Guides

In order to determine the customs treatment reserved for a good during import or export operations, there are three essential concepts that you must know and master: the tariff classification, the origin of your goods and their customs value.

During the
customs declaration, the commercial designation of your merchandise must be completed with the corresponding tariff classification. This tariff classification is the name given to your goods in the common customs classification, which includes more than 23,000 classification sections.

Both for import and export operations, this classification is essential for companies. From it depends on determining the rates of customs duties, the trade policy measures, the security standards, the prohibitions or embargoes measures, the common agricultural policy (CAP), the interior taxation or the foreign trade statistics compilation.

>This information must be transmitted to the customs authorities during each customs clearance, via the customs declaration.

It is therefore by anticipating and mastering this data that we can eliminate customs risk, and thus organize and manage international flows in the best interests of the company.

During the
customs declaration, the commercial designation of your merchandise must be completed with the corresponding tariff classification. This tariff classification is the name given to your goods in the common customs classification, which includes more than 23,000 classification sections.

Both for import and export operations, this classification is essential for companies. From it depends on determining the rates of customs duties, the trade policy measures, the security standards, the prohibitions or embargoes measures, the common agricultural policy (CAP), the interior taxation or the foreign trade statistics compilation.

In the case of the European Union :

· The Combined Nomenclature (CN) is constituted of the first 8 numbers.

· The Integrated Tariff of the European Communities (TARIC) is composed of the first 10 numbers of the nomenclature, and must be provided on customs declarations. (for export declarations, some member states of the EU only require the Combined Nomenclature).

The first 6 numbers of the nomenclature represent he Harmonized System (HS) position (S.H.), the globally applicable coding system for goods, which avoids multiple codes association with the same product.

The system guarantees a unique and methodical classification for every country using it (currently 195 countries, covering 95% of world trade) for goods traded internationally. It also allows the comparison of trade flows.

The origin of the merchandise can be defined as its customs nationality. It gives information about its obtaining or manufacturing country, a necessary data to apply the proper customs reglementation during importation.

In fact, a product 100% produced in a given country (agricultural crops, natural resources,…) comes naturally from this particular country. But what about a product whose several countries participated in the manufacturing ?

In this situation, there are two possible scenarios : the “non-preferential” origin and the “preferential” origin.

The non-preferential origin of a merchandise is equivalent to its common law origin. On the contrary of the preferential origin, goods always have a NPO. It is used to apply UE trade policy measures as well as establishing the statistics about the foreign trade and the origin marking, the “Made in”.

WARNING

The non-preferential origin must not be confused with :

– The provenance, geographic notion that refers to goods physical flows. For instance, a product manufactured in Spain, and then delivered in Germany by a French distributor, will have Spain as origin and France as provenance.

The preferential origin allows to reduce customs duty rates or to apply a 0% duty rate when importing goods. Indeed, to help developing international trade, a large number of countries have signed free-trade agreements (FTAs) and economic partnerships (ETA), it results to the reduction or the deletion of customs duties, but only for goods directly coming from and towards the partner country. On the contrary of the NPO, goods don’t always have a PO.

In case goods have been manufactured from materials or components that are not from the partner country, hey must have been transformed enough (according to the rules established in the partner countries’ agreements) to be qualified as originating from this partner country, and therefore to benefit from the advantages of the preferential origin.

Moreover, the access to preferential rates depends on the presentation of a proof of the goods origin during the customs clearance process.

Depending on the legal framework, you might need these documents :

– A movement certificate of   EUR-MED goods in the pan-Euro-Mediterranean area (for the EU).

– A EUR.2 form as part of the agreement with Syria (for the EU).

– A declaration of origin, by an Approved Exporter (AE), established by all exporter on its trade document, if the value of the shipment doesn’t exceed 6,000€ (10,000€ for shipments towards overseas territories), and without limitation of value.

– A certificate of origin, by a Registered Exporter System (REX), established by all exporter on its trade document, if the value of the shipment doesn’t exceed 6,000€ and without limitation of value.

If you have doubts about the interpretation of the origin rules, it’s possible to file a request for BOI (Binding Origin Information) with the customs services, in order to have goods’ origin officially validated by customs.

The BOI request is free and it allows to :

– Ensure the accuracy of the “origin” data from the customs declarations.

– Ensure the TEC (Common External Tariff) and the commercial policy measures (tariff quotas, anti-dumping duties,…) applicable to import goods (non-preferential origin).

– Benefit from reduced or zero customs duties (preferential origin).

The list of the European Union agreements and unilateral preferences can be consulted here.

The customs value is the goods value to declare during the passage through customs. With the tariff classification and the goods origin, it’s one of the key elements forcalculating duties and taxes at import..

When export, it also allows to establish statistics about foreign trade for the exporting country.

When import,the customs value of goods is calculated based on its transaction value..

IThe transaction value is the price actually charged to the buyer, to which we may add or subtract certain costs (insofar as they are objective and quantifiable) :

– Fees   to be added (corresponding to  costs, products and services associated with the manufacturing, the use and the transport of imported goods) are the sales commissions, the cost of contributions, the cost of packaging and containers, the amount of royalties and license fees, the valueany part of the product of any resale, transfer or subsequent use of imported goods directly or indirectly returning to the seller, and the costs of transport, handling and insurance to the point of entry into the customs territory.

When exporting, you must declare the value of goods at the exit point of the exporting country’s territory. This value can be increased by transport costs to the border, but doesn’t include the amount of exit fees and internal taxes.

The export customs value corresponds to the entire price paid by the foreign buyer for the supply of the goods, determined at the exit point of the exporting country’s territory.

In the case of a succession of sales prior the export to the exporting country, the calculation takes into account the value of the sale made between the last owner of the goods and the foreign buyer. If the commissions (intermediary remunerations), the fees and license fees are included in the invoiced price, they must be taken into account in the customs value. However, discounts on the price reduce the invoiced value when they are granted by the exporter to its foreign client.