‘Don’t go it alone’: Experts advise on classifying your goods

"Use the tools available and get it right at the start". That was the message from last week’s Institute of Export & International Trade (IOE&IT) webinar on customs classification. Featuring contributions from TariffTel’s Elizabeth Davies, it explored the importance of classification as a skill and what firms can do to ensure they approach it successfully.

‘Essential for anyone involved’

A poll early in the webinar found that, while most feel at least “quite confident” that their customs classification data is 100% accurate, as many as 17% suggested they were “not very confident”.

IOE&IT expert Lyn Dewsbury, who also presented, suggested that, while it was good to see that most were confident, it was also noteworthy that there was “honesty” about where extra education might be needed. She added that accurate data was “essential for anyone involved in international trade”, including firms’ partners.

Queries answered

Responding to an audience question on how the Single Trade Window (STW) programme could affect classification, Dewsbury said that digital product passports would “improve classification by providing comprehensive, standardised and transparent product information”.

While she noted the STW was still at a “testing stage”, it would allow better understanding of how a commodity code performs in the future.

“We’ll know at an early stage if there’s an issue with a commodity code and we’ll have the opportunity to correct it quickly without incurring delays.

“I’d still recommend you do your due diligence and check your commodity codes – the digital passport and STW won’t replace that.”

Davies said that the digital product passport provision and the STW would require traders to think about new data requirements and where they would store that data. It’s important that it is “easily accessible and available”, she noted.

Bundle blues

On a question around classifying the tariff codes for bundled items with one total price, Davies said:

“It depends if your product is a single-tariff set or a multi-tariff set. You need to follow the General Rules of Interpretation (GRIs) to see which it is, and if it’s multi-tariff you’ll need to break down the set and tariff codes, as well as the values within that set.

There are risks associated with getting things wrong on bundled items, as a firm may end up paying less duty than they owe, she explained:

“We had an issue with a perfume being sold with a cosmetics bag – 0% duty on the perfume, with the perfume’s code being used as it was the highest-value item.

“But the bag was missed and not classified, and the company [involved] imported high volumes without paying duty on the bag. They then had to go back and pay all that duty.”

‘Devil’s in the data’

Davies’ prevailing message throughout was that “the devil’s in the data” – that it’s crucial to be on top of the detail.

Using the example of Christmas baubles, she noted that, until 20 September 2022, products with an explicit connection to Christmas were distinguished from those without. Afterwards, this was changed so that even those baubles without an explicit connection could fall under the same heading. This had a financial implication, with Christmas-related decorations under the heading requiring the payment of a lower duty rate.

Traders need to be aware of these and similar changes to goods classification, Davies said.

“It was important that we were abreast of that change so our clients weren’t paying the old duty rate.

“This just shows you how you need to be aware of what’s happening – not just tariff code changes, but wording changes too.”

AI scrutinised

Addressing questions around the role of AI in the future of customs classification, Davies used the example of Christmas decorations again, as well as plant pots, where she suggested AI “would really struggle with the level of detail” required to classify goods correctly.

“Data is the backbone of accurate product duty classification. It enables us to make those informed decisions, we need these detailed product descriptions, we need the origin, we need a good image.

“AI can play a significant role in enhancing capabilities – it can gather and analyse large amounts of data, and even suggest a classification - but it’s not a standalone solution. It shouldn’t be used on its own.”

‘Fill the room’

Setting out her ‘top tips’ for traders when navigating commodity codes, Dewsbury’s advice was to “fill the room”.

“Don’t go it alone. Get the experts in the room with you – many hands make light work. You’re much more likely to make the correct determinations if you utilise the technical expertise within your business.”

If you’re still unsure, you can contact HMRC or IOE&IT, which offers a course on classifying your goods properly, for which you can sign up here.