Most importers know that to classify a product under the correct HTS code is no easy task. Oftentimes professionals make these common mistakes, which can result in disaster.
We spoke with John M. Peterson
, international trade/Customs law expert and partner at Neville Peterson LLP
, about these dangerous mishaps. John has co-authored this 3-part-blog and provided some first-hand examples on classification errors that he sees regularly in the industry.
1. Choose the Lowest Duty Rate Versus the Correct Classification
You’re importing woven textile graduation gowns. The HTS subheading 6211.43.0091 provision for “other” wearing apparel carries a 16% ad valorem
duty rate – ouch! On the other hand, “festive articles” of HTS Heading 9505 are duty free, and, after all, graduation gowns are typically worn on festive occasions. So you enter the goods under Heading 9505. That’s potentially a costly mistake, since Customs has ruled that graduation gowns are classifiable as apparel.
Since U.S. Customs issues penalties for an entry by means of false statements, acts or practices are expressed as a multiple of revenue losses
, a reclassification, plus a simple “negligence” penalty of two times the loss of revenue, you could find yourself owing the government 48% of the value of your imports.
What’s the best solution?
Just because Customs says something in a ruling doesn’t make it right; an importer has every right to protest duty assessments and challenge classifications administratively in the U.S. Court of International Trade. [In fact, one importer is challenging the classification of graduation gowns right now]. But an importer who ignores rulings in favor of convenience does so in peril. Better to seek your own ruling, file a protest if you disagree – or both.
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