Tariff Classification and Customs Valuation
Classification and valuation together determine the duty base, so exam questions often test them jointly. For classification, master the structure of the tariff: sections, chapters, headings, subheadings, and the General Rules for Interpretation (GRI). GRI 1 governs by heading text and section/chapter notes; GRI 2 covers incomplete/unassembled goods and mixtures; GRI 3 resolves competing headings by specificity, essential character, then last in numerical order; GRI 4 handles goods not otherwise provided for by analogy; GRI 5 covers cases and packing; GRI 6 extends the analysis to subheadings. Section and chapter notes are legally binding and frequently override intuition.
For valuation, know the six sequential methods: transaction value, transaction value of identical goods, of similar goods, deductive value, computed value, and fallback. Transaction value requires a bona fide sale, no restrictions beyond permitted ones, and adjustment for assists, royalties, commissions (buying commissions are excluded), packing, and proceeds. Traps: treating freight and insurance as part of customs value where the jurisdiction uses a CIF basis versus FOB; ignoring that assists provided free by the buyer must be added; assuming related-party prices are automatically acceptable when they may require a test of influence; and jumping to method two before confirming method one fails.
Rule of thumb: classify first, then value, then apply origin - changing any one changes the duty. Worked example: a buyer supplies free molds to a foreign manufacturer. The invoice shows only the finished goods price. The molds are an assist and must be apportioned and added to transaction value. If the parties are related and the relationship influenced the price, method one fails and the examiner proceeds down the hierarchy.