A common error in HTS classification is assigning a tariff code based solely on the material a product is made of — plastic, metal, glass, etc.
While material composition may seem intuitive, the Harmonized Tariff Schedule (HTSUS) prioritizes function and use over mere material in many sections.

Failing to apply this principle often leads to misclassification, incorrect duty payments, and compliance risk — especially for composite goods or multi-component products.

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Why “Material-Based Classification” Leads to Errors

1. HTS Rules Focus on Purpose and Use, Not Just Substance

The General Rules of Interpretation (GRIs) — the legal backbone of HTS — establish that classification should reflect a product’s essential character, not just its material composition.

Under GRI 3(b), when goods consist of multiple materials or components, classification is determined by the material or component that gives them their essential character — which is often linked to function.

Example:
A plastic flashlight isn’t classified as a “plastic article” (Chapter 39) but as an electrical lighting device (Chapter 85) — because its function defines its tariff identity.

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2. Material Headings Are Often Residual

Many “material chapters” (e.g., plastics, metals, wood) contain basket categories meant for goods not elsewhere specified or included (NESOI).
If another chapter covers the product based on its function or use, that heading takes precedence over a material-based one.

For instance, a stainless steel kitchen knife is not classified as an “article of steel” — it falls under cutlery due to its function.

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3. Overlooking Section Notes Can Mislead

Section and Chapter Notes often explicitly exclude functional goods from material-based chapters.
For example:

• Section XV (base metals) excludes machinery and electrical equipment of Section XVI.
• Chapter 39 excludes machines, tools, and appliances made of plastic but designed for specific functions.

Ignoring these notes often results in double misclassification: first by material, then by missing the correct chapter referral.

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Common Scenarios Where This Mistake Appears

Scenario	Incorrect (By Material)	Correct (By Function)	Why It Matters
Plastic kitchen utensil	Classified under “articles of plastic”	Classified under “kitchenware” (Chapter 39.24)	Heading 39.24 explicitly covers function, not material
Metal drill bit	“Articles of steel”	“Tools for working metal” (Chapter 82)	Function overrides material composition
Plastic motor housing	“Plastic parts”	“Parts of machinery” (Chapter 84/85)	Notes exclude functional machine parts from plastics
Glass thermometer	“Glassware”	“Instruments for measuring temperature” (Chapter 90)	Function defines the tariff scope
Composite device (metal + plastic)	“Other articles of mixed material”	Determined by essential function (GRI 3(b))	Material-based approach ignored essential character

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How to Avoid This Mistake in HTS Classification

1. Determine the Product’s Essential Character

Ask:

“What does this product actually do?”
“Which component performs its main function?”

If the product’s core purpose is functional (not decorative or structural), classification must reflect that function.

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2. Apply the General Rules of Interpretation (GRIs)

• GRI 1: Start with the legal text of headings and notes.
• GRI 3(b): For mixed materials or functions, classify by essential character.
• GRI 6: Compare subheadings by applying the same logic.

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3. Check Section and Chapter Notes

Before confirming a material-based heading, review Section and Chapter Notes to ensure:

• No exclusion clauses apply.
• No reference redirects the product to another section.

Pro tip: Notes often state: “This Chapter does not cover…” — that’s your sign a functional reclassification is required.

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4. Document Functional Reasoning

Record why a product’s function overrides its material in your classification notes or audit trail.
This builds defensibility in audits and aligns with best practices for compliance documentation.

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5. Leverage AI Tools That Weigh Function Over Form

Modern HTS engines, like Trade Insight AI, integrate semantic analysis that evaluates:

• Product purpose and behavior
• Key action verbs (“cut,” “measure,” “heat,” “transmit”)
• Context clues from technical specs and use cases

This ensures your classification logic aligns with functional intent, not superficial materials.

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Conclusion

Classifying goods by material rather than function is one of the most frequent — and costly — errors in HTS classification.
The function of a product determines its true tariff identity under the General Rules of Interpretation, supported by Section and Chapter Notes.

To stay compliant:

1. Identify the essential function.
2. Verify legal notes and GRIs.
3. Document rationale for audit readiness.
4. Use AI tools like Trade Insight AI that classify based on functional logic, not material labels.

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Explore the series:
Common HTS Classification Mistake #1: Ignoring Section Notes and Legal Notes

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