Expert Customs Guidance Turns Tariff Error into Opportunity

A European automotive company faced a hefty customs bill due to a tariff classification error. Discover how the experts helped them turn the situation around and not only avoid the fines but also recover significant costs. Moreover, thanks to our expertise and support, they are now better positioned to avoid future costs, essentially saving money and securing their operations in the long run. 

When it comes to international trade compliance, success is often found in the details—especially in customs tariff classification. A European automotive company importing spare parts from South Korea faced a costly setback after an error in tariff classification was uncovered during a customs audit. Here’s how the experts at Customs Support Group helped turn this problem into an opportunity. 

The Misstep: A Simple Error with Big Consequences 

The automotive company had been sourcing automotive spare parts from a South Korean manufacturer. They entrusted a freight forwarding company to handle customs clearance in another EU country, assuming everything was being handled properly. However, when customs authorities conducted an audit, they discovered an error that would cost the company around €300,000 in additional duties due to incorrect tariff classification.

The company had delegated the responsibility for assigning tariff codes to the freight forwarder, assuming all processes were managed. Unfortunately, when customs authorities questioned the tariff code used, the company realized too late that they hadn’t paid enough attention to this critical part of the import process. 

Customs Support Group Steps In: Identifying the Problem 

Facing a hefty financial burden, the company reached out to Customs Support Group (CSG) for help, hoping the customs authorities had made a mistake. However, after a thorough review, our team of experienced tariff classification specialists confirmed that the customs authorities’ findings were correct. 

Instead of pointing fingers, CSG took a proactive approach. We asked the company three essential questions: 

• Who was responsible for assigning the tariff codes? 

• What data was used to determine the codes? 

• What did the contract with the freight forwarder say about these responsibilities? 

The response? No one knew. There was no clear accountability for the error. The company had no internal processes in place, and the freight forwarder didn’t assume responsibility either. It was a classic case of “nobody’s fault,” but under customs law, the importer is always ultimately responsible for the information provided on import declarations. 

The Solution: Turning a Problem into an Opportunity 

Rather than dwelling on the past, CSG focused on finding solutions. We presented the company with two viable options to recover some of the “lost” duties: 

• Free Trade Agreement (FTA) Benefits: We pointed out that the EU-South Korea Free Trade Agreement allowed for preferential tariff treatment. If the company could obtain retrospective origin certificates for the already-imported goods, they could amend their customs declarations and apply a 0% duty rate. This solution would not only cover past shipments but also benefit future ones. 

• Inward Processing Relief (IPR): The second solution was applying for inward processing relief, a special customs procedure that allows EU companies to import goods duty-free, provided the goods are processed and then re-exported outside the EU. Given the company’s business model—importing spare parts, assembling them into larger products, and exporting them—this solution fit perfectly. With the necessary permissions, which could even be applied retroactively, the company could significantly reduce its duty payments going forward. 

The Outcome: Successful Mitigation of Costs 

Thanks to the right guidance, the company successfully mitigated a significant portion of the unexpected duty costs. By leveraging preferential tariff treatment and special customs procedures, they not only recovered part of the lost funds but also optimised their future import processes. The proactive approach from CSG’s specialists ensured that the company would not face similar issues again in the future. 

The Takeaway: Expertise Saves the Day 

Both solutions offered the potential for considerable cost savings, and they could be applied retroactively—up to three years in the case of the FTA solution, and up to one year for inward processing relief. 

This case underscores the importance of working with an experienced team of specialists who can navigate the complexities of international trade. Early engagement with customs compliance experts can help companies avoid costly mistakes and ensure their operations are fully aligned with legal requirements. 

In an ideal world, the automotive company would have consulted a reputable customs consulting firm before engaging with their South Korean supplier. Trade compliance experts could have designed a supply chain strategy from the start that ensured correct tariff classification and identified opportunities for cost savings. But, as the saying goes, hindsight is 20/20—or, in this case, “Better safe than sorry.” 

Conclusion: Don’t Leave Customs to Chance 

This story serves as a valuable reminder that customs compliance should never be left to chance. The next time your company faces a customs challenge, whether it’s a simple classification issue or a more complex matter, the experts at Customs Support Group are ready to guide you through every step of the process. 

Need assistance with your own customs challenges? Reach out to Customs Support Group today to ensure your business is fully compliant and optimized for success.