The International Trade Blog Export Compliance
An Exporter's Guide to Product Classification
On: August 18, 2021 | By: David Noah | 9 min. read
Product classification codes are required for most exports. They are used by the Census Bureau through the Automated Export System (AES) to help compile trade statistics and used by the country of import for assessing duties and taxes.
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 a recommended place to start?” These are all questions we’ve been asked, and today, we’ll address them.
Product Classification: A Background
Importers and exporters are sometimes confused by the different but similar sounding types of product classification. Sometimes classification numbers are six digits and other times they’re 10-digit numbers. To help you understand, let’s look at Harmonized System numbers, Harmonized Tariff Schedule numbers and Schedule B codes, and when each of these classifications should be used.
The Harmonized System (HS)
The Harmonized System classification is a six-digit standard administered by the World Custom Organization (WCO), called a subheading, for classifying globally traded products. HS codes, also called HS numbers, are recognized in 98% of world trade. The United States, and many other countries, add additional digits to the HS number to further distinguish products. Typically, these additional digits are different in every country.
The WCO reviews HS codes every five years to account for new products that have entered the market and changes to existing products. The most recent update, HS 2022, entered into force on Jan. 1, 2022. (Our article, HS Codes 2022: What Every Exporter Needs to Know, details the most recent set of changes.)
Schedule B and the Harmonized Tariff Schedule
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. They take the same form as an HS code for the first six digits, then have four differing last digits.
Companies that are already classifying their products using HTS codes for their imports may want to use HTS classification for all of 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) to AESDirect through Customs and Border Protection’s (CBP) Automated Commercial Environment (ACE). A description of the merchandise, in sufficient detail to permit the verification of the Schedule B number, must also be provided in ACE, as well as other statistical data. An AES filing is required for most exports of merchandise from the United States to a foreign country if the merchandise is valued at $2,500 or more by Schedule B number.
CBP uses HTS and Schedule B numbers to collect export statistics and assess duty and taxes on imported goods. These product classifications are not used to determine export controls.
Export Compliance Classifications
There are two classification types that deal with export compliance: ECCN and USML. Export Control Classification Numbers (ECCN) are found in the Commerce Control List (CCL) of the Export Administration Regulations (EAR). They identify items that are subject to U.S. export control regulations, usually dual-use items (meaning they can be used for military and commercial purposes). Most commercial goods will not have an ECCN (in which case they will be designated EAR99), but you need to check the CCL to know for sure.
Keep in mind that the ECCN or USML classification is only one of the steps for determining if there are any restrictions on exporting your goods. How they will be used (end use) and who will be using them (end user) are important determining factors as well. Download our free white paper, What you Need to Know about Export Compliance, for more details.
If your items have a direct military application, they may fall under the jurisdiction of the State Department’s Directorate of Defense Trade Controls (DDTC) and use the U.S. Munitions List (USML). Learn more about this in our article USML vs. ECCN: What's the Difference?
Most products fall under the jurisdiction of the EAR, and most items don’t require an export license. But you should never just make that assumption. Our free whitepaper, How to Determine if You Need an Export License, gives a detailed explanation of this process.
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 know 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, based on the HS, 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 2022 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 reading and understanding HTS and Schedule B codes in our article How to Use the Harmonized Tariff Schedule of the United States. 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. There are two scenarios for repaired items—one is goods imported for repair and exported for return, and the other is goods 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. You can learn more about using the Schedule B search engine here.
How Trade Wizards Can Help With Product Classification
The Shipping Solutions Product Classification Wizard allows you to search for a specific Schedule B number or Harmonized Tariff Schedule 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 a word or brief description that can help you identify it.
Our Product Classification Wizard goes beyond the basic Schedule B and HTS search engine. The Product Classification Wizard also helps you identify ECCN and USML codes used for export control purposes and HS numbers used for imports. Try it out for free!
- Watch the one-hour webinar: Classifying Your Products for Importing and Exporting. The webinar guides you through the Harmonized System so you understand when to use the HTSUS versus Schedule B, how to select the proper codes, and how to use this understanding to take advantage of free trade agreements and potential product modifications that could save your company a substantial amount of money.
- For more in-depth training and information on properly classifying your products under the Schedule B or Harmonized Tariff Schedule codes, check out the full-day Tariff Classification webinar or seminar. This one-day webinar or seminar explains the tariff schedule and gives you the tools to classify your company's products.
- The Census Bureau. If you can’t find the Schedule B code you need, consult the U.S. Census Bureau at (800) 549-0595, option 2, or send an email to firstname.lastname@example.org.
Correct Product Classification Is Crucial
As the exporter, you are responsible for reporting the correct product classification codes to the U.S. government, regardless of any classification your supplier may suggest, and you are ultimately liable for mistakes. This is an important consideration when determining whether simply to accept your supplier’s suggested HS numbers.
You can use them as a guide to direct you to the approximate location of the code in the Harmonized System, and then use your own analysis to determine which code you will use; or you can conduct your own product classification, and then use the supplier’s code as a way to double-check your work. In either case, 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.
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This article was first published in December 2018 and has been updated to include current information, links and formatting.
About the Author: David Noah
David Noah is the founder and president of Shipping Solutions, a software company that develops and sells export documentation and compliance software targeted at U.S. companies that export. David is a frequent speaker on export documentation and compliance issues and has published several articles on the topic.