CB5u—Intro to U.S. Customs Brokerage, Part 5: Basic HTSUS Classification

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Estimated total study time: 19 hours 47 minutes [Enroll now]

This the fifth of the six-part series of introductory courses in the practical work of U.S. customs brokerage work groups, and should be taken after completion of Intro to U.S. Customs Brokerage, Part 4, for proper continuity. (See the syllabus for Part 4 for more information).

This course begins with the basic structure of the tariff and why it is important to use the right classification. Next, we talk about the way the tariff is written and the rules for interpretation. Finally, we address the special provisions in Chapters 98 and 99, conditionally free and reduced duties and special treatment, rates of duty and how to calculate it. This is in the context of the most basic classification for a terminal operator who uses a database to determine classification. If there is a question on which classification in the database to use, they will know how to look it up and have a basic understanding of why it is classified there. This course also addresses what to look for when deciding if special treatment is in order. Computation of duty is also included because it may be necessary for calculation of bond amounts or to determine if shipments exceed credit limits.

Important: If more than a basic understanding is needed, or a refresher for a classifier is required for importing into the United States, please look over course C6u—U.S. Customs Tariff (HTSUS) Classification Basics. Even more in depth for import or export, with several case studies, is C5—Harmonized Tariff Classification.

Note: The actual processing of a customs entry is covered in Part 6 of this introductory course series.

Classification of Goods in the Customs Tariff

The Harmonized Tariff Schedule of the United States (HTSUS) is subdivided into various elements which together form the structure of the nomenclature. In order to perform accurate classification it is essential to understand the relation between the elements. In this lesson we will review these elements: sections, chapters, subchapters, headings, and subheadings.

(Estimated study time: 1 hour 27 minutes)

Notes, Language and Punctuation

The last element to look at in the structure are the notes. They are a very important part of classification and must be consulted in every case. First at the section level, then the chapter level, and finally at the subheading level.

Apart from the very structure of the Harmonized Tariff Schedule of the United States (HTSUS), classifying involves understanding language and punctuation. It is important to know the meaning of some Latin expressions, pay attention to punctuation, and be aware of the language of the HTSUS.

(Estimated study time: 50 minutes)

General Rules of Interpretation - Rule 1 and 2

HTSUS Classification in the Harmonized Tariff Schedule of the United States (HTSUS) is governed by six HTSUS General Rules of Interpretation. The General Rules provide a uniform and mandatory system to read and interpret all the elements of the tariff. Knowledge and understanding of those rules is the single most important prerequisite to accurately classify goods. We begin with rules 1 and 2. Rule 1 shows us the legal elements - what to read vs. what not to read. Rule 2 expands the scope of headings to include goods that do not perfectly match the terms of those headings such as incomplete, unassembled, mixed or composite goods.

(Estimated study time: 1 hour 20 minutes)

General Rules of Interpretation 3 and 4

Rule 3 tells what to do when goods are classifiable in two or more headings. There are three parts to rule 3:

  1. Directs us to the heading whose text better identifies the goods.
  2. Advises when to use "essential character" to determine the proper heading. If neither of these work,
  3. Classification numerically in the last heading.

Then there is Rule 4, the rule to use when all else fails. It helps us classify things that cannot be classified anywhere in the HTSUS.

(Estimated study time: 1 hour 22 minutes)

General Rule of Interpretation 5

From Rule 5 we will learn how to classify packing materials and containers. This will include containers specially made for articles, as well as reusable and non-reusable containers.

(Estimated study time: 47 minutes)

General Rule of Interpretation 6

Rule 6 helps us determine the proper HTSUS subheading. We have learned that to find the proper heading we must apply Rules 1-5 in order. Now, to find the subheading, we must apply Rules 1-5 in order again at the subheading level.

(Estimated study time: 32 minutes)

Additional U.S. Rules of Interpretation 1(a) and (b)

The HTSUS Additional U.S. Rules of Interpretation are provided by the U.S. government to further clarify the GRIs. This lesson details the first two rules dealing with the use and purpose of goods.

(Estimated study time: 56 minutes)

Additional U.S. Rules of Interpretation 1(c) and (d)

Continuing our discussion of the HTSUS Additional U.S. Rules of Interpretation we arrive at clarification for the classification of parts & accessories along with mixtures of textile materials.

(Estimated study time: 43 minutes)

Other Notes Specific to the Harmonized Tariff Schedule of the United States

The HTSUS contains notes in addition to those of the sections and chapters. There are HTSUS General Statistical Notes, HTSUS additional U.S notes, HTSUS General Notes and more! We will discuss each briefly in turn to give an idea of what they are and where to find them.

(Estimated study time: 54 minutes)

More U.S. Notes and Harmonized Tariff Schedule of the United States Information

HTSUS additional U.S notes often give definitions or qualifications useful in classifying specific products. The assessments will provide a couple examples of these. In addition, we will describe other parts of the tariff such as the appendices and statistical annexes.

(Estimated study time: 44 minutes)

Special Harmonized Tariff Provisions in Chapter 98 - U.S. Goods Returned

In this lesson we review the conditions for U.S. Goods Returned, otherwise also known as U.S. Goods Returned(USGR). We will also touch on a few other provisions under HTSUS heading 9801 for articles to return to the U.S. with free or reduced duty. Heading 9802 provides provisions for reduced duty for goods exported from the U.S., repaired or altered abroad and then returned to the U.S. This includes repaired articles and articles imported with U.S. content.

(Estimated study time: 1 hour 7 minutes)

Special Harmonized Tariff Provisions in Chapter 98 - U.S. Content

9802 provides provisions for reduced duty for goods exported from the U.S., repaired or altered abroad and then returned to the U.S. We have already discussed goods repaired or altered abroad so we will continue with articles imported with U.S. content and their conditions for re-importation.

(Estimated study time: 49 minutes)

Special Harmonized Tariff Provisions in Chapter 98 - Government Contract

There are some other Chapter 98 provisions, but the two additional classifications you will see most often will probably be from HTSUS headings 9808 and 9813. In this lesson we will review imports under government contract and talk a little bit about ITAR.

(Estimated study time: 40 minutes)

Special Harmonized Tariff Provisions in Chapter 98 - Temporary Import Bond

In this lesson we continue on with the Temporary Import Bond provisions in Chapter 98. Closing a temporary bond is more important than opening one because if it is not closed properly, the importer may incur double the duties. It is just as important to recognize when a temporary import bond is required and whether it is more beneficial to the importer NOT to file under a TIB.

(Estimated study time: 49 minutes)

Special Harmonized Tariff Provisions in Chapter 99

Chapter 99 provides temporary legislation for changes in the rate of duty charged upon import. We will review some of the circumstances to look into Chapter 99 for these special duty rates and some of the conditions for import.

(Estimated study time: 1 hour 56 minutes)

Conditionally Free or Reduced Duty Rate Goods

Some goods have a condition that must be met in order to be imported duty free or with a reduced duty rate. In this lesson we will talk about special treatment based on importer, and disposition of goods.

(Estimated study time: 51 minutes)

Rates of Duty

In order to determine the proper duty rate it is important to be able to read all of the parts of the HTSUS. Different rates of duty columns mean different things. There are codes called special program indicator (SPI)s that increase or decrease normal trade relation (NTR) duty rates. It is also essential to understand certain circumstances where articles are exempted from duty or allowed to be commingled together. This lesson addresses all of these issues.

(Estimated study time: 46 minutes)

Most Common Trade Agreement - North American Free Trade Agreement (NAFTA)

Trade agreements have conditions for importing that must be met in order to receive the free or reduced duty rate. Here we review the two most common, GSP and NAFTA.

(Estimated study time: 29 minutes)

Trade Agreements for Africa, Australia and the Pacific Islands

In the previous lesson we covered the two most common duty-free or reduced duty rate trade agreements, NAFTA and GSP. This lesson talks about the general requirements for various trade agreements and requirements for those specific to the regions of Africa, Australia and the Pacific Islands.

(Estimated study time: 1 hour 11 minutes)

Trade Agreements and Special Treatment for Asia

In this lesson we review the requirements for trade agreements specific to Asia. These include BFTA, ILFTA, JFTA and SFTA.

(Estimated study time: 43 minutes)

Trade Agreements for the Americas Other than NAFTA

To continue the coverage of the trade agreements, in this lesson we first cover the many agreements specific to North, Central and South America. The agreements for study in this region are CBERA, CBI, CBTPA, CAFTA, Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE Act), ATPA, ATPDEA and CFTA. NAFTA, a commonly used trade agreement, was discussed in a previous lesson.

(Estimated study time: 50 minutes)