Top 10 Errors in Determining the HS Code

Determination of the HS code is one of the key stages in customs clearance of cargo. Errors in coding can lead to serious consequences: increased duties, fines, delays at the border and even confiscation of cargo. In this article, we will look at the 10 most common mistakes that companies make when classifying products, and explain how to avoid them.

Error in choosing the main classification criterion

Problem:
Many focus only on the name of the product or its main function, ignoring important characteristics such as composition, method of production, purpose.

Example:
A typical cotton T-shirt and a synthetic T-shirt can refer to different codes. Incorrect definition of the composition will lead to incorrect classification and inflated duty.

How to avoid:

• Carefully study the rules of interpretation of HS (GENERAL rules of interpretation).
• Check which product characteristics are key to classification.

Use of incorrect product description

Problem:
The goods in the documents are described not accurately or with incorrect characteristics. This can lead to the wrong choice of code.

Example:
If the documentation indicates simply “equipment”, customs may attribute the goods to an inappropriate section, which will entail a recalculation of duties.

How to avoid:

• Use the most accurate and detailed description of the product.
• Specify all key characteristics (materials, functionality, equipment, technical parameters).

Ignoring changes in the classification of HS

Problem:
FEA codes are updated periodically, but companies continue to use outdated classifications.

Example:
Since 2022, the codes for a number of goods have changed within the framework of the EAEU 2022 FEA, but some companies, out of old habit, indicate old codes, which leads to problems with customs clearance.

How to avoid:

• Regularly monitor the updates of the FEA classifier.
• Consult with customs specialists before registration of new consignments of goods.

Error in determining the set or part of the goods

Problem:
Some products come in sets or in parts, but are incorrectly classified as separate items.

Example:
If you bring parts to the machine, their code may depend on whether they are part of the equipment or a separate product.

How to avoid:

• Examine the OPI regarding kits.
• Determine whether to classify the goods separately or as part of the equipment.

Incorrect determination of the origin of goods

Problem:
Some codes depend on the country of origin, and errors in the definition of the country can lead to incorrect charging of fees.

Example:
A product from China can be subject to duties at one rate, and a similar product from Vietnam at another, if there is a free trade agreement between the countries.

How to avoid:

• Determine the exact country of origin of the goods.
• Check if there are preferences or additional requirements for that country.

Misapplication of the analogy

Problem:
Some companies try to classify products by analogy with similar ones, without taking into account differences in their characteristics.

Example:
Wireless headphones and wired headphones can fall into different categories, since wireless devices fall into the group of electronic goods.

How to avoid:

• Rely on the exact description of the product and technical documentation.
• Use current classification examples from customs practice.

Incorrect definition of product material

Problem:
The encoding of some products depends on the material from which they are made.

Example:
Plastic furniture and wooden furniture fall into different sections of the HS, even if they perform the same function.

How to avoid:

• Precisely indicate the material in the documentation.
• Check the classification of the material before submitting the declaration.

Misunderstanding of classification notes

Problem:
Notes to the FEA sections contain exceptions and clarifications that are ignored in the classification.

Example:
In some cases, the product can be classified by its main function, and in others – by composition. For example, children's toys with mechanisms can fall either into the toy section or into the mechanical devices section.

How to avoid:

• Carefully study the notes to product groups.
• If necessary, consult with customs specialists.

Mistakes in the translation of the name of the goods

Problem:
Some products have different names in the original documentation and translation, which can lead to incorrect code selection.

Example:
The term "circuit breaker" can be translated as "fuse", but these products have different codes HS.

How to avoid:

• Use precise technical terms when translating documentation.
• Check the translated descriptions with the original characteristics of the product.

Lack of pre-classification by customs authorities

Problem:
Some companies do not ask customs for a preliminary decision on the code and then face unexpected problems when declaring.

Example:
If the goods are controversial and can be classified into several groups at once, customs can independently choose the code, which will lead to unexpected costs.

How to avoid:

• For complex goods, make a preliminary decision on classification in the FCS.
• Please consult customs representatives before submitting the declaration.

Errors in determining the FEA code can lead to financial and temporary losses. To avoid problems:

• Study the rules of classification (OPI, notes, changes in HS).
• Properly describe the product, taking into account all the characteristics.
• Check the country of origin and technical documentation.
• Ask customs for a preliminary solution for complex goods.

Competent approach to classification will help to avoid fines, delays and unnecessary expenses in foreign economic activity!