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

Issue 537, November 10, 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 and addresses changes in technology. 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 a massive number of 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 Harmonized Tariff are being added, eliminated, merged or separated into new tariff headings. While machinery and electronics (Chapters 84, 85 and 90) will be particularly hard hit, products in almost all categories will feel changes.

As an importer of record, it is imperative that you review the new legislation and its impact to your product’s classification for 2007. The earliest date on which such new numbers must be used is December 18, 2006. Changes that apply to your products should be reported to your Customs Broker representative to reflect your intent for reclassification to the new numbers. Note that full 10 digit HTS classification information has not yet been published; however, the tools listed below will enable you to get a head start on this important process.

We encourage you to visit the following website for detailed information about the changes and begin to prepare your company for the changes.

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

There is no easy way to make these changes without a concerted effort on your part to know the law, understand the General Rules of Interpretation to the HTSUSA and be diligent about the tariff number assignment and the impact the change may play in relation to your Free Trade Agreement (FTA) provisions. In many cases a new set of Rules of Origin may need to be considered to qualify your goods for duty free treatment.

There is a strong potential for the following supply chain impacts

	Increased number of physical exams of good due to the changes in HTS
	Delays in release and delivery of import cargo pending accurate assignment of new HTS numbers
	As a result of the delays, associated storage and demurrage charges
	Significant interaction with your broker to review and apply correct HTS numbers
	Related expenses for ensuring compliant release and entry of your cargo

Therefore, we recommend that you take action today by:

	Reviewing or creating a detailed listing of your imported goods by vendor and country of origin with complete product detail
	Each part should be then associated to a current and valid 2006 HTS number
	Next, review the information in the most recently published guidelines from USITC at http://hotdocs.usitc.gov/docs/tata/hts/Pub3851.pdf and watch for associated updates
	Additionally, review the General Rules of Interpretation of the HTSUS at http://hotdocs.usitc.gov/docs/tata/hts/bychapter/0612_tocgn.htm for applicability to your parts
	Cross reference your parts from the 2006 HTS number to the proposed 2007 HTS number at the 6 digit level, as not all detail is yet available from the USITC
	Communicate your classification decisions to your broker so that they are apprised of your intent for goods entering the country in 2007 and for use as early as December 18, 2006
	If assistance is required to prepare for the changes, DGF Regulatory & Compliance consultants can be made available to ensure that you have exercised reasonable care in this critical import compliance activity

	For goods previously subject to CBP Binding Rulings, new rulings will be required.
	Goods entitled to reduced rate or duty free entry under the various Free Trade Agreements will again need to be reviewed carefully for any changes in their respective Rules of Origin and the validity of such claims

Feel free to contact any of the Regulatory & Compliance Consultants listed below for assistance in developing a plan to prepare for the upcoming tariff changes.