Top 10 Customs Classification Mistakes to Avoid

Why Classification Errors Are So Costly

Tariff classification errors are the single largest source of customs penalties in the United States. CBP's Regulatory Audit Division reports that classification discrepancies appear in a significant percentage of focused assessments, and the financial impact ranges from minor duty underpayments to six-figure penalty assessments. The following ten mistakes account for the vast majority of classification errors seen in practice.

1. Classifying by Product Name Instead of Tariff Terms

The HTS classifies goods based on the terms of the headings and notes, not commercial product names. A product marketed as a "fitness tracker" might be classified as a wrist watch (Chapter 91), an electronic instrument (Chapter 90), or a data processing machine (Chapter 84) depending on its primary function and construction. Always start from the tariff language, not the marketing language.

2. Ignoring Section and Chapter Notes

The section and chapter notes are legally binding and take precedence over heading text. For example, Chapter 39 (Plastics) Note 2 defines what constitutes a "polymer" for classification purposes — ignore this and you may classify a product under the wrong chapter entirely. These notes frequently include or exclude specific products and define key terms used in the headings.

3. Applying GRI Rules Out of Order

The six General Rules of Interpretation must be applied sequentially, starting with GRI 1. A common error is jumping to GRI 3 (most specific heading) without first exhausting GRI 1 and GRI 2. This can lead to a defensible-looking classification that is technically incorrect because the proper analytical framework was not followed.

4. Failing to Identify Material Composition

Many HTS headings classify products by their constituent materials — textiles by fiber content, chemicals by composition, metals by alloy type. Relying on a supplier's general description ("polyester bag") without verifying the actual material breakdown ("52% polyester, 48% nylon") can result in classification under the wrong subheading. For textiles in particular, the chief weight rule means a few percentage points can shift the entire classification.

5. Using Stale Classifications

The HTS is updated annually, and sometimes more frequently through presidential proclamations or trade remedy actions. A classification that was correct in 2024 may be wrong in 2026 because the heading was amended, a new subheading was created, or the duty rate changed. Importers who set up a classification once and never review it are sitting on a ticking compliance time bomb.

6. Ignoring End Use and Principal Function

Some headings classify based on function rather than material — particularly in chapters 84, 85, and 90 (machinery, electrical equipment, instruments). A motor designed for use in a washing machine may classify differently than the same motor sold as a general-purpose component. Understanding the principal function and intended end use is essential for these chapters.

7. Misclassifying Sets and Composite Goods

Goods put up in sets for retail sale (GRI 3(b)) must be classified by the component that gives the set its essential character. A first-aid kit with bandages, scissors, antiseptic, and a case requires analysis of which component provides the essential character. Importers frequently default to classifying under the most expensive component, but that is not what the GRI requires.

8. Not Consulting CBP Rulings

CBP has issued tens of thousands of binding and internal advice rulings on classification questions. These rulings are publicly available in the CROSS database and represent CBP's official position on how specific products should be classified. Failing to consult relevant rulings means missing critical guidance — and if CBP has already ruled on a substantially similar product, your contrary classification will not survive an audit.

9. Incorrect Country of Origin Determination

While not strictly a classification error, country of origin mistakes often accompany classification errors. The country of origin affects duty rates under trade preference programs, antidumping and countervailing duty liability, and marking requirements. Substantial transformation rules under 19 CFR Part 134 require careful analysis — simply assembling components in a country does not necessarily confer origin.

10. Relying on Supplier-Provided HTS Codes

Foreign suppliers often provide HTS codes as a convenience, but they have no legal obligation to get them right — and frequently do not. The importer of record bears full legal responsibility for classification accuracy. Using a supplier's code without independent verification is a failure of reasonable care that CBP will not accept as a defense.

“The importer of record is ultimately responsible for the accuracy of all information provided to CBP, regardless of who prepared the entry or provided the underlying data.”

— 19 USC 1484 — Customs Modernization Act

How TariffPro Prevents These Mistakes

TariffPro's AI classification engine is designed to address each of these pitfalls systematically. It classifies based on tariff terms rather than product names, applies GRI rules in sequence, cross-references CBP rulings, flags stale classifications when HTS updates occur, and creates documented audit trails for every decision. For US importers processing more than a handful of classifications per month, it transforms a high-risk manual process into a structured, defensible workflow.