All goods have to be classified when they are imported or exported. There are over 10,000 different classifications, and only one code can be absolutely correct. The classification of imported goods determines the duty rate that is applied to calculate the amount of duty due. Classification also influences other matters, for example, whether anti-dumping duty might be due, whether the goods require an import licence, or whether they are entitled to a reduced or free rate of duty under a tariff preference (see below).
Tariff classification is the area where errors most frequently occur and is the most important part of customs planning.
If goods have been misclassified, there is a three year window for amending the error.
Traders can apply to HMRC for a written classification decision which will remain valid for three years, provided the decision issued was based on accurate and complete data and provided there are no subsequent changes making the decision incompatible with UK law. These decisions are known as ATaRs and are similar to EU BTI (Binding Tariff Information) decisions.
An ATaR covers only one product, so a separate application is required for each type of goods. The ruling only applies to goods imported after the date of issue and is only binding on the named holder of the decision.
Where raw materials or components required for processing are not available in the UK, or where they are not available for production within the time limits specified by the customer, the government may suspend the duty which would normally be payable on importation of those goods. Since duty is a tariff barrier intended to protect local industry, if there is no local industry to protect, it is logical for there to be no customs duty. The UK recognises this logic and has a procedure whereby customs duties may be suspended on goods imported for processing.
Suspensions which have been agreed are identified in the tariff and are generally restricted to exact descriptions of particular goods. For some products, the suspension of the duty is dependent upon the specific use to which the goods will be put and an importer would need to have an End Use approval (see Duty reliefs).
Obtaining a duty suspension for imported goods is a reasonably simple process with the completing of an application form which is published by the Department for International Trade so that any objections to the tariff suspension may be heard. Once a tariff suspension is agreed, it is available to all importers of that product.
Goods from certain countries may be imported at preferential rates of duty, either under a bilateral Free Trade Agreement that the UK has entered into with a particular country, or under the scheme for developing countries known as the Generalised System of Preferences.
The UK allows goods from certain less developed countries in the world to be imported duty free or at reduced rates of duty, so as to encourage exports from those countries and to promote international trade. The system is known as the Generalised System of Preferences, or GSP. Reduced duty or duty free importation is limited to certain tariff headings and, in some cases, to specified countries (see Origin).