Harmonized Tariff Schedule (HTS) is an international goods classification system that is designed for worldwide customs use. The U.S. defines products using ten digit HTS codes. In order to import merchandise in a timely manner and to comply with relevant laws and regulations, it is indispensable to use reasonable care in classifying the merchandise with the appropriate Tariff number. Chapter 98 belongs to special classification provisions which are reserved for national use. The main attributes of using Chapter 98 classification are based on classification IDs, value of the goods and country of origin.
Chapter 98 provides following two special provisions during goods classification:
U.S. goods returned not advanced or improved (9801)
The HTS 9801 provision covers situations where U.S. goods are exported, used abroad and where U.S. goods are returned temporarily to the U.S. for repair or alteration. To make use of this provision it is mandatory to have USA as the country of origin for the merchandise as well as merchandise previously exported from the U.S. Also the merchandise should neither have advanced in value nor improved in condition while outside of the USA. For example if we export faucet from USA to China and the customer see the faucet in a worse condition (rusted and broken) then goods are returned from China to USA and this shipment would qualify for a 9801 provision since it satisfies all the conditions under 9801 provision.
Goods with components of U.S. origin (9802)
Under 9802 provision allows U.S. importers to deduct the value of the U.S. components from the total customs value if the goods are assembled abroad consisting of U.S. components. The U.S. components are entered duty free while the remaining value of the article is entered under the duty rate associated with the classification of the imported merchandise. Customs defines “assembly operations” as fitting or joining together of fabricated components by any methods such as soldering, welding, gluing and laminating. Mixing of gases, liquids, chemicals, amorphous solids are not considered an assembly operation. To make use of this provision it is mandatory to merchandise exported from U.S. in a condition ready for assembly, maintain their physical identity and merchandise should neither have advanced in value nor improved in condition except that it is being assembled while outside of the USA. Utmost care to be taken in understanding nature of the “assembly operations” before deciding it falls under 9802 provision.
SAP GTS allows Import filing of goods with special classification provisions through standard configuration as well as enhancing the system according to business requirements. Here are some of the best practices that are followed in SAP GTS:
- Classify products with multiple HTS numbers through end use functionality for merchandise subjected to special classification provision (9801/9802)
- Entry summary form [CF 7501] is enhanced to show both primary HTS and secondary HTS when the merchandise is subjected to special classification provision (Chapter 98)
- Entry summary form [CF 7501] is enhanced to show both Invoice retail value (fair market value) as well as repair value; any price that is maintained in feeder system is brought over to GTS through integration of systems
- GTS generating trade forms like Country of Origin, Entry summary and Commercial Invoice to declare to customs authorities