Customs Tariff Codes – What you need to know

Medical device or plastic goods? Parts for motor vehicles or iron and steel goods? Our customs lawyers check the correct tariffing of your goods. We first determine together the classification-relevant characteristics of your goods and develop a strategy to convince customs of the correct code number. Depending on the type of goods, our clients usually send us a sample of the goods, a description of the goods and their intended use. We then assess whether the customs tariff number you favour is correct and show you a practical way of enforcing our classification.

How we help you with customs tariff numbers

  1. We check the classification of your goods and provide information about the correct tariff number.
  2. We apply for a binding customs tariff information at customs tariff (vZTA) to ensure the correct classification in the customs tariff.
  3. If the information provided by customs is incorrect, we will check it and give you security for importation.
  4. Strategic advice on import and export duties

Why are goods tariff numbers assigned?

In order to regulate international trade, it is necessary to record all goods imported or exported around the world according to a uniform and harmonised system. In order to comply with the regulatory function, each wheel with identical characteristics, for example, must have the same uniform and binding code number, regardless of whether it is imported into Mexico, Germany or South Africa.

Classification of goods is not only important for customs, however, because it also has a practical effect on companies elsewhere. Just as the variety of goods and products in international trade is great, so are the potential customs duties that may vary greatly depending on the type of goods. For example, it makes a big difference whether a wheel for children is classified as a “bicycle” or a “toy” according to customs law. If it is a toy, only the usual import duties apply when importing the wheel. However, if a wheel were to be classified under customs law as a bicycle, the problem of anti-dumping duties could possibly arise.

However, the exact classification under the customs tariff is also extremely important for the general requirements for the import and export of goods. In some cases, import licences or export licences are required for the import and export of certain goods, or customs suspensions and continents exist. The tariff number can also be used to check whether a product is subject to anti-dumping duties. To make these circumstances tangible, the classification of products under mandatory goods tariff numbers is indispensable.

The Harmonized System – HS-Code for Customs

The basis for the uniform tariff classification of goods today is the”International Convention on the Harmonized Commodity Description and Coding System” (HS), which is administered and regularly revised by the World Customs Organization (WCO). The revisions of the nomenclature are regularly necessary in order to adapt them to the new conditions of international trade, which may result, for example, from developments in the modern structure of goods. This tariff scheme is currently used by more than 155 parties and 200 administrations, accounting for over 98% of world trade. Six of the digits of the goods tariff number are assigned via the Harmonised System.

Tip: The German customs authorities often link the regular changes to the HS with a duty for companies to review their classification practice. It is therefore advisable to check at least with a revision of the HS whether the code numbers used still correspond to the current status. The HS code for customs must be correct.

The current nomenclature comprises about 5,000 finely divided, different product groups, which are identified by a six-digit code and have been brought into a legal and logical structure according to binding rules. The nomenclature is currently divided into 21 sections and 99 chapters, which in turn designate the product groups in the subitems. To get an initial overview of the customs tariff scheme, it is helpful to know that it is basically structured according to the “production principle”. The Harmonised System has the practical effect, for example, of classifying a rangefinder worldwide under HS subheading 901510.

The Combined Nomenclature – Key to the goods tariff number

At European Union level, the six-digit number generated according to the above model is extended by two more digits (Combined Nomenclature – CN). In the event that a seventh and eighth sub-item are not issued, a”00″ is moved to this position.

The European Union shall publish annually in its Official Journal the current Combined Nomenclature, no later than 31.10 for the following year.

The Combined Nomenclature itself comprises 21 sections, 99 two-digit chapters, 1,224 four-digit HS headings, 5,205 six-digit HS subheadings and 9,382 eight-digit CN subheadings.

The following figure illustrates the structure of the Combined Nomenclature using the example of the classification of chocolate:

 

Chapters of the Harmonised System2-digitCocoa and preparations of cocoa = Chapter 18
HV position4-digitChocolate and other food preparations containing cocoa = 1806
HS sub-item6-digitCocoa powder with added sugar or other sweeteners = 1806 10
CN subheading8-digitContaining no saccarose or containing less than 5 % by weight of sucrose (including invert sugar expressed as sucrose) or isoglucose expressed as sucrose = 1806 10 15

Integrated Community Customs Tariff (TARIC)

As already explained, a code number to be registered consists of up to eleven digits. Nine and ten of the customs tariff numbers are assigned according to the “Integrated Tariff of the European Union” (TARIC). Items nine and ten of the code of the tariff number refer to encrypted Community measures taken by the EU. These include tariff measures such as preferential tariff rates, tariff suspensions, third country duties or tariff quotas. It also covers trade policy measures such as anti-dumping duties or countervailing duties and measures relating to restrictions on movement such as import and export bans, import or export restrictions and quantitative restrictions. In individual cases, measures for statistical purposes within the framework of import and export monitoring are also coded using these digits. As in the Combined Nomenclature, the subheading is not classified as “00”. For example, TARIC subheading 4011 1000 00 applies to rubber tyres of the type used for passenger cars.

It is very important to know that the data for TARIC are updated daily by the European Union. In this way, the community can react to current events. The updated data are made available directly and every working day by the Centre for Information Processing and Information Technology (ZIVIT).

The eleventh digit of the customs tariff number is used solely for national purposes. It can be used, for example, to encrypt VAT rates or national prohibitions and restrictions.

Structure of the customs tariff item

Chapters90“Medical and surgical instruments, apparatus and devices” (HS, same worldwide)
HV position9021“Artificial body parts” (same worldwide)
HS sub-item9021 21“Artificial teeth” (same worldwide)
TARIC sub-item9021 2190 00(same EU-wide)
Code number9021 2190 00 1
“for people” EZT (only in DE)

How does the classification of goods work?

This raises the question of how exactly the classification of goods works. First of all, it can be stated that the classification refers to the assignment of goods to a specific goods number. A fixed customs tariff item exists for all possible goods from the outset. Depending on the purposes for which the customs tariff heading is required, the goods code can contain up to eleven digits. For example, the commodity number for export is an eight-digit commodity number and the code for import is an eleven-digit one.

The main principle is that goods and products must always be classified and included in the tariff nomenclature exclusively on the basis and on the basis of their purely objective nature. The intended use of the goods in question is only relevant if the customs tariff or the explanatory notes on the Combined Nomenclature so stipulate. Also it does not depend with the classification in principle on a subjective use intention of the entrepreneur. Rather, it depends on the wording of the tariff and the comments. Explanations are an important aid to interpretation. However, the name of the product, certification, user manual or scientific opinions are not significant.

Correct customs tariff number often difficult to determine

A few examples are intended to illustrate once again the practical effects of the classification:

A wooden chair could be classified as’Other articles of wood’ in heading 4421 or as’Seating furniture’ in heading 9401 on the basis of its material nature.

A dialysis bag could be classified as “plastics or articles thereof” under heading 3926 by its material nature or as a “part or accessory” of a dialysis machine under chapter 90 by its function. In the first case, duties would be payable, whereas the bags would be duty-free as parts of a dialysis machine.

As shown, classification can be very demanding in individual cases, since the list of goods is abstract and there can therefore only ever be one error-free classification of a product, so that only one goods tariff number is correct under customs law. Even the definition of a product and the recognition of its exact composition can pose major problems for companies. If one then considers in this light the considerable consequences of incorrect classification of products, such as the risk of tax evasion, the possible denial of customs authorisations or even more frequent inspection, then it becomes clear why the careful application of recognised principles and legal sensitivity are necessary, particularly in this area.

Tip: Companies that regularly import similar goods should therefore make use of it if possible to obtain a binding customs tariff information (vZTA) free of charge

Lawyer Dr. Tristan Wegner

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