In reality, using incorrect codes can lead to customs delays, fines, or even legal action. Take the recent tribunal case between HMRC and Star Images Enterprises where Star Images Enterprises found itself facing two C18 Post Clearance Demand Notices from HMRC for the underpayment of Customs Duty and Import Tax. This is a stark reminder of the importance of human expertise and interpretation in classification.

It’s crucial for businesses to prioritise the correct classification of goods to avoid these types of potential complications and financial risk. That’s where our TariffTel platform comes in to support businesses in accurate and compliant classification for even the most complex of products, supported by the guidance of our customs experts.

Here we look at the unexpected consequences of misclassifying goods and the repercussions it can have across a business if you’re found to be non-compliant by the government.

Repaying underpayments of duty

Underpayments of duty can lead to businesses having to repay the shortfall that should have been initially paid to customs authorities. This is often a meticulous and complex procedure that includes a thorough review of the misclassified products and the subsequent calculation of the correct tariff codes and associated duties, taking up both time and resource from elsewhere in the business. The financial impact of repaying underpayments extends beyond the actual duty amount. There are additional costs associated with conducting internal audits, hiring customs experts or consultants to rectify the misclassification, and possibly engaging legal support to navigate the complex regulatory landscape.

Associated fines with noncompliance

Customs authorities take tariff code accuracy seriously, and any errors can result in penalties that can put strain on a company’s financial resources. These fines are not just nominal; they can escalate rapidly, especially if the misclassification is considered a deliberate attempt to evade duties.

Potential loss of Authorised Economic Operator (AEO) status

AEO status is a coveted designation that provides companies with various benefits, including simplified customs procedures and reduced scrutiny. Losing this status could result in increased administrative burdens, longer processing times, and additional costs associated with adhering to standard customs procedures.

Further audits to ensure future compliance

Following a misclassification of goods, businesses may find themselves subjected to further audits by government authorities to ensure future compliance with customs regulations. This means that customs authorities scrutinise a company’s import and export activities in-depth, aiming to identify any potential irregularities, errors, or intentional noncompliance. These audits typically involve a meticulous examination of the company’s documentation, including customs declarations, invoices, and other relevant records. The impact of these audits is significant. The company may incur additional costs associated with the preparation of documentation, engagement of specialised consultants, and potential legal expenses to navigate the audit process.

Damage to company reputation

Repeated instances of noncompliance may lead to a damaged reputation within the industry. Customers, partners, and stakeholders may view the company with increased scepticism, potentially affecting its competitiveness and market position. The repercussions extend beyond the immediate financial and operational challenges, and can impact the long-term viability and sustainability of a business.

TariffTel’s combination of advanced customs data and our unrivalled team expertise create a precision solution for every business prioritising trade efficiency and growth.

If you want to find out more about a tariff code solution that’s right for your business or want to learn how your business could benefit from TariffTel, get in touch with our team.

The post What are the consequences of misclassification? appeared first on .

In a recent tribunal between HMRC and Star Images Enterprises, a licensed dolls and figures importer, the complexity of tariff codes and the correct interpretation of explanatory notes came under the spotlight. The case involved iconic characters like ‘Chucky’ from Child’s Play, ‘The Hulk’ and ‘Captain America’ from The Walking Dead, and highlighted the need for precision in assigning tariff codes, as well as an informed interpretation of the HS book and explanatory notes by experts.

Star Images Enterprises found itself facing two C18 Post Clearance Demand Notices from HMRC for the underpayment of Customs Duty and Import Tax. The root cause? Importing 189 different figures under a zero-rated import code when HMRC say they should have been assigned a tariff code which attracted a 4.7% duty. In tariff classification, the combination of accurate data and expert knowledge is essential to assign the correct tariff code to your goods. Simply looking up a code in the tariff book or an online tool, without considering the section, chapter, and explanatory notes, often leads to a wrong classification and incorrect duty payment. And this is the case here. It’s important to understand the properties of a product when assigning HS codes in order to do it correctly, as explained here in this blog about what makes up a HS and HTS code.

So, why is it crucial for businesses to invest in the right classification platform to assign correct tariff codes?

Risk of errors and unplanned costs

The large number of classification codes available increases the potential for errors, leaving businesses vulnerable to unplanned fines, penalties  and shipment delays if they are caught by HMRC in getting things wrong. In the case of Star Images Enterprises, a seemingly straightforward zero-rated code turned out to be a costly mistake. HMRC argued that the toys and figures should have been classified under a code which attracted a 4.7% duty and this was discovered through a lengthy audit process. Income duties are levied based on commodity codes assigned to the item being imported. Typically, the onus is on an importer to declare which code applies to their items. These codes are diverse and specific and for a lay reader, might be considered similar in attributes, but in fact carry different duties.

Knowledge and expertise matter a great deal in classification

The tribunal between Star Images Enterprises and HMRC shed light on the variations in rule interpretation, emphasising the need for dialogue in the classification process to clarify uncertainties. This is where the expertise of our TariffTel team is invaluable for customers when they come across a particularly complex product as highlighted with M&S and classifying some of their more complex Summer products.

The tribunal unraveled a debate over the main factors which could determine the correct classification, including whether figures represented humans or non-humans, if they were dolls or statuettes, and whether figures with additional items constituted a play set or a figure with accessories. The questions led to broader discussions, such as whether superheroes are human, if character backstory matters, and whether the figure serves a play or display purpose.

To read more of the arguments which both sides used to justify their position for classifying, the full judgement can be found here.

Lessons learned from the Star Images Enterprises case

The case demonstrated that interpretation of classification rules can significantly vary, impacting importation costs and goods’ profitability. The final judgment assigned the 189 figures to five different classification codes, with different suggestions from the importer, HMRC, and the tribunal for the same items.

Having the right classification platform in place is not just a matter of compliance but a strategic move to safeguard your business from costly errors, uncertainties, and unforeseen penalties. The Star Images Enterprises case serves as a poignant reminder that interpretation and customs knowledge should be a vital part of every classification solution. The consequences of getting it wrong are too great.

TariffTel’s combination of advanced customs data and our unrivalled team expertise create a precision solution for every business prioritising trade efficiency and growth.

If you want to find out more about a tariff code solution that’s right for your business or want to learn how your business could benefit from TariffTel, get in touch with our team.

The post When classification goes wrong for a toy importer appeared first on .

What is the number one trade challenge for businesses trying to ship their goods internationally?

Data – collection, accuracy and validation. This was the number one challenge raised by almost all visitors to our stand at the recent Import Export Show, hosted by the Institute of Export & International Trade. And it doesn’t come as a surprise to us.

Our team were not only talking about our TariffTel solution and how it is transformative for businesses in collecting and managing data to classify goods, but had their ear to the ground finding out more about the hot topics we’re all talking about as we get ready to enter 2024.

The event was bustling with people looking to get ahead in international trade, coming armed with questions and insights on how trade can be improved and what’s not working. Importantly, people were there to discuss solutions to overcome the current barriers they’re facing, with classification being just one of them that we can help with.

Having listened to the director of the IOE&IT, Maro Forgione, heard from knowledgeable attendees, along with government ministers, as well as academics and key thinkers involved in international trade, here are our five key takeaways to inform your approach to trade in 2024.

Five key takeaways to inform your approach to trade in 2024

1) The UK Government wants the UK to have a more effective trade border, or most effective compared to what it is now, and compared to other countries’ trade operations – a big, but noble, ambition in our opinion and one requiring considerable change and innovation. With the goal to make trading with the UK quicker, safer and more cost effective, it will take the cooperation and knowledge of the whole industry, as well as a willingness to adopt new developments in technology, to set changes in motion to give the UK border that reputation in the near future.
A comment in one of the morning discussions was around how freely the notion of ‘free trade’ is spoken about, but the reality is that businesses today are operating within ‘managed trade’ confinements due to a high amount of documentation needed and a lack of digitalisation that is holding UK trade back.

2) Data collection, accuracy and validation of data in trade operations is a challenge for many businesses still. This was a challenge raised by almost all visitors to our stand. Businesses are struggling in two ways, both of which are equally problematic: They don’t know where to get the data they need from, and it takes too long to receive it when they do. In either scenario this can potentially lead to incorrect tariff codes and wrong duty payments which in turn, results in shipment delays leading to loss of sales and even fines by HMRC. It all starts with data. Many people we spoke with understood that incorrect data can have these dire consequences and were looking for a solution to improve their data accuracy and compliance. This is where our tariff code solution TariffTel comes in to support businesses in working with their suppliers to collect and record accurate data in the first instance, which enables the correct tariff codes and duty payments to be assigned.

3) ‘Small, but nimble’, this was a sentiment that came up several times at the event by policy experts describing the UK’s force in global trade. Rather than trying to compete with the world power of the trade bodies of the EU or US, the UK as a standalone trading country, needs to retain its importance as a ‘friend to all’ like Switzerland. It was also agreed by policy experts that with the reduced influence as a global rule-setter, the UK should instead look to reorient itself as a ‘smaller, more nimble’ country. What this means for British business we think is open to interpretation and we certainly see nimble as being interchangeable to agile. If businesses are able to be more agile in their operations, they can respond quicker to opportunities, and also deal with challenges quicker. Technology can provide great support here in streamlining processes and managing data for the necessary paperwork. Ultimately, the UK’s force in global trade is going through a period of change as the UK looks to live up to this new way of trading as a standalone trading country.

4) The international market has huge potential for UK businesses and it doesn’t pay to play it safe and trade only in the UK. There was a fascinating panel discussion on ‘What international trade has done for my business’ which involved a range of businesses discussing how they are now exporting more than selling into the UK. The huge success of Fever Tree was held up as a great example as a British business that is now enjoying strong success in the US market. It was great to hear from all of the panel who talked about taking risks in international trade rather than staying safe and just trading in the UK. All of them have seen a huge increase in business by opening up to international markets.

5) Always look for the opportunities in international trade as you never quite know where they will come from, and do your research on new markets. This was the main message from Barry Tong Sol Retail at the Import Export Show who started out with £10 and converted it to £10 million in 10 years. Quite a success story. After starting out selling on ebay, he was quickly approached by Amazon and soon became one of Amazon’s top 100 sellers. He works with brands to help distribute their products to 16 other countries and this really started to take off during and after the pandemic when online retail sky-rocketed and he was able to meet consumer demand with the products he distributed. But, whilst he took advantage of the opportunity, he was also faced with the challenge of exporting to many different markets: each country has their own customs rules and regulations that you have to adhere to. For example, when exporting to France, they have a number of banned ingredients which means goods with these ingredients cannot be shipped there.

How are you preparing your business for the trade challenges and opportunities ahead?

If your business has the challenge of data, like the many we spoke to at the Import Export Show, and you want to understand how you can better collect and manage data as part of your customs classification approach in 2024, please get in touch with our team. We’ve saved many British businesses from paying incorrect duty costs and ensured their shipments stay on track, we can help you too.

Read more about another important issues concerning the industry right now, compliance, why it’s important. 

The post Five key considerations for international trade for 2024 appeared first on .

The TariffTel team were at the Institute of Export and International Trade Membercon 2023 event in Liverpool which brought together industry leaders and visionaries to discuss all the challenges and issues they’re seeing today in global trade. It was a chance to hear from experts on important topics such as freeports, green trade and export controls and a time to collaborate, ask questions and learn from success stories from businesses that have overcome hurdles when exporting and importing goods internationally.

Our Head of Sales, Darren Wareing, was invited to be involved in a panel discussion on ‘Managing the costs of international trade’, which was a jam-packed session, clearly appealing to many business leaders and supply chain executives who face increasing costs relating to export controls across their supply chain. As part of the panel, compliance in customs procedures, including assigning correct HS codes to goods at the start of their journey in the supply chain, was a big focus. The costs of non-compliance are significant, and whilst the process of getting things right is complex, the panel discussed the resources that are available to businesses to make things simpler and quicker.

Having expertise within your team plays an important part in meeting compliance standards. A well-trained, knowledgeable team can support your business in understanding the terminology, processes and requirements involved, but technology and automated product classification solutions like TariffTel, can transform operations and ensure compliance is met for every single product. This is particularly true when managing large numbers of SKUs each month.

As Darren said, “The reality of penalty fines and delayed shipments if HS codes are wrong, or you have incorrect paperwork on customs declarations, are not worth contemplating. HMRC can issue fines for incorrect classification, especially if duty has been under declared and under paid. If a shipment is held at customs because the paperwork or customs entry isn’t correct, then demurrage or storage costs can be incurred. This is much worse at the port of entry. A British retailer had ocean containers held in the US due to border control difficulties. US customs required extra details about product composition and manufacturer documentation. This resulted in very high demurrage costs plus loss of sales, and reputational damage.”

Another complication is that HS codes can change regularly according to updates to the Harmonised System that standardises numerical methods of classifying traded products and is used by customs authorities worldwide. This means using out-dated HS codes can be more common than people think. Find out more on the intricacies of HS codes.

Business can safeguard against this by working with a platform that automatically updates these changes as and when they happen, like TariffTel. Also, by tapping into the valuable resource of the teams behind the technology who work hard to keep systems updated. These teams have a wealth of knowledge and experience to help businesses understand even the most complex of classifications.

There was also discussion about customs systems not marrying up with each other that can cause added confusion for businesses trying to navigate the correct approach. For example, in the past, some businesses have experienced problems with Export Health Certifications (EHC) and the tariff book not matching up. For food exporters this presents a problem that the panel agreed needed to be addressed by HMRC.

The panel then moved on to discussions around supply chain efficiency and the role of technology in managing international trade costs. Darren explained, “Data is everywhere and in various forms. This unfortunately creates data silos which are an operational overhead with teams having to go to many systems and sources to manually create reports. It’s inefficient, time consuming, and not always reliable.

The key is to centralise your data from single verified sources, rather than from multiple sources, department or people. Make sure you reference the data and don’t duplicate anywhere else. By using robust integrations, such as industry standard API’s, you can enable rapid data exchanges between all parties and avoid disparate systems, giving you one single version of the truth.”

Membercon2023 proved a great event to discuss and debate the complexities of global trade. For anyone who missed the event, or who attended and would like to pick up discussions on what a trusted customs classification solution such as TariffTel can achieve for your business, please get in touch. We are happy to share how we support long-standing customers such as M&S, Primark and ASDA with their customs classification, ensuring compliance and visibility across export controls and procedures.

The post The importance of compliance in global trade at IOE&IT’s Membercon appeared first on .

Successful classification comes with knowing your good’s exact properties in order to determine the correct duty and customs tariffs with a six-digit HS code developed by the World Customs Organization (WCO). If your business classifies a growing number of SKUs, using a customs classification solution like TariffTel takes the headache out of classification and reduces any risk of major shipment delays that can play havoc for any business.  

Getting customs classification wrong can be a stumbling block for your company’s supply chain. Incorrect classification can not only lead to delays in shipments, but in increased costs that many retailers want to avoid.  

5 reasons to outsource customs classification 

1. Expert advice – You will receive the correct Tariff Codes from trained Customs Classification experts. These people are highly skilled in their field and fully understand the complexity of acquiring Tariff Codes. They have access to all the sources of data they require and understand how to use them. This takes all the pressure of this important task off the retailer giving peace of mind 
2. Accurate information – You know your Tariff Codes will be up to date, changes are always happening and it can be difficult to keep abreast of those changes. Outsourcing this function means you have the most accurate information at all times. One common pitfall is to use the same Tariff Code you used last time. With every classification there is the risk that the HS code has changed and is now not valid. Let someone else do the hard work of keep tracking of all the changes so you don’t have to. 
3. Integration – How do you keep track of Tariff Codes changes? Will you need a new system? The short answer is no! Our TariffTel system can integrate fully with your current system. We can run reports and you can download them in Excel. You will be provided with all the data that you need when you need it. On time information is key to a smooth efficient supply chain. 
4. Save money – Working with a team of customs classification specialists ensures that you are not overpaying on incorrect tariff codes, you pay the correct amount every time. Costs are also saved when shipments arrive at their destination on time. If goods are held at country’s border due to incorrect HS codes there can be associated costs for warehousing and storage until the error is corrected. Finally, outsourcing to a team, rather than relying on a customs specialist in-house, means you have the skills of many people to hand during busy periods such as Christmas, or can scale back over quieter months. Resource planning becomes easier and more cost effective.  
5. Compliance – It is imperative that you follow all customs regulations when classifying products to minimise the risk for error and ensure a good working relationship with Customs Authorities. If you do not abide by the rules your goods can be seized, you could face penalties/fines and even criminal charges. By using a customs classification solution you are always ready for an audit with the data at your fingertips. 

Find out more about outsourcing your customs classification or contact us to speak to a member of our team 

The post Five benefits of using customs classification technology appeared first on .

The cost of using the wrong custom code for importers really does come with a high price as this example reveals! 

How to avoid assigning the wrong tariff code? 

Assigning a Harmonised system (HS) code or tariff code is not as simple as just checking a directory. Over 200 countries including the UK, United States and Canada base classification on the World Customs Organisation’s Harmonised System which is a standardised listing of commodities, with a corresponding six-digit code number for each. The Harmonised System was updated on 1st January 2022. The United States used the Harmonised System as the basis for its Harmonized Tariff Schedule (HTS). HTS codes are ten-digits long with the first six-digits coming from the HS and the remaining four unique to the United States. Canada maintains its own ten-digit based system, known as Customs Tariff. 

It’s complex, and different county by country as you can see. Tariff codes can also be updated regularly so it pays to work with a customs classification solution like TariffTel that checks daily for updates from the WCO (World Customs Organisation) and implements them in a timely manner into the TariffTel system. 

Understanding the main properties and function of a product 

There are many circumstances in which a product can seem to fall under multiple categories and this is where use of the six General Interpretive Rules (GIR Rules) for classifying a product are useful.  

Rule three is to support classifying for mixture of products. What is the essential characteristic of the Product? Should I classify as 1 Product and use the last numerical Tariff code or should the Product be broken down into separate items. 

Take a Plastic-Coated Wash Bag and inside the bag is a Soap and a Sponge. 

Soap Bar – 340130 – duty 0% 

Sponge – 392490 – duty 6% 

Plastic Coated Wash Bag  420292 – duty 8% 

This Product should be broken down as you could use the Plastic-Coated Wash Bag again. 

As you can see the duty rates on all items are different and are an importance consideration for a retailer when importing thousands of these products. 

Determining a product’s main function plays another important role in assigning tariff codes. If you were to just use the Tariff Book in isolation it would be very easy to incorrectly classify a Sports Bra versus a Crop Top. 

What is the difference between these two products? 

To be classified as a sports bra under heading 6212, it has to have a clear definition of cups or separation of the breasts. The separation can be in the form of clear individual cups or merely stitching or gathering of material between the breasts. There is a clear difference in duty payments depending on which code is appropriately assigned. 

Sports Bra – 621210 – 6% duty 

Crop Top – 621142 – 12% duty 

Using TariffTel and working with our expert customs classification team, we take the time to access all the relevant data to ensure our database, which is product led, is accurate. 

Assuming all countries follow the same rules 

Assuming all countries are the same is a common pitfall we see in assigning HS codes. There are different Tariff books for different countries. 

For example, Flip Flops with uppers of leather or composition of leather have a varying duty whether you’d importing into the UK or US.

Import into UK – 640510 – duty 2% 

Import into US – 640510 – duty 10% 

What happens if you can not decide on the correct code? 

BTI stands for Binding Tariff Information. This is when companies are unsure of what Tariff Code to use and they ask for advice from a National Customs Authority. This authority provides the Tariff code and the relevant duty. All these are stored for other businesses to use.  

In the United States, they use Cross Rulings which work in a similar way. We have access to all this information and use on a regular basis to cross check our Tariff Codes. 

Find out more about our Tarifftel solution here to relieve the headache of customs classification 

The post The high price of using incorrect tariff codes appeared first on .

What does a HS code look like? 

A HS code structure is based on the chapter number, heading and subheading codes of the HS nomenclature.  

For example, HS Code 620520 would therefore comprise of the following: 

• 62 (Chapter) – Articles of apparel and clothing accessories, not knitted or crocheted 
• 05 (Heading) – Men’s or Boy’s Shirts 
• 20 (Subheading) – Of Cotton 

All countries using the HS will publish their own tariffs using this universal code. HS Codes are required for export and are used by customs to classify the product being shipped. That way it can accurately calculate taxes and duties and apply any necessary restrictions. 

If you don’t include the HS code on the commercial invoice and other shipping documents, you risk the receiver paying the wrong tax and could possibly delay the shipment. 

How do I get a HS code for my product? 

You can find a HS code by using as online HS code search tool or the Tariff Book. But the accuracy of these tools relies on your understanding of how best to use these tools, and the product description you have. Without prior knowledge and the right level of detail, the code these tools provide are not necessarily correct.

How to provide a good description 

The key to successful classification is providing a clear description of the goods you are shipping. This means stating clearly what your goods are, what they are made of and what they are used for. A clear description will provide the correct duty and customs tariffs.  

Why use an online search tool like TariffTel for customs classification 

Unlike other tools, TariffTel is not simply a tool that searches an electronic version of the HS book, but a solution that allows you to focus on the characteristics of your item. Our unique approach to classification provides accurate results using our proprietary data that has been interpreted from the HS books and their explanatory notes – so you don’t have to.  

TariffTel allows you to: 

• Obtain the HS Code for export and the Tariff Commodity Code for import for the United States, United Kingdom, European Union, Canada, Australia, and many more 
• Easily find your item using our intelligent search and by answering questions specific to customs requirements for your item 
• Receive an email of the classification for your records 
• Registered users can review their classification history online 

Try TariffTel to find HS Codes for 1 – 1,000+ SKUs

The post What is a HS Code? appeared first on .