Classifying Parts as Finished Goods

Alpha Limited makes excavators in the UK primarily for sale in the domestic market.

Alpha imports a wide range of components used in the manufacture of excavators from the Far East. The components attract various rates of duty between 1.7% and 6% giving rise to a customs duty bill of over £500,000 each year.

As a result of various multilateral trade agreements, finished excavators are classified under a commodity code which is free from customs duty.

Therefore, the UK manufacturer is at a disadvantage to his overseas competitors because he has to build the customs duty into his selling price.

However, the customs regulations provide a solution to this issue by allowing the importer to classify his parts under the same heading as the finished excavator and therefore reduce his customs duty bill by £500,000 each year.

In order to realise these savings, Alpha applies for and obtains the appropriate authorisation and implements procedures to meet the underlying conditions of this special procedure. Taking these steps will cost a fraction of the amounts saved.

Re-Classifying your goods to gain maximum benefit from the Customs Tariff

Tazaki Foods imports a large number of different foods and drinks from the Far East for onward sale in the UK and Europe to wholesalers and restaurants.

Like many retailers they found it difficult to determine the correct classification of their goods due to the number and variety of the SKU’s imported.  They relied heavily on their agents to assist them. The description of the goods attached to the movement was a little vague and the agents under time pressure to clear the goods.

We carried out a review of the classifications used using a number of techniques to focus in on material errors such as:

• Analysing Tazaki’s imports against our database of recent classification rulings and court cases;
• Identifying which items attracted the highest rates of duty
• Identifying which items attracted the highest amounts of duty
• Identifying areas where we know other clients have had issues in the past

Our project highlighted a number of duty errors leading to overpayments of duty, including wet-type long-life noodles that had been previously classified as dry noodles.  This error was costing Tazaki in excess of £50,000 each year and so we worked with Tazaki’s agents to make sure the correct code would be used going forward.

We then worked with Tazaki to recover this overpaid customs duty going back three years.  This involved isolating the imports of wet noodles from the thousands of other imports and then building a schedule of evidence to support the customs reclaim.  We also obtained a legal ruling on the correct classification of the wet noodles from HM Revenue & Customs as this helped speed through the reclaim but also ensured our client enjoyed the certainty that this reclaim could not be reversed as the result of a subsequent audit.

We now have a clearer understanding of what Tazaki imports against what commodity codes and are well placed to spot any ongoing classification changes that can impact on their costs.

If you would like International Trade Solutions to review the classification of your imports then contact us on 01905 619229 or e-mail us: This e-mail address is being protected from spambots. You need JavaScript enabled to view it