Tariff Classification and Valuation: GRI Order and the Six Methods
This domain tests two linked skills: placing a good in the correct tariff line using the Harmonized System, and determining the customs value on which duty is assessed. Classifiers must follow the General Interpretative Rules in strict order; valuers must follow the six valuation methods in strict order. Order is the whole game in both halves of this domain.
Classification: the HS and its rules
- The HS has 21 sections and 96 chapters (Chapter 77 is reserved), with headings at four digits and subheadings at six.
- GRI 1: classification is determined by the heading text and by the legal notes to the sections and chapters. Notes are binding and frequently exclude goods that the heading text appears to cover.
- GRI 2(a): incomplete, unassembled or disassembled articles that have the essential character of the complete article.
- GRI 3: when two headings compete, apply (a) the heading giving the most specific description, then (b) essential character, then (c) the heading occurring last in numerical order.
- GRI 4: goods most akin to those that can be classified.
- GRI 5: packing and containers.
- GRI 6: comparison is made at subheading level, using subheading notes and the same rules.
Valuation: the six methods in sequence
- Transaction value; 2. Identical goods; 3. Similar goods; 4. Deductive value; 5. Computed value; 6. Fallback, applied flexibly within the Agreement's limits. Adjust transaction value by adding assists, royalties payable as a condition of sale, selling commissions, packing, and transport and insurance to the place of importation where the national basis is CIF. Exclude buying commissions, post-importation construction, duties and taxes, and interest charges. A related-party price is acceptable if the relationship did not influence the price.
Worked example
An importer pays 100 for the goods, 5 as a buying commission, 10 as a royalty required as a condition of sale, freight 8 and insurance 2. Value = 100 + 10 + 8 + 2 = 120. The buying commission is excluded because it remunerates the buyer's own agent, not the seller.
Traps that cost marks
- Jumping to GRI 3(b) before checking whether a legal note resolves the question under GRI 1.
- Applying GRI 3(c) at heading level rather than only at subheading level under GRI 6.
- Adding a buying commission, or deducting freight on a CIF-basis system.
- Assuming a related-party price is automatically rejected.