--- title: "Classification 101" description: "Decode the details of classification. Learn what all those digits mean and why they matter for your supply chain." language: en canonical: https://www.flex.thisisbrew.com/flexu/classification-101/ lifecycle: live --- # Classification 101 ## 1. Breaking Down HS Codes (2:26) \[MUSIC PLAYING\] BENY SIRKIN: What is classification anyway? Classification is assigning goods on numeric code, which allows customs authorities in all countries to identify what types of products are being traded. These are used for the purposes of collecting duties, safeguarding their economies, and ultimately protecting the citizens in their borders. These numeric codes are found in the harmonized system. Today the harmonized system is the universally adopted numeric system for classification that is used to classify any and all merchandise. Classifications will generally differ from country to country as most countries have their own schedules, but in most cases, they will have the first six digits in common. As you can probably imagine, the harmonized system is quite comprehensive. It consists of 99 chapters, which are grouped by goods that are in common, which equates to 21 sections of merchandise. In this session, we will focus on the HTSUS, or the Harmonized Tariff Schedule of the United States, to help you understand how to classify your products. When talking about the HTSUS, all merchandise will be classified under a 10 digit code so that the United States Customs authority, known as CBP, can identify what is being shipped and how it must be imported. Let's take this HTS code for baby sunsuits as an example. The first two digits of the HTS code refer to the chapter and the first four refer to the heading. The first six digits are referred to as subheadings. After the subheading, the number of additional digits varies by country. The US has two additional suffix levels resulting in a 10-digit code. The heading and subheading column, the leftmost column on the tariff pages of the HTS schedule, will have anywhere from four to eight digits that correspond with an article description. The last two digits will be in the second column, or the statistic suffix column. The fourth column, unit of quantity, represents how the imported goods is declared to customs. For instance, most foods are declared in kilograms, most fabrics are declared in meters squared, and commercial goods are by quantity. Developing and presenting a correct HS classification to customs in any country is extremely important to the importer to determine duties that the importer might pay. When an importer does not properly classify a product, even if they do so mistakenly, the importer can face serious legal penalties or even seizure of goods. ## 2. General Rules of Interpretation (1:47) NARRATOR: Determining an HTS code can be a very difficult concept to master. So let's discuss the steps to arrive at the correct code. First, we will take a look at the General Rules of Interpretation, or GRIs. There are six GRIs that globally govern classification under the harmonized system. In the US, they are found on the first page of the HTS US. The GRIs can be a little confusing, and the language is complex so let's break it down to make it a bit easier. GRI 1 takes precedence over the remaining rules. It states that classification is determined first according to the terms of the headings and any relative section or chapter notes. Whether you're classifying goods that are extremely simple-- think coconuts-- or extremely specific-- think diodes-- you'll first look into the headings section and chapter notes for terms that describe the good. If those terms are not sufficiently specific or complete to classify, you'll move on to GRI 2. GRI 2 has two points. GRI 2a refers to incomplete articles, for instance, an unpainted statue. The rule classifies the incomplete or unfinished statue as if it were the final statue because it would be identifiable as a statue even when unpainted. 2a also applies to disassembled goods. GRI 2b applies to goods made of more than one material, like a cup of plastic and metal. If one material imparts the character of the cup, 2b applies. If that cup is equal parts plastic and metal and looks like it may be classified under more than one heading, GRI 3 will be your next step. ## 3. Choosing the Right Heading (2:19) \[MUSICAL TONES\] NARRATOR: GRI3 applies to goods that appear to be classifiable under two or more headings. Goods are classified based on three criteria taken in order. Let's dig into the hierarchy. First, GRI2a provides that goods should be classified in the heading that provides the most specific and complete description. For example, although hair clippers are described by the heading for electro-mechanical domestic appliances 8509, chapter 85, heading 09, according to GRI3a, they are classified under more specific headings for hair clippers with electric motors, 8510. With that said, there are cases where GRI3a does not work as some goods could potentially fall under more than one heading. Queue GRI3b. GRI3b addresses mixed and composite goods, as well as sets put up for retail sale. Let's walk through each. Mixed goods consist of two or more ingredients in equal amounts. Composite goods have more than one component located in the same housing, each of which could potentially be classified in a different heading. But no exact classification is provided for the composite good as a whole. Lastly, sets put up for retail sale. An example of a set would be a pre-made pasta kit. For all of these examples, you would need to determine the ingredient, material, or article that presents the essential character. Let's take a pasta kit, for example. We have ravioli, sauce, and Parmesan cheese. Are you buying the set for the Parmesan cheese or the sauce? Probably not. You are most likely buying it for the ravioli, the essential character here. So the goods will be classified under the ravioli. Where more than one classification could equally apply to a product and either 3a or 3b apply, GRI3c provides that the good will be classified under the heading that occurs last in numerical order. Take for example stationery sets. These items would all be used together, but there is no real essential character. In this case, they would be classified by the item which falls last in the tariff schedule. Here, it would be the ballpoint pens in chapter 96. ## 4. Wrapping Up With GRIs (1:07) NARRATOR: GRI 4 is kind of a last resort rule that should only be applied infrequently and if necessary. The rule generally applies to new products that don't fall anywhere nicely in the tariff. These goods are classified with the goods to which they are most akin. GRI 5 explains how to classify containers. GRI 5a deals with long-term use containers imported with the articles that they are intended to contain, like instrument cases with instruments. The rule provides that the instrument case will be classified with the instrument GRI 5b provides that disposable, one-time use packaging is classified with the articles that they package. For example, a wine bottle will be classified with the wine itself. GRI 6 is the final GRI and extends the application of the hierarchy from GRI's 1 through 5 to the subheading level. This is how GRI's apply beyond the headings to determine the full 10-digit tariff classification. --- *This is a markdown version of [https://www.flex.thisisbrew.com/flexu/classification-101/](https://www.flex.thisisbrew.com/flexu/classification-101/) for AI/LLM consumption.*