Here, our Head of Technology Tim Ingram-Smith, outlines the successful practices he sees many organisations adopt to optimise the classification operation.

Know the trade environment

Goods that cross borders not only need to be classified with the correct tariff code to assign duty payments, but also require a customs declarations form. Trade compliance managers have an end-to-end role in managing this process, from the origin of goods, to the delivery of goods to the consumer. They facilitate the points where the goods pass from one jurisdiction to another.

National governments, and supra-national organisations like the European Union, stipulate or negotiate special trade agreements, duty rates, quotas and flat-out sanctions across a whole range of criteria and your goods may be subject to sanctions. It pays to know the whole trading environment you’re operating in.

For each item you need to be sure of its Country of Origin and Country of Manufacture. For example, an electric-corded nail gun coming into the UK from the EU attracts a duty rate of 0%, but if the same products comes from China, it is assigned a 2% duty rate.

Know all the parts of every product

All manufactured goods are composed of constituent parts, likely made of different components, possibly made in different countries.

It’s worth creating a ‘product map’ which shows the raw materials that make up each item. For example, in the UK Trade and Cooperation Agreement with the EU, automotive components which originate outside the UK should be less than 45% of the price of the final vehicle (Source: UK-EU Trade Agreement).

As well as origin of goods, you’ll need to be aware of the InCoTerms that apply. International Commercial Terms are a set of short codes that signal the agreement being called into play when goods cross a border. For example, if your documentation says ‘DDP’ that means ‘Delivered Duty Paid’ which in turn means that the buyer can be sure, and is contractually accepting, that when they take delivery of the items from the transportation agent, that the duty has already been paid. Incoterms are common with big companies across Global Value Chains.

It’s crucial to be aware of the end-to-end journey of your goods from component manufacturer to assembly, transportation and import into destination country. This is where a solution like TariffTel can assist. TariffTel has a Vendor Portal where your suppliers can enter the relevant details about the products they are manufacturing. They know your products best after all!

Plan your paperwork

It’s a good idea to get your paperwork in order before your goods hit the customs queue. There are many questions to be completed on cross-border documentation, many of which can be handled electronically for more advanced countries.

You need to understand what your products are made of, as you may need to answer audit questions around, for example, deforestation rules or animal welfare. Have a read of our top tips for creating a good goods description.

Let’s face it, trade compliance can be complex, and ever evolving. Tariff arrangements don’t stand still and special arrangements and government announcements can happen at any time, whether beneficial to your product set or detrimental. TariffTel keeps business on top of any changes sending alerts whenever the duty changes on an item change, this immediate notification is crucial to ensure continual compliance with regulations. It also pays to keep your ear to the ground with special programs, preferential tariffs and trade agreements.

You can hear more from Tim in this video series from key takeaways from the Customs Compliance Conference.

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At the heart of this process lies the goods description—a concise yet comprehensive, and legal, description of the item being classified. Getting the information needed for customs classification can sometimes prove a challenge as data can be held in numerous sources or with your suppliers. But it’s a crucial aspect of classification to address that will lead to accurate classification and improved compliance.

Here’s our guide to navigating this important aspect of classification.

Six steps to the perfect goods description

Be specific, yet concise: The key to a clear goods description is finding the balance between specificity and brevity. Include essential details such as material composition, function, and intended use, while avoiding unnecessary jargon or superfluous information. For example, instead of simply stating “fasteners,” specify the type (e.g., screws, bolts) and material (e.g., stainless steel, brass). This is because tariff codes in many cases are classified according to material type.

Use standardised terminology: Consistency is key when communicating with customs authorities worldwide. Use standardised terminology and the central Harmonised System (HS), from which all tariff codes are based, to ensure you follow the guidance provided. It’s also important to keep up to date with changes to the Harmonised System which can happen regularly. Our TariffTel solution provides automatic notifications to let you know when your codes have changed, giving you time to update them before shipments leave with the incorrect paperwork in place.

Provide visual aids: Sometimes, words alone are not enough to accurately describe complex products. That’s why we introduced the image functionality into TariffTel to enable businesses to upload and store product images which can be accessed centrally to all who need to see them. These visuals can help customs officials better understand the nature and characteristics of the goods, reducing the risk of misclassification.

Include technical specifications: For products with unique or specialised features, it’s a good idea to include technical specifications such as dimensions, weight, and performance metrics. These details enhance the clarity of the goods description, make sure the correct code is assigned and you’re paying the right duties and taxes.

Consider regulatory requirements: Certain products may be subject to specific regulatory requirements or restrictions based on factors such as health and safety, fat or sugar content in food items, or environmental impact in the case of wood used in homewares. Ensure that your goods description accurately reflects these additional considerations to avoid delays or penalties during customs clearance.

Update regularly: Nothing in trade stands still and it’s likely that the composition of your products could change over time, especially if they are best-sellers and you have sold the product for a while. It’s a good idea to regularly review and update your goods descriptions to reflect any modifications or enhancements to your product line. This proactive approach will keep you compliant with evolving trade regulations.

For more insight into how to classify goods correctly, take a look at some of our sector specific guides on classifying food and homewares.

A customs classification solution like TariffTel can help streamline the process of classification and support your team in creating accurate goods descriptions which lead to the correct tariff code. TariffTel’s combination of customs data and our unrivalled team expertise create a precision solution for every business prioritising trade and growth.

If you want to find out more about TariffTel, please contact our team for a demo.

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