Improve your customs process – know your product

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Improve your customs process – know your product

Rene Magritte dubbed his painting ‘Ceci n’est pas une pipe’ (‘this pipe is not a pipe’). A customs expert could say something similar. You see, at import he would classify a pipe as code 9614009000, which is Chapter 96, MISCELLANEOUS MANUFACTURED ARTICLES; Smoking pipes (including pipe bowls), and parts thereof: other.

This blog further explores ‘Know your product’ (see our previous blog). It’s not about how you see your product, but how Customs looks at your product. If you step into Customs shoes, you can plan and design your business processes better.

Classification

Customs uses a standard classification with which virtually anything can be classified. Products like live animals, computers, wood, shoes, machines, but also art and guns all have their own code. Have a look at website of Dutch customs and EU, to browse all 21 sections and 99 chapters. The classification determines your product’s import duties (together with country of origin), but also whether there are any restrictions on import or export.

Hence, you start by determining the correct classification of your product. But how? It might seem like a simple task, but you have to consider all the details. There are plenty examples of difficult cases, like Christmas toys, shoes or gumball machines. Is it a Christmas decoration or a toy? Are the shoes made of leather or do they only have leather soles? Gumballs are edible, the machine is not – which one is leading?

To perform a proper classification you require expertise, so always make use of an expert. He will use his expert knowledge to classify your product and indicate whether restrictions might apply to import or export. I will discuss restrictions like permits and inspections in another blog.

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Origin

Let’s turn to Origin. In short it means: the country in which the product was made, harvested or born. The country of origin determines whether the standard import duties are either raised or lowered. An example: instead of 16% import duties, you’ll pay only 0% for bananas from Ecuador as result of a trade agreement. Conversely, extra import duties have to be paid to import solar panels or steel (certain producers) from China. Hence, you’ll definitely want to know the exact origin of your product.
Determining the origin is not always an easy task. Raw materials might be sourced from various countries, first assembly done in country A, second assembly in country B, etc. To assist this process, Customs has drawn up the so-called ‘Rules of Origin’. If you are in doubt of the exact origin of your product, you’ll want study this.

Look further

You’ve now classified your product and you’ve determined its origin, so you also know the import duties and (if applicable) restrictions. Whether you are happy with the outcome or not, remember this is not the end – always look further. You can always improve, by changing the origin (different supplier), by modifying your product so it’s classification changes or by amending your supply chain.

Your supply chain has been set up in such a way that you import raw materials or the final product. Import duties can differ, so it might be more interesting to process raw materials in the Netherlands instead of importing the final product. A famous example is cocoa: chocolate is more expensive to import than cocoa powder, which in turn are more expensive to import than cocoa beans. The same applies to Magritte’s pipe: to import the ebauchon (wooden bloc) you’ll pay 0% import duties, while the import duties on the final product are 2.7%.

Final tip

Import duties have been harmonized across the EU, hence no need to go around shopping for lower import duties in other EU countries. There are however differences on a limited amount of goods, like coffee, soda and excise goods.

Next blog will be on inspections and associated permits. In case you have any questions or suggestions, feel free to share via this blog or send me an email via hkolk@boltrics.nl.

These postings are provided “AS IS” with no warranties and confer no rights.
You assume all risk for your use.

Hubert Kolk
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Hubert Kolk