International trade helps businesses to increase their profits, grow their brand and reduce their reliance on their domestic market. However, to do this successfully, firms need to be aware of the customs regulations and processes that govern both exports and imports.
In the Chartered Institute for Export & International Trade’s customs whitepaper, ‘Strong Foundations’, Customs Practice Lead Anna Doherty laid out the four pillars for customs compliance and how to keep your trade customs-compliant.
The free guide set out how firms and traders can get customs-confident, and boost their international trade.
Classify your goods
The first pillar for building customs confidence is classification.
How you classify your goods determines a wide range of legal requirements and possible cross-border taxes for your business’ trade, and is something your firm will need to be on top of.
For imports, classification determines what charges are applied to the goods, including the standard import duty rate, excise duty, import VAT or additional rates, such as anti-dumping.
Classification also impacts how your goods are treated at the border, with export controls requirements or the application of sanitary and phytosanitary (SPS) controls being linked to a particular commodity code.
Code
Getting the code right is, therefore, incredibly important. Each trader, whether they are an importer or exporter, is generally only responsible for the classification of goods upon their import into the destination country. But
In the UK, commodity codes are made up of:
- A HS code
- Two further digits that make up the eight digit export commodity code
- Another two make up the 10-digit import commodity code
For example, the commodity code for a loaf of bread might look like this: 1905903000
Each trader, whether they are an importer or exporter, is generally only responsible for the classification of goods upon their import into the destination country.
However, even if a company hands responsibility for customs documentation to an intermediary, the customs team should be confident about using the correct code, as the responsibility (and any charges) will lie with the importer or exporter of record.
Risk and penalties
If you fail to classify your goods correctly, your business could end up paying the wrong duties or risk non-compliance with key regulatory requirements. This failure could result in fines, penalties and delays to your goods movements.
If the goods are classified incorrectly leading to the trader not meeting their legal obligations, such as exporting strategic goods without a licence or not paying the appropriate amount of duty, this could lead to seizure, detention or destruction.
Selecting a wrong commodity code could also lead to overpayment of import duty and increased costs.
Resources
The UK Integrated Online Tariff is a great place to begin understanding the codes that are applicable to your goods.
You can use this page to search for your goods’ product codes, though any classification exercise must follow the legal requirements.
Our Customs Advisory Practice is also on offer. We partner with your business to turn customs challenges into opportunities, building your team's capabilities to build sustainable success in international trade.
Click here to download our free guide on building customs confidence.
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