RECOMMENDATION
OF THE CUSTOMS CO-OPERATION COUNCIL ON
THE IMPROVEMENT OF TARIFF CLASSIFICATION WORK AND
RELATED INFRASTRUCTURE (25 June 1998).

THE
CUSTOMS CO-OPERATION COUNCIL,

NOTING
that the Harmonized System has been widely adopted by countries and Customs or
Economic Unions,

RECOGNIZING
that correct and uniform application of the Harmonized System in an efficient
manner would facilitate international trade and investment and promote
compliance with fiscal and trade rules or laws,

RECOGNIZING
that classification practices should be objective, predictable and transparent
for ensuring voluntary compliance by the trade community,

REALIZING
that achieving the above objectives requires well-defined and effective
classification practices and infrastructure therefor,

RECOMMENDS
that Member administrations, Contracting Parties to the Harmonized System
Convention and Customs or Economic Unions, taking into account the elements of
a good tariff classification work model set out at the Appendix hereto, take
all appropriate steps to improve their Harmonized System classification work by
:

(a)
Establishing an adequate classification work infrastructure to carry out
classification work in an efficient manner;

(b)
Carrying out classification work so as to facilitate international trade and
investment and to ensure compliance with both fiscal and trade rules or laws
with emphasis being placed on the pre-entry and post-clearance stages and not
only on the declaration-processing stage;

(c)
Providing adequate training for Customs officers and the trade community,
encouraging integrity and making classification-related information available
to the public in order to enable Customs to achieve the above objectives;

(d)
Setting up appeal procedures satisfactory both to the Customs administration
and to the trade community for the settlement of classification disputes, and

REQUESTS
Member administrations, Contracting Parties to the Harmonized System Convention
and Customs or Economic Unions to notify the Secretary General of their
acceptance of this Recommendation and of the date of its application.

APPENDIX

Main elements of a
good tariff classification work model

Introduction

1.
A good tariff classification work model is essential to promote correct and
uniform classification of goods in the Harmonized System (HS). Such a model
would facilitate international trade and investment and promote compliance with
fiscal and trade rules or laws as well as equal treatment of all members of the
trade community. This would result in, among other things, a reduction in
losses to the revenue and to businesses due to misclassification.

2.
Adequate classification work infrastructure at both headquarters and
regional/local levels, including the establishment of a classification centre,
is a prerequisite for achieving such objectives.

3.
Classification work can be carried out at three different stages : pre-entry,
declaration-processing and post-clearance stages. The determination of
classification at the pre-entry stage and checking of classification at the
post-clearance stage help reduce classification delays at the
declaration-processing stage.

4.
Appropriate appeals systems should be available to the trade community.

5.
Adequate training in classification is a prerequisite for developing and maintaining
good classification skills. Such training should assist Customs officers in
achieving a high level of commitment and integrity when performing their
duties.

6.
Customs officials and the trade community should be provided with updated
classification aids in order to ensure accurate and uniform classification. As
more information is made available to the trade community, the level of
voluntary compliance will improve.

Part I

Classification
infrastructure

7.
Classification infrastructure consists of the offices or departments within a
Customs administration or a Customs or Economic Union, responsible for
determining the classification of goods for the purposes of HS-based Customs
tariffs and statistical nomenclatures.

8.
It should be supported by an adequate number of classification experts with
clearly defined functions and responsibilities. The experts should be provided
with classification aids such as national tariffs, the HS Convention and
Nomenclature, HS and/or national Explanatory Notes, Compendium of
Classification Opinions, national classification rulings and guidelines and a
classification database. In a modern Customs environment, the classification
aids are made available on a computer terminal to officers involved in
classification work (e.g., the HS Commodity Data Base).

Headquarters and
classification centre

9.
The classification work may be co-ordinated by the headquarters. This
coordination function may be performed, for example, through a classification
committee composed of appropriate members. The committee may invite comments
from the trade ommunity and government departments interested in classification
matters. Ad hoc meetings could be held frequently within the department to
discuss classification questions.

10.
A classification centre that is responsible for ensuring the correct and
uniform classification of merchandise throughout the importing country or the
Customs or Economic Union may also be established at the headquarters’ level.
The centre may, among its other duties, provide useful guidance to the
classification officers in the field. It may also act as a technical advisory
body to higher-level management (and, if appropriate, to the classification
committee) on classification matters, particularly on the settlement of
classification disputes. At the headquarters’ level, the following functions
may be performed:

(a)
Examining classification questions referred by the regional or local offices,
as well as pre-entry classification requests from the trade community and
issuing classification rulings for uniform application throughout the country
or Customs or Economic Union.

(b)
Updating the national tariffs and complementary classification-related
publications.

(c)
Preparing and updating centralized information (including a database) on tariff
classification matters and disseminating it to the field offices and to the
trade community.

(d)
Publishing binding tariff information or other tariff classification data for
the information of the public and the trade community.

(e)
Serving as a liaison with the WCO and the HS Committee, and facilitating the
implementation of the HS Committee's classification decisions.

(f)
Maintaining contacts with other Customs administrations and Customs or Economic
Unions on classification matters.

(g)
Co-ordinating with other government departments and agencies on tariff,
statistical and other nomenclature related matters.

(h)
Maintaining contacts with manufacturers, scientific institutions, universities,
etc. to keep abreast of developments in technology and changes in patterns of
international trade.

(i)
Co-ordinating training activities on the HS.

11.
At the headquarters’ level (including the classification centre), centralized
information (such as a database) on suspected or known classification fraud, or
on goods for which misclassification frequently occurs, may be kept to assist
the field officers with risk management. In many administrations, however, the
responsibility for gathering, analysing and disseminating intelligence and
information to field units is carried out by an independent unit or agency at
the headquarters’ level. Such a unit or agency has overall responsibility for
collecting intelligence and conducting investigations of suspected or alleged
Customs offences (including commercial fraud) and consulting with other Customs
administrations and regional or international organizations on these matters.

12.
In a Customs or Economic Union, regional classification centres may be
established at the headquarters of the individual members for co-ordinating the
classification work between the field offices and the headquarters of the
Union.

Regional
or local classification offices

13.
At the regional level of the Customs organization or at major Customs offices,
where the actual tariff classification of goods takes place on importation or
exportation, the following units may be established :

(a)
A classification unit composed of classification experts to give advice to
declarationprocessing units, to issue pre-entry classification information at
the request of the trade community, and to serve as a liaison with the
headquarters or classification centre.

(b)
Declaration-processing units which handle routine tariff classification work.
In major Customs offices, such units may be organized on the basis of industry
sectors or HS Chapters. Where classification disputes or problems occur, the
entry-processing units should refer the matter to a classification unit for
advice or a ruling (which may, in turn, decide to refer the matter to headquarters
or the classification centre).

(c)
Risk assessment units which should help target suspect or high-risk
declarations on tariff classification fraud or help target goods for which
misclassification frequently occurs. This might be achieved by, for example,
marking high-risk commodity categories, screening the cargo manifests,
gathering intelligence, keeping surveillance, keeping importers' profiles, etc.
and alerting the declaration-processing units or post-clearance audit units.
The risk assessment function may be centralized at headquarters’ level for
higher efficiency.

(d)
Post-clearance audit units. These units may be established in order to check
classifications on the basis of risk assessment or random selection. Audits may
be carried out in the Customs offices or at importers’ or exporters’ premises.
Audits may be more effectively performed at an importer’s or exporter’s
premises because the records and operations of the company can be more easily
and comprehensively examined. These audits may include checking and comparing
the classification of a company’s goods cleared by any Customs office.
Reviewing all the importing and exporting activities of a given company will
increase the probability of detecting possible Customs offences.

Part II

Classification
procedure

14.
The classification of goods is one of the basic requirements in Customs
procedures and in international trade and investment. This is a specialized job
requiring expertise and involving various aspects such as checking of Customs
declarations and other relevant documents, examination of goods, laboratory
analysis, referring to technical literature and classification aids. However,
delays in clearance of goods on account of classification should be minimized
to the extent possible for facilitating international trade and investment.

15.
Therefore, a combination of all the three following procedures is recommended
in order to achieve a balance between trade facilitation and compliance. In all
these cases, consultation between Customs and the economic operator as well as
reference to competent technical bodies for advice (e.g., Customs laboratory,
experts in the industry) should be encouraged.

Pre-entry
classification

(a)
Pre-entry classification should be furnished in the Customs administration
(headquarters, classification centre, regional or local office). The number of
authorities having the ability to issue binding classification information may
be limited to ensure uniform classification.

(b)
Details of pre-entry classification information issued should be included in a
centralized database so as to enable checking by others (headquarters,
classification centre or other regional/local offices) and thus avoid issuance
of conflicting information on the same product by different offices.

(c)
Binding classification information is highly desirable, and ideally it should
be issued within a prescribed time and should remain valid for a specific
period unless found to be incorrect, altered or withdrawn. It is also highly
desirable to institute a procedure for delayed application of a change or
modification of a ruling for the recipient of the original ruling who has
satisfactorily demonstrated that it has relied on the original to its
detriment.

(d)
It is highly desirable that any pre-entry or binding classification information
(or ruling) issued to an importer or prospective importer or an exporter should
also be published in order to provide guidance to the general public on the
classification of similar or related merchandise.

Declaration-processing
stage classification

16.
A 100 % classification check at this stage may cause delays and interfere with
facilitation of trade. It is therefore recommended to:

(a)
introduce selectivity on the basis of risk management and/or suspect declarations
and/or of the random selection method;

(b)
refer classification doubts or problems to tariff classification experts
(headquarters, classification centre or regional/local classification units);

(c)
consult the declarant before a change of tariff classification is effected by
Customs;

(d)
allow the declarant to amend classification mistakes with or without fine;

(e)
leave time-consuming tariff classification checks to the post-clearance stage
provided that an appropriate security measure is taken to avoid losses of
revenue or non-compliance with trade regulations.

Post-clearance
stage classification

17.
Post-clearance audits may be carried out :

(a)
to check tariff classifications where no checks were performed at the
declaration processing stage;

(b)
to correct any classification mistakes made at the declaration-processing
stage;

(c)
to check possible classification fraud;

either
in Customs offices or at importers' or exporters’ premises on the basis of risk
management, random selection method or both.

Part III

Dispute
settlement

18.
Classification disputes with the trade community can arise at various stages
such as the pre-entry classification, the declaration-processing stage or the
post-clearance stage. An appropriate mechanism for consultation between the
trade community and the Customs Administration should reduce such disputes to a
great extent. Therefore, a combination of consultation and formal appeal
procedures is recommended for settlement of classification disputes. Speedy,
objective and efficient handling of the matter is important in the case of
departmental procedures.

(a)
Consultation procedure: This is
applicable within the Customs department at any of the pre-entry,
declaration-processing or post-clearance stages. If appropriate, the responsible
unit or office should consult with the importer or exporter on points requiring
clarification and convey to him or her its preliminary findings on
classification of the merchandise under consideration. If the importer or
exporter disagrees with the preliminary findings, he/she should be given a
reasonable opportunity to present, within a reasonable time, all relevant
information and arguments (both orally and in writing), before a final decision
is taken on the classification of the merchandise. A final decision should be
appealable under the formal appeal procedure.

(b)
Formal procedure: The formal appeal
procedure should be clearly outlined, and the legal requirements and procedures
should be explained to the trade community, if so requested. The first appeal
may be to a designated departmental authority whereas the second appeal or
further appeals should be to independent judicial authorities. The headquarters
or classification centre should provide all necessary background or technical
information at its disposal to such an authority, if so requested by the
authority.

19.
When a dispute is handled within the Customs administration, a unit or officer
which is different from the original unit or officer processing the declaration
should handle the matter.

Part IV

Training and other
aspects

Training

20.
Training is indispensable for the staff in any organization for the development
of necessary skills. Soundly based classification training, in addition to
training in other related areas of Customs control, should be provided to the
staff assigned to tariff classification work. The course content should include
the HS Convention, the structure of the HS, classification principles, detailed
analysis of HS Chapters, case studies on classification, HS Committee
decisions, classification rulings, possible areas of classification fraud,
Customs laboratory analysis, etc., to the extent possible or appropriate. Basic
and on-the-job training courses should be designed to meet the needs of the
Customs administration.

21.
The responsibility for organizing the training courses should be with the
departmental training division or institute and the course content should be
designed in consultation with classification experts at the headquarters and/or
classification centre. Ideally, the training should be given by experienced
trainers who are specialized in classification. Training materials should
include national tariffs, the HS Training Modules, the HS Explanatory Notes and
other complementary HS publications and other relevant Customs laws and
regulations. The Customs may also provide classification training to the trade
community.

Integrity

22.
Integrity of the Customs staff engaged in classification work is vital for the
successful maintenance of an effective classification infrastructure and for
the efficiency of tariff classification work. Though no simple rules can be
prescribed to inculcate commitment to work and integrity, a great deal can be
achieved by training, and providing incentives for good work, and providing
maximum transparency in tariff classification work.

Publishing
information

23.
Providing the necessary and accurate information on tariff classification
matters to the trade community and public is very important for enhancing the
efficiency of Customs work. All relevant classification aids, rules,
regulations, guidelines, binding tariff information and other relevant details
concerning tariff classification should be published, due account being taken
of confidential information. This could be in the form of priced publications,
official gazettes, bulletins, notices or, if appropriate, through na electronic
information system such as Internet. Regulatory changes affecting tariff
classification should be made available to public before implementation. There
may be a public relations mechanism where the trade community and the public
can obtain information and clarification without delay.

 

Have a great week.

Cesar Olivier Dalston, www.dalston.com.br

Source:
www.wcoomd.org