I'm Tony Sargis with the U.S. Dept. of Commerce Commercial Service, Connecticut office, and we're holding webinars for manufacturing month in October, we've received a lot of feedback regarding the Trade Talk Tuesday series. You'll note that the sessions are kind of quick, so we're here for about 20 minutes. We'll address a few questions in the Q&A at the end of the presentation.
Our speaker today is Jill LaMadeleine, Vice President at International Tariff Management. Jill is a duty drawback and classification specialist. ITM has been in the industry for over 40 years, helping clients find the correct answer Schedule B number for their products. And that's what we're going to talk about today.
So the classification of goods process is extremely intricate and can be rather complex to navigate. Today, we will talk about some tools that are available to assist you during the process.
We hope you will gain some valuable insight into the world of customs tariffs. With all the supply chain challenges the world is facing, our aim is to maximize your duty drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.
I'm Tony Sargis with the U.S. Dept. of Commerce Commercial Service, Connecticut office, and we're holding webinars for manufacturing month in October, we've received a lot of feedback regarding the Trade Talk Tuesday series. You'll note that the sessions are kind of quick, so we're here for about 20 minutes. We'll address a few questions in the Q&A at the end of the presentation.
Our speaker today is Jill LaMadeleine, Vice President at International Tariff Management. Jill is a duty drawback and classification specialist. ITM has been in the industry for over 40 years, helping clients find the correct answer Schedule B number for their products. And that's what we're going to talk about today.
So the classification of goods process is extremely intricate and can be rather complex to navigate. Today, we will talk about some tools that are available to assist you during the process.
We hope you will gain some valuable insight into the world of customs tariffs. With all the supply chain challenges the world is facing, our aim is to maximize your duty drawback dollars and boost your bottom line. We hope you'll subscribe to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.
Welcome to The Duty Drawback podcast from International Tariff Management. Here at ITM, we help our clients secure refunds and reductions of duty burdens on imported and exported goods. With more than 40 years of classification, free trade and compliance experience, in each episode, we explore real life examples of how companies are taking full advantage of numerous programs in place for both importers and exporters, and how these little known programs can yield substantial returns to their bottom lines. If you're engaged in international trade, you can expect to learn actionable tips and strategies that you can implement in your business to become a more profitable importer and or exporter. Thanks for tuning in. Now let's dive into this month's episode. Good morning everyone. Welcome to trade talks Tuesday are part of manufacturing month. Just to note this webinar is being recorded. If you object, please disconnect at this time. I'm just going to cover down briefly on our trade Talk Tuesday series for Manufacturing Month and then we're going to begin today's presentation. So Trade Talk Tuesdays, the series, Our Office in Connecticut. Again, I'm Tony Sardis with the U.S. Commercial Service, Connecticut office we've been running for the last couple of years during manufacturing month in October, we've received a lot of feedback regarding the Trade Talk Tuesday series. You'll note that the sessions are kind of quick, so we're here for about 20 minutes. We'll address a couple handful of questions in the Q&A box at the end of the presentation. But the purpose of these sessions and the feedback we receive is to cover down on a topic fairly briefly and then go through it throughout the month. So we have five topics we're lucky enough for this October 2023 to have five Tuesdays this month. We're going to start with analyzing your product. We're going to go the following Tuesday with five finding your tariff rate, followed by product evaluation and then free trade agreements, qualifying your product and then free trade agreements documenting origin and covering down also on certificates of origin. So again, I'm Tony Sergeants with the U.S. Commercial Service in Connecticut. Our speaker today is Jill La madeleine vice president at International Tariff Management. I'm going to turn it over to her in one minute. Just a quick note before I turn it over to Jill. The Q&A box, you have two features here. You'll have the chat box if you'd like to send a direct chat, you can send that to us directly in the chat feature. Make sure you send it to all panelists or you can select our name directly. But we encourage you rather than that to use the Q&A feature. If you have a question regarding the content or questions you would like us to address towards the end of the presentation, Jill, we'll turn it over to you. Thank you again for for volunteering your time to present on this topic and we look forward to the content. Thank you. Right. Thanks, Tony. Thanks for having us. We're always happy to participate with you in these webinars. As Tony said, my name is Jill Madeleine. I am the vice president with International Tariff Management Item. There is a duty drawback and classification specialist. We've been in the industry for over 40 years. I personally have been with the company for almost 30 years and we specialize in multiple things. But one of the things we do participate in is classification and helping clients find the correct answer Schedule B number for their products. And that's what we're going to talk about today. So let me do that and classification of goods. So the classification process is extremely intricate and priors, an understanding of both the codes and the merchandise being classified. The process can be rather complex, but we will talk about some tools that are available and can assist you during the progression. Next slide. So what is NHTSA code? The harmonized system is a standardized numerical method of classifying traded products. It is used by customs authorities around the world to identify products when assessing duties and taxes and for gathering statistics. Every product that comes into the United States must be classified as a ten digit number, according to the Harmonized Tariff schedule of the United States or the U.S.. In order to properly classify an imported item, one must understand how to navigate the tsunami That includes over 10,000 classifications that are broken down by sections, chapters, headings and ultimately subheadings Subsequently. One must also understand what the product is, what it is used for, and how it is made for items that are not specifically provided for. The process is very complex and quite often mistakes are made. Next slide. So what is a schedule will be number. Schedule B numbers are ten digit statistical classification codes for all domestic and foreign goods that are being exported from the United States. The ten digit code is built upon the first six digits of the tax code. The last four digits define commodity detail and report statistics to the U.S. Census Bureau. The Schedule B code is a U.S. specific coding system used to monitor U.S. exports for export compliance and trade data collection. It is merely used for monitoring purposes, reporting of statistics, and does not assign duty rates. Just like the tax number, there is a schedule B number for every physical product from paperclips to airplanes. The Schedule B is administered by the U.S. Census Bureau's Foreign Trade Division, with over 9000 codes. Finding a Schedule B number can also be a complex process and overwhelming. While it's possible to use the tax code in place of the Schedule B code for export from the U.S., the reverse cannot be done. This means that Schedule B codes cannot be used in place of an agent's code for an import into the U.S.. Therefore, if you are a U.S. exporter, you should be more concerned with the Schedule B codes than the FTC's codes. Next slide. So why is incorrect import classification so important in that an inaccurate classification can cause an underpayment of duty which can result in a heavy burden of monetary penalties as well as an interruption of receipt of your merchandise. Conversely, an incorrect classification where too much duty is paid, is giving away money that could fall to your organization's bottom line. A lot goes into an accurate analysis and classification. A Commerce miss. A common misconception is that every item is accounted for in the U.S.. That is not the case. More often than not, an evaluation involves a significant knowledge of the product itself to determine where it belongs. A product may be designated in the HTC according to what it is, but it can also be defined according to how it is used. Many companies and trust their customs brokers to do this work, but the ultimate accountability falls on the actual importer to use the correct digit code. Import brokers have a general understanding of the harmonized Tariff schedule of the United States and classify thousands of separate items across hundreds of different industries. But they typically don't really know what the products are or how they are intended to be used. Next slide. So why is the correct schedule be determination so important? Well, while both codes are used for use in the U.S., only in classified goods being shipped, it is the shippers responsibility to know the difference, to provide the correct Schedule B code for the products being shipped. The Schedule B is maintained by the United States Census Bureau and is based on the 4 to 6 digit heading and subheading of the harmonized tariff schedule. The U.S. Census Bureau keeps records of the number of exports by country quantity and value in U.S. dollars. While the Schedule B does not affect the duty rate, it will dictate certain applicable sanctions and restrictions. Next slide. The classification process is extremely detailed and requires an understanding of both the figures as well as the merchandise being classified. The importer is obligated to properly classify imports even if there is no change in the duty rate. Therefore, in order to be compliant, it is imperative that importers exercise their due diligence to ensure that their items are properly assigned upon importation. We've been classifying merchandise according to the U.S. for over 35 years, and in doing so we have found that a lot of merchandise is not always classified correctly. One of the prime reasons for this is that things are not always what they appear to be. It is very important to manage the process with a dual prong approach, considering both the HTC as well as the product being classified on the import side. Understanding the HTC is vital. It includes over 10,000 classifications and more than 4500 paid product pages. I'm sorry, a product is not always specifically accounted for in the HTC US. More often than not, one will need to account for the composition, functions, function and purpose of a product in order to place it in the correct section. Chapter heading and ultimately subheading. Next slide. How to avoid classification mistakes using chapter notes that are included in the HTC and the explanatory notes are valuable and critical pieces to the puzzle. Each chapter in the HTC has detailed information on what should and should not be included in the applicable chapter. The explanatory notes are a supplemental index to the FTAs, and they are published by the Brussels Customs Cooperative Council. They are used internationally and explain some merchandise headings and classification criteria in more detail than the harmonized tariff schedule. Although they are not legally binding within the United States, Customs and Border Protection accepts their interpretation. They are a very useful tool in classifying merchandise and many brokers overlook them in classifying your merchandise. In addition, CBP reviews merchandise daily and writes hundreds, if not thousands of rulings as to the positions on how individual items should be classified. The cross Rulings Online Search System database is an important tool in reviewing other similar products that have been officially ruled, according to CBP. We can use this database to determine whether other exporters or importers requested a ruling on the same or a similar product. And if so, what that ruling was in regards to the classification. This can be used to review and determine schedule B numbers as well. Next slide. On the export side, assuming the imported HD as has been determined and is available, assigning the Schedule B is slightly more straightforward. The U.S. Census Bureau Schedule B search engine can be helpful in narrowing down which Schedule B number you report for your goods. This free, widely used online Schedule B search tool can help you classify your products. The site provides training resources to help you better identify your Schedule B number, as well as contact information for assistance. X-Line. So let's use an example to follow the process. The merchandise shown here is a porous tip pen. It appears to be a writing instrument and if so, would probably be classified. According to the HTC s under 9608 20 0000, which includes felt tipped and other porous tipped pens and markers with a duty rate of 4%. Next slide. Well, in this case, the item is not used for writing. It is a correction pen that contains an opaque white formula designed to cover ink made with titanium dioxide and some binders. After reviewing the tariff, one would find in Chapter 38, which contains chemical products, a note that specifically includes correcting fluid put up in packaging for resale. Further review of the explanatory notes would confirm that these fluids can be put up in the form of pens. Next slide. So the proper classification for this correction pen is 3824 9950 500 As a chemical product, who would ever guess what looks like a pen is not actually a pen, it's a chemical product. The slight difference in duty 3.7 versus 4% might not seem significant, but this importer, who happened to be our client, saved over $85,000 a year by making that classification correction. And so now that we have the correct classification, we can easily determine the schedule B number using the U.S. Census Bureau schedule B search engine. We can look up for FTEs 38, 24, 99, 5500. The options will show under that six digit base number. By reviewing the information, we would determine that the applicable schedule B number is 38, 24, 99, 55, 95. Next slide Importers should initiate periodic reviews of classification of merchandise. How individual items should be classified can change over time. You should review your classifications regularly in order to remain compliant and up to date. A specific item classified under one US code last year might have a totally different code today. And the most important thing is that when you're in doubt, you should seek the help of a professional. And that's it. That's it. That's the conclusion of the presentation. And awesome. Thank you, Joe, for that. Yeah. So we have a couple questions that came in. I also had a couple of questions regarding your contact. We lost the last slide unfortunately here, so I added your contact information in the chat as well as a couple of questions regarding resources that were asked. So I think I sent that to everyone, but we will follow up with an email in in response to this webinar this afternoon with a copy of the the slides, and we'll work on finalizing the recording as well, and then we'll send a couple of links for various resources as well as Jill's contact information and their website. So a couple of questions that came in. What are some training resources for companies that are looking to learn more about this topic? Any recommendations that you might have about resources out there. In terms of resource? Yeah, we we focus predominantly on tax codes and imports into the country and we've put out a bunch of webinars on those on our website. Those can be resources for anybody. But everything that I talked about in the presentation is available online. The explanatory notes, the chapter notes the harmonized tariff system. So you can really go in there and focus on it yourself and use the actual tools that that I talked about in the presentation. As far as the Schedule B numbers, the U.S. Census Bureau has provided a really good series of training articles and videos, and they have those right on their website as well, and they are very communicative. If you give them a call, if you reach out to them, they will personally help you through it. It's a little more complicated on the import side, Customs really doesn't want to help importers classify their products, but they're more resources on the export side for the Schedule B numbers. Absolutely. And we'll share those as well. I know that they have, you know, like their one 800 number with option two of a lot of clients that reach out and they've had good success getting a response and assistance. So that's good. Next question is, we talked to you talked a little bit. You had assignable incorrect codes in like just some of your experience with that. I mean, as a person that works in international trade, that does research for clients, I often see clients that'll send me incorrect codes and they want us to do export research. So, I mean, as far as how you've seen that unfold with folks that may work with a company in their hand, did these codes from a previous person, What are your recommendations on how often a company should reevaluate their codes? And that information. We tell people to do review them every year annually, make a time every once a year that you go through them and make sure nothing's changed according to the tariff or nothing's changed according to your product and have a running list and updated annually. Thank you. This is one pretty straightforward, but we did get the question regarding if a customer, a foreign customer asked you to should change your HDFC code or schedule B, what should you do and why would they ask you to do that as well? What are the reasons why somebody might ask you to change it from what you currently have that you feel like is inaccurate? Whether they're looking to manipulate the duty rates on their side or any sanctions that could apply as well. We advise clients to do your research and classify it the way that you can prove that you can substantiate. And and if there's a valid decision to be made between the two numbers, have somebody look at it and and, you know, customs understands that everybody is not experts. You need to do your due diligence. So you need to be able to substantiate the classification. You choose. Some. Thank you. One other question regarding, you know, I just came back from a trade show last week out in the West Coast regarding disasters. And we often run into clients that have a super innovative product. It's you know, they might say it's one of a kind. If they have a product that they think they can identify because it's so unique that there's nothing that lists their product in the, you know, heading subheadings chapters, What how do they move forward with a process like that generally? I mentioned in the presentation the cross rulings. So if you don't find anything similar to what you are working with in the in the ruling website, you can submit a ruling to Customs and ask them to tell you what the correct classification is, or you can present what you feel the correct classification is and allow them to agree with you or disagree with you so that you know that you're being compliant and you're bringing it in or sending it out the right way. All right. Very good. Thank you, Jill. That covers what we had in the chat. I'm just going to we'll give it a moment or two for any final questions. You can put them in the Q&A or chat. I'll cover down again. We want to thank Jill La madeleine International tariff manager, for joining us for the first session of Manufacturing Month. Again, the purpose of these presentations are to be kind of short and sweet and cover content within 20 to 30 minutes. Today we covered analyzing your product. We will send a follow up email with the details from today's webinar as well as resource links this afternoon and then moving forward for the remainder of this month. We have four more sessions as we have five Tuesdays in October with next week being finding your tariff rate. Last check, I'm going to do four questions here, Jill bore down on that question. That does it. So I am going to cut the recording. Jill, if you stay on with me for a line count. to our podcast to stay current with each new episode in which will unveil numerous ways to improve your international trade profitability. Thanks for listening.