n January 27, 2022, the new Harmonized Tariff Schedule of the US (HTSUS) was rolled out with many changes to classifications — some of which were unexpected. These changes could impact the classification of your products and the amount of duty you may be charged to import your goods into the United States. The apparel and textile industries are especially vulnerable to these changes due to the wide variety of products they encompass, including clothing, footwear, textiles, and accessories.
Apparel and textiles imports into the U.S. were valued at $121.4 billion in 2017, reflecting the year-on-year increase in consumer spending and the improving economy. Despite the growth of this industry, many importers still struggle with classifying their products correctly. And with the new changes to the HTSUS, this could be more confusing to American importers. Your business will be much better prepared if you know what is ahead so you can develop strategies to deal with it.
Importers need to follow current industry trends when reviewing proposed changes and consider how they affect their business. In this article, we will discuss the changes to the HTSUS in general and for apparel and textiles in specific; this will help you navigate the classification changes and understand how they might affect your business when importing apparel and textiles into the U.S.
What is the HTSUS?
The HTSUS is a global standard and the basis for trade agreements like USMCA/CUSMA/T-MEC and CAFTA-DR. As a comprehensive system of names and numbers used to classify traded products, HTSUS is designed to fulfill two functions: first, it provides a commodity classification system for the collection of international trade statistics based on a common language; and second, it is an instrument for the administration of tariff and trade measures.
The HTSUS is the primary resource for determining tariff classifications for goods imported into the United States. In addition to providing tariff rates, the HTSUS also contains legal notes that provide interpretive guidance on how certain goods are classified in a specific section or chapter of the tariff schedule. The last major update to the HTSUS occurred in 2017, when the North American Free Trade Agreement (NAFTA) was replaced by the US-Mexico-Canada Agreement (USMCA). While the U.S. continues to negotiate new trade agreements, the negotiations will be based on the 2022 HS updates.
Why is the HTSUS changing?
The HTSUS has been in place since 1989, while the rate of change in global trade and technology has increased significantly over the last 30 years. This necessitates periodic revisions to account for new commodities every five years to align with the Harmonized Schedule (HS) issued by the World Customs Organization (WCO). On a local level, the U.S. International Trade Commission (ITC) has been updating the HTSUS since 2017 to reflect changes in technology and industry practices and new international standards in areas such as environmental and health care products.
Changes to the 2022 HTSUS have gone into effect on January 27, 2022. There are numerous changes to classifications at the 4-digit Heading Level, the 6-digit Subheading Level and in some cases, the 8-digit Legal Tariff Level. Although the changes are to provide relative duty neutrality, some of the new Legal Chapter Note provisions clarify the interpretation of the tariff classification for some products. The changes may also impact the Most Favoured Nation duty rates, Free Trade Association tariff shift rules and, in some cases, previously issued Customs Rulings.
The proposed changes to the HTSUS will affect imports and exports in many industries, including apparel and textiles. Among these changes, updates were made to:
- Account for new technologies;
- Better reflect environmental, health, and safety concerns; and
- Provide US Customs and Border Protection (CBP) with more detailed information to evaluate trade compliance matters.
Moreover, the changes in the updated version of HTSUS will impact many aspects of your business, including:
- Classification of imports and exports
- Determining applicable duties
- Identifying products that are eligible for special duty treatments
- Claiming free trade agreements or other preferential programs
- Ensuring compliance with quotas and/or textile verification procedures
The Office of Textiles and Apparel (OTEXA) has provided a detailed summary of the 2022 Harmonized Tariff Schedule to align the trade community on the changes.
What are the Changes in the 2022 HTSUS for Apparel and Textiles?
The HTSUS contains specific categories for every type of fabric, garment construction method, embellishment technique, and textile component processed manufacturing process imaginable for apparel and textiles. For example, there are different tariff codes for knit fabrics made from silk yarns versus knit fabrics made from synthetic yarns. This can be unclear for brands and retailers who do not have an extensive background in importation and classification codes but need to navigate them.
The major overhaul of the HTSUS includes significant changes to product descriptions, tariff provisions, and legal notes in several chapters relevant to apparel and textile importers. The changes are intended to align U.S. classifications with those of other WCO member nations and ensure that product descriptions reflect technological advances and recent industry trends, including health and safety considerations.
The new HTSUS provisions will have a major impact on apparel and textiles importers by:
- Broadening the scope of Chapter 61 and/or 62 of the HTSUS for certain types of apparel (e.g., knitted fabric) or material used in the production of apparel (e.g., fur, plastics).
- Limiting the scope of Chapter 61 and/or 62 for other types of apparel (e.g., woven fabric).
How will this Affect you as a Textiles and Apparel Importer?
Apparel and textile classification presents many challenges to importers and customs brokers alike. The reason for this is the subtleties in the product descriptions and images associated with each code that is required to identify between a wide variety of articles that can vary by material, quality, size, design, branding, etc. Each code has its own set of rules that must be followed to classify any new product into it.
Changes in Textiles and Apparel Classifications
The apparel and textile industry will see changes in the following classifications and their respective duty rates:
- Garments of man-made filament yarns, including knitted or crocheted garments
- Garments of cotton, including knitted or crocheted garments
- Garments of man-made staple fibers, including knitted or crocheted garments
- Garments of other textile materials, including knitted or crocheted garments
- Garments made of laminated or coated fabrics
- Articles of apparel and clothing accessories, not knit or crochet
How GHY can Help you Prepare for the 2022 HTSUS Changes
Apparel and textile tariffs are some of the most complex issues in international trade. Broader tariff changes can cause big challenges for you and your business to know what is going on around regulations and tariff code updates. That’s why we’re here to free trade and help you eliminate import complexities.
Contact one of our trade experts to get a preview of the 2022 HTSUS changes and ensure you are one step ahead of the 2022 changes coming for apparel and textiles. We offer guidance on classifying your products and help with duty drawbacks, import license requirements, and USMCA qualifications.