Some information on the Tariff

These are some things about the structure and use of the Tariff and the Commodity Code system posted on my twitter account in June 2011.

1. Did you know that if you have the CAS/ CUS of a chemical you can cross ref to the com/code? see ECICS the European Customs Inventory of Chemical Substances. It is an information tool managed by the European Commission's Directorate General (DG) for Taxation and Customs Union which allows users to:
• clearly and easily identify chemicals;
• classify them correctly and easily in the Combined Nomenclature;
• name them in all EU languages for regulation purposes.
It was first published in 1974 and became an activity of the Group of European Customs Laboratories in 2009. It is available freely as part of DG Taxation and Customs Union's Data Dissemination System. ECICS lists chemical names in a number of EU languages (currently mainly eleven) along with their tariff classification in the European Community's Combined Nomenclature (eight-digit CN codes). As the CN codes are based on the "Harmonized Commodity Description and Coding System" emanating from WCO, the ECICS tariff classifications are helpful throughout the world.

2. Harmonized System (HS) for commodity codes came in 1 Jan 1988 it used 200,000 commodities traded internationl to make appropiately 9,000 codes. Managed by the World Customs Organisation (WCO) to is harmonised in over 200 countries which account for 98% of world trade by value.

3. There are 21 Sections in the structure of the tariff schedule each divided into Chapters. There are 97 Chapters in all. The HS Coding system is designed so that the more developed or manufactured a product is the later it comes in the tariff. This works for Chapters and within the headings and sub-headings of chapters.

4. The General Interpretative Rules (GIRs) give 6 rules that must be used if it is not clear which commodity code number is suitable for your goods. You do not choose the commodity code with the lowest duty rate or the one that describes the goods as "other". You must look at the goods not the additional information when deciding on a code, and if in doubt, ask Customs.

5. You can receive an "opinion" from Customs, but these are not legally binding. For a legal decision you must apply for a Binding Tariff Information (BTI) Ruling.

6. The commodity code number is important because it:
* corresponds directly to the rate of import duty payable
* points to any import restrictions
* indicates if any preferential agreement applies
* relates directly to any trade policy measure affecting the import of the goods
* is used in trade statistics
* Facilitates trade negotiations, eg preference agreements
* shortens customs clearance times
* reduces the number of disputes between Customs
* increases trade supply chain security

7. You must select commodity code numbers with care - here are some tips:
1. Need full product information
2. Need access to the commodity codes
3. Use Chapter Headings
4. Use Explanatory Notes
5. The European Inventory of Chemicals
6. Know the General Interpretative Rules

Need to go further ????
Check for EBTI rulings , Tariff Notices, the Compendium of Classification Opinions, Official Journal – Commission Regulations, HS Decisions – on World Customs Organisation website

Whatever you do when classifying goods - TAKE IT SERIOUSLY!

Further reading: S&H Articles
History of Customs Duty
General Interpretative Rules - the GIRs
Brief Guide to Tariff Classification
Relevant training: Tariff Classification Explained

UK/ EC Export Documents & Procedures

Exporting to countries outside the European Community (EC) can be daunting so a planned, structured appropriate is essentials. Strong & Herd LLP are publishing some key points to help in the practical movement of goods, to ensure you are compliant and, also, to ensure key elements of the international trade agreement are not forgotten.

Exporting doesn't end with the order being received, practical issues must be addressed such as which documents do we need: what information must go on the forms, do we need anything special, have we organised the transport in a cost effective way, are we using an Incoterm that helps us rather than cause us problems? All of these issues are covered in our Export Training courses.

Here are a few tips:

1. Check the trade relationship between the EU and your clients' countries. The EU has negotiated preferential trade agreements with lots of overseas countries which allow goods made in the EU (which meet the qualification rules) to enter these countries at a reduced - often zero - rate of customs duty. This gives EU/UK manufacturers an advantage over non-EU companies. The new Free Trade Agreement coming into for on 1 July 2011 is the EU-S.Korea FTA.

2. Make sure the Incoterms rules in the contract, eg FCA, FOB, CIF, DDU, DAP, are clearly understood and that you don't do more than you are legally obliged to do. Also, makes sure you understand the full implications of what your company has agreed too - ie DDP requires you to be registered in your customers' countries so you can organise the import customs clearance and pay relevant duties and taxes.

3. Clear description of goods on the paperwork is essential. Most shipments move internationally under cover of an invoice, and this document is important because it will be seen by all parties in the supply chain. Just having part numbers or abbreviated descriptions is not helpful - at the very least there should be a plain language general description.

4. A lot of companies use system generated invoices which includes pre-loaded commodity codes (aka tariff numbers). EU Customs require a 8-digit commodity code (called the Combined Nomenclature - CN) to be made on the export declaration. Some companies show the 10-digit EU import commodity code (TARIC) on export paperwork. Remember only the first 4 or 6 numbers will match the code numbers applicable in other countries. This is under the Harmonised System (HS) Codes. Be aware that if you show full UK/EU commodity codes on the invoice you may get questions from the customer's country.

5. Value of goods - you must always show the true value of the transaction on an export invoice. Do not be tempted to under declare a value because an overseas customers says "it will help the goods get through customs quicker". There is some confusion when goods are shipped free of charge; following the WTO/GATT valuation rules for imports if there is no charge you must still price the goods at a true costs, following the principles of a) indentical pricing (not being sold this time); b) similar goods; c) cost of materials/overheads and profit.

6. Evidence of export. Under UK VAT rules you are allowed to VAT zero-rate an export, but you must be able to provide evidence that the goods have left the UK. This evidence must be in the exporting companies name (or cross-reference to them as the supplier) and show that the goods left the UK within 3 months of despatch or payment received (whichever is first). This can cause problems to exporters if they sell ExWorks as the overseas buyer is then in control of the export.

7. In the UK HM Revenue & Customs (HMRC) use an electronic export customs presentation system called NES (the National Export System) based on EU SAD Form which replaced the paper C88 Form. NES links to the customs computer CHIEF and records all exports. It is recommended that exporters receive a copy of this declaration from freight companies.

8. Indirect exports from the UK, via other EU member states, to non-EU countries must be tracked on the electronic system with a Movement Reference Number (MRN) issued on the Export Accompanying Document (EAD). Exporters who ship goods, for example, by road to Switzerland, Russia, Ukraine, etc must ensure they receive the MRN. This can be check on the Europa Database under Export.

9. Don't confuse "origin" of goods with "preference" - though preference rules use origin as a starting point the qualification regulations under preference are more than just that the goods were made in the EU. Additional rules of preference include a percentage of EU components, materials requiredin the manufacture, a named process to take place in the UK/EU, a change of commodity code between materials and finished goods or a combination of all three. The preference rules depends on the customer country and the commodity code of the goods.

10. Export licensing controls affect the supply of certain goods - though only about 5% of exports from the UK are controlled there are embargoes and sanctions to check. If your goods are of a high capability or technology level that could be used in a military, nuclear, space environment or have been specially designed, modified or reconfigured for millitary/ defence use then you will have to check the export licensing regulations . And, if your technology or goods originate from the USA you may also require US Department of Commerce or Department of Defence approval to re-export.