As the end of the year quickly approaches, importers are reminded the Harmonized Tariff Schedule (“HTS”) is currently slated for significant revisions effective January 1, 2007.

The 2007 HS Reform affects each of the 166 countries participating in the WCO; Importers should consider the impact of these changes on their operations in order to avoid cargo clearance delays and to ensure the proper tariff classification on imported merchandise. Exporters are also reminded the tariff revisions will impact the Harmonized Tariff Schedule worldwide.

The International Trade Commission (“ITC”) completed its report on the proposed changes to the HTS, earlier this year. More than 350 amendments to HTS Codes and notes have been made, affecting 83, or almost 90%, of the 97-chapter Harmonized Commodity Description and Coding System. HTS Chapters 84, 85, and 90 are the most heavily impacted. These tariff changes currently await enactment through formal proclamation by the President after Congressional reporting and public notice, a process which is expected to potentially delay the January 1st implementation.

Importers will be overwhelmed with the task of updating tariff databases and correlating obsolete tariffs to the newly updated HTS. Since Customs' Automated Commercial System (“ACS”) requires all entry transmissions to include a valid HTS; entry transmissions that contain obsolete tariffs will be rejected unless updated to reflect the new tariff provisions. This process will be further complicated by the fact that many of the tariff revisions do not provide for direct one-to-one correlations to a new tariff subheading.

At present, the new tariff provisions are summarized in the ITC report at the 8-digit subheading level. The U.S. Trade Representative's office has drafted the revisions to the 10-digit level, but has not published the final version. Although most of the proposed tariff revisions are designed to be revenue neutral, the ITC applied the duty rate of most actively traded merchandise in cases where several tariff provisions were consolidated. Therefore, the new tariff changes may, in some cases, affect the duty rate applied to imported merchandise, as well as potentially alter the effect of an importer's tariff classification rulings or certifications concerning free trade agreements.

Importers are encouraged to review the HTS revisions in order to identify records which may require updating and to determine the impact of the tariff revisions upon overall trade compliance.

To help comply with the amendments, John S. Connor, Inc. has produced a correlation table to further advise our customers in updating their HTS information, as well as assist in determining the correct customs duty rate.

Please contact your account representative or Branch Manager for further information and review.

**The 109th Congress will leave town this weekend with the Congressional layover period for the sweeping HTS changes still not complete. The full-60 day layover period is now expected to elapse the second week of January after the 110th Congress has been in session several days. Due to strong pressure from NCBFAA, AAEI and others, House and Senate trade staff did include a provision in the trade and tax package to make the HTS changes effective 30 days after the Presidential Proclamation and HTS changes are published in the Federal Register and posted on the ITC website. Although we had pressed for a 45-day period, this change will help, IF the trade package passes Congress this weekend. [If the bill does not pass, the President might be willing to exercise his discretionary authority to extend the effective date beyond the usual 15 days.]

The Administration is strongly resisting the trade and Congress' pleas to post the changes on the ITC website as soon as the Congressional layover process is over, rather than waiting until the proclamation is signed. This would give the trade an additional two to three weeks to prepare for implementation since it usually takes several weeks for the proclamation to be signed and published. Nevertheless, we continue to work with CBP to have the changes transmitted through ABI at the earliest opportunity. The bottom-line: expect to see the complete HTS changes in mid-to-late January, with an effective date for implementation of mid-to-late February.