Due to Brexit, from 1 January 2021, businesses will need to make customs declarations to move goods into and out of the EU. An essential part of a customs declaration is the classification of goods, and it is vital that this is correct.
The customs classification is also known as a commodity code and tells the customs authorities about the nature of the goods. It shows how much duty and import taxes are payable, and whether there are any conditions or restrictions on movement of these goods. It is the importers responsibility to get the classification right – you should not wholly rely on a supplier or a freight forwarder for this.
Customs classification is one of the most commonly audited areas of customs compliance. Incorrect classification can result in under or overpayment of duties and taxes. Compliance errors can have serious consequences, including demands for underpaid dues, civil penalties and loss of authorisations.
So how do you identify the correct customs classification?
There is a handy lookup available via gov.uk (www.gov.uk/trade-tariff), but please be careful! There are classification rules that must be followed, especially if there is any ambiguity about the correct classification. In the case of ambiguity, there are a set of rules to follow- these are called the ‘General Rules for The Interpretation of the Harmonized System’ (GRIs). Explanatory notes are also available via the (World Customs Organization) WCO online bookshop.
If you require certainty about your classification, perhaps because the duty difference is significant, you can apply for a Binding Tariff Information (BTI). Note that you may need to reapply for a UK BTI once the Brexit transition period concludes.
What should you do next?
Qualify the type and volume of goods you trade with the remaining EU Member States; if you complete intrastat returns, this can be a really good starting point.
Ensure you have a compliant classification for each product.
Develop a communication process with your Customs agent to ensure the correct classification is applied in customs declarations.
Discuss the routes into (and from) Europe with your freight forwarders – to identify costs and risks associated following the transition period.
If you need support, you might consider engaging an advisor to provide training and/or help with ambiguity in classification.
Please contact our Dorset Chamber International Trade team on 01202 714800 for more information.