Continuing our series on General Rules of Interpretation, here are rules 3 and 4 from the HTUS, Harmonized Tariff of the United States. Rule 3 pertains to goods which are classifiable under two or more headings. Rule 4 is used when goods cannot be classified under rules 1-3. Contact mitch@52.91.45.227 for help with regulations.

3. When, by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to headings providing a more general description.However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

4. Goods which cannot be classified in accordance with the above rules shall be classified under the heading appropriate to the goods to which they are most akin.

In previous posts we have discussed how to classify commodities using the Harmonized Tariff System. In order to use the tariff it is important to understand the General Rules of Interpretation which are found at the beginning of the publication. There are 6 General Rules plus some additional rules. Here are the first two rules as shown in the HTUS (Harmonized Tariff Schedule of the United States). Look for the rest of the rules in future posts. Contact mitch@52.91.45.227 for help with regulatory questions.

GENERAL RULES OF INTERPRETATION

Classification of goods in the tariff schedule shall be governed by the following principles:

1. The table of contents, alphabetical index, and titles of sections, chapters and sub-chapters are provided for ease of reference only;

for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter

notes and, provided such headings or notes do not otherwise require, according to the following provisions:

2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided

that, as entered, the incomplete or unfinished article has the essential character of the complete or finished article. It shall

also include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this

rule), entered unassembled or disassembled.

(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of

that material or substance with other materials or substances. Any reference to goods of a given material or substance shall

be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of

goods consisting of more than one material or substance shall be according to the principles of rule 3.

In previous posts I have written about the importance of proper commodity classification and how to determine ECCN. The next step in export compliance is checking for license requirements based on country of ultimate destination. Here is some info from the BIS website. Don’t automatically assume NLR No License Required is accurate for your exports.

Contact mitch@52.91.45.227 for help with export compliance.

Country Guidance

The country of ultimate destination is a key factor in determining license requirements administered by the Bureau of Industry and Security (BIS) pursuant to the Export Administration Regulations (EAR). BIS maintains the Commerce Country Chart to use in conjunction with other portions of the EAR to determine whether a license is required.  Please review Part 732 of the EAR for additional information on how to use the EAR, including the Commerce Country Chart.

Exporters, do you know how to determine your ECCN? While it is true that the majority of exports can be designated EAR 99 and NLR (No License Required), it is important to first check for an ECCN. Here is some info from the BIS (Bureau of Industry and Security) website.

Contact mitch@52.91.45.227 for help with exports

Export Control Classification Number (ECCN)

A key in determining whether an export license is needed from the Department of Commerce is finding out if the item you intend to export has a specific Export Control Classification Number (ECCN). ECCNs are five character alpha-numeric designations used on the Commerce Control List (CCL) to identify dual-use items for export control purposes.  An ECCN categorizes items based on the nature of the product, i.e. type of commodity, software, or technology and its respective technical parameters.

An ECCN is different from a Schedule B number, which is used by the Bureau of Census to collect trade statistics. It is also different from the Harmonized Tariff System Nomenclature, which is used to determine import duties.

Here is a good tool for simplifying export compliance. The Consolidated Screening Tool can be found on the BIS (Bureau of Industry and Security) website  under the Export Management and Compliance tab. This tool allows exporters to screen 11 lists in one search including: Denied Persons List (DPL), Unverified List (UVL), and Entity List (EL) as well as all other lists needed for screening.

contact mitch@adhoclogistics for help with export compliance

Have you used the new consolidated screening tool?
Screen eleven lists in one search

In previous posts I have written about export compliance as good risk management. If your company has implemented a  formal Export Management Compliance Program you have reduced risk. However, even if you have not implemented an EMCP, it is still good business practice to take some basic steps which can help reduce the risk of non compliance.  To get started I suggest the following:

• Review and confirm correct Harmonized and Schedule B codes
• Check CCL Commodity Control List to see if your product is listed
• Check EAR regulations for correct exception codes and license or NLR designations
• If exporting under ITAR you need a responsible trained officer
• Check common “Red Flags” such as denied parties lists, entities lists, and unverified lists
• Review export documentation for possible improvements

For help with export compliance contact mitch@52.91.45.227