Customs tariffs for import and export
How to classify your products
The Harmonized System of the World Customs Organization aims to make international goods traffic easier. However, classifying products and the formalities of customs clearance in import and export seem very complex at first sight. The following explanations are meant to familiarise you with the Harmonized System and provide you with an overview of customs tariffs.
What is the Harmonized System?
The Harmonized System (HS) of the World Customs Organization describes and classifies all goods that may be shipped within the framework of international trade. An HS code (sometimes HTS code) determines the customs and tax rate due for the respective goods. For international trade, the goods must therefore be declared with the right code. Find out more about how this works in the FAQ section below.
How does the Harmonized System work?
The HS coding system classifies 5,300 products and articles with 6-digit numbers as well as descriptions structured into headings and subheadings. The numbers and descriptions form the basis for further national classification in the respective countries of exportation. Ideally, all signatories of the Harmonized Commodity Description and Coding System use the same HS codes, headings and subheadings for specific goods. However, time and again, conflicts occur since not all countries apply the rules in the same way.
Along with the increasing complexity of products, knowledge gaps with regard to technical aspects of certain goods and historical particularities, country-specific variations lead to complicated, inconsistent and sometimes risky differences in classification, making navigation significantly more difficult.
Who is responsible for correct goods classification?
The legal responsibility for correct goods classification lies with the importer or exporter. BARTH+CO reports the data to customs authorities on behalf of the customer.
What happens if HS classification was carried out incorrectly?
Incorrect product classification might incur an incorrect tax rate. If it is too low, subsequent customs and tax payment will fall due. In the worst case, goods could be seized or even destroyed by tax authorities.
If goods are charged with excessive customs tariffs or tax rates due to incorrect goods classification, the customer bears the higher costs to begin with. A subsequent application for reimbursement is possible, yet frequently complicated, since the reasons for the retroactive change and refunding of customs fees and tax must be completely corroborated and clearly sound.
The correct classification of customs tariffs and tax rates requires comprehensive expertise and experience. At BARTH+CO, we have been specialising in global freight transport for more than 60 years. Our customs experts offer extensive consulting in the HS classification of your goods to ensure that they are correctly declared for import and export, crossing borders without a hitch.
How can BARTH+CO support you?
Our customs team is familiar with all regulations and requirements of the Harmonized System and can provide support in classifying your goods. We will be happy to discuss how we can best advise and support you. Give us a call. We look forward to hearing from you.
Frequently asked questions
First look for the item to be classified in the index of your country’s tariff. You can find it here. There you will also find remarks for every tariff on whether specific goods or elements are explicitly included or excluded.
If your product is not included in the index or not clearly classifiable in a specific category, you will have to categorise it according to the General Rules of Interpretation (GRI), based on its form and function. As there are many pitfalls involved in this process, expert consulting is strongly recommended for these cases.
In the Harmonized System, goods are attributed to one of 21 sections in the first step. The sections are then divided into chapters with headings and subheadings.
For instance, a woman’s wool coat is classified as follows:
HS section: Section XI: Textiles and textile articles;
HS chapter: Chapter 61: articles of apparel and clothing accessories, knitted or crocheted
HS section: Headings 6102: Women's or girls' overcoats, car coats, capes, cloaks, anoraks, incl. ski jackets, windcheaters, wind-jackets and similar articles, knitted or crocheted (excl. suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls);
HS subheading: HS Code 61021010: Women's or girls' overcoats, car coats, capes, cloaks and similar articles of wool or fine animal hair, knitted or crocheted.
Among other things, HS classification serves customs authorities and governments worldwide for price monitoring, tax collection, trade statistics, trade politics and monitoring of quotas. The Harmonized System is also involved in analyses, security checks and risk assessments.
The HS specifies six General Rules of Interpretation (GRI) for product classification. Their purpose is to provide a basis for unified and legally sound interpretation of the HS nomenclature for formal goods classification. However, on an international level, the rules are sometimes applied in different ways. As you can see in the examples below, the application of the GRIs is subject to a strict order of numbers. However, they only serve to illustrate the rules. In cases where GRIs cannot be clearly applied to specific products, we strongly recommend you seek professional advice.
Rule 1 explains that titles of sections, chapters and sub-chapters do not have legal status. Classification shall be determined according to the terms of the headings and any relative section or chapter notes and according to the other provisions.
Example: The title of Chapter 87 reads “vehicles other than railway or tramway rolling stock, and parts and accessories thereof”. However, not every part included in a vehicle automatically falls under that Chapter. Tyres, for instance, fall under Chapter 40.
Rule 2 part (a) stipulates that if the incomplete or unfinished article has the essential character of the complete or finished article the same headings shall apply to both types of articles. Likewise, products that are transported in an unassembled state shall have the same heading as fully assembled products.
Example: This rule can, for instance, be applied to furniture or other goods delivered as (partial) assembly kits. Furthermore, under this rule, incomplete kits of products meant for restoration are also classified in the same way as the entire product.
Rule 2 part (b) determines that headings for specific materials shall also refer to goods made of a combination or mixture of the material with other materials or substances.
Example: A shirt made of 70% cotton and 30% polyester or other synthetic fibres falls under the chapter of cotton shirts. If the material consists of 50% cotton and 50% polyester, rule 3 shall be applied.
Rule 3 applies to all cases where goods are classifiable under two or more headings. We recommend systematically consulting an expert in all cases in which rule 3 must be applied.
Rule 3 part (a) says that headings which provide specific descriptions shall be preferred to headings providing a more general description.
Should your product fall into the scope of rule 3, please contact us to go through the classification process together.
Rule 4 applies to all goods that cannot be classified in accordance with rules 1 to 3. These goods shall be classified under the heading appropriate to the goods to which they are most akin. However, this rule is rarely applied.
Example: If a product looks, clucks and lays eggs like a chicken, it must be classified as a chicken.
Rule 5 applies to the secondary packaging of goods, i.e. cardboard boxes or similar containers. Under this rule, packaging containers are attributed to the goods themselves, provided they are not reusable containers.
Example: The plastic packaging of toys is not classified separately. Containers for sea or rail transport are not considered to be a part of the product and must therefore have their own classification.
Rule 6 ensures that rules 1 to 5 are not only binding for the assignment of headers but also for the classification of the goods in the subheadings.
The Harmonized System is full of complicated details, thus time and again leading to mistakes and confusion in its implementation.
Do not hesitate to contact us if you have any questions regarding this topic. We will advise you with regard to your product and the related classifications.