Natalia Chi
The application of US trade laws relies on the correct classification of the imported product. Activate fare preference benefits if applied correctly and enforcement control if not.
In 2022, the Harmonized Tariff Schedule of the United States (HTSUS) underwent a major overhaul. While the update included tariff codes for some products in the electric vehicle (EV) and automotive industries, the static nature of customs laws and regulations makes it difficult for the agency to keep pace with the rapid introduction of new electronic products. As a result, the correct HTSUS classifications for the EV supply chain will continue to lag behind technological advances in this sector.
What brought us here
- On 1 January 2022, among other changes, the World Customs Organization (WCO) created new classifications for electric heavy trucks under subheadings 8704.41 to 8704.60.
- Prior to the WTO’s 2022 tariff classification updates, electric heavy trucks were primarily classified under sub-item 8704.90, and the CBP implemented these WTO changes to the HTSUS.
- The EV contains numerous components not found in an internal combustion engine (ICE) vehicle, including some battery inputs and battery management system (BMS) components, such as the electric power control unit (EPCU ).
- Battery inputs for vehicles are typically classified under HTSUS 8507, although the sub-entry may vary based on battery chemistry and input characteristics, such as a battery cell, battery module, or battery pack.
- Depending on the functions of the components within the BMS, its classifications can vary from those concerning EPCUs and electrical control units with more individual functions to devices which contain boards and perform more specific functions (e.g. communication, measurement, etc. ).
What to know
- The HTSUS upgrades add new challenges beyond interpreting the classification of certain products.
- These challenges can also impact the duty rate, the application of Section 301 duties, and FTA eligibility, among other issues.
- For example, in some cases, the new HTSUS amendments may add complexity in determining whether a given part is considered a principal, principal, or ancillary part, which may impact its qualification under the USMCA.
- With decades of prior classification rulings, administrative guidance exists to help guide interpretations of classification when the underlying laws and regulations have not caught up with the technology. However, the line between multiple possible classifications can be a close call. For instance:
- Electrical control panels with the following characteristics would traditionally be classified under HTSUS heading 8537: (1) comprising at least two components under HTSUS heading 8535 or 8536; (2) incorporate programmable memory for instruction storage; and (3) electrically control various functions of another device.
- At the same time, switchgear which lacks any of these features or which has additional functions equivalent or predominant to electrical control may find itself properly classified under HTSUS 8543 or elsewhere.
- As electric control cards evolve with electric vehicle technology to potentially change characteristics or acquire more functions, this can raise questions as to whether the classification previously used for the card is aligned with the latest technology.
How can we help
The components and products used in EV assembly are critical to the implementation and functionality of EVs and their global supply chain. However, the industry’s evolving technology will continue to outpace the rules for classifying these components, presenting challenges for executives to ascertain the required U.S. regulations and other import legal information, ultimately impacting cost and production time. of the associated EV supply chain in the United States. It can also undermine and dissolve the company’s compliance performance in the US and bring its imports under the CBP microscope.
The Electric Mobility team can leverage its extensive HTSUS classification with its experience of the mechanical and electrical parts of the electric vehicle to advise on these emerging and highly complex tariff classification issues that have broad implications for a utility company’s supply chain. electric vehicles.
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