What is an HTS Code?
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.
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What are your best practices? Leave a comment in the comment section below!
Martin, I emailed you.
James, good insight. I'm curious as to what you include in your questionnaires and who you distribute them to.
I include questions that help me to determine what the function is based off my past experience with the ENs and chapter/section notes. I dont distribute them as they are for internal company use only, sorry. But a good example would be asking if something that looks like it is used with a computer whether it meets the criteria of an Automatic Data Processing machine per the EN and chapter notes defenition because often what someone thinks is a "computer" is actually not an ADP, which changes your classification. I also keep a spreadsheet of useful CROSS rulings to back up my classifications.
Interesting example of how HTS classification can affect companies income.
In addition to your comments, we can not forget, over all, the 6 classification rules, and the possibility to check out the HTS line (up to 6 digits) used by the exporter when perform the export.
Best regards. Juan
When classifying under the HTSUS the use of the CROSS database is much more instructive than using the Explanatory Notes (ENs) published by the WCO. The ENs are not a binding interpretation on US Customs. When in doubt, hire an experienced customs lawyer and get a ruling letter.
Hello, Would some one be able to tell me what is HTS code for carton sealing tapes (known as BOPP tapes)
coming from china. Thanks