In my last article on exporting, I said I would go into some more depth this time. I recently began working on a harmonized system database classification project for a client, and I thought it might be helpful to explain some essential import and export basics about the Harmonized System. The following paragraphs discuss the worldwide use of the system, the two US names for the system, a starting point, NAFTA and destination classification variances.
Worldwide System: The Harmonized System of classification as used worldwide has a basic set of six digits defined as the chapter (first 2), heading (first 4) and sub heading (first 6). The Harmonized Tariff Schedule of the US (HTSUS) adds four digits to help further define commodities for the purposes of import and export statistics and duty rates. For example, 3926.90.5600, plastic machinery v belts of predominantly vegetable textile fibers, is assigned 5.1% duty for US imports, but 3926.90.5700, plastic machinery v belts of predominantly man-made fibers, receives a 6.5% duty for imports into the United States.
Two Names: Exports from the United States valued over $2,500 per line require the harmonized classification number for export statistics. In the US export regulations, the harmonized classification numbers are listed as "schedule B." Schedule B numbers vary a little from the HTSUS because we do not need to make as detailed distinctions between classifications for export purposes. For example, the schedule B classification of plastic belts of textile fabric only offers 3926.90.5500 — v belts and 3926.90.5800 — other plastic belts. However, heavy imports of a certain product can shut down a functioning US business. Detailed data of what specific imports are causing the problem to a US business are sometimes needed for tariff rate applications.
A Starting Point: So how does someone come up with a number for classification? The Harmonized Tariff Schedule of the United States (http://www.usitc.gov/tata/hts/) provides an index in the back of the book and chapter notes defining which items are covered by a particular classification and which items are not. A Schedule B search engine (http://www.census.gov/foreign-trade/schedules/b/) is also provided on the Internet by the US Department of Census. I personally find the US Customs CROSS database search engine (http://rulings.cbp.gov/) helpful because the system will search for a particular word and then list any US Customs rulings where the word appears. Since Customs rulings usually provide a background or frame of reference, these documents provide helpful information to identify the appropriate subheading of the US tariff schedules. For example, searching for plastic machinery belts in the CROSS search engine identifies US Customs and Border Protection ruling NY859598, which suggests 3926.90 for plastic machinery belts. I also recommend the product Customs Info, which has an even more extensive database of searchable customs rulings (http://www.customsinfo.com/).
NAFTA: In order to claim duty free status under NAFTA when exporting from the US to Canada or Mexico, the six- digit harmonized number and a NAFTA certificate of origin are required. In the Canadian tariff, plastic machinery belts of predominantly textile fibers are classified as 3926.90.9110 and are free of duty under their general tariff rate. In this case, items under this classification are duty free with or without a NAFTA certificate of origin.
Destination Classification Variances: Though efforts have been made to standardize and simplify classification of products and components, the United States Service and Border Protection takes a very restrictive role of classification. The US and Canadian harmonized rules state that any component of a product that is specifically named in the tariff must be entered under the named provision. Therefore, machine screws imported as replacement parts for a particular product must be classified as machine screws unless you can define that these screws are only applicable to a particular machine due to their size and shape. However, many countries accept component parts as classifiable as component parts, so it may behoove the shipper to contact the broker in the foreign country to assure the least duty impact classifications are being used within local interpretation of import laws.
Conclusions: The harmonized system is a worldwide system of product classification utilized to assist in streamlining imports and exports and data collection for trade negotiations. In the US the system has two names, HTSUS for import and Schedule B. There are a number of ways to identify a classification for a product. Use of the CROSS database search engine is offered as an efficient starting point. NAFTA uses the first six digits of the harmonized system on certificates of origin. Exporters and importers are advised to check with the destination customs broker to see if there are any unique local interpretations of the law that should be considered for import classifications.
Thomas M. Stanton, AFMS International Analyst, can be reached at tom.stanton@afms.com.
Worldwide System: The Harmonized System of classification as used worldwide has a basic set of six digits defined as the chapter (first 2), heading (first 4) and sub heading (first 6). The Harmonized Tariff Schedule of the US (HTSUS) adds four digits to help further define commodities for the purposes of import and export statistics and duty rates. For example, 3926.90.5600, plastic machinery v belts of predominantly vegetable textile fibers, is assigned 5.1% duty for US imports, but 3926.90.5700, plastic machinery v belts of predominantly man-made fibers, receives a 6.5% duty for imports into the United States.
Two Names: Exports from the United States valued over $2,500 per line require the harmonized classification number for export statistics. In the US export regulations, the harmonized classification numbers are listed as "schedule B." Schedule B numbers vary a little from the HTSUS because we do not need to make as detailed distinctions between classifications for export purposes. For example, the schedule B classification of plastic belts of textile fabric only offers 3926.90.5500 — v belts and 3926.90.5800 — other plastic belts. However, heavy imports of a certain product can shut down a functioning US business. Detailed data of what specific imports are causing the problem to a US business are sometimes needed for tariff rate applications.
A Starting Point: So how does someone come up with a number for classification? The Harmonized Tariff Schedule of the United States (http://www.usitc.gov/tata/hts/) provides an index in the back of the book and chapter notes defining which items are covered by a particular classification and which items are not. A Schedule B search engine (http://www.census.gov/foreign-trade/schedules/b/) is also provided on the Internet by the US Department of Census. I personally find the US Customs CROSS database search engine (http://rulings.cbp.gov/) helpful because the system will search for a particular word and then list any US Customs rulings where the word appears. Since Customs rulings usually provide a background or frame of reference, these documents provide helpful information to identify the appropriate subheading of the US tariff schedules. For example, searching for plastic machinery belts in the CROSS search engine identifies US Customs and Border Protection ruling NY859598, which suggests 3926.90 for plastic machinery belts. I also recommend the product Customs Info, which has an even more extensive database of searchable customs rulings (http://www.customsinfo.com/).
NAFTA: In order to claim duty free status under NAFTA when exporting from the US to Canada or Mexico, the six- digit harmonized number and a NAFTA certificate of origin are required. In the Canadian tariff, plastic machinery belts of predominantly textile fibers are classified as 3926.90.9110 and are free of duty under their general tariff rate. In this case, items under this classification are duty free with or without a NAFTA certificate of origin.
Destination Classification Variances: Though efforts have been made to standardize and simplify classification of products and components, the United States Service and Border Protection takes a very restrictive role of classification. The US and Canadian harmonized rules state that any component of a product that is specifically named in the tariff must be entered under the named provision. Therefore, machine screws imported as replacement parts for a particular product must be classified as machine screws unless you can define that these screws are only applicable to a particular machine due to their size and shape. However, many countries accept component parts as classifiable as component parts, so it may behoove the shipper to contact the broker in the foreign country to assure the least duty impact classifications are being used within local interpretation of import laws.
Conclusions: The harmonized system is a worldwide system of product classification utilized to assist in streamlining imports and exports and data collection for trade negotiations. In the US the system has two names, HTSUS for import and Schedule B. There are a number of ways to identify a classification for a product. Use of the CROSS database search engine is offered as an efficient starting point. NAFTA uses the first six digits of the harmonized system on certificates of origin. Exporters and importers are advised to check with the destination customs broker to see if there are any unique local interpretations of the law that should be considered for import classifications.
Thomas M. Stanton, AFMS International Analyst, can be reached at tom.stanton@afms.com.
