CB5u—Intro to U.S. Customs Brokerage, Part 5: U.S. Customs Tariff (HTSUS) Classification

Subscriber price: $299.00, Non-subscriber price: $418.00
Estimated total study time: 20 hours 31 minutes

This the fifth of the nine-part series of introductory courses in the practical work of U.S. customs brokerage. This is a comprehensive "nuts and bolts" training in how to properly classify goods in the U.S. customs tariff. 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 Additional Rules of Interpretation, general notes, and the most commonly used special provisions in the HTSUS (Chapter 98 and 99), are introduced.

This course is updated at the beginning of each year to reflect the amendments to the basic HTSUS publication. Links to the online version and 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 and to fill in the gaps for existing staff who perform basic classification but who have not been formally trained.

For drill and practice purposes after taking this course, assign C8u—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.

Important: This course can be taken out of sequence if so desired.

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: 57 minutes)

Introduction
Background of the Harmonized System
- Reasons for Global Harmonization
- The Core Classification System for Participating Countries
- Periodic Harmonized System Updates
Overview of the U.S. Classification System
- U.S. Obligations under the Harmonized System Convention
- Maintenance of the HTSUS
- The U.S. Nomenclature System
- U.S. Tariff Classification Determines Duty and Taxes
- The Importer is Ultimately Responsible for Proper Classification
- Most Commodities are Classifiable
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

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: 43 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

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: 43 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

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: 57 minutes)

Introduction
Subheading Notes are Shown After Section and Chapter Notes
- Subheading Notes are Strictly for Classification at the Subheading Level
- Example A; Subheading Notes that Apply to a Chapter
- Example B; Subheading Notes that Apply to the Whole Section
Practical Application of Notes
Visible Elements vs. Elements that are not Visible
Technical Language and Vocabulary
Latin Expressions in the HS Represent Specific Concepts
Text Punctuation Influences Meaning
The Semi-Colon Meaning for Classification
Text Punctuation and the Comma

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 9 minutes)

Introduction
The Operating System
At a Glance...The Six General Rules
The Rules Made Readable
Classification Examples
General Rule of Interpretation Number 1
The First General Rule of Interpretation is the Most Important!
Section, Chapter and Subchapter Titles are for Reference Only
Chapter and Section Titles May be Misleading
Certain Underwear, Even if Knitted or Crocheted, is Classified in Chapter 62
Classify According to Legal Elements
Terms of the Headings
Terms of Relative Section and Chapter Notes
Remember to Check the Legal Notes When Deciding on a Heading
Not to Contradict Rule 1
When the Text of a Heading Creates a Hard Stop at Rule 1
Rule 1 Conclusion

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: 47 minutes)

Introduction
General Rule of Interpretation Number 2
General Rule 2 Broadens 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
Unassembled or Disassembled Articles Must be Ready for Assembly.
Examples of Unassembled or Disassembled Articles
General Rule 2(b)
Materials and Substances Mixed with Other Materials or Substances
Goods Consisting Wholly or Partly of Materials or Substances
Goods or Articles Made of a Given Material or Substance
When Two or More Headings may Apply
Watch for Possible Rule 2 Exclusions
- Rule 2 must not Contradict Rule 1
- Certain Heading Terms May Forbid Using Rule 2

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: 27 minutes)

Introduction
General Rule of Interpretation Number 3
Rule 3 The Referee...
General Rule 3(a)
The Heading Providing the Most Specific Description
When Having the Most Specific Description is Not Sufficient!
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?

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
Goods NOT Considered as Sets for Retail Sale
Essential Character
Use Essential Character Only if Applicable

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: 45 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

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: 58 minutes)

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

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: 1 hour 2 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.
- Practical Hierarchy within the Rules

Additional U.S. Rules 1(a) & (b): Use and Purpose of Goods

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 7 minutes)

Introduction
Additional U.S. Rules of Interpretation
- Additional U.S. Rules in General
- Use and Purpose of Goods
- Additional Rule 1(a) – Principal Use
- Additional Rule 1(b) - Actual Use

Additional U.S. Rule 1(c): Parts and Accessories

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 9 minutes)

Introduction
Additional Rule 1(c) – Parts & Accessories
Classification Using The Double Approach
Application of Section and Chapter Notes
- Note 2 to Section XVI
- Subject to Section XVI Note 1 and Note 1 of Chapters 84 and 85
- Note 2 to Section XV
Parts of General Use
Section and Chapter Specific Conditions
The Terms "Solely" and "Principally"
- Classification Example: Ball Bearings for Motorized Toy Truck
- Classification Example: Lawn Mower Handle
Sequence for Determining Classification of Parts
Notes Always Govern Classification of Parts

Additional U.S. Rule 1(d): Mixtures of Textile Materials

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: 15 minutes)

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

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 31 minutes)

Introduction
A Classification Strategy
Tips on Searching for the Proper Heading
Conducting a Classification Inquiry
Factors Influencing Classification
Description of Goods from the Commercial Invoice
Seeing Goods "as Presented"
Subjective Factors in Classification
Reusable Packing Material

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: 44 minutes)

Introduction
Tariff Treatment for "Conditionally" Free or Reduced Duty
Special Treatment Based on Importer
Special Treatment Based on Disposition of Goods
Goods for Personal Use and Commercial Samples Exempt from Quota

Chapter 98 Subchapter 1 (9801)—Articles Exported and Returned, Not Advanced or Improved in Condition; Animals Exported and Returned

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: 54 minutes)

Chapter 98 Subchapter 1 (9801) Introduction
Product Returned to the United States
Documentation Required for Returned Product
- Documentation for Product Returned to the U.S. Valued at $2500 or less
  - Documentation for USGR Valued $250 or Less and Certain Aircraft and Aircraft Parts & Equipment
  - Documentation for Foreign and U.S. Goods Returned Valued $800 USD or less
  - Documentation for Foreign and U.S. Goods Returned Valued $801 - $2500 USD
- Documentation for USGR Valued over $2500 USD
  - Responsibility to Provide Documented Proof for USGR Claim
  - Foreign Shippers Declaration (FSD)
  - Consignee's or Owner's Declaration
  - Manufacturer's Affidavit
- Documentation for Certain USGR Valued at $10,000 or Less
- Other Documents Providing Sufficient Proof of Export
- Documentation Requirements for Certain Aircraft Returned to the U.S.
- Documentation Requirements of Re-imported Goods Under Department of State License
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

Chapter 98 Subchapter 2 (9802)—Articles Exported and Returned, Advanced or Improved Abroad

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 6 minutes)

Chapter 98 Subchapter 2 (9802) Introduction
U.S. Goods Repaired, Altered, or Processed Abroad and Returned
- Classifications Applicable to Goods Returned after Alteration or Processing Abroad
- The Two-Step Process for U.S. Goods Repaired, Altered, or Processed Abroad and Returned
- Definition of Repairs and Alterations
- What are Not Considered Repairs or Alterations?
- Repairs, Alterations and Processes Completed in a USMCA Country
- Special Documentation Required to Declare Articles Repaired, Altered or Processed
Articles with U.S. Content
- Classifications Applicable Articles with U.S. Content
- U.S. Content Articles in General
- Definition of Assembly and Acceptable Assembly Procedures Under 9802
- What are not Acceptable Assembly Procedures
- Valuation of U.S. Components
- Country of Origin Marking of Goods Assembled with U.S. Content
- U.S./Mexico Assembly Provision (Mexican Special Regime)
- Special Documentation for U.S. Content Articles

Chapter 98 Subchapter 8 (9808) - Importations of the United States Government (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: 39 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

Chapter 98 Subchapter 13 (9813) - Articles Admited Temporarily Free of Duty Under Bond (TIB)

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: 32 minutes)

Introduction
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

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 0 minutes)

Introduction
Chapter 99 General Information
General Tariff Classification and Entry Procedures for Goods Classified in Chapter 99
- Consult any Filing Instructions, Chapter or Subchapter Notes
- General Entry Filing for Goods Classified in Chapter 99
- When Quota Applies to Goods in Chapter 99
- CBP Rejects for Inaccurate Classification or Information in Chapter 99
- Post Entry for Goods in Chapter 99
Order of Reporting for Multiple HTSUS Classifications (Column 29A)

HTSUS General Notes Define Terminology, Exemptions, and Trade Agreements

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: 46 minutes)

Introduction
General Notes to the HTSUS
General Note 1—Tariff Treatment of Imported Goods and of Vessel Equipment, Parts and Repairs
General Note 2—Customs Territory of the United States
General Note 3—Rates of Duty
- Duty Columns
  - Duty Column 1
  - Duty Column 2
- Insular Possessions
- Products of the West Bank, the Gaza Strip or a Qualifying Industrial Zone
- Duty Exemptions
- Commingling of Goods
- Unit of Quantity
- Products Eligible for Special Tariff Treatment
- Abbreviations and Definitions
- Issuance of Rules and Regs and Methods of Ascertainment
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 13—Pharmaceutical Products
General Note 14—Intermediate Chemicals for Dyes
General Note 15—Exclusions
U.S. Trade Agreement Listing By General Note
- GN3 – Insular Possessions, QIZ
- GN4 - GSP Generalized System of Preferences
- GN5 - ATPA (Andean Trade Preference Act) Expired
- GN7 - CBERA (Caribbean Basin Economic Recovery Act) –
- GN8 - ILFTA (Israel Free Trade Agreement) –
- GN9 – US-Canada Free Trade Agreement – Suspended
- GN10 - FAS (Freely Associated States) –
- GN11 - USMCA (United States-Mexico-Canada Agreement) –
- GN12 - NAFTA (North American Free Trade Agreement) Expired
- GN16 - AGOA (African Growth and Opportunity Act) –
- GN17 - CBTPA (Caribbean Basin Trade Partnership Act) –
- GN18 – U.S.-JFTA (Jordan Free Trade Agreement) –
- 19 – 24 Reserved
- GN25 - SFTA (Singapore Free Trade Agreement) –
- GN26 - UCFTA (Chile Free Trade Agreement) –
- GN27 - UMFTA (Morocco Free Trade Agreement) –
- GN28 - UAFTA (Australia Free Trade Agreement) –
- GN29 - CAFTA-DR (Dominican Republic-Central America-United States Free Trade Agreement -
- GN30 - UBFTA (Bahrain Free Trade Agreement) –
- GN31 - UOFTA (Oman Free Trade Agreement) –
- GN32 - PTPA (Peru Trade Promotion Agreement) –
- GN33 - UKFTA (Korea Free Trade Agreement) –
- GN34 - CTPA (Columbia Trade Promotion Agreement) –
- GN35 - PANTPA (Panama Trade Promotion Agreement) –
- GN36 - USJTA(Japan Free Trade Agreement) –
- ATPDEA (Andean Trade Promotion and Drug Eradication Act) Expired

Other Information Included in the U.S. HTS

The HTSUS contains other useful information in addition to the classifications, rules and notes discussed earlier. There are Statistical Notes, Notes for the U.S. imports only, Appendices, Annexes, and change records, oh my! We will discuss each briefly in turn to give an idea of what they are and where to find them.

(Estimated study time: 35 minutes)

Introduction
General Statistical Notes at the Beginning of the HTSUS
Other Statistical Notes Throughout the HTSUS
Additional U.S. Chapter and Subheading Notes
Additional Information Found in the HTSUS
- HTSUS Change Record
- Preface to the HTSUS
- Notice to Exporters
- Appendices to the HTSUS
- Statistical Annexes to the HTSUS
- Alphabetical Index to the HTSUS and the Online Search Function

The WCO Explanatory Notes and Other References

There are documents (paper and electronic) that provide authoritative guidance in HTS classification. This lesson is an overview of those documents.

(Estimated study time: 46 minutes)

Introduction
Reference Material Supporting Classification
- The WCO Explanatory Notes
  - Some Answers are not in the legal text...
  - We found answers!
  - Explanatory Notes Legal Status
  - Explanatory Notes Periodic Amendments
  - The Ultimate Reference
- Compendium of Classification Opinions
  - WCO Classification Opinions
  - Compendium of Classification Opinions Legal Status
  - Compendium of Classification Opinions Periodic Amendments
- Alphabetical Index to the Harmonized System
- The Harmonized System Commodity Database on CD-ROM
- Contacts
- Other Sources of Harmonized System Classification Information
- More Sources
- Summary of Available Resources
  - Two Types of Resources
  - The Essentials
  - Extra Resources