In the field of mechanical engineering, there is a problem. More specifically, the experts in customs at each company. The different parts of these companies can work well together and share important information for daily business, but the customs tariff is and will continue to be a problem.
People often talk about the customs tariff in general because they don't know much about it and there aren't many ways to learn more. This is also one reason why ERP master data for international trade isn't always kept up to date.
Chapters 84 and 85 of the customs tariff are the most important for mechanical engineering. Because people often don't have enough in-depth technical knowledge. I don't just bring that, of course. The main way I got it was through my work in the private sector. Even now, there is still a lot to learn.
In this blog post, we try to give an overview of these two chapters and go into some of them in more depth.
Chapter 84 classifies nuclear reactors, boilers, machinery and mechanical appliances; parts thereof. Chapter 84 contains about 86 headings.
Chapter 85 classifies "Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles". Chapter 85 contains about 48 headings.
So, in total, there are about 134 headings, making the classification of these Chapters particularly tricky.
Definition of the word "machinery"
What does the term "machinery" mean in the customs tariff? It's straightforward. According to HS note 5 to section XVI, the tariff defines "machinery" in terms of its function, as it is described in the wordings under the first four digits (also known as the "HS heading") of the customs tariff number.
For example, for a "diaphragm pump," we look first in chapters 84 and 85 at the 4-digit tariff number level for the appropriate functional description.
We use the web browser's search function to find it. We open Chapter 84 and type in the word "pump."
A summary of HS headings 8412 to 8415
About motors and pumps
The term "pump" appears in the heading "8413 - Pumps for liquids, whether or not equipped with a measuring device; liquid elevators." Even if the diaphragm pump is not specifically mentioned, it still represents a "pump for liquids."
Then we look to see if there are any exclusions from this chapter. We use the notes from Section XVI for this (see chapter below)
What now for machines with multiple functions? There is no alternative text for this image.
We ask the following questions, using the diaphragm pump as an example:
What if this diaphragm pump is outfitted with various components such as valves or an electric motor? Valves, for example, are mentioned in HS heading 8481, and electric motors in HS heading 8501. Which heading should we use in this situation?
Note 3 to Section XVI explains this.
We must determine the main function of machines composed of various components that form a whole and for which there are separate headings in the customs tariff. When we look at the diaphragm pump, we see that the main function is clearly covered by the tariff text at 8413 "Pumps for liquids (...)." The other components are simply parts of the overall pump.
If the valves and/or electric motor are sold separately as spare parts and shipped separately from the machine, they are of course classified under their intended headings as well.
The (exclusion) notes to section XVI are at the heart of chapters 84 and 85.
Before we look at the headings of chapters 84 and 85, we ask ourselves if if the machine or spare part even belongs in one of those two chapters.
The first note of section XVI, to which both chapters 84 and 85 belong, and the first notes of both chapters are devoted to spare parts that are not classified in these chapters. The mechanical engineering industry may be affected by the following exclusions:
Plastic (3926), rubber (4010), or textile conveyor and transmission belts (5910)
plastic (3926) or rubber (4016) seals machine parts made entirely of EPDM, NBR, SBR (4016)
pipe fittings primarily made of steel (7307) or plastic (3917)
simple plastic pipes (3917) or steel pipes (7303-7306), not manufactured as an assembly
steel chains (7315) steel bolts, nuts, cotter pins, washers (7318) or plastics (3926) steel (helical) springs (7320)
machine interchangeable tools (8207)
non-electric hand tools with a steel working part, such as grease guns (chapter 82)
metal tubing that is flexible (8307)
Flow metres and pressure gauges are examples of measuring instruments that belong in chapter 90.
machine parts made of ceramic (6909)
brushes as machine components (9603)
Other machine parts classification
After reviewing the above-mentioned exclusion notes, the question of what else should be considered machine parts or spare parts remains. Note 2 to Section XVI describes them, but in such a convoluted manner that I almost don't understand it. As a result, here it is in layman's terms.
Classification under a separate HS heading in chapter 84, 85, or 90: Purchased components from a supplier with "own" functionalities
heading 8481 valve
If a machine part is mentioned by a heading in chapter 84 or 85, I classify it there rather than in the manufactured machine's (sub)heading (at the 6-digit level). For example, coffee machine valves fall under heading 8481 rather than 8516.90.
We recommend going through all of the headings once and marking what is relevant for yourself. If you buy electrical parts or components with "own intelligence" or functionalities from a supplier who specialises in this field, you will typically find them under a specific heading in chapters 84, 85, or 90.
Components manufactured according to CAD drawings are classified in the corresponding (sub)heading of machine parts.
A CAD drawing example
So, what's left? Typically, stamped or injection-moulded parts are purchased from a corresponding supplier based on a CAD drawing. These will only fit into the machine for which they are designed. These components must be assigned to the appropriate "part (sub)headings." For example, an injection-molded housing part of a coffee machine falls under subheading 8516.90, whereas the finished appliance falls under 8516.71.
Classification within the relevant material chapter: Stamped and injection moulded general, regular geometrical parts
Even if they were manufactured according to drawings, stamped and injection-molded parts with regular shapes such as rectangles, profiles, roundels, and the like are not considered "suitable for use solely or principally with a particular kind of machine."
These components are classified in the corresponding material chapter.
Plastics (Chapter 39)
rubber (chapter 40)
steel (Chapter 73)
A well-informed layperson should be able to tell without much research whether a machine part is considered suitable for use solely or primarily with a specific type of machine.
Which machine technical data are required for proper classification?
I still need to determine the remaining local digits of the customs tariff number, i.e. the so-called subheadings, after I found a heading for the machines in chapters 84 and 85. It is important to understand the machine's technical specifications. This may be difficult, especially with supplier machines, if data sheets are missing from the ERP system (I can tell you a thing or two about it).
Aside from the machine's functionality, which I need to know for almost every number, the following parameters are required:
steam turbines (8406): power in MW internal combustion engines (8407): cylinder capacity in cm3 hydraulic turbines (8410): power in kW turbojet engines (8411): thrust in kN, power in kW electric motors (8501): output in W and kVA electric generating sets (8502): output in kVA electric transformers (8504): power handling capacity in W electric resistors
Electric incandescent lamps and discharge lamps, LED lamps (8539): power in W, voltage in V electric cables (8544): voltage in V