We import parts and accessories. How do we determine the correct tariffs?
Updated: Nov 6, 2021
Logistics manager Jim W imports to the UK for the first time. Customs classification can be a particular hurdle for many businesses. But thanks to his ongoing support subscription, he gets answers from a dedicated customs manager. Here is what we answered.
Jim,
Thank you for your e-mail. We appreciate you reaching out via the ongoing support service, which provided unlimited support for any customs and global trade query.
Choosing the correct commodity code for your product can be difficult and confusing. Getting it wrong can be costly, causing delays loss of cash and make. Chose the right code and save costs, time and expand your business.
The term ‘tariff classification means determining the correct HS code with a Chapter, heading, subheadings or further subdivisions of the national trade tariff for the product you intend to import or export.
If you intend to move goods to and from one country to another it’s essential that they’re classified in order to identify what duties and controls apply and ensure a correct customs declaration.
Whether you have an agent who handles customs entries on your behalf, you have a legal responsibility to ensure the correct classification is applied.
Incorrect classification can lead to delays in clearing goods, overpayment of duty and possible penalties.
In the EU, it is, for example, Combined Nomenclature (CN) under which the goods will be classified.
Classification is not just used to determine the customs duty rate for a specific good. It is also used to apply non-tariff measures. So, even if all goods were zero-rated for customs purposes, classifications could still be necessary if you need to:
apply for an import or export licence
find out if import or export restrictions apply
issue a certificate of origin
claim an export refund or similar
determine whether a product is liable to excise duty
find out if a reduced value-added tax rate applies
The system in your country is based on the Harmonized System (HS Codes) which is defined by the first 6 digits. The good news: 98% of World Trade uses the HS system over 180 countries. For exports: Usually, 8 digits used, imports mainly 10 but some do have many more.
The tariff is like a book of products, of 21 Sections, 99 chapters but many countries only use 97 (77 Empty). There is a logical progression of how the "book" is structured with Chapters, heading, subheading etc.
Take the EU as an example. The EU classification system has 2 elements:
The Combined Nomenclature (CN) - the EU’s 8-digit coding system. The CN is used for the EU’s common customs tariff. It is also used to provide EU trade statistics.
The Integrated Tariff (TARIC) provides information on all trade policy and tariff measures that apply to specific goods in the EU (e.g. temporary suspension of duties, antidumping duties).
It is made up of the 8-digit code of the CN plus 2 extra digits (TARIC subheadings).
To learn more, I would like to invite you to one of our next customs classification pieces of training. Using fun and stimulating exercises, let us break down complexities and help you unleash your inner classification warrior. We will look at
Explanation and importance of the Tariff
How a commodity code is made up
Determining the correct code for your products
General Rules of Interpretation
Binding Tariff Information
Best practice tariff code management
Effective use of TARIC and the UK Global Tariff
The EU’s Access2Markets tool explained
Classifying parts and accessories
Classifying sets, machine parts and more
Understanding Rules of Interpretation
Book here: https://www.customsmanager.org/booking
Keep your eyes on our Expert blog as well. It has a dedicated classification section where new decisions, updates and rulings are posted. All to keep you up to date. There are even classification quizzes. Can you classify these items?
https://www.customsmanager.org/customs-global-trade-blog/categories/customs-classification
Don't forget our classification hub to support you. It provides full details on how to classify your product, provides checklists and much more: https://www.customsmanager.org/easy-customs-hs-code-classification
I am looking forward to seeing you soon. Do not hesitate to reach out to our dedicated customs manager if you'd like a helping hand with your classification.
Thanks for being with us
Arne