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”s 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”s briefly examine the complexity of the tariff schedule as defined by the harmonized system.
It is comprised of 21 sections with 96 chapters; in Canada there are over 10,000 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 section, chapter 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.
Here are the key reasons why “getting it right” is so important. Let”s start with the area that everyone is aware of.
- Duty rates: The tariff classification has a direct correlation to the duty rate that you will be expected to pay (and no, it”s not a matter of “finding the one that says FREE”).
- NAFTA: Very important as one of the first steps in determining if goods qualify under NAFTA is to find the tariff classification for the product and to then check under the NAFTA Specific Rules of Origin to determine how the goods might qualify. A common misconception is that products will AUTOMATICALLY qualify if they are made in Canada, the U.S. or Mexico. Click Here to view these rules.
- Anti-dumping duty: 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…you guessed it…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. Click here for a full list of the Canadian imports subject to dumping duties.
- Exporting to countries other than the U.S. where the shipment value exceeds $2,000.00? 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.
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!
Tags: HS Tari
