1. Tariff Classification – Part 2
What Do You Want It To Be?
**Duty Free**

2. • This event will be recorded and both the recording and the
presentation slide deck will be made available after the
webinar.
• You will all be in the “Listen Only” mode for the webinar.
• If you have a question please use the “Ask a Question”
function on your GoTo Webinars panel.
– All questions will be addressed at the end of the presentation unless
there is a common, reoccurring question.
• If you are experiencing technical difficulties, please use the
“Chat” function on your GoTo Webinars panel; OR email Nigel
directly at nigel@ghy.com
House Keeping

3. • This class is designed for the importer who wants to
learn the basics of the customs tariff. There are always
ways to cut costs with proper classification, applying
NAFTA, using the proper tariff treatment and also annex
codes.
About the Class

4. • Kim Ross has been in the customs industry since 1991.
She has her professional designation with CBSA and
also her CTCS and CCS.
• Kim’s brokerage highlight was handling the customs
brokerage for the 1999 Pan Am Games. She was very
involved, clearing chartered aircrafts and temporary
shipments. Kim was even Pato – the mascot.
About the Speaker

5. • The Harmonized System: “The language of trade”...
– Developed and maintained by World Customs Organization
(WCO).
– Is the basis for collection of customs duties and international
statistics by almost all countries.
– Is backed by Explanatory Notes and a Compendium of
Classification Options and used as a basis for:
• Customs tariffs; Rules of origin
• Trade negotiations
• Monitoring controlled goods; various customs control programs and
procedures
– High degree of error in this program – as high as 30% - 40%.
Tariff Classification – Part I (Recap)

6. • Harmonized Description & Coding (HS) – 141 Countries
– 6 Digit – International (4 Digit – country and state specific).
– Responsibility of importer/exporter.
– Affects duty, trade agreements, and rules of origin.
– Customs ‘risking & security profiling’ largely based on HS
classification.
• Information and declaration of most imports to Customs.
• Incorrect HS results in compliance liabilities affecting costing and margins.
Tariff Classification

7. • 8481.80
– International Level
• 84 – Chapter
• 84.81 – Heading
• 8481.80 – Subheading
• 8481.80.00.72
– Country-specific Level
• 8481.80.00 – Tariff Item
• 8481.80.00.72 – Classification No.
• First 6 digits represent the international portion of the
classification number used by all countries acceding to the
International Convention on the Harmonized Commodity
Description & Coding System.
• The Last 4 digits reflect Canadian tariff and statistical
requirements.
The Harmonized System Structure

10. What is the Harmonized System?
• The Harmonized System (HS) contains approximately
5,000 headings and subheadings covering virtually all
articles in trade.
• These provisions are organized in 99 chapters, arranged
in 21 sections.
• Classification in accordance with RULES –
– General Interpretive Rules, Legal Notes, Binding Rulings, etc.

11. • Parts and accessories.
• Sets and kits.
• New products on the market.
• Multi-purpose products.
• Products consisting of mixed materials.
• Products that can be described by several different
names.
• Chemicals.
• Dual purpose goods.
Products that are Difficult to Classify

12. Pick a
Tariff!
Any
Tariff!

13. Classification Opinions can Differ:
Among Countries (i.e. USA/ Canada)
Canada’s Determination Levels
• Declaration
• Redetermination (or Customs Ruling)
• Appeal of Redetermination
• Canadian International Trade Tribunal (CITT)
Appeal
• Federal Court Appeal

14. • Annex 9948 Televisions or Technology
• Cell Phone Case – Fashion or Function
• Ratchets – Machines or Hand Tools
Products Innovate More Rapidly Than
Governments Add ‘Classifications’

15. With RULE(s) are often ‘Exceptions’
Commercial shipments
5,000 unique tariff
classifications
Protected sectors (end-use)
• Agricultural
• Manufacturing
Non commercial shipments
3 tariff classifications
9825
Choices:
• Duty Free
• 8%
• 20%

16. Non Commercial Shipments
Bucket classification codes where normal duty rates is not
5 % more or less than the catch-all HS
Rate HS Classification
DUTY FREE 9825.30.00.00
8% 9825.20.00.00
20% 9825.10.00.00

17. DUTY
FREE
20%
8%

18. HS Classification Research &
Considerations
• Determine what the product is, its material composition
and its use (primary function).
• Is the product specifically named in the HS (normally a
‘part of general use’).
• Is it directly/indirectly used in the manufacturing or
agricultural sectors
• Is it a commercial transaction (5,000 tariffs) or a non-
commercial transaction (3 tariffs)

19. Understanding Risks / Opportunities
Business/Relational/3rd Party Liability
• Customs systematically increasing audits and enforcing
actions.
– Undetected errors result in retroactive costs impacting
profitability (fines, penalties, administration, etc.)
• Importer of Record own ‘compliance and financial risks’
associated with declaration.

20. Trade is Changing / has Changed
• One size doesn’t fit all. Even though WCO provides
Global RULES for tariff classification …. Exceptions Exist
• When was the last time you reviewed options and
opportunities relating to cross-border trade?

21. Best Practices Approach
1. Have a PLAN - Ensure your supply chain partners are
aware of what is required of them to support
declarations
2. Follow the PLAN (what you can’t measure you can’t
manage)

22. • Global sourcing adds value and complexity.
– http://tradecompliance.ghy.com/2012/08/coping-with-differing-
global-trade-compliance-standards/
– http://tradecompliance.ghy.com/2012/08/gibson-settles-charges-
but-at-what-cost/
• Governments are escalating enforcement actions
(focused assessment – systematic review and targeting)
– http://www.cbp.gov/linkhandler/cgov/trade/trade_programs/audits
/focused_assessment/fap_documents/exh4a.ctt/exh4a.pdf
• Tariff is essential to targeting/risking (problems not
detected early have systemic impact and can be costly
both financially and to importers’ brand/image)
Tariff is the Foundation of Trade

23. Kim Ross
Trade Analyst
Phone: 204-947-6700 ext. # 288
Email: kim@ghy.com
www.ghy.com
consulting@ghy.com
Contact Information