Goods classification

Goods classification

The importance of customs classification of your goods

Although a lot of companies assume that it is ‘just about a 10 digit code’ there are a lot of complex rules & regulations applicable. Also customs classifications are subject to (periodic) change, when was the last time your classifications were checked on validity? How was this checked performed? Is this process documented? These are just few examples of question related to this subject. Customs Support can help you find the answers, to these and other questions. How you classify your goods from a customs point of view is an important part of customs compliance. Failing to correct classification of your goods can have a major effect on your business and relation with the Customs Authorities.

One the one hand, wrongly classifying your goods can cause delays in your customs declaration process or delays when the Customs Authorities detain a shipment at the border when they have questions regarding a classification. On the other hand, wrong classifications can form a big financial risk regarding higher duties to be paid and even significant fines.

Determination of the correct classification is linked to:

  • Duties
  • Import- and export limitations
  • Documentation requirements
  • Licenses
  • Trade policy measures
  • Security measures

How are goods classified?

Goods are classified according to the Harmonised System. The customs classification is done according to the classification rules set out by the World Customs Organization. Also each Section and Chapter in the Harmonised System contains specific information regarding classification. The classification rules are too complex to go into detail, but I will mention the two most commonly used rules below.

The titles of sections, chapters and sub-chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes and, provided such headings or notes do not otherwise require, according to the following provisions.

Classification rule number 1 is the base rule for classifying goods and supersedes all other classification rules.

For the classification of goods under the terms of the headers, the wording used for these headings and any relative section or chapter notes is used for legal purposes. The same goes mutatis mutandis for the previous rules, with the distinction that only classifications of similar standing can be compared. For the use of this rule, the terms of the headings and any relative section or chapter notes and, provided such headings or Notes do not otherwise require, according to the following provisions, apply.

Once you determine the correct code for a product, it is called a customs classification. Based on the rules of classification, goods are classified in the Harmonised Tariff System (HTS) / Combined Nomenclature (GN). This is a classification system that the World Customs Organization maintains. The HTS system is used almost everywhere in the world. The GN system is an expansion of the HTS system used in the European Union.

Explanation of a customs classification code

The first six are ( or should be) the same worldwide. The numbers after that can differ per country. For example, if you source your goods from suppliers outside the European Union it is very important to check or ‘translate’ the provided codes to the codes used in the European Union. This to ensure that you work with valid & correct customs classification code.

Determination of customs classification for your goods is a complex activity. Failing to comply with the applicable rules & regulations can form a serious threat for the continuity of your business. This is were a specialist can support to give advice or review the customs classification codes you are using.