Savings Strategies: Tariff Classification and Engineering

There are a number of duty savings strategies companies can use to conserve cash, lower customs duties and tariffs, and seek refunds. These strategies are always a high priority for businesses involved in international trade, but particularly so in today’s volatile environment. This is another in ST&R’s series of articles examining these strategies in more detail and covers tariff classification and engineering.

Classification. While the U.S. has historically maintained relatively low import duties on most products, there are exceptions. Some categories, such as agricultural goods and textile and apparel products, are subject to high duties in an effort to aid domestic industries. The U.S. can and does also impose increased tariffs to protect national security and counter unfair trade practices or unexpected import surges.

In every case, import duties are associated with specific subheadings under the Harmonized Tariff Schedule of the U.S., making it vitally important to ensure imported goods are classified accurately. Sometimes this is a fairly simple task, but for new or complex goods it can be a challenging endeavor requiring a ruling from U.S. Customs and Border Protection or the services of an expert like a customs broker or attorney.

Regular classification reviews can help importers ensure they’re not paying more in duties than they need to and avoid the fines and penalties that can result from misclassification. These reviews can also identify whether changes in the tariff code, product composition, or other factors may result in a classification with a more favorable duty rate.

Tariff engineering. Tariff engineering means importing goods that would otherwise be subject to high duties or trade remedy tariffs in unfinished or embellished forms that are classified under different HTSUS numbers with a lower duty rate. U.S. courts have repeatedly affirmed the legitimacy of this practice on the grounds that CBP can only levy tariffs on goods in their condition as imported.

Chapter 98 provisions. Special provisions under HTSUS Chapter 98 may enable importers to partially or fully avoid duties and trade remedy tariffs on numerous types of products based on their use or condition. For example, products exported from and returned to the U.S., regardless of their country of origin, are exempt from import duties under heading 9801. In addition, the value of U.S. components in a product assembled abroad can be deducted from the total dutiable value of that good when it is imported into the U.S. under heading 9802.

ST&R has helped companies of all sizes utilize these tools to save hundreds of millions of dollars in import duties and tariffs. Our professionals have commodity-specific experience and expertise across all chapters of the HTSUS that enable them to identify and implement the right strategies for each client. We have also successfully used administrative and legal proceedings to uphold importers’ rights to use those strategies.

For more information on how proper tariff classification can save you money, please contact ST&R.