Choosing the correct Tariff Code

Gordon Tutt of the AFSS explains

Ensuring the correct Tariff Code is used when undertaking an import declaration is a problem that I expect has existed almost since goods first required an import declaration.
More recently the use of the Tariff Code has been extended in different forms beyond its use in just the import declarations.
Having started my career in exports as a clerk, I had very little interest in such things as Customs tariffs. These were left to “the import clerks” on the second floor to worry about. It was much later (25 years to be precise) that I received my first training on the application and use of Customs tariffs when undertaking import declarations, including how to look up the appropriate tariff.
Many of the experienced senior import clerks knew the tariff codes regularly used off-by-heart and could quote them like commonly used telephone numbers. (Before the days of mobile phones.) However, even the more experienced import staff would face difficulties in using the correct code. Commercial invoices and bills of lading often failed to provide sufficient detail in order for them to be able to establish the correct code. Frantic phone calls would be made to the importer or their agent to try to establish more details. Despite all the ‘best efforts’ mistakes occurred and the wrong duties and taxes were occasionally applied.
One Project Manager I worked for told me that years earlier she had been given her first entry to complete as a young import clerk. The shipment was described as “Leaf Cutters”. The importer was in a frantic rush to collect the shipment and following lengthy examination of the tariff she eventually found a code which related to lawn mowers. This seemed to be the most accurate tariff covering the general description. Only after she had completed the entry, paid duties and taxes, did she discover that the shipment was “live insects”. I expect the time and effort then required to sort out the error was very costly.
The only interest I had as an export clerk was to ensure the correct IATA ‘Commodity Code’ (Not to be confused Harmonised Commodity Code) was applied to the chargeable rate on the Air Waybill. These were set in those days by IATA and carriers would be penalised if they permitted goods to be carried under the discounted IATA rate set for specific types of commodities on certain routes. The other major decision was how to describe the goods on the Air Waybill and Cargo Manifest. The commercial invoice or letter of instruction may have provided the details, but this often needed to be abbreviated in order to fit on these documents. “250 Ladies Cotton Blouses, 500 Ladies Woollen Skirts, 100 Polyester-Cotton Dresses” would be abbreviated to “Ladies Apparel” or “Apparel” or “Clothing” depending on how the mood took you at the time. Looking back if the tariff code had been on the Air Waybill this would have made life easier for all involved.
As I mentioned earlier, export departments had little interest in Customs tariffs as their prime concern was to move the goods as quickly as possible and pass on the problem of establishing the description of good to the final destination.
Today, with the introduction of more sophisticated technology, the ability to use bulky, worn and well-thumbed Customs tariffs in import departments around the world has been replaced in many cases by their IT systems, sometime integrated into the importers declaration systems. Many of the AFSS members provide this option as an alternative to the paper tariff. More alternative solutions are being developed every year to help both the buyer of the goods, the shipper and their agent as well as the traditional Import Declarant.
What may be of interest is that many companies now look ahead in advance of making any purchase to establish the correct tariff. In knowing the tariff they are not only able to establish the costs in respect of duties and taxes but can also help identify the types of goods which may be subject to quotas, prohibitions, licences or controls.
Having the knowledge of the potential cost, the buyer can in some cases modify their order to an alternative type of goods, which may not be subject to higher duties. In the same way that manufactures have utilised systems to identify the optimum packing sizes and thereby reducing transportation costs, some major companies now use the tariff code to save on costs and help remain competitive within a global market.
Having knowledge of the tariff codes in advance of the shipment has many additional advantages for all parties involved in the logistics chain. With an increasing demand for advance data to be provided electronically. Customs and Government agencies in many countries see the tariff code as an alternative means to the using the descriptive text. Many countries provide the ability to submit a Harmonised Commodity Code (HCC) in addition to the descriptive text.
The Import Control System, when originally proposed in the EU, mandated the HCC as one of those key data elements to be provided in the Entry Summary Declaration. (ENS)
Following consultation from the Trade, The Commission agreed to set this data element as optional rather than mandate it. Trade Representatives had explained the difficulties that some sectors of trade would have in meeting the proposed regulations. It was believed that obtaining the HCC at source, and having the ability to provide this data prior to loading, would not always be possible.
With the variety of languages used within the EU, I believe the Commission were correct to plan to utilise the HCC in any electronic submissions as an alternative to descriptive text. I also feel that their decision to make this optional in the interim was correct. Clearly the way forward will to be to use both the descriptive text and the HCC in future. The Harmonised Commodity Codes can be listed providing the itemised detail of the shipment and the description text can also be provide for the “Human Mk 1” who may need to read the submission or documentation. With some countries, including the EU, USA, Canada and China having a list of prohibited descriptions, it should be possible for systems to use the tariff codes to derive an acceptable descriptive text.
By using the HCC, the tariff can also be easily found and if the tariff is known in advance of purchase this can be used in any conversion to a HCC.

Many AFSS member’s systems provide an electronic alternative to the use of the old paper tariff, with some systems designed to engage with vendors and buyers to improve classification accuracy while reducing administration costs. The tariff can be maintained electronically and kept up to date much easier with new versions downloaded routinely. The tariff code can then be included into any export documents or messages, converted into the HCC and the details passed down the distribution chain. This can then be utilised by those in trade partners, Customs and Government agencies alike. Many systems already have templates for those customers who regularly ship the same goods with the tariff or HCC embedded in the template.
Software providers continue to work with their customers to enhance their systems, providing additional functionality in order to help improve the efficiency of the business, as well as providing cost savings. There was a great deal of interest shown on the use of electronic tariff at this year’s Multimodal. Those AFSS members exhibiting were kept busy throughout the show. The 2014 AFSS Directory was also distributed in the visitors pack. A full list of AFSS members can be found on the AFSS web site.