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Harmonized tariff schedule

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What Is Harmonized Tariff Schedule?

The Harmonized Tariff Schedule (HTS) is a comprehensive system used to classify goods involved in international trade. It serves as the primary resource for determining the tariff rates and statistical categories for merchandise imported into a country. This system is a critical component of trade policy, falling under the broader financial category of international trade and customs regulations. The HTS is based on the international Harmonized System (HS), a global nomenclature system for most world trade in goods. All goods imported into the United States, for example, are subject to the provisions of the Harmonized Tariff Schedule.16

History and Origin

The Harmonized Commodity Description and Coding System, commonly known as the Harmonized System (HS), was developed by the World Customs Organization (WCO) and implemented on January 1, 1988, through the HS Convention.15 This system serves as a universal language and code for transportable goods, used by over 200 countries and economies for customs tariffs and trade statistics.14 Before the HTS, the United States used its own tariff schedules. The shift to the Harmonized Tariff Schedule in the U.S. was enacted by Congress and became effective on January 1, 1989, replacing the former Tariff Schedules of the United States.13 This conversion was initiated after President Ronald Reagan requested the U.S. International Trade Commission (USITC) to prepare a draft of the U.S. tariff schedules using HTS nomenclature in 1981.

Key Takeaways

  • The Harmonized Tariff Schedule (HTS) classifies goods for import and export, assigning a unique code to each product.
  • It determines the import duties and taxes applicable to goods entering a country.
  • The HTS is based on the internationally recognized Harmonized System (HS), managed by the World Customs Organization.
  • Governments and businesses utilize the HTS for trade statistics, policy development, and managing customs procedures.
  • Correctly classifying goods under the HTS is crucial for compliance and avoiding penalties.

Interpreting the Harmonized Tariff Schedule

Interpreting the Harmonized Tariff Schedule involves understanding its hierarchical classification structure. The HTS categorizes goods based on their name, use, and the materials used in their construction. The international Harmonized System uses a six-digit code to identify commodity groups, with countries then adding further digits for more detailed classification.12 For instance, the U.S. Harmonized Tariff Schedule expands to a 10-digit number.11 The first six digits of this 10-digit code align with the international HS subheading.10 Understanding these codes is essential for importers and exporters to accurately determine the applicable tariffs, taxes, and trade regulations for their goods. The U.S. Customs and Border Protection (CBP) is responsible for interpreting and enforcing the HTS and provides legally binding advice on classification.9

Hypothetical Example

Imagine a company, "Global Gadgets Inc.," wants to import a new type of smart wristwatch from Switzerland into the United States. To determine the correct import duties, Global Gadgets Inc. would consult the Harmonized Tariff Schedule of the United States.

They would navigate the HTS to find the appropriate chapter and heading for "wristwatches, electrically operated, with an integral data processing function." After reviewing the descriptive text and legal notes within the HTS, they might arrive at a specific 10-digit classification code, for example, 9102.12.8000. This code would then correspond to a specific tariff rate that Global Gadgets Inc. must pay on the value of each wristwatch imported. Properly identifying this code is crucial for accurate cost estimation and compliance with U.S. customs regulations.

Practical Applications

The Harmonized Tariff Schedule has numerous practical applications in international trade and commerce. It serves as the foundation for assessing tariffs and duties on imported goods, directly impacting the cost of goods and, consequently, consumer prices. For businesses, accurately classifying products under the Harmonized Tariff Schedule is vital for proper financial planning and customs compliance, often requiring the expertise of a customs broker. The system also plays a significant role in collecting statistical data on international trade flows, which governments use to analyze trade patterns, negotiate trade agreements, and formulate economic policies. The International Monetary Fund (IMF) notes that changes in tariff rates, influenced by systems like the HTS, can have significant macroeconomic effects, impacting government revenue and trade levels, and potentially even influencing global economic growth.8,7

Limitations and Criticisms

While the Harmonized Tariff Schedule aims for global harmonization in trade classification, challenges and criticisms exist. One limitation is the inherent complexity of classifying a vast array of goods, which can sometimes lead to misinterpretations or disputes. The HTS, despite its detailed structure, may not always perfectly account for rapidly evolving technologies or highly specialized products, leading to ambiguities in classification. Incorrect classification can result in penalties, delays, or unexpected costs for businesses. Furthermore, the application and interpretation of the Harmonized Tariff Schedule can vary slightly between countries, even though they are based on the same underlying Harmonized System. This can create complexities for businesses engaged in global supply chain management, as they must navigate the specific nuances of each country's HTS implementation. Research by the IMF highlights that tariffs, and by extension the systems that administer them like the HTS, can depress trade, investment, and output, underscoring the broader economic consequences of trade protectionism.6

Harmonized Tariff Schedule vs. Schedule B

The Harmonized Tariff Schedule (HTS) and Schedule B are both systems for classifying goods in the United States, but they serve different primary purposes. The Harmonized Tariff Schedule is primarily used for classifying goods imported into the United States and determining the applicable tariff rates. It is maintained and published by the U.S. International Trade Commission (USITC).5

In contrast, Schedule B is specifically designed for classifying goods exported from the United States for the purpose of collecting export statistical data. It is administered by the U.S. Census Bureau. While a complete 10-digit U.S. Schedule B number and a U.S. Harmonized Tariff Schedule number may not always be identical for the same physical product, the crucial commonality is that the first six digits (the Harmonized System subheading/code) will be the same for both.4 Therefore, while both systems are rooted in the international Harmonized System and facilitate international trade data collection, the HTS focuses on import duties and regulations, whereas Schedule B focuses on export statistics.

FAQs

What is the purpose of the Harmonized Tariff Schedule?

The main purpose of the Harmonized Tariff Schedule is to classify goods that are imported into a country. This classification then determines the specific tariff rates, or customs duties, that apply to those goods. It also helps in collecting trade statistics.

Who maintains the Harmonized Tariff Schedule in the United States?

In the United States, the Harmonized Tariff Schedule is maintained and published by the U.S. International Trade Commission (USITC).3 However, U.S. Customs and Border Protection (CBP) is responsible for administering the tariff and providing legally binding interpretations.2

Is the Harmonized Tariff Schedule the same in every country?

No, while the Harmonized Tariff Schedule in most countries is based on the international six-digit Harmonized System developed by the World Customs Organization, individual countries add their own further digits and specific legal notes. This means the full classification code beyond the initial six digits can vary from country to country.1

How does the Harmonized Tariff Schedule affect consumers?

The Harmonized Tariff Schedule directly impacts consumers by influencing the cost of imported goods. The import duties determined by the HTS are typically passed on to consumers as part of the product's final price. Higher tariffs can lead to higher prices for imported items.