In the United States, a ruling may be requested under Part 177 of the CBP Regulations (19 C.F.R. Part 177) and in Canada, advance rulings concerning the tariff classification of goods may be obtained from the CBSA under paragraph 43.1(1)(c) of the Customs Act.
The key advantage of obtaining an advance ruling from Customs is that it provides certainty to the importer as to how the specific goods in question are to be classified. This not only firmly establishes the applicable duty rate for purposes of determining landed cost, but also facilitates the various documentation requirements for clearing goods at the border.
So why might you NOT want to get a binding ruling? Seattle-based compliance expert Jim Dickeson addressed this seemingly counterintuitive question in a recent article entitled The Ruling that Binds.
The foremost reason Dickeson offers is the possibility that the classification ruling you perhaps hoped to obtain may not wind up being that which Customs arrives at. After assessing your ruling request if, for whatever reason, Customs mistakenly determines that your merchandise should be classified under another tariff item that happens to attract a higher rate of duty than was initially anticipated, you will now be legally obligated to pay the higher rate of duty whenever the goods are imported until such time as the dispute is eventually resolved (presumably in your favour) through a lengthy and potentially expensive re-determination and refund claims process.
As an alternative approach to the conventional gambit, Dickeson recommends that importers undertake everything needed to properly make a ruling request with the intent of being absolutely sure that Customs fully understands the product in question and gives you the correct classification; e.g., providing product literature, detailed technical information, references to other rulings to support your position, and even samples if necessary. However, at the point you get all of that information together, Dickeson suggests you STOP right there and not submit the request… but instead, just file the information away in a safe place.
Dickeson’s reasoning is that in compiling all the information needed to make a ruling request you have already more than adequately fulfilled your precautionary “reasonable care” standard and, in the event Customs ever challenges the tariff classification of your product at some later point in time, it should be sufficient to prove your case.
Of course, there is an element of risk involved in either approach and we are not necessarily in complete agreement with Dickeson’s opinion on the matter. It is though perhaps something that may be worth bearing in mind when considering whether or not to obtain a binding ruling from Customs in future.
