Classification of Textile Costumes Under the HTSUS - CBP.gov
A.K.A. CLASSIFYING EVERYTHING) - … PPT/040814-ST… · classifier’s best friend in the HTSUS....
Transcript of A.K.A. CLASSIFYING EVERYTHING) - … PPT/040814-ST… · classifier’s best friend in the HTSUS....
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TARIFF CLASSIFICATION 101
(A.K.A. CLASSIFYING EVERYTHING)
Presented by Deborah B. Stern, Esq.
© 2014 Sandler, Travis & Rosenberg, P.A. All rights reserved.
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Reserved.
DISCLAIMER
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• Importance of Classification
• HTSUS Overview
• The Classification Process
• The GRIs
• Parts and Accessories
• Best Practices
• Questions?
AGENDA
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• Duty rate
• Textile category
• Quota/Visa/License
• Eligibility for special duty rates
• Avoid delay in Customs clearance
• Reasonable care
WHY CLASSIFY?
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• Online Searchable HTSUS http://hts.usitc.gov/
• Full Text of the HTSUS
(preferred)
http://www.usitc.gov/tata/hts/
• 22 Sections, 99 Chapters
(97 are international),
hundreds of headings,
thousands of subheadings
THE HTSUS
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• General Rules of Interpretation (“GRIs”)
• Additional U.S. Rules of Interpretation
• General Notes (Special Programs)
• Section Notes
• Chapter Notes
• Subheading Notes
• Additional US Notes
• Statistical Notes (nonlegal)
• Headings and Subheadings
• Appendices
COMPOSITION OF THE HTSUS
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HTSUS HEIRARCHY
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HEADING
SUBHEADINGS
INT’L: 6-digit
US ONLY: below 6
8 -digit provides
duty rate, SPI
10 -digit US trade
stats (US Census)
© 2014 Sandler, Travis & Rosenberg, P.A. All rights reserved.
CLASSIFICATION RESOURCES
• The text of the HTSUS (http://www.usitc.gov/tata/hts)
• WCO Explanatory Notes (pay service)
• CBP administrative/binding rulings (CBP’s CROSS Rulings
Database http://rulings.cbp.gov)
• CBP “Informed Compliance Publications”
(http://www.cbp.gov/xp/cgov/trade/legal/informed_compliance_pubs/
• Court Decisions (pay service and CBP Bulletin and Decisions)
http://www.cbp.gov/xp/cgov/trade/legal/bulletins_decisions/
• CBP Import Specialists, National Import Specialists, Attorneys (nonbinding oral advice)
• Specialized Customs Counsel ([email protected])
• Customs Broker
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• NY Rulings cover specific product described; serve as guidance for
materially and substantially identical goods; usually lacks
analysis
• HQ Rulings serve a precedent because they contain legal analysis
and interpretation of the tariff provisions as well as specific products
addressed therein; often complex, may need advice.
• Note the year a ruling was issued and whether subsequent rulings
seem to come to a different result or provide a different interpretation
of a tariff provision.
• Do not automatically rely on the first ruling you see that appears to
classify your product. Review several and analyze which is most
akin to your specific facts.
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CBP RULINGS
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CBP’s Informed Compliance Publication on Footwear
A. “Zoris” must have all of the following characteristics:
1. It is wholly of rubber or plastic.
2. An upper which is a single molded piece of rubber or plastic.
3. A foamed rubber or plastic sole, which is approximately uniform in thickness, i.e., the thickest point
is neither more than 3/8 inch thicker than the thinnest point nor more than 35 percent thicker than the
thinnest point.
4. At its thickest point, the sole is less than 2 inches thick.
5. The sole does not have a separate “insole.” A layer of rubber or plastic similar to the other layers of
the sole is not a separate insole, assuming it is more than 1/32 inch thick.
6. The molded rubber or plastic upper segment has plugs at the end of each segment and each plug
must penetrate all or part of the sole. The plugs do not have to penetrate all layers of the sole.
7. The upper either has straps (segments) which form a “V” or “Y” and a thong which goes between
the first and second toes or has straps (segments) which form an “X.”
B. “Zoris” may have:
1. Either a sole of one piece of foamed rubber or plastic or many horizontal layers of different colors
joined together.
2. A separate, loosely attached ornament on the upper, such as a plastic flower.
WHY LOOK BEYOND THE TARIFF?
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THE CLASSIFICATION PROCESS
• Identify the good.
• Play the “name game.”
• Choose your headings.
• Apply the GRIs in order.
• Consult Classification
Sources and Analyze.
• Record your work.
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1. Identify the good:
– Your product must be classified in its condition as imported into the U.S.
– Gather all relevant product information. • What is this item called?
• What is its part number?
• Where and how is it used?
• What is it made of?
– Gather product information before you classify – any surprise facts discovered later can turn the classification around completely.
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THE CLASSIFICATION PROCESS
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2. Play the “name game”:
• Think of different terms which might describe this item
(especially if its called an ambiguous term like “adapter”
or “accessory” or “assembly”).
• What some might call a seal, to others may be a gasket,
a washer, an O-ring, etc.
• Be flexible with words – the difference between a “boot”
and a trunk or a “bonnet” and a hood may be which side
of the Atlantic you’re on.
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THE CLASSIFICATION PROCESSnt.)
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3. Choose your headings:
• Use Index to find headings which might describe the item
you’re trying to classify. It is not legally binding, but can be a
classifier’s best friend in the HTSUS.
• Look to the language of the Heading text. Does it describe
your good? Could it be more specific?
• Search terms in CBP’s Rulings database CROSS for other
possible headings
o Do NOT choose the first classification you see (more on this to follow)
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THE CLASSIFICATION PROCESSnt
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4. Apply the General Rules of Interpretation
• “Eliminate all suspects.”
• Break down heading text language.
• Review Legal Notes and Explanatory Notes (Ens) to determine
scope of heading text and whether your good fits in it.
o Legal Notes identify what is excluded from heading even if
otherwise covered by the heading text.
o Legal Notes define heading text terms.
o ENs provide explanations and examples of goods that fit
into heading text and what is excluded.
• The last heading remaining after all eliminations should be the
proper tariff classification for the item, but…
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THE CLASSIFICATION PROCESSnt
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5. Research and Analyze
• Research HTS Resources: CBP rulings (CROSS),
CBP Informed Compliance Publications, Court cases, etc.
o These resources help determine how the tariff provisions are interpreted and applied. The heading text and legal notes are not the full story!
o Look for definitions/explanations of scope of heading text terms in rulings and decisions
o Look at what kind of goods are classified in the provision.
• Analyze the Classification:
o Identify: Which one heading covers this product and no other?
o Analyze: Compare and contrast the facts of the product to be classified with the language of the heading and the “rules” derived from classification sources.
o Conclude: The product must be classified under this heading because …
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THE CLASSIFICATION PROCESSnt
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6. Record your work: • You have just spent company time & resources in arriving at a
correct tariff classification.
• You do not want to spend additional resources researching a second time to verify the classification.
• Record your product research, analysis and conclusion in an audit trail.
• Your audit trail is the only proof you have that your classification is not “unreasonable” for the purposes of reasonable care.
• Your reasoning can now be used to classify similar products.
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THE CLASSIFICATION PROCESSnt
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GRI 1 Classification of goods shall be determined
according to the terms of the headings of the tariff schedule
and any relative Section or Chapter Notes.
The table of contents, alphabetical index, and titles of
sections, chapters and sub-chapters are for reference
purposes only.
In the event that the goods cannot be classified solely on
the basis of GRI 1, and if the headings and legal notes do
not otherwise require, the remaining GRIs may then be
applied.
GENERAL RULES OF INTERPRETATION
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Classification is based on the terms of the
headings, and, if relevant, the section and/or
chapter notes.
• What is the scope of the heading?
• Does it describe my good?
• Is my good excluded from the heading?
• Does any other heading also describe my good?
• Is it a part (or accessory) of another good?
GRI 1
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• “Automatic Data Processing Machine”
• Magnetic/Optical Readers
• Machines for Transcribing Data
GRI 1 –BREAK DOWN HEADING TEXT
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GRI 1 – APPLY LEGAL NOTES
“Automatic data processing machines” of
heading 8471 are defined in the legal notes
to Chapter 84:
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APPLY LEGAL NOTES
• If the “computer” you are classifying does not satisfy each
element of that note, it cannot be classified in heading 8471.
• So, for example, a special purpose computer embedded in
medical equipment that has specific requirements and the
performs only pre-defined tasks which cannot be changed by
the user is not an ADP machine of heading 8471.
• By extension, a requirement in another tariff provision that
specifies “of a kind used in an ADP machine” is similarly limited
by the parameters of the legal note.
IN ANY CASE, in a conflict between the legal notes and the
GRIs, legal notes will take precedence.
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Unassembled or Disassembled Articles are
classified in the same provision as the
assembled articles.
Example:
• Complete bicycle shipped unassembled =
heading 8712
GRI 2(a)
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Incomplete or Unfinished Articles are classified in the same provision as the complete or finished articles, provided that they have the Essential Character of the complete or finished article. (and they may also be unassembled.)
Example:
• Complete bicycle shipped without seat and unassembled = heading 8712
GRI 2(a) (Cont.)
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Material described in a heading includes mixtures
and combinations of that material as they still have
its essential character.
But, for goods consisting of more than one
material or substance, go to GRI 3.
GRI 2(b)
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Goods that are classifiable under more than one
heading should be classified in the heading which
provides the most specific description.
Example:
Where is an electric shaver classified?
– Electro-mechanical tools for working in the hand
(8505);
– Electro-mechanical domestic appliances (8509); or
– Shavers & hair clippers (8510)
GRI 3(a)
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When two or more headings each refer to only part
of the materials/components in an article, treat
each heading as equally specific, even if one is
more complete or precise and apply GRI 3(b).
Example:
Wooden table for office w/ glass top
Part wooden office furniture = 9403.30
Part glass office furniture = 9403.80
Treated as equally specific, and go to GRI 3(b)
GRI 3(a) Cont.
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May be used to classify:
1. Mixed Goods or Composite Goods
2. Goods put up in Sets for Retail Sale
Classified as if consisting of the component which
gives the composite good or set its essential
character.
(But some mixed goods may actually be classified at GRI
1, e.g., certain mixtures of chemicals (3824), GRI 1 sets
such as tool sets, manicure sets, stencil sets)
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GRI 3(b)
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Composite Goods may be made up of:
1. Components attached to each other, or
2. Separate components, but only if
° adapted one to the other;
° mutually complementary; and
° together must form a whole which would not normally
be offered for sale in separate parts
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GRI 3(b) COMPOSITE GOODS
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1. Must consist of at least 2 different articles which are
classifiable in different headings.
2. Must consist of articles put up together to meet a
particular need or carry out a specific activity.
3. Must be put up in a manner suitable for retail sale.
GRI 3(b) sets are classified by the component that imparts
the essential character of the set
GRI 3(b) SETS FOR RETAIL SALE
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For composite goods or sets for retail sale, must
consider the following:
Nature of the component or material:
bulk, quality, quantity, weight, value
Role of the component in relation to the
overall use of the goods
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GRI 3(b) SETS FOR RETAIL SALE
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If goods cannot be classified under 3(a) or (b) then
they should be classified under whichever tariff
provision falls last in the tariff among those that
merit equal consideration.
Should be used infrequently, only as last resort.
GRI 3(c)
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• Q: Six fondue forks (heading 8215) packaged together for retail sale? A: No, same heading.
• Q: Bottle of vodka (heading 2208) and bottle of wine (heading 2204) packaged together for retail sale? A: No, not used together for particular need or specific activity (yes, that’s debatable!). But a margarita set? Yes!
• Q: Package of grated cheese (heading 0406), package of uncooked spaghetti (heading 1902) and can of tomato sauce (heading 2103) in a carton proclaiming “Spaghetti For Two”. A: Yes!
IS IT A GRI 3(b) SET?
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If goods cannot be classified according to GRIs 1-3, then
they may be classified under the heading appropriate to the
goods to which they are most akin.
• Should be applied very infrequently! GRIs 1-3
will cover the classification of almost all goods.
• When attempting to apply this rule, consider description,
character, purpose or intended use, designation,
production process and the nature of the goods.
GRI 4
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Long-term use containers imported with articles the
articles for which they are intended to be used are to be
classified with the articles if they are of a kind of container
normally sold with such articles (e.g., camera cases with
cameras and musical instrument cases with musical
instruments).
This rule DOES NOT apply to containers that give the
imported article its essential character. Such merchandise is to be
classified under the heading for the container
GRI 5(a)
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GRI 5(b)
Packing materials/containers are classified with the goods if:
– Normally used for packing goods when entered w/ such goods. (e.g., cardboard boxes or containers containing food products).
– Are not commercially suitable for repetitive use. Packaging materials or packing containers that are clearly suitable for repetitive use are classified separately from the materials that they hold.
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GRI 5(b) (Cont.)
• “Clearly Suitable for Repetitive Use”
– Commercially reusable, not like long term use of GRI 5(a). Does not require actual reuse but clear durability
– Example: Hangers used in hanger recovery programs
• “Of a kind normally sold with”
– If not normally sold with contents (aka “Unusual”) then
classified separately under GRI 5(b).
– Example: 4 foot tall long-neck bottle with containing wine
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GRIs 1-5 are to be reapplied in the same manner
to determine the classification of goods at the
subheading level within a given heading. (hint:
substitute “subheading” wherever you see the
word “heading”)
GRI 6
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There are 4 rules, but the most often used are (a) and (c)
In the absence of special language or context which requires
otherwise:
(a) a tariff classification controlled by use (other than actual
use*) is to be determined in accordance with the use of
like goods in the US at, or immediately prior to, the date
of importation;
(c) a provision for parts of an article covers products solely
or principally used as a part of such articles but a
provision for “parts” or “parts and accessories” shall not
prevail over a specific provision for such part or
accessory
ADD’L US RULES OF INTERPRETATION
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Use provisions are identified by the terms of the provision
• “Of a kind used…” (e.g., of a kind used for table, kitchen,
toilet…and similar purposes)
• “Articles for…” (e.g., articles and equipment for general
physical exercise, gymnastics…)
• Terms designating use (e.g., diagnostic or laboratory
reagents; kitchenware; household articles; toy)
• “used for” (but “used for” may mean actual use, different
from principal use and must comply with 19 CFR 10.131-
10.139)
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ARI 1(a) AND PRINCIPAL USE
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• Use provisions (other than actual) are based on “Principal Use”
• Principal use is the use of the class or kind of merchandise at issue
that exceeds any other use.
• Carborundum (or Lennox) Factors are used to determine whether a
particular article belongs to a particular class or kind of good and
has been used to determine an article’s principal use
the general physical characteristics of the article,
the expectation of the ultimate purchaser,
channels of trade,
environment of sale (accompanying accessories, manner of advertisement
and display),
use in the same manner as merchandise which defines the class,
economic practicality of so using the import, and
recognition in the trade of this use
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ARI 1(a) AND PRINCIPAL USE
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Example: Festive Articles
Festive Articles – Heading 9505 – is a use provision because defining
feature is implied by an article’s use.
• Classification of merchandise as a festive article requires that the
article satisfy two criteria:
(1) It must be closely associated with a festive occasion and
(2) It must be used or displayed principally during that festive occasion.
• In addition, CBP applies the Carborundum factors to determine of a
good belongs to a class or kind of festive article
(Note Landmark Cases: Midwest, Park B Smith, Michael Simon, Wilton
Industries)
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ARI 1(a) AND PRINCIPAL USE
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Example: Festive Articles Cont.
• An article that is found to be (or rather, principally used as) a Christmas
ornament is prima facie classifiable as a “festive article” under heading 9505
• CBP recently considered “keepsake” ornaments imported in 2007 that were
liquidated as statuettes, music boxes, made up textile articles, etc. They
were not all Xmas-themed articles. (HQ H167996, December 4, 2012).
Carborundum was applied.
• Ornaments had physical features of Xmas ornaments, including metal
eyelets for attaching to a tree
• Marketed during holiday season as Xmas ornaments used to decorate
Xmas trees
• Found and sold in importer’s Xmas ornament catalogue
• Has “Christmas ornament” printed on packaging
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ARI 1(a) AND PRINCIPAL USE
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• Parts must be solely or principally used as a part, as
these terms are interpreted for purposes of classification.
• Specific provision for a particular part prevails over a
“parts” or “parts and accessories” provision (ala GRI
3(a)) unless a legal note or the like dictates otherwise.
• Example -- Chapter 95, Note 3 -- Subject to note 1
above, parts and accessories which are suitable for use
solely or principally with articles of this chapter are to be
classified with those articles.
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ARI 1(c), PARTS AND PRINCIPAL USE
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• Integral, constituent or component part, without which the article to
which it is to be joined could not function as such article
• “Dedicated solely for use with another article” rather than being a
separate and distinct commercial entity.
o specially designed, clearly identifiable, won’t fit anything else
o determined by legal notes and heading text
• Never includes “Parts of General Use” as defined by Note 2, Section
XV (even if dedicated for specific use)
• Where a particular part of an article is provided for specifically, a part
of that particular part is more specifically provided for as part of the
part than as part of the whole”
PARTS: BRIEF OVERVIEW
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PARTS vs. MATERIALS
When does a "material" becomes an "article" ?
• Character or identity is fixed with certainty
• Not commercially capable of any other use.
• Material has been so far advanced/processed that it loses its character as material
• If the material is intended to be made into multiple parts, the individual parts to be made from it must be identifiable and fixed with certainty.
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ACCESSORIES: BRIEF OVERVIEW
• Not defined term in the HTSUS or in the ENs
• Not necessary for principle article to function
• Of secondary importance, but contributes to the effectiveness of the principal article
• An accessory must relate directly to the thing accessorized. (Rollerblade, Inc. v. United States, 116 F. Supp. 2d 1247 (CIT 2000), aff’d, 282 F. 3d 1349 (Fed. Cir. 2002))
• Articles called accessories are not classified as an accessories if there is a more specific provision (e.g., imitation jewelry, articles made of artificial flowers, cables, power adapters, memory cards ) – ARI 1(c)
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• Create and regularly update comprehensive classification database for
current products (by product number/style number, detailed description, classification, duty rate, rulings and other support for decision, etc.)
• Create a process for identifying and capturing new products as early as possible
• Document the classification process in a manual
• Get outside expert advice or get rulings for tough calls
• Instruct brokers not to make unilateral decisions on classification without first consulting with the importer, and brokers, ask your importers about classification
• Conduct regular internal audits.
BEST PRACTICES
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© 2014 Sandler, Travis & Rosenberg, P.A. All rights reserved.
Deborah B. Stern, Esq.
Member - Miami Office
Sandler, Travis & Rosenberg, P.A.
305.894.1007
www.strtrade.com
QUESTIONS?
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