Training Manual for Harmonized Tariff Schedule (Hts) Classification

5/20/2018 Training Manual for Harmonized Tariff Schedule (Hts) Classification

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InternalGlobal Tariff Classification - Finance| Feb 11, 2014

TRAINING MANUAL

FOR

HARMONIZED TARIFF SCHEDULE (HTS)CLASSIFICATION

Global Tariff Classification Project

Karthik Vijayarangan

RN03414


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Training Objectives

At the end of the lesson, participants will be able to:

Define terms used in the Customs Nomenclature

Outline the evolution of Customs Nomenclature

State the reasons for tariff classification

Identify the uses of the Harmonized System

Outline the structure of the Harmonized System

Identify the concept of classification

Basis of Authority 1 & 2

Use General Rules of Interpretation (GRI)

Know about Explanatory Notes and Cross Rulings.


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DEFINITIONS

Nomenclature:

A systematic naming, or enumerating of all goods found in internationaltrade along with international rules and interpretations.

Customs tariff:

A systematic classification of goods entering the international trade for

National interests together with rates of duties.

Classification:

A process of arriving at a particular heading or sub heading of a

commodity entering the international trade.

International trade:

An exchange of goods between two or more countries.


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Reasons for tariff classification:

Systematic Classification of goods

Uniform Classification of goods

To have common Custom language

To ensure simplification and certainty

HISTORICAL BACKGROUND


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The Harmonized System took more than 100 years to design

Aim was to facilitate international trade

Classification according to commodities alphabetical order

From 1853-1922 an international statistical nomenclature.

Approved by an international convention and signed by 29 countries.

IMPORTANT STAGES OF DEVELOPMENT


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It consisted of 186 items, arranged in five groups namely:

Live animals Food and beverages

Raw and simply prepared materials

Manufactured goods

Gold and Silver

In 1922 International Bureau of Statistics compiled commercial

statistics

Used in the preparation of the harmonized commodity description and

coding system.



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THE LEAGUE OF NATIONS

League of Nations Conference 1927

Draft Nomenclature produced 1931

Geneva Nomenclature

The nomenclature had 991 headings grouped in 86 chapters

The chapters were arranged into 21 sections

Revised in 1937

Development stopped by World War II



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THE BRUSSELS CONVENTION 1950

1948 -European customs study group continued to work on Geneva

nomenclature.

1950-Draft named Brussels Tariff Nomenclature (BTN)



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1974-(BTN) renamed The Customs Cooperation Council

Nomenclature (CCCN). CCCN Had 1241 headings

Grouped into 99 Chapters

Arranged in 21 Sections

CCCN supported by:

Explanatory Notes for official interpretation Alphabetical index listing

A compendium of classification opinion

1983 CCCN was replaced by the Harmonized Commodity

Description and Coding System.

1988 The Harmonized System entered into force.



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Basis for customs tariff

Collection of international trade statistics

Rules of Origin

Collection of government revenue

Trade negotiations (e.g. the WTO schedule of tariff concessions)

Transport tariffs and statistics

Monitoring prohibited and restricted goods

As a vital element of core customs process areas of customs controls and

procedures

USES OF HARMONIZED SYSTEM


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Arrangement of Harmonized system

Raw materials/natural goods Un-worked products

Semi-finished products

Finished products

Headings covering related products are grouped into chapters

Chapters covering related products are grouped into Sections

21 Sections

99 Chapters

Chapter 77 reserved for future use

Chapters 98 & 99 reserved for National Use

STRUCTURE OF HARMONIZED SYSTEM


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International(HS)

CODE POSITIONS

Chapter 1 & 2

Heading 3 & 4Subheading 5 & 6

8708.29.5060 = 87 8708 870829

Chapter Heading Subheading



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Section I: Live Animals; Animal Products

Section VII: Plastics and Articles Thereof Rubber and Articles

Thereof

Section XV: Base Metals and Articles of Base Metal

Section XVII: Vehicles, Aircraft, Vessels and Associated Transport

Equipment



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The titles of Sections, Chapters and Subchapters are not legallybinding

They are for ease of reference only

They are pointers or labels used to divide up the

nomenclature.

Help in directing you to areas of the nomenclature.

They should not be quoted to support classification.

Example: Section XV is entitled base metal and articles of base

metal However, many articles of base metal are classified in other

Sections.



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Chapter Commodities

01-05 Animal & Animal Products06-15 Vegetable Products

16-24 Foodstuffs

25-27 Mineral Products

28-38 Chemicals & Allied Industries

39-40 Plastics / Rubbers

41-43 Raw Hides, Skins, Leather, & Furs

44-49 Wood & Wood Products

50-63 Textiles

64-67 Footwear / Headgear

68-71 Stone / Glass

72-83 Metals

84-85 Machinery / Electrical

86-89 Transportation

90-97 Miscellaneous

98-99 Service



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Sections and Chapters CommoditiesSection VII: Plastics and Articles Thereof Rubber and Articles Thereof

Chapter 39 Plastics and articles thereof

Chapter 40 Rubber and articles thereof

Section XIII: Articles of Stone, Plaster, Cement, Asbestos, Mica or Similar

Materials; Ceramic Products; Glass and Glassware

Chapter 70 Glass and glassware

Section XV: Base Metals and Articles of Base Metal

Chapter 73 Articles of iron or steel

Chapter 82 Tools, implements, of base metal; parts thereof of base metal

Chapter 83 Miscellaneous articles of base metal

Section XVI: Machinery and Mechanical Appliances; Electrical Equipment;

Parts Thereof; Sound Recorders and Reproducers, Television Image and

Sound Recorders and Reproducers, and Parts and Accessories of Such

Articles

Chapter 84

Nuclear reactors, boilers, machinery and mechanical appliances; parts

thereof

Chapter 85

Electrical machinery and equipment and parts thereof; sound recorders

and reproducers, television image and sound recorders and reproducers,

and parts and accessories of such articles

Section XVII: Vehicles, Aircraft, Vessels and Associated Transport

Equipment

Chapter 87

Vehicles other than railway or tramway rolling stock, and parts and

accessories thereof

Section XVIII: Optical, Photographic, Cinematographic, Measuring,

Checking, Precision, Medical or Surgical Instruments and Apparatus;

Clocks and Watches; Musical Instruments; Parts and Accessories Thereof

Chapter 90

Optical, photographic, cinematographic, measuring, checking, precision,

medical or surgical instruments and apparatus; parts and accessories

thereof

Section XX: Miscellaneous Manufactured Articles

Chapter 94

Furniture; bedding, mattresses, mattress supports, cushions and similar

stuffed furnishings; lamps and lighting fittings, not elsewhere specified or

included; illuminated sign illuminated nameplates and the like;

prefabricated buildings



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Goods are grouped in two broad categories:

Goods which the earth is endowed with.

e.g. Minerals, Animals, Plant Water etc.

Goods which are man-made

e.g. TVs, Motor vehicles, the list is endless because of change intechnologies

Goods under chapters 1 to 83 are generally classified according to

material of manufacture.

Goods under chapter 84 to 96 are generally classified according to

function



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Where is it used? (LOCATION)

What material or substance is it made of? (MATERIAL)

What is its function or use? (FUNCTION)

In what form/spec is it imported? (SPECIFICATION)

Is this the only possible classification?

PRINCIPLES OF TARIFF CLASSIFICATION


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HOOD ASSY

Location: Body

Material: Metal

Function: Car Hood

Section XVII

Chapter 87

Heading 8708 Subheading 870829



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To properly arrive at the correct classification of a good, the

following must be understood and applied:

Structure and arrangement of Sections, Chapters and Subchapters

How to apply the Sections, Chapter and Subchapter Notes

How to apply the General Rules of Interpretation

How to search Cross Rulings

How to read the Explanatory Notes.



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A commodity can be classified either by:

Terms of the Heading

Notes to the Sections, Chapters or Subheadings

The General Interpretative Rules (GRI)



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This can be further categorized into five parts:

Lists of Description

Legal Notes (Legal Force)

General Rules of Interpretation

Explanatory Notes (No legal force)

Classification Rulings



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The Legal Notes which appear in front of most Sections andChapters are known as Section Notes and Chapter Notes

Section XI is the only Section with Subheading Notes' which refer to

the interpretation of Subheadings

The Legal Notes for each Section and Chapter provide:

Exclusions

Definitions Classification Provisions

Limitations of Scope

SECTION, CHAPTER AND HEADING NOTES


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Exclusion: Note 1 Chapter 87

VEHICLES OTHER THAN RAILWAY OR TRAMWAY ROLLING-

STOCK,AND PARTS AND ACCESSORIES THEREOF

This chapter does not cover

This chapter does not cover railway or tramway rolling-stock designed solelyfor running on rails.

Heading 8712 includes all children's bicycles. Other children's cycles fall in

heading 9503.



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Definition: Note 2 Chapter 87

Note 2: For the purposes of this chapter, "tractors" means vehicles

constructed essentially for hauling or pushing another vehicle, appliance

or load, whether or not they contain subsidiary provision for the

transport, in connection with the main use of the tractor, of tools,

seeds,fertilizers or other goods.

Machines and working tools designed for fitting to tractors of heading

8701 as interchangeable equipment remain classified in their respective

headings even if presented with the tractor, and whether or not mounted

on it.



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Classification Provision: Note 4 to Section XVII

These notes establish the classification of certain goods.

Example: Note 4 to section XVII establishes the classification of

amphibious motor vehicles

Note 4. For the purposes of this section:

(b) Amphibious motor vehicles are classified under the

appropriate heading of chapter 87;



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Limitation of Scope: Note 2 to section XVII

These notes limit the scope of goods to be classified in the section.

Example: Note 2 to section XVII (which limits the scope of the

expressions Parts and Parts and accessories).

Note 2. The expressions "parts" and "parts and accessories" do not apply to the

following articles, whether or not they are identifiable as for the goods of this

section:



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The General Rules of Interpretation (GRI) are designed to ensure

that a given product is always classified in the same heading andsubheading with the exclusion of any other heading meriting

consideration.

They illustrate and provide step-by-step basis for classification of

goods in the harmonized system.

A clear route to the classification of any item can be made

Provide authority and justification for any classification

Uniform system operated throughout the world.

GENERAL RULES OF INTERPRETATION


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There are six rules which are applied in hierarchical order.

No GRI can be used until the preceding GRI has failed

They should be quoted to support classification.

All goods must be classified according to the terms of the heading texts

in the nomenclature

AND any relative section or chapter notes.

Where not possible, then according to the following provisions

A systematic and consecutive approach to the rules must be taken

Remember, Headings and the Legal Note must first be considered

when determining classification



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General Rule of Interpretation 1:

The titles of sections, chapters and sub-chapters are provided for ease of

reference only; for legal purposes, classification shall be determined

according to the terms of the headings and any relative section or chapter

notes and provided such headings or notes do not otherwise require,

according to the following provisions.

Used when direct classification can be made

Many items can be classified using GRI 1 only:

A live sheep is classified in 0104

A leather suitcase is classified in 4202

A base metal is classified in 8301

A car door is classified in 8708



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General Rule of Interpretation 1

Not only where the item is mentioned in the heading text

BUT

Only after consulting the Section and Chapter Notes

These Notes should be consulted for EVERY classification

Because of the direction given in GRI 1, use of GRI 2 is allowed onlywhere classification using GRI 1 is not possible.



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Can only be used if GRI 1 has failed.

This rule refers to:

Incomplete

Unfinished Unassembled or

Disassembled Articles

Mixtures or combinations of materials or substances

There are two parts to this rule: GRI 2(a) & GRI 2(b)



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General Rule of Interpretation 2(a): Essential Character

Any reference in a heading to an article shall be taken to include a

reference to that article incomplete or unfinished, provided that, as

presented, the incomplete or unfinished article has the essential character

of the complete or finished article. it shall also be taken to include a

reference to that article complete or finished (or falling to be classified as

complete or finished by virtue of this rule), presented unassembled ordisassembled.

GRI 2(a) covers:

Incomplete

Unfinished Unassembled or

Disassembled articles



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Where you can clearly recognize in an unfinished or incomplete article

the essential character of the goods described in a particular heading.

The article only lacks a component(s) or part(s) or assembly.

Classify as if complete under GRI 2(a)



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Question to ask What is the essential function of the item?

Or What is its main purpose and use?

Influencing factors:

The kind of goods being considered

The nature of the material or components

Their bulk, quality or weight

The role of a particular constituent material or component in relation to the

use of the goods

The way the goods are packaged..and so on.



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Examples:

Bottle performs of plastic in tubular shape, with one closed end and one

open end threaded to secure screw type closure

Motor vehicles without engine or wheels

Freezer without a compressor

An unassembled bicycle with all the components of a finished bicycle

An unassembled table with all the components of a finished table

A rough forging that has the profile shape of the finished good



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General Rule of Interpretation 2(b):

Any reference in a heading to a material or substance shall be taken to

include a reference to mixtures or combinations of that material or

substance with other materials or substances, any reference to goods of a

given material or substance shall be taken to include a reference to goods

consisting wholly or partly of such material or substance. The classification

of goods consisting of more than one material or substance shall beaccording to the principles of rule 3.

GRI 2(b) covers mixtures or combinations of materials or substances

but only if the headings or Section/Chapter Notes do not otherwise

require



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Refers to three situations:

Heading reference to a material or substance

Reference to goods of a given material or substance

Goods consisting of more than one material or substance i.e., classifiable

under two or more headings



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Heading reference to a material or substance

Under GRI 2(b), a stainless steel travel mug with a plastic handle would be

classifiable in heading 7323 as a table, kitchen or other household article of

steel despite the plastic handle, as it retains the essential character of a

table, kitchen or other household article of steel as mentioned in heading

7323.

Reference to goods of a given material or substance

If a travel mug, however, contained relatively equal amounts of stainless

steel and plastic (e.g., the outside or outer surface of the mug is made of

plastic and the inside or inner surface (lining) of the mug is made of stainless

steel), then the travel mug would be potentially classifiable under twoheadings: heading 3924 as tableware, kitchenware or other household

article of plastic and heading 7323 as a table, kitchen or other household

article of steel.



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Can only be used after GRI 1, 2(a) and 2(b) fail

Covers goods consisting of more than one material or substance and

classifiable under two or more headings, i.e., when there is no essential

character

Example: travel mug consisting of relatively equal amounts of stainless steel

and plastic does not have the essential character of a table, kitchen or other

household article of steel as mentioned in heading 7323. In this situation we

must go to GRI 3 for classification of the product.

There are three parts to this rule: GRI 3(a), GRI 3(b) and GRI 3(c)



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General Rule of Interpretation 3(a): Most Specific Description

The heading which provides the most specific description shall be preferred toheadings providing a more general description, however, when two or more

headings each refer to part only of the materials or substances contained in mixed or

composite goods or to part only of the items in a set put up for retail sale, those

headings are to be regarded as equally specific in relation to those goods, even if

one of them gives a more complete or precise description of the goods

Most specific description

Tufted textile carpet for automobiles: 5703 or 8708? Answer: 5703

Carpets and other textile floor coverings, tufted, whether or not made up is more

specific than Parts and accessories of the motor vehicles of headings 8701 to

8705

Seats for automobiles: 8708 or 9401? Answer: 9401

Seats (other than those of heading 9402), whether or not convertible into beds,

and parts thereof is more specific than Parts and accessories of the motor

vehicles of headings 8701 to 8705



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General Rule of Interpretation 3(b): Essential Character

Mixtures, composite goods consisting of different materials or made up of differentcomponents, and goods put up in sets for retail sale, which cannot be classified by

reference to 3(a), shall be classified as if they consisted of the material or component

which gives them their essential character, insofar as this criterion is applicable

For the purposes of GRI 3(b) goods must be:

Mixtures Composite goods of different materials

Composite goods of different Components

Goods put up in sets for retail sale.

For the Purposes of GRI 3(b) goods put up in set for retail sale means:

Consist of at least two different articles.

Consist of products or articles put up together to meet a particular need or carry out a

specific activity.

Are put in manner suitable for sale directly to users without repacking.



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General Rule of Interpretation 3(b): Essential Character

MIXTURE: A mixture of barley of heading 1003 and oats of heading 1004 in equal amounts.In such an instance, there is a product consisting of two or more ingredients with each

ingredient having a provision in which it could potentially be classified and no provision exists

in the Harmonized System that provides for the mixture as a whole.

COMPOSITE GOOD: A combined flashlight of heading 8513 and radio of heading 8527

contained in the same housing. In such an instance, there is a product consisting of two or

more different units or components that are located in the same housing with eachcomponent having a provision in which it could potentially be classified and no provision

exists in the Harmonized System that provides for the composite good as a whole.

SET: A hairdressing kit consisting of a pair of electric hair clippers of heading 8510, a comb

of heading 9615, a pair of scissors of heading 8213, and a brush of heading 9603. In such an

instance, there is a product that consists of more than one item or article with each article

having a provision in which it could potentially be classified and no provision exists in theHarmonized System that provides for the set as a whole. In the above-mentioned

hairdressing kit, the articles are put up together to meet the particular need or carry out the

specific activity of grooming hair.



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General Rule of Interpretation 3(c): Last in Tariff

When goods cannot be classified by reference to 3(a) or 3(b), they shall be classifiedunder the heading which occurs last in numerical order among those which equally

merit consideration.

No ingredient, material, component or article can be found to impart the essential

character to a particular good

Goods are to be classified in the heading which occurs last in numerical order

among those which equally merit consideration.



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General Rule of Interpretation 4: Most Akin

Goods which cannot be classified in accordance with the above rules shall

be classified under the heading appropriate to the

This is a "last resort" rule.

Most often used with new technologies.



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General Rule of Interpretation 5(a): Cases

Camera cases, musical instrument cases, gun cases, drawing instrument cases,necklace cases and similar containers, specially shaped or fitted to contain a

specific article or set of articles, suitable for long-term use and presented with the

articles for which they are intended, shall be classified with such articles when of a

kind normally sold therewith. This Rule does not, however, apply to containers which

give the whole its essential character;

Specifies how to classify containers which:

Are shaped or fitted for the article they will contain,

Are suitable for long-term use,

Protect the article when not in use,

Are of a kind normally sold with such articles,

Are presented with the articles they are designed to contain.

Containers which have these characteristics can be classified with the products

which they contain. However, in cases where the container gives the product its

essential character it would be the container which would have to be classified.



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General Rule of Interpretation 5(b): Packing

Subject to the provisions of Rule 5 (a) above, packing materials andpacking containers presented with the goods therein shall be classified

with the goods if they are of a kind normally used for packing such goods.

However, this provision does not apply when such packing materials or

packing containers are clearly suitable for repetitive use.

Deals with packing containers and materials.

These items should be classified with the goods they contain if they are

of a kind normally used for packing such goods and are not suitable for

repetitive use.

Example: An importer bringing in goods and using styrofoam chips for

padding. Styrofoam chips are normally used for the padding and insulation

of many goods and are rarely reused.



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For legal purposes, the classification of goods in the subheadings of a

heading shall be determined according to the terms of those subheadings

and any related Subheading Notes and mutatis mutandis, to the above

Rules, on the understanding that only subheadings at the same level are

comparable. For the purpose of this Rule the relative Section and Chapter

Notes also apply, unless the context otherwise requires.

Once goods have been classified to the Heading level by the use of GRI

1 through 5, classification to the Subheading level can take place by

repeating GRI 1 through 5 and taking into account any related Legal

Notes.



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The Explanatory Notes represent the official interpretation of theCustoms Cooperation Council (hereafter referred to as the World

Customs Organization) on the scope of each heading of the

Harmonized System at the international level.

They are intended to be applicable at the 4-digit (heading) numericalcode level, and sometimes at the 6-digit (subheading) numerical

code level.

At times, however, the Explanatory Notes may provide guidance at

the national numerical code level (i.e., beyond the 6-digit numericalcode level) in a contracting party's tariff system.

EXPLANTORY NOTES


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Although they are neither legally binding on the contracting parties

to the Harmonized System Convention nor considered to bedispositive in the interpretation of the Harmonized System, the

generally accepted view is that the Explanatory Notes should be

consulted for guidance and considered as persuasive authority in

interpreting the Harmonized System (although some countries may

treat the Explanatory Notes as having the same legal authority as

the legal text of the Harmonized System).

The Explanatory Notes are periodically amended by the Harmonized

System Committee (which is a committee of the World Customs

Organization that is charged with interpreting and maintaining the

Harmonized System--see discussion below). All such amendments

to the Explanatory Notes are periodically published by the World

Customs Organization as amending supplements to that document.

EXPLANTORY NOTES

CUSTOMS RULINGS ONLINE SEARCH


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A tariff classification ruling is a legally binding opinion on theclassification of a specific good issued by U.S. Customs Office of

Regulations and Rulings.

CROSS is a searchable database of CBP rulings that can be

retrieved based on simple or complex search characteristics usingkeywords and Boolean operators. CROSS has the added

functionality of CROSSreferencing rulings from the initial search

result set with their modified, revoked or referenced counterparts.

Rulings collections are separated into Headquarters and New Yorkand span the years 1989 to present. Collections can be searched

individually or collectively.

CUSTOMS RULINGS ONLINE SEARCH

SYSTEM (CROSS)


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Training Manual for Harmonized Tariff Schedule (Hts) Classification

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