Mastering HTSUS and Schedule B Classifications

Suzanne Richer

Rennie Alston

Michael Roll

ClassificationMastering Your Classification

Program

Suzanne Richer

Director,

Global Trade Academy

Amber Road’s Global Trade Academy

• Trade Advisory Practice

– Import / Export Assessments

– C-TPAT A to Z

– Develop Written Manuals

• Training – Earn CCS and CES Credits

– Over 75 Courses – Public and On Site/Webinars

– Drawback / CCLS / Export Control Certifications

– Made In America – How to Qualify Your Goods

Customs & Trade Solutions, Inc. 2011 ©

Highlights and Key Points

• Importance of Classification

• Globally Harmonized

• Classification Challenges that Lead to

Non Compliance

• Best Practices

Importance of Classification

• Basis of

– All Import / Export Activity

– Filing Data within Single Window

– Free Trade Agreements

– ISF Filings

– Combined with Value, Top Audit Areas for

CBP

Customs & Trade Solutions, Inc. 2011 ©

General Rules of Interpretation (GRIs)

• Six GRIs Globally

– Harmonized, Regardless of the Language

You Read them in

• Country Specific Rules do NOT

Supercede a GRI

– I.e.: USA, Canadian or WCO additional Rules

Customs & Trade Solutions, Inc. 2011 ©

Country Specific Classification Rules

Canadian Additional Country Rule # 3

• For the purpose of packing materials or

packing containers clearly suitable for

repetitive use shall be classified under

their respective headings.

Customs & Trade Solutions, Inc. 2011 ©

Country Specific Classification Rules

Harmonized GRI 5(b)• This Canadian rule restates that part of GRI 5(b)

which provides that "packing materials and packing

containers entered with the goods therein shall be

classified with the goods if they are of a king

normally used for packing such goods. However,

this provision is not binding when such packing

materials or packing containers are clearly suitable

for repetitive use.

Customs & Trade Solutions, Inc. 2011 ©

General Rules of InterpretationGRI 1

• Table of Contents, Index…Ease of reference

only;

• For legal purposes, classification shall be

determined according to the terms of the

headings AND any relative section or chapter

notes,

Customs & Trade Solutions, Inc. 2011 ©

General Rules of InterpretationGRI 1

• Classify Terms of the Heading (4-Digits)

AND Section and Chapter Notes

Customs & Trade Solutions, Inc. 2011 ©

General Rules of InterpretationGRI 1

• Example

– 0101 Live horses

– Chapter 84 – 85 Headings Include Parts

at Heading Level • ….Parts Thereof

• ….With their Parts

Customs & Trade Solutions, Inc. 2011 ©

GRI 1 – Headings and Notes

• Section Notes / Chapter Notes

– Define the Scope or Limit of a Heading or a

Subheading

– Provide list of items excluded from a section,

chapter or heading

– Provide list of items included

• GRI 1 and 6

• Rule is

Often

Misapplied

13

Challenges Leading to Non Compliance • Parts, Accessories and Parts of General

Use

• Use of Chapter 98 Codes

• Reliance on Broker or Supplier, FF

• Misuse of Rulings

When is a Part a Part?

• Parts

• Accessories

• Parts of General Use

15

Customs & Trade Solutions, Inc. 2011 ©

Classification of Parts

What is a Part?

• Part cannot be used on its own

• Must be combined with other articles to be used

• Integral component required for article to work

• Identifiable as being used as a part

Customs & Trade Solutions, Inc. 2011 ©

Classification of Parts

What is an Accessory?

• Facilitates use or handling

• Widens range of uses of main article

• Improves operation of main article

• Not needed to enable article used on to function

• Identifiable as intended for use with specific article

Customs & Trade Solutions, Inc. 2011 ©

Classification of Parts

Part – Classification Example

– Wiper Aid: plastic unit helps efficiency of

windshield wiper, prevents wind lift

– Is it a “part?”

Customs & Trade Solutions, Inc. 2011 ©

Classification of Parts

– Is it a “part?”

• Part cannot be used on its own

• Must be combined with other articles to be used

• Integral component required for article to work YES

• Identifiable as being used as a part

• Not excluded within the Notes

8512 – Windshield wipers

8512.90.9000 – Parts: Other

Customs & Trade Solutions, Inc. 2011 ©

Parts of General Use

Section XVI – Machinery; Electrical; Parts thereof

– Note 1 This section does NOT cover:

• (g) Parts of general use, as defined in note 2 to section

XV, of base metal (section XV), or similar goods of

plastics (chapter 39)

Parts of General Use

• Legally Defined Group

• Distinct and Separate from a “Part” or an

“Accessory”

• Excluded from Most Chapters from 82 -

96

Chapter 98 Codes

• Conditionally Duty Free

• Have specific “supporting documentation”

required – 19 CFR Part 10

• Must have these documents on file at time

of importation

Liability Differences

• Importer / Exporter are Responsible

parties

– Importers should control the Supplier and the

Customs Broker

• This includes Using FFs who Choose the

Customs Broker

– Exporters must control Customer and Freight

Forwarder

Liability Differences

• What does it mean to “Control” your

service agents?

– Understanding “letter of the law” Compliance

– Written instructions

– “Check and Balance” or “Monitoring

Capability”

– Documented Corrective Action

Rulings

• CROSS or WCO Rulings

– Wonderful Resource

– Your LAST Tool in Classification – Should Not

be Primary First step to Classification

– Benefits of Research HQ Rulings

– Case Study – how a Ruling Can lead you

astray

Classification Best Practices

• Groom Your Team to Become Classification

Experts

– Consider becoming a Certified Classification

Specialist (CCLS ™)

• Centralize the Classification Program

– Limit Authorization of Those who Can

Classify

• Audit External Sources for Data (i.e.: Supplier or

Customer HTS Codes)

Classification Best Practices

• Manage Your CF 28s

– This Includes Emails from the CBP CEEs

• Recognize Impact on FTA and DB Qualification

Process – You don’t want to Pay CBP Back for

Your Duty Savings

Contact Our Team

Suzanne Richer

Amber Road

Director, Trade Advisory Practice

SuzanneRicher@AmberRoad.com

609 638 3639

Drop off a Card to be added to our Free

webinar listing

HTS Compliance Management

Rennie Aston,

CEO

American River

Group of

Companies

Rennie AlstonChief Executive Officer

American River Group of Companies

Mr. Alston is the Chief Executive Officer of American River Group of Companies and

President of American River Brokerage Services Ltd., a premiere international trade

and logistics consulting firm. He is also the founder, CEO and President of the

Alston Group. Mr. Alston is regarded as a premiere Customs Regulatory expert,

licensed customhouse broker, and Global Security specialist, who holds over thirty

years of interactive work experience with the Bureau of Customs and Border

Protection.

In 2010, Mr. Alston received his Master Certification from the International Chamber

of Commerce in Paris, France as a Master trainer of the International Commercial

Terms. Mr. Alston has provided Incoterms training for the United Nations global

purchasing and procurements managers from all four regions of the globe.

Mr. Alston began his career with United Customs Inc. as an import manager. He

later became a senior account representative for The Wilson Group USA. Mr. Alston

then served nine years as Brokerage Manager for Nippon Express USA. Respected

and noted throughout the international trade community, Mr. Alston is considered

an expert in the area of Customs Regulatory issues and Compliance Management.

Topics of Discussion

• Periodic HTS Line Review management

• New product assessment and HTS

determinations strategies

• Use of Ace to review scope of HTS numbers

used in IOR profile

• Defense of HTS determination supported by

GRI, Section and Chapter notes

• Best practices of use of Cross in your

affirmation of HTS classifications

Periodic HTS Product Line Review

• Annual vs periodic designation of line review

• Proactive query of all active HTS numbers

against PO and inventory activity

• Review replacement numbers for alternative

HTS designations

Periodic HTS Product Line Review continued…

• Review legacy numbers to ensure they remain the

most specific option of HTS classification available

in the updated annual reference

• Include product knowledge specialist as an internal

resource in this effort such as engineers, scientist,

lab technicians, etc.

• Utilize Customs brokers, attorneys and consultants

as a demonstration of reasonable care

New product assessment

• Connectivity in a corporation breeds

advance knowledge of pending items for

purchase or sale

• Utilize this advance information to

determine HTS classification applicability

prior to shipment status

New product assessment continued…

• Utilize descriptive literature in alliance with

internal HTS knowledge to assign classifications

to new products based on essential character

and controlling use as applicable

• Proactive assessment will identify partnering

government agency actions requirements and

affirm landed cost deliverables related to duties,

fees and taxes.

Use of Automated Commercial Environment

• Importer Activity Reporting to identify HTS

numbers used

• Entry type category to identify ADD/CVD

entries filed against existing HTS

database

Use of Automated Commercial Environment continued…

• Query HTS item status to identify ADD/CVD

applicability considerations

• Query HTS item to identify PGA cross

reference regulations to imported items

• Access ACE to monitor CF28 request for

information related to HTS numbers utilized

Defense of HTS Classifications currently used

• General Rules of Interpretation

• Section Notes

• Chapter Notes

• Alphabetical Index

• Cross Ruling reviews

• Informed Compliance

• HTS written standard operational procedures

• Annual HTS line review findings

Best Practices for Use of Cross

• Use Cross as a reference for classification

affirmation, not for classification execution

• Cross is not a substitute for Informed

Compliance

• Review rulings for elevated understanding of

CBP past interpretations

• Use CBP interpretations as guide for your

independent research

Best Practices for Use of Cross continued…

• Understand that all rulings may not directly apply to the

specific item that you are attempting to classify though

similar in nature

• Follow any binding rulings issued to your company until

such ruling is overturned

• Utilize the advisory services of attorneys, consultants or

brokers before applying an indirect ruling to your

company’s direct profile if there is any need for

clarification of any points beyond your industry expertise

as a reasonable care standard.

Summary of Classification Management

• Informed Compliance demonstration as formal

HTS training is required

• Connectivity with technical knowledge in your

company for product specific information

necessary for proper classification

• Detailed knowledge of all of the general rules of

interpretation

Summary of Classification Management

• Understanding of definitions to terms in the Section

and Chapter notes

• Reference of the alphabetical index for reference

purposes

• Understanding of the HTS page outline format

• Specific knowledge on the interpretation of “Other”

references throughout the tariff

Rennie Alston, CEO

American River Group of Companies

ralston@americanrivergroup.com

Office: 732-947-5485

Mobile: 908-313-7605

HTSUS/Schedule B –A Legal Point of View

Michael Roll, Esq.

Pisani & Roll LLP

mroll@worldtradelawyers.com

310-826-4410

Classification Considerations

• Need to exercise due diligence

• Due diligence basics include

– Getting all relevant FACTS

– Reviewing all applicable LAW

Relevant Facts

• Relevant facts are not merely product

invoice descriptions but instead include a

wide array of data points.

• Not all of these data points are always

needed but relevant data would include:

– Drawings, pictures, samples, usage,

marketing materials, cost/value information,

bill of materials/components, type of material,

etc.

Relevant Law

• Tariff schedule

• Explanatory Notes

• Administrative Precedent

– Rulings

– Other decisions

• Court cases

Facts + Law = Analysis

• Sometimes analysis is

simple/straightforward

– These are the black & white cases

• Sometimes analysis is not

simple/straightforward

– There are rulings that say tariff = A but you

think rulings are wrong

– Rulings are inconsistent

– Legal analysis is complicated

What to do in the hard cases?

• Go to court?

• Go to lawyer?

• Get own ruling?

• Get opinion letter?

• Distinguish rulings?

• Challenge rulings?

What to do in the hard cases?

• Need to understand the risks !!!!

• Being practical vs. being legal and

knowing when to be practical vs. legal !!!!