A+
Automotive Products Trade Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B
United States-Australia Free Trade Agreement . . . . . . . . . . . . . . . . . . . . . . . . . AU
Agreement on Trade in Civil Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C
North American Free Trade Agreement:
Goods of Canada, under the terms of
general note 12 to this schedule. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . CA
Goods of Mexico, under the terms of
general note 12 to this schedule . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . MX
United States-Chile Free Trade Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . CL
African Growth and Opportunity Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D
Caribbean Basin Economic Recovery Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E or E*
United States-Israel Free Trade Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IL
Andean Trade Preference Act or
Andean Trade Promotion and Drug Eradication Act . . . . . . . . . . .. .. .. .. . . . . . . J, J* or J+
United States-Jordan Free Trade Area Implementation Act . . . . . . . . . . . . . . . . JO
Agreement on Trade in Pharmaceutical Products . . . . . . .. . . . . . . . . . . . . . . . . . K
Uruguay Round Concessions on Intermediate
Chemicals for Dyes L
United States-Caribbean Basin Trade Partnership Act . . . . . . .. . . . . . . . . . . . . . R
United States-Singapore Free Trade Agreement . . . . . . . . . . . . . . . . . .. . . . . . . . SG

 

  (d) Certain international shipping Motor Vehicles Manufactured in Foreign Trade Zones. - In general regarding assembling foreign cars (Toyota for example) in U.S. Free Trade Zones. Auto-parts coming to the USA and cars assembles in the Free Trade Zones. Labor is duty free and as the result those cars are subject to much lower duty rate then it it were imported from foreign countries as cars.

*****

 

#4.

GSP. Products of Countries Designated Beneficiary Developing Countries for Purposes of the Generalized System of Preferences (GSP).
- It tells how product has to be done in order to be classified.
First you look at HTS#. THEN YOU LOOK IF THERE IS letter A or A* or A+ and refer to the lists.

IMPORTANT:

  1. TO BE CLASSIFIED FOR GSP PRODUCTS MUST BE DIRECT SHIPPED! i.e. it must go directly to the USA without entering into commerce zones of third countries.

  2. 35% of value requires to be qualified for GSP. YOU CANNOT ADD PROFIT TO CALCULATE THAT 35%!

Examples:
- 1.1. International shipping goods from Ukraine via Germany to the USA. It just had been hold in a German warehouse for transshipment. Then it qualifies for GSP.
- 1.2. Those Ukrainian international shipping goods had been sold in Germany and go to the USA. Then NOT. It is NOT qualified for GSP.
- 2.1. Item is made in Ukraine with 40% of Ukrainian parts and 60% Japanese. Then it IS qualified. 40% > 35% (minimum)

 

(a) The following countries, territories and associations of countries eligible for treatment as one country (pursuant to section 507(2) of the Trade Act of 1974 (19 U.S.C. 2467(2)) are designated beneficiary developing countries for the purposes of the Generalized System of Preferences, provided for in Title V of the Trade Act of 1974, as amended (19 U.S.C. 2461 et seq.):

   

- Countries that qualified for GSP (General System of Preferences)
Independent Countries

Afghanistan
Albania
Algeria
Angola
Antigua and Barbuda
Argentina
Armenia
Bahrain
Bangladesh
Barbados
Belize
Benin
Bhutan
Bolivia
Bosnia and Hercegovina
Botswana
Brazil
Bulgaria
Burkina Faso
Burundi
Cambodia
Cameroon
Cape Verde
Central African Republic
Chad
Colombia
Comoros
Congo (Brazzaville)
Congo (Kinshasa)
Costa Rica
Cote d'Ivoire
Croatia
Djibouti
Dominica
Dominican Republic
Ecuador
Egypt
El Salvador
Equatorial Guinea
Eritrea

Ethiopia
Fiji
Gabon
Gambia, The
Georgia
Ghana
Grenada
Guatemala
Guinea
Guinea-Bissau
Guyana
Haiti
Honduras
India
Indonesia
Iraq
Jamaica
Jordan
Kazakhstan
Kenya
Kiribati
Kyrgyzstan
Lebanon
Lesotho
Macedonia, Former
Yugoslav Republic of
Madagascar
Malawi
Mali
Mauritania
Mauritius
Moldova
Mongolia
Morocco
Mozambique
Namibia
Nepal
Niger
Nigeria
Oman
Pakistan
Panama
Papua New Guinea
Paraguay
Peru
Philippines
Romania
Russia
Rwanda
St. Kitts and Nevis
Saint Lucia
Saint Vincent and
the Grenadines
Samoa
Sao Tome and PrincipeSenegal
Seychelles
Sierra Leone
Solomon Islands
Somalia
South Africa
Sri Lanka
Suriname
Swaziland
Tanzania
Thailand
Togo
Tonga
Trinidad and Tobago
Tunisia
Turkey
Tuvalu
Uganda
Uruguay
Uzbekistan
Vanuatu
Venezuela
Republic of
Yemen
Zambia
Zimbabwe

 

Non-Independent Countries and Territories

Anguilla
British Indian Ocean
Territory
Christmas Island
(Australia)
Cocos (Keeling)
Islands
Cook Islands
Falkland Islands
(Islas Malvinas)
Gibraltar
Heard Island and
McDonald Islands
Montserrat
Niue
Norfolk Island
Pitcairn Islands

 

Saint Helena
Tokelau
Turks and Caicos Islands
Virgin Islands, British
Wallis and Futuna
West Bank and Gaza
Strip
Western Sahara

Associations of Countries (treated as one country)

Member Countries of the Cartagena
Agreement (Andean Group)
Consisting of:

Bolivia
Colombia
Ecuador
Peru
Venezuela

Member Countries of the West African Economic and Monetary Union (WAEMU)
Consisting of:

Benin
Burkina Faso
Cote d'Ivoire
Guinea-Bissau
Mali
Niger
Senegal
Togo

Member Countries of the Association of South East Asian Nations (ASEAN)
Currently qualifying:

Cambodia
Indonesia
Philippines
Thailand

Member Countries of the Southern Africa Development Community
(SADC)

Currently qualifying:

Botswana
Mauritius
Tanzania

Member Countries of the Caribbean Common Market (CARICOM), except The Bahamas
Consisting of:

Antigua and Barbuda
Barbados
Belize
Dominica
Grenada
Guyana
Jamaica
Montserrat
St. Kitts and Nevis
Saint Lucia
Saint Vincent and
the Grenadines
Trinidad and Tobago

 

  (b) (i) The following beneficiary countries are designated as least-developed beneficiary developing countries pursuant to
section 502(a)(2) of the Trade Act of 1974, as amended:
Afghanistan
Angola
Bangladesh
Benin
Bhutan
Burkina Faso
Burundi
Cambodia
Cape Verde
Central African
Republic
Chad
Comoros
Congo (Kinshasa)
Djibouti
Equatorial Guinea
Ethiopia
Gambia, The
Guinea
Guinea-Bissau
Haiti
Kiribati
Lesotho
Madagascar
Malawi
Mali
Mauritania
Mozambique
Nepal
Niger
Rwanda
Samoa
Sao Tome and
Principe

 

Sierra Leone
Somalia
Tanzania
Togo
Tuvalu
Uganda
Vanuatu
Republic of
Yemen
Zambia
  Whenever an eligible international shipping article which is the growth, product or manufacture of one of the countries designated as a least-developed beneficiary developing country is imported into the customs territory of the United States directly from such country, such article shall be entitled to receive the duty-free treatment provided for in subdivision (c) of this note without regard to the limitations on preferential treatment of eligible international shipping articles in section 503(c)(2)(A) of the Trade Act, as amended (19 U.S.C. 2463(c)(2)(A)).

*****

 

#5

Automotive Products and Motor Vehicles Eligible for Special Tariff Treatment. Articles entered under the Automotive Products Trade Act are subject to the following provisions: (Auto-Motor Act or Automotive Products Trade Act. FOR DUTY FREE AUTOMOBILE PRODUCTS [not Automobiles only but auto parts as well. No trailers etc. ] IMPORTED FROM CANADA ONLY. Letter - " B "

  (iv)

The term "bona fide motor-vehicle manufacturer" means a person who, upon application to the Secretary of Commerce, is determined by the Secretary to have produced no fewer than 15 complete motor vehicles in the United States during the previous 12 months (1), and to have installed capacity in the United States to produce 10 or more complete motor vehicles per 40-hour week (2). The Secretary of Commerce shall maintain, and publish from time to time in the Federal Register, a list of the names and addresses of bona fide motor-vehicle manufacturers.
- In general to be eligible for the special treatment Canadian exporter must:

  1. have produce no fewer than 15 complete motor vehicles in the United States during the previous 12 months

  2. have installed capacity in the United States to produce 10 or more complete motor vehicles per 40-hour week

#6 Civil aircrafts. Articles Eligible for Duty-Free Treatment Pursuant to the Agreement on Trade in Civil Aircraft.
- Basically speaking ALL CIVIL AIRCRAFT TO THE USA ARE DUTY FREE.
  (ii)

The term "civil aircraft" does not include any aircraft, aircraft engine, or ground flight simulator (or parts, components, and subassemblies thereof) purchased for use by the Department of Defense or the United States Coast Guard, unless such aircraft, aircraft engine, or ground flight simulator (or parts, components, and subassemblies thereof) satisfies the requirements of subdivisions (i) (A) and (i) (B)(1) or (2).
IT CANNOT BE PURCHASED FOR the Department of Defense (1) or the United States Coast Guard (2).
The only thing it requires is FAA Certification. FAA is U.S. Federal Aviation Administration.

#7

CBERA. Caribbean Basic Economy Recovery Act. Products of Countries Designated as Beneficiary Countries for Purposes of the Caribbean Basin Economic Recovery Act(CBERA). Letters - "E" or "E* "

  (a)

The following countries and territories or successor political entities are designated beneficiary countries for the purposes of the CBERA, pursuant to section 212 of that Act (19 U.S.C. 2702):

Antigua and Barbuda
Aruba
Bahamas
Barbados
Belize
Costa Rica
Dominica
Dominican Republic
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Montserrat
Netherlands Antilles
Nicaragua
Panama
St. Kitts and
Nevis
Saint Lucia
Saint Vincent and the
Grenadines
Trinidad and Tobago
Virgin Islands, British

- Some products from those countries (marked E*) goes into the column 1b (examples: beef, weal, sugar, watches etc)

  • IT HAS 35% of the Value RULE and;
  • Must be direct shipped and;
  • You can merge those 35% of CBERA countries with Virgin Islands & Puerto Rico to get Free Duty.
    Example: A product made from a. 20% CBERA's country + b. 15% Puerto Rico + c. 65% Japan's THEN IT IS QUALIFIED! 15% + 20% = 35%
  • The U.S. CAN SUPPLY SOME COMPONENTS to get free duty. BUT ONLY UP TO 15%. [exam question]
    Example when product DOES NOT qualified:
    Value % Country  
    $.10 10% Jamaica CBERA's country  
    $.30 30% USA's part of product => ONLY 15% U.S. value can be qualified! THEN IT IS JUST 15%!
    $.60 60% Japan  
    $1.00 100% => CBERA's part is only 25% (not 40%!) < 35%. Then it is NOT qualified.
#8 United States-Israel Free Trade Area Implementation Act of 1985. USA - Israel Free Trade Act. Letter - " IL ".
 
  • IT HAS 35% of the Value RULE and;
  • Must be direct shipped and;
  • The U.S. CAN SUPPLY SOME COMPONENTS to get free duty. BUT ONLY UP TO 15%. (NO Virgin Islands & Puerto Rico in this case)
  • Must have an EXPORT DECLARATION from an exporter.
    Declarations in general state that Exporter certifies that following % is true. The item is made in this country and % of foreign to that country components.

 

#9 NO general note 9. United States-Canada Free-Trade Agreement. (Suspended; see general note 12.)
#10 Products of the Freely Associated States. Freely Associated States. Shows letter " Z " when you type CF7501
  (a)

...3 countries:
Marshall Islands;
Micronesia;
Federated States of Republic of Palau

  • IT HAS 35% of the Value RULE and;
  • Must be direct shipped and;
  • The U.S. CAN SUPPLY SOME COMPONENTS to get free duty. BUT ONLY UP TO 15%. (NO Virgin Islands & Puerto Rico in this case)

Exemptions in general: Tunas (1); Skipjack (3) and Watches (3)

(d) The duty-free treatment provided under subdivision (b) of this note shall not apply to--
(i) tunas and skipjack, prepared or preserved, not in oil, in airtight containers weighing with their contents not over 7 kilograms each, in excess of the quantity afforded duty-free entry under subdivision (c) of this note;
(ii) textile and apparel articles which are subject to textile agreements;
(iii) footwear, handbags, luggage, flat international shipping goods, work gloves and leather wearing apparel, the foregoing which were not eligible articles for purposes of the Generalized System of Preferences on April 1, 1984;
(iv) watches, clocks and timing apparatus of chapter 91 (except such articles incorporating an optoelectronic display and no other type of display);
(v) buttons of subheading 9606.21.40 or 9606.29.20; and
(vi) any agricultural product of chapters 2 through 52, inclusive, that is subject to a tariff-rate quota, if entered in a quantity in excess of the in-quota quantity for such product.

#11 Andean Act (ATPA). Products of Countries Designated as Beneficiary Countries for Purposes of the Andean Trade Preference Act (ATPA).
Letters - " J " or " J* "
  (a)

The following countries or successor political entities are designated beneficiary countries for purposes of the ATPA, pursuant to section 203 of the Act (19 U.S.C. 3202): (4 countries)

Bolivia
Ecuador
Colombia
Peru
  • IT HAS 35% of the Value RULE and;
  • Must be direct shipped and;
  • You can merge those 35% of ATPA countries with Virgin Islands & Puerto Rico to get Free Duty.
    Example: A product made from a. 20% ATPA country + b. 15% Puerto Rico + c. 65% Japan's THEN IT IS QUALIFIED! 15% + 20% = 35%
  • The U.S. CAN SUPPLY SOME COMPONENTS to get free duty. BUT ONLY UP TO 15%.
  • Must have an EXPORT DECLARATION from an exporter.

 

#12 NAFTA. North American Free Trade Agreement. Import to the USA from Canada or Mexico. Letters - " CA " or " MX "
  GENERAL REQUIREMENTS TO BE QUALIFIED FOR NAFTA.
  • It must be a DIRECT shipment.
  • NAFTA CERTIFICATE OF ORIGIN must be used (CF434)
  • Also EXPORTER CERTIFICATE (CF363) has to be used.
  • Invoice can be in English, Spanish or French. HOWEVER, if an invoice in Spanish or French then ENGLISH TRANSLATION MUST BE ATTACHED.
  • You have 5 (FIVE) WORKING DAYS to submit NAFTA certificate of origin to Customs.

If it 100% grown in Canada or Mexico, then it is automatically qualifies for NAFTA (Examples: Tomatoes, plants etc).

If it is NOT 100%, then it in order to qualify for NAFTA exemptions it must have two things [see GN12 (c)]:

  • SUBSTANTIAL TRANSFORMATION (1) (Also known as TARIFF CHANGE).
  • It CAN have foreign components, BUT you must calculate the REGIONAL VALUE CONTENT (2).

Substantial Transformation occurs when it has:

  1. New Name
  2. New Use
  3. New Characteristic
  Most important is to pay attention to GN 12 (t)...
 

(t) Change in Tariff Classification Rules.
Chapter 1. A change to headings 0101 through 0106 from any other chapter.
Chapter 2. A change to headings 0201 through 0210 from any other chapter.
Chapter 3. A change to headings 0301 through 0307 from any other chapter.
Chapter 4. A change to headings 0401 through 0410 from any other chapter, except from tariff items 1901.90.32, 1901.90.33, 1901.90.34, 1901.90.36, 1901.90.38, 1901.90.42 or 1901.90.43....

  ...With every question regarding NAFTA, before to go to calculations you must go to GN 12 (t).
It will give you list of situations whether or not the item under its HTS# qualifies for NAFTA.
 

After that, if according GN 12 (c) the product IS eligible to be qualified for NAFTA but HAS FOREIGN COMPONENTS IN IT, then you have to calculate its REGIONAL VALUE CONTENT:

There are TWO ways to calculate the REGIONAL VALUE CONTENT:

  1. TV (Transactional Value) = 60% or grater.
    VNM -Non NFTA Materials (Foreign Components)

    TV - VNM
    RVC = --------------------------- X 100 TV - including PROFIT.

    TV
  2. N/C (Net Cost) = 50% or grater.
    NC - VNM
    RVC = -------------------------- X 100
    NC - NO Profit

    NC

Example: International shipping TV made in Canada with foreign components in it:
- Sell price of TV = $550
- Foreign components = $250
- Profit = $50

$550 - $250
1. TV (Transactional Value) = --------------- X 100 = 54.5% - NOT. IT IS NOT QUALIFIED.
$550

$500 - $250
2. N/C (Net Cost - NO PROFIT) = --------------- X 100 = 50% - YES. IT IS QUALIFIED.
$500

!!! IMPORTER HAS A CHOICE, WHICH METHOD OF CALCULATION OF REGIONAL VALUE CONTENT TO CHOOSE AND SUBMIT TO THE CUSTOMS !!!

Exception: YOU CANNOT TO USE TRANSACTION VALUE (TV) METHOD IF YOU ARE DEALING WITH RELATED PARTIES because in this case RELATED PARTIES can move around value of products.

VNM -Non NFTA Materials (Foreign Components) = Its cost + FREIGHT.
That means all international freight to bring foreign parts of product to Canada or Mexico must be added to the cost of Non NFTA Materials.

NAFTA Agreement continually changes. You must keep track to changes in annual issues of U.S. HTS all the time.

 

#13 Pharmaceutical products. Whenever a rate of duty of "Free" followed by the symbol " K " in parentheses appears in the "Special" subcolumn for a heading or subheading, any product (by whatever name known) classifiable in such provision which is the international shipping product of a country eligible for tariff treatment under column 1 shall be entered free of duty, provided that such product is included in the pharmaceutical appendix to the tariff schedule. Products in the pharmaceutical appendix include the salts, esters and hydrates of the International Non-proprietary Name (INN) products enumerated in table 1 of the appendix that contain in their names any of the prefixes or suffixes listed in table 2 of the appendix, provided that any such salt, ester or hydrate is classifiable in the same 6-digit tariff provision as the relevant product enumerated in table 1.
- You must all the time go into the Pharmaceutical products appendix and check exemptions. Similar to exclusions that we had in GN 4.
#14

Intermediate chemicals for dyes. Whenever a rate of duty of "Free" followed by the symbol " L" in parentheses appears in the special subcolumn for a heading or subheading, any product classifiable in such provision which is the international shipping product of a country eligible for tariff treatment under column 1 shall be entered free of duty, provided that such product is listed in the intermediate chemicals for dyes appendix to the tariff schedule.

#15

Exclusions. Whenever any agricultural product of chapters 2 through 52, inclusive, is of a type (i) subject to a tariff-rate quota and (ii) subject to the provisions of subchapter IV of chapter 99, entries of such international shipping products described in this note shall not be counted against the quantity specified as the in-quota quantity for any such international shipping product in such chapters: ...

#16 AGOA. Sub-Saharan African countries. Products of Countries Designated as Beneficiary Countries under the African Growth and Opportunity Act (AGOA). Articles provided for in a provision for which a rate of duty appears in the ?Special? subcolumn followed by the symbol ? D ?.
#17

CBTPA. Caribbean Basin Trade Partnership Act (CBTPA). Products of Countries Designated as Beneficiary Countries under the United States-Caribbean Basin Trade Partnership Act of 2000. Rate of duty appears in the ?Special? subcolumn followed by the symbol ? R ?.
Barbados, Belize, Costa Rica, Dominican Republic, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Panama, Saint Lucia, Trinidad and Tobago.

#18 Jordan. United States-Jordan Free Trade Area Implementation Act. Rate of duty appears in the ?Special? subcolumn followed by the symbol ? JO ?
#25 Singapore. United States-Singapore Free Trade Agreement.
(a) Originating goods under the terms of the United States-Singapore Free Trade Agreement (SFTA) are subject to duty as provided herein. For the purposes of this note, goods of Singapore, as defined in subdivisions (b) through (o) of this note, that are imported into the customs territory of the United States and entered under a provision for which a rate of duty appears in the ?Special? subcolumn of column 1 followed by the symbol ? SG ? in parentheses are eligible for the tariff - has a lot of exclusions.
#26 Chile. United States-Chile Free Trade Agreement.
(a) Originating goods under the terms of the United States-Chile Free Trade Agreement (UCFTA) are subject to duty as provided herein. For the purposes of this note, goods of Chile, as defined in subdivisions (b) through (n) of this note, thatare imported into the customs territory of the United States and entered under a provision for which a rate of duty appears in the ?Special? subcolumn of column 1 followed by the symbol ? CL ? in parentheses are eligible for the tariff treatment andquantitative limitations set forth in the ?Special? subcolumn, in accordance with sections 201 and 202 of the United States-Chile Free Trade Agreement Implementation Act (Pub.L.108-78; 117 Stat. 948). - has a lot of exclusions.
#28 Australia. United States-Australia Free Trade Agreement Implementation Act.
(a) Originating goods under the terms of the United States-Australia Free Trade Agreement (UAFTA) are subject to duty as provided for herein. For the purposes of this note, goods of Australia, as defined in subdivisions (b) through (n) of this note, that are imported into the customs territory of the United States and entered under a provision for which a rate of duty appears in the ?Special? subcolumn of column 1 followed by the symbol ? AU ? in parentheses are eligible for the tariff treatment and quantitative limitations set forth in the ?Special? subcolumn, in accordance with sections 201 through 203, inclusive, of the United States-Australia Free Trade Agreement Implementation Act (Pub.L. 108-286; 118 Stat. 919). For the purposes of this note, the term ?UAFTA country? refers only to Australia or to the United States.

 

GENERAL STATISTICAL NOTES (GSN):

GSN information used especially for CF3461 and CF7501.

#3 Statistical Reporting Number.
  (a)

Except as provided in paragraph (b) of this note, and in the absence of specific instructions to the contrary elsewhere, the statistical reporting number for an article consists of the 10-digit number formed by combining the 8-digit subheading number with the appropriate 2-digit statistical suffix. Thus, the statistical reporting number for live monkeys dutiable under subheading 0106.00.50 is "0106.00.5010".

  (c)

Whenever an article is eligible for reduced Merchandise Processing Fee (MPF), and a claim therefor is made under one of the following programs, the statistical reporting number is, in absence of specific instructions to the contrary elsewhere, the 10-digit number prefixed by the appropriate symbol indicated below:

Automotive Products Trade Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B#
Agreement on Trade in Civil Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C#

North American Free Trade Agreement:
Goods of Canada or of Mexico, under the terms of general note 12, included in the
pharmaceutical appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . K#
Goods of Canada or of Mexico, under the terms of general note 12, included in the
intermediate chemicals for dyes appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . L#
Other international shipping goods of Canada, under the terms of general note 12 . . . . . . . . . . . . . . . . . . . . . CA
Other goods of Mexico, under the terms of general note 12 . . . . . . . . . . . . . . . . . . . . . . MX

  (d)

Whenever a claim is made for special tariff treatment under one of the following programs, the statistical reporting number is, in absence of specific instructions to the contrary elsewhere, the 10-digit number prefixed by the appropriate symbol indicated below:

Products of West Bank and Gaza Strip . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N
Products of Puerto Rico (advanced in value or improved in condition
in a CBERA beneficiary country (see 19 U.S.C. 2703(a)(5)) . . . . . . . . . . . . . . . W
Products of Insular Possessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Y
Articles from the Freely Associated States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Z

  (c)

Whenever in the tariff schedule goods are classified as a set in accordance with General Rules of Interpretation 3(b) or 3(c), the set is to be identified by placing the prefix "X" in front of the statistical reporting numbers applicable to the set.

#4 Abbreviations.
  (a) An "X" appearing in the column for units of quantity means that no quantity (other than gross weight) is to be reported.
  (b)

Whenever two separate units of quantity are shown for the same article, the value of the article is to be reported with the first unit of quantity shown, unless there is a "v" following the second unit of quantity in which case the value of the article is to be reported with that unit of quantity.

 

CHAPTER NOTES:

IT IS VERY IMPORTANT TO READ CHAPTER NOTES BEFORE USING HTS#. If you do not read chapter notes before dealing with HTS# then you have slightest idea what you are dealing with.

As an example international shipping TEXTILE (HTS Chapter 52):
It gives you an idea how to calculate the number applies to wool and cotton, list of countries and quote for cotton for them, different terms etc.

Another example: (HTS Chapter 61) ARTICLES OF APPAREL AND CLOTHING ACCESSORIES, KNITTED OR CROCHETED gives you DEFINITION OF CLOTHING such as "Suit"; "ensemble"; "babies' garments and clothing accessories", male or female etc.

Rule for UNISEX clothing: IF IT SUITABLE FOR BOTH MAN AND WOMAN, THEN IT AUTOMATICALLY CLASSIFIES UNDER WOMEN.

 

QUOTAS:

  • Department of State negotiates different programs with different countries regarding reduced Customs duty rates or no duty at all for certain countries.
  • Department of Commerce regulates imports of goods as far as it relates to QUOTAS and create contracts or agreements with foreign countries in order to establish numbers of quotas for international shipping.
  • U.S. Customs enforces other Government Agency programs and contracts.

Chapters from 52 up to 60 in brackets 3 digit numbers are QUOTA ITEMS.
It can be found in U.S. TEXTILE AND APPAREL CATEGORY SYSTEM by U.S. Department of Commerce. Office of Textiles and Apparel (OTEXA). See
http://otexa.ita.doc.gov/corr.htm

...To view a Correlation of Harmonized Tariff Schedule (HTS) numbers with a specific textile or apparel category number, visit http://otexa.ita.doc.gov/corr.htm and click on the specific category. Categories numbered in the:

200 series are of cotton and/or man-made fiber
300 series are of cotton
400 series are of wool
600 series are of man-made fiber
800 series are of silk blends or non-cotton vegetable fibers

 

 

       
       
       

 

Appendixes:

USEFUL CHART FOR CALCULATION REGIONAL VALUE CONTENT:

PROGRAM

GSP

CBI

ISRL

ANDE

ACFT

AUTO

INSLR POSS.

FREE ASSOC

AGOA
**

CBTA

JORDAN
**

LETTER

A

E

IL

J

C

B

"Y"

"Z"

D

R

JO

SHIP

D

D

D

D

D/I

D

D

D/I

D

D

D

%

35%

35%

35%

35%

-

100

30%

35%

35%

100%

35%

PR&VI

N

Y

N

Y

-

N

N

N

N

N

N

U.S.

N

15%

15%

15%

-

N

100

15%

15%

N

15%

GEN. NOTE

4

7

8

11

6

5

3A

10

16

17

1


NAFTA
CA OR MX
100% GROWTH OR PRODUCT OF CA OR MX
IF SUB-PART IS TRANSFORMED, IT MUST BE ON " SHIFT LIST" AND MAY HAVE REGIONAL VALUE CONTENT
REQUIREMENT - GN 12C
TRANSACTIONAL VALUE = 60% OR MORE
NET COST METHOD = 50% OR MORE
DIRECT SHIP ONLY

United States - Singapore Free Trade Agreement (SFTA)
General Note 25
Letter Symbol = SG
Two Countries: USA and Singapore
Direct Shipment
100% or Use:
Tariff Shift [GN 25(o)]
Regional Value Content [GN 25(g)]:
Build Up Method = 35% or Build Down Method = 45%
Records and Certificates of Origin Kept for 5 years
from date of Importation
**New Programs

United States - Chile Free Trade Agreement (UCFTA)
General Note 26
Letter Symbol = CL
Two Countries: USA and Chile
Direct Shipment
100% or Use:
Tariff Shift [GN 26(n)]
Regional Value Content [GN 26(g)]:
Build Up Method = 35% or Build Down Method = 45%
Records and Certificates of Origin Kept for 5 Years from
Date of Importation

 

 

Sample of USHTS page. Some topics to read HTS pages.:

See the Harmonized Tariff Schedule of the United States on-line at http://www.usitc.gov/tata/hts/bychapter/index.htm

 

Some topics to read HTS pages.

Rates of Duty columns:

  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.
Letter Program
A or A* The Generalized System of Preferences (GSP)
E or E* The Caribbean Basin Initiative (CBI)
I The United States-Israel Free Trade Agreement (FT A)
Z The Compact of Free Association (FAS)
 
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