Being able to describe your products ought to be one of the easier tasks you need to complete in a business, particularly when it comes to completing sometimes arduous documentation like customs declarations.
And yet, when it comes to identifying and using the correct commodity code for a business’ goods, staff responsible for completing these declarations will often tell you that having the required, detailed product knowledge is not necessarily that easy.
The Chartered Institute offers in-depth education on classification in the form of its practical workshops and courses on the subject. They can be accessed here.
Last week, we reported a finding from classification experts TariffTel that roughly two in five businesses are using the incorrect commodity codes for their products, meaning they could be significantly under- or over-paying on import duties.
So why is it that businesses struggle with identifying the correct classification for the thing they should know best – their product?
Coming a crop-per
TariffTel’s customs system manager, Elizabeth Davies, explains that most people simply cannot call upon the level of data that’s required, as set out in regulatory frameworks like the UK Global Tariff or WCO Harmonized System. Indeed, sometimes within these tariff books, the detail can be difficult to find.
“If you’re looking at garments, you’ve got to read the tariff and notes, including from the WCO, to understand all the different points of detail that you need to classify your goods,” she explains.
“With a crop top, for example, it’s defined as a top that does not meet the waist, but you would never say, when you’re going shopping, I’d like to buy a top that doesn’t meet the waist – you’d say you’re looking for a crop top!
“There’s a language barrier, with all the jargon that’s used to describe the products in the tariff. That creates a problem for businesses.”
Lost in translation
These linguistic challenges are heightened by the international nature of trade. For instance, Davies gives another example of a pinafore – a type of clothing that’s well known in the UK, but less so in the US.
“If you’re importing a pinafore into the US, it won’t come up in its tariff book because it doesn’t exist to them, to them it is a jumper which means something completely different to us in the UK” she says.
How best to navigate these linguistic challenges will vary from sector to sector, she says, advising that businesses should get external advice if the tariff isn’t clear.
“There are so many data sources, and the notes in the WCO’s Harmonized System can be complicated, so it’s difficult.
“If a business’ products are simple to find in the tariff, they will probably be fine, but if its products are more complicated to identify this way, they should seek external help.”
Two-step verification
Even if a business can internally identify the correct codes for its products, Davies suggests that putting verification processes in place is a good idea.
“You should definitely have a two-step approach – whether that’s internal or external. Someone should be doing the classification and someone should be checking it. That’s really important.”
And while understanding how classification works in theory is a must, nothing beats experience, particularly as different territories will do commodity codes differently.
“If you’ve got experience of importing into the US, you’ll know that it’s completely different to the EU.
“There are approximately 120 codes for knitwear in the US under chapter 6110 as opposed to approx.20 in the UK, each with varying duties, for instance. You wouldn’t believe some of the defining features for these different classifications – you need to know the stitch count or the hem line, or for t-shirts there are many defining features you need to know if it has side splits, a pocket, if it’s got a print, if that print is 3D to name a few
“There’s so many details that you need to know about and it’s a completely different animal compared to the EU or UK in differing duty rates.”
Same page
The other complication that businesses face is ensuring that all their supply chain partners are using the correct and the same data for the goods.
Davies says that TariffTel navigates this potential complication by collecting goods data “at source”, from the original supplier, and by ensuring that this feeds through throughout the chain.
“The supplier knows the product, the construction, how it’s produced – they’re best placed to provide the information that’s needed for the classification.
“There are other things you can use though. We can make strong recommendations based on images of the goods, because that image will tell you key details such as, for instance, the pocket, neckline or hemline on the t-shirt. Using images can already eliminate a lot of questions if you’ve got a good image of the product.
“But it’s key to get the data from the supplier before the goods are shipped, as you can then have any discussion or check before the product starts moving. This prevents it from getting stuck or delayed anywhere, because you know the correct code is being used.”
Further information
If you need further support or education to understand what classification is and how to do it, check out the IOE&IT’s ‘how to classify your goods’ training course.
For more details on TariffTel's solutions on tariff code accuracy, duty rate assurance and cost savings when classifying products, you can visit here.
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