CHAPTER 3CLASSIFICATIONPOLICYF-M wi

CHAPTER 3
CLASSIFICATION



POLICY

F-M will use “reasonable care” in classifying its imports and ensuring compliance with all Customs classification requirements. Misclassifications can result in the overpayment/underpayment of duties, failure to satisfy import restrictions, and monetary penalties. F-M will promptly notify Customs of any classification discrepancies discovered subsequent to entry filing.

The Global Trade Compliance Manager maintains a tariff classification database in the SAP item master. The database may be leveraged for local country obligations. Questions on how to best leverage this database should be raised to the Global Trade Compliance Manager.



























INTRODUCTION

Thailand is a signatory to the International Convention on the Harmonized Commodity Description and Coding System. Signatories to the agreement have agreed to use the Harmonized System Nomenclature for the tariff classification of imported merchandise into their respective countries. Developed by the World Customs Organization, the Harmonized Tariff System (HTS) is designed to facilitate the collection, comparison and analysis of international trade statistics. The HTS serves as a framework for the determination of Customs duties for all contracting parties to the Convention. The first six digits in theory should be the same among all the nations using the HTS.

All articles imported into the Customs territory must be classified under the Harmonized Tariff Schedule. Product classification is the process of applying the rules found in the HTS and selecting the appropriate tariff number and corresponding duty rate, which most properly applies to the merchandise under consideration. Since product classification determines the rate of duty, it is important to have a clearly defined process in order to avoid erroneous tariff classification(s) that could result in underpayment or overpayment of customs duty.






























KEY TERMS/CONCEPTS

The Harmonized System

The HTS is based upon the Harmonized Commodity Description and Coding System, better known as the Harmonized System (HS), which promotes common customs procedures worldwide. The HS was designed as a “core” system, permitting individual countries adopting it to make further product subdivisions according to their particular tariff or statistical needs. This “core” international system promotes a high degree of international uniformity in customs tariffs and foreign trade statistics.

The HS has 97 chapters indexed in 21 sections – generally grouped together by branches of industry, commerce, and progressing from raw materials to finished goods. These groupings are not absolute, but serve as an indication of the proper classification.

The HTSUS also contains the General Rules of Interpretation (GRIs) as well as section and chapter notes, which govern the proper classification of all articles in the HTSUS (see page 3 of this Chapter below).

Harmonized Tariff System Numbering

In the HS, each Heading is assigned a four-digit number. The first two digits of that number denote the chapter and the second two digits indicate the Heading number within that chapter. For example, HTS 8517 is to be found in chapter 85 and is the 17th Heading within chapter 85. A six-digit number identifies each associated Subheading. The HS classification is common to all countries, which use the HS up to the Subheading (6-digit) level.

Each country using the HS is permitted to more specifically identify articles beyond the six-digit international number. Thailand has added two additional sets of two digits each. Based on the protocol governing the implementation of the ASEAN Harmonized Tariff Nomenclature (AHTN protocol), each tariff provision is coded in eight digits and the tariff reporting number, which incorporates the statistical suffix, is ten digits.

The HTS is hierarchical in nature. Thus, in order for an article to be classified at a given 8-digit Subheading level it must be classifiable at its 6-digit level, and in order to be classified at the 6-digit Subheading it must be classifiable at its 4-digit Heading level. Consequently, a given article must fall within its particular section and chapter before it can be classified in any one heading or subheading.

Preceding each section and chapter are legal notes. These notes define the precise scope and limits of sections, chapters, headings, and subheadings of the HTS. They also contain rules intended to prevent the conflict of competing provisions. Through these particular rules, headings, chapters, or sections may be given precedence over others.