Harmonized Tariff Changes

The United States International Trade Commission (ITC) has published an investigation report titled "Proposed Modifications to the Harmonized Tariff Schedule of the United States," which presents to the Office of the President the results of ITC investigation No. 1205-6. The investigation recommends a large number changes to the Harmonized Tariff Schedule of the United States (HTSUS) that are intended to take effect on or near January 1, 2007.

The report includes background information on the international Harmonized System (HS) and the procedures involved in its modification, a discussion of proposed modifications requested by the Bureau of Customs and Border Protection (Customs), an appendix presenting all of the proposed HTSUS modifications, cross-reference tables and appendices concerning written submissions.

The recommended changes to the HTSUS nomenclature are substantial. Alterations have been made to 83 of the HTSUS chapters, and two-hundred forty headings have been reconstructed. Subheadings covering information technology, textiles, motor vehicle parts and industrial products are significantly affected, with Chapters 84, 85 and 90 the most heavily impacted. Certain section and chapter notes have been changed, many subheadings have been deleted or divided and several new subheadings have been inserted.

The HTSUS changes recommended in the report are provided to the 8-digit tariff classification number. Customs requires classification to the 10-digit level to determine admissibility and duty status on entries of imports into the commerce of the United States, and under the Customs Modernization or ?Mod? Act, the importer of record is responsible for using reasonable care to classify and determine the value of imported merchandise.

The WCO developed the Harmonized Commodity Description and Coding System (HS) in 1988 as a standardized nomenclature for international trade. Governments and organizations in almost 200 countries and nations utilize the Harmonized System (HS) to monitor controlled goods, international trade compliance, rules of origin and customs duties. Every four to six years, the HS commodity classification is reviewed and amended by the WCO at the six-digit level. The current HS nomenclature is under its third major revision, which is scheduled to go into effect January 1, 2007.

In the Overview section of "Proposed Modifications to the Harmonized Tariff Schedule of the United States," ITC stated that the investigation is required as part of the requirements section 1205 of the Omnibus Trade and Competitiveness Act of 1988.

"Section 1205 requires the Commission to keep the Harmonized Tariff Schedule of the United States (HTS) under continuous review and to recommend to the President modifications to the HTS in order to reflect amendments to the Harmonized Commodity Description and Coding System (the Harmonized System or HS) that are periodically recommended by the World Customs Organization (WCO), formally named the Customs Cooperation Council (CCC), for adoption, and as other circumstances warrant," ITC stated.

ITC stated that Section 1206 of the Omnibus Act authorizes the President to proclaim modifications to the HTSUS based on the ITC investigation, but requires that he can only proclaim the modifications after the expiration of a 60-legislative day (not calendar day) period, which begins on the date the President submits a report containing all modifications and their reasons to the Committee on Ways and Means in the U.S. House of Representatives and to the Committee on Finance in the U.S. Senate. If the 60-day period ends and the President signs an implementing proclamation, the proclamation must be published in the Federal Register and another 15-day period must pass before the HTSUS changes can take effect.

The Recommendations section of the ITC's proposed modifications investigation report explained that Section 1205(d) of the Omnibus Trade Act provides that ITC cannot recommend a modification to the U.S. tariff schedule unless the change:
"(1) is 'consistent with the Harmonized System Convention or any amendment thereto recommended for adoption;'
"(2) is 'consistent with sound nomenclature principles;' and
"(3) 'ensures substantial rate neutrality.'"
"Any modification that would change a rate of duty must be consequent to, or necessitated by, recommended nomenclature changes," ITC added. "Finally, the recommended modifications 'must not alter existing conditions of competition for the affected U.S. industry, labor, or trade.'"

"Proposed Modifications to the Harmonized Tariff Schedule of the United States" can be accessed on-line at: http://hotdocs.usitc.gov/docs/tata/hts/Pub3851.pdf