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Harmonized Tariff Schedule in International Shipping (Part 1)

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

As in the previous, classification finds the correct tariff number and duty rate on an imported article for international shipping. 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 US Customs uses to determine tariff classifications, import duty rates, quotas, and all other product-specific import details in international shipping.

This article is intended to provide a general understanding of the structure of the Harmonized Tariff Schedule for international shipping 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 do you determine import tariffs in international shipping?

In international shipping US, import duty and international freight taxes can be determined using the United States Harmonized Tariff Schedule. This vast book breaks down virtually every product and commodity imported into the United States into categories. Variations of the HTS are used in international shipping worldwide in a cooperative effort to regulate global trade.

There are three primary purposes behind the USHTS in international shipping:

1. The US Harmonized Tariff Schedule is used in international shipping 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 tracks import and export statistics for the US Department of Census. Hundreds of billions of dollars in goods and services are imported and exported from the United States each month. The international shipping 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. In international shipping, the United States can exercise a certain amount of economic influence by raising and lowering duty rates and import restrictions from specific countries or around the world.

How to Read the International Shipping Tariffs?

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

The notes portion of the international shipping 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 this article, we will focus primarily on the rules of classifications.

Reading the HTS Notes

Each chapter of the international shipping HTS contains notes on classifying products within that chapter. It is essential to thoroughly review these chapter notes before continuing with the classification process. These notes often 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 for international shipping.

Reading the HTS Headings and Subheadings

An international shipping 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 hand tool used in agriculture, horticulture, forestry, and, more specifically, a spade or shovel.

This classification's first two digits (82) reference 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: tools 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 type 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 acceptable measure of quantity for a product for international shipping by US Customs. This measurement must be reflected on your commercial invoice.

Reading the HTS Rates of Duty
In international shipping Rates of Duty, the Column determines the duty you must pay on an imported product.
Typically, these duty rates 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 do you interpret the tariff in international shipping?

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

The following principles shall govern the classification of goods in the international shipping tariff schedule:

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 titles 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 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 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 about 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 equal merit considerations.

4. Goods that the above rules cannot classify shall be classified under the heading appropriate to the goods they are most akin to.

5. In addition to the preceding provisions, the following rules shall apply concerning 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 customarily sold in addition to that. This rule does not, however, apply to containers that 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 generally used for packing such goods. However, this provision is not binding when such packing materials or containers are 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 this rule, the relative section, chapter, and subchapter notes apply unless the context otherwise requires them.

 
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