International Transactions - Harmonized Tariff Schedule

Have you ever wanted to import goods? 

It might be surprising to find out that businesses large and small take advantage of lower cost (Asian Manufacturing), or high end technical products (European Design & Manufacturing) that are designed and manufactured overseas. Often times, even products that are manufactured here in the USA contain components manufactured abroad. In light of these facts, US based companies (large and small) have to deal with seemingly complex import regulations. These importers might ask themselves, their freight carrier, or their attorney:

  • Is this product covered under NAFTA (or some other treaty)? 
  • How is this product or component classified under the HTS?
  • Why does it take so long for my product or component to get through customs? 
  • Can't I just lie and say that these products or components are actually something else so that I don't have to pay an ##% import tariff? 

As is typical in the worlds of Law and Business, the answers to those questions are never easy or simple. In many cases, the answers simply lead to more questions. 

HTS - Harmonized Tariff Schedule

The Harmonized Tariff Schedule (HTS), put simply, is the giant spreadsheet used by all interested parties to determine 1) How a completed product or component is classified, and 2) What the import tax rate is for that given classification. Feel free to visit the list here. If you take a moment or two to peruse the list, you will be amazed at what you find. Just when you think to yourself, "I bet they didn't think about X!", you dig a little deeper and find that they have! In addition, you may even find two or three different classifications that appear to be for the exact same thing! While they've thought of a lot of things, they haven't thought of everything. 

One of the most commonly misunderstood concepts about the HTS an customs is that you are stuck with whatever classification they give you. While that is partially true, you really have two opportunities to impact the classification of your goods or components. First, you get to "recommend" a classification. Typically you work with your freight forwarder to determine what your recommendation will be, and because they don't necessarily work for your business, they will often defer to your judgement. Getting a competent attorney involved at this early point can help save you time and money on the front end. By closely analyzing your product, and the alternatives found in the HTS, you can begin to craft your argument as to why your product should be classified as A and not B. In general, A tends to be cheaper (or free) to import than B, hence why you would argue in A's favor. By crafting this determination early on, you are prepared in the event you need to appeal the decision made by customs later. 

In the event customs classifies your products or components in a manner that you don't agree with, you always have the opportunity to appeal their decision. While this isn't done with great frequency, if the importer stands to save a large sum of money, an appeal may be worth it. By appealing the classification, you have the opportunity to argue why they got the classification wrong. US Customs and Border Patrol then issues a ruling related to your appeal. These rulings, found here, can then be used by other importers of goods to help them classify their products correctly. 

Now I just have more questions!

If you are an importer, or want to become an importer of goods, having a knowledgeable attorney on your team can help. While we would certainly be honored to help, if you already have an attorney, be sure to check with them first. If you have any questions about the topics contained in this post, please feel free to Contact Us, and we'd be happy to answer them.