HTS Code Lookup Best Practices
HTS Code Lookup Best Practices
The first hurdle that importers face when importing a new product is to answer the most basic question: what is it? Everything from apples to shoelaces needs to be classified by a number recognizable to the importing government. This number is of course, the Harmonized Tariff Schedule Code (HTS Code). Assigning an HTS code may seem like a simple step, but it is the most important considering the risks associated with getting it wrong.
Recently there was a featured story on NPR’s Radiolab that pointed out the difficulties that arise when classifying products. Back in the late nineties, there was a dispute whether Marvel Comics’ X-men toy line should be classified under the HTS as “dolls” or “toys”. These two HTS classifications carry a duty of 12% and 6% respectively. Since X-men are considered “mutants” they didn’t fit into the narrow classification of “human beings”. The court cases went on for nearly a decade, and resulted in a win for Marvel. These minor points of language can result in millions of dollars in duty savings. Therefore, it behooves companies to carefully consider how to best classify their products according to the HTS.
The following are some of the best practices to lookup HTS codes.
Know your product
Before you even start researching the Harmonized Tariff Schedule, you need to know the materials, functions, and performance specifications of your product. It also goes without saying that whoever is assigned the task of classifying the product knows your product.
Research the tariff
Familiarize yourself with the headings, notes, and language of the tariff. Compare numbers at the same rank or hierarchy. When doing so you must select the four-digit heading first and then move on to selecting the subheading and U.S. classifications.
Use other publications
Use explanatory notes published by the World Customs Organization for insight into the six-digit level of the tariff. Research binding rulings at government sources or third party databases.
Document the process
To demonstrate reasonable care and generally CYA, you should document the product specification records and record the thought process used to arrive at a classification.
What are your best practices? Leave a comment in the comment section below!