3SCM - douane1 .pptx

# Classification of goods and tariff harmonization ### Core idea * Goods classification is a system for categorizing products for customs purposes, enabling consistent application of tariffs and trade regulations globally. * Harmonization aims to create a uniform system for classifying goods across different countries, simplifying international trade. ### Key facts * The Harmonized System (HS) is an internationally recognized nomenclature developed by the World Customs Organization (WCO). * The HS classifies goods into 21 sections and 99 chapters, further broken down into tariff headings and subheadings. * There are approximately 1,240 tariff headings and 5,000 subheadings in the HS nomenclature. * The HS code consists of six digits, providing a globally harmonized classification. * The EU uses the Combined Nomenclature (GN), which extends the HS code to eight digits, adding two further digits for specific EU purposes. * The TARIC code is the EU's integrated tariff, extending the classification to ten digits (or more for specific measures), incorporating additional EU-specific measures like anti-dumping duties and agricultural regulations. * Import declarations into the EU require a minimum of ten digits (TARIC code), while export declarations require a minimum of eight digits (GN code). ### Key concepts * **Harmonized System (HS) Code:** A six-digit international code used to classify traded products, forming the basis for customs tariffs and trade statistics. * **Combined Nomenclature (GN) Code:** The EU's specific tariff nomenclature, which is an extension of the HS code, adding two digits for EU-specific classification. * **TARIC Code:** The Integrated Tariff of the European Union, a ten-digit code that incorporates all EU external trade measures, including tariff preferences, quotas, and specific prohibitions or controls. * **Indelingsregels (Classification Rules):** A set of six legally binding rules used to determine the correct tariff classification of goods, ensuring consistency and accuracy. * **Rule 1 (General Rule):** Classification is determined by the terms of the headings and any relative section or chapter notes. * **Rule 2a:** Unfinished or incomplete goods are classified as if they were complete or finished products if they possess the essential characteristics of the finished product. * **Rule 2b:** Mixtures and composite goods are classified according to the material or component that gives them their essential character. * **Rule 3a:** When goods can be classified under two or more headings, the most specific heading takes precedence. * **Rule 3b:** For mixtures or composite goods that are equally specific under different headings, classification is based on the component that gives them their essential character. * **Rule 3c:** If goods cannot be classified by Rule 3a or 3b, they are classified under the heading that occurs last in numerical order among those equally meriting consideration. * **Rule 4:** If goods cannot be classified by the preceding rules, they are classified in the heading corresponding to the goods with which they are most closely assimilated. * **Rule 5:** Goods, such as containers and packaging, are classified with the goods they are intended to contain or pack, if they are of a kind normally sold therewith. * **Rule 6:** This rule governs classification within headings, applying the same principles as Rules 1-5 to subheading levels. * **Bindende Tarief Inlichting (BTI):** A binding tariff information issued by customs authorities that provides a legally binding classification for specific goods, valid throughout the EU for three years. ### Implications * Accurate classification is crucial for determining correct import duties, taxes, and applying trade policy measures. * Misclassification can lead to incorrect duty payments, potential penalties, and delays in customs clearance. ### Common pitfalls * * * * Goods classification ensures uniform application of customs duties, trade statistics, and commercial policies worldwide. * The Harmonized System (HS) provides a standardized international nomenclature for classifying traded products. * National and regional customs unions further subdivide HS codes to meet specific needs. * The Harmonized System (HS) is a global nomenclature developed by the World Customs Organization (WCO). * The HS is updated annually, with the latest versions published online. * The HS classifies all existing goods into 21 Sections, further broken down into 99 Chapters. * Chapters are subdivided into approximately 1,240 tariff headings (6-digit codes). * These headings are further divided into approximately 5,000 subheadings (6-digit codes). * The HS code, comprising the first six digits, is internationally harmonized. * The Combined Nomenclature (CN) for the EU adds two digits (7th and 8th) to the HS code. * The TARIC code for the EU adds a 9th and 10th digit to the CN code for import purposes. * For import into the EU, a minimum of 10 digits (TARIC code) is required. * For export from the EU, a minimum of 8 digits (CN code) is generally required. * Additional digits (up to 12) can exist for specific national purposes, such as excise duties or VAT. * **HS Code:** The internationally standardized 6-digit code for classifying goods. * **Combined Nomenclature (CN):** The EU's 8-digit tariff and statistical nomenclature, based on the HS. * **TARIC Code:** The integrated EU tariff system, comprising 10 digits for import, incorporating HS, CN, and specific EU measures. * **Section & Chapter Notes:** Legal notes at the beginning of HS Sections and Chapters that define their scope and provide classification guidance. * **Tariff Headings & Subheadings:** The hierarchical classification levels within the HS and CN. * **Indelingsregels (Classification Rules):** Six legally binding rules that govern the classification of goods under the HS/CN. * **Rule 1:** The primary rule; classification is determined by the terms of the headings and any relative Section or Chapter notes. * **Rule 2(a):** Applies to incomplete or unfinished goods that possess the essential character of the complete product. * **Rule 2(b):** Addresses mixtures and composite goods. * **Rule 3(a):** When goods can be classified under two or more headings, the heading with the most \_specific description takes precedence. * **Rule 3(b):** For composite goods or sets, classification is based on the material or good to which they owe their essential character. * * * ### Harmonized System (HS) and Nomenclature Codes * The Harmonized System (HS) code is a 6-digit international nomenclature for classifying traded products, developed by the World Customs Organization (WCO). * The HS code is the basis for customs tariffs and international trade statistics worldwide. * The WCO was founded in 1952 and has 186 member countries as of February 2024. * All existing goods are classified into 21 sections, further divided into 99 chapters. * These chapters are broken down into approximately 1,240 tariff headings (4 digits) and about 5,000 subheadings (6 digits). * The EU expands the HS code by adding a 7th and 8th digit to create the Combined Nomenclature (GN) code. * The TARIC code, used in the EU for imports, adds a 9th and 10th digit, resulting in a minimum of 10 digits. * For exports from the EU, a minimum of 8 digits (GN code) is generally sufficient. * The first six digits (HS code) are internationally harmonized, while the subsequent digits (GN, TARIC) are specific to the EU. * National codes may add further digits for specific national duties like excise or VAT. ### Classification Rules (General Interpretative Rules - GIR) * Goods are classified using 6 "General Interpretative Rules" (GIRs). * Rules 1 to 5 determine classification up to the 4-digit tariff heading level. * Rule 6 governs the classification within subheadings (further subdivisions of a heading). * The order of the rules is legally binding. #### Rule 1: Headings and Section/Chapter Notes * The legally binding basis for classification is the wording of the headings and any relevant section or chapter notes, not the titles of sections or chapters themselves, which are merely * **Example:** A wooden box is not classified under Chapter 44 (wood) if Chapter 94's notes specify it as furniture. * **Example:** Cooled apricots are classified under 08.03 (fresh apricots) because Chapter 8, Note 2 states cooled fruit is classified with fresh fruit. * **Example:** Water-soluble soap is classified under 34.01 because the heading refers to "SOAP" and Chapter 34, Note 2 clarifies "SOAP" applies only to water-soluble soap. #### Rule 2a: Incomplete or Unfinished Goods * Goods in an incomplete or unfinished state, or imported unassembled or disassembled, are classified as the complete or finished product if they possess its essential characteristics. * This rule applies if the various components are intended to be assembled by simple means like screws, bolts, rivets, or welding. * Half-finished products lacking the essential form of the finished product are excluded. * **Example:** A bicycle missing its lights is classified as a bicycle. * **Example:** A container of TV parts assembled into functional TVs is classified as TVs. * **Example:** IKEA furniture, even when unassembled, is classified as furniture. #### Rule 2b: Mixtures and Composite Goods * Substances described in a heading include the substance in pure form as well as mixed with other substances, unless a heading or note specifies otherwise. #### Rule 3a: Most Specific Description #### Rule 3b: Essential Character #### Rule 3c: Highest Heading Number #### Rule 4: Analogy #### Rule 5: Packaging and Containers #### Rule 6: Classification within Headings ### Binding Tariff Information (BTI) ### Customs Valuation (CVA) #### Simplified Procedure for Customs Valuation ### Origin of Goods #### Preferential Origin #### Non-Preferential Origin #### Proof of Origin #### Last Substantial Transformation #### Rules for Determining Origin * * * ### Harmonized System (HS) and its expansion * **Harmonized System (HS)**: A standardized international nomenclature for classifying traded products, developed by the World Customs Organization (WCO). * The HS code is a 6-digit code, with the first six digits being universally applied across member countries. * **Combined Nomenclature (GN)**: The European Union's tariff system, which expands the HS code by adding a 7th and 8th digit. * **TARIC code**: The integrated tariff of the European Community, further expanding the GN code with a 9th and 10th digit for import, and additional digits for specific measures. * For export from the EU, a minimum of 8 digits (GN code) is generally required. * The HS system divides all existing goods into 21 sections, which are further broken down into 99 chapters. * Chapters are then divided into approximately 1,240 tariff headings (6-digit codes). * Tariff headings are further subdivided into approximately 5,000 subheadings (6-digit codes). * The HS code (6 digits) is consistent globally, ensuring that the description of goods is recognized internationally. * This standardization aids customs in targeted controls and simplifies automated declarations by companies. ### Indelingsregels (Classification Rules) * Six legally binding rules are used to determine the correct tariff classification of goods. * Rules 1 through 5 generally determine classification up to the tariff heading level (4-digit code). * Rule 6 is used for further subdivision within a tariff heading. #### Rule 1: General Rule * The text of the headings and any relevant section or chapter notes are legally decisive for classification. * Classification is based on the specific description at the heading level, not just the titles of sections or chapters. * **Tip:** Section and chapter titles are merely indicative; always refer to the specific descriptions and notes. * Goods in incomplete, unfinished, or unassembled state are classified as the complete or finished product if they already possess essential characteristics of that product. * This also applies to goods imported in unassembled or disassembled state if the parts are intended to be assembled. * **Example:** A bicycle missing its lights is still classified as a bicycle if it has all other essential features. * A substance mentioned in a heading includes that substance when mixed with others, unless a specific heading or note prohibits it. * **Example:** A plastic coffee pot with a metal casing is classified under plastics (post 39.24). * When goods can be classified under two or more headings, the heading with the most specific description takes precedence. * This rule applies if it does not conflict with the wording of other headings or notes. * **Example:** Tufted textile carpet intended for cars is classified under carpets (post 57.03), not as an automotive accessory (post 87.08). #### Rule 4: Goods not specified ### Customs Value (CVA) ### Origin Rules #### Non-preferential Origin Determination #### Preferential Origin Determination * * * * Harmonization of tariffs through standardized goods classification ensures consistent application of duties and trade measures globally. * The Harmonized System (HS) provides a foundational six-digit international nomenclature for classifying goods. * The Combined Nomenclature (GN) and TARIC codes extend the HS for EU-specific trade requirements. * The Harmonized System (HS) is established by the World Customs Organization (WCO), founded in 1952, with 186 member states as of February 2024. * The HS divides all existing goods into 21 sections and 99 chapters. * These chapters are further subdivided into approximately 1,240 tariff headings (6 digits). * Tariff headings are broken down into around 5,000 subheadings (also 6 digits). * The EU extends the six-digit HS code with two additional digits to create the Combined Nomenclature (GN-code). * The TARIC code further adds two digits, resulting in a minimum of 10 digits for imports into the EU. * Export declarations from the EU require a minimum of an 8-digit GN-code. * **HS-code (Harmonized System code):** The first six digits of a goods classification code, universally applied. * **GN-code (Combined Nomenclature):** An EU-specific classification code, comprising the first eight digits. * **TARIC-code (Integrated Tariff of the Community):** The EU's integrated tariff system, extending the GN-code to 10 digits or more for import purposes. * **Tariff headings:** The first four digits of the HS code, representing a specific category of goods. * **Tariff subheadings:** Further subdivisions of tariff headings, extending to six digits. * **National codes:** Additional digits used by individual EU member states for national taxes (e.g., VAT) or specific measures. * **Indelingsregels (Classification Rules):** Six legally binding rules used to determine the correct tariff classification of goods. * **Binding Tariff Information (BTI):** A binding decision issued by customs authorities on the tariff classification of a specific good, valid for three years across the EU. * Accurate classification is crucial for determining correct duties, applying trade policy measures (like quotas or anti-dumping duties), and facilitating targeted customs controls. * Misclassification can lead to incorrect duty payments, penalties, and delays in customs clearance. * The hierarchical structure of classification codes allows for progressively more specific identification of goods. * The use of specific codes is essential for automated customs declarations and efficient trade processing. * The process of tariffication (determining the correct code) is a specialized skill requiring logical thinking and application of legal rules. ### Classification rules * **Rule 1 (General Rule):** Classification is determined by the terms of the headings and any relative section or chapter notes. Descriptive titles of sections or chapters are only indicative. * **Rule 2a:** Unassembled or disassembled goods exhibiting the essential character of the complete or finished product are classified as such. * * * # Customs valuation and incoterms ### Core idea * Customs valuation determines the value of imported goods for duty calculation, often adjusting the invoice price. * Incoterms define responsibilities, costs, and risks between buyers and sellers in international trade transactions. ### Key facts * The customs value is crucial for calculating import duties and taxes. * Additions to the invoice price can include sales commissions, packing costs, and freight costs to the EU border. * Deductions from the invoice price may apply to discounts, financing interest, and intra-EU freight costs. * Exchange rates used for customs valuation are fixed monthly for the entire EU. * Incoterms, like EXW, FOB, and CIF, dictate which party is responsible for various costs and risks during transport. * For CIF, the invoice price typically equals the customs value. * For DDP, import duties and VAT must be deducted to determine the customs value. ### Key concepts * **Customs Value (CVA):** The basis for levying import duties, calculated according to specific rules that often involve adjusting the invoice price. * **Additions to Invoice Price:** Costs incurred by the buyer that are not included in the invoice but are part of the customs value, such as freight to the EU border. * **Deductions from Invoice Price:** Items included in the invoice price that are excluded from the customs value, such as intra-EU transport or certain taxes. * **Incoterms:** Standardized trade terms that clarify the division of responsibilities and costs between buyer and seller. * **EXW (Ex Works):** Seller makes goods available at their premises; buyer bears all costs and risks from that point. * **FOB (Free On Board):** Seller delivers goods on board the vessel nominated by the buyer; seller's costs and risks end there. * **CIF (Cost, Insurance and Freight):** Seller arranges and pays for carriage, insurance, and freight to the destination port. * **DDP (Delivered Duty Paid):** Seller delivers goods, cleared for import, at the named destination; seller bears all costs and risks, including duties and taxes. * **Conversion Rate:** A specific, fixed monthly exchange rate is used for converting foreign currencies to the EU's currency for customs valuation. ### Implications * Understanding Incoterms is vital for accurate cost calculation and risk management in international trade. * Incorrect customs valuation can lead to overpayment or underpayment of duties and potential penalties. * The chosen Incoterm significantly impacts the buyer's and seller's financial exposure and logistical responsibilities. > **Tip:** Always verify the Incoterms used in contracts and ensure they align with your responsibilities and cost expectations > **Example:** If goods are imported under EXW, the buyer is responsible for all costs from the seller's factory, including export clearance, main transport, insurance, and import clearance * This will significantly increase the landed cost compared to DDP where the seller handles most of these * * * ### Customs value calculation * The customs value (CVA) is the basis for calculating duties and taxes. * It generally equates to the transaction value, which is the invoice price of the goods. * All costs incurred until the goods reach the EU border are added to the invoice price if not already included. * **Additions to invoice price:** * Sales commissions. * Cost of packing. * Freight costs to the EU entry point. * Value of buyer's contributions (e.g., free samples). * Intellectual property rights if related to the imported goods and not already paid. * Profit sharing. * **Deductions from invoice price:** * Discounts (if distinct from the payable price). * Financing interest charges. * Selling costs. * Installation costs after import. * Reproduction rights. * Community duties and taxes. * Price reductions for damage or non-compliance. * Freight costs within the EU. * Purchasing commissions. * Quota costs for textiles/clothing. * The official exchange rate for customs valuation is a fixed monthly rate, applicable throughout the EU. ### Simplified customs value determination * Companies can apply for a "customs valuation authorization" for simplified determination. * This authorization allows for pre-agreed additions or deductions for costs like transport or insurance. * The authorization is generally unlimited in validity but the declared value is typically valid for a maximum of one year. ### Incoterms * * * * Customs valuation determines the value of imported goods for duty assessment, adjusting the invoice price with additions and deductions. * Incoterms define the responsibilities, costs, and risks associated with the transportation and delivery of goods between buyers and sellers in international trade. * The customs value is calculated based on the invoice price, plus specific costs and charges up to the EU border. * Deductions can be made for costs not included in the invoice price, such as internal EU transport or customs duties within the EU. * Specific additions to the invoice price can include sales commissions, packing costs, freight to the EU border, and intellectual property rights related to the goods. * Deductions from the invoice price can apply to discounts, financing interest, installation costs (if not the seller's responsibility), and price reductions for damage. * Incoterms are standardized trade terms published by the International Chamber of Commerce (ICC) that clarify the responsibilities of buyers and sellers. * The choice of Incoterm significantly impacts which party bears the cost of transportation, insurance, and customs clearance. * For import, the customs value is generally calculated up to the point of entry into the EU. * For export, the calculation of the customs value can differ based on the Incoterm used. * **Customs Value (CVA):** The price of goods plus all costs and charges incurred to bring the goods to the EU border. * **Additions to Invoice Price:** Costs that must be added to the invoice price to determine the customs value if they are not already included. * **Deductions from Invoice Price:** Costs that can be subtracted from the invoice price if they are included but are not part of the customs value calculation. * **Incoterms:** Standardized international commercial terms that define the obligations of buyers and sellers in international transactions. * **EXW (Ex Works):** Seller makes goods available at their premises; buyer handles all transport and export formalities. * **FOB (Free On Board):** Seller delivers goods on board the vessel nominated by the buyer; buyer handles main carriage and insurance. * **CIF (Cost, Insurance and Freight):** Seller arranges and pays for cost, insurance, and freight to the destination port; buyer assumes risk once goods are on board. * **DDP (Delivered Duty Paid):** Seller delivers goods to the buyer's premises, cleared for import, with all duties and taxes paid; highest seller responsibility. * **Monthly fixed exchange rate:** Used for currency conversion in customs valuation, fixed for the entire EU. * Accurate customs valuation is crucial for correct duty and tax calculation, avoiding penalties. * Understanding Incoterms helps in accurately calculating total landed costs and managing risks in international trade. * The correct application of Incoterms shifts responsibilities and associated costs between buyer and seller. * Choosing the appropriate Incoterm can influence the buyer's total expenditure and the seller's risk exposure. ### Examples > **Example:** For an EXW shipment, the seller's responsibility ends at their factory * All subsequent costs (freight, insurance, export/import customs) are borne by the buyer * * * * Customs valuation determines the value of imported goods for duty purposes. * Incoterms define responsibilities, costs, and risks in international trade contracts. * The customs value is generally based on the transaction value, adjusted for certain additions and deductions. * Incoterms are crucial for identifying which costs are included in the invoice price for customs valuation. * The customs value is primarily the transaction value, which is the price actually paid or payable for the goods. * Additions to the invoice price include selling commissions, packing costs, and freight/insurance costs to the EU border. * Deductions from the invoice price can include discounts, financing interest, and price reductions due to damage. * The exchange rate used for currency conversion is the monthly fixed rate published by the EU. * Simplified procedures for customs valuation may be permitted through specific licenses. * Incoterms (e.g., EXW, FOB, CIF, DDP) dictate the responsibilities for these costs. * **Transaction Value:** The price paid or payable for goods when sold for export to the customs territory, adjusted as necessary. * **Additions to Transaction Value:** Costs incurred by the buyer but not included in the price payable, such as freight and insurance to the place of entry into the customs territory. * **Deductions from Transaction Value:** Elements included in the price payable but not part of the value of the goods for customs purposes, such as post-importation costs. * **Incoterms:** Standardized international commercial terms that define the seller's and buyer's obligations regarding delivery, cost, and risk. * **EXW (Ex Works):** Seller makes goods available at their premises. Buyer bears all costs and risks from that point. * **FOB (Free On Board):** Seller delivers goods on board the vessel nominated by the buyer. * **CIF (Cost, Insurance, and Freight):** Seller arranges and pays for cost, insurance, and freight to the destination port. * **DDP (Delivered Duty Paid):** Seller delivers goods to the buyer's premises, cleared for import, bearing all risks and costs. * **Customs Value Declaration (CVA):** The process of declaring the value of imported goods. * **Licensed Customs Value:** A permit allowing simplified methods for determining customs value, often for frequent importers. * Accurate customs valuation is essential for correct duty and tax assessment. * Incorrect valuation can lead to penalties, fines, and delays. * Understanding Incoterms is vital for correct cost allocation and customs declarations. * The choice of Incoterm directly impacts which costs are included in the customs value. * Provisions exist for simplified valuation methods to ease administrative burdens. * * * ### Customs valuation * Customs value is determined based on the transaction value of imported goods. * The transaction value is generally the price actually paid or payable for the goods when sold for export to the customs territory. * Additions to the invoice price may include: * Selling commissions. * Freight costs to the place of introduction into the EU. * Cost of supplies made by the buyer. * Intellectual property rights if related to the imported goods and included in the sale value. * Deductions from the invoice price may include: * Discounts (if distinct from the price payable). * Selling costs (if distinct from the price payable). * Installation costs (if distinct from the price payable). * Reproduction rights (if distinct from the price payable). * Community taxes and duties. * Price reductions for damage or non-conformity. * Purchase commissions. * Quota costs for textiles and clothing. * The exchange rate used for determining customs value is a fixed monthly rate for the entire EU. * A simplified procedure for determining elements of customs value exists through a special authorization from customs. * This authorization allows for standard additions or deductions for costs like transport or insurance. * It can be based on coefficients (percentage or price per unit). * The coefficient's validity is typically for one year and requires renewal. ### Customs origin * * * # Rules of origin and preferential trade ### Core idea * Rules of origin determine the "nationality" of goods for customs purposes, impacting tariffs and trade regulations. * Preferential origin grants reduced or zero import duties based on trade agreements. * Non-preferential origin applies standard customs duties and measures like anti-dumping rights. ### Key concepts * **Harmonized System (HS) Code:** A six-digit international nomenclature for classifying traded products, established by the World Customs Organization (WCO). * **Combined Nomenclature (CN) Code:** An EU system extending the HS code to eight digits, used for import and export statistics and common customs tariff. * **TARIC Code:** The EU's integrated tariff system, extending the CN code to ten digits (or more for specific measures) for import into the EU. * **Classification Rules (Indelingsregels):** Six legally binding rules to determine the correct tariff classification of goods. * Rule 1: Legal texts of headings and section/chapter notes are binding. * Rule 2a: Incomplete or unfinished goods are classified as complete goods if they possess essential characteristics. * Rule 2b: Mixtures and composite goods are classified according to the material or component that gives them their essential character. * Rule 3a: The most specific description takes precedence over more general ones. * Rule 3b: Goods are classified according to the material or component that gives them their essential character when multiple headings apply. * Rule 3c: If Rules 3a and 3b don't provide a solution, the heading with the highest number is applied. * Rule 4: Goods not classifiable by the previous rules are classified under the heading that corresponds to the goods with which they most closely resemble. * Rule 5: Packing materials are classified with the goods they normally accompany, if of the type normally sold with them. * Rule 6: Applies to classification within headings, using subheadings and relevant notes. * **Customs Value (CVA):** The basis for calculating import duties, generally the transaction value (price paid or payable) plus certain additional costs up to the EU's external border. * **Incoterms:** Standardized trade terms that define the responsibilities of buyers and sellers for the delivery of goods, impacting the calculation of customs value. * **Preferential Origin:** Goods originating from countries with which the EU has a preferential trade agreement, allowing for reduced or zero import duties. * Conditions: Requires a trade agreement, correct proof of origin, direct transport, and meeting the origin criteria (wholly obtained or substantial transformation). * Proof of Origin: EUR.1 certificate, origin declaration on invoice (for consignments up to 6,000 euros), or approved exporter/REX declaration (for consignments over 6,000 euros). * **Non-Preferential Origin:** Determines the country of origin for goods without preferential trade agreements, essential for applying most-favored-nation (MFN) tariffs, anti-dumping duties, and other measures. * Determination: Based on "wholly obtained" or "last substantial transformation" (usually determined by tariff shift, value, or process). * **Wholly Obtained:** Products considered entirely produced in one country (e.g., minerals, agricultural products, live animals). * **Substantial Transformation:** A significant processing or manufacturing operation that results in a new product or represents a major stage of manufacture, determining origin when multiple countries are involved. ### Implications * * * * Determining the origin of goods is crucial for applying customs duties, trade measures, and statistical purposes. * Preferential origin grants reduced or zero duties under trade agreements, while non-preferential origin determines standard duty rates. ### Key facts * The Harmonised System (HS) code is a 6-digit international nomenclature, with EU additions leading to the Combined Nomenclature (CN) and TARIC codes. * Goods are classified using 6 general Interpretative Rules (IR) for HS codes, with Rules 1-5 determining the tariff post and Rule 6 for subdivisions. * Rule 1 is the primary rule, relying on post descriptions and chapter/section notes. * Rule 2a applies to incomplete or unassembled goods that possess essential characteristics of the complete product. * Rule 2b covers mixtures and composite goods, classifying them by their most important component if no specific rule applies. * Rule 3a prioritizes the most specific description when goods can be classified under multiple headings. * Rule 3b classifies sets or goods composed of different materials based on the component giving them their essential character. * Rule 3c acts as a tie-breaker, selecting the heading with the highest number if Rules 3a or 3b cannot resolve classification. * Rule 4 is used when a product cannot be classified by the preceding rules, classifying it under the heading it most resembles. * Rule 5 deals with containers and packaging, classifying them with the goods they are normally sold with if they are specially shaped for them. * Rule 6 applies to the classification of goods within subheadings of a tariff heading. * Customs Value (CVA) is the transaction value of imported goods plus specified costs up to the EU border. * Origin is determined by rules defining where goods originate, which does not change with transport (unlike "herkomst"). * Preferential origin applies to goods traded under agreements granting reduced duties; non-preferential origin applies otherwise. * Non-preferential origin is determined by specific rules, often focusing on the country of "last substantial transformation" or "wholly obtained" criteria. * Preferential origin requires compliance with specific conditions under a trade agreement, including proof of origin and direct transport. * Proof of preferential origin can include EUR.1 certificates, origin declarations on invoices, or statements from Registered Exporters (REX). * "Wholly obtained" goods are those entirely produced in one country from natural resources or domestic animals. * "More than insignificant processing" or "substantial transformation" rules determine origin for goods produced in multiple countries. * The "list rule" within trade agreements specifies the level of processing required for non-originating materials to confer preferential origin. * The tolerance rule allows for a small percentage of non-originating materials or value without affecting preferential origin. * **Tariff Classification:** Assigning goods a specific code based on their nature, material, and use. * **Harmonised System (HS) / Combined Nomenclature (CN) / TARIC:** Hierarchical coding systems for goods. * * * * Rules of origin determine the "nationality" of goods in international trade, impacting customs duties and trade policy. * Preferential origin grants reduced or zero duties under trade agreements, while non-preferential origin applies standard tariffs or measures. * **Harmonised System (HS) code:** A six-digit international nomenclature for classifying traded products, forming the basis for tariffs. * **Combined Nomenclature (CN) code:** An EU-specific eight-digit classification, extending the HS code. * **TARIC code:** A ten-digit integrated tariff code for the EU, including additional digits for specific measures. * **Classification Rules:** Six general rules used to determine the correct HS/CN/TARIC code for a product. * **Binding Tariff Information (BTI):** A legally binding ruling from customs authorities on a product's tariff classification. * **Customs Value (CVA):** The value of imported goods for customs purposes, typically the transaction value plus associated costs up to the EU border. * **Incoterms:** Standardized trade terms defining responsibilities, costs, and risks between buyers and sellers, impacting customs value calculations. * **Preferential Origin:** Goods originating from countries with trade agreements with the EU, qualifying for reduced tariffs. * **Non-Preferential Origin:** The origin of goods not covered by preferential agreements, subject to standard tariffs and trade defence measures. * **Proof of Preferential Origin:** Documentation like EUR.1 certificates, origin declarations on invoices, or REX system declarations, proving eligibility for preferential treatment. * **Direct Transport:** Goods must generally be transported directly from the exporting country to the EU to qualify for preferential treatment. * **Wholly Obtained:** Goods considered to originate from a single country if they are entirely produced or obtained there (e.g., minerals, agricultural products). * **Substantial Transformation:** For goods produced in multiple countries, the origin is determined by the last substantial transformation, often indicated by a change in HS code. * **List Rules:** Specific criteria within trade agreements detailing the required manufacturing processes or value thresholds for a product to gain preferential origin. * **Tolerance Rule:** Allows for a small percentage of non-originating materials or value to be present without jeopardizing the preferential origin status of the final product. * Correct classification and origin determination are crucial for applying the right customs duties and avoiding penalties. * Preferential origin significantly reduces import costs, enhancing the competitiveness of goods from partner countries. * Trade defence instruments like anti-dumping duties are applied based on non-preferential origin and can lead to substantial additional costs. * Accurate documentation is essential for claiming preferential treatment and can involve complex procedures and specific permits. ### Common pitfalls * Misinterpreting classification rules leading to incorrect HS codes and duty payments. * Incorrectly calculating customs value by omitting or including non-eligible costs. * Failing to meet the strict requirements for preferential origin, such as direct transport or substantial transformation. * Using expired or incorrect proof of origin documentation. * * * * Preferential origin allows for reduced or zero import duties based on trade agreements. * Non-preferential origin determines the country of origin when no preferential agreement applies, impacting duties, anti-dumping measures, and quotas. * The classification of goods (HS code) is a prerequisite for determining origin and applicable trade measures. * The Harmonized System (HS) code is a globally standardized numerical code for classifying traded products. * The Combined Nomenclature (CN) code is an EU extension of the HS code, adding further digits for EU-specific measures. * The TARIC code is the EU's integrated tariff system, adding more digits for detailed import and export regulations. * Import declarations require a minimum of 10 digits (TARIC code), while exports require a minimum of 8 digits (CN code). * Customs value (CVA) is crucial for calculating import duties and is determined by the transaction value plus specific additional costs up to the EU border. * The principle of "last substantial transformation" is key for determining non-preferential origin when multiple countries are involved. * Preferential origin requires proof of origin, such as an EUR.1 certificate or a declaration on invoice, issued under specific trade agreements. * Direct transport, wholly obtained criteria, and substantial transformation rules are essential for claiming preferential origin. * **Preferential Origin:** Origin conferring eligibility for preferential tariff treatment under trade agreements. * **Non-Preferential Origin:** Origin determined by specific rules when no preferential agreement applies, indicating the economic origin of goods. * **Harmonized System (HS) Code:** A six-digit international nomenclature classifying goods for customs purposes. * **Combined Nomenclature (CN) Code:** An eight-digit classification used within the EU, extending the HS code. * **TARIC Code:** The Integrated Tariff of the European Union, a ten-digit code for import into the EU. * **Customs Value (CVA):** The value of goods for customs purposes, typically the transaction value plus certain costs. * **Wholly Obtained:** Products considered to originate entirely from one country if entirely produced there. * **Substantial Transformation:** A process that significantly changes a product, leading to a change in its HS code and conferring origin. * **Rule of Origin:** Criteria used to determine the country of origin for goods. * **Trade Agreements:** Bilateral or multilateral agreements between countries or blocs that grant preferential tariff treatment. * **EUR.1 Certificate:** A movement certificate used to prove preferential origin for goods traded under certain agreements. * **Origin Declaration on Invoice:** A statement on a commercial invoice declaring preferential origin, often used for lower-value shipments or under specific agreements. * **Direct Transport:** Goods must be transported directly from the exporting country to the importing country, with limited transit operations. * **List Rule:** Specific origin criteria found in trade agreements detailing manufacturing processes or value thresholds required for preferential origin. * * * # Customs representation and declaration procedures ### Core idea * Customs declarations are a crucial step in the customs clearance process, requiring accurate classification and valuation of goods. * The Combined Nomenclature (CN) and TARIC code are essential for identifying goods and determining applicable duties and regulations. * Determining the origin of goods is vital for applying correct tariffs and non-tariff measures, distinguishing between preferential and non-preferential origins. ### Key facts * The Harmonized System (HS) code, developed by the WCO, uses a six-digit system for classifying goods globally. * The EU expands the HS code to an eight-digit Combined Nomenclature (CN) code and a ten-digit TARIC code for import purposes. * For exports from the EU, a minimum of an eight-digit CN code is generally required. * The classification of goods is guided by six legally binding General Rules for the Interpretation of the Harmonized System (GRIS). * Rule 1 is the general rule, making the description of headings and relevant section/chapter notes legally decisive for classification. * Rule 2a addresses goods in incomplete or unfinished states but possessing the essential characteristics of the finished product. * Rule 2b covers mixtures and composite goods, classifying them based on their most important characteristic or material. * Rule 3a prioritizes the most specific description when goods could fall under multiple headings. * Rule 3b applies to mixtures and composite goods, classifying them by the substance or good that gives them their essential character. * Rule 3c acts as a tie-breaker, selecting the heading with the highest number when goods could equally fall under multiple headings. * Rule 4 applies when no other rule provides a solution, classifying goods based on their closest resemblance to other goods. * Rule 5 addresses packing and packaging materials, classifying them with the goods they normally accompany. * Rule 6 governs classification within headings, down to the subheadings. * Customs value (CVA) is determined based on the transaction value of goods plus additional costs up to the EU's external border. * Incoterms significantly influence which costs are included in the customs value. * Preferential origin grants reduced or zero import duties based on trade agreements between the EU and third countries. * Non-preferential origin determines the country of origin for goods without preferential agreements and is always applied. * Determining non-preferential origin often relies on the principle of "last substantial transformation" or "last significant process." * Proof of origin can include EUR.1 certificates, origin declarations on invoices, or Registered Exporter (REX) system declarations. * The direct transport rule ensures goods are transported directly from the exporting country to the EU to qualify for preferential treatment. ### Key concepts * **HS Code:** A globally harmonized six-digit code for classifying goods. * **CN Code:** The EU's eight-digit extension of the HS code. ### Implications ### Common pitfalls * * * * Customs declarations are crucial documents that provide information for customs authorities to assess duties, taxes, and other charges, and to ensure compliance with legal provisions. * The accuracy and completeness of declarations are paramount for efficient customs clearance and risk management. * Customs representation allows entities to appoint a third party to handle customs formalities on their behalf. * The process involves submitting specific information about the goods, their value, origin, and intended use. * **Customs declaration:** A formal statement submitted to customs authorities detailing goods being imported or exported. * **Types of representation:** * **Direct representation:** An authorized agent acts in the name and on behalf of another person (the declarant). * **Indirect representation:** An agent acts in their own name but on behalf of another person. * **Customs declaration data elements:** Include details like description of goods, tariff classification, origin, value, quantity, and the relevant licensing or authorization. * **Submission of declarations:** Can be done electronically or, in specific cases, manually. * **Role of customs authorities:** * Risk management for control and facilitation. * Verification of declaration data. * Collection of duties and taxes. * **Modifications and rectifications:** Declarations can be amended or corrected under certain conditions and timeframes. * **Tariff classification:** Assigning a standardized code to goods based on their nature, composition, and intended use (e.g., HS code, CN code, TARIC code). * **Harmonized System (HS) code:** A six-digit international nomenclature. * **Combined Nomenclature (CN) code:** An eight-digit EU system extending the HS. * **TARIC code:** A ten-digit EU code incorporating CN, additional EU measures, and national subdivisions. * **Rules of origin:** Determining the national source of goods, which impacts preferential tariffs and non-preferential measures. * **Preferential origin:** Grants reduced or zero duties based on trade agreements. * **Non-preferential origin:** Determines applicable duties, anti-dumping measures, and other trade policy instruments. * **Customs value (CVA):** The basis for calculating import duties, typically the transaction value of the goods plus costs to the EU border. * **Incoterms:** International Commercial Terms that define responsibilities, costs, and risks in international trade transactions, influencing the determination of customs value. * The World Customs Organization (WCO) was founded in 1952 and has 186 member states. * * * * Customs declarations are a fundamental requirement for goods entering or leaving the customs territory. * The process involves submitting specific information to customs authorities, often electronically. * Customs authorities use this information for risk management, control, and revenue collection. * Customs declarations are legally binding documents detailing the goods, their origin, value, and intended use. * Accurate classification using Harmonized System (HS) codes is crucial for determining duties and compliance. * The Combined Nomenclature (CN) code and the TARIC code provide further EU-specific classification details. * Customs value (CVA) is determined by the price of the goods plus all costs up to the EU border. * Origin rules determine the "nationality" of goods, impacting tariff rates and trade policy. * Preferential origin can lead to reduced or zero import duties under trade agreements. * Non-preferential origin determines the application of standard tariffs, anti-dumping duties, and other measures. * Documentation like EUR.1 certificates, origin declarations on invoices, and Approved Exporter (AE) or Registered Exporter (REX) status are used to prove preferential origin. * Customs declarations can be modified or rectified under specific circumstances. * **Harmonized System (HS) Code:** A globally standardized system for classifying traded products. * **Combined Nomenclature (CN) Code:** An EU-specific eight-digit code that expands on the HS code. * **TARIC Code:** A ten-digit code used for imports into the EU, incorporating CN codes with additional EU measures. * **Customs Value (CVA):** The basis for calculating import duties, typically including the transaction value and associated costs. * **Incoterms:** Standardized trade terms that define the responsibilities of buyers and sellers for the delivery of goods. * **Preferential Origin:** Origin determined by trade agreements, leading to preferential tariff treatment. * **Non-Preferential Origin:** Origin determined by general rules, used for standard tariffs and trade defence measures. * **Direct Transport:** Requirement for goods to be transported directly from the exporting country to the importing country to qualify for preferential treatment. * **Wholly Obtained:** Goods that are entirely produced in a single country. * **Substantial Transformation:** A significant change in the nature or form of goods through processing or manufacturing, determining origin. * **Product-Specific Rules (PSRs):** Detailed rules within trade agreements that specify the processing required for a product to gain preferential origin. * **Rule of Origin:** A rule that determines the country of origin of goods. * **Customs Declaration:** A formal statement submitted to customs authorities detailing imported or exported goods. * * * * This section focuses on the practical application of customs regulations, specifically regarding the classification of goods, customs valuation, and rules of origin. * It details the hierarchical system of goods codes and the complex rules for determining the origin of goods for preferential and non-preferential tariff purposes. * The procedures for calculating customs duties and the implications of different incoterms on customs valuation are also covered. * **Goods Classification (Tariffing):** * Goods are classified using a harmonized system (HS) code, developed by the World Customs Organization (WCO). * The Harmonized System (GS) code has 6 digits, with the EU adding 7th and 8th digits for the Combined Nomenclature (GN) code. * The TARIC code adds 9th and 10th digits for integrated EU tariff information. * Import declarations require at least a 10-digit TARIC code, while export declarations require at least an 8-digit GN code. * Classification is guided by 6 legal rules, with rules 1-5 determining the tariff post (4 digits) and rule 6 for further subdivision. * **Indelingsregels (Classification Rules):** * Rule 1 is the main rule, prioritizing the description of the tariff post and relevant section/chapter notes. * Rule 2a states that incomplete or unassembled goods are classified as complete if they possess the essential characteristics. * Rule 2b covers mixtures and composite goods, classifying them by their most important component. * Rule 3a prioritizes the most specific description among multiple possible classifications. * Rule 3b classifies goods based on the component that gives them their essential character. * Rule 3c is a tie-breaker: if multiple posts are equally applicable, the one with the highest number is chosen. * Rule 4 applies when rules 1-3 are insufficient, classifying goods by their closest resemblance to other items. * Rule 5 classifies packing materials with the goods they accompany. * Rule 6 applies to subdivisions within a tariff post, using similar logic to rules 1-5. * **Customs Value (CVA):** * Customs value is primarily the transaction value (price paid or payable for the goods). * All costs incurred until the EU border (e.g., freight, insurance, commissions) are added to the invoice price to determine the customs value. * Deductions can be made for discounts, financing interest, and costs incurred \_after arrival in the EU. * Incoterms significantly impact what costs are included in the customs value. * Simplified procedures can be authorized by customs to allow for standard adjustments to customs value, reducing administrative burden. * * * # Authorized Economic Operator (AEO) status and simplified procedures ### Core idea * Authorized Economic Operator (AEO) status is a certification granted by customs authorities to businesses that demonstrate a high level of supply chain security and compliance with customs regulations. * AEO status facilitates simplified customs procedures, leading to faster clearance, reduced inspections, and increased business efficiency. ### Key facts * The AEO program aims to enhance supply chain security and facilitate legitimate trade. * AEO status is recognized internationally, promoting mutual recognition agreements between customs administrations. * Benefits of AEO status include fewer physical and documentary controls, priority treatment for goods selected for inspection, and easier access to simplified customs procedures. * There are different types of AEO certifications, typically focusing on customs simplifications (AEOC) and security (AEOS), or a combination of both (AEO C&S). * Simplified customs procedures are a key benefit of AEO status, designed to expedite the movement of goods. * Entry into the Declarant's Records (EIDR) is one such simplified procedure, allowing authorized businesses to record goods in their own records before formal customs declaration. ### Key concepts * **Supply chain security:** A core principle of AEO, requiring businesses to implement measures to protect their goods and operations from illicit trade and security threats. * **Customs compliance:** AEO certified businesses must demonstrate a consistently high level of adherence to customs legislation and procedures. * **Mutual Recognition Agreements (MRAs):** Agreements between countries to recognize each other's AEO programs, extending benefits to businesses operating across borders. * **Simplified procedures:** Customs processes that are streamlined or modified for AEOs to reduce delays and administrative burdens. * **Entry into the Declarant's Records (EIDR):** A specific simplified procedure that allows businesses to enter customs declaration data into their own systems, with a subsequent summary declaration submitted to customs. ### Implications * Businesses with AEO status gain a competitive advantage through faster customs clearance and improved supply chain reliability. * AEO certification fosters stronger partnerships between businesses and customs authorities, built on trust and transparency. * The implementation of simplified procedures requires robust internal controls and data management systems within the AEO-certified company. * AEO status contributes to a more secure global supply chain by promoting best practices among businesses. * Enhanced security and compliance can reduce the risk of customs penalties and disruptions to trade. * * * * AEO status is a voluntary certification for businesses involved in international trade. * It signifies a secure and compliant supply chain, recognized globally. * AEOs benefit from simplified customs procedures and faster clearance. * AEO status is granted by customs authorities to businesses meeting specific security and compliance criteria. * The program aims to enhance supply chain security and facilitate legitimate trade. * AEO certification is recognized internationally through mutual recognition agreements. * Benefits include fewer physical and documentary checks, priority treatment, and reduced costs. * Different AEO types exist: AEO Certificate, AEO Full, and AEO Simplified Procedures. * Simplified procedures include Entry in Declarant's Records (EIDR). * **Supply Chain Security:** A fundamental requirement for AEO status, focusing on the integrity of goods throughout their movement. * **Customs Compliance:** Adherence to all relevant customs laws, regulations, and procedures. * **Mutual Recognition:** Agreements where one country's AEO status is recognized by another, extending benefits internationally. * **Entry in Declarant's Records (EIDR):** A simplified procedure allowing declarant to record goods in their own records instead of immediately submitting a full customs declaration. * **Risk Management:** Customs authorities use risk profiles to assess potential threats, with AEOs generally presenting a lower risk. * Businesses with AEO status can experience significantly faster customs processing. * Reduced delays lead to improved inventory management and supply chain efficiency. * Enhanced reputation and credibility with customs authorities and business partners. * Competitive advantage for AEO-certified companies in international trade. * Implementation requires a thorough review of internal processes and security measures. > **Tip:** Focus on understanding the specific requirements for each AEO type and the applicable simplified procedures to leverage the benefits effectively > **Example:** A company might use EIDR to record imported goods daily in their own system and then submit a consolidated declaration at a later date, simplifying the immediate processing * of each shipment * * * ## Authorized economic operator status and simplified procedures * The Authorized Economic Operator (AEO) program aims to enhance and secure the international supply chain while streamlining customs procedures for compliant businesses. * AEO status offers tangible benefits including faster customs clearance, reduced inspections, and priority treatment, leading to increased supply chain efficiency and cost savings. * AEO certification requires meeting specific criteria related to customs compliance, record-keeping, security, and financial solvency. * The AEO program is recognized internationally, with mutual recognition agreements between different customs administrations to facilitate trade. * AEO status can be granted in different tiers or categories, such as AEO for security (AEOS) and AEO for customs simplification (AEOC). * AEOs benefit from simplified customs procedures, enabling faster movement of goods across borders. * **AEO (Authorized Economic Operator):** A trusted entity in the international supply chain, certified by customs authorities for its compliance and security. * **Benefits of AEO status:** * Reduced number of physical and documentary controls. * Priority treatment for controls. * Faster release of goods. * Mutual recognition agreements with other customs administrations. * **AEOS (AEO for Security):** Focuses on the security of the supply chain, including physical security, cargo security, and personnel security. * **AEOC (AEO for Customs Simplification):** Focuses on customs compliance, record-keeping, and efficient customs procedures. * **Mutual Recognition Agreements (MRAs):** International agreements that recognize the AEO status granted by one customs administration by another, facilitating smoother trade flows. * Companies with AEO status experience greater predictability and reduced lead times in their logistics operations. * AEO certification can be a competitive advantage, signaling reliability and trustworthiness to business partners. * The AEO program encourages better internal control systems and compliance management within businesses. * AEO status contributes to a more secure global trading environment by partnering with reliable businesses. * * * * AEO status offers benefits, including expedited customs clearance and simplified procedures. * This section focuses on specific simplified procedures. * **Entry into Declarant's Records (EIDR):** This is a simplified procedure where the declarant records goods in their own accounting records instead of presenting them to customs at the time of * **EIDR requirements:** * Authorization from customs is mandatory. * The declarant must be an AEO. * Goods must be entered into the declarant's records as soon as possible. * A subsequent supplementary customs declaration must be lodged. * **Benefits of EIDR:** * Reduces physical presentations of goods to customs. * Streamlines the import process by allowing immediate release of goods. * Offers greater control and flexibility for the importer. * **Other simplified procedures mentioned:** * **Local clearance:** Allows goods to be cleared at a location other than the customs office. * **Pre-arrival processing:** Customs data is submitted before the goods arrive. * **Periodic declaration:** Consolidates multiple import declarations into a single monthly declaration. * AEO certification and the use of simplified procedures can significantly reduce lead times and operational costs for businesses. * It allows businesses to demonstrate compliance and security to customs authorities, fostering trust. * Implementation requires robust internal processes and systems to ensure compliance with authorization conditions. * These simplifications aim to balance customs control with trade facilitation for compliant economic operators. * * * * The Authorized Economic Operator (AEO) program aims to foster security and compliance in the international supply chain. * AEO status offers significant benefits, including access to simplified customs procedures. * Various types of AEO certifications exist, catering to different aspects of supply chain security and compliance. * AEO status facilitates smoother and faster customs clearance for accredited businesses. * Benefits include reduced physical and document checks, priority treatment for shipments, and mutual recognition of AEO status in different countries. * Different AEO certifications (e.g., AEOC for customs simplification, AEOS for security) exist. * Companies must meet strict criteria related to their customs compliance, record-keeping, and supply chain security. * The application process for AEO status involves a comprehensive self-assessment and an evaluation by customs authorities. * **AEO (Authorized Economic Operator):** A trusted partner of customs authorities, recognized for their compliant and secure supply chain operations. * **Customs Simplification:** Privileges granted to AEOs that streamline import and export processes. * **Supply Chain Security:** Measures and practices implemented to ensure the integrity and safety of goods throughout the supply chain. * **Mutual Recognition:** Agreements where countries recognize each other's AEO status, extending benefits across borders. * **Self-Assessment Questionnaire (SAQ):** A tool used by companies to evaluate their eligibility for AEO status. * Achieving AEO status requires a robust internal compliance program and a strong focus on supply chain security. * The investment in achieving AEO status can lead to significant operational efficiencies and cost savings. * AEOs contribute to a more secure global trade environment by demonstrating a commitment to compliance and security. * Companies that are not AEOs may face longer customs delays and increased scrutiny. * * * # Customs transit and electronic customs systems ### Core idea * Customs transit procedures are governed by EU regulations, ensuring goods remain under customs control while moving within or through the customs territory. * The system has evolved from paper-based processes to sophisticated electronic systems, enhancing efficiency and control. ### Key facts * **T1 Procedure:** Applied to goods that are not in free circulation within the EU customs territory. These goods are subject to import duties and other charges. * **T2 Procedure:** Applied to Union goods (goods already in free circulation within the EU) that are being moved to or from specific territories of the EU where the provisions on * The Combined Nomenclature (CN) is a harmonized system of codes used for classifying goods, essential for customs duties, statistical purposes, and trade policy measures. * The Harmonised System (HS) code forms the first six digits of the CN code, globally recognized. * The TARIC code is the EU's integrated tariff, comprising 10 digits, and is used for import into the EU. * Goods imported into the EU require a minimum of 10 digits (TARIC code), while exports from the EU require a minimum of 8 digits (CN code). ### Key concepts * **Goods Classification (Tarification):** The process of assigning the correct goods code. * It involves following 6 General Interpretative Rules (GIRs) to determine the correct classification. * Rule 1 is the principal rule, relying on headings and chapter notes. * Rules 2-5 handle specific scenarios like incomplete goods, mixtures, sets, and packaging. * Rule 6 applies to classification within subheadings. * **Customs Value (CVA):** The basis for calculating import duties. * It's generally the transaction value of the goods, plus costs like freight and insurance, up to the EU's point of entry. * Adjustments (additions and deductions) are made based on specific criteria. * Incoterms significantly influence the calculation of customs value. * **Origin of Goods:** Determining the country where goods originate is crucial for applying tariffs and trade policy measures. * **Non-preferential origin:** Determines the country of origin for general trade purposes, often based on the "last substantial transformation." * **Preferential origin:** Grants reduced or zero import duties under specific trade agreements between the EU and third countries. * Proof of preferential origin is required, such as EUR.1 certificates or origin declarations on invoices, depending on the trade agreement and value. * **Direct Transport:** For preferential origin, goods must generally be transported directly from the exporting country to the EU, or transit through other countries under customs supervision without substantial transformation. * **Wholly Obtained:** Goods considered wholly obtained in a country (e.g., minerals, agricultural products) automatically acquire that country's origin. * **Substantial Transformation:** For goods produced in multiple countries, the "last substantial transformation" determines the non-preferential origin. * **Rule of Origin Compliance:** This involves checking if goods meet specific criteria like post-springing, value, process rules, or tolerance rules as defined in trade agreements. ### Implications * * * * This section focuses on the HS code (Harmonized System) and its European adaptations (GN and TARIC) for classifying goods. * It details the complex rules for determining the origin of goods, differentiating between preferential and non-preferential origin. * The process of calculating customs value and its impact on duties and taxes is explained. * The Harmonized System (HS) code, developed by the WCO, provides a standardized numerical code for classifying goods. * The EU further developed this into the Combined Nomenclature (GN) and the integrated TARIC code for import/export. * Goods classified for import into the EU require a minimum of 10 digits (TARIC code), while export requires at least 8 digits (GN code). * The classification of goods relies on six legally binding rules, with rules 1-5 determining the tariff post and rule 6 for further subdivision. * Customs value is based on the transaction price plus costs like freight and insurance up to the EU border. * Origin of goods is crucial for applying preferential tariffs, trade agreements, and non-tariff measures. * Preferential origin allows for reduced or zero import duties based on trade agreements between the EU and third countries. * Non-preferential origin determines applicable duties, especially anti-dumping or compensatory measures. * Proof of origin can be an EUR.1 certificate, a statement on invoices, or a Registered Exporter (REX) declaration. * Direct transport is a key condition for applying preferential origin. * The "wholly obtained" rule applies to goods produced entirely in one country. * For goods produced in multiple countries, the "last substantial transformation" determines non-preferential origin. * **Indelingsregels (Classification Rules):** A set of six rules used to determine the correct commodity code for goods. * **Harmonized System (HS) Code:** A six-digit international nomenclature for classifying traded products. * **Combined Nomenclature (GN):** The EU's eight-digit version of the HS code. * **TARIC Code:** The EU's ten-digit integrated tariff code, used for import and including additional EU measures. * **Douanewaarde (Customs Value - CVA):** The value of goods for customs purposes, forming the basis for duties and taxes. * **Incoterms:** Standardized trade terms that define the responsibilities of buyers and sellers regarding delivery, costs, and risks. * **Preferential Origin:** Origin that qualifies goods for reduced import duties under trade agreements. * **Non-Preferential Origin:** Origin that determines standard customs duties, anti-dumping duties, and other measures. * **Wholly Obtained:** Goods entirely produced in one country. * **Last Substantial Transformation:** The critical processing step that confers origin to goods produced in multiple countries. ### Common pitfalls * * * * This section details the complex rules for classifying goods using the Harmonized System (HS) code, Combined Nomenclature (CN) code, and TARIC code. * It outlines the six General Rules for the Interpretation (GIR) of the Harmonized System, crucial for determining the correct tariff classification. * The concept of Customs Value (CVA) and its calculation, including necessary adjustments, is explained. * The rules for determining the origin of goods, both preferential and non-preferential, are a key focus, with detailed steps and conditions. * The Harmonized System (HS) code, established by the WCO, has 6 digits. * The EU's Combined Nomenclature (GN) code extends HS to 8 digits. * The TARIC code further extends GN to 10 digits for imports and is used for integrated tariff measures. * The six rules for the interpretation of the Harmonized System are the legal basis for classification. * Rule 1 is the principal rule, emphasizing the descriptions of headings and relevant section/chapter notes. * Rule 2 covers goods in incomplete or unfinished state, and goods in unassembled or disassembled state. * Rule 3 (a, b, c) deals with goods classifiable under two or more headings, prioritizing specificity, essential character, or highest heading number. * Rule 4 applies when Rules 1-3 do not resolve classification, by analogy. * Rule 5 addresses containers and packaging materials. * Rule 6 governs classification within headings, at the subheading level. * Customs Value (CVA) is the transaction value of imported goods plus certain costs up to the EU border. * Positive adjustments to CVA include selling commissions, packing costs, and transport costs to the EU border. * Negative adjustments to CVA include discounts and price reductions. * The EU uses a fixed monthly exchange rate for CVA calculation. * Preferential origin grants reduced import duties based on trade agreements, requiring proof of origin. * Non-preferential origin determines duties for countries without agreements and applies when preferential rules aren't met. * Proof of preferential origin can be an EUR.1 certificate, origin declaration on invoice, or REX/Authorised Exporter declarations. * Goods must meet conditions like "wholly obtained" or "sufficient working/processing" to qualify for preferential origin. * Non-preferential origin is determined by the country of "last substantial transformation" or highest value/weight if no transformation occurred. * **Tariff Classification:** Assigning a numerical code (HS, GN, TARIC) to goods based on their characteristics and intended use, crucial for duty calculation and trade statistics. * **General Rules for Interpretation (GIR):** A hierarchical set of rules that dictate how to classify goods consistently under the Harmonized System. * * * * This section focuses on the practical application and implications of customs procedures and electronic systems, specifically covering the T1 and T2 transit regimes and the evolution towards advanced electronic customs * **T1 Transit Procedure:** Used for non-Community goods entering the EU customs territory, requiring a guarantee and subject to customs supervision. * **T2 Transit Procedure:** Used for Community goods transported under customs supervision, either within the EU or to non-EU countries with which the EU has a customs union or similar agreement. * **Electronic Customs Systems Evolution:** Shift from paper-based processes to integrated digital systems for efficiency and data management. * **MASP-C (Multiannual Strategic Plan for Customs):** A framework driving the modernization and digitalization of customs procedures. * **AES (Automated Export System):** A system for processing export declarations electronically. * **IDMS (Import Control System/Integrated Data Management System):** Part of the broader electronic customs framework, likely focusing on import data and management. * **NCTS (New Computerised Transit System):** An electronic system for managing goods in transit within the EU and partner countries. * **Electronic Declaration:** Digital submission of customs declarations, replacing paper forms for increased speed and reduced errors. * **Data Harmonization:** Efforts to standardize customs data across member states and international partners. * **Risk Management Systems:** Electronic tools used to identify high-risk shipments for targeted inspections. * **Real-time Data Exchange:** Enables immediate sharing of customs information between authorities and stakeholders. * **Digital Authorizations:** Electronic processing and management of customs licenses and permits. * **Transit Declaration:** The formal document required to initiate and track goods under transit procedures. * **Customs Guarantee:** Financial assurance provided by the importer or their representative to cover potential customs duties and taxes. * **Customs Supervision:** The monitoring and control exercised by customs authorities over goods in transit. * **Single Window Concept:** Aim to allow businesses to submit all required information and documents for import/export/transit through a single point of entry. * **Interoperability:** The ability of different electronic customs systems to communicate and exchange data effectively. * **Data Security and Privacy:** Critical considerations in electronic customs systems to protect sensitive trade information. * **Increased Efficiency:** Automation and electronic processing significantly speed up customs clearance. * **Reduced Costs:** Streamlined procedures and fewer errors lead to lower operational expenses for businesses and customs authorities. * **Enhanced Compliance:** Electronic systems facilitate better tracking and monitoring, improving adherence to customs regulations. * **Improved Data Accuracy:** Digitalization minimizes manual data entry errors, leading to more reliable customs statistics. * **Facilitation of Trade:** Modern electronic systems are designed to ease legitimate trade while maintaining robust controls. * **Better Risk Assessment:** Advanced data analytics in electronic systems allow for more targeted and effective risk management. * * * ## Common mistakes to avoid * Review all topics thoroughly before exams * Pay attention to formulas and key definitions * Practice with examples provided in each section * Don't memorize without understanding the underlying concepts

| Term | Definition | |------|------------| | Douanegebied (Customs territory) | The geographical area where a specific customs law applies. For the European Union, this territory is generally composed of all its member states, but certain areas may be excluded for fiscal purposes (e.g., overseas territories). | | Harmonisering douanetarieven (Harmonization of customs tariffs) | The process of creating uniform tariff classifications and duties across different countries or regions, typically through international agreements like the Harmonized System (HS) Convention. | | Goederencode (Commodity code) | A standardized numerical code used in international trade to classify goods for customs duties, taxes, and statistical purposes. It forms the basis for import and export regulations. | | Tariefpost (Tariff heading) | A six-digit code within the Harmonized System (HS) that represents a specific product category, used as a primary classification for customs purposes. | | Waarde (Value) | In customs, this refers to the customs value of goods, which is the basis for calculating import duties and taxes. It typically includes the transaction value plus certain additional costs. | | Oorsprongsregels (Rules of origin) | Criteria used to determine the country or territory where goods originate. These rules are crucial for applying preferential tariffs, trade sanctions, or other origin-specific measures. | | Vertegenwoordiging (Representation) | The act of one person or entity acting on behalf of another in customs matters. This can be direct (where the representative acts in their own name but on behalf of the principal) or indirect (where the representative acts in their own name and for their own account, but the principal is the one declared). | | AEO (Authorized Economic Operator) | A status granted by customs authorities to reliable and secure businesses involved in the international supply chain. AEOs benefit from simplified customs procedures and faster clearance. | | Afhandeling aangifte (Declaration processing) | The process by which customs authorities examine, verify, and approve or reject customs declarations submitted by importers or exporters. This includes checks for accuracy, completeness, and compliance with regulations. | | Onregelmatigheden (Irregularities) | Any breach or violation of customs laws and regulations. This can range from minor administrative errors to serious offenses like fraud or smuggling, leading to penalties or legal action. | | MASP-C (Multi-Annual Strategic Plan for Electronic Customs) | An EU strategic plan aimed at modernizing and improving electronic customs systems, with the goal of replacing all paper-based customs procedures with digital ones. | | EIDR (Entry into the Declarant's Records) | A simplified customs procedure allowing authorized traders to record goods movements in their own accounting system instead of submitting a full customs declaration at the point of entry, with a subsequent supplementary declaration. | | Douanewaarde (Customs value) | The value of imported goods for customs purposes, determined according to specific rules, which serves as the basis for calculating import duties. It generally includes the transaction value plus any additional costs up to the EU border. | | Incoterms (International Commercial Terms) | A set of internationally recognized rules published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers for the delivery of goods under sales contracts. They clarify costs, risks, and obligations. | | Preferentiële oorsprong (Preferential origin) | The origin of goods that qualifies them for reduced or zero import duties under preferential trade agreements between countries or blocs. It requires meeting specific origin criteria and providing valid proof. | | Niet-preferentiële oorsprong (Non-preferential origin) | The origin of goods determined by non-preferential rules, used for applying general trade measures such as Most Favored Nation (MFN) tariffs, anti-dumping duties, or quotas. | | Rechtstreeks vervoer (Direct transport) | A condition for applying preferential origin rules, requiring that goods are transported directly from the exporting country to the importing country or its territory without transshipment or significant handling in a third country, unless specific conditions are met. | | Geheel en al verkregen (Wholly obtained) | Goods considered to originate from a single country if they are entirely produced or obtained within that country, such as minerals extracted, plants grown, or animals born and raised there. | | Meer dan ontoereikende behandeling (More than insufficient treatment) | A key criterion for determining preferential origin for goods that are not wholly obtained in one country. It means that the processing or working undergone in a country must be substantial enough to grant the goods origin in that country, going beyond minimal or insufficient operations. | | Lijstregel (List rule) | Specific origin-conferring processing rules outlined in trade agreements that determine how goods are treated for preferential origin purposes, often based on changes in tariff classification (post-springing), value added, or specific manufacturing processes. | | Postverspringingsregel (Classification rule change) | An origin rule that grants preferential origin if the non-originating materials used in the production of the goods fall under a different tariff chapter or heading than the final product. | | Waarderegel (Value rule) | An origin rule that grants preferential origin if the value of the non-originating materials used in the production of the goods does not exceed a certain percentage of the ex-works price of the final product. | | Procesregel (Process rule) | An origin rule that grants preferential origin if specific manufacturing processes are applied to the goods, regardless of the origin of the materials used, as long as these processes are considered significant. | | Tolerantieregel (Tolerance rule) | A provision in preferential trade agreements that allows for a certain percentage of non-originating materials to be used in the production of goods without affecting their preferential origin status, typically applied to prevent trade disruptions. | | Vrijstelling van kennisgeving (Exemption from notification) | A customs procedure where an authorized trader does not need to immediately notify customs of goods movements, as long as the goods are released into free circulation after an initial entry into their records and a subsequent supplementary declaration is filed. | | Aanvullende aangifte (Supplementary declaration) | A secondary customs declaration submitted after the initial release of goods, providing more detailed information required for final customs clearance and duty calculation, often used in simplified procedures like EIDR. | | Borgstelling (Security) | A financial guarantee provided to customs authorities to cover potential customs duties, taxes, or penalties. It ensures that the customs administration will be reimbursed if the importer fails to meet their obligations. | | Douanevervoer (Customs transit) | A procedure that allows goods to be transported from one customs office to another within or outside the EU, with duties and taxes suspended until the goods reach their final destination. T1 is for non-EU goods, and T2 is for EU goods. | | Enig Document (Single Administrative Document - SAD) | The standard customs declaration form used in the EU and EFTA countries for import and export procedures. It has been largely replaced by electronic systems. | | AES (Automated Export System) | An electronic system used for managing export declarations within the EU, part of the MASP-C initiative to streamline and digitize customs processes. | | IDMS (Import Customs Management System) | An electronic system for managing import declarations and customs procedures within the EU, intended to replace paper-based processes and national systems. | | NCTS (New Computerised Transit System) | An electronic system for managing customs transit procedures (T1 and T2) across the EU and associated countries, ensuring goods are accounted for throughout their journey. | | Gegevenssets (Data sets) | In the context of MASP-C, these are structured collections of data used to submit customs declarations electronically, replacing older declaration formats and enabling digital processing. |