Do you have the correct commodity codes?

Commodity codes are also referred to as Tariff codes, tariff number or tariff headings, Harmonised code or HS (Harmonised Standard) number. Basically they are referring to how your items are classified for customs purposes. They are a number broken down into chapters with paragraphs and sub paragraphs as they become more detailed. 

The commodity code for printed books would be: 4901 10 00 00

As illustrated in the HM Tariff below:

How do I classify an item?

As very simple example is this – what is item:

Is this a bolt? or a screw?

What is it made of? Steel or Nickel maybe?

Steel? If its classified as steel bolt the commodity code could be 7318 15 62 99 with the duty rate: 3.7%

If its Nickel? Then it could be classified with the commodity code 7508 90 00 00 with the duty rate: 0%

If you import several thousand there is a big difference between 0% duty and 3.7% duty! It is important to classify the goods as accurately as possible to ensure you are paying the correct import duty amount.

Who is responsible for finding the correct commodity code?

You are as the importer.

Many company leave this down to their customs clearing agents – this can lead to complications. Clearing agents specialise in logistics and customs procedures not in your products.

For every import you need to instruct your clearing agent which commodity code to use.

I leave all that to my shipping agents – thats what i pay them for

Your clearing agents are acting on your behalf. If they misinterpret a supplier invoice and get it wrong who is responsible for the penalties and duty and VAT shortfall?

You are as the importer.

On UK customs entries there is a term called ‘Direct Representation’ meaning the clearing agent is acting on your instruction as a representative of your company. Therefore any errors or omissions leading to wrong classification, under declaration and duty and VAT shortfalls will all come back to your company not the clearing agent.

Mis-classification

There are many examples of mis-classification and classification disputes. They may have arose from the company or from HM Customs.

December 2016 – Apple iWatch straps

HMRC says the wristband on Apple’s watch should be classed as an “other plastic” import and has hit the product with a 6.5% tariff. However, Apple argues the Apple Watch Sport cannot function without a strap, and that the £49 plastic wristband should be treated like the rest of the watch, which enjoys duty-free status.

Currently going to a tribunal – read the full news story here.

November 2012 – Set top boxes

The three companies imported identical set-top boxes with a communication function into Bulgaria from Korea under commodity code 8528 71 13, making them exempt from customs duties (i.e., customs duty rate of 0%). Upon inspections, however, the Bulgarian customs authorities disagreed and imposed administrative acts by taking the view that the concerned set-top boxes were not equipped with an integrated modem and therefore should have been classified under commodity code 8528 71 19, making the customs duty rate of 14% applicable. Read the full news story here.

If you are concerned regarding the classification of your goods please discuss the matter with your clearing agent and your local HM customs office. If your goods are being declared wrong you could well be under (or over) paying Duty and VAT.