On January 1, 1989, the Harmonized Tariff Schedule (HTS) was created by Congress to replace previous US Tariff Schedules. Administered by the World Customs Organization (WCO), the HTS further defines the WCO’s 4- to 6-digit Harmonized Commodity Description and Coding System (HS) into unique 8-digit rate lines and 10-digit statistical reference categories. Building on the HS, the HTS further defines the specific categories to which a given shipment is assigned. As a result, the importer can immediately determine the appropriate tariff and duty for the given shipment.
Regardless of shipper preferences, the Harmonized Tariff Schedule enhances and improves the assessment and collection of duties on imports. In the supply chain, international trade is fundamental to maintaining growth and ensuring prices remain low. Since the Harmonized Tariff Schedule uses the WCO’s HS, which is used by most countries in international trade, the HTS ensures all parties are making appropriate payments to the respective CBP.
For example, the HTS focuses on imports into the US while WCO’s HS ensures exports to foreign countries have gone through a specified, proper assessment of duties and tariffs. Essentially, the Harmonized Tariff Schedule and HS function to prevent illicit trade practices. However, Customs and Border Protection remains the only governing body with the authority to enforce the HTS.
When considering why the HTS should be fully utilized in all imports, recall our previous discussion on Incoterms. Similar to the potential problems for shippers who do not use Incoterms in shipping practices, an importer who evades the HTS may subject to additional inspection, assessment of fines, penalties, or other extenuating measures as part of the punishment. This punishment may include a ban from imports, increases in audits of the importer of record, or additional problems throughout the course of shipping.
Additionally, the HTS is important in maintaining an even playing field for importers. When a given company does not properly assess duties, as described within the HTS, the respective company is able to import goods without proper payment to the CBP. Initially, this may sound acceptable; however, it reflects the smuggling of goods into the US. As a result, the illegally-operating company may sell merchandise at a lower rate that competitors would have been unable to access due to payment of duties.
In the global supply chain, compliance and visibility are top concerns for all parties. Furthermore, visibility impacts public perception of a given company, and poor public perception can reduce customer purchases. For organizations who do not use the HTS, the public may present a higher distrust in the respective organization’s practices, regardless of the degree of visibility within other aspects of the organization. As a result, overall performance and demand for the organization’s products will be reduced.
Aside ethical obligations to make required payments for tariffs, the HTS enhances an importer’s productivity. Since the unique IDs of the HTS specify the general and subsequent classification of importers, the assessment and payment of tariffs and duties is simplified. As a result, an importer may dedicate more time to the process of transporting imports than awaiting assessment of duties by the CBP.
The Harmonized Tariff Schedule is critical in ensuring fair, accurate processing of tariffs for US imports. From maintaining productivity to ensuring compliance with import laws, the benefits of the HTS extend far beyond the consequences of not using it. However, all importers must remember the CBP holds the final determination in the correct rate of duty for a given import, and the HTS simply provides a way of helping this assessment move forward efficiently.