As e-commerce continues to break down international trade barriers, understanding tariff and commodity codes has become very important for online entrepreneurs. These classification benchmarks not only influence duty rates but also ensure compliance with global trade regulations.
In this article, we will explain what exactly are tariff numbers, how you should use them and why that matters.
The Basics of Product Classification
For any online shop that sells products to other countries, it’s important to know about certain codes used by customs when you send or receive products. These codes are like a product’s passport for trade and travel across borders. They tell the customs officials what is inside a package, where it comes from, and what rules it should follow. Each product has a specific number that you must use when you fill out forms for sending or getting goods from other countries.
Getting the right product code is very important because it decides how much tax you will have to pay. It can also tell you if you need extra papers like special permits or certificates. If you use the wrong code by mistake, you might pay the wrong amount of tax or get into trouble for not following trade rules. But don’t worry, there are experts and online tools that can help you find the right code for your products. This way, you can be sure you’re doing everything right and avoid any extra costs or problems with your business.
The Harmonized System (HS) Codes
Also known as HS codes, these codes comprise six digits and form the foundation for classifying goods worldwide, developed by the World Customs Organization (WCO). More than 200 countries utilize these standardized codes for consistent tracking of products.
Extended Commodity Codes: Beyond the HS Code
Countries and economic regions often expand upon the HS code to further detail a product for trade purposes.
CN Codes: For exports from the European Union, the CN (Combined Nomenclature) code adds two digits to the primary HS code, resulting in an eight-digit code necessary for export declarations.
TARIC Codes: When importing into the EU, a ten-digit code known as the TARIC (Integrated Tariff of the European Union) code is used. This code informs customs about the due import duty, value-added tax (VAT), and if the product is subject to additional charges like anti-dumping duties.
Intrastat Codes: For trade within EU member states, the eight-digit Intrastat code, equivalent to the CN code, is used to gather trade statistics.
Practical Examples
Let’s consider leather handbags and how various codes apply:
- HS-code:
4202 21 - CN-code: (Exports):
4202 21 00 - TARIC code: (Handmade imports into EU):
4202 21 00 10 - TARIC code: (Machine-made imports into EU):
4202 21 00 90 - Intrastat-code: (Intra-EU trade):
4202 21 00
The Significance of Using the Correct Codes
Inaccurate classification can lead to unintended consequences such as incorrect duty payments or failure to meet regulatory requirements. In the worst-case scenario, errors in classification might result in customs imposing additional duties or fines up to three years after importation. Conversely, overpayment of duties due to misclassification may be rectified through reimbursement requests submitted within the same time frame.
Ensuring Accurate Commodity Codes
To avoid costly mistakes, entrepreneurs can seek guidance from customs advisers or forwarders who can propose commodity codes based on product descriptions. However, only customs authorities provide the final determination on code accuracy.
Verifying a Code’s Accuracy
While suppliers outside the EU may provide HS codes, these should only be used as a starting point. It’s vital for importers to verify and ensure the accuracy of these codes. One way to achieve certainty is to request Binding Tariff Information (BTI) from customs officials. This ruling provides a legally binding commodity code classification, valid across the EU for up to three years.
Finding Commodity Codes
E-commerce entrepreneurs can access a wealth of information and search for accurate HS, CN, and TARIC codes via the customs tariff databases or the World Customs Organization website.