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General Rules of Interpretation – Customs Tariff – Harmonized System

 

The GRI’s instruct users to a single classification number that is appropriate for each  product – they explain how to classify.
There are 6 GRI’s, and they must be applied systematically in order.

 

GRI rule 1
If a commodity is specifically named in a heading, you must use that heading in order to classify your good.   
         GRI 1 has precedence
         Rules 2 through 4 apply ONLY if goods cannot be classified by the application of GRI 1

 

GRI rule 2(a)
Use rule 2(a) to classify incomplete/unfinished and unassembled/disassembled goods.
They must have the essential character of the complete or finished article. E.g.
“Blanks” are considered an article not ready for direct use, having the approximate shape or outline of the finished article or part, and which can be used only for completion into the finished article or part.

 

GRI rule 2(b)
The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3.
Therefore, if you have a mixture or combination immediately go to GRI 3.
An example of when to apply GRI 2(b) would be Grass Seed of heading 12.09 that was treated with a fast grow fertilizer.

 

GRI rule 3
Resolves the potential for classification disputes or gridlock when you have a commodity that can be classified under two or more headings of the HS. By applying the principles governing GRI 3 the matter can be resolved in three ways – by:
            3 (a)  Employing the most specific description
            3 (b)  Classifying according to essential character
            3 (c)  Using the last heading in numerical order

 

The criteria must be applied in the order presented

 

GRI rule 3(a) – more specific heading
         Applied to goods which are not multifunctional nor composed of more than one material or substance, when the goods are classifiable under two or more headings
         Gives priority to the heading with the more/most specific description
Example – classification of electric shavers
85.09         Electro-mechanical domestic appliances, with self-contained motor
85.10                  Shavers and hair clippers, with self-contained electric motors
85.10 would be correct as the most specific.

 

GRI Rule 3(b) – Essential Character
Applied if:
    1. More than one heading could apply
    2. The headings are equally specific; and
    3. The goods are:
         a mixture,
         composed of different materials,
         made up of different components, or
         presented in sets put up for retail sale.
Essential character is subjective. It may be based on, for example:
         the nature of the material or components
         their volume, quantity, weight, quality, & value
         their relative importance with regard to end use
        Legal notes
Example – Where would you classify a Pre-packaged spaghetti dinner if it consisted of the following?
         A package of uncooked spaghetti (heading 19.02)
         A pouch of grated cheese (heading 04.06)
         And a can of tomato sauce (heading 21.03)
Answer: The essential character of Pre-packaged spaghetti dinner would be derived from the package of uncooked spaghetti, of heading 19.02
Exception to GRI 3(b) – Gift baskets or boxes that contain a variety of products.
If any one of these commodities falls under the TRQ regime, such as: cheese or cheese products, wheat or barley products, GRI 3(b) will not apply, and every product identified in the basket or box will have to be rated & classified under their own respective headings. 
*A common mistake is to assume a set must be classified using essential character, GRI 3(b), however, some sets are provided for in the terms of the heading and therefore GRI 1 would apply.
Example : Tariff item 8206.00   Provides for Tools put up in sets for retail sale
Example : Tariff item 8215.20.10 provides for “Other sets of assorted articles

 

GRI Rule 3(c) – Last Heading
When goods cannot be classified by reference to Rule 3 (a) or 3 (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.
         Applied when classification cannot be resolved by GRI 3(a) or 3(b)
         Simply gives priority to the heading
last in numerical order
         Reflects the general structure of the Nomenclature (i.e., advancing complexity)
GRI 3(c) Example
An axe and saw are packaged together as a set for retail sale.
82.01   … axes …
                            8201.40 – Axes … and similar hewing                                                                   tools
82.02   Hand saws…..
                            8202.10 – Hand saws…
         Headings are equally specific
         Neither provides set its essential character
         Classified under heading 82.02 – last in numerical order

 

GRI Rule 4
Goods which cannot be classified in accordance with GRI 1, GRI 2(a) & (b), GRI 3(a), (b) or [c], shall be classified under the heading appropriate to the goods to which they are Most akin, (Similar to)
  • Applied only if rules 1 to 3 cannot not resolve the classification
  • The goods are not provided for anywhere else in the Nomenclature, including any of the residual headings.
  • Very rarely used; if ever
  • If ever used, would be based on a comparison to similar goods, taking into account factors such as:
            description       character       purpose
  • Exists only to ensure the GRI’s are exhaustive
    (i.e., that even something never before known or considered could be classified)

 

GRI Rule 5
In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to therein:
(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith.  This Rule does not, however, apply to containers which give the whole its essential character.

 

GRI Rule 5(a)
This rule applies to Cases / Containers
         specially shaped or fitted for the article
         suitable for long-term use
         presented with the article; and
         of a kind normally sold therewith that do not themselves give the whole its essential character.

 

GRI Rule 5(b)
(b) Subject to the provisions of Rule 5 (a), packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods.  However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.
           
Covers packing materials and containers:
         Presented with goods
         Of a kind normally used for packing such goods
         Not suitable for repetitive use
Examples –
ü      Collar and backing inserts in men’s shirts
ü      Plastic bags containing chips, candies, etc.
      X   Liquefied gas container filled with gas (Suitable for repetitive use)

 

GRI Rule 6
All the preceding rules apply to the Sub-Heading Level. 

 

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Customs Tariff – Legal Notes and Explanatory Notes

LEGAL  NOTES
Essentially, legal notes are consolidated notes that outline conditions that apply to all goods that are to be found within a given Section or Chapter.  These critical notes appear at the beginning of each Section and Chapter within the tariff.
            A precise interpretation of the heading or subheading cannot be made without using the Legal and Explanatory notes.

 

Four Levels of Legal Notes
1)      Section
        2)    Chapter
3)      Sub-Heading
4)      Supplementary 
         Form part of the Customs Tariff legislation
         Distinct from the Explanatory Notes, which are instructive only
         Essential tool in the classification process
         Located at beginning of Sections and Chapters
         There are both International and National notes.

 

Inclusions:      what goods are covered in a particular section, chapter, or heading; including conditions to qualify.

 

Exclusions:     list goods which are excluded from a section, chapter, or heading; & directs us to the appropriate section, chapter, or heading.

 

Definitions:    defines terms for HS/Tariff purposes.

 

Directions:      specify how a commodity is to be classified.

 

Parts:  provisions for the classification of parts within a particular section, chapter, or heading.

 

HS EXPLANATORY NOTES
Available for order from WCO
         Same sequence/structure as the HS
         Reprint Section/Chapter Notes
         Give direction as to goods covered
§         Define/explain terminology
§         Lists of goods
§         Exclusions and inclusions
§         Technical descriptions (appearance, properties, etc.)
§         Methods of production or uses

 

5 LEVELS
1)   General Content of the Section          Section XVI
2)      General Notes to the Chapter             Chapter 84
3)      To the Heading                                   84.07
4)      To the Subheading                              8407.10
5)      Canadian Notes

 

TO SUBHEADING (6 DIGIT)
         Tool to assist in classification
         Indicated if (+) at end of exp.. note to heading
         More detail: specific to subheading
         Example:                     17.01(+)
                                                            1701.11           

 

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