We are delighted to welcome you to this useful and insightful guest blog by th experienced Tim Hiscock, known to many of us as the Accidental Exporter. Tim is European Sales Manager for a footcare company, tutor at the Institute of Export and freelance writer – you can read his fantastic blog HERE. We have asked Tim to tell us more about tariff codes: what they are, why they matter and how we can find more about them…
If you are an exporter or importer of goods, you need to know the correct tariff numbers for your products. If this comes as a surprise to you, you are not alone as many regular exporters are not aware of the requirement because it is being fulfilled for them by their shipper.
This is leaving a lot to chance. The law says that it is the responsibility of the business that is exporting or importing the goods to ensure the correct code is used, and you could be legally liable if the wrong code is applied. You or your customer could also be paying the wrong amount in import tariffs.
For most products, it is not too difficult to identify the right code. Although there are several thousand codes in the system, they are arranged in a logical system which makes it easy to find the right one, according to the form and function of the product.
– What is a commodity code and what is the difference between a HS and other codes?
Whenever a business exports or imports goods, they have to identify the specific product code for the items. These codes are variously called tariff codes, Integrated Trade Tariff, TARIC, HS, CN, as well as a number of other variations used in different parts of the world. The reason the code is important is because it helps to determine any tariff payments that are payable as well as any controls that are applicable to trade in the goods.
Almost all countries operate tariff codes that comply with the Harmonised System (HS). All countries use the same six digit codes, to which they can add up to six further digits in order to refine the definitions according to local requirements.
– How important is it to know your products’ tariff codes?
Very important! An exporter or importer who uses the wrong code for their goods can receive a heavy fine as well as having their shipment confiscated.
It has been reported that 30-50% of entries are misclassified. At the very least, an incorrect entry can cause delays to the shipment and possibly the allocation of the wrong import tariff, which may lead to the business paying too much to the customs authorities.
Lots of exporters leave the classification to their shipper. This is a risky thing to do, as the exporter stands to take the responsibility in the event of a mistake. Exporters should know the codes for their products that are applied by the authorities in their country.
Companies who buy or sell to other European Union countries will also need to use these codes to complete their Intrastat returns
Exporters will often need to know the correct tariff code in their customer’s country as well. Many countries now require pre-shipment information before the goods are sent, and the local tariff code will usually be among the information required. Exporters should usually liaise with their customer to find the correct classification.
– I had never heard of commodity codes, how do I find which apply to our products?
For UK based businesses, HMRC has a website and online service to help identify the correct code https://www.gov.uk/trade-tariff
The tariff is divided into 21 sections that define items according to their physical constitution and their function. In most cases, finding the right code is fairly straightforward, but sometimes there may appear to be more than one code that could be applied. The gov.uk website (the service that has replaced the old Business Link) provides guidance on how the tariff should be interpreted https://www.gov.uk/classification-of-goods
The complete tariff table is online here https://www.gov.uk/trade-tariff/sections and in most cases it is quite straightforward to find the appropriate code for your product. This website also shows the import tariff rates that are applicable.
If you are still in doubt, HMRC offers a telephone advice service. Call 01702 366077 during office hours. This is not a legally binding service. You will need to provide a full description of the goods including their components, materials and purpose.
If there is still any doubt, then a legally binding (BTI) decision should be requested from HMRC using form C103.
– Do codes apply only to goods? How about services?
The codes only apply to physical goods. But restrictions and controls on international trade in services do apply. UK based companies who are planning to provide services internationally can get guidance from the HMRC website https://www.gov.uk/international-trade-in-services-import-and-export-regulations
We would like to thank Tim for his contribution. We will soon blog about Mercosur and its very own tariff codes – the ones you need to know to sell to or buy from Brazil, Argentina, Uruguay… and possibly a few others… Keep coming back or sign up for our monthly newsletter HERE to be kept up-to-date with information.