In the series “What does an export officer have to consider?”, we would like to give you an overview of the necessary customs and foreign trade law steps to be taken in the case of intra-Community deliveries and exports to third countries.
Importance and challenges of tariffing in practice
In cross-border trade in goods, the statistical commodity number is the central order characteristic. Goods are classified according to their technical characteristics and receive a goods number (also called a customs tariff number). It plays a central role in all areas of customs and foreign trade law:
- Trade policy measures
- Customs debt
- Customs exemption
- Prohibitions and restrictions
- Turnover tax/consumption tax
- Export control, risk analysis
- Authorisation requirements, documents to be submitted, import VAT rate
- Determines the actual rate of duty and the reduced rate of duty
In practice, this means that the assignment of a product to the wrong goods number in the customs and foreign trade sector can have far-reaching consequences. Thus, on the one hand, it is necessary to take account of the changes at the turn of the year. On the other hand, however, it is also necessary to check the correctness of the goods numbers supplied by service providers and suppliers. Especially in the electronic customs system ATLAS, an incorrect goods number often has comprehensive consequences (rejection of the customs application, export permit obligation arises, increased duty on import, etc.).
The electronic tariff (EZT) collects the necessary information at import or export. The EZT includes, among other things, necessary document coding, additional codes approvals, licenses and possible proof of preference. The search is possible here: auskunft.ezt-online.de.
As of 1 January each year, the product numbers change. The Federal Statistical Office in Wiesbaden announces the changes to the list of goods for foreign trade statistics on the Internet. It should be noted that a pure comparison of the product numbers is not sufficient, because there are always changes in content. Thus, it may well be possible that the previously used goods number still exists, but the goods must be assigned to another number.
Structure of the product number and use
There are different terms for the product number, depending on the application.
The Harmonised System (HS) for the designation and coding of international trade goods is the six-digit, worldwide nomenclature. Currently, 151 states are parties to the HS. In total, the system is applied by 207 states or economic unions.
The HS is also the basis for the EU’s eight-digit product number. Depending on the operation, either the 11-digit code number or the 8-digit product number (Combined Nomenclature) must be specified:
- International trade:6-digit code number (Harmonised System HS)
- Imports into the EU: 11-digit code number (electronic tariff)
- Export from the EU: 8-digit product number (combined nomenclature)
- Intrastat: 8-digit product number (Combined nomenclature)
Overview of the formal breakdown of the 11-digit code number using the example of a bound children’s book (source: www.zoll.de):
|Code number||Formal breakdown||Importance|
|49||Chapters – Harmonised System|
|4901||Position – Harmonised System|
|4901 99||Subheading – Harmonised System||Internationally uniform classification of goods|
|4901 9900||Subheading – Combined nomenclature||Allows the assignment of customs duties, textile categories, prohibitions and restrictions or import authorisations on import|
|4901 9900 00||Subheading – TARIC||Encrypted Community measures, e.g. anti-dumping rules, tariff suspensions, tariff quotas|
|4901 9900 00 9||Code Number – Electronic Customs Tariff||Use for national purposes, e.g. encryption of VAT rates, national prohibitions and restrictions|
The current nomenclature comprises 21 sections, 97 chapters and over 5,000 subheadings.
Basics of classification
Classifying goods is a challenging and difficult task. On the one hand, the current nomenclature comprises 21 sections, 97 chapters and over 5,000 subheadings. On the other hand, the list of goods is abstract and must also enable the classification of goods that have just been invented. In-depth product knowledge is also essential.
The bases for classification are located, often unnoticed, at the beginning of the list of goods for external trade statistics. The so-called General Rules for the Design of the Inventory of Goods (AV) in many cases lead to a clear classification. There are regulations on:
- Incomplete goods
- Cases of doubt when several product numbers are eligible:
- Purpose of use stands out material (purpose before substance)
- More detailed description stands out general description
- Larger product number stings smaller
A complementary tool for classification is the Explanatory Notes to the European Commission’s Combined Nomenclature 2015. The explanatory notes are considered to be an important tool for interpreting the individual tariff headings, but without being legally binding. The explanatory notes on the Combined Nomenclature are given in Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and the Common Customs Tariff. The last version was published on 4 March 2015.
(Binding) Information on the correct product number
In spite of the different means of classification, there are differences of opinion in practice as to which product number is to be applied. It is also conceivable that the same goods may be classified differently at different customs offices. This is problematic for a company because changes have far-reaching consequences, such as the tariff or the required documents. The following options can be used for clarification:
- Different views within a main customs office district: clarification by the competent main customs office.
- Different views within Germany: clarification by the General Customs Directorate Dresden. Although such information is not legally binding, it should normally be sufficient for uniform handling.
- Different views within the EU or a desire for binding information: for this purpose, there is the instrument of binding tariff information (BTI).
This is issued by the Main Customs Office in Hanover, it is valid in principle for three years and binds the administration throughout the EU. The former application for a BTI was amended on 1 October 2017 and is now entitled ‘Application for a decision on a binding tariff information’. The new application form asks for the EORI number and the representative relationship of the applicant and customs representative.
Since 1 May 2016, the applicant has also been bound by the BTI, both for new AND pre-1 May 2016 BTI. Since then, ZTAs have also been issued for exports and must be encoded in customs declarations (C626).
BTI already granted can be searched in an EU database.
BTI’s can also have a binding effect on similar products, provided that “these are product and manufacturing-related unavoidable deviations that cannot have an impact on the classification result,” according to the Bundesfinanzhof (BFH), judgment of 26.1.2012, VII R 17/11.
Further information on the binding customs tariff information can be found on the customs website: www.zoll.de/DE/Fachthemen/Zoelle/Zolltarif/verbindliche-Zolltarifauskunft/verbindliche-zolltarifauskunft_node.html
- Commodity numbers for an export: can also be requested from the Federal Statistical Office