What is the tariff species and how is it determined?

In the vast world of international trade, precision and clarity are paramount. When a company starts importing or exporting goods, it is faced with a complex set of regulations, taxes and standards to comply with. At the heart of these complexities lies the notion of tariff species, which is one of the three pillars - the other two being origin and value - on which the customs and tax structure of international transactions is based.

The correct determination of tariff species plays a crucial role, as it largely determines not only customs duties but also other applicable taxes, as well as the regulatory compliance of goods. In this article, we'll explore in detail what tariff species is, its importance in global trade, and the tools available for businesses to effectively navigate this vital area.

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Understanding tariff species: Definition and issues

Tariff species are an essential element for companies operating in international trade, helping them to understand and comply with the complex customs regulatory system.

What is the tariff species?

Imagine that every product we buy has its own identity card. This card informs customs about the nature of the product and how to treat it. The tariff item plays the role of this "identity card" for goods in international trade. When a company wishes to export or import products, it must indicate this "identity card" so that customs can determine how to handle these products, for example, the amount of tax to be applied or any special rules associated with the product.

But there's more to the pricing species than basic identification. Imagine yourself in a huge global supermarket. Each product carries a label which, in addition to its commercial name, specifies its exact place on the chessboard of world trade. This label is the tariff species.

In reality, the tariff item is the official designation assigned to each commodity in the Common Customs Tariff. But it's much more than just a label. It is a meticulously elaborated and extremely detailed classification, going far beyond the commercial name of the product. It provides a precise identification, essential for international transactions, influencing taxes, regulations and many other aspects of trade. To frame all this, Article 28 of the National Customs Code defines the tariff species, underlining its crucial role. It is important to note that the tariff species does not indicate the origin of the product, but rather its classification within the customs framework.

The importance of tariff classification

Tariff classification is the process by which we determine the appropriate tariff species for a commodity. This "label" is assigned to each product to define its nature, origin and how it will be treated on import or export.

Role in determining customs duty rates

Article 28 of the National Customs Code specifies that each commodity must be assigned to a tariff class. This classification is not insignificant, as it is carried out among almost 15,500 classification headings in the Common Customs Tariff. This classification determines the amount of customs duty that will be applied. Incorrect classification can have major financial implications for companies.

Influence on trade policies, safety standards and other regulations

Beyond the determination of customs duties, tariff classification plays a major role in the application of other regulations. Whether it's tariff suspensions, anti-dumping duties or safety standards, tariff classification is fundamental. It is also essential for the application of sanitary and phytosanitary measures and other rules, such as those relating to public health or the environment. Some products may even be subject to specific restrictions, such as embargoes or controls linked to the Common Agricultural Policy (CAP). What's more, this classification is vital for internal taxation and a cornerstone for foreign trade statistics.

Tariff classification is much more than just an administrative process. It is a pillar of international trade, impacting not only direct costs, but also a whole panoply of regulations and policies that define global commerce. A keen understanding and rigorous application of this classification is therefore vital for companies wishing to thrive on the international stage.

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The different levels of tariff nomenclature: How they define the tariff species

The tariff item, as we saw earlier, is an essential element in international trade, serving as an "identity card" for goods. But how is this "identity card" defined? The answer lies in customs nomenclatures, which are structured on several levels, from general to specific.

The tariff heading and subheading

In the vast world of tariff classification, each commodity is initially identified by a tariff heading. This heading is a combination of numbers that reflects its general category within the classification system. However, international trade often requires a higher level of precision, particularly to distinguish between similar but distinct products. This is where the subheading comes in. The subheading refines the classification, offering a more detailed and specific distinction of the merchandise.

Let's take a look at Chapter 20 of the classification system, which concerns "Preparations of vegetables, fruit or other parts of plants". Within this chapter, products are first divided into general tariff headings, such as :

• 2001: Vegetables, fruit and other edible parts of plants, prepared or preserved with vinegar or acetic acid.
• 2002: Tomatoes prepared or preserved other than with vinegar or acetic acid.

For additional precision, these positions are further divided into sub-positions. For example, under position 2002, we might have :

• 200210: Tomatoes, whole or in pieces.

And this subheading can be further specified, as with :

• 2002101000: Peeled tomatoes.

This level of detail in classification enables customs and companies to understand precisely the nature of the products traded, facilitating the determination of appropriate customs duties and ensuring compliance with international regulations.

The World Customs Organization (WCO) is the pillar of this classification system. It ensures that the headings and subheadings are constantly updated, reflecting the evolution of goods and technologies. Moreover, thanks to the WCO, these classifications are harmonized worldwide, ensuring consistency and mutual understanding between countries and facilitating international trade.

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Harmonized System (H.S.): World Classification

The H.S. is the foundation on which customs nomenclatures are built throughout the world. By establishing global standards for the classification of goods, it creates a uniform framework for the identification of tariff species on an international scale. The HS consists of six digits (HS6), which are used universally.

In addition, this system is often extended to meet the specific needs of customs unions or individual countries. For example, some customs unions may add two extra digits for specific needs, thus forming an eight-digit code (HS8). Similarly, national nomenclatures may extend the ten-digit code (SH10) for even more detailed specification.

This multi-level structure enables precise identification of goods at different levels, facilitating global trade while allowing adaptation to the specific requirements of different countries.

Nomenclatures specific to the European Union

The European Union, to meet its specific regional needs, has developed nomenclatures that add even more detail to the tariff species: the Combined Nomenclature (CN) and the Integrated Tariff of the European Communities (TARIC).

Practical application: the Document Administratif Unique (DAU)

Ultimately, for a company to be able to export or import goods, it must provide precise documents, such as the SAD, where all these classifications converge. The SAD, by integrating the tariff species defined by these nomenclatures, ensures a smooth and compliant transaction.

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Tools and provisions for tariff classification

The basics of tariff classification

The Common Customs Tariff is the nomenclature used within the European Union to classify goods and assign each one a specific tariff species. By mastering this document and understanding how to navigate through its various sections and chapters, companies are able to determine the tariff species applicable to their products.

The General Interpretative Rules (GIR), as well as the heading headings, section and chapter notes, are all elements that clarify and guide the interpretation of the Common Customs Tariff, ensuring precise classification in line with legislation.

World Customs Organization (WCO) publications

The WCO's Harmonized System Explanatory Notes (HSEN ) and specific classification notices are indispensable resources for understanding how to apply the tariff species to a given product, providing clarifications, examples and classification recommendations.

European Union notes and regulations

Similarly, the EU's Combined Nomenclature Explanatory Notes (CNENs) and legally binding classification regulations are invaluable tools for companies seeking to determine the tariff species of their products according to the specifics of European legislation.

In short, tariff classification is an essential step in determining the tariff class of a commodity. By drawing on available tools and resources, companies can ensure accurate classification in line with current regulations, thus facilitating their international trade activities.

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How to determine the tariff classification of a product?

Binding Tariff Information (BTI)

Binding Tariff Information (BTI) is a mechanism developed by customs authorities to provide companies with a guarantee of the tariff classification of their goods. When a company submits an application for BTI, it receives a written decision, valid for up to three years, which officially establishes the tariff classification of the goods concerned.

This decision is legally binding not only for all customs authorities within the European Union, but also for the beneficiary company. This binding character ensures uniformity and predictability in the treatment of goods within the EU. The BTI is particularly useful for products whose classification may be ambiguous, or for new goods that do not yet have a clear precedent for classification.

The use of RTC enables companies to secure their commercial operations by minimizing the risk of classification errors and the costs associated with these errors, such as fines, customs delays or tax adjustments. For the beneficiary company, compliance with the RTC decision is essential to avoid legal and administrative complications.

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Online tools available

RITA online service

The Integrated Tariff Directory (RITA) is an online service offered in some countries, enabling users to search for the tariff codes applicable to their products. The tool also provides access to detailed information on tariff provisions, duty rates, and other information relevant to the classification of goods.

TARIC service on the Europa website

TARIC (Integrated Tariff of the European Communities) is a comprehensive online database designed to facilitate the tariff classification of goods within the European Union. It allows you to search for tariff codes, access detailed information on tariff provisions and duty rates, and consult previous classification decisions.

The TARIC service is updated regularly, ensuring that users have access to the most up-to-date and accurate information for determining the tariff species of their products. It plays an essential role in facilitating international trade, and helps companies to ensure the compliance of their operations.

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The crucial importance of tariff species in trade

Understanding and correctly applying tariff species is a major challenge for securing trade and mastering the associated customs formalities. It's a process that requires in-depth knowledge of the rules and provisions in force, as well as the judicious use of available resources and tools.

Tariff classification has a direct influence on the applicable customs duties, thus impacting total import or export costs. Incorrect classification can lead to financial penalties and delays in deliveries, jeopardizing the smooth running of commercial operations.

By fully embracing the importance of tariff species, and investing in the training and tools required for their accurate application, companies can not only avoid costly pitfalls, but also strengthen their competitiveness on the international stage.

Tariff species is a cornerstone of success in international trade, guaranteeing compliance, optimizing costs and contributing to smooth navigation through the complexities of customs regulations.