The Harmonized Tariff Schedule (HTS) was developed by the Congress on January 1, 1989 for the purpose of replacing previous tariffs. The World Customs Organization (‘WCO’) was responsible for its subsequent implementation. The WCO uses the Harmonized Commodity Description and Coding System (HS) to assign codes to commodities. The HTS builds on this system and uses these existing codes to develop unique identifiers for each commodity category. This facilitates assigning a given shipment to specific categories. As a result, importers can easily verify the duty and tariff that apply to a shipment.
Why Use HTS?
Irrespective of the preferences of shippers, the HTS augments the assessment and subsequent duty collection on imports. The HTS uses the HS which is what the majority of countries use in international trade, as a result of which it is ensured that all involved parties are making the necessary payments to each CBP.
As an example, the primary focus of the HTS is US imports compared to the HS which ensures an adequate assessment of the tariffs and duties of exports. HTS and HS work to prevent criminal trade activities.
Why Is HTS Important?
Compliance becomes problematic for shippers. Importers who try to avoid the HTS are subjected to added inspection, penalties, assessment of fines or other mitigations as punishment. The punishment could involve a ban on importing and an increase in the frequency of audits of the given importer.
The HTS ensures a level playing field for all importers. If a company does not correctly assess the relevant duties, in accordance with the HTS, it can import the goods without properly paying the CBP. This is subsequently interpreted as smuggling. The company would then be able to sell goods at significantly lower rates compared to its competitors.
In supply chains at a global level, complete visibility and compliance are primary concerns for all involved parties. Moreover, visibility is something that affects the perception of a company by the public. Therefore, a poor perception ultimately results in a company falling out of the public’s favor. Organizations not using the HTS are usually distrusted by the general public, which affects the overall demand for that organization’s products.
The HTS also augments the productivity of an importer. The product IDs from the HTS are unique identifiers which make the process of assessing duties and tariffs simpler and quicker. Therefore the importer can then invest more time in transporting the importing rather than wait for the assessment by the CBP.
The Harmonized Tariff Schedule is crucial to ensuring that tariffs for American imports are accurately and fairly processed. From ensuring international trade compliance to increasing productivity, the benefits that come with the HTS far outweigh the costs of following it. However, it should be noted that the CBP is the final arbiter in determining the appropriate duty rate for a given consignment of goods; the HTS merely provides a mechanism that simplifies the process.