The Harmonized Tariff Schedule of the United States (HTSUS or HTS) is designed so imported products can be classified with specific codes.
To accomplish this, the tariff is governed by six rules known as the General Rules of Interpretation (GRIs). To determine an accurate classification, the first four GRI rules must be applied in sequence. In this article, GRIs are outlined briefly in plain language. For a more detailed understanding of GRIs, importers should consult a licensed customs broker.
General Rule of Interpretation #1:
This first rule requires that classification be determined according to the terms of the headings of the Harmonized System, which are the four-digit level descriptions. Put more simply, if an article is specifically named in an HTS heading, then that is where it must be classified. The first GRI also forbids the use of table of contents, index, section titles, and so on as the basis of classification and instructs the user to read section and chapter notes to be sure if a product is specifically included or excluded from that area of the HTS.
General Rule of Interpretation #2:
This GRI is divided into two parts:
- Addresses goods consisting of incomplete articles in need of only minor finishing processes. The GRI states that such articles can be classified in the same heading as a fully finished version of the same article as long they bear the essential character of the finished article. This principle also applies to unassembled or disassembled products. If all the components are entered together at the same time, a disassembled product can be classified in the same manner as the same article fully assembled.
- Refers to goods of mixed materials/substances. It allows for some mixing – for example, a stainless-steel mug with a plastic handle may still be classified with stainless steel mugs regardless of the handle. However, this GRI allows the user to proceed to GRI 3 in the event that the mixing of materials begins to deprive the article of its essential character, or makes it such that the article may be classified equally well in multiple headings.
General Rule of Interpretation #3:
The third GRI offers guidance on how to classify goods that appear to belong to two or more possible HTS headings. It is divided into three parts:
- States goods should be classified in the heading that provides the most specific description. When describing this GRI, US Customs uses the example of electric hair clippers. While both “electromechanical domestic appliances with self-contained electric motor” of heading 8509 and “shavers and hair clippers with self-contained electric motor” of heading 8510 apply, heading 8510 is preferable due to its specificity.
- Applies to goods put up in sets for retail sale. Sets are at least two different articles put together to meet a specific need or carry out a particular activity. These articles are packaged together for sale to consumers directly without the need for re-packing. In these cases, the set is to be classified according to whichever component gives the set its essential character.
- If neither of the other two parts of GRI 3 can be used to determine a proper classification, then the third and last part of GRI 3 states that goods should be classified under the heading that occurs last in numerical order of all those that equally merit consideration.
General Rule of Interpretation #4:
Put very simply, GRI 4 states that goods which cannot be classified according to the rules of the first three GRIs should be classified in the same HTS heading as goods to which they are most similar. When determining whether goods are similar or “akin,” US Customs expects the user to take description, character, purpose or intended use, designation, production process, and the nature of the goods into consideration.
General Rule of Interpretation #5:
This GRI deals with various types of containers presented with the articles for which they are intended and is divided into two parts:
- The first part deals with long-term use containers such as camera cases, musical instrument cases, and so forth. This GRI states that such cases may classified with the articles they are intended for (for example, a camera and case may be classified as a camera).
- The second part of this GRI deals with containers that are not normally intended to be reused, such as retail packaging or cardboard boxes. These containers are also to be classified together with the goods they contain.
The rules of GRI 5 do not apply in certain instances. When the container itself gives the good its essential character, then the good should be classified as a container. When empty containers are shipped separately, they should also be classified as a container. Last, when the container is suitable for repetitive use, it should also be classified as the type of container it is.
General Rule of Interpretation #6:
The last of the GRIs, GRI 6 describes the hierarchy of levels within the HTS system. This GRI states that the user must start with the section, chapter, or subchapter notes of the HTS when classifying an item, then move on to the HTS headings and subheadings. Additionally, this GRI states that only headings at the same level (the same number of digits) are comparable – for example, a six-digit HTS level description may not be compared to one at the eight-digit level.
The United States has additional Rules of Interpretation that must be applied, and also chapter and heading notes, for accurate classification and compliance with Reasonable Care. Please consult with your Juno Customs Broker.
GRIs can serve as a great roadmap to properly classifying imported products, but interpretation of the rules can be confusing. In theory, classifying commodities should be a straightforward process. In reality, there are many gray areas open to a certain amount of subjectivity and interpretation. Some strategic thinkers may seek to maximize the trading benefits available. This involves considerable research, resources, and expertise. Finding an experienced trade expert, such as a licensed customs broker, can help uncover opportunities while avoiding problems.
Going through the General Rules of Interpretation as described above will usually lead to a proper classification. However, other useful resources are available for classifying goods, including:
Explanatory Notes: These are published by the World Customs Organization and are the organization’s official interpretation of the Harmonized System. Explanatory Notes can be an extremely useful resource for guidance in the classification process, but they are not considered legally binding. Additionally, one must purchase a copy or electronic access to the Explanatory Notes.
Customs Ruling Online Search System (CROSS): This is a free, online, searchable database of official U.S. Customs classification rulings. Rulings are available to view dating back to 1989. This system is extremely useful in verifying whether a classification is correct. It can also provide a starting point when one is completely uncertain where to begin with an unusual article. While U.S. Customs does change, modify, or revoke rulings from time to time, CROSS can be a wonderful source to cite as proof of the validity of certain classifications.
Schedule B: These ten digit codes are used by the United States to classify and catalogue exports from the U.S. Read U.S. Exports: A Guide to Classifying Products for an overview of Schedule B classifications and the use of the Automated Export System.
To help guarantee a classification has been correctly assigned, importers always have the option to apply for a Binding Ruling from U.S. Customs and Border Protection (CPB). Juno Can assist you in presenting an argument for a favorable ruling. CBP will review and then assign classification (or valuation or country of origin). Keep in mind these determinations are binding and must be followed (though unfavorable decisions can be appealed).
For a more general overview of HT and HTS codes, please read Why is Product Classification So Important?