Do you rely on your broker to classify your imported products?

March 28, 2022

How proper classification can equate to big savings for your company.

Do you import? Do you rely on your broker to classify your imported products?   Import brokers have a general understanding of the Harmonized Tariff Schedule of the United States (HTSUS), and classify thousands of separate items across hundreds of different industries. But do they really know what your products are or how they are intended to be used?   The classification process is extremely intricate and requires an understanding of both the HTSUS and the merchandise being classified. We at ITM have been classifying merchandise according to the HTSUS for nearly 40 years and in doing so have found that a lot of merchandise is not always classified correctly.   In order to properly classify an imported item, one must understand how to navigate the HTSUS that includes over 10,000 classifications that are broken down by Sections, Chapters, Headings and ultimately Subheadings. Subsequently, one must also understand what the product is, what it is used for and how it is made. For items that are not very specifically provided for, the process is very complex and quite often mistakes are made.   A lot goes into an accurate analysis and classification. A common misconception is that every item is accounted for in the HTSUS. This is not the case. More often than not, an evaluation involves a significant knowledge of the product itself to determine where it belongs. A product may be designated in the HTSUS according to what it is but it can also be defined according to how it is used.   An inaccurate classification, causing an underpayment of duty, can result in the burden of monetary penalties as well as an interruption of receipt of your merchandise. Conversely, an incorrect classification where too much duty is paid, is giving away money that could fall to your organization’s bottom line.   Not everything is misclassified. 90% of imported merchandise is classified properly. Of the 10% that is improperly classified, 80% results in millions of dollars of over-payment of duties.   The importer is obligated to properly classify imports even if there is no change in the duty rate. Therefore, in order to be compliant, it is imperative that importers exercise their due diligence to ensure that their items are properly assigned upon importation.   An importer should initiate periodic reviews of the classification of merchandise. CBP reviews merchandise on a daily basis and writes hundreds, if not thousands, of rulings as to their positions on how individual items should be classified. As these change over time, you should review your classifications regularly in order to remain compliant and up to date. A specific item classified under one HTSUS number last year might have a totally different HTSUS today.   Don’t settle for generic. Demand an in-depth analysis of your products when determining how they fit into the HTSUS. ITM specializes in providing a meticulous evaluation of your product while determining the precise tariff classification.   A portion of the millions of dollars of overpaid duties might be yours!
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