Commodity code changes: are you aware?

The changes came into effect on 1st January 2022.

Commodity or trade tariff codes are used to classify any goods being imported or exported.  They are a key requirement to ensure compliance with customs declarations; compliance with relevant legal or safety regulations for dangerous or restricted goods and to help determine the level of duties and other taxes payable.

Failure to be familiar with the changes and use of the incorrect classification codes will inevitably have significant consequences for cross-border traders and their customers. Goods could be held and delayed by customs authorities or seized for unpaid duty giving increased exposure to demurrage charges, possible penalty charges as well as the time consuming and often costly process of seeking to have seized goods restored to you.

Changes for traders

The HS 2022 amendments include, among other changes, new headings and subheadings, modified article descriptions, and new or revised legal notes, recognising changing trade patterns, new technologies and product streams

According to the WCO, some of the notable changes include:

• Unmanned aerial vehicles (drones) – specific provisions added to simplify their classification
• Smartphones – a new subheading added and new chapter note to define the scope of the term.
• Rapid diagnostic kits — recognising the dangers from delays in deploying tools for rapidly diagnosing infectious diseases, changes have been made to the provisions for test kits for detecting the Zika virus and other mosquito-borne diseases to simplify their classification.
• Placebos and double–blinded clinical trial kits – new provisions to enable their classification without information about placebo ingredients to facilitate cross-border medical research.
• Dual-use goods — new subheadings have been added for various dual-use goods that could be diverted for unauthorised uses, such as radioactive materials, biological safety cabinets, and parts required for the construction of improvised explosive devices, such as detonators.
• Materials controlled under international conventions – new subheadings for certain hazardous chemicals controlled under the Rotterdam Convention; persistent organic pollutants controlled under the Stockholm Convention; and others  noting that such initiatives often rely on HS for practical implementation.
• Heavy duty vehicles with electric motors – expands provisions for certain tractors and motor vehicles for the transport of goods to include new subheadings for partial and fully electric heavy-duty vehicles.
• Electrical and electronic waste (‘e-waste’) – specific provisions for its classification to assist countries in their work under the Basel Convention which regulates the transboundary movements of hazardous wastes and other wastes to ensure such wastes are managed and disposed of in an environmentally sound manner.
• Glass fibres and metal forming machinery – major reconfigurations have been undertaken
• Multi-purpose intermediate assemblies – there will be more products classified in their own right rather than generically such as flat-panel display modules
• Novel tobacco and nicotine-based products – new provisions added for tobacco products intended for inhalation without combustion i.e. vapes

Impact and key considerations

All businesses will be impacted by the changes and you may need to be consider them across all elements of your business if they may increase your cost base.

• Be aware of how the changes will affect your business if you have a new code. Look at the qualification requirements for rules of origin under the Trade Co-operation Agreement to get zero percent customs rate if goods are coming from the EU or you are exporting to the EU.
• Carefully check the supplementary notes for the particular tariff – there may have been amendments providing extra information and clarification to determine how the goods fit into the particular tariff.
• Ensure all documentation, in particular invoices often used as the basis for a declaration, is updated to reflect any changes.
• Use the trade tariff lookup tool (https://www.gov.uk/trade-tariff) – allows you to find the right code by narrowing your search using information such as what your product is, what it’s made from, how it works, and how it’s packaged.
• Open dialogue between all parties involved in the carriage or arrangement of carriage of the goods to make sure they are aware of the changes, particularly given full customs declarations are required with the EU. If the product has changed code is there extra licensing required and has your forwarder or carrier been made aware of this position? Are there are extra tasks which they/you need to perform depending on who will be the declarant for the purposes of the customs declaration?
• Be aware of your global supply chain – validate changes against correlation tables of the country of import or work with business you are exporting to make sure you are declaring the correct codes in the relevant countries where the goods will be delivered. WCO and WTO also have a tariff download facility where you can select relevant countries you import/export with and the product to obtain the tariff codes duty and rates for the selected countries as opposed to separately checking the tariff schedule with each country in which you have operations.
• Email HMRC for advice – ask HMRC for advice on the best fit code for the goods (classification.enquiries@hmrc.gsi.gov.uk). You need to include information about the goods you are planning to import or export and should include: a description of the product; the materials it’s made from; what it is used for and how it’s presented or packaged. HMRC ask for a separate email for every item you want to ask about.
• Consider a BTI ruling – binding tariff information ruling to confirm your commodity code. You will require an EORI number to do so. There are no costs from HMRC but you may need to pay if there are tests needed, for example, to determine the materials used in your product. Samples must always be provided for textiles, ceramics and shoes, but you might also find it helpful to provide samples for other types of items. There is a right of appeal if you disagree.
• Be aware of your terms of sale (Incoterms) – if you are responsible for importing you could have different duty rates and more irrecoverable costs for the business. Amendments may also be needed to budgets, forecasts and pricing to account for any increased costs.
• Consider use of a Duty Deferment Account facility or one of the customs special procedures which can reduce duty and tax liability such as customs warehousing, inward processing, outward processing, and temporary admission.

If you are affected by these issues contact one of our specialists to find out more