The first article in a series of publications "Classification of goods from A to Z".
For those who are related to foreign economic activity, the terms "product code", "UKT FEA code", "product classification", etc. have long been familiar. At the beginning of 2017, representatives of "domestic" business also got acquainted with the classification of goods, because from January 2017, the product code according to the UKT FEA must also be indicated in tax invoices. Therefore, we propose to first understand the basic terms, then consider the algorithm of classification of goods, the most common disputes about the classification and how to avoid them.
What is UKT FEA?
UKT FEA - abbreviation of the Ukrainian classification of goods of foreign economic activity. It is developed on the basis of the Harmonized Commodity Description and Coding System and the Combined Nomenclature of the European Union. UKT FEA coincides with the Harmonized System at the level of six characters, and with the EU Combined Nomenclature - at the level of eight characters of the product code.
UKT FEA actually consists of:
1) a set of product codes;
2) descriptions of goods that comply with these codes;
3) rules and explanations on how to classify goods according to certain codes.
The essence of the classification of goods is as follows. Each product that is moved across the border is assigned a 10-digit code. This is done in order to unambiguously identify the product, determine the rate of duty and control measures to be applied. In addition, the assignment of the code simplifies the maintenance of customs statistics.
Each product code corresponds to a certain rate of duty. UKT FEA together with the duty rates make up the Customs Tariff of Ukraine, which is approved by the Law of Ukraine "On the Customs Tariff of Ukraine" №584-VII of 19.09.2013.
What is the structure of the UKT FEA code?
The ten-digit product code includes:
product group code (first 2 digits);
commodity item code (first 4 digits);
commodity subheading code (first 6 digits);
product category code (first 8 digits);
product subcategory code (first 10 digits).
The entire UKT FEA is divided into 21 sections and 97 product groups. Sections are denoted by Roman numerals and, unlike the group, the digits of the section are not reflected in the structure of the product code. The names of sections and groups are given solely for the convenience of using UKT FEA. Each group is divided into appropriate commodity items, subheadings, categories and subcategories.
The number of groups in sections and the number of product items in groups vary greatly. Chapter XIX "Weapons, ammunition; parts and accessories thereof ”contains only one group of the same name 93. Instead, Section I“ Live animals; products of animal origin "includes 5 groups: Group 01" Live animals ", Group 02" Meat and edible offal ", Group 03" Fish and crustaceans, molluscs and other aquatic invertebrates ", Group 04" Milk and dairy products; poultry eggs; natural honey; edible products of animal origin, not elsewhere specified ", Group 05" Other products of animal origin, not elsewhere specified or included ".
What is affected by the UKT FEA code?
The product code affects the application of tariff and non-tariff measures to this product.
As the name implies, tariff measures are duties and other charges levied on the movement of goods across the customs border. The size of the import duty directly depends on the classification of the goods according to this or that code of UKT FEA. Each product code corresponds to its own rate of import duty, even if it is equal to 0 %.
When importing excisable goods, in addition to customs duties, you must also pay excise tax. The list of such goods is given in the Tax Code of Ukraine (Article 215). And the size of the excise tax rate may also be affected by the product code according to UKT FEA.
Therefore, everything is clear with tariff measures - changing the code of UKT FEA can lead to "rise in price" of goods. Instead, non-tariff measures may make the import or export of such goods impossible.
Non-tariff measures are any restrictions and prohibitions on the movement of goods across the border that are not related to the application of customs duties. Such restrictions can take many forms. Thus, in certain cases it is necessary to pass an additional form of control (environmental, phytosanitary, etc.), certify the product, confirm compliance with a technical regulation, provide permission from a particular authority, license or other document.
Not all non-tariff measures directly depend on the classification of goods. However, here is one interesting example that will show how the change in the product code affects the list of permits required for customs clearance. A few years ago, the customs authorities suddenly began to change the codes of medical alcoholic infusions and classify them as alcoholic beverages.
A license is required to import alcoholic beverages. Importers did not have such a license, because these alcoholic infusions were medicines, not alcoholic beverages. They were forced to temporarily suspend imports of such goods.
When do you need to determine the product code?
Very often the classification of goods is mentioned before customs clearance. This should not be done. You need to determine the product code before signing the contract. This will allow you to correctly describe the product in the shipping documents, get all the information from the supplier and minimize the risks of changing the product code by customs inspectors.
In the following articles we will find out: how to classify goods; what is a preliminary decision on the classification of goods; how the customs checks the correctness of the classification; how to protect your code in a dispute with customs; as well as answer other interesting classification questions.
The original article is published in the online edition Logist.FM