C6u—U.S. Customs Tariff (HTSUS) Classification Basics

Non-subscriber price: $380.00, Subscriber price: $290.00
Estimated total study time: 22 hours 38 minutes

This is basic "nuts and bolts" training in how to properly classify goods in the U.S. customs tariff or Schedule B. You will learn the structure of the Harmonized Tariff Schedule of the United States ("HTSUS") and how to apply the HTS classification steps known as General Rules of Interpretation ("GRIs") to most types of products. The general notes, including NAFTA eligibility and the most commonly used special provisions in the HTSUS (Chapter 98 and 99), are introduced.

This course reflects 2007 amendments to the nomenclature of the global Harmonized Commodity Description and Coding System. Links to download the current HTSUS are provided. However, some students may find it more convenient to use the HTSUS in paper format to complete the practical exercises.

Use this course to rapidly train staff newly assigned to handle HTSUS or Schedule B classification and to fill in the gaps for existing staff who perform basic classification but who have not been formally trained.

Note: To keep this course relatively short, we do not provide complex practical application exercises for GRIs 3 and 4. For more in-depth training in HTS classification, we recommend GISTnet Course C5—Harmonized Tariff Classification. Alternatively, for drill and practice purposes after taking this course, assign C8u— U.S. Customs Tariff (HTSUS) Classification Post Evaluation; Learning by Practice and Simulation. Please note, there is also a final exam for certification purposes at the end of C8u.

1. C6u - Classification of Goods in the HTSUS

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. These elements are sections, chapters, subchapters, headings, subheadings, and notes. This first lesson deals with the general overall structure, and the breakdown by sections.

(Estimated study time: 52 minutes)

Introduction
Overview of the HTS
Classification of Goods in the Customs Tariff
How Important is it to Get the Right Classification?
Responsibility for Classification of Imported Goods
Basis for the HTSUS
The HTSUS is Divided into Sections

2. C6u - HTSUS Framework

This lesson continues with the breakdown of the HTSUS by chapters, headings and subheadings. Also available for download in this module is a unique Chapter and Heading listing that is not commercially available. This document allows a quick glance at the whole HTSUS condensed into less than 30 pages.

(Estimated study time: 1 hour 8 minutes)

Introduction
Sections are Divided into Chapters
Chapter and Heading Listing to the Rescue
Chapters 1-97
What about Chapters 98 and 99?
Chapters are Divided into Headings
Headings Organized in Subchapters
Headings are Divided into Subheadings
- Subheadings are not born equal!
- Example of One-tab Subheading
- Example of a Two-tab Subheading
- Parts of the Tariff Number beyond Six Digits

3. C6u - HTSUS Section and Chapter Notes

The next important thing to consider when determining the correct classification of an article are the section, chapter and subheading notes. Notes hold the key to exclusions and definition of terms.

(Estimated study time: 40 minutes)

Introduction
Section Notes and Chapter Notes
- Defining and Refining Classification Options
Exclusions from Classification in Section and Chapter Notes
Definitions of Goods or their Composition in Section and Chapter Notes

4. C6u - More on Notes, Language and Punctuation

Apart from the very structure of the Harmonized Tariff Schedule of the United States (HTSUS), classifying involves the knowledge of the meaning of some Latin expressions, attention to punctuation, and awareness of the language of the HTSUS.

(Estimated study time: 1 hour 16 minutes)

Introduction
Subheading Notes
Practical Application of Notes
Classification Example to Check Your Understanding
Visible Elements vs. Elements that are not Visible
Technical Language and Vocabulary
Latin Expressions Represent Mental Concepts
Text Punctuation Influences Meaning
Text Punctuation and the Semi-Colon
Text Punctuation and the Comma

5. C6u - General Rule 1

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 will begin with Rule 1 which deals with the legal elements.

(Estimated study time: 1 hour 21 minutes)

Introduction
General Rules of Interpretation
- General Rules in General
The Operating System
Classification of a Fancy Cork
At a Glance...The Six General Rules
The Rules Made Readable
- The Text of the General Rules
- Rule 1
- Rule 2
  - Rule 2(a)
  - Rule 2(b)
- Rule 3
  - Rule 3(a)
  - Rule 3(b)
  - Rule 3(c)
- Rule 4
- Rule 5
  - Rule 5(a)
  - Rule 5(b)
- Rule 6
General Rule of Interpretation Number 1
Section, Chapter and Subchapter Titles are for Reference Only
Rule 1 is the Chief!
Examples of Titles that are Misleading
Classify According to Legal Elements
Terms of the Headings
Terms of Relative Section and Chapter Notes
Classification of Chilled Grapes
Not to Contradict Rule 1
Classification of Needlecraft Assortment
Rule 1 Conclusion

6. C6u - General Rule 2

This lesson details how General Rule 2 expands the scope of headings. It covers incomplete, unassembled, mixed or composite goods. We will discuss how headings are expanded through GRI 2 to include goods that do not perfectly match the terms of those headings.

(Estimated study time: 52 minutes)

Introduction
General Rule of Interpretation Number 2
Expand the Scope of Headings
General Rule 2(a)
How to Handle Incomplete or Unfinished Articles
Examples of the Essential Character of Incomplete Articles
"Blanks" are Considered Unfinished Articles
Blanks Require Additional Manufacturing
Practical Use of Blanks
What to do with Unassembled or Disassembled Articles
What if the Articles are Both Unassembled or Disassembled AND Incomplete or Unfinished?
Unassembled AND Incomplete: The Double Test
Classification of an Unassembled Bicycle
Unassembled or Disassembled Articles Must be Ready for Assembly.
Examples of Unassembled or Disassembled Articles
General Rule 2(b)
Goods Consisting Wholly or Partly of Materials or Substances
Materials and Substances Mixed with Other Materials or Substances
Classification of a Horticultural Mixture
Goods or Articles Made of a Given Material or Substance
When Two or More Headings may Apply
Rule 2 must not Contradict Rule 1

7. C6u - General Rule 3(a)

Rule 3 is the referee. In this lesson we will discuss the first and second part of Rule 3. When a good is, at first glance, classifiable in two or more headings, it is Rule 3 that will tell us which heading to use. Rule 3(a) directs us to the heading whose text better identifies the goods.

(Estimated study time: 37 minutes)

Introduction
General Rule of Interpretation Number 3
Rule 3 The Referee...
General Rule 3(a)
The Heading Providing the Most Specific Description
Classification of a Gas Barbecue
When Having the Most Specific Description is Not Sufficient!
Classification of a Gas Barbecue (Continued)
Examples of Headings which do not Refer to "Part Only" of Materials
Steps for Classifying Two or More Plausible Headings
What happened to all the examples?

8. C6u - General Rule 3(b)

We know that Rule 3 tells what to do when goods are classifiable in two or more headings. If there is no heading that better identifies the goods according to Rule 3(a) then Rule 3(b) will provide the direction on when to use essential character to determine the proper heading.

(Estimated study time: 57 minutes)

Introduction
General Rule 3(b)
Material or Component Giving Essential Character
Mixtures
Composite Goods Consisting of Different Materials
Composite Goods Made Up of Different Components
Goods Put Up in Sets for Retail Sale
Essential Character
Classification of a Gas Barbecue Conclusion
Classification of Scrap Metal Alloy
Use Essential Character Only if Applicable

9. C6u - General Rule 3(c) and 4

Rule 3 tells what to do when goods are classifiable in two or more headings. This lesson will provide training on when to move past essential character and look at the third part of Rule 3 to classify numerically in the last heading. Then, we will learn when to use the rule that applies when all else truly fails. Rule 4 helps classify something that can absolutely not be found elsewhere in the nomenclature.

(Estimated study time: 51 minutes)

Introduction
General Rule 3(c)
Heading Appearing Last in Numerical Order
Rule 3 Conclusion
General Rule of Interpretation Number 4
- General Rule 4
- When Everything Else Fails

10. C6u - General Rule 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: 1 hour 0 minutes)

Introduction
General Rule of Interpretation Number 5
- Boxes, Cases, Packaging and Packing
- General Rule 5(a)
- General Rule 5(b)

11. C6u - General Rule 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: 55 minutes)

Introduction
- General Rule of Interpretation Number 6
  - Classification in Subheadings
  - Mutatis Mutandis
  - Only Subheadings at the Same Level are Comparable
  - Section and Chapter Notes may also Apply to Subheadings.

12. C6u - Additional U.S. Rules 1(a) & (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: 1 hour 9 minutes)

Introduction
Additional U.S. Rules of Interpretation
- Additional U.S. Rules Made Readable
- Use and Purpose of Goods
- Additional Rule 1(a) – Principle Use
- Additional Rule 1(b) - Actual Use

13. C6u - Additional U.S. Rule 1(c)

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

(Estimated study time: 1 hour 12 minutes)

Introduction
Additional Rule 1(c) – Parts & Accessories
No General Rule Applicable to Parts
Classification Using The Double Approach
Application of Section and Chapter Notes
Parts of General Use
Section and Chapter Specific Conditions
Sequence for Determining Classification of Parts

14. C6u - Additional U.S. Rule 1(d)

Continuing our discussion of the HTSUS Additional U.S. Rules of Interpretation we arrive at clarification for mixtures of textile materials. This lesson is about classification by the weight of material and applicability of General rule 3(b) versus 3(c) for textiles.

(Estimated study time: 36 minutes)

Introduction
Additional Rule 1(d) - Mixtures of Textile Materials
Textile Mixtures Classified by Predominant Weight
Classification Appearing Last Numerically

15. C6u - A Classification Strategy

After learning the theory of the HTSUS, the next step is to put it all together to make it work as a coherent ensemble. This is where we define some common pitfalls and discuss irregular situations. How goods are presented is a big part of determining the correct classification. The use and purpose of the good is also an important factor. We will discuss these and show that even when all the facts are given, the outcome can still be subjective.

(Estimated study time: 1 hour 24 minutes)

Introduction
A Classification Strategy
Tips on Searching for the Proper Heading
Inquiry Skills
Factors Influencing Classification
Description of Goods
Seeing Goods "as Presented"
Subjective Factors in Classification
Reusable Packing Materials
More Sources
Additional Information Found in the HTSUS
- Appendices to the HTSUS
- Statistical Annexes to the HTSUS
- Alphabetical Index to the HTSUS
- Change Records
- Notice to Exporters

16. C6u - General Notes 1-3

The General Notes give direction on how to handle the different trade agreements and provide guidance on tariff treatment of imported goods and what is considered the customs territory of the United States.

The General Notes also give guidance on determining the proper duty rate. General Note 3 describes the rates of duty columns and what they mean. 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: 1 hour 1 minute)

Introduction
General Notes to the HTSUS
General Note 1—Tariff Treatment of Imported Goods and of Vessel Equipments, Parts and Repairs
General Note 2—Customs Territory of the United States
General Note 3—Rates of Duty
- Duty Columns
- Special Program Indicator (SPI) Codes
- Duty Exemptions
- Commingling
- Unit of Quantity
- Products of Insular Possessions
- Products of the West Bank, the Gaza Strip or a Qualifying Industrial Zone

17. C6u - GSP and NAFTA

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 some of the regulations concerning the two most common trade agreements GSP and NAFTA that have conditions for importing at the preferential duty rate.

(Estimated study time: 58 minutes)

Introduction
General Note 4—Generalized System of Preferences
- What Type of Articles are Designated as Eligible for GSP?
- How Does an Import Receive GSP Duty-free Treatment?
- Identifying Articles under the Generalized System of Preferences in the Tariff Schedules
- What are Statutory Competitive Need Limitations
- Inputs from GSP Beneficiaries Can Pool Inputs
- Products and Countries Covered by the Certified Handicraft Textile Arrangement
- Generalized System of Preferences Expiration and Retroactive Renewal
General Note 12—North American Free Trade Agreement
- NAFTA Rules of Origin
- Determining NAFTA Eligibility

18. C6u - All Other General Notes

The HTSUS General Notes define trade agreements, exemptions, and rules for determining the applicable duty rate. We will continue with our study of the General Notes and discuss other requirements for classification under various other free trade agreements.

(Estimated study time: 1 hour 7 minutes)

Introduction
General Note 5—Automotive Products and Motor Vehicles Eligible for Special Tariff Treatment
General Note 6—Articles Eligible for Duty-Free Treatment Pursuant to the Agreement on Trade in Civil Aircraft
General Note 10—Products of the Freely Associated States
General Note 13—Pharmaceutical Products
General Note 14—Intermediate Chemicals for Dyes
General Note 15—Exclusions
Other General Notes Specific to Trade Agreements

19. C6u - Other HTSUS Notes

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: 53 minutes)

Introduction
General Statistical Notes
Additional U.S. Notes
Other Statistical Notes

20. C6u - U.S. Goods Returned (9801)

In this lesson we review the conditions for U.S. Goods Returned touching on a few other provisions under 9801 for articles to returned to the U.S. with free or reduced duty.

(Estimated study time: 1 hour 5 minutes)

Introduction
Chapter 98 Special Classifications
U.S. Goods Returned (USGR)
- Returned U.S. Product
- Documentation Required for U.S. Goods Returned
  - Documentation for USGR Valued $250 or Less
  - Documentation for USGR Valued over $2000
    - Foreign Shippers Declaration (FSD)
    - Consignee's or Owner's Declaration
    - Manufacturer's Affidavit
  - Documentation Required for USGR Valued $10,000 or Less
- U.S. Goods Returned and NAFTA
Articles Previously Imported Duty Paid, Not Advanced and Re-imported
- Articles Previously Imported Duty Paid, Not Advanced while Abroad, and Returned to the U.S.
- Re-imported Articles Exported under Lease
- Articles Exported and Returned
- Articles Exported for Scientific or Educational Purposes and Returned
- Articles Exported for Exhibition and Returned

21. C6u - Repaired Goods and U.S. Content (9802)

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. We'll briefly discuss the conditions for re-importation.

(Estimated study time: 1 hour 7 minutes)

Introduction
U.S. Goods Repaired, Altered, or Processed Abroad and Returned
- The Two-Step Process for U.S. Goods Repaired, Altered, or Processed Abroad and Returned
- Documentation Required to Declare Articles Repaired, Altered or Processed
  - Shipper's Declaration
  - Consignee/Owner's Declaration
Articles with U.S. Content
- U.S. Content Articles in General
- Documentation for U.S. Content Articles

22. C6u - Government Contract (9808) and TIB (9813)

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 government contract, talk a little bit about ITAR and temporary imports under bond.

(Estimated study time: 1 hour 5 minutes)

Introduction
Articles Imported under Government Contract
- Department of Defense Contract Articles
- Government Contract Articles Sold to Government Facilities or DCMCI-IC
- ITAR Direct Government Shipments
- ITAR Government Temporary Imports
Temporary Imports; Another Two-Step Process
- Importing under a Temporary Import Bond
  - Documentation for Temporary Importation Bond Imports
  - Additional Fees for Temporary Importation Bond Handling
- Cancellation of the Temporary Import Bond

23. C6u - Chapter 99 Provisions

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: 34 minutes)

Introduction
Chapter 99 Temporary Legislation
Conclusion