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U.S. Updates Tariff Classifications For 2007

August 4, 2006

Big changes in tariff numbers are in store for importers and brokers for 2007. While the official tariff for 2007 with these changes has not yet been published, you can get a head start in knowing how these changes are going to effect products you import in 2007. This newsletter will focus on proposed tariff number changes in the area of chapters 84 and 85 effecting computer products, semiconductor manufacturing and assembly equipment, and integrated circuits.

Why Change The Tariff?

The U.S. tariff schedules is a living document. Changes are made throughout the year as Congress enacts trade legislation or the President implements proclamations that effect specific provisions and/or trade preference programs. The U.S. tariff schedules is also based on an international tariff nomenclature, which is maintained and updated by the World Customs Organization (the WCO). Over 190 countries around the world participate in the WCO's Harmonized Classification and Coding System (which is simply referred to as the Harmonized System or HS) and implement tariff systems in their home country based on the WCO version. For more information on the WCO and the HS, go to http://www.wcoomd.org/en/topics.aspx. To ensure that the HS remains relevant to today's world, sections, chapters and headings of the HS undergo review and revision at the WCO. At established intervals these changes are published and all participating countries are expected to implement these changes. As a general rule implementation of changes is to be duty or revenue neutral. The last major WCO HS update was in 2002. This current update reflects negotiated revisions to the HS that have occurred since then.

Implementation Date And Effect Of Changes

The WCO changes, as well as changes the U.S. wishes to make that do not otherwise effect its obligations to follow the WCO HS, are scheduled for implementation on January 1, 2007. Imports occurring as of this date that do not carry the new numbers are typically rejected and will need to be refiled after the new HTS number is determined. Importers and brokers are, therefore, advised to review these changes and understand how they will affect their products well in advance of the implementation date.

How Can I Find Changes That Effect The Products We Import?

The list of proposed changes to the U.S. Harmonized Tariff Schedules as a result of changes in the international Harmonized System (HS) nomenclature, with explanations, is found in the Appendix B. (The chapter headings and subheadings have been bookmarked to provide easy reference to the proposed changes.) A conversion table from current HTS numbers to new HTS numbers is also provided as Appendix D.

The United States International Trade Commission publishes the U.S. tariff schedules and any conforming changes. General information on changes to the U.S. HTS can be found at http://www.usitc.gov/tata/hts/index.htm. You can also obtain a subscription to the HTS through the Government Printing Office by going to www.gpo.gov.

Proposed Tariff Classification Changes For Chapter 84
Treatment of Printers, Networking Apparatus And Monitors

There are numerous changes to both Note 5 to chapter 84 and to the scope of products covered by heading 8471. Chapter 84, Note D clarifies that printers, copying machines, and facsimile machines, whether or not combined, when separately presented, are not classified under heading 8471. When separately presented, these articles will be classified under heading 8443, along with their parts and accessories.

Often, networked equipment can meet the requirements of Legal Note 5(B)(b) and 5(B)(c) to chapter 84. They are connectable to the central processing unit either directly or through one or more other units; and they are able to accept or deliver data in a form (codes or signals), which can be used by the system. Classification determinations often turn on whether networked equipment meets the terms of Legal Note 5(B)(a) to chapter 84, HTSUS. That is, CBP must determine whether the networked equipment is of a kind solely or principally used in an ADP system. Such a determination is consistent with CBP rulings on various networking equipment, including HQ 965047, dated June 19, 2002, HQ 963250, dated July 23, 2001, and HQ 963234, dated July 23, 2001. Under the 2007 changes, all apparatus for communicating in a wired or wireless network when separately presented are excluded from classification under heading 8471, even though they otherwise meet the conditions of note 5(c) to chapter 84. Such apparatus will be classified under 8517. In 2007, Heading 8517 will provide for:

Telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, including apparatus for communication in a wired or wireless network (such as a local or wide area network), other than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528; parts thereof:

Finally, computer monitors and digital projection devices, if separately presented, are excluded from classification under heading 8471, even though they otherwise meet the conditions of note 5(c) to chapter 84. Such apparatus will be classified under heading 8528. In 2007, Heading 8528 will provide for:

Monitors and projectors, not incorporating television reception apparatus; reception apparatus for television, whether or not incorporating radio-broadcast receivers or sound or video recording or reproducing apparatus

Tariff Classification Changes For Semiconductor Manufacturing Equipment For 2007

Another significant change will occur in the classification of machines and equipment for the manufacture and assembly of semiconductors and integrated circuits, flat panel displays and related handling equipment. Currently, these articles have different tariff classifications, depending on their individual functions. New heading 8486 brings all of these articles together under a single heading:

Machines and apparatus of a kind used solely or principally for the manufacture of semiconductor boules or wafers, semiconductor devices, electronic integrated circuits or flat panel displays; machines and apparatus specified in Note 9(C) to this Chapter; parts and accessories:

New note 9(D) provides that machines and apparatus answering to the description of the heading 8486 are to be classified in this heading and nowhere else.

Tariff Classification Changes For Integrated Circuits For 2007

Products that are currently classified under USHTS heading 8542 and certain multichip integrated circuits classified under 8543 undergo significant changes as a result of a collapsing of many unused and outdated subheadings and statistical line items. Additionally, the language of Heading 8542 has been changed so that it now encompasses multichip packaged integrated circuits, which were previously classified under heading 8543 because they were not monolithic integrated circuits. New Chapter Note 8(b)(iii) was added to clarify that multichip integrated circuits are now included in Heading 8542. Following is a summary of the changes to heading 8542:

  • Processors and controllers, whether or not combined with memories, converters, logic circuits, amplifiers, clock and timing circuits, or other circuits will be classified under 8542.31.
  • Memory devices will be classified under subheading 8542.32
  • Amplifier circuits will be classified under subheading 8542.33
  • All other integrated circuits will be classified under subheading 8542.90

There is no longer a distinction between digital, analog and mix signal type devices. No subheading statistical breakouts exist except for multichip devices in each of the above subheadings.

The new changes to the tariff are many and far reaching. It will take time for companies to fully understand both the scope and effect of these changes. So, before its too late, take a look and see what tariff changes may be in store for you.   

If you would like more information on how these changes may affect your company, or assistance in classifying or reclassifying product, please contact us at (415) 986-8780 or via email.

The information in this article is general in nature, and is not intended to constitute legal advice or to create an attorney-client relationship with respect to any event or occurrence, and may not be considered as such.

Copyright 2006 by Tuttle Law Offices.

All rights reserved. Information has been obtained from sources believed to be reliable. However, because of the possibility of human or mechanical error by our offices or by others, we do not guarantee the accuracy, adequacy, or completeness of any information and are not responsible for any errors, omissions, or for the results obtained from the use of such information.

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