The impact of incorrect tariff code classification

Classification of goods is significant from a customs point of view. It has an impact on customs duties, excise duties, import VAT, import and export restrictions and more. For this reason, the importance of correct classification cannot be underestimated.

Companies often neglect their classification or do not have a robust process to classify their products, which might result in significant costs, e.g. wrong amount of duty being paid or improper use of free trade agreements. With our customs classification platform, TariffTel, we have helped companies who were struggling to achieve only 60% to 70% classification compliance to reach 100%.

Classifying products accurately requires knowledge and obtaining the necessary information on the essential characteristics for customs. We address these requirements directly. At the heart of TariffTel is the knowledge, master tables built and maintained by our highly skilled team, enabling non-technical people to understand quickly what information is needed. Once the information is fed into TariffTel, a tariff code is automatically assigned.

It is easy to mis-classify products

We corrected a tariff code for shoes for our customer who had misclassified the item due to missing information. When classifying footwear you need to classify by type of footwear, parts of footwear and the materials in footwear that the “upper” and “sole” are made from. Other characteristics such as whether the shoe covers the ankle, the size, the height of the heel, and whether it’s intended for men or women all need to be factored in. The main issue with our customer’s shoes was with leather uppers being misclassified under textile or plastic/rubber uppers. They were overpaying duty by 9% on one footwear product leading to a significant overpayment of £120,000.

Poor compliance leads to higher occurrences of duty over payments. How compliant are you? Read more about the high price of using incorrect tariff codes.