I explored unorthodox methods companies use to find the correct Harmonized Tariff Schedule (HTS) classification for their goods in a previous article. Now, I will outline the best practices your company should use when classifying your products.
Those of you familiar with the classification process are, without a doubt, veterans of the General Rules of Interpretation (GRIs), the six international rules that provide instructions for determining the Harmonized Tariff Schedule (HTS) code for your products.
Those of you new to the process will find these rules printed for you at the beginning of the Harmonized Tariff Schedule of the United States.
Where should you place your international trade compliance office within your importing or exporting organization? Should it be part of sales, accounting, shipping, legal, purchasing or supply chain?
My answer may seem flippant, and among readers of this blog, it may even seem controversial.
You all know about the three academic R’s, of Reading wRiting and aRithmetic. But are you familiar with the three R's of export compliance: the FTR, the EAR and the ITAR?
We all know intuitively what a part is. Nearly every company has a parts department. These are the areas of the company staffed by those magical people who never throw anything away and always seem to be able to find that one widget or what is needed to repair a product and satisfy a customer.
It comes as a surprise to some that the Harmonized Tariff Schedule (HTS) uses the word part with a much narrower and precise definition. What we call a part in industry is rarely what the HTS code refers to as a “part” or “parts thereof.” As examples, it is not uncommon to find headings in the tariff such as:
Following is a bit of light fiction blended with, I’m afraid, a heavy dose of truth:
“Even a trained squirrel could do classification, John!” a product engineer at a manufacturing firm told me the other day when we were discussing the Harmonized Tariff Schedule (HTS) classification process at his company.
“What’s that you’re saying?” I had to restrain myself from reaching across the table and throttling him.
Is your trade compliance office known as the office of NO? Perhaps your company considers you to be the Sales Prohibition Department?"
When you walk through the aisles at work do colleagues avoid you by turning the other way? Perhaps when you pass by they pretend to be on the phone?
I am sorry to inform you but these are all symptoms that you are losing the battle for trade compliance within your company.
Import-export trade compliance is often characterized by trite phrases and platitudes:
While trite, the above statements also contain truths. Importers and exporters have an obligation to exercise due diligence in conforming to the myriad of trade regulations.
I received the following in my inbox the other day:
It's Virginia. I attended a number of seminars you presented last April. I hope all is well with you. I've recently accepted a new position with a big important company and am trying to get them on the right track. I could use your assistance.
A request came down from corporate. I need to provide them supporting evidence as to why we, as a manufacturer and distributor, should be responsible for providing the HTS codes for importing and exporting. On the import side they think we should just accept the HTS codes provided by our vendors and our customs brokers. On the export side they think our buyers and their freight forwarders are the ones who should be assigning the Schedule B codes.
I know we are responsible, but I just can't put my finger on the regulations that hold us accountable. Can you please point me in the right direction to find that supporting article, regulation or requirement?
As part of my business, I have the honor of leading a fair number of import and export regulatory compliance seminars. Some of my students have been rather vocal about the compliance issues they’ve experienced within their companies. As a seminar leader my job is to illuminate an issue and introduce tactical solutions the student’s company might consider implementing.
The common response to my suggestions is, “Yeah but.” (This rhymes with rabbit when spoken quickly.) “Yeah, but you don’t understand the situation at my company.” The discussion then continues with some reason why the company has not moved forward with an effective import/export compliance program.