TARIFF CODE: WHAT THEY ARE USED FOR AND EXAMPLES - CULTURE VOCABULARY - 2024

The tariff section is the specific code of a product, as documented in the Harmonized System maintained by the World Customs Organization (WCO). It is also known as a commodity code or tariff code.

All commercial import and export transactions require that the products in the customs declarations be classified according to an appropriate tariff fraction.

Source: GTO Puerto Interior, from Wikimedia Commons

There are tariff lines for almost all products involved in world trade. As it is required in the official shipping documents to link it to the tariff rate to be paid on that product, the tariff section guarantees uniformity in the classification of products throughout the world.

A full tariff code is not less than six digits and can be up to ten. The more digits a tariff code string has, the more specific the product it identifies will be.

A string of less than six digits is considered a partial tariff code that represents a broad category of products, or is a chapter of products in the harmonized system.

What is the tariff section?

Tariff classification is related to the proper classification of goods within the Harmonized Commodity Description and Coding System (tariff book).

This system of tariff nomenclature is a standardized international system of names and numbers for the classification of traded products.

It came into force in 1988 and has since been developed and maintained by the World Customs Organization, an independent intergovernmental organization based in Belgium, with almost 200 member countries.

The harmonized system is organized into 21 sections, which are subdivided into 97 chapters. The 97 chapters of the harmonized system are subdivided into approximately 5,000 titles and subtitles.

Sections and chapters describe broad product categories, while titles and subtitles describe products in more detail.

The harmonized system is logically organized by economic activity or component material. For example, animals and animal products are in one section of the harmonized system, while machinery and mechanical appliances are in another.

What are they used for?

The tariff classification of goods establishes the need for import permits, the obligation of rules of origin and the applicability of customs return provisions.

It is crucial that an importer has sufficient knowledge of these rules to ensure the correct classification of imported products.

It is important for an importer to have a proper description of the goods before importing them, as the identified tariff code must be inserted in the customs declaration.

Customs duties and VAT to be paid will be calculated based on the type of duty established by the specific tariff item.

An incorrect classification of the goods within the tariff book could result in insufficient or excessive payment of customs duties and value added tax (VAT) on importation.

The tariff item system is based on a 6-digit nomenclature. Individual countries have extended this to 10 digits for import and 8 for export. Almost 200 countries use the tariff lines as a basis for:

- Entrance fees.

- Trade statistics.

- Regulations of origin.

- Trade agreements.

- Checking of controlled assets (weapons, waste, protected animal species).

- Risk analysis.

Examples

In general, the sections and chapters of the harmonized system are ordered according to the degree of manufacture of a product or in terms of its technological complexity.

Natural products, such as live animals and plants, are described in the first sections of the harmonized system. On the other hand, more advanced products, such as precision machinery and instruments, are described in later sections.

Chapters within individual sections are also often arranged in order of complexity or degree of manufacture.

For example, within Section X: Wood pulp or other fibrous materials. Recovered paper or cardboard. Paper, cardboard and their articles, Chapter 47 provides for wood pulp or other fibrous materials. On the other hand, Chapter 49 covers printed books, newspapers, and other printed materials.

Finally, the titles within each chapter follow a similar order. For example, the first title in Chapter 50 (Silk) indicates silkworm cocoons, while items made of silk are covered by later chapter titles.

Composition of the tariff item

The harmonized system code consists of 6 digits. The first two digits designate the chapter of the harmonized system. The second two digits designate the title. The third two digits designate the subtitle.

For example, tariff item 1006.30 indicates Chapter 10 (Cereals), Title 06 (Rice), and Subtitle 30 (Semi-milled or fully milled rice, whether polished or glazed).

Classification

The process of assigning tariff items is known as the harmonized system classification. Tariff lines can be determined by a variety of factors, such as the composition of the product and its shape.

By composition

An example of a product classified according to its material composition is a picture frame. Wooden frames are classified in subtitle 4414.00, which includes wooden frames for paintings, photographs, mirrors or similar objects.

Plastic frames are classified under subtitle 3924.90, which covers plastic tableware, kitchen utensils, other household items, and toiletries or toiletries. Others.

Glass frames are classified under subtitle 7020.00, which covers Other Glass Items. And so on.

By shape

An example of a product classified by shape would be whole potatoes. The classification will also change depending on whether the potatoes are fresh or frozen.

Fresh potatoes are classified in position 0701.90, under the heading Potatoes, fresh or chilled, subheading Others. On the other hand, frozen potatoes are classified in position 0710.10, under the heading Uncooked vegetables, steamed or with boiling water, frozen, sub-heading Potatoes.

Unrated

Although each product and each part of each product is classifiable in the harmonized system, very few are explicitly described in their nomenclature.

Any product for which there is no explicit description can be classified under a title or sub-heading "pot", which includes Other Products. Pot codes usually appear last in numerical order, under their related titles and subtitles.

An example of a product classified in a pot title is a live dog. This must be classified in title 01.06, which contemplates Other live animals.

This is because dogs are not covered by titles 01.01 to 01.05, which explicitly provide for the presence of live bovines and horses. Live pigs, live sheep and goats, and live poultry, respectively.

References

1. Wikipedia, the free encyclopedia (2019). Harmonized System. Taken from: en.wikipedia.org.
2. UPS (2019). What is Tariff Code? Taken from: ups.com.
3. Logistics Glossary (2019). Tariff code. Taken from: logisticsglossary.com.
4. Sars (2018). Tariff. Taken from: sars.gov.za.
5. Revenue (2019). Classification. Taken from: revenue.ie.