Using General Rules of Interpretation to Classify Goods
Imagine a manufacturer getting ready to ship its very first load of exported goods. The director of shipping and receiving read online that the products have to be classified according to HTSUS codes. It is simple enough, or so he assumes until he starts looking at the codes. Suddenly he doesn’t know which code to use. Now what? It’s time to turn to the General Rules of Interpretation (GRI).
The GRI is a set of six rules that exporters work through to determine the correct codes for their goods. The rules are necessary for the simple fact that similar goods can be classified in many different ways. One example is use. If a product is intended for a specific use by the importer, one code might be used. The same product intended for a different use could have a different code.
It is important to note that the six rules are numbered and are intended to be followed in order of sequence. Failing to do so could ultimately lead to utilizing the wrong code.
The Six Rules Summarized
The rules themselves can seem ambiguous at times. Even an experienced trade compliance provider like Ohio-based Vigilant Global Trade Services can stumble trying to classify some types of goods. Nonetheless, here are the six rules in a nutshell:
- Headings – The Harmonized System classifies certain goods under specific headings. If a particular good falls under one of those headings, that heading’s 4-digit code is the starting place for further classification.
- Incomplete and Mixed Articles – Some goods are exported as either incomplete or mixed articles. They are coded accordingly.
- Multiple Headings – The third rule applies to goods that seem to fall under multiple headings. This rule has three parts that must be applied in sequential order.
- Separate from 1-3 – The fourth GRI becomes the starting point for goods that cannot be coded according to the first three rules. Such goods must be classified using codes of similar types of goods that can be classified under the first three rules.
- Containers – Articles designed as containers are covered under the fifth GRI when exported with the products they are intended to contain. There are two parts to this rule that must be followed in sequential order.
- Hierarchy – The final rule outlines the hierarchy exporters must utilize when going through headings, subheadings, and product descriptions.
These descriptions of the six rules are by no means detailed. They are summaries, at best. But they should give you some idea of how complicated export classification is. Unfortunately, a new manufacturer just getting started in the export game may discover that its export staff make a lot of mistakes before figuring things out.
Classification Without the GRI
While the GRI is intended to be the primary tool by which exporters classify their goods, it is not the only way of obtaining the right HTSUS codes. For example, consider a company that acts more as a distributor than a manufacturer. Their manufacturer may supply the goods without codes because said goods are being sold to a domestic partner. Nonetheless, that manufacturer may already know the correct codes for its goods.
U.S. Customs and the Census Bureau – the two U.S. agencies most concerned about HTSUS codes – are not all that concerned about how exporters figure out product classification. They only care that exporters get it right. That’s where companies like Vigilant come in.
Companies specializing in global trade management and compliance make it their business to understand the GRI and all things HTS-related. Partnering with such a company is the best way for exporters to maintain compliance.