International customs operations are based on three essential pillars: tariff classification, origin and value. Defined in article 28 of the national Customs Code, tariff classification is the name assigned to goods in the Common Customs Tariff, which comprises some 15,500 classification headings. An essential classification for all companies operating internationally.
At customs clearance, the commercial designation of the goods must be determined by the corresponding tariff heading. All goods are assigned a code, with different designations such as: tariff species, customs code, HS CODE, customs nomenclature, customs tariff, ... . In all cases, these designations are identified as follows:
- First 6 digits = WCO (World Customs Organization) Harmonized System
- The 8-digit Combined Nomenclatures of the EU (European Union) (NC8)
- TARIC 10 (Integrated Community Tariff) codes are detailed by the EU.
On imports, this classification defines taxation with customs duty rates, trade policy measures (such as tariff suspensions, anti-dumping duties, quotas), safety standards or sanitary or phytosanitary formalities or of any other nature, prohibitions or embargoes, national taxation or the compilation of foreign trade statistics.
For exports, this classification determines the rate of customs duties that may apply to the goods on entry into the third country, sanitary or phytosanitary formalities, prohibitions or embargoes, the application of final destination controls (e.g. for dual-use goods) and the compilation of foreign trade statistics.
To secure commercial operations and know the tariff classification of goods, it is possible to obtain a Binding Tariff Information (BTI) from the customs administration.
BTI is valid for a maximum of 3 years in all member states. However, it can only be invoked against the customs administrations of member states, and not outside the European Union (EU).
DETERMINE THE RIGHT TARIFF CLASSIFICATION
Depending on the type of product, classification can be more or less complicated. These difficulties and subtleties can be overcome, as demonstrated by the 6 HS rules of interpretation:
Rule 1: Titles are only indicative of classification. Classification is determined by the wording of headings and section or chapter notes, when they are not contrary to the terms of the said headings and notes according to rules 2, 3, 4 and 5.
- Rule 2 a : Incomplete or unfinished articles. The rule extends the part of a heading concerning a complete article to an incomplete or unfinished article, provided that it has the characteristics of a finished or complete article. Articles presented in disassembled or unassembled condition. The rule extends the position relative to an assembled article to an article presented in a disassembled or unassembled state.
- Rule 2 b: Mixed products and composite articles: this rule extends the scope of headings relating to a specific material to include materials mixed or combined with other materials.
The same applies to headings for articles made of a specific material.
These items are classified according to rule 3.
Rule 3: This rule makes it possible to classify in a tariff heading items that may fall under two or more headings.
- Rule 3 a): The most specific heading has priority over general headings.
- Rule 3 b): Goods are classified according to their essential character. This includes : Mixed products, works composed of different materials and goods presented in assortments.
- Rule 3 c): If the application of rules 3a and 3b does not allow classification, the merchandise is placed in the last possible position in order of numbering.
Rule 4: Goods which cannot be classified in application of the preceding rules are classified by analogy.
Rule 5: Classification of containers and cases
- Rule 5 a) : Boxes, cases, containers presented with the product follow the classification of the product unless they confer the essential character.
- Rule 5 (b): Subject to the provisions of Rule 5 (a) above, packagings containing goods are classified with the goods when they are of the type normally used for such goods. However, this provision is not mandatory when the packagings are likely to be validly used repeatedly.
Classification rule for tariff subheadings.
Rules 1 to 5 above also apply to the classification of a product in a subheading of the same tariff heading.
It should be noted that errors are sanctioned by Customs, particularly if they involve infringements with fiscal (duties, taxes or other), prohibition or other foreign trade implications.
Useful links :
The European Commission's Market Access Database site provides access to the applicable tariff (customs duty rates) for goods originating in the European Union in destination countries.
To obtain Binding Tariff Information (BTI) from the customs authorities.