How “Non-Binding” NGO Comments Affect U.S. Customs Tariff/HTSUS Classifications

A recent customs ruling highlights how “non-binding” Explanatory Notes published by a non-governmental organization (NGO) can affect classifications under the Harmonized Tariff Schedule of the United States (HTSUS).  Because different tariff rates apply to different types of goods from different countries, these tariff classification questions can involve lots of money and shape business deals and supply chains.

In H3427890, Customs dealt with the chemical compound molybdenum disulphide (MoS2). If that sounds complicated, the basic point is this: MoS2 is not the same thing as pure Molybdenum (Mo). Mo is a metal element. It is imported into the US from Mexico, Chile, and Peru, among other places. MoS2 is a compound made from molybdenum and sulfur and is often used as a lubricant. It is typically imported from Asian countries.

In this ruling, Customs revisited and revoked a previous ruling on MoS2. Yes, Customs can revoke its own rulings! The prior ruling (N306461) was made by the New York office, and it was essentially overruled by the Headquarters (HQ) office. When new information comes to light, or a more clear argument needs to be made, importers can sometimes succeed in taking rulings to HQ to be revisited.

In this case, the original ruling classified the MoS2 under tariff heading 2830, which has the title, “Sulfides; polysulfides, whether or not chemically defined.” On its surface, that seems to be a clear enough fit. MoS2 is a sulfide, after all.

But here another nuance of the tariff classification system comes to light. In its analysis, the customs board made frequent reference to the Explanatory Notes (more fully entitled the Harmonized Commodity Description and Coding System Explanatory Notes, but typically abbreviated simply as ENs). The ENs are published by the World Customs Organization (WCO), an NGO, and provide a commentary on the scope of the heading in in the tariff codes.  Importantly, they are not legally binding nor dispositive. In spite of their non-binding nature, Customs and the Court of International Trade generally treats them as a persuasive guide on the interpretation of the HTSUS tariff code and will use them as guidance.

In this particular ruling, Customs used ENs as a winding trail to get to a tariff classification for MoS2. First, Customs looked at the originally suggested heading, 2830, and found that the ENs explicitly exclude molybdenum sulphide and instead point to another heading, 2613. So next the board went over to that heading (“Molybdenum ores and concentrates”; another category that would seem to fit since MoS2 comes from molybdenum), they again found that the ENs explicitly exclude molybdenum sulphide used as a lubricant (the use at issue in the ruling) and point to another heading, 2530. Finally, Customs reviewed heading 2530 (“Mineral substances not elsewhere specified or included”), including relevant HTSUS Chapter notes and, once again, the ENs. While there were relevant notes to this Chapter, none of them exclude MoS2, and so 2530 was ruled as the correct heading.

This Customs ruling letter basically stands for the proposition that, while the ENs are not binding, they can nevertheless be highly relevant to U.S. importers and their suppliers. 

In summary, obtaining the correct HTSUS classification may involve not just understanding the exact nature of the imported merchandise, but also reviewing chapter notes, the ENs, and prior rulings – and sometimes challenging those rulings.

If you need help navigating HTUS classification issues, please consider contacting us to discuss whether we can help.