Customs Classification and Advance Ruling Programme

Zhaokang Jiang
Sandler, Travis & Rosenberg
[email protected]

Customs classification
Classification is initially the responsibility of an importer, customs broker or other person preparing the entry documents. The movement of merchandise in international trade, however, would be very slow and costly if the merchandise had to be classified under differing tariff systems of various countries. Under the auspices of an international body known as the Customs Cooperation Council (now known as the “World Customs Organization” or simply the WCO), on January 1 1988, all this was resolved with the entry into force of the International Convention on the Harmonized Commodity Description and Coding System to which the HarmonizedSystem with the General Rules of Interpretation, legal notes is appended as an annex. Most Asian countries and regions, including China, are the signatories of the Convention.
At the international level, the Harmonized System consists of approximately 5,000 descriptions which appear as headings and subheadings. These descriptions are arranged into 97 chapters grouped into 21 sections, which deal separately with merchandise in broad product categories. These categories cover animal products, vegetable products, products of various basic materials such as wood, textiles, plastics, rubber, and steel and other metal products in various stages of manufacture, chemicals, machinery and electrical equipment, and other specified or non enumerated products. The last section, Section XXII, covers certain exceptions from duty and special statutory provisions. Coding beyond the six-digit level is usually at the eight-digit level and is generally referred to as the “national level”, and the 10-digit level is for trade statistics purpose.
There are six General Rules of Interpretation (GRIs). Rules one to four are related and must be applied in sequence, Rules five and six stand on their own and are to be applied as needed.

RULE 1: The 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 according to the following provisions.
RULE 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 presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented 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.

RULE 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.

RULE 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.

RULE 5: In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to therein: (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This Rule does not, however, apply to containers which give the whole its essential character; (b) Subject to the provisions of Rule 5 (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision does not apply when such packing materials or packing containers are clearly suitable for repetitive use.

RULE 6: For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and mutatis mutandis, to the above Rules, on the understanding that only subheadings at the same level are comparable. For the purpose of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.”

The GRIs provide that goods must first be classified by heading level, and only after the appropriate heading has been determined,
then by equal subheading levels (by six-digit international levels) within that heading. When considering the appropriate
classification at a particular subheading level, no consideration should be given to any of the terms of any lower-level subheading.
This step-by-step analysis applies without exception throughout the Harmonized System (and throughout any national subheading levels as found in a particular country's Harmonized System-based tariff system).

Advance ruling programme
With the support of WTO, WCO and APEC, to encourage informed trade compliance by the government and the trade community, the customs administrations in Asia, including China Customs, have adopted advance customs classification decision and ruling programmes by which the importers may request customs classification binding decisions or rulings in advance to ensure compliance and cost-saving. The traders in this region should take advantage of the benefits from the compliance and efficiency effect of the advance ruling programmes.