Basic principles of Tariff Classification

Tariff Classification is one of the main areas of Customs Law and is crucial when imposing customs duties. Specific rules on classification can be found in HS Convention to which almost all the WTO Members (except Taipei) are party. HS consists of over 5000 commodity groups with a six-digit code. HS consists of: 

(1) Chapter, Heading and Sub-heading Notes; and 

(2) General Rules for the Interpretation (GIR) of the Harmonized System. 

The first one which is Chapter, Heading and Subheading Notes is the main step to identify the product classification. 

The second part, GIR provide certain principles to classify goods: (i) incomplete or unfinished goods if they don’t have a proper line are classified as finished goods; (ii) when goods are prima facie classifiable under two or more headings, classification shall be effected as follows. (a) A heading that provides a more specific description is to preferred to the more general description; (b) mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, shall be classified as if they consisted of the material that gives them their essential character; and (c) if goods can not be classified under the above rules shall be classified under the heading which occurs last in numerical order among those which equally merit consideration. (3) If the goods can not be classified under the above rules, then they shall be classified under the heading appropriate to the goods to which they are most akin. The classification of subheadings of a heading are also important and should be referred to subheading notes and GIR of HS as well as explanatory notes and classification opinions.

Basic principles governing tariff classification of different countries were developed by Customs Courts and Tribunals of different countries. For example, in EU it is the Court of Justice of the EU. In the USA it is US Court of International Trade and Court of Appeals for the Federal Circuit. Basic principles include first of all the wording of Heading and Subheading that serves as the main step of classification. The second principle includes the intended use of a product and its properties and characteristics. The other principle are explanatory notes, consulting to the dictionaries (e.g. Oxford dictionary), scientific authorities and other reliable sources of information. In WTO law, tariff classification is governed under Article II of the GATT 1994.