When making a customs declaration, it is important to classify the goods in question correctly. This is because incorrect classification can cause undesirable consequences. Think of delays at the border, higher customs duties and even fines. The process of classifying goods is not always easy, so mistakes are easily made. This is the case, for instance, when classifying (sub)parts of goods. This blog will focus on the classification of (sub)parts of goods.
How does the classification of goods work?
A harmonised system using codes is used to classify goods. In itself not immediately a difficult issue you might say. Unfortunately, the opposite is true. There are different types of codes and therefore different names for different classifications. Some of these types of codes are the following:
- HS-code (Harmonised System)
- Commodity code
- HTS-code (Harmonised Tariff System)
- CN-code (Combined Nomenclature)
- Taric-Code
Most of them are harmonised at international level; the CN-code and Taric-Code, on the other hand, are used specifically in the European Union.
Based on the final commodity code, the product is classified. For example, a party tent falls under the commodity code 6601 1000.
Destination criterion and necessity criterion
As mentioned earlier, this blog will focus on the classification of (sub)parts of goods, where, among other things, the "destination criterion" and the "necessity criterion" are important to consider whether a product is actually a part of another product. These two concepts will therefore be discussed below.
Case law of the ECJ implies, among other things, that a product can only be classified as a part of another product if the product is necessary for the mechanical or electrical operation of the whole. With this, the so-called necessity criterion seems a lot stricter than the destination criterion to be discussed below. For example, under the necessity criterion, it is not sufficient to show that without the part of the product (often a machine) it cannot perform the function for which it is intended. Consequently, the ECJ concludes in the majority of cases that products do not qualify as parts on the basis of this criterion.
An example here would be reflectors on a trailer. Are these necessary for the mechanical operation of the trailer? The answer to this is no, although the reflectors increase the safety of the trailer, the trailer can be used (relatively safely) on the road even without them.
In addition to the necessity criterion, the nomenclature uses the destination criterion. This criterion means that goods can only be classified as parts provided they are exclusively or mainly intended for the whole of which they form part. However, it can be used in exceptional cases, but it must be possible to establish beforehand - on the basis of the objective characteristics and properties of the product - that it will actually be used as part of a whole. So the product will already have to be almost specially made to function as part of the whole.
Here, for example, standard nails, screws and cables are too general to be classified as part of a whole. While it may be established that the screws in question are for a more advanced product, they are too general to be classified as part of the whole.
Binding Tariff Information
To avoid problems and discussions with Customs, it may be wise to apply for a Binding Tariff Information (BTI). This gives you more legal certainty in advance regarding the correct classification of the (sub)parts of goods. A BTI is valid for three years within all member states of the European Union from the date of issue, and can be extended for three years upon request. If you want to know more about the BTI, consult our earlier blog on the subject.
Conclusion
Classifying goods and specifically (sub)parts of goods is not an easy matter. Especially when classifying (sub)parts of goods, mistakes are often made. Both the necessity criterion and the destination criterion are not easily met, as a result of which it is often ruled that a certain product is not part of a whole, even though this is the intended use.
Want to know more?
Do you have questions about customs law or international trade? Or would you like to know more about the classification of goods or (sub)parts of goods? If so, please feel free to contact one of our lawyers.