Tariff Classification

Tariff Classification

All goods imported into the United States must be classified under the Harmonized Tariff Schedule of the United States (HTSUS). The HTSUS is an extensive nomenclature (like the dewey decimal system) which allows customs to categorize all goods entering the commerce of the United States. Classification can therefore become a complex exercise, even when common items are concerned.

Where an item is classified may ultimately depend on specific facts, the General Rules of Interpretation (GRI), Additional Rules, Legal Notes, U.S. judicial precedents, Customs rulings, and various other materials, including guidance from the WCO.  

Tariff Disputes with U.S. Customs

Since tariff classification determines the effective rate of duty, it is common for disputes to arise between Customs and importers over which classification applies. Customs holds a mandate to protect the revenue of the Treasury - which means that the agency may tend to disagree with an importer’s classification decisions.

Should such a disagreement arise, the provisions of 19 U.S.C. § 1592 (the Customs fraud and negligence statute) may allow the government to "claw-back" duties over a period of 5 prior years of prior imports and to impose harsh civil penalties, and interest charges against all of them.  See, Customs Penalties.

Importers are therefore wise to use experienced attorneys to render advance guidance establishing “reasonable care" (to protect against future negligence claims).  

If such advance precautions were not taken, however, experienced counsel can sometimes shield the importer from negligence penalties and claims. Sometimes counsel may recomend filing a prior disclosure. Counsel can also actively challenge the merits of the Customs assessment, via administrative procedures (including adminstrative protests), and if the agency issues self-serving decisions, such issues can be litigated at the U.S. Court of International Trade.

Tariff Engineering

Tariff engineering is a term used to leverage an understanding of the tariff to create more competitive business strategies. As an example, garlic powder might ordinarily be classified under heading 7012 as garlic “not further processed”, however, if blended with even only 1% onion powder, that commodity may qualify for favorable tariff treatment as a “vegetable blend.” The strategies involved in identifying such tariff opportunities are also important parts of our work.

Miscellaneous Tariff Bill (MTB)

Tariffs are often a means of shielding U.S. manufacturing concerns from foreign competition - hence, where there are no U.S. manufacturers that might be harmed by foreign imports, Congress can be amenable to granting a partial or full elimination of tariffs. The MTB is the legislative vehicle for this process. The application process for the MTB is now administered by the International Trade Commission (ITC), and we assist importers in navigating the sometimes complex path to applying for and obtaining duty-free (or reduced-duty) treatment for such products.

Curated news related to tariff classification:

*Next MTB round to open October, 2019.