If you’ve ever imported anything from another country, you’ll probably have dealt with tariffs at some point. Whether it’s just to pay duty and taxes, or trying to classify the items you’re bringing in, tariffs play a role in ensuring your items are imported compliantly.
Tariffs came into play in 1950, when the initial version of the tariff classification system, the Customs Cooperation Council Nomenclature, was developed by the Customs Cooperation Council in Brussels, Belgium. In 1970, the system was modernized and revised to include over 200 countries, and eventually transformed into the Harmonized Commodity Description and Coding System (or Harmonized System) that we use today: a schedule that covers every kind of commodity, identifying them by a 10-digit tariff code.1
Many countries use the Harmonized System for its unanimity across goods, at least up until the 6th level in the code. After that, the codes may change across countries depending on need and identification of duty rates or units of measurement. In this article, we will use the Harmonized Tariff Schedule of the United States (HTSUS) as an example.
Classification occurs in levels of the tariff code based on the number of digits.
Chapters (ex. 01)
The first two digits of the tariff code designate what chapter the code belongs to. There are up to 99 chapters, numbered from 01-99, that each cover different kinds of similar items. These chapters are organized into sections that contain categories of nominal chapters.
Example:
Section I: Live Animals; Animal Products contains the following:
Chapter 1: Live Animals
Chapter 2: Meat and edible meat offal
Chapter 3: Fish and crustaceans, molluscs and other aquatic invertebrates
Chapter 4: Dairy produce; birds’ eggs; natural honey; edible products of animal origin, not elsewhere specified or included
Chapter 5: Products of animal origin, not elsewhere specified or included
Headings (ex. 1234)
At the Heading level, commodities are sorted at the 4th level of their tariff codes. This will generalize a certain type of commodity such that it should be easily identified.
Example:
Section I: Live Animals; Animal Products
Chapter 1: Live Animals
Heading 0101: Live horses, asses, mules and hinnies
This means that any tariff code beginning in 0101 will refer to a commodity that can be described as being one or multiple live horses, asses, mules and/or hinnies.
Subheadings (ex. 1234.56.78)
Subheadings further divide the categories into more specific orders of commodity. Some classifications may end at the 6th level of the tariff code, but most go on to the 8th level.
Example:
Heading 0101: Live horses, asses, mules and hinnies
Subheading 0101.21: Horses
Subheading 0101.21.00: Purebred breeding animals
Suffixes (ex. 1234.56.78.90)
Finally, classifications are narrowed down to a single type of article at the 10th level, with the final two digits indicating the suffix of the tariff code. This is the highest and most descriptive level of classification.
Example:
Heading 0101: Live horses, asses, mules and hinnies
Subheading 0101.21: Horses
Subheading 0101.21.00: Purebred breeding animals
Suffix 0101.21.00.10: Males
Now that we understand what comprises the tariff code and the article it identifies, we can determine other factors about the article such as unit of quantity and rates of duty.
Based on the HTSUS website (here), we can look up the tariff code 0101.21.00.10 (which we already know refers to male purebred horses intended for breeding) and find that there is no designated unit of quantity. You will also find that there are three columns pertaining to duty: Column 1: General, Column 1: Special, and Column 2. Column 1 refers to articles coming in from all countries except North Korea and Cuba. Column 2 refers to articles originating from those countries, if they have been permitted. In this case, there is no duty listed for either column.
It is important to read the Preface and other information about the tariff schedule you are using because these rules tend to differ based on the country these commodities are being imported into.
Identifying the Tariff Code of an Article
Let’s examine a different type of commodity and attempt to identify it using the HTSUS. While some websites may be able to automatically determine a tariff code based on a description of the item, you should know how to classify a commodity by hand in the event that there is a computer error that may give you the wrong tariff code. Even a mistake at the 8th or 10th level of the tariff code may result in erroneous duty charges or penalties with CBP, so you must be vigilant when identifying tariff codes to use for your imports.
How would you classify an object such as a horseshoe?
In order to begin properly classifying a horseshoe, we must ignore all identifiers based on function, and examine the object by its most basic properties.
Horseshoes are typically made of iron or steel. Therefore, we will begin by looking through the sections of the HTSUS for a chapter referring to articles that either are iron or steel, or comprised of iron or steel.
Some quick searching through the sections will yield Section XV: Base Metals and Articles of Base Metal. That accurately describes the horseshoe, so we will look through the chapters in Section XV for the appropriate one. Fortunately, the chapter we’re seeking is the second one: Chapter 73: Articles of iron or steel.
Why is it not Chapter 72: Iron and steel? Because it is a manufactured commodity–something made out of iron or steel. That makes it an article of iron or steel.
We now have a starting point on where to begin combing for the proper classification.
The first thing you should do is read the Section and Chapter notes. If you don’t find anything relating to the item you are looking up–in this case, horseshoes–you should proceed to look through the articles in the chapter.
Because we already begin to see specific articles mentioned at the heading level, we will need to read through the articles listed and dismiss anything that doesn’t match our description of a horseshoe. Eventually, we will run out of specific articles being mentioned and head into “Other” classification territory. The last heading with a specific definition is 7324: Sanitary ware and parts thereof, of iron or steel, and if our horseshoes aren’t that, then the next heading we see is 7325: Other cast articles of iron or steel. If our horseshoes were made by casting iron or steel, they might fall into this category. However, we know that they were forged (as most horseshoes are), so that brings us to the heading after it, which is 7326: Other articles of iron or steel.
There are a few specific articles listed in this heading, including, fortunately, 7326.90.45.00: Horse and mule shoes. Not every item is so clearly defined, but horseshoes are a unique commodity that have received their own identifying tariff code.
Now that we have a tariff code, we can see that horseshoes are measured in kilograms (kg), and have a general rate of duty as “Free” as specified under Column 1. When being imported from North Korea or Cuba, they have a duty rate of 10%, as specified under Column 2.
Try classifying some other items around your office or home and see how accurately or quickly you can identify their corresponding tariff code based on the HTSUS or another country’s tariff schedule. It will take a lot of practice, and searching online will yield many resources you can use to supplement your classification methods. If you are a regular importer, we would highly recommend familiarizing yourself with the process in order to avoid delays or errors in the clearance of your goods.
Alternatively, a customs broker like Border Brokers will know exactly how to classify your goods. If you are interested in obtaining a classification for your goods, feel free to give us a call at our toll-free number 1-(866)-753-8156 or send us an email at release@adrutherford.com.
1 Referenced from https://www.globaltariff.com/hshistory.cfm