Export Commodity Classification

FTS-COMMERCE-ITA-1 Moderator: Doug Barry February 23, 2011 2:00 pm ET Coordinator: Thank you for standing by For today’s conference, all parties will be on listen-only During the question-and-answer session, please press star 1 if you would like to ask a question You will be prompted to record your name Please unmute your phone and record your name clearly in order to be introduced into the conference Today’s call is being recorded If you have any objections, you may disconnect at this time and I will now turn today’s call over to Mr. Doug Barry Sir, you may begin Doug Barry: Thank you very much and good afternoon or good morning on the West Coast Thank you so much for joining us this afternoon and morning for I think what is going to be an extremely worthwhile hour for you The topic today is Export Commodity Classification and we will start in just a moment but first a couple of messages and a ground rule Message, this is part of the Obama administration’s National Export Initiative and this is our effort to encourage the doubling of U.S. exports in the next five years And so we really want to thank you for what you’re doing out there to generate those exports It’s a great time The world economy is snapping back and hopefully that’s going to be reflected in your order books soon and as it is, we fully expect to put more of our fellow citizens back to work It’s really a great time, an exciting time and we’re glad that you’re joining us today to participate in the series Now at the bottom in that first slide there you’ll see a URL for all of the Webinars that are coming up over the next two or three months and we welcome you to take a look at those when you have a moment and sign-up for more I think you’ll find that this curriculum that we have put together is going to be extremely helpful and useful for you as you grow your exports even further entering into new markets and finding new buyers with the help of the Department of Commerce and the U.S. Commercial Service And the program for today is in just a moment I will introduce our speaker and then at the end of the session towards the end of the hour, we’ll have about 15 minutes for questions and answers These will be live questions You’ll take your phone off of mute The operator will come back on and introduce you and then we will be able to take your question and Tony will answer Now we have a very large number of participants today, close to a thousand and so we can’t obviously take all of your questions or we’d be here until the end of the year but we do want you to e-mail the presenter after the session today with your specific questions about your specific products and business and Tony will give you a personal reply to every question that you have And that I think will be an extremely valuable service for you Now here is export.gov This is the homepage You may have seen it before If not, go to www.export.gov when you have a moment later today or in the future and you’ll be able to see this great amount of information that we have here for your company to help you generate additional exports And there’s the Webinar tab as you’ll see over on the right side If you click on that, it will take you to a page You can find the free Basic Guide to Exporting Webinars of which today’s event is part of and you can register for additional programs at that time And so I would like very much now to introduce our special guest His name is Tony Pu and he is a Commodity Analyst for the Commodity Analysis Branch of the U.S. Census Department Tony, it’s great to have you with us Take it away Tony Pu: Thank you Doug and good afternoon, everyone Welcome to the Export Commodity Classification Webinar My name is Tony Pu and I’m the Analyst in the Commodity Analysis Branch of the Foreign Trade Division at the U.S. Census Bureau More specifically my area of expertise is with the transportation-related commodities on the import side Today we’ll be discussing the international harmonized system for commodity classification, export commodity classification tools and tips, and hopefully answer any questions or clarify any issues you may have In the interest of time, there’s a few expectations and ground rules I will not classify any specific company products

If you do need assistance with specific products, you’re welcome to call our call center, e-mail our Commodity Analysis Branch e-mail, or even e-mail me specifically I’ll provide the contact information at the end of the presentation Once we cover the general rules of interpretation, you should be able to classify your goods for export so in the interest of time, please keep questions general Thank you for your cooperation Both the Schedule B and the HTS USA which is the acronym for Harmonized Tariff System of United States Annotated are based on the international harmonized system governed by the World Customs Organization The structure of the harmonized system is broken down into the following: the two-digit level is called a chapter; the four-digit head, six-digit subheading, eight-digit legal and 10-digit statistical The World Customs Organization sets the standard up to the six-digit level where U.S. imports and exports match each other in other countries so the eight-digit level – the tariff level – is only significant on the import side It is established by the United States trade representative and proclaimed by the President At the 10-digit level, this is how we collect the statistical data This is established by the Census Bureau for the export side or the United States International Trade Commission on the import side Here you can see the top half is a sample page from the Schedule B book In the bottom half it’s a sample page from the HTS or Harmonized Tariff Schedule book As we learned 9-4, the first two numbers denotes the chapter and Chapter 94 is for furniture, bedding, mattresses, etcetera, lamps and lighting fittings, and NESOI which you’ll see frequently NESOI is an acronym for Not Elsewhere Specified Or Included When comparing the two, you can see the four and six-digit codes in descriptions match; however, at the HTS level it delineates into eight-digit subheadings and breaks down into more detailed categories The eight-digit level is where the duties are assigned When looking at the bottom half of the Harmonized Tariff Schedule book, you can see Column 1 General applies to imports for most countries from most countries Column 1 Special addresses trade agreements like NAFTA, agreements with Singapore, Oman and Peru and Column 2 shows the rates of duty for Cuba and North Korea This is also listed in the General Notes 3B Schedule B shows the code description and required unit of quantity Now as you can see, the Schedule B is more general This is why you cannot use import numbers to classify exports – this is why you can use import numbers to classify exports – but it doesn’t work the same the other way so you cannot export numbers to classify imports There are two books, the Harmonized Tariff Schedule of the United States Annotated in the Schedule B book Schedule B is the statistical classification of domestic and foreign commodities exported from the United States, has approximately 9000 codes and is revised and/or produced annually Revisions are effective January 1st of every year For the HTS book, those revisions are done generally made twice a year so once in January and once in July The HTS book is used for enforcement of duties and quotas whereas the Schedule B is less specific so it adds to ease the burden for exporters And just a quick reminder, in the HTS book there’s a section called Notice to Exporters and what that is, it lists out the commodities

which you must use the export code for filing your export and you cannot use the import code for filing your export For some freight forwarders and Custom brokers, you may have to update your number if it’s outdated from the last year Revisions are usually made because members of the trade community are looking for greater detail in their statistical data Several tools are available to you in classifying your products: general rules of interpretation; the Schedule B Website with a browse and search function; World Customs Organization explanatory notes; the Harmonized Tariff System online reference tool; Customs rulings; and Commodity Analysis Branch assistance I will address each in this presentation The first tool, general rules of interpretation The foundation of the general rules of interpretation, merchandise must first be classified in the Harmonized System by the four-digit heading whose terms most specifically describes the merchandise so only the four-digit headings are comparable These are international rules on classification using the six-digit Harmonized System so even if you think the specific product you’re looking for is included in a six or 10-digit description, you can only compare four-digit headings Again, first read through the four-digit headings until you find the area where your product would be classified GRI 1, state set The following are provided for ease of use Table of contents, alphabetical index, section and chapter titles and to classify according to commodity description using the headings and related section in chapter notes so basically GRI 1 is to use the section in chapter notes This GRI is used most often Here we have an example of GRI 1 This is for chapter notes for Chapter 1 for live animals The notes define terms in the chapter and give definitions for odd units of quantity They also tell you which products don’t belong in that chapter even if it seems that they belong in there and it tells you where those products should be classified So for example if you’re exporting a let’s say circus elephant which as you can see here, 1C states animals of heading 89508 which covers traveling circuses and menageries Those circus elephants wouldn’t fall under Chapter 1 where you would think is for live animals They fall into Chapter 95 because they are used for traveling circuses and menageries GRI 2A, articles that are incomplete or unfinished, unassembled or disassembled are classified as complete articles They must have the essential character of the finished articles so the essential character of a product is its nature, purpose or function An example would be ceramic statutes Whether or not they’re painted or polished, they’re still classified the same because essentially they’re still ceramic statutes Another example would be unassembled bicycles, even if missing parts such as pedals or tires, they would still be classified as bicycles GRI 2B, mixtures and combinations As long as a specific mixture is not referenced elsewhere, you classify according to essential character An example of a mixture that’s specifically referenced would be frozen mixed vegetables An example of a mixture that’s not specifically referenced would be an umbrella hat; an umbrella worn on head

by attached hat which is essentially an umbrella where as a propeller beanie hat is essentially a hat GRI 3 states for products that can be classified in two or more areas, you classify by A, the most specific heading So let’s use a clock radio for example which will fall under Heading 8527 which is for reception apparatus for radio broadcasting whether or not combined in the same housing with sound recording or reproducing apparatus or a clock instead of 9105 which is for other clocks GRI 3B classified by the essential character so what determines essential character can vary between different goods depending on the nature of the materials or the components, may be the bulk, quantity, weight, value or volume So for a paint kit containing paint, paintbrushes and stencils all packaged together, the paint provides the essential character of the kit, not the brushes or the stencils GRI 3B – I’m sorry, 3C – states that you classify by the last heading in numerical order so for example a 50/50 mixture of barley which falls under Heading 1003 and oats which fall under Heading 1004 is all classified as oats and this is because 1004 is the last heading of the two We always go with the higher number, often referred to as “other” basket category or NESOI which again is an acronym for Not Elsewhere Specified Or Included And a quick reminder, GRIs are hierarchical in international rules used by all countries on the Harmonized System Following these rules ensures that everyone is classifying goods in the same way GRI 4, classified goods according to which they are most akin This should be used infrequently An example would be a machine that washes car parts The user opens the door, puts the parts in, adds soap, closes the door, runs the cycle and removes the clean parts Similar to a dishwasher so therefore classified under the same heading as dishwashing machines not for domestic use so in some cases you may need to be creative and flexible GRI 4 should be used as a last resort GRI 5A, specially-fitted containers are classified with the article except when the container determines the essential character An example would be a violin case If shipping a violin with its case, you classify only the violin Other examples would be camera cases, cases for musical instruments, gun cases An example of an exception would be crystal candy dishes with hard candies You classify both because the essential character of the container is not related to the object being contained So these products don’t necessarily go together They can be sold, shipped or used separately or with other items instead This does not qualify as a kit and therefore cannot be classified under GRI 3B Neither component determines the essential character of the product GRI 5B, packing materials and containers are classified with the goods They must not be suitable for repetitive use with the exception of medical containers for a compressed gas which is just an example that fits as an exception because these containers, they must be classified

because they are reusable so you classify both the container and the gas These containers are specifically accounted for in the Schedule B under Heading 7311 if it’s made of iron or steel and 7613 if it’s made of aluminum And finally GRI 6, classification of goods in the subheading of a heading shall be determined according to the terms of the subheading, related subheading notes and section, chapter and subchapter notes may also apply So in other words once you have found your four-digit heading, you repeat the same process to determine your six-digit subheading so basically this is the same as GRI 1 but at the subheading level which is a six-digit level Here’s an example of GRI 6 for Chapter 1 At this level, only the six-digit subheadings are comparable so if you’re shipping dairy cows, the natural instinct is to zoom-in on 0102.10.0020 but first you must ask yourself, “Are these purebred breeding animals?” and a suggestion when pulling chapters up, I would use the PDF version because sometimes the indents are not very clear in the HTML version Additional U.S. rules of interpretation These expand on the GRIs at the national level Except where specifically noted, the following rules apply: A, end use is determined by use in the United States immediately prior to export So if you’re shipping pie tins to a country where they will be used as Frisbees, you still classify them as pie tins because that is a use in the United States prior to export B, parts classifications shall not prevail over a specific provision for such parts or accessories so an example would be aircraft seats Aircraft seats are specifically covered under Subheading 9401.10 so they’re not classified as airplane parts which fall under Chapter 88 C, for a classification of goods in which a textile material is named follow the principles in Section 11 Note 2 regarding mixtures of two or more textile materials For more details, read Note 2 of Section 11 in the HTS USA, the Harmonized Tariff Schedule, United States Annotated Essentially the note echoes GRI 3B which is the essential character and GRI 3C which is the last heading in the numerical order Here’s a snapshot of what you will see when visiting our Webpage The Web address is www.census.gov/scheduleb and it takes you directly to the Foreign Trade Division’s Schedule B page On this page you can check to see if a Schedule B number is valid, browse through the chapters, download the current export and import codes for use in the Automated Export System and also view obsolete Schedule B codes back to the last major revision which was in 2007 This does not apply for HTS codes which are for imports When looking at this snapshot, you can see the second box down, the link under Schedule B search takes you to an external site where you’ll find our new enhanced search Additional tools, World Customs Organization issues explanatory

notes which are available for purchase through the Website It consists of five volumes covering all HS Chapters 1 through 97 providing specific examples of items that do and do not fall under each heading and subheading If it’s something you’re looking for that’s minor, you may just want to call our call center because we can just read you the excerpt in the notes or we can also just scan you the pertinent pages and send it to you United States International Trade Commission provides an HTS online reference tool This allows you to search current HTS codes and descriptions These are organized by heading and links to Customs rulings Customs and Border Protection provides two tools The first one, the Customs Rulings Online Search System also called CROSS The free site allows you to search every Customs rulings from 1989 to the present so what you want to do is read the entire ruling to determine if it closely matches what you’re shipping So two important reminders when using this is one, because this is a historical database, some of these commodity codes have expired and two, because these are Customs rulings, the codes provided are HTS numbers, not Schedule B. You cannot put outdated import codes on your export documentation What I recommend doing is taking the first six digits of the HTS code and searching or browsing through the Schedule B to find your current export code You can use it as a guide to narrow your search And the second tool are the informed compliance publications which are helpful as a review of what we go over today It explains the GRIs in regular terms and everyday language so I use several of their examples in this presentation Provided here is the contact information for the Commodity Analysis Branch If you have any questions, specific questions, concerns or if you think of any later on, please feel free to either e-mail us at ftd.scheduleb@census.gov or call us at 1-800-549-0595, Option 2, or you can fax us at 301-763-4347 We’re here to assist exporters in navigating the book but it is their responsibility to classify A reminder, there are no binding rules on export codes You can ask for in writing for other countries’ Customs agents are not going to accept our recommendation as a statistical agency just as United States Customs has the final say on import classification so during this presentation we reviewed each of these tools As you can see here, please note that the Commodity Analysis Branch assistance is the last option and the reason is because it is ultimately the exporter’s responsibility to classify their goods for export so we are here to assist you to navigate a Schedule B, not to classify all your products for you so please refrain from faxing us invoices, catalogs, or lists of product numbers What I recommend is finding your Schedule B code in advance so you’re not panicking last minute but whenever you do need extra guidance, again please call our call center and here are some general tips to lessen any unnecessary stress There is a commodity code for every physical tangible good but not every product has its own code

The Schedule B is only so specific You cannot use parts numbers or ID numbers in the search engine Read the four-digit headings to determine whether the product is classified so you classify the product based on what it is, what it does, or what it is made of Refer to the Customs rulings for guidance Previous Customs determinations may point you in the right direction and I find this tip especially helpful for unique goods and when appropriate, use NESOI which again is Not Elsewhere Specified Or Included If you have any questions or concerns at a later time, please feel free to contact me My e-mail is T-O-N-Y dot P-U at census.gov Thank you for your time and attention and are there any questions? Doug Barry: Tony, thank you very much Great presentation, very informative and how did you know that I needed a classification number for a pie tin throwing circus elephant? What insight? Only the government would know such a thing, right, so let me – before we open it up to general questions, let me sort of jump in here and ask one and, you know, a lot of people that we talk to every day are, you know, very worried and maybe understandably so about getting the classification numbers wrong But unless it’s intentional, you know, no one is going to punish you but there are some, you know, common problems that occur if the product is classified incorrectly, especially on the export documents as the items leave the United States and as they arrive in their foreign destination What are some of the common problems that can arise if the product is classified incorrectly? Tony Pu: Well, if it’s a minor misclassification, usually you can just go in and make an amendment to your AES filing and that should be fine but if it’s something that’s more, you know, classified completely incorrectly then that might be subjected to what Customs does If that’s something you’re unsure of, it’s always best to just give us a call and we also have an Automated Export System branch and also a regulations branch and they can help clarify information before you ship your product Doug Barry: Okay and it is important too for the Customs officials as they examine these shipping documents, they are looking for the description of the item from the classification code and this is the way they determine duties and taxes, right? Tony Pu: Right, well there’s never any duties when exporting but on the import side for the country receiving the product, that’s how that’s assessed, yes Doug Barry: Correct and you mentioned the AES system and that is the sort of substitute for the shippers’ export declaration which is now by law filed online for exports valued at over $2500 And Tony we just happen to have a Webinar on how to file in the AES system and I’m going to refer our listeners and viewers today to the Website that we provided at the beginning of the hour which will take you to the whole list of Webinars that you can register for and you’ll see the one on the AES system and how to file And if you have questions about that of course you can always call the Trade Information Center at 1-800-USA-TRADE and we can certainly help with that while you’re waiting for the Webinar to come up so let’s open the lines up now for questions Operator, are you with us? Coordinator: I am If anyone would like to ask a question, please press star 1 on your touch-tone phone Please record your name in order to be introduced into the conference I do have one question already and that comes from Participant 1 Your line is open Participant 1: Yeah, hi I have a question Can you have a different Schedule B in a USHTS? I have determined my Schedule B number and I assume it is the same six-digit number

under the USHTS unless there is a cross-binding ruling for the import side Tony Pu: Well, obviously the six-digit level, it should always be the same unless one of the numbers is outdated Participant 1: Okay, so they can’t be different? Tony Pu: No, not up to the six-digit level but the 10-digit level, it can be different but there are a lot of instances where they are the same too Participant 1: Okay, so they should always almost be the same? Tony Pu: Not quite It depends on the commodity because like I mentioned earlier, there’s about 9000 codes for Schedule B and the HTS has about double the codes Participant 1: Okay, thank you Tony Pu: Sure Coordinator: And the next question comes from Participant 2 Your line is open Participant 2: Hi It’s actually (Participant 2) and my question is that under Schedule B, I have several points that the commodity doesn’t show up like a product for electronics and I have to choose like a general commodity Do you guys plan to update the commodities with the new product or should I just keep using the generic one? Tony Pu: Can I ask you which system you are using? Participant 2: The shipping system is Starship Tony Pu: Oh, is it through the freight forwarder or is it the Participant 2: Through our warehouse, we have Starship Tony Pu: Okay, so that may need updating because if you’re filing through the Automated Export System the aesdirect.gov, those should be updated along with the Schedule B book so if other programs are using in conjunction with the actual the official program, then a lot of times they have to update as well Participant 2: Okay, great Thank you Tony Pu: Sure Coordinator: Next question is from Participant 3 Your line is open Participant 3: Hi I wanted to ask a question about when to know, when to apply the parts rules and because many finished products are actually classified as part of the article so how do you know which, if your finished good is actually part of the article or is it just when it’s specified specifically? Tony Pu: Right, so if there’s a code specific to the part, then you would use that code so what you want to do is first search for that part and if it’s not in the Schedule B book, then you will use the parts and accessories number to, you know, to the machinery or apparatus or Participant 3: So you’ll use the parts and accessory of that article versus just the basket provision, just say Tony Pu: Yeah, you’ll use the specific parts description unless if there isn’t one, then you’ll use the parts and accessories because if the parts and accessories is the basket category Participant 3: Okay, and unless it’s excluded in the general, I mean, in the section notes, if it’s specifically for that article and it’s not a part of general use, is that up to our interpretation? Tony Pu: Yeah, that is and a lot of the times when it’s specific to its manufactured specifically for that article, then many of the times it’s going to just be classified as parts and accessories for that number, for that article and usually parts and accessories is a few numbers down so let’s say for example 8802 is for aircraft, 8803 would be for parts of aircraft Participant 3: And then there’s usually like I work a lot in Chapter 87 – 8716 and 8708 – and there are several parts and accessories categories, headings You just find the most appropriate, I guess or does it Tony Pu: Right Participant 3: …okay Tony Pu: Right Participant 3: Okay Thank you Tony Pu: Sure Coordinator: Next up is Participant 4 Your line is open Participant 4: Hi, Tony You touched base briefly on kits and/or combined products such as like my cousin he does promotional products and so I’m thinking of gift baskets and things that have combined Would you just classify the individual commodities within that kit or basket or something of that nature? Tony Pu: That’s a more specific case It depends on what’s in the kit if there’s one good that essentially describes what the kit is There are certain numbers for kits but it’s pretty limited and usually kits are I guess as you said if they’re used for a trade promotion, there is a number for promotion or products as well so for that, that can change as no really one answer for that

Participant 4: Okay Tony Pu: So yeah, I advise if you are shipping something in that field then you may just want to give us a call and see if there is a specific number for that kit Participant 4: Okay, perfect Thank you Tony Pu: Yeah, sure Coordinator: The next question comes from Participant 5 Your line is open Participant 5: Hi, Tony My name is Participant 5 I was wondering, is this presentation available on your Website or is it downloadable someplace? Doug Barry: I can answer that, Tony Yes. Within three or four days, everyone that registered for the Webinar today will get a copy of it, the audio as well as the slides which you can print off at your convenience so the answer is everyone gets what they’re hearing today and they will receive it probably early next week Participant 5: Great, thank you Doug Barry: You’re welcome Coordinator: Next question comes from Participant 6 Your line is open Participant 6: Hello, Tony My name’s Participant 6 and I’ve used the search engine before and I was wondering first of all is there any way we can search for something based on a name rather than a commodity code and also is there a way that we can have a chemical appendix or the CAS numbers as a way for searching for a commodity code? Tony Pu: Yes, so to answer your first question, the Schedule B search only takes general terms It doesn’t take any brand names or parts numbers The Customs rulings Website, the historical database in many cases does So in my preference when I’m helping out someone who just has that information, I like to use cross-reference between the Customs rulings and the Schedule B so yeah, so if it’s something that’s a brand name, you may want to just Google and find out, get some general terms to use and then use the Schedule B search and I’m sorry, can you repeat your second question? Participant 6: No My second part was regarding the CAS numbers, the chemicals Tony Pu: Oh, right There actually there is a Website If you, yeah, since this is more specific, if you can e-mail me then I can go ahead and e-mail that link to you Participant 6: Great Tony Pu: …because, yes, so if you have your CAS number, it’s actually pretty easy Participant 6: Okay Tony Pu: It’s something that’s done I believe through the United Kingdom Participant 6: Oh, really? Tony Pu: Yeah, or I believe if you just Google ECICS consultation, it’s for the European Commission Taxation and Customs Union and that’s just something I use on – when you just – if you know your CAS number, you can just enter that in and it pops out up to I think the six or eight-digit level of your Schedule B code Participant 6: Thank you and also for Customs rulings, if you have a Customs ruling that’s, you know, say 10 years old and you know that there’s been changes, to they automatically update the commodity code? Tony Pu: No, not in the database, no What you can do is when you do find the one that’s relevant – the code that’s relevant to yours – you want to look to the left of it They have the date of the ruling and usually if it’s, you know, dated a few years back or a few years back should be fine but if it’s dated many years back, it’s definitely either way you still want to just check with the Harmonized Tariff Schedule page and their Web address is hts.usitc.gov and generally it just changes a little bit so you can kind of compare the two Participant 6: Okay, thank you very much Tony Pu: Sure Coordinator: Next question comes from Participant 7 Your line is open Participant 7: Hi, how are you? Tony Pu: Hi Participant 7: I have a question about some jewelry that we shipped A lot of our jewelry is made from silk or fabric I’d like to know if it has to be categorized as jewelry or as the textile that it’s made out of Tony Pu: So this is a question of the mixture? It would just depend on what essentially if it’s more so jewelry, if it’s more so a fabric Maybe one of them is higher is value so it would depend on what exactly and for your instance, this is more specific to your good If you want to give me more information, I can talk to you individually either through e-mail or phone Participant 7: Okay Tony Pu: All right? Participant 7: Okay, thank you so much for your time

Tony Pu: Oh, yeah You’re welcome Coordinator: Next question comes from Participant 8 Your line is open Participant 8: Hi I wanted to ask, you know, you mentioned that there’s a number for that trade promotion section Do you know what it is? Woman: Promotional part Tony Pu: Oh, for that? That, yes If you’d like to e-mail me or call me as well, I can help you with that too Participant 8: Okay then Tony Pu: Because yeah, that’s not really one number and it also depends on what exactly you’re shipping Yeah, so not everything qualifies for, you know, trade advertising material and it would be kind of specific to your case Participant 8: And it should say there, right? Tony Pu: Yeah Participant 8: Okay, then Thank you Tony Pu: You’re welcome Participant 8: Bye bye Coordinator: Next question comes from Participant 9 Your line is open Participant 9: Thank you very much Question about products that have been shipped overseas and are coming back for upgrades and then being returned after being upgraded Tony Pu: So it’s, okay, for that – there is under – let me see on Chapter 98 which is for special classification provisions but that’s only specific to, yeah, so it’s for under 9801.10.000, it’s for articles that were previously imported for repair or alteration and the prior to export from the United States Participant 9: The export number would be the same as the original or is there a different export number for upgraded products that’s being re-exported? Tony Pu: So let’s see, so this is being imported for repair or exported for repair? Participant 9: Being imported for repair It’s a U.S. product being brought back into the U.S for repair and then being re-exported again Tony Pu: Okay, so in that case, you don’t want to use the commodity number you used prior You want to use the Chapter 98 code which again is 98011 followed by five more zeroes Participant 9: Thanks Tony Pu: …so when it’s, yes, you’re welcome Coordinator: The next question I could not understand the first name but the last name is Participant 10 Place your line in Participant 10: Hi, it’s Participant 10 and my question is you mentioned an AES filing Can you tell us a little bit more of what is that and what is it used for? Tony Pu: Sure, the Automated Export System, it’s just (for) anything that’s over $2500 or if it needs a license requires you to file through the Automated Export System to provide what’s actually being exported from the country I don’t want to go too much into that because I’m not specialized in that section so there is an AES branch if you want more information or I believe there’s also a seminar coming up, right, Doug? Doug Barry: Yeah, that’s correct Tony and the caller can certainly phone 1-800-USA-TRADE and we’d be happy to explain the process this afternoon Okay, operator, next question, please? Coordinator: And that comes from Participant 11 Your line is open Doug Barry: And operator, we seem to have some background – oh, it’s gone now – okay, great Coordinator: Yeah, that was coming from that participant’s line Doug Barry: All right, thanks a lot Coordinator: You’re welcome Participant 11: Sorry about that My question’s kind of related to the AES part of it On a (carnet) shipment, if it’s a foreign (carnet), would you still have to file or classify the product? Tony Pu: That, I’m sorry, I’m not too sure That’s more of a regulations issue so I suggest that you call either – yeah, you can either call – it’s best to just call our call center It’s 1-800-549-0595 and then you want Option 3 for regulations Participant 11: All right, great, thank you Tony Pu: And that, yeah, they can help you You’re welcome Coordinator: And if anyone else would like to ask a question, please press star 1 on your touch-tone phone and please record your name in order to be introduced into the conference Doug Barry: Great We’ll wait another minute for additional calls Tony, this is a very interesting exchange here between you and our callers today Tony Pu: Oh, good, good Doug Barry: A lot of good information Coordinator: I do have a question from Participant 12 Your line is open Participant 12: Hi, Tony, this is Participant 12 Tony Pu: Hi Participant 12: And I’m calling in regards to a large machine

that is too big to load into containers so they get broken down and packed within cartons and obviously they turn into parts Though we ship this in the same container, do we classify it still as the whole machine or since there’s nuts, bolts and belts, do we classify them on the individual parts? Tony Pu: Correct You will still classify as the entire machine because it’s shipped together; however, if you do ship them in piecemeal, then you may have to classify them as parts Participant 12: So only if it’s separated in the shipment? Tony Pu: Yeah, exactly Participant 12: Okay You answered my question Thank you Tony Pu: You’re welcome Doug Barry: It’s a whole lot easier to classify it because of the function of the machine rather than the hundred individual parts, isn’t it? Coordinator: Next up is Participant 13 Your line is open Participant 13: Hi, this is Participant 13 My question for you is we make a pharmaceutical component that can be used in several different products and then also it comes in a couple of different forms, either a powder, a gel, a liquid and what we’re having a hard time is we’ve found four different classifications it falls under Tony Pu: Okay Participant 13: And so some of our clients are encouraging us to use other classifications We’ve stuck with one up to this point but we’re wondering how do we determine which is the best one to use because from my understanding, there’s also tariff and Customs charges that vary depending on the code you use? Tony Pu: Right, so this is on your side you want to choose what you feel based on your knowledge what best describes your product Participant 13: Yes Tony Pu: If it’s your client that maybe wants it different due to just, you know, tariff issues, that’s something you may want to discuss with them because at least on our side, we’re required to report at the best of our knowledge Participant 13: Okay, because the other issue is that sometimes our product is also used for research purposes and under that classification that we normally that describes it as a medicament which is a drug and for research, you can’t use it for drugs so that’s – we get – so then we’re like we have the same product that has two different classifications based on its use That’s where we, I’m wondering if you can tell me anything about this? Tony Pu: Yeah, because the end use is still, yeah, if the end use differs, you still want to the end use that’s pertinent to the States in the States Participant 13: Okay, so it’s the use – at that point then – it’s the use that should qualify the code, not the ingredient necessarily? Tony Pu: That depends If you don’t mind, if you want to just shoot me an e-mail because this one’s a little bit more specific Participant 13: Sure Tony Pu: …if I can answer, I can help get someone in regulations to help out too Participant 13: Okay, I’d appreciate it Thank you Tony Pu: No problem Coordinator: Next question comes from Participant 14 Your line is open Participant 14: Hi Occasionally we do some trade shows overseas and so we ship a box full of our display goods Also included in that is some incidental items that might be called, you know, office supplies or things like that and my question is for the paperwork, do we have to specify the smaller incidental items also? Tony Pu: Are those the smaller – the incidental items – are they less than $2500 in total? Participant 14: Yes Tony Pu: Okay, so in that case, no, unless, yeah, unless if it’s only when it’s – if it’s less than 2500 but it needs an export license – that’s the only time you’ll still need to file Participant 14: Okay, thank you Tony Pu: Sure Coordinator: Next question is from Participant 15 Your line is open Participant 15: Hello I have a question about a specific kit We had sent in our kit to the Customs Office to receive an official class ruling for it and they came back with a ruling that we couldn’t classify under one HTS code, that it had to be split-up in two My question is is some of our customers are retailers If we either do online registration or type-out the form, they only request one number be used What is the correct number we should be supplying them? Are there any general rules? Do you take the part that has the highest duty? Tony Pu: Yeah, that’s something I’m not exactly sure of,

might have to deal with regulations as well because you want to use basically what essentially describes that kit but in some cases if there are, you know, too-high-valued items in the kit, it may have to be separate so it kind of depends and if you can also e-mail me as well, I can discuss it Participant 15: Okay Tony Pu: Yeah Participant 15: Thank you Tony Pu: You’re welcome Doug Barry: Time for one more question Participant 16: Doug and Tony maybe, this is Participant 16, is there any specific guidance for classification of services if service is included as part of export sales contract? Tony Pu: That’s a good question Yeah, you only classify tangible goods so anything you can actually touch so services are not classified because yeah, they’re not actually being traded Participant 16: Thank you Doug Barry: And does that also include computer software, Tony, that is the commodity classification maybe on the medium on which it’s shipped, not necessarily the intangible software? Tony Pu: Exactly, yeah, so just the actual tangible disk or so but not the intellectual value, IP value Doug Barry: Great, well thank you so much This has really been informative Tony Pu: Sure Doug Barry: Appreciate you joining us today and those of you who have questions, feel free to e-mail them to Tony and he will be happy to answer them later this week and next Please do that He’ll be happy to accommodate you and get back to you with a personal reply Want to remind you that this is the second in a series of 16 Webinars and we hope that you will check the schedule and go to export.gov and see if there are other ones that are of interest to you and register for them accordingly And then finally this is the U.S. Commercial Service of the Department of Commerce and I think we’re best known for our matchmaking services, that is, our buyer-finding services We have representatives in more than 85 countries around the world and I know that many of you are involved in the logistics part and the shipping part but if you have colleagues who are in new business development and want to help your company generate some new sales outside the United States, please look at export.gov – www.export.gov – or call us here at the Trade Information Center Monday through Friday, 1-800-USA-TRADE So until next week at this same time and curb your enthusiasm because the next topic is calculating duties and taxes for whatever country you’re shipping your goods to and that’ll be next Wednesday, 2:00 Eastern Time and we hope to see many of you for that Webinar so thanks again for joining us and for all you do to help the United States grow out of its current economic difficulties with more exports We’re doing it They’re up 18% over last year, over a trillion and a half dollars being generated in goods and services from the United States Let’s double it Thanks so much and we hope to see you again soon All the best Bye for now Coordinator: Thank you for participating in today’s conference You may disconnect at this time