Product classification codes, which are used by the Census Bureau through the Automated Export System (AES) for trade statistic purposes and are also used at the country of import for assessing duties and taxes, are required for most exports.
For some exporters, getting started with product classification can be difficult. “I need a Schedule B number. How do I find the right number?” “Should I just start Googling?” “Is there recommended place to start?” are all questions we’ve been asked, and today, we’ll address them.
We spoke with Adam Palmer, lead compliance consultant at Trade Compliant, to discuss the strategies exporters should use to help them find and use those codes to correctly classify their products.
Product Classification: A Background
Schedule B numbers are 10-digit U.S. export classification codes and Harmonized Tariff Schedule (HTS) numbers are 10-digit U.S. import classification codes. Companies that are already classifying their products using the HTS codes for their imports may want to use HTS classification for all their products to eliminate the need to classify their products twice—once under HTS and once under Schedule B. That is perfectly acceptable, but keep in mind that there are certain HTS codes that can't be used for exporting.
The correct commodity number shown in the Schedule B must be reported as part of the Electronic Export Information (EEI) filed in the Automated Export System (AES). A description of the merchandise, in sufficient detail to permit the verification of the Schedule B number, must also be provided in the AES, as well as other statistical data.
Strategies for Classifying Your Products
Here are some things to keep in mind when it comes time to classify your products for export.
Know Your Material
Before attempting to classify your product, you must have its complete description and knowledge of the product’s function, composition and characteristics. This includes having documentation that describes its:
- Composition (metals, plastics, wood, etc.)
- Specifications (size, thickness, etc.)
- Performance specifications (capacity, flow rates, voltage, etc.)
- Product use and essential character
Learn the Structure of Schedule B (and HTS) Codes
The Schedule B product classification system is based on the Harmonized System (HS) and consists of 22 sections divided into 97 chapters. Chapters 1 through 97 correspond with the international system of numbering, with chapter 77 being blank. An additional chapter, 98, is used for special classification provisions that apply only to U.S. exports.
The 10-digit Harmonized System-based Schedule B codes (commodity numbers) comprise these chapters, and everything from cereal to clocks, mineral oil to meat is covered in these chapters. There are approximately 9,000 of these 10-digit classification codes in the 2017 edition of Schedule B.
Read the Introduction to the Schedule B chapters including the definitions and General and U.S. Rules of Interpretation. These should be reviewed before attempting to locate the correct commodity number. Each chapter and section also contains notes, with which you should familiarize yourself.
Learn more about why and how you should always check the notes in our article, When Classifying Parts Using HTS Codes, Read the Notes!
Repairs, Warranty Replacement, and Schedule B Numbers
Classifying goods to export for repair purposes are handled differently. According to Palmer, there are two scenarios for repaired items—one is goods imported for repair and exported for return, and the other is exported for repairs and re-imported to return them to the U.S.
For goods that were imported for repairs, you will use the Schedule B number 9801.10.0000 on your export documentation and EEI filing. The reported value is the total cost of the parts and labor. Therefore, you do not include the value of the original product.
If the goods are replaced under warranty instead of being repaired, the Schedule B number of the replacement item is used on the EEI and the value reported is the cost of the new item. If the value reported on the EEI (and submitted through AESDirect) is different from the value on the bill of lading or invoice, include the statement “Product replaced under warranty, value for EEI purposes.” As with all exports, if the value of the parts and labor is over $2,500, then EEI must be filed.
For U.S. Munitions List (USML) goods (licensed military goods), in the license value field, report the value designated on the export license that corresponds to the commodity being exported if required by the licensing agency. EEI must be filed regardless of value.
For goods purchased and imported from outside the U.S. that must be returned for repair or warranty, these goods may be exported and then re-imported. Upon export, the schedule B number specific to the goods is used and Schedule B 9801.10 is not applicable. The exporter must make a determination of the value at the time of export.
Customs and Border Protection (CBP) advises filling out CBP Form 4455 Certificate of Registration, and including it with the shipment. This form is then returned with the shipment so it is clear to the CBP Officer that the goods were previously in the U.S.
For more on exporting repaired goods, make sure to read Cathy Petersen’s article, Repaired Goods: Import and Re-Export.
Use the Census Schedule B Search Engine
If you are exporting material that is not already classified, you can start with the U.S. Census Bureau’s Schedule B search engine. Keywords are entered and the tool will ask questions to narrow down the Schedule B options. For example, if you enter the key word “chair,” it will provide options to select cane/bamboo, wood, metal, or other. Based on the selection, it might then ask if the chair is upholstered and so on, until it determines the likely Schedule B number.
How Trade Wizards Can Help With Product Classification
The Shipping Solutions Product Classification Wizard allows you to search for a specific Schedule B number either based on a partial code of at least the first two digits or by entering a text description of the product. Otherwise you can type in word or brief description that can help you identify it.
Our Product Classification Wizard goes beyond the basic Schedule B search engine. In addition to Schedule B classification, the Product Classification Wizard can also help you identify Export Control Classification Numbers (ECCN) used for export control purposes and HS numbers used for imports. Try it out for free!
- Tariff Classification Seminar from IBT. If you want more training and in-depth information on properly classifying your products under the Schedule B or Harmonized Tariff Schedule codes, this seminar is for you. It’s helpful for both exporters and importers.
- Classifying Your Products for International Trade, our free white paper.
- The Census Bureau. If you can’t find the Schedule B code you need, consult a commodity specialist at the U.S. Census Bureau Foreign Trade Division. For durable goods (metals, machinery, computers, electronics, and other miscellaneous goods), call (301) 763-3259. For non-durable goods (food, animal, wood, paper, mineral, chemical, and textile goods), call (301) 763-3484.
Correct Product Classification Is Crucial
As the exporter, you are responsible for correct reporting to the U.S. government, regardless of any classification your supplier may suggest, and you are ultimately liable for any mistakes. This is an important consideration when determining whether simply to accept your supplier’s suggested Schedule B numbers.
You can use them as a guide to direct you to the approximate location of the code in the Schedule B book, and then use your own analysis to determine which code you will use; or conduct your own product classification, and then use the supplier’s code as a way to double-check your work—just make sure you take control of the process.
Knowing the right and wrong ways to use HS numbers, HTS numbers, and Schedule B numbers is not just a good idea; it’s a legal requirement. Misclassifying your product is committing fraud—and if you’re found guilty, you could face fines and other penalties.
Special thanks to Adam Palmer for his expertise in this article.