Importers Should Prepare for Major Classification Changes Coming Jan. 1, Broker Says

Importers should be reviewing existing tariff classifications for their products and planning ahead for major changes to the tariff schedule that will take effect Jan. 1 when the U.S. implements 2022 changes to the global Harmonized System, Flexport’s Adam Dambrov said during a Sept. 15 webinar. Particularly affected by the changes are goods of chapters 44, 84 and 85, with some changes to chapter notes also resulting in changes for textiles and apparel.

In the pipeline for years (see 2101220042), changes to the Harmonized System will affect classification at the four- and six-digit level for participating countries worldwide. The greatest impact will be on goods of Chapter 85, said Marcus Eeman, customs manager at Flexport. Smartphones will be broken out into their own tariff provision under heading 8517, and classification changes will affect not only smartphones but also their accessories and component parts, Eeman said.

In Chapter 44, almost every four-digit heading has been affected, Eeman said. Not only is the definition of plywood changing, but also the way tropical woods are described, with an eye toward greater transparency. The U.S. currently distinguishes tropical woods at the 10-digit level, he said, so the concept will not be new for U.S. importers, but the tariff classification scheme will be different. The International Trade Commission recently put out a list of its recommended tariff schedule changes to implement with the Jan. 1, 2022, update (see 2105140030).

In Chapter 84, changes will affect classification of three-dimensional printers, which are called additive manufacturing machines in the tariff schedule. Other updates affect heading 8462 for industrial and steel processing machinery, and industrial robots were also given their own breakout in Chapter 84. A new heading in Chapter 88 will be created for drones under new heading 8806. Shiitake mushrooms will be given their own six-digit breakout, Eeman said.

Changes to chapter notes will have an outsize impact for textiles and apparel. Currently, women’s woven shirts with pockets at the bottom, such as scrubs, are classified in heading 6211, and receive a lower duty rate, but that is not the case for men’s shirts. That will change Jan. 1, with the relevant chapter note making men’s woven shirts with pockets at the bottom, currently classifiable in heading 6205, instead classifiable in heading 6211, Eeman said.

Likewise, a change to the chapter note governing classification of coated and laminated fabrics of heading 5903 is changing so that the lamination does not have to be visible to the naked eye to be classified in the heading, said Tom Gould, Flexport vice president-global customs. That means that apparel made from laminated fabrics with an invisible plastic layer will be classifiable in headings 6113 or 6210 for apparel made from fabrics of heading 5903, which in general carry lower duty rates than the relevant headings for apparel made from other fabrics.

The widespread changes to the tariff schedule will cause some uncertainty for importers around the Jan. 1 transition, Dambrov said. It still remains to be seen how the Office of the U.S. Trade Representative will handle the application of Section 301 tariffs and Section 301 exclusions for goods that are affected by the changes. Also affected will be tariff flagging, such as for goods subject to antidumping and countervailing duties. AD/CVD coverage is dictated by the written scope of an order, so whether a good is subject or not will not change, but the importer or broker may not see an AD/CVD flag in the Automated Broker Interface where there used to be one.

Importers should look at customs rulings they rely on to see if they are affected by the classification changes, and if they are importers may want to seek modification of the relevant ruling to make sure it still applies. Importers may also want to consider whether changing classifications could result in either duty savings, in which case they may want to wait to import a good until after Jan. 1, or cost them more in duties, in which case they should import more before that date, Dambrov said.