As logistics professionals, our focus is to optimize the flow of materials based on product quality, transit time and overall cost.
We optimize these areas with the support of our purchasing department, our manufacturing facilities and other functional areas.
When dealing with an international network of suppliers and customers, we need to consider the impact of customs duties on the total landed cost of our products.
Many times, this piece of the “total landed cost” equation is left out, which means that we are not properly calculating all costs.
A critical part of determining these customs duties is to understand the proper classification of our materials; this classification, also known as the Harmonized Tariff Schedule code or HTS code, is the basis for the import duty percentage one must pay to the government when importing these goods.
Surprisingly, a recent radio story highlights the importance of proper customs classification with a story about the Snuggie, a “super-soft blanket with sleeves” that is sold on-line and in your favorite retail stores!
Here is the link.
As you will hear, classifying the Snuggie to the proper HTS code was not an easy task: one side thought it best fit the description of a “garment” like a priestly cloak or a graduation gown (very high import duty rate) while others, like the importer (!), thought it was best categorized as a “blanket” which carries a much lower import duty rate.
Some $16 million was at stake in this classification controversy.
You can hear how it all plays out, but the point is that understanding the potential product classifications can cost you or save you lots of money!