Need A CBP Binding Ruling? We’ll Prepare and Submit It

The complex legal language used to articulate customs regulations often leaves a lot of room for interpretation. You could ask three different customs experts to classify a commodity and receive three different Harmonized Tariff Schedule (HTS) codes in return. If you need a definitive answer regarding customs compliance, one of your best options is to request a binding ruling from U.S. Customs and Border Protection (CBP).

Key Takeaways

• Binding rulings, also called customs rulings, provide importers with guidance and decision-making about certain aspects of customs clearance from CBP itself.
• Common reasons to request such a ruling include determining the correct HTS code for a complex commodity, establishing country of origin, and determining whether a trade agreement can be applied to a given product.
• Requesting a binding ruling requires you to supply CBP with detailed information about the goods in question, including manufacturing processes and the source country or countries for the item’s individual components.
• Partnering with a Licensed Customs Broker will help you submit the most thorough ruling request possible, ensuring an accurate and authoritative answer to your question.

In this article, we’ll review what a binding ruling is, situations that might call for a ruling request, and how importers benefit from letting CBP have the last word. 

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Binding Ruling Meaning

When you request a binding ruling from CBP, you are essentially asking for a directive about how to classify your imports from the authority who enforces those rules. The ruling is considered binding for CBP and the requesting party. 

The Binding Rulings Program provides importers with a mechanism to make these requests. Once submitted, the request is eventually scrutinized by the National Commodity Specialist Division (NCSD) of Regulations and Rulings.

CBP states that customs binding rulings are usually issued within 30 calendar days of successfully submitting the request. This time frame can double or triple under certain circumstances, including:

• Determining Partner Government Agency (PGA) involvement
• The need to perform lab tests 

To see what these rulings address, let’s take a look at some examples provided by CBP’s Customs Ruling Online Search System (CROSS).

Examples of Binding Rulings from CBP

The following examples, while specific, also illustrate some general reasons importers submit binding ruling requests.

Steel Tank, or Car Part?

An importer sought permission from CBP to classify a steel tank as an auto part. Since the tank is designed to be bolted to a truck, the importer argued that the tank should be classified under the heading 8708, which deals with parts and accessories of motor vehicles. He had previously been directed to classify the goods under heading 7309, reserved for reservoirs, tanks, vats, and similar containers with specific volume capacities.

Superficially, this seems like a reasonable request, and there are advantages to classifying something as an auto part rather than an article of steel when it comes to tariff rates. However, the General Rules of Interpretation ultimately indicated that the tanks don’t count as car parts since they’re not designed to be removed. 

Benefit to the Importer: While they pay a higher tariff for articles of steel, the importer will avoid potential punitive actions from future CBP audits by adhering to the ruling and using the recommended HTS code.

Country of Origin Determination

Given how many different countries can contribute to a single commodity’s overall supply chain, determining country of origin isn’t always straightforward. For instance, a Vietnamese-based manufacturer makes lead-acid jump packs for passenger vehicles. Final assembly takes place in Vietnam, but the components are also partially sourced from China.

There are two main factors at play here: whether the manufacturing process is considered “substantially transformative” and which component of the jump pack contributes most to its value. Since assembly mostly involves adding a casing and accessories to a lead-acid battery, the change is considered non-transformative, and the country of origin would not be impacted by this factor.

That leaves the most valuable component, which is the battery itself. Since the battery is made in Vietnam and is the final product’s most highly valued part, CBP determined that the correct country of origin for the jump pack is Vietnam, not China.

Benefit to the Importer: Trade relations between China and the US are often strained, leading to high tariffs and complicated customs compliance rules. Being able to identify the product’s country of origin as Vietnam means the importer won’t have to deal with the unique headaches of sourcing goods from the world’s factory. 

Related: How to Calculate Import Duties and Taxes From China to the US

When to Request a Customs Ruling

Timing is important to ensure you get the most out of your ruling request. For instance, if you’ve gotten far enough along in your business plan to know what you want to sell and your preferred supplier, it would be wise to request a binding ruling for classification guidance months before you start importing.

As stated earlier, CBP tries to respond to ruling requests within 30 days of their receipt. However, the time frame can go up to 90 days in some cases. For this reason, it’s best to submit requests as early as possible.

Some of the most common reasons to request a binding ruling are:

• HTS Classification: This is probably the number one reason importers use the binding ruling program. Getting the right HTS code is crucial for determining duties and tariffs. Keep in mind that the code itself is binding, but the duty rate may fluctuate over time.
• Country of Origin Determination: A product’s country of origin impacts everything from duties and tariffs to whether the product can enter the country in the first place.
• Application of Section 301/232 Tariffs: These tariffs are determined by HTS code and country of origin, so finding out whether they apply to a particular product is an ideal use of the Binding Ruling Program.
• Trade Agreement Eligibility: The rules of origin for trade agreements tend to be very complex. Finding out for certain whether a product qualifies for such treatment can be a massive asset to importers, as conforming products enjoy lower or zero duty rates in many cases.
• Preventing Future Problems: If a CBP audit exposes compliance or classification errors in your business, the fines and penalties can be substantial. Anticipating these issues and requesting associated binding rulings can save you money and time in the future.

Overall, these reasons stem from the desire to take as much uncertainty as possible out of the import process. 

Applying for a CBP Binding Ruling

Customs and Border Protection provides links to information about binding ruling applications on their website. In practice, however, many small and medium-size business owners submit these requests via a Licensed Customs Broker.

There are a few reasons to let a broker handle your binding ruling request, not the least of which is the amount of detail that needs to go into it. The data points CBP will need in order to issue a clear ruling include:

• The country of origin for all of a product’s parts, possibly down to its most basic components such as steel and aluminum
• A detailed description of the product’s manufacturing process
• Weight and dimensions
• A description of the merchandise in question, including its application and intended end user
• Blueprints, drawings, safety data sheets, manuals, samples, pictures, and other literature specific to the product 
• Citations of previous findings that support the importer’s objective

These are just a few pieces of information that need to accompany your request. If the process seems exhausting, don’t worry: you don’t have to go it alone.

Customs Brokerage Services From USA Customs Clearance

Like most customs-related documents, the filing of a binding ruling request is best done by a Licensed Customs Broker with daily experience handling the ins and outs of classification and customs compliance. By partnering with USA Customs Clearance, you can rest easy knowing all of your import paperwork is completed properly and submitted promptly.
Call us today at (855) 912-0406 or fill out a contact form online to find out how we can help you build your import business.