Background on Trade Barriers and Harmonized Codes

Exercise Individuals can determine trade barriers by examining the import regulations of foreign governments. This information is accessible online, but requires the researcher to know the harmonized code of the product of interest. To facilitate international trade, most countries use a system for classifying all products according to a ten-digit number, known formally as the “International System of Numbering” or “International Harmonized Codes”. Once a product’s harmonized code is known, the researcher then determines what trade barriers, if any, the product is subject to. Each ten-digit number provides an exact classification for every type of product and is available from various sources, including online from the US Department of Commerce (www.doc.gov) , ministries of commerce, and other government trade agencies worldwide. There are approximately 8,000 different categories in the harmonized code. Every exported item is assigned a unique 10-digit identification code. Every code is part of a series of progressively broader product categories. For example, concentrated frozen apple juice is assigned a 10-digit identifier that is aggregated into a broader category assigned a 6-digit identifier described as “apple juice”. The 6-digit identifier described as apple juice is aggregated into a broad category assigned a 4-digit identifier described as “fruit juices” and “vegetable juices”. The 4-digit identifier is further aggregated into a broader category assigned a 2-digit identifier described as “preparations of vegetables, fruit, and nuts”. Individuals can look up the unique ten-digit number from publicly available sources, such as the harmonized code, Schedule B, which is a large book with 97 chapters that correspond to the international system of numbering. However, remember that for imports, the Harmonized Tariff Schedule (HTS) is used. But, as an example, let’s examine the harmonized code to illustrate how both the HTS and Schedule B work since their structure is very similar. Let’s look at the harmonized code from Schedule B of: 0303.12.0012. 03 refers to the chapter in which the commodity is classified, Fish. 0302 refers to the heading “Fish, Fresh or Chilled” 0302.12 refers to the subheading: Pacific Salmon. 0302.12.0012 refers to the commodity code for “Chinook (King) Salmon” The table of contents at the front of Schedule B lists all the sections and chapters with their descriptions and is a guide on how the product is classified. Schedule B also contains an alphabetical index that indicates the first six digits or six-digit range of the 10-digit Schedule B numbers for the listed item. After locating the description and six-digit code for an item in the alphabetical index, the manager then searches for that numerical sequence in the body of Schedule B. After reading all pertinent sections, the individual should assign the appropriate 10-digit Schedule B number. Once the product’s harmonized code is known, it is then a simple matter to look up the relevant tariff. Determining Duty Rates http://206.241.31.147/ImageCache/cgov/templates/images/spacerclear_2egif/v1/image_2ddata/1/spacerclear.gifThe Harmonized Tariff System (HTS) provides duty rates for virtually every item that exists. The HTS is a reference manual that is the size of an unabridged dictionary. Experts spend years learning how to properly classify an item in order to determine its correct duty rate. For instance, you might want to know the rate of duty of a wool suit. A classification specialist will need to know, does it have darts? Did the wool come from Israel or another country that qualifies for duty-free treatment for certain of its products, where was the suit assembled, does it have any synthetic fibers in the lining, etc. The U.S. International Trade Commission – Tariff Database link,(U.S. International Trade Commission – Tariff Database (Links to an external site.)) will take you to an interactive data base that will enable you to get an approximate idea of the duty rate for a particular product. By registering (it’s free), you will have access to the Interactive Database with a wealth of information. Please also be aware that the duty rate you request is only as good as the information you provide. The actual duty rate of the item you import may not be what you think it should be as a result of your research. CBP makes the final determination of what the correct rate of duty is, not the importer. For very specific duty information on a particular item you may request a Binding Ruling. You may also receive guidance by calling your local CBP port.