In Detail
Section 484 of the Tariff Act of 1930 requires every importer of record to use "reasonable care" in making entry. For classification, reasonable care means taking appropriate steps to ensure that the HTS code declared on the entry summary is correct — not merely relying on the customs broker's filing or an inherited classification with no independent review.
CBP has not defined reasonable care through a checklist — the standard is fact-specific and scales with the importer's size, sophistication, and the complexity of the goods. A multinational corporation with a dedicated trade compliance function is held to a higher standard than a small business importing for the first time. CBP's Reasonable Care Informed Compliance Publication identifies factors relevant to the standard's application.
Indicators of reasonable care in classification include: consulting a licensed customs broker with relevant expertise; obtaining a CBP binding ruling; reviewing applicable CBP Informed Compliance Publications; researching comparable CROSS rulings for the goods; maintaining written classification records with rationale; and conducting periodic internal classification reviews. Any combination of these, appropriately documented, supports a reasonable care defense.
Reasonable care is also the threshold for CBP's penalty authority. Under 19 USC 1592, negligence — defined as the failure to exercise reasonable care — allows CBP to assess penalties of up to twice the unpaid duties on negligent misclassification. Gross negligence carries penalties up to four times unpaid duties. Fraud carries up to the full domestic value of the merchandise. The distinction between these tiers turns substantially on whether reasonable care was exercised.
Classification Significance
Reasonable care is the single most important compliance concept for importers. It is both the legal floor for classification practice and the decisive factor in penalty proceedings. A classification error made despite reasonable care may result in a duty demand but not a penalty; the same error without reasonable care produces both. Documented classification rationale is the primary evidence of reasonable care.
How Kanon Handles This
Kanon's Classification Support Package is designed to document the classification rationale — GRI sequence, note evaluation, heading analysis, and subheading determination — in a form that demonstrates the analytical steps taken. This documentation is evidence of reasonable care: it shows what was considered, in what order, and why the selected code was reached.
Frequently Asked Questions
Is consulting a customs broker enough to satisfy reasonable care?
Not automatically. Reasonable care requires an active role, not mere delegation. Providing the broker with complete and accurate product information, and reviewing the classification they propose, are part of the standard.
What is the penalty for failing to exercise reasonable care?
Under 19 USC 1592, negligence (failure of reasonable care) can result in penalties up to twice the unpaid duties. Gross negligence carries up to four times unpaid duties.