Memorandum D10-13-1

Locator No: 095B

Ottawa, February 19, 1998

SUBJECT

CLASSIFICATION OF GOODS

This Memorandum outlines and explains the methodology for classifying goods in the Customs Tariff.

Legislation

The following sections of the legislation are relevant to the classification of goods:

Customs Tariff

2. (1) The definitions in this subsection apply in this Act.

3. The List of Tariff Provisions is divided into Sections, Chapters and sub-Chapters.

10.(1) Subject to subsection (2), the classification of imported goods under a tariff item shall, unless otherwise provided, be determined in accordance with the General Rules for the Interpretation of the Harmonized System and the Canadian Rules set out in the schedule.

(2) Goods shall not be classified under a tariff item that contains the phrase “within access commitment” unless the goods are imported under the authority of a permit issued under section 8.3 of the Export and Import Permits Act and in compliance with the conditions of the permit.

11. In interpreting the headings and subheadings, regard shall be had to the Compendium of Classification Opinions to the Harmonized Commodity Description and Coding System and the Explanatory Notes to the Harmonized Commodity Description and Coding System, published by the Customs Co-operation Council (also known as the World Customs Organization), as amended from time to time.

Customs Act

General Rules for the Interpretation of the Harmonized System and the Customs Tariff

Classification of goods in the Nomenclature shall be governed by the following principles:

1.The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:

2.

3. When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows:

4.Goods which cannot be classified in accordance with the above Rules shall be classified under the heading appropriate to the goods to which they are most akin.

5. In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to therein:

6. For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis, to the above Rules, on the understanding that only subheadings at the same level are comparable. For the purpose of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.

Canadian Rules

1. For legal purposes, the classification of goods in the tariff items of a subheading or of a heading shall be determined according to the terms of those tariff items and any related Supplementary Notes and, mutatis mutandis, to the above Rules, on the understanding that only tariff items at the same level are comparable. For the purpose of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.

2. Where both a Canadian term and an international term are presented in this Nomenclature, the commonly accepted meaning and scope of the international term shall take precedence.

3. For the purpose of Rule 5 (b) of the General Rules for the Interpretation of the Harmonized System, packing materials or packing containers clearly suitable for repetitive use shall be classified under their respective headings.

Note: Unless the context otherwise requires, the provisions of Rule 6 of the General Rules for the Interpretation of the Harmonized System shall apply, mutatis mutandis, to the classification numbers within any one tariff item. (This note does not form part of the Customs Tariff legislation.)

GUIDELINES AND GENERAL INFORMATION

1. The Departmental Consolidation of the Customs Tariff includes the 214 sections of the Act and a schedule containing the List of Tariff Provisions. The regulatory portion of the Departmental Consolidation contains regulations and orders made pursuant to section 99 of the Customs Tariff .

Classification in the Customs Tariff

2. The most important concept which must be borne in mind when classifying goods in the List of Tariff Provisions of the Customs Tariff is that it is a hierarchical system consisting of Sections, Chapters, headings, subheadings, and tariff items. Thus, the classification of goods must be performed using a step-by-step methodology.

3. The List of Tariff Provisions of the Customs Tariff is divided into Sections and Chapters which tend to be organized in the order of their technological complexity. Thus, agricultural products are in Section I, while more complex goods such as machinery and precision instruments are in the later Sections and Chapters.

4. This same concept holds true within each Section and Chapter. For example, Chapter 50 provides for silk products. The first heading in that Chapter provides for silk-worm cocoons while articles made from silk can be found in the later headings of the Chapter.

5. There are six rules of classification which must be observed at all times. They are the General Rules for the Interpretation of the Harmonized System. The paramount rule, Rule number 1, specifies that goods must be classified according to the terms of the headings and the relative Section and Chapter notes. In most cases, Rules 2 through 6 will not affect classification of goods, which is clear by the terms of the heading and the Section and Chapter notes. However, there are instances where these other Rules must be used in order to arrive at the correct classification. For an official detailed explanation of the rules, reference should be made to the Harmonized System Explanatory Notes, Volume 1.

6. Headings can only be compared with other headings and subheadings with other subheadings of the same level, and so on.

7. It should be noted that headings are often further subdivided internationally into subheadings and domestically into tariff items. Subheadings are preceded by one or two dashes while tariff items are preceded by three or four dashes. One-dash subheadings can only be compared to other one-dash subheadings within the same four-digit heading while two-dash subheadings can only be compared to other two-dash subheadings. This same principle applies to the three- and four-dash tariff items (and is extended to the five- and six-dash statistical subdivisions).

8. The example shown in Appendix A to this Memorandum illustrates this concept of comparing at equal levels:

9. To illustrate this process, refer to Appendix B to this Memorandum and examine the following example:

10. Importers and brokers are advised that although the legislation consists of eight-digit tariff items, for coding purposes, Form B3, Canada Customs Coding Form, must contain a ten-digit classification number. The additional two digits are for statistical purposes and do not have an impact on the rate of customs duty applicable. For information concerning the coding of Form B3, consult Memorandum D17-1-10, Coding of Customs Accounting Documents.

11. As part of the legal framework, Section and Chapter notes are located at the beginning of the Chapter or Section. Most, but not all, Sections and Chapters have such notes. It must be recognized that these notes are part of the legislation and, therefore, must be observed. Typically, these notes will list certain inclusions and exclusions for the Chapter or Section. In some cases, the notes define certain terms or they may specify how a certain commodity is to be classified. Also, where applicable, they will state what treatment is to be given to parts of goods.

12. For classification purposes, the legal core of the Customs Tariff consists of the General Rules for the Interpretation of the Harmonized System, the Section or Chapter notes, and the heading or subheading texts. These have been converted into the schedule to the Customs Tariff .

13. To complement the legal core, there are Explanatory Notes. While these notes do not form part of the legal core, Section 11 of the Customs Tariff requires that regard shall be had to the Explanatory Notes in interpreting the headings and subheadings in the schedule to the Customs Tariff . A number of Canadian Explanatory Notes have been developed to ensure uniform interpretation of tariff subdivisions created to fulfil domestic requirements.

14. As the name indicates, the Explanatory Notes offer explanations as to what is included in certain headings or subheadings, how certain Chapter or Section notes should be interpreted, how certain products of a heading are manufactured, and general information respecting the scope of the various headings and subheadings. In addition to having general Explanatory Notes to each Section and Chapter, there are Explanatory Notes corresponding to every heading. Many subheadings also have Explanatory Notes.

15. For the purposes of subsection 10(2) of the Customs Tariff, the same principles of tariff classification will apply as provided for in subsection (1). However, in accordance with subsection 10(2), certain agricultural products can only be classified under a tariff item that contains the phrase “within access commitment” when the importer has a valid import permit specifying entitlement to the “within access commitment” rate of duty, issued by the Department of Foreign Affairs and International Trade (FAIT). These permits may be issued individually for particular importations of goods (application required), or they may be General Import Permits (GIPs) (for which no application is required) such as for wheat, barley, and wheat and barley products which are administered on a first-come first-served basis. Further, these permits will have terms and conditions which must be met to be valid. If the importer does not have an import permit or if the “within access commitment” GIP has been revoked by FAIT, the goods are classified under the “over access commitment” tariff item, which attracts a higher rate of duty than the “within access commitment” tariff item for those goods.

16. To illustrate this process, refer to Appendix C to this Memorandum and examine the following example:

17. For more information on GIPs and import permits, refer to Memorandum D19-10-2, Export and Import Permits Act .

18. For more information on the administration of “within access commitment” and “over access commitment” tariff items, consult Memorandum D10-18-1, Tariff Rate Quotas .

APPENDIX A

EXAMPLE FOR CLASSIFICATION

Tariff

Item   Description of Goods

27.11

Petroleum gases and other gaseous hydrocarbons.
- Liquefied:

2711.11.00

- - Natural gas

2711.12

- - Propane

2711.12.10

- - - In containers ready for use

2711.12.90

- - - Other

2711.13.00

- - Butanes

2711.14.00

- - Ethylene, propylene, butylene and butadiene
10 - - - - - Ethylene
20 - - - - - Propylene
30 - - - - - Butylene
40 - - - - - Butadiene

2711.19

- - Other

2711.19.10

- - - In containers ready for use

2711.19.90

- - - Other
- In gaseous state:

2711.21.00

- - Natural gas

2711.29.00

- - Other

APPENDIX B

CLASSIFYING LIQUEFIED ETHANE GAS

Tariff

Item   Description of Goods

27.11

Petroleum gases and other gaseous hydrocarbons.
- Liquefied:

2711.11.00

- - Natural gas

2711.12

- - Propane

2711.12.10

- - - In containers ready for use

2711.12.90

- - - Other

2711.13.00

- - Butanes

2711.14.00

- - Ethylene, propylene, butylene and butadiene
10 - - - - - Ethylene
20 - - - - - Propylene
30 - - - - - Butylene
40 - - - - - Butadiene

2711.19

- - Other

2711.19.10

- - - In containers ready for use

2711.19.90

- - - Other -

2711.21.00 - - Natural gas

2711.29.00 - - Other

APPENDIX C

LIVE BROILERS FOR
DOMESTIC PRODUCTION

Tariff

Item   Description of Goods

01.05

Live poultry, that is to say, fowls of the species Gallus domesticus, ducks, geese, turkeys, and guinea fowls.
- Weighing not more than 185g:

0105.11

- - Fowls of the species Gallus domesticus

0105.11.10

- - - For breeding purposes
- - - Broilers for domestic production

0105.11.21

- - - Within access commitment

0105.11.22

- - - - Over access commitment

0105.11.90

- - - Other

REFERENCES

ISSUING OFFICE –

Trade Policy and Interpretation Directorate

LEGISLATIVE REFERENCES –

Customs Tariff, S.C. 1987, Chapter 49, subsection 2(1), sections 10, 11 and subsection 147(1)

HEADQUARTERS FILE –

N/A

SUPERSEDED MEMORANDA “D” –

D10-13-1, January 1, 1995

OTHER REFERENCES –

D8-5-1, D10-18-1, D17-1-10, D19-10-2