Proper classification of your imports has become increasingly important in the age of escalating Trump tariffs. Proper classification of your imports determines whether your product will avoid or have to pay these punitive tariffs that increase your costs.
The US importer has a LEGAL responsibility to correctly classify products for entry into the United States. Proper classification of imports is also a COST-SAVING tool for the importer because it determines the duty rate at which products enter the country. Importers, you want to classify your imports so that they enter at the lowest legally possible duty rate and lower the final cost of your products. Proper classification of your imports is crucial in determining whether your products are eligible to take advantage of preferential programs that eliminate or reduce tariffs, further lowering costs; or whether they will attract the punitive tariffs now placed on thousands of goods. Improper classification of your imports could mean that Customs will instead determine your duty rate. It could also lead to delays in the release of goods and to penalties, further adding to costs.
This process is equally important for importers of US goods into non-US markets (US exporters) who, for the same reasons, want to be sure their products are properly classified. Countries have placed retaliatory tariffs on US imports. Proper classification will also help to ensure that the lowest legally possible duty rate is paid.
So, the proper classification of products is an essential tool for managing your imports and exports.
Tools for Proper Classification of Your Imports
The Harmonized Commodity Description and Coding System (Harmonized System or HS) provides the universally used tools for proper classification of your imports. The Harmonized System allocates a unique six-digit code to about 5,000 groups of products ranging from live animals and plants at one end to locomotives and ammunition at the other, and everything in between. Covering 98% of the goods traded internationally, the HS uses well-defined rules to ensure that an apple, airplane part, or any other good will be traded under the same HS code around the world.
The HS Tools to make sure your imports are being correctly classified include:
- Rules of Interpretation which provide the legal rules to be applied to the classifications in the HS. These include General Rules developed by the World Customs Organization (WCO) which developed and governs the HS. These rules are applied universally. The United States and other countries also Additional Rules that are applied nationally. Equally important are the Notes found at the beginning of the Sections and Chapters of the HS.
- Product Descriptions & Codes across the 97 Chapters grouped in 21 Sections form the core of the Harmonized System. These Sections and Chapters as well as the HS codes found within each are also universally consistent. Proper classification of your imports is accomplished by applying the Rules of Interpretation and Section/Chapter Notes to the Product Descriptions to identify the unique HS Code for your product.
- An Alphabetical Index along with a Table of Contents and Titles for each Section and Chapter are provided purely to assist with navigating the voluminous and complex document. They do not provide a legal basis to properly classify your product.
However, the process begins with a clear and accurate description of your product. Whether you undertake this challenging task yourself or work with an experienced customs broker or customs attorney, only you know your product. And the legal responsibility for the proper classification of your imports is yours. So, get it right!
DevelopTradeLaw, LLC provides business-oriented advice to the legal challenges that face companies doing business internationally. Contact us for more information or advice on the topic of this article.
I am a seasoned international trade and customs attorney, and policy adviser for various companies and governments with a demonstrated history of successfully developing and implementing sustainable and dynamic trade programs. I am experienced in creating partnerships with various business-support organizations to drive compliance and growth in the international market.
