Harmonized Tariff Schedule of the United States (HTSUS)
the primary system used to determine the classification of incoming goods for taxes.
How Harmonized Tariff Schedule of the United States Works
The Harmonized Tariff Schedule of the United States (HTSUS) is critical in determining tariffs on imported goods into the United States. This classification system analyzes goods during the importation process and assigns a tax that the importer is then responsible for.
The HTSUS is split into sections and chapters that detail different types of products. These products are broken down into categories and individual products. Any incoming good is subject to this process, and all incoming goods will be taxed according to this scale.
Internally, the department of Customs and Border Protection leads the process of importing and categorizing goods. In the United States, Customs and Border Protection is the only government agency that can create legal rulings on the classification of goods. While the responsibility falls on the importer to ensure that the classifications made are correct, to correct any errors, and pay the duty, Customs and Border Protection is the only office that enforces these laws.
Example of Harmonized Tariff Schedule of the United States
The Johnson Corporation needed to import a large shipment of raw materials. After conducting some research, they found overseas vendors for rubber, iron, and steel. Once the Johnson Corporation placed their order, each overseas company shipped the materials via a boat.
Once each boat landed at a United States port, officials inspected ships. Upon inspection, each commodity was categorized, counted, and analyzed. Once the inspector had determined the shipment contents, they placed a tariff, based on the Harmonized Tariff Schedule, on every good entering the country.
Once the shipment was officially allowed to enter the United States, the Johnson Corporation received an invoice for all goods and taxes. The Johnson Corporation then paid the seller of the goods and the United States tariff. After finalizing all payments, the Johnson Corporation received all raw materials to begin the production of goods.
Significance of Harmonized Tariff Schedule of the United States
The HTSUS is important in many ways. Without an organized system of classification, countries would not correctly tax the scope of goods coming across the border. This system of categorization encompasses any and all goods that a company can import into the country.
In the Tariff Schedule, the guide contains categories, which then list individual items. Each good is assigned a number from the chapter to identify it easily and clearly. This creates reliable and consistent categorization for any country that places a tariff on a good. Without this system, the United States Government could lose a significant portion of its income to inaccurate taxation.
The United States bases the tariff schedule on a global list of the same premise. The majority of nations follow this classification in some way. This creates a cohesive global trading structure. Most nations base their own coding guide for imported goods on the International Harmonized System. The World Customs Organization upholds this system.