Re-Thinking Strategies for Classification Challenges Ahead for New EV Technologies

Application of US trade laws rely on the proper classification of the imported product. It triggers tariff preference benefits when properly applied, and enforcement scrutiny when not.

In 2022, the Harmonized Tariff Schedule of the United States (HTSUS) underwent a major overhaul. Although the update included tariff codes for certain products in the electric vehicle (EV) and automotive industry, the static nature of customs laws and regulations makes it difficult for the agency to keep up with the fast-paced introduction of new e-products. As a result, the proper HTSUS classifications for the EV supply chain will continue to lag behind technological advancements of this industry.

What Got Us Here

  • On January 1, 2022, among other changes, the World Customs Organization (WCO) created new classifications for electric heavy trucks under subheadings 8704.41 through 8704.60. 
  • Prior to the 2022 tariff classification updates by the WCO, electric heavy trucks were mainly classified under subheading 8704.90, and CBP has implemented these WCO changes to the HTSUS.
  • The EV contains numerous components not found in an internal combustion engine (ICE) vehicle, including certain battery inputs as well as components of the battery management system (BMS), such as the electric power control unit (EPCU).
    • Battery inputs for vehicles are typically classified under HTSUS heading 8507, although the subheading can vary based on the battery chemistry and the characteristics of the input, such as a battery cell, battery module, or battery pack, for instance.
    • Depending on the functions of the components within the BMS, its classifications can range from those that cover EPCUs and electric control units with multiple individual functions to apparatuses that contain boards and perform more specific functions (e.g., communication, measurement, etc.).

What to Know

  • The updates to the HTSUS add new challenges that go beyond the classification interpretation of certain goods.
    • 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 changes may add complexities in determining whether a certain part is considered a core, principal, or complementary part, which can affect its qualification under the USMCA.
  • With decades of past classification rulings, administrative guidance exists to help guide classification interpretations when the underlying laws and regulations have not caught up with technology. However, the line between multiple possible classifications can be a close call. For example:
    • Electric control boards of the following characteristics would be traditionally classified under HTSUS heading 8537: (1) Comprising at least two components under HTSUS heading 8535 or 8536; (2) Incorporating programmable memory for the storage of instructions; and (3) Electrically controlling various functions of another device.
    • At the same time, electric control boards that either lack one of these characteristics or that have additional functions that are equivalent or predominant to electric control may find themselves properly classified under HTSUS heading 8543 or elsewhere.
    • As electric control boards evolve with the EV technology to potentially change in characteristics or capture more functions, this can raise questions as to whether the classification previously used for the board aligns to the newer technology.

How We Can Help

The components and products that are used in the assembly of EVs are critical to the deployment and functionality of EVs and their global supply chain. However, the evolving technology of the industry will continue to outpace the rules for classifying these components, presenting challenges for executives to ascertain the required US regulatory and other legal import information, which ultimately impacts the cost and timing of the associated EV supply chain production in the United States. It can also undermine and dissolve the company’s US compliance performance and bring its imports under the CBP microscope.

The Electric Mobility team can leverage its extensive HTSUS classification with its expertise of the EV’s mechanical and electrical parts to advise on these emerging and very complex tariff classification issues that have broad implications for an EV company's supply chain.


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