Chemical & Pharmaceutical Tariff Classification

Posted by Jim Conrad
Blog originally posted on 01/06/2023 07:45 AM

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Why is it that chemicals and pharmaceutical items are often classified incorrectly? The answer has more to do with the nature of pharmaceutical trade than the complexity of the tariff (though it is complex). In an industry with its fair share of non-commercial product movements for testing, diagnosis, analysis, and new product development, that ‘newness’ and the speed at which product moves can make compliance determination challenging. However, meeting reasonable care standards makes attention to and investment in an accurate classification process critical. Here are some tips on how to get it right.

Classification of Drugs - The Basics

Finished drugs are typically classified in Chapter 30. To be considered a drug under the harmonized tariff, the substance must be:

  1. Therapeutic – used in the healing of a disease
  2. Prophylactic – used in the defense of a disease
  3. Medicine – used in the treatment of a disease as a curative substance

Of course, that’s not the end but the beginning of the questions:

  1. Is the product a separate chemically defined substance?
  2. For use in clinical trials?
  3. Organic or inorganic?
  4. Placebo or contains API?
  5. Pre-clinical trial product? FDA Phase?

We often find in discussing drug classification with importers that product is incorrectly classified in Chapter 30 as a finished drug when a classification that better describes the item in its raw form is correct.

Classification of Chemicals

Chemical trade is very reliant on the Material Safety Data Sheet (MSDS). However, chemicals should not be classified with just the MSDS. While it may have the Chemical Abstract Service (CAS) number and chemical name, it will rarely have all the ingredients listed (just the hazardous ones). You’ll need to know the principal use of the product (of course). You’ll also need to identify all the functional groups in the chemical structure, i.e., hydrocarbons, aldehydes, and alcohols. Yes, that means that knowing the chemical name of the substance will not suffice (sorry). You’ll likely need quite a bit of other information about the product that may require the skills of a chemist. Unfortunately, I’m not a chemist, so we keep one on staff for the particularly ugly stuff, but a lot of information is available on the web.   Below is a list of questions that will help to drive you to an accurate HS classification of your product:

  1. Single compound?
  2. Principal use?
  3. Chemical name?
  4. Chemical structure?
  5. If not pure, what is the weight of each component?
  6. CAS#?
  7. Organic/inorganic?
  8. Know by any other names?
  9. Dissolved in anything?

Lastly, how do I know if I’m doing it right? There are some tell-tale signs that may indicate that you need some help. Do you get a lot of CF28 Customs Requests for Information or CF29 Notices of Action for classification changes? Have you been advised of an upcoming Customs Assessment recently? Do you have an unusual number of sample requests from Customs or exams?

Reasonable Care starts with training, documenting, and auditing your work. Good Luck.

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Topics: HS Classification

Blog originally posted on 01/06/2023 07:45 AM

Jim Conrad

Written by Jim Conrad

Jim joined Tradewin in 2009, continuing a successful career in international logistics and trade compliance that began in 1980. He has spent more than three decades in leadership roles overseeing international trade compliance including the positions of corporate Director of Operations and as Chairman of the Board of Directors for a large U.S. shipper’s association. Jim’s technical background covers a wide range of international trade areas including harmonized tariff classification, valuation, anti-dumping and risk analysis. Jim is a graduate of North Shore Community College and majored in Business Administration at Salem State University. He is a member of the International Compliance Professionals Association and a U.S. Licensed Customs House Broker.