Goods classification for importers: know what you're responsible for
As an importer, it’s easy to lose track of your responsibilities when it comes to classifying the goods you are importing. If you’re unclear on how to classify your goods, or even what you are responsible for on your end as an importer, it’s vital you grow your education on tariff classification. Without it, you could end up with all kinds of surprises—and not the good kind.
Know your responsibilities as an importer
Full disclosure: tariff classification and particularly the Harmonized System (HS) for coding goods can seem complex and at first blush, it certainly does not seem easy. Starting out by learning from our tariff classification overviews, as explained in our articles on the basics of tariff classification and the Harmonized System (HS), is a great way to begin.
But even before you dive in, it's worth pausing to ask yourself: As an importer, what am I responsible for?
If on answering the above question you realize that you don’t fully know what you’re responsible for, you’re not alone. Many importers do not know how their goods get to them and what the process involves. This creates confusion, especially when working with a customs broker who is assisting with classification. Another common mistake importers make is assuming that hiring a customs broker means we classify their goods for free—which we do not.
While it’s true that partnering with a skilled customs broker will help immensely when it comes to ensuring accurate classification of goods (and within that, navigating elements like the HS), our best advice to any importer is to educate yourself in order to get a stronger handle—and more autonomy, ultimately—on this topic.
Why do we emphasize this? Because without knowing your responsibilities as an importer, it’s possible you don’t realize that you are the liable party in the transaction.
So... what are you responsible for as an importer? Importers are responsible for correctly classifying and valuing goods being imported so CBSA can assess for duties, collect statistics and determine whether requirements such as special licensing and import permits are met at the time of customs clearance. This goes for exporting as well.
Educating yourself on your goods and how to classify them accurately will potentially help you avoid the following:
- CBSA audits
- AMPS penalties
- Loss of importing privileges
- Costly border delays
Further, not educating yourself here puts you at risk of making more assumptions. Do you expect your vendors to provide all the necessary product information when ordering? If so, your expectation will lead to disappointment, as this is not always the case.
Understanding why correct classification is important is the first step toward educating and empowering yourself so that you are not only aware of the amount of duties and taxes paid, but can then validate the accuracy of the classification of your goods, which may save money with your duties and taxes. This then allows you an even more competitive advantage in your market.
Where to start?
Beyond learning the basics of tariff classification in articles from our 101 series or our videos on the topic, one excellent habit to build early when it comes to goods classification is to find out as much information on your commodities as possible.
Here are some sample questions to use to kickstart your fact-finding: What are the products made from? What is their function? What do you use the item for? What is their trade name? Do you have pictures and other data sheets from your vendor?
The more information you have available on the goods being imported, the more you will assist yourself and your customs broker with proper HS classification, risk assessment, and determining if goods are admissible into Canada. Providing your customs broker with pre-documentation from vendors will give time for open discussions about the classification of the goods, whatever this may mean to you and your business. For example, any equipment that is considered “self-propelled” would have to have titles, spend 72 hours on the U.S. side set-up, require ITN numbers, and the list goes on. Without even one of the required pieces of information available at the time of shipping, as the importer, you are the one who will be at risk of any added duty. You will also be the one who suffers should the shipment be delayed at the border because of missing information.
In other words, the onus is on you as the importer to know what you’re responsible for so you can get your ducks in a row. Get started with these basic steps:
- When ordering, ask your vendors for a full description of all commodities ordered or website information that outlines name, materials, and functions. Have these goods been shipped internationally before?
- Ask your vendors if they have experience with international shipping and what information is needed on their documentation for customs clearance.
- If they can provide one, request an example of your vendors’ shipping documentation and invoicing so you can review it. If they have none to share, you will need to assist them by doing your own investigation or contacting your customs broker.
- Ask if your vendors supply USCMA certificates to qualify goods as duty-free (if supplied, this will help greatly to classify your goods, as this will also provide the first six digits of HS). As with everything in the world of customs, you should send any paperwork and certificates to your broker for review. The CBSA will only accept validated USMCA certificates for imported goods manufactured in the United States and Mexico.
Investing in education on this topic will always yield a return, especially if you are importing on a regular basis. At Cole, we strive to make this education available through different blog articles (like this guide to U.S. Customs for importers), as well as have our customs brokers treat each customer as “new,” regardless of how long they’ve been importing for. This way, working with us, you know that our knowledge—as well as your own—is continually refreshed—and you are on top of any changes in tariff classification the instant they occur.
It’s not just your knowledge that benefits from being refreshed on this topic. Being able to take a similarly “fresh” look at your goods is another element we commonly see in importers. Not seeing every order as a brand-new order leads to complacency. It is easy to believe that the same product you ordered even as little as two years ago will be classified the same way when ordering it now. But the reality is, products and industries are changing every year, month, week, day, and minute!
This is why CBSA updates the tariff classification book yearly. Changes may mean the goods you imported even one year ago are dutiable or classified in different sections and now require additional information or licensing to import. Ignoring classification changes could cost your business dearly. Why set yourself up for an unnecessary surprise here?
Best practices for goods classification
The good news is, if you invest in educating yourself on the ins and outs of goods classification, you can be proactive and avoid much of the stress that comes with not classifying goods properly. Here are some best practices to help you move forward with goods classification in a comprehensive way:
- Always forward copies of commercial invoices. This allows the customs brokers time to ask import customs questions or advise on any additional information that might be missing, i.e. licensing, permits, information not located on the invoice, etc.
- Be aware of your FTAs and USCMA/ CUSMA certification
- Be on the lookout for any other certifications the material may have (e.g. MSDS sheets, mill certs, etc.)
- Ask for pictures and product names from your vendors, along with in-depth production descriptions including use and functionality
- Seek to partner with a quality customs broker. An experienced customs broker will be highly beneficial in helping connect the dots and fill the gaps.
We’re here to help
At Cole International, our team of customs brokers is well-versed in the technicalities of goods classification. Never be caught off-guard when you partner with us.
We have an entire department dedicated to assisting our importers because of all the requirements needed. Our services range from assisting with finding item facts via Google search to contacting vendors directly. We help you investigate and get the information you need, whether it’s a USMCA/CUSMA certification, a customs ruling on a similar product, or whatever else we need to find in order to classify your goods properly. Simultaneously, we empower you to grow your education on the topic, as we have seen time and again how working with a trusted partner accelerates your learning process.
Be fully informed before your shipment reaches the border. Contact our customs brokerage team today.
Tariff classification. It's what we do.
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