Common Classification Mistakes

It is essential that importers exercise and demonstrate reasonable care when assigning HTS classification to parts that are being imported.  Misclassifying parts can lead to increased duties and penalties. Listed below are some common mistakes all importers should avoid when it comes to classifying parts for importation. 

Relying on Brokers:  Allowing Customs brokers to assign classifications at their own discretion will lead to misclassified parts.  Since an import compliance program is only as strong as its weakest link, a broker assigning parts, without the requisite knowledge, systems, processes, oversight and measurements in place will prove problematic for an importer in the long run.   It is important that brokers be provided SOP’s, parts lists, and the information needed to classify parts.  It is also crucial that all brokers be measured and audited for performance. 

Using Rulings Incorrectly:  A search in CROSS for existing rulings is a proven way to gain information on how parts should be classified.  It is very important, however, that you be thorough in your search and remember the guidelines for customs rulings. Rulings should only be consulted in conjunction with Chapter & Section Notes and Explanatory Notes (EN).  Be aware of the timeliness of a ruling. If the ruling is very old there may be a completely new HTS in place at the present time, rendering the HTS in the ruling useless.  Also be aware of rulings that have been revoked.  Knowing what to search for in CROSS is of the utmost importance and knowing what word or combination of words to use in your search will help you be successful. 

Classifying by Default:  Don’t automatically classify using one of the following default positions:  lowest duty rate, highest duty rate, last reasonable HTS, parts of a specific machine or type of material.  If your business is to import for a certain type of machine, it is necessary to avoid the pitfalls of overusing the “parts of” provision for that machine.  While it may actually end up correct for certain parts, it is certainly no way to demonstrate reasonable care, and will leave you with incorrect HTS classification numbers in the end.  

Experts: While technical expertise is often necessary for proper classification, don’t make the mistake of assuming that someone with technical expertise can classify correctly.  It is just as important that the classifier have expertise in the classification process as in the technical specs. Knowledge of the GRI’s, EN’s, Rulings, and the industry go a long way.  Your best bet is a collaboration of someone with classification experience and technical expertise. 

Beware of Descriptions:   Classifiers need to be aware that sometimes descriptions can be misleading.  A classification may seem cut and dry based on a description of the part, but in reality the description may actually be for another tariff item completely.  This is particularly dangerous when the description lists a “kit”, “set” or “parts”.  Just because a description lists a set, doesn’t mean that the items form a set according to the GRI’s.  Also sometimes parts are just ambiguous and will lead to confusion in where the items should be classified.  A good example of this would be a bushing.  A bushing can be classified under a variety of different headings. When classifying a bushing it is important to determine the actual form, fit and function of the bushing. 

Up To Date:  It is important that all of the reference materials and information you are using to classify parts are up to date.  Are you using the current edition of the HTS?  Are you looking at a ruling that still applies?  In addition to reference materials it is important that you remain up to date on your technology?  Perhaps a new technology or function of an item that has been around for years will lead to using a new HTS. 

Classifying items correctly is of the utmost importance and can be the difference between compliance and non-compliance. Avoiding the above pitfalls will go a long way towards ensuring that your classifications are correct.  If you have additional questions, or feel you would like some assistance with your classification please feel free to contact Allyn International. 

If you would like more information on this or any other Global Trade Compliance matter please contact Allyn at (239) 489-9900 or you can email us at Dreckman.M@allynintl.com