Master customs procedures: tariff species, origin and value of goods

Customs play a fundamental role in regulating international trade, protecting national economies and ensuring border security. By overseeing the flow of goods into and out of a country, it ensures not only that customs duties are collected, but also that national and international regulations are complied with.

In this context, the customs species/origin/value triptych is a central pillar of customs procedures. Understanding and mastering these three elements is crucial for both customs authorities and companies involved in international trade. Each component of this triptych brings a specific and complementary dimension to trade management.

Species, or the classification of goods, enables precise categorization of goods in order to apply appropriate customs duties and identify specific restrictions. Origin, on the other hand, determines the provenance of products and plays a key role in trade agreements and tariff preferences. Finally, customs value assesses the value of goods, thus influencing customs duties and import taxes.

This article takes a detailed look at each of these components of the customs triptych. We will analyze how the species, origin and value of goods interact and influence customs procedures, providing a comprehensive overview of this essential subject for international trade.

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Customs tariff species

The tariff classification of goods is a key concept for companies involved in international trade. Along with origin and value, it is one of the three fundamental notions that determine the customs treatment of products as they cross borders.

Tariff species definition and issues

The tariff item corresponds to the specific classification of goods in the Common Customs Tariff. When making a customs declaration, it is essential to indicate the exact tariff species for each product. This classification, governed by article 28 of the National Customs Code, has a direct influence on the customs duties applied, trade policies such as anti-dumping measures, and sanitary and phytosanitary compliance requirements.

Tariff classification of goods

For precise classification, several levels of nomenclature are used:

• Tariff heading: The first four digits of this heading are defined by the World Customs Organization (WCO) and apply worldwide.
• Subheading: The following figures further refine the classification, defined both by the WCO and, specifically for the European Union, by additional codes.

The Harmonized System (HS) uses the first six digits for a standardized worldwide classification of goods. This methodology has been adopted by 195 countries, covering the vast majority of international trade.

At European level, the Combined Nomenclature (CN) extends this classification by adding two digits for greater precision, notably in customs duties and foreign trade statistics.

The Integrated Tariff of the European Communities (TARIC ) goes even further, adding two more digits, for a total of ten, to specify customs and trade regulations specific to the European Union.

Tools and resources for tariff classification

Several tools and resources are available to help companies correctly determine the tariff species of their goods:

• Harmonized System Explanatory Notes (NESH): Published by the WCO, these notes are crucial to the interpretation of the first six digits of the classification.
• Combined Nomenclature explanatory notes (NENC ): supplied by the European Union, these help to interpret the eight digits of the CN.
• Specific classification regulations: Published by the European Commission, these regulations have legal force and provide clear guidelines for the classification of certain goods.

How do you establish your tariff classification?

To secure your commercial operations and accurately determine the tariff category of your goods, we recommend you obtain a Binding Tariff Information (BTI). This service is accessible via the SOPRANO-RTC online platform, subject to prior registration and certification as a customs operator.

For more information and a detailed analysis of tariff species, please consult our dedicated blog article "What is tariff species and how to determine it?". This article offers practical advice and in-depth explanations for navigating this complex field.

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Customs origin of goods

Theorigin of goods is a key concept in customs procedures, representing the economic "nationality" of the products traded. It is important not to confuse origin with provenance, which simply indicates the country from which the goods were shipped.

Understanding the origin of goods

The origin of a good is determined by specific rules, according to which products are considered as originating in a country if they have been entirely obtained there, or if they have undergone their last substantial and economically justified transformation. This process must take place in a company equipped for the purpose, resulting in a new product or a significant stage of manufacture. Within the European Union, member states are collectively considered as a single economic entity for origin purposes.

Types of origin and their implications

Rules of origin are crucial in determining applicable customs duties and trade treatments. There are two main types of origin: non-preferential and preferential.

1. Non-preferential origin: This category is used to apply standard trade rules such as anti-dumping duties, quantitative restrictions and trade embargoes. It is also essential for trade statistics, origin marking and public procurement. The European Union has its own criteria for defining non-preferential origin, distinct from those of other regions.

1. Preferential origin Preferential rules of origin are applied within the framework of specific trade agreements between the EU and other countries. If goods comply with these rules, they can benefit from reductions or exemptions from customs duties, thus promoting trade between partners.

Tools for determining origin

To secure commercial transactions and ensure the conformity of goods, companies can obtain Binding Origin Information (BOI). BCOs are decisions issued by customs authorities, valid for a period of three years, and providing certainty on the origin of goods. These rulings are binding on all parties, and can be crucial to benefiting from the tariff advantages offered by trade agreements.

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Customs valuation

The customs value is a central element in the calculation of customs charges and associated taxes, such as VAT. It is determined according to precise methods established by the European Union to guarantee a fair and standardized valuation of imported and exported goods.

Importance of customs valuation

The customs value is the basis for calculating customs duties, which are often expressed as a percentage of this value. It is also used to determine VAT on imported goods, and plays a crucial role in compiling trade statistics. All these valuations must follow international WTO guidelines, specified in the Agreement on the Determination of Customs Value.

Determination of customs value

The customs value is calculated during customs clearance, either on import or export of the goods. For imports, this value is needed to deduct customs duties and other taxes, while for exports, it enables the company to obtain a VAT exemption.

The methods for determining customs value must be applied in a specific order, generally starting with the transaction value method.

Transaction value method

The main method is based on the price actually paid or payable for goods exported to the customs territory of the Union. This price is adjusted to include certain additional costs, such as commissions, container charges and royalties. Approximately 95% of EU trade uses this method.

For this method to be applicable, several conditions must be met: there must be no significant restrictions on the buyer's use of the goods, the price must not be influenced by any special relationship between buyer and seller, and the seller must not benefit from the buyer's subsequent resale of the goods without appropriate adjustment.

Other calculation methods

If the transaction value method cannot be used, other methods are applied in a specific order:

1. Transaction value of identical goods: Based on the price of identical goods imported at the same time.
2. Transaction value of similar goods: Uses the price of similar goods with comparable characteristics.
3. Deductive method: Calculated from the selling price of goods in the Union, with deductions for costs incurred.
4. Calculated value: Based on production costs, profit, overheads and transport costs to the point of entry into the EU.
5. Backup method: Flexibly applies previous methods when these are not applicable.

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Practical application and administrative procedures

When importing goods, a customs declaration is always required, whether for imports from non-EU or intra-EU countries. This declaration is used to determine the applicable customs duties and other taxes.

For imports of goods valued at €20,000 or more from third countries, a customs declaration of value is also required. This declaration is made by completing a specific form and submitting it to the customs authorities, together with the Single Administrative Document (SAD).

The customs value must include all costs incurred by the buyer which are not included in the price paid, such as commissions, container costs and royalties related to the goods. Transport costs up to the point of entry into the European Union must also be included. On the other hand, costs after the point of entry, interest charges and import taxes should not be included in the customs value.

For specific situations or amounts that cannot be quantified at the time of the customs declaration, the authorities may authorize determination criteria on request, in order to guarantee an accurate valuation that complies with current regulations.

For more information, we talk about customs valuation in our article "Refine your customs process with DVA (Customs Valuation Opinion)".

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Mastering the customs triptych for efficient international trade

In this article, we explore the three essential components of the customs triptych: species, origin and value of goods.Tariff species enables products to be accurately classified, directly influencing customs duties and applicable regulations. Theorigin of goods, defined by strict criteria, determines the tariff treatment and privileged trade agreements to which they are entitled. Finally, the customs value is crucial for calculating customs duties and taxes, relying on precise methods to ensure fair and consistent valuation.

For companies and customs authorities alike, a thorough understanding and rigorous application of these three concepts is essential. Mastery of the customs triptych ensures compliance with international regulations, optimizes customs processes, and minimizes the costs and risks associated with international trade. By understanding and correctly applying the rules of species, origin and value, companies can benefit from tariff advantages, avoid penalties and delays, and maintain an efficient supply chain.

In the future, technological developments and ongoing trade agreements could transform the application of the species/origin/value triptych. The integration of advanced technologies such as artificial intelligence and blockchain promises to simplify and secure customs procedures.