14. The Interpretation Rules

14.3. Part 2: Classify by the terms of headings and legal notes

The second part of Rule 1 directs:

...for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes...

Key point

The classification of goods in the Nomenclature, and in any national tariffs based thereon, is to be determined by reference to the 4-digit headings and the Section or Chapter Notes. They are the primary classification factors. This is the key point to Rule 1 and the key point to all classifications.

Terms of the heading

The terms of headings are self-explanatory. If for example, the goods are ball or roller bearings, they are classified within heading 84.82. That’s what the heading covers.

The importance of punctuation

When examining a heading, read the punctuation carefully. In the Nomenclature, a semicolon has the same effect as a full stop. Each grouping of words on either side of a semicolon is independent of the other.

 

Example: read past the first words of heading 84.22

Heading 84.22 reads: Dish washing machines; machinery for cleaning or drying bottles or other containers; machinery for filling, closing, sealing or labelling bottles, cans, boxes, bags or other containers; machinery for capsuling bottles, jars, tubes and similar containers; other packing or wrapping machinery (including heat-shrink wrapping machinery); machinery for aerating beverages.

Five semicolons divide this heading into independent groups. There is no relationship between machinery for aerating beverages and the machinery that precedes it, even though both sit in heading 84.22.

Someone looking for the classification of aerating machines could miss this heading because the first words do not relate to those goods. Examine the entire text of a heading. Do not disregard a heading just because the initial product descriptions are not what you are looking for.

 

Example: heading 42.02 and material qualifiers

Heading 42.02 reads: Trunks, suit-cases, vanity-cases, executive-cases, brief-cases, school satchels, spectacle cases, binocular cases, camera cases, musical instrument cases, gun cases, holsters and similar containers; travelling-bags, insulated food or beverages bags, toilet bags, rucksacks, handbags, shopping bags, wallets, purses, map-cases, cigarette-cases, tobacco-pouches, tool bags, sports bags, bottle-cases, jewellery boxes, powder-boxes, cutlery cases and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanised fibre or of paperboard, or wholly or mainly covered with such materials or with paper.

The heading relates to a variety of containers and is part of the structure of Chapter 42, which relates essentially to leather goods.

On the third line, after the words 'similar containers,' there is a semicolon.

•    The containers described after the semicolon must be made of certain materials (leather, plastic sheeting, textile, vulcanised fibre, paperboard).

•    The containers described before the semicolon have no such material qualifier.

What this means is that although goods such as travelling bags, shopping bags and sports bags, must be made of certain materials to be classified in heading 42.02, goods such as suitcases, spectacle cases and binocular cases, may be made of any material.

For example, an aluminium briefcase is classified within heading 42.02, not in the headings of Chapter 76, because briefcases sit in the first group, where material is not a constraint.

These examples show why reading the words and punctuation carefully is so important. Read what is there, not what you think is there. Many classification mistakes come from misreading the Nomenclature.

Residual headings

Residual headings operate at the 4‑digit level and may or may not use the word “other”. They are different from the ‘other’ subheadings found within a heading (as already covered in the study guide) which operate at the 6‑digit level. 

Many chapters in the Nomenclature contain residual headings. They exist because although the Nomenclature has provision for some 5,000 classifications, the number of different types of commodities being traded throughout the world far exceeds 5,000, and the majority of headings/subheadings of the document, that is, those that describe goods in their own right, reflect those commodities that are traded the most. Residual headings are required to accommodate the vast array of other products that are traded to a lesser extent and do not merit individual recognition within the document.

Note

The Harmonized System Committee uses a threshold to decide whether a commodity is described in its own right in the Nomenclature. To merit heading status, its value of trade must exceed US$100 million per annum. To merit subheading status, its value of trade must exceed US$50 million per annum.

How residual headings are described

Heading

Wording

21.06

'Food preparations not elsewhere specified or included.'

44.21

'Other articles of wood.'

84.79

'Machines and mechanical appliances having individual functions, not specified or included elsewhere in this Chapter.'

Regardless of how they are described, residual headings are an integral part of the Nomenclature and have the same status as any other classification. Classifiers should not attempt to fit goods in the preceding headings - “at all costs” - with a view to avoiding classifying goods within these “other/residual” headings.

Note: How to test against a residual heading

The classification of goods within residual headings is dependent upon those goods not being classified in headings that more specifically describe goods. The correct procedure to classify goods involving consideration of residual headings is not to compare residual headings with other more specific headings, but rather to ask the question, ‘Are the goods classified in the more specific heading?’ If the answer is ‘yes’, the goods are so classified, and there is no need to proceed to the residual heading. If the answer is ‘no’, the goods are classified within the residual heading.

Section and chapter notes

The other primary classification factor is the legal notes. They appear at the front of some sections and all but three chapters. The different types of legal notes are covered in Part 2. Two functions of legal notes deserve attention here.

Two functions of legal notes

01 They define terms

Legal notes can fix the meaning of a term for the purposes of a heading, for example, the dimensions of "pocket-size" for heading 84.70.

02 They direct classifiers

Legal notes point classifiers towards or away from particular areas of the Nomenclature.

 

Example: “pocket-size" is defined in Note 9 to Chapter 84

Note 9 to Chapter 84 directs: For the purposes of heading 84.70, "pocket-size" applies only to machines the dimensions of which do not exceed 170 mm x 100 mm x 45 mm.

An examination of heading 84.70 will reveal that the term ‘pocket-size’ relates to data recording, reproducing and displaying machines that have calculating functions.

Therefore, a data recording machine that incorporates a calculating function, for example, has to comply with the dimensions that are set out in Note 9, irrespective of any claim that the goods are ‘pocket-size’. If the product exceeds those dimensions, it will not fall within heading 84.70.

 

Example: Note 1(s) to Chapter 95 directs classifiers elsewhere

Heading 95.06 covers amongst other goods: ...equipment...for...sports...or outdoor games...

However, Note 1 to Chapter 95 excludes certain goods, which at first consideration, may have been thought classified within heading 95.06. Consider the classification of sports whistles, for example. Whilst heading 95.06 seems a logical classification, Note 1(s) excludes these goods from Chapter 95 and points to heading 92.08. The correct classification is therefore automatic.