4 Reasons For Determining The Correct Harmonized Tariff Classification

The Dilemma

You are always getting calls from your Customs Broker asking for further information about your products.

When asked "why", they respond that they need to determine the correct harmonized tariff classification.

To the uninformed observer, why care? I mean let us be honest - all you want to know is: "Do I have to pay Customs duty on these goods?" Right?

Like everything, you need to peel back the layers to see what lies beneath. First of all, let us briefly examine the complexity of the tariff schedule as defined by the harmonized system.

The Harmonized System (H.S.) Tariff Schedule

The H.S. Tariff Schedule is comprised of 21 sections with 96 chapters; in Canada there are over 12,000 individual tariff classifications at the ten digit level. There is a specific hierarchy (the General Rules of Interpretation) which defines the methods used to determine a product classification. Additionally, there are sections, chapters and explanatory notes to consider, plus further rules defining how to navigate the punctuation and use of dashes or hyphens. Granted, some items can be classified easily but many require an expert with years of tariff classification experience.

The Most Crucial Aspect Of Global Trade: H.S. Tariff Codes

Key Reasons Why Getting Your Tariff Classification Is So Important

1. Duty Rates

The tariff classification has a direct correlation to the duty rate that you will be expected to pay (and no, it is not a matter of "finding the one that says FREE").

2. Free Trade Agreements (FTA)

This is very important as one of the first steps in determining if goods qualify under a FTA is to find the tariff classification for the product and to then check under that FTA's Specific Rules of Origin to determine how the goods might qualify.

3. Anti-Dumping Duty (ADD)

If a government decides that they need to protect a domestic industry, they can impose an anti-dumping duty on specific imports. This is also driven by the harmonized tariff classification. Pay close attention to this area as anti-dumping duty rates are always very high - usually double or sometimes triple digit percentages.

For a full list of Canadian imports subject to dumping duties visit Goods subject to anti-dumping or countervailing duties.

4. Exporting To Countries Other Than The U.S.

Where the shipment value exceeds $2,000, you or your freight forwarder will be required to complete a B13A export document (or electronic equivalent), and you will need the eight digit harmonized system export code or the Canadian 10 digit import code for each product. Once again, export restrictions and permits governed by Foreign Affairs are driven by the tariff classification.The above topics are the primary reasons for determining the correct tariff classification. In addition, we should also include the controls through other governmental agencies, such as the Canadian Food Inspection Agency, Free Trade Agreements with other countries, and also the effects on Canada's trade statistics.

 Proposed Changes To The General Preferential Tariff Regime

Remember: If your company's name is indicated as the importer on any Customs documents, you (not your Customs Broker) are looked upon as the responsible party to ensure all declarations are correct. You may be able to avoid any future problems by getting it right the first time.

HS Tariff Classification Training
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About Author
Annette Rowan
B.Com, LL.B, CCS, CTCS

Annette Rowan is the Trade Advisory Consultant with Pacific Customs Brokers Ltd, with over 10 years in the international customs trade industry. Combined with a Bachelor of Commerce degree (International Finance) from the University of Alberta, and a Bachelor of Laws degree (International Trade) from the University of Victoria, Annette works on behalf of importers to research and interpret complicated customs laws, rules, and regulations. She also currently holds a Certified Trade Compliance Specialist designation through the Canadian Society of Customs Brokers. When Annette is not working or researching, she enjoys spending time with her husband, 2 kids, and Brutus - the dog. She also manages a small forest of jungle cacti and is a gardening enthusiast.

While we strive for accuracy in all our communications, as the Importer of Record it is incumbent upon your company to ensure that you are aware of the requirements under the new regulations so that you maintain compliance as always.