Brexit – Tariff and Classification

What is a Commodity Code?

This is an eight (or in some cases for imports ten) digit code which identifies the type of product. Every item in the world can technically be classified into a code. It is used to determine the import duties due, licences and other documentation/pre notification requirements. The code is also used when considering rules of origin and preference tests which is relevant for meeting the terms of any Free Trade Agreements (FTA). It is therefore important you have classified your products correctly.

Which Tariff?

‘The Tariff’ is often used to describe a list of commodity codes. Until 31 December 2020, the UK will apply the Common External Tariff (CET) rates to any imports into the UK from Non-EU countries (EU Rates). Post transition the UK will apply the rates in the UK Global Tariff (UKGT) (UK Rates). Both rates can be checked here against the commodity codes: https://www.check-future-uk-tradetariffs.service.gov.uk/tariff

Trade between the UK and EU

If an FTA exists between the UK and EU it is likely that there will be no tariffs due. However, in the absence of an agreement the UKGT rates will apply to imports into the UK, and the CET will apply to imports into the EU, increasing the costs of trading as duty is not recoverable.

How to classify?

Most traders will use the suppliers code, Google or use the search function within the current trade tariff https://www.gov.uk/trade-tariff to find the code. However, the World Customs Organization (WCO) has 6 General Interpretive Rules (GIRs) which must be used to classify goods. The vast majority of items can be classified using Rules 1 and 6.

They must always be considered in order as follows:

Classification of goods at a heading (first 4-digits) level, is based on the wording of the headings, the relative Section and Chapter Notes.
Expands the use of the heading to consider:
a Incomplete and unassembled goods
b Mixtures and combinations of goods
Classify goods that could potentially be classifiable
under two different HS headings:
a The most specific
b Quality that provides ‘Essential Character’
c Last tariff subheading in numerical order
Classify to goods it is most akin to
Classify packaging:
a Cases, boxes and similar containers
b Packing material and packaging containers
Use the above rules to classify the remaining 6 digits

These rules can be confusing, and as a result, the trader should also refer to the notes in the tariff and can use other aids such as explanatory notes and guidance documents which are publicly available. Traders can also ask HM Revenue and Customs for rulings for more certainty.

Information gathering

Before you start to classify, you should ask three key questions; what are the goods made of? How does it function? What are the distinguishing features? As the answers will help you find the right code.

Once you have determined the code you need to keep a record of how you classified your item and provide this code to the customs agents when clearing the goods for import or export