About the Tariff

Basic Classification Methodology

This section illustrates how to classify goods.

Two methods are discussed, the Reference or Keyword method, and the Hierarchical method.

Hierarchical (or "Drilldown") Method

This method of classification follows the structure of the Tariff. It is the most thorough method, as it ensures that all exceptions, exclusions and so on are noted, and that the logic of the hierarchy is followed.

On the downside, this method is more time consuming than the Reference or Keyword method, and for novices, can be a little challenging. Before using the Hierarchical method, we recommend following one or more of the practice examples.

Step by Step

1. Locate the Section in which the product is likely to be found.

2. Carefully read the Explanatory Notes that apply to the Section. If the product seems like it could be in more than one Section, read the Explanatory Notes for each.

3. Once the pertinent Section(s) is identified, look at the Chapters in the Section(s). Read the Chapters Notes in question, and look at the Chapter Notes within the Explanatory Notes as well.

4. Look at the Headings in the Chapter(s) you have selected. Assigning the product to the correct Heading is of crucial importance — as explained in the Rules of Interpretation, remember that the words in the Section and Chapter titles only point you in the direction of the correct Heading. Check the words in the Heading very carefully to make sure it fits the product. Re-check the Section, Chapter and relevant parts of the Explanatory Notes to confirm that the product is not excluded, or that you are not directed to another Heading.

5. Remember that Headings are mutually exclusive. Legally, a product can only be classified under one Heading. If you have more than one Heading under consideration, you will need to use GIR 3 to decide between them. Refer to the General Rules of Interpretation, any Legal Notes related to the Heading, and the Explanatory Notes.

6. Once the Heading has been selected, the item must be classified down to the Subheading level. Subheadings are breakouts of the 4-digit Headings. Thus, they can include only products which are included in the Heading to which they apply. Subheadings exhaust the Heading from which they are derived. All products may be listed, or a few categories may be named explicitly and the rest referred to as "Other". If there are first and second level Subheadings, first find the appropriate first level Subheading and then locate the second level one below it. Note that there are some Subheading Notes amongst the Legal Notes and there are also some Subheading-level Explanatory Notes.

In going below the Subheading level of classification, you will have left the international part of the Tariff and are now dealing at the level that is unique to the country.

For most countries, including the U.S., Canada, and Mexico, it is at the Tariff Item level, the 7th and 8th digit levels, that the duty rate is determined. Your aids in deciding about this level are the Supplementary Notes (ie. the country-specific notes) and the country-specific Explanatory Notes. Where there are first and second level Tariff Items, first find the appropriate first level Tariff Item, then, below that find the correct second level Tariff Item.

Where a country has added another level, such as the U.S. and Canada, the next step is to look at the 9th and 10th characters if they are non-zero. The logic at this level is the same as at the other levels. It is advisable to check any applicable Notes. Also, there may be first and second level Classification Numbers.

The lowest level Classification Number is the number that is generally used on most country's import documentation. In the case of the U.S. and Canada this is 10 digits, for Mexico it is 8 digits. The duty rates for the most commonly used Tariff Treatments are found associated with the Tariff Item. Pick the one that applies to the country you are importing your product from. Don't forget to ensure that your certificates are in order for preferential treatments.

Example

A Canadian importer wants to import packaged low protein biscuits suitable for special dietary needs. They will be imported from the United States and sold in health food stores. The first step is to find the appropriate Section. Looking through the Section descriptions, we see that Section IV: Prepared Foodstuffs; Beverages, Spirits and Vinegar; Tobacco and Tobacco Manufactured Substitutes is most likely to be the correct one.

Next, we look at the Legal Notes for this Section to see if there are any exclusions or special considerations that could affect whether this product actually belongs in this section. Nothing in the Notes would seem to rule out classifying this product in this section.

Now we need to find the correct Chapter. Part of the Chapter list for Section IV is shown below:

16. Preparations of meat, of fish or of crustaceans, molluscs or other aquatic invertebrates.

17. Sugars and sugar confectionery.

18. Cocoa and cocoa preparations.

19. Preparations of cereal, flour, starch or milk; pastrycooks' products.

20. Preparations of vegetables, fruit, nuts or other parts of plants.

The most likely candidate is Chapter 19: Preparations of cereal, flour, starch or milk; pastrycooks' products.

Nothing in the Chapter Notes seems to disqualify our placing the product in this chapter.

We now look through the Headings in the Chapter, a partial list of which is shown below:

19.01 Malt extract; food preparations of flour, meal, starch or malt extract, not containing cocoa powder or containing cocoa powder in a proportion by weight of less than 50%, not elsewhere specified or included; food preparations of goods of heading Nos. 04.01 to 04.04, not containing cocoa powder or containing cocoa powder in a proportion by weight of less than 10%, not elsewhere specified or included.

19.02 Pasta, whether or not cooked or stuffed (with meat or other substances) or otherwise prepared, such as spaghetti, macaroni, noodles, lasagna, gnocchi, ravioli, cannelloni; couscous, whether or not prepared.

1903.00.00 Tapioca and substitutes therefor prepared from starch, in the form of flakes, grains, pearls, siftings or in similar forms.

19.04 Prepared foods obtained by the swelling or roasting of cereals or cereal products (for example, corn flakes); cereals, other than maize (corn), in grain form, pre-cooked or otherwise prepared.

19.05 Bread, pastry, biscuits and other bakers' wares, whether or not containing cocoa; communion wafers, empty cachets of a kind suitable for pharmaceutical use, sealing wafers, rice paper and similar products.

Biscuits are specifically stated under the Heading 19.05, so it should be the correct one. (Obviously determining this requires detailed product knowledge). Going back to the Section and Chapter Notes, we can see that none of them apply to this Heading.

The next step is to look below the Heading level in order to find the correct Subheading, Tariff Item and Classification Number.

Look at the following partial breakdown of this Heading:

1905.10 Crispbread
1905.20.00 Gingerbread and the like
1905.30 Sweet biscuits; waffles and wafers
1905.40 Rusks, toasted bread and similar toasted products
1905.90 Other
1905.90.11 Ordinary bread, leavened with yeast
1905.90.12 Unleavened bread for sacramental purposes
1905.90.13 Other bread, in packages of a weight not exceeding 11.34 kg each
1905.90.14 Other bread, in bulk or in packages of a weight exceeding 11.34 kg each
1905.90.21 Biscuits: valued at not less than 44ยข/kg, said value to be based on the net weight and to include the value of the usual retail package
1905.90.29 Other:
1905.90.29.10 Soda biscuits
1905.90.29.90 Other

Subheading 1905.90 refers to Other. We know that this biscuit product can only fall under this Subheading because the Subheadings above exclude biscuits, but not 1905.90. As we go through the Classification Number levels, we see our product falls under the first level 1905.90.29. The second level Classification Number, 1905.90.29.90, referring to Other is the one we must use on our accounting documents.

Now we can look at the duty rate information for the Tariff Item.

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Using Indexes or Keywords

Indexes and keyword systems can help you to zero in on the Classification Number more quickly. While they can be a bit misleading if used incorrectly, if used properly, they should be at least as accurate as the more formal hierarchical method described above. In indexing and keyword methods you are using words or phrases found in the product description to look up the Classification Number. Most indexes consist of an alphabetical list of product descriptions. Beside each is the suggested 10-character Classification Number and sometimes other information such as duty rates etc. Computerized keyword lookups allow you to enter one or several keywords. If these words are found in the Tariff, further screens appear to show where they are located and display any relevant Tariff Items, Classification Numbers and duty rates.

The essential step in ensuring accurate classification when using indexes or keywords is to properly verify the Classification Number found in the lookup. If several numbers are suggested, you must also choose between them. Assess the suggested classification(s) by checking the relevant Section and Chapter Notes for each looking for any exclusions or qualifications.

Then proceed to the Heading level. Compare the Heading description to what you know about the product. Use any Legal Notes that apply at the Heading level, and the Explanatory Notes if you have access to them. As explained earlier, Headings are mutually exclusive. If you have retrieved Classification Numbers that belong to more than one Heading, rule out all but one Heading before proceeding.

Once certain that you have the correct Heading, proceed to verify the Subheading, Tariff Item and Classification Number levels in the same way.

Example

We are trying to classify an item whose product description reads, Crude sulphur put up in 1 kilogram packages for retail sale as a fungicide. The most obvious word combination to try is crude sulphur. Looking up this combination, or in some alphabetical index books, sulphur, crude retrieves the Classification Number:

2503.10.00.00 Crude or unrefined sulphur

It looks like this classification might fit. But what if we had looked up the word fungicide instead? The closest match is the following:

3808.20 Fungicides
3808.20.10.00 In packages of a gross weight not exceeding 1.36 kg each.

Now our problem is to determine which of the two Classification Numbers is correct. Here we rely on the Legal Notes for the Chapter and Section. There are no notes for Section V. The only note in Chapter 25 that mentions sulphur refers to "sublimated sulphur, precipitated sulphur or colloidal sulphur" as being excluded from this Chapter. But these designations do not apply to our product.

However, look at the following notes for Section VI and Chapter 38 respectively:

Section VI - Note 2:

Subject to Note 1 above, goods classifiable in Heading No. 30.04, 30.05, 30.06, 32.12, 33.03, 33.04, 33.05, 33.06, 33.07, 35.06, 37.07, 38.08, by reason of being put up in measured doses or for retail sale are to be classified in those headings and in no other headings in the Nomenclature.

Chapter 38 - Note 1:

This Chapter does not cover:

(a) Separate chemically defined elements or compounds with the exception of the following:

(1) ...

(2) Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products and plant-growth regulators, disinfectants and similar products, put up as described in heading No. 38.08.

The note for Chapter 38 says that separate chemically defined elements or compounds (which description may apply to our product) are not covered by this Chapter except if used as insecticides, rodenticides, fungicides etc., put up as described in heading No. 38.08. Thus our product seems to fit into this heading. The note for Section VI confirms this impression and in fact says that we must classify it in this Heading. Therefore 3808.20.10.00 is the correct Classification Number.

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