Tariffs have been in the news a lot lately, but most people don’t know how tariffs work.
Tariffs are based on the World Customs Organization’s (WCO) Harmonized Commodity Description and Coding System (HS). Harmonized codes (or tariffs) are binding and are used to clear goods at the border.
As tariff classifications can be complex, advance rulings can be made to ensure the correct classification number is used. The ruling is binding until it is revoked or amended.
An advance ruling provides certainty to the importer on the classification of goods and clearing them at the border.
An advanced ruling can be requested by an importer in Canada, a non-resident exporter, a non-resident producer of the goods in question, or a person who is authorized to account for the importer goods in question (e.g. a customs broker).
Once a request is made, Canada Border Services Agency (CBSA) has 120 days to issue a ruling. If additional information is required, CBSA will notify the importer in writing and the importer will have a period of 30 days to provide the required information.
Classifying a good
HS came into effect in 1988 and has since been developed and maintained by the Brussels-based WCO. There are more than 200 member countries in the WCO.
The HS is organized logically by economic activity or component material. For example, animals and animal products are found in one section of the HS, while machinery and mechanical appliances are found in another. The HS is organized into 21 sections, which are subdivided into 97 chapters. The 97 HS chapters are further subdivided into approximately 5,000 headings and subheadings. The HS code consists of six numbers.
For example, if one wanted to find the tariff classification for rice, the first section would be to identify it as being under Section 2-Vegetables Products; followed by Chapter 10-Cereals; then by heading 06-Rice; and Subheading 30-Semi-milled or wholly milled rice whether or not polished or glazed, thereby producing the tariff classification of 1006.30.
Disputing an advance ruling
Anyone who disagrees with the classification number has the right to dispute the ruling under section 60(2) of the Customs Act. When disputing a customs classification, one must write a letter that provides arguments to support the dispute, the letter must be sent within 90 days of the ruling, and the letter must be sent to the appropriate regional office..