The commodity code of the foreign trade nomenclature is ten digits that determine almost everything: the duty rate, whether a certificate is needed, whether preferences apply, whether the goods fall under prohibitions and restrictions. Get the code wrong and you have got the budget of the shipment wrong.
How the code is built
The ten-digit code is read from left to right, and every pair of digits narrows the description:
- the first two — the chapter;
- four — the heading;
- six — the subheading, identical worldwide;
- the last four — the national detail, and it is this part that most often changes the rate.
So «we found a six-digit code on the internet» is not yet a classification. The difference between two ten-digit codes inside one subheading can easily be tens of per cent of duty.
Classification follows the properties, not the name
Goods are classified under the interpretation rules of the nomenclature, and what decides the outcome is not the marketing name but the physical characteristics: material, composition, function, method of manufacture, presence of a motor, power, intended use. The classic disputed cases:
- Multifunctional products. Classified by their principal function — and that function has to be proven with a technical description.
- Sets and kits. Either they take a single code, that of the item giving the set its essential character, or they are broken down into components.
- Mixtures and compositions. The percentage of the components decides, and a laboratory test report confirms it.
- Parts and accessories. A part of a machine and a stand-alone article are different codes and different rates.
- Disassembled equipment. A machine that arrives in three containers is normally classified as a complete machine, not as a set of assemblies.
What a mistake leads to
If the inspector disagrees with the declared code, the declaration will not be released until the question is closed. What can follow:
- additional duty and VAT assessed on the difference in rates;
- administrative liability for inaccurate declaration;
- demurrage at the temporary storage warehouse — payable;
- a sudden demand for a permit you do not have, because the «correct» code turns out to be on the list subject to mandatory conformity assessment;
- a review of shipments already released, during a subsequent audit.
The last one is the most unpleasant: the goods were sold long ago, and the demand for payment arrives months later.
How to protect yourself
- Build the evidence before filing. The manufacturer’s technical description, the product passport, the composition, photographs and, where needed, a test report from an accredited laboratory.
- Obtain an advance classification ruling. This is an official answer from the customs authority on a specific product. It takes time, but it removes the dispute for years ahead and is especially worthwhile for regular shipments.
- Keep one code across the whole line of shipments. If the same item goes under different codes in different declarations, it is the first candidate for an audit.
- Check the code before you pay the supplier. After payment, changing anything in the specification is late and expensive.
What we need from you to assign the code
The invoice, a technical description and an understanding of what the product is used for are enough. For difficult items we ask for the composition, a drawing or a link to the manufacturer’s page — and in disputed cases we say straight away that an advance ruling is safer here than counting on luck.
We take responsibility for the declared code and answer for it before customs together with you — which is why we assign it from the documents on the goods, not from the name on the invoice.
