"ISSUES OF CLASSIFICATION OF GOODS FOR CUSTOMS PURPOSES AT THE PRESENT STAGE OF DEVELOPMENT OF THE EURASEC CUSTOMS UNION", the official compilation of the International Conference "Customs Union - Ukraine: Prospects, Risks and Opportunities"
Author: Irina L. Vakhterova,
The head of group legal consulting of Bar association Customs & Corporate Lawyers
Subject classification of goods according to the Commodity Nomenclature of Foreign Trade (HS) is, in our opinion, one of the most relevant for the participants of foreign economic activity (FEA). Firstly, the classification of goods to a particular classification code TN VED often requires the availability of technical expertise and additional expertise related to defining the technical characteristics of the goods, manufacturing processes, etc. Secondly, on to which the classification code TN VED will be assigned product depends rate of duty and VAT and, consequently, the amount of customs duties paid. Naturally, the majority of disputes with customs authorities there was at the stage of verification of the claimed declarant classification code of goods.
In most countries, there is a common approach to the classification of goods, as the classification of goods for customs purposes on the basis of the Harmonized System in accordance with the International Convention on the Harmonized System, done at Brussels on 14.06.1983 (hereinafter - the Convention). The Convention has more than 100 states, including member states of the Customs Union (Russia, Kazakhstan, Belarus) and Ukraine.
In paragraph "a" of Article 1 of the Convention states that Harmonized System nomenclature means, including the headings, subheadings and their related numerical codes, notes to the sections, groups and subheadings, as well as basic rules of interpretation of the Harmonized System.
In accordance with paragraph 1 of Article 3 of the Convention, each Contracting Party undertakes that its customs tariff and statistical nomenclature of the Harmonized System will comply with the Convention entered into force with respect to that Contracting Party. Thus, the Contracting Parties undertake:
- Use all the headings and subheadings of the Harmonized System, as well as their related numerical codes without any additions or modifications;
- Apply the basic rules of interpretation of the Harmonized System, as well as all the notes to the sections, groups, headings and subheadings and do not modify the content of the sections, groups, headings or subheadings of the Harmonized System;
- Comply with the order of coding adopted the Harmonized System.
Harmonized system of coding provides a six-digit codes of goods. In this case, in accordance with paragraph 3 of Article 3 of the Convention, each Contracting Party may establish in its customs tariff or statistical nomenclature subdivisions for more in-depth classification of goods than in the Harmonized System, provided that any such sub-sections will be added and coded over a six-digit numeric code.
The decision of the EurAsEC Interstate Council on 27.11.09 № 18 and the decision of the Customs Union Commission 27.11.09 № 130 approved uniform commodity nomenclature of foreign economic activity of the Customs Union (CU HS) and import duties of the Common Customs Tariff of the Customs Union.
HS TC is based on the Harmonized System of the World Customs Organization and the Single Commodity Nomenclature of Foreign Economic Affairs of the Commonwealth of Independent States.
Commission Decision of the Customs Union from 18.06.10 № 296 approved the Regulations on the procedure for the adoption of the Customs Union Commission decisions and explanations on the classification of certain goods. In accordance with the aforementioned Regulations authorized by the customs authorities at different approaches for the classification of the goods in accordance with the HS TC and in case of failure to reach agreement on the classification of a particular kind of product appeal to the Commission of the Customs Union with a proposal addressing the issue of classification of goods in accordance with the HS TC.
At the same time, as the Regulation, the differences between the customs authorities of the Member States of the Customs Union on the classification of certain goods in accordance with the HS TC may arise on the basis of:
decision on the classification of goods, adopted in accordance with paragraph 3 of Article 52 of the CC CU, ie in case of misclassification;
a preliminary decision on the classification of goods, adopted in accordance with paragraph 5 of Article 52 of the CC CU;
solutions and explanations on the classification of certain goods made in accordance with paragraph 6 of Article 52 of the CC CU.
But not entirely clear causes of such differences, since preliminary decision on the classification in accordance with paragraph 3 of Article 53 of the CC CU is required only if the declaration of goods on the territory of a Member State Customs Union, customs authorities which tentatively decided.
Solutions and explanations on the classification provided for in paragraph 6 of Article 52 of the CC CU, as binding only when declaring goods in the territory of a Member State Customs Union, customs authorities which they accepted.
In other words, the Russian Federation adopted a preliminary classification decisions will not be applied, for example, in Kazakhstan and Belarus. Accordingly, none of the parties have no interest in a common approach to the classification of the same product.
In this case, to initiate an appeal to the Secretariat of the Customs Union Commission to take a decision or clarification on the classification of goods can only customs authority, a trader is deprived of such a possibility.
The site of the Commission of the Customs Union published a collection of preliminary decision of customs authorities of the Member States of the customs union on the classification of goods as of October 2010. Specified collection is constantly updated. However, as already noted, a preliminary decision in relation to any particular product, issued by an authorized customs authority of Kazakhstan and placed in the specified Collection, will not be the absolute grounds for a similar classification of the same goods in Russia.
Thus, in practice, the situation is quite acceptable when one and the same product will be classified by the customs authorities of the Member States of the customs union on different classification codes. And if this is available and the difference in the applicable codes to data rates of customs duties, it can happen a substantial redistribution of trade flows for certain categories of goods.
From a practical point of view, it is interesting paragraph 4 of Article 52 of the CC CU. In accordance with the aforementioned item codes TN VED listed in the commercial, transport (shipping) and (or) other documents, as well as opinions, certificates, instruments examinations issued by expert institutions are not binding for the classification of goods.
Thus, it is possible that in the country of origin, which is a party to the Convention, the product is classified, for example, in the position 5903 (textile fabrics impregnated, coated, covered or laminated with plastics). In this case, the code is indicated in all shipping documents, the contract, the export declaration, etc. When importing goods into the territory of the Customs Union, the goods were classified by the customs authority of the Member State of the Customs Union to the position of 3921 (plates, sheets, film, foil and strip, of plastics, etc.). At the same time customs duties on goods classified in accordance with the position of 3921 is higher than the rates of customs duties on goods classified in accordance with the position of 5903.
At first glance, the customs authority that made the decision to classify the goods to the position 3921 HS TC, do not contradict the law, since in accordance with Article 52 of the CC CU customs authority has the right to decide on the classification of imported goods.
In this case, the following situation arises. The customs authority of the country party to the Convention decided on the classification of goods in position 5903, and the customs authority of the Member State of the Customs Union decided to classify the same goods in position 3921, that is, in some case, there was an error in the classification of the goods in accordance with the Harmonized description and Coding System products. In this case, the customs authority of the Member State of the Customs Union does not take into account the documents of the exporting country in accordance with paragraph 4 of Article 52 of the CC CU. Thus, the provisions of the Convention, according to which the Contracting Parties undertake to comply with the order of coding adopted the Harmonized System, in fact, are not complied with, since under the Convention classification codes in the Member States of the Convention should be the same at the level of the first six characters, and the present case are different even group classification code.
This situation is, unfortunately, in practice, there is very often. However, participants VED no recourse to the WTO Secretariat for clarification, as well as the Secretariat of the Customs Union Commission.
As a result, as before, the only way to prove the validity of FEA participant declared them a classification code and protect their interests, is to appeal to the Court of Arbitration. In accordance with Article 52 of the CC CU decision of the customs authority on the classification may be appealed in the manner and within the timeframe established by the legislation of the Member State of the customs union, the decision is appealed against. Thus, for example, in Russia, in deciding the arbitration courts take into account the conclusions acts examinations issued by expert institutions, as well as guided by the provisions of the International Convention on the Harmonized System.