Proposed Modifications to the Harmonized Tariff Schedule to Take Effect on January 1, 2007

Issue 526, September 18, 2006

Every five years the World Customs Organization (WCO) overhauls the Harmonized Tariff Schedule. In response, the United States International Trade Commission (USITC) changes the Harmonized Tariff Schedule of the United States (HTSUS) in order to keep it in line (harmonized) with the tariff schedule of the rest of the world. This is a process involving several years. These changes to the HTSUS are scheduled to become effective January 1, 2007 and will update the current HTSUS to reflect the World Customs Organization (WCO) recommended HTS modifications. The USITC issues a document listing the proposed changes to be made to the HTSUS and, after a comment period for review, changes are made. These changes will occur on January 1, 2007.

The currently proposed modifications affect close to 1000 tariff numbers in 83 chapters and 240 headings of the HTSUS. In many cases, entire headings (four digits) and subheadings (six digits), which are common to all countries using the Harmonize Tariff are being added, eliminated, merged or separated into new tariff headings. While machinery and electronics will be particularly hard hit, products in almost all categories will feel changes.

Almost all of the proposed tariff changes will not affect the duty rate of any item. There are cases, however, where changes resulting from the elimination of a heading or subheading may affect an item’s eligibility for preferential treatment Free Trade Agreements that are based on tariff shift, such as NAFTA.

The current document is titles Proposed Modifications to the HTSUS (ITC Publication 3851). The United States Trade Representative (USTR) is still reviewing the changes and it has not yet been submitted Congress. Congress will have at least 60 days to review the report. If Congress approve the report and passes it into law Presidential Proclamation will not occur for at least 15 days. This means that the modifications will take place and be signed into law at the last moment before 2007, making absolute certainty about the changes impossible. There are not expected to be any changes to the published proposed modifications, however. Importers should begin to examine the proposed modifications published at

http://hotdocs.usitc.gov/docs/tata/hts/Pub3851.pdf

Appendixes B, C and D list the changes that are expected to be made. Importers should review these changes for HTS number that are affected. More detail on the exact change is presented in Appendix B. Importers should review these changes in order to be prepared for 2007. The changes are made at the eight digit level, which is the level at which duty rates are applied. In most cases the ninth and tenth digits will not change. It is the importer’s responsibility to insure that the entries are correctly classified at time of entry.

For more information, please contact your local sales representative.