The determining factor for the import duties to be paid is the customs tariff, Art. 56(1) UCC. The customs tariff comprises a range of measures and legal acts that determine which import duties are payable for which goods. International trade in goods would be inconceivable without a precise and standardised classification of goods. The core element of the customs tariff is the Combined Nomenclature. Goods are classified using the Combined Nomenclature. For companies that regularly import or export goods, correct application is therefore of central importance.

An overview of the nomenclature and the measures applicable for imports and exports is provided by the Electronic Customs Tariff (EZT-Online).

1.    Structure of the Combined Nomenclature

The Combined Nomenclature establishes a classification system into which all goods subject to import or export can be categorised. The Combined Nomenclature is based on the WTO Harmonised System, which is applied in all WTO member states.

The first six digits are taken from the Harmonised System. They are identical worldwide in all member states of the Harmonised System. The Harmonised System is incorporated into EU law through the Combined Nomenclature, with two additional digits. EU law measures depend on the TARIC code, which is determined by the ninth and tenth digits. The TARIC code is further supplemented by national codes, e.g., for statistical purposes.

The Combined Nomenclature is accompanied by binding notes and non-binding explanations. While the notes are binding for classification matters, the explanations are only aids to interpretation. However, the customs administration generally regards the explanations as binding.

2.    Classification of goods in the Combined Nomenclature

The requirements for classifying goods in the Combined Nomenclature are set out in Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and the Common Customs Tariff. Preceding the Combined Nomenclature are the “General Rules for the Interpretation of the Combined Nomenclature” (GR). These must be observed in every classification examination.

2.1. GR 1

GR 1 determines which elements are decisive for the interpretation of the Combined Nomenclature:

• Wording of the headings

• Notes to sections and chapters

• Unless otherwise provided, the GR

2.2. GR 2

GR 2 a) determines the rules for the classification of incomplete and unfinished goods. These are to be classified in the same way as the complete or finished goods if they already have the essential characteristics.

GR 2 b) determines the rules for the classification of goods consisting of mixtures or combinations of several materials. In this case, GR 3 applies.

2.3. GR 3

GR 3 resolves the conflict where, due to the mixture or combination of several materials in a product, several classifications are possible.

According to GR 3 a), the heading with the most specific description prevails over headings with a more general description. In general, a description by function is deemed more specific than one by material. If classification cannot be made according to GR 3 a), GR 3 b) applies.

According to GR 3 b), it must be determined which material or component gives the product its essential character. The application of GR 3 b) is often the subject of disputes with the customs authorities. If classification cannot be made according to GR 3 b), GR 3 c) applies.

According to GR 3 c), the product is to be classified under the heading which occurs last in numerical order among those which equally merit consideration.

2.4. GR 4

Goods which cannot be classified under the above General Rules are to be classified under the heading of the goods to which they are most akin. GR 4 reflects the fact that no nomenclature can cover every conceivable product that may be imported or exported at any given time.

2.5. GR 5

GR 5 provides special rules for containers and packaging. These are to be classified in the same way as the goods they contain, provided they are presented together with those goods.

2.6. GR 6

GR 6 stipulates that classification in subheadings is to be carried out in the same way as classification in higher-level headings. Only subheadings at the same hierarchical level are to be compared.

3.    Import duties

The customs tariff also includes the applicable customs duties for goods, Art. 56 para. 2 lit. c) UCC. In addition to the regular third-country duty rate, these include, for example, anti-dumping and countervailing duties. Furthermore, preferences unilaterally granted by the Union or bilaterally agreed are also part of the customs tariff, Art. 56 para. 2 lit. d) and e) UCC.

4.    Significance for other areas of law

In addition to determining import duties, the classification of goods in the Combined Nomenclature is relevant for other areas of law:

• In foreign trade law, classification is decisive for the application of export restrictions, licensing requirements, or export bans. Exports are also recorded for foreign trade statistics on the basis of classification.

• In VAT law, classification serves as an aid when determining for which supplies of goods the reduced VAT rate applies. Schedule 2 of the VAT Act refers to the customs tariff. However, the tax authorities are not bound by classification decisions of the customs authorities.

5.    Binding Tariff Information (BTI)

The multitude of possible goods and the complexity of the customs tariff often lead in practice to uncertainties regarding tariff classification. In order to provide legal certainty for companies, it is possible to apply for Binding Tariff Information (BTI) from the customs authorities. The competent main customs office in Germany is the HZA Hannover.

A BTI is an official decision which determines, for a specifically designated product, under which tariff number it is to be classified. The BTI is binding for the applicant as well as for the customs authorities of all EU Member States and is generally valid for three years. However, it can be revoked or amended if the legal basis or international regulations change.

Prerequisites for the issuance of a BTI are a precise and complete description of the goods. Samples or technical documents may be required. Where necessary, a review is conducted by the Finance Administration’s Education and Science Centre (BWZ).

The application is free of charge. The BTI provides companies with planning certainty and protects against subsequent duty demands or sanctions.