HTS Classification – Do Your Homework!

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Many private label sellers and manufacturers of imported goods are unaware, but all need to be very aware, of HTS (Harmonized Tariff Schedule) classification and what it means to your bottom line.

Would you spend $30 to ensure that your new product is classified correctly for import to the US? What if I told you that failing to obtain proper classification could result in hundreds of dollars per day in storage fees, while the classification (and testing) of your product takes place? And that the worst-case scenario would be that your entire shipment is seized, destroyed, and your name as an importer is subsequently watch listed?

Your HTS classification is the one-stop shop for knowing what governing bodies will be scrutinizing your shipment once it reaches US shores, and thusly what taxes and import fees you will be subject to. It is very important that it be done early and it be done right. Don’t know your HTS code? Then you don’t really know what your profit margins are going to be. Scary? Yes, it could be!

In terms of peace of mind, $30 is a small price to pay.

Take for instance a recent client who contracted with Cascadia to assist with the importation of his already-manufactured goods, after his whole container was seized by the FDA (Food & Drug Administration) for inspection. To make a long story short, he did not have a correct HTS classification, and it was a very stressful waiting game while the FDA did what they had to do to satisfy their own requirements. Which included inspection of his entire shipment, and actual product testing to ensure that the FDA’s I’s were dotted and T’s crossed. It set back his schedule for product launch, and caused him to almost give up on the whole shipment. Luckily, right as he was about to just throw in the towel and start all over, the FDA came back and said his product passed muster and was fine to enter the US unobstructed. That was a close one!

A proper HTS classification takes anywhere from just 2-15 minutes, and can be done as early as the product development stages. Had the above client reached out to me first, this would have been part of the process at the very beginning. I review the claims, the product specifications, and provide the HTS code with duty rate up front for the client to review. And then the shipment and paperwork would have been done right! No waiting game, no surprises. An FDA inspection is a whole lot less stressful when you’re prepared for their questions. When you’re not prepared, losing a night of sleep or stress-eating a pint of Ben and Jerry’s becomes the least of your worries!

And it’s not just the FDA that the classification helps you prepare for… the classification tells you exactly which government body will have eyes on your product when it reaches the US. For example, let’s say you are manufacturing and importing a radio controlled toy racecar. The FCC (Federal Communications Commission) will expect that you have met their regulations and can provide the documentation to support that. The FDA probably will not have any jurisdiction over your racecar… but you don’t really know until your classification is complete. And correct.

What is the profit margin on the item you’re manufacturing, and do you know your HTS code? If your answer to that second part is “no”, then you don’t really know what your profit margin is either, because you don’t know what your import fees are actually going to be, without proper classification.

Don’t get caught with your pants down! Regulatory requirements and profit margin are two areas you definitely want to be crystal clear on by the time your item goes into production. We can help with all of this and more, so you don’t ever feel like you’re alone in the sometimes overwhelming world of product development. I have been in the field of international logistics and trade for many years, and have the experience you need to ensure that you never find yourself in a regulatory pinch.

Have a product you’re considering bringing to market? Reach out, we’d love to hear from you!

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