A - Tariffs Customs Procedure

Tariffs & Customs Procedures

1. Organizations and agents
The World Trade Organization (WTO) is an organization that intends to
supervise and liberalize international trade. It deals with regulation of trade between
participating countries; it provides a framework for negotiating and formalizing trade
agreements, and a dispute resolution process aimed at enforcing participants adherence
to WTO agreements. WTO's headquarter is located in Geneva, Switzerland.
The WTO was born out of negotiations, and everything the WTO does is the result of
negotiations. WTO agreements are negotiated and signed by the bulk of the world’s
trading nations. These documents provide the legal ground rules for international
commerce. They are essentially contracts, binding governments to keep their trade
policies within agreed limits. Although negotiated and signed by governments, the goal
is to help producers of goods and services, exporters, and importers conduct their
business, while allowing governments to meet social and environmental objectives.
The WTO agreements cover goods, services and intellectual property. They spell out the
principles of liberalization, and the permitted exceptions. Where countries have faced
trade barriers and wanted them lowered, the negotiations have helped to open markets
for trade. But the WTO is not just about opening markets and removing obstacles; it
also means, in some circumstances, rules that support maintaining trade barriers —for
example, to protect consumers or prevent the spread of disease—, and ensuring that
individuals, companies and governments know what the trade rules are around the
world, and giving them the confidence that there will be no sudden changes of policy. In
other words, the rules have to be ‘transparent’ and predictable.
As trade relations often involve conflicting interests, agreements, including those

painstakingly negotiated in the WTO system, often need interpreting. The most
harmonious way to settle these differences is through some neutral procedure based on
an agreed legal foundation. That is the purpose behind the dispute settlement process
written into the WTO agreements.
Dispute settlement: Trade friction is channelled into the WTO's dispute settlement
process where the focus is on interpreting agreements and commitments, and how to
ensure that countries' trade policies conform with them. That way, the risk of disputes
spilling over into political or military conflict is reduced. The WTO’s procedure for
resolving trade quarrels under the Dispute Settlement Understanding is vital for
enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring
disputes to the WTO if they think their rights under the agreements are being infringed.
Judgements by specially appointed independent experts are based on interpretations of
the agreements and individual countries’ commitments.
The WTO is run by its member governments. All major decisions are made by the
membership as a whole, either by ministers (who usually meet at least once every two
years) or by their ambassadors or delegates (who meet regularly in Geneva). While the
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WTO is driven by its member states, it could not function without its Secretariat to
coordinate the activities. The Secretariat employs over 600 staff, and its experts —
lawyers, economists, statisticians and communications experts— assist WTO members
on a daily basis to ensure that negotiations progress smoothly, and that the rules of
international trade are correctly applied and enforced.
The World Customs Organization (WCO) is an independent

intergovernmental body whose mission is to enhance the effectiveness and efficiency of
Customs administrations.
Today, the WCO represents Customs Administrations across the globe that collectively
process approximately 98% of world trade. The WCO’s governing body – the Council –
relies on the competence and skills of a Secretariat and a range of technical and
advisory committees to accomplish its mission. The Secretariat, comprises over 100
international officials, technical experts and support staff of some nationalities.
As a forum for dialogue and exchange of experiences between national Customs
delegates, the WCO offers its Members a range of Conventions and other international
instruments, as well as technical assistance and training services provided either directly
by the Secretariat, or with its participation. The Secretariat also actively supports its
Members in their endeavours to modernize and build capacity within their national
Customs administrations. Besides stimulating the growth of legitimate international
trade, WCO efforts to combat fraudulent activities are internationally recognized.
Finally, in an international environment characterized by instability and the ever-present
threat of terrorist activity, the WCO’s mission to enhance the protection of society and
the national territory, and to secure and facilitate international trade, takes on its full
meaning.
The main goals of WCO are:
✓ International Co-operation and Information Sharing; providing a forum for

international co-operation to promote greater connectivity and more harmonious
interaction, including the exchange of information and experience and the
identification of best practices, between Member administrations, international
organizations and other relevant stakeholders.
✓ Harmonization and Simplification of Customs Systems and Procedures;

developing a series of internationally agreed conventions, other instruments and
best-practice approaches to achieve harmonization and simplification of
Customs systems and procedures.
✓ Compliance and Enforcement; supporting Members through activities in the

areas of commercial fraud, drug trafficking, money laundering´and other related
offences, through the development of compliance and enforcement tools and
intelligence sharing via the Customs Enforcement Network for the protection of
society in the areas of public health and safety, environmental crimes, and
containment of possible pandemics.

✓ Trade Facilitation; promoting the Revised Kyoto Convention to assist

Members on trade facilitation matters, working together with the World Trade
Organization.
✓ Supply Chain Security and Facilitation; enhancing Customs-to-Customs

networks and Customs-to-Business partnerships in a meaningful and mutually
beneficial way, including co-ordinated Border Management in co-operation with
other border agencies.
The Authorized Economic Operator (AEO) can be defined as ‘a party

involved in the international movement of goods in whatever function that has been
approved by or on behalf of a national Customs administration as complying with WCO
or equivalent supply chain security standards. Authorized Economic Operators include
inter alia manufacturers, importers, exporters, brokers, carriers, consolidators,
intermediaries, ports, airports, terminal operators, integrated operators, warehouses and
distributors’.
The growth of global trade and increasing security threats to the international movement
of goods have forced customs administrations to shift their focus more and more to
securing the international trade flow and away from the traditional task of collecting
customs duties. Recognizing these developments, the World Customs Organisation
(WCO), drafted the WCO Framework of Standards to Secure and Facilitate global trade
(SAFE). In the framework, several standards are included that can assist Customs
administrations in meeting these new challenges. Developing an Authorized Economic
Operator programme is a core part of SAFE.
The AEO concept is one of the main building blocks within the WCO SAFE
Framework of Standards (SAFE) to secure and facilitate global trade. The latter is part
of the future international Customs model set out to support secure trade. SAFE sets out
a range of standards to guide international Customs Administrations towards a
harmonised approach based on Customs to Customs cooperation and Customs to
Business partnership.
SAFE is based on four core elements:
1. harmonization of the advance electronic cargo information

2. each country that joins SAFE commits to employing a consistent risk
management approach to address security threats
3. on request of the Customs administration of the receiving nation, the customs
administration of the sending nation will perform an outbound inspection of
high-risk containers and cargo.
4. definition of benefits that Customs will provide to businesses that meet minimal
supply chain security standards and best practices.
The essence of the AEO-concept can be found in the Customs-to-Business partnerships.

Operators can be accredited by Customs as AEOs when they prove to have high
quality internal processes that will prevent goods in international transport to be
tampered with. I.e.:

• Ensure the integrity of the information, i.e. what is said to be in a container,

really is in the container and nothing else, more, or less;
• Ensure the integrity of its employees, that they will not put goods in the
container that should not be there; and
• Secure access to its premises, to prevent unauthorised persons to put goods in
the container.
As a result, customs will trust the operator and perform less or no inspections on goods
imported or exported by or via the AEO. This benefits the mover of the goods as goods
are available more quickly, which means lower transport costs. Customs benefits as
scarce inspection capacity can be targeted better at cargo of unknown and potentially
unsafe operators.
Most members of WCO have acceded to the SAFE framework and it can be expected
that in the next few years, the majority of customs administrations will introduce AEO-
programmes. At present, AEO or similar programmes have been introduced in the
United States (under the name of C-TPAT: Customs-Trade Partnership against
Terrorism), the member states of the European Union, APEC (Asia Pacific Economic
Cooperation), New Zealand (under the name of Secure Export Scheme), Singapore
(under the name of Secure Trade Partnership, and others.
Although all these programmes find their roots in the SAFE framework of standards,
the approaches differ. E.g. the USA only allows importers to participate in C-TPAT
whereas the European AEO programme is open to all operators in the supply chain. The
European AEO programme differs from the other programmes as that it has a wider
scope, as it encompasses customs simplified procedures next to security and with that
relates to compliance with all customs legislation, including customs duties.
The importance of coordinated, similar, programmes lies in the fact that the ultimate
goal is to get all national programmes mutually recognized, meaning that AEO
accreditions have the same value everywhere. As a result secure supply chains can be
established, as all parts of the chain from origin (place of stuffing of the container) to
destination (place of unpacking of the container) are deemed to be safe, albeit under
different AEO programmes. This would greatly facilitate global trade. Mutual
recognition agreements are being signed between several countries and trade blocks are
starting their negotiations about it, e.g. the US and the EU.
2. Tariffs
Customs duties on merchandise imports are called tariffs.
Tariffs give a price advantage to locally-produced goods over similar goods which are
imported, and they raise revenues for governments. As a result of previous negotiation
rounds (Uruguay, Doha, …) countries assumed some commitments to cut tariffs and to
“bind” their customs duty rates to acceptable levels, although significant tensions are
always present.

The Common Customs Tariff: Since the completion of the internal market, goods can
circulate freely between Member States. The 'Common Customs Tariff' (CCT) therefore
applies to the import of goods across the external borders of the EU. The tariff is
common to all EU members, but the rates of duty differ from one kind of import to
another depending on what they are and where they come from. The rates depend on the
economic sensitivity of products. The tariff is therefore the name given to the
combination of the nomenclature (or classification of goods) and the duty rates
which apply to each class of goods. In addition the tariff contains all other Community
legislation that has an effect on the level of customs duty payable on a particular import,
for example country of origin.
The Modernised Customs Code: It lays down the general rules and procedures
applicable to goods brought into or out of the customs territory of the Community. This
new code aims to facilitate trade by simplifying and computerising customs procedures
and ensuring the interoperability between the IT systems of the EU customs
administrations, while ensuring a high level of safety and security at the external borders.
It replaces the Community Customs Code as its relevant implementing provisions are
adopted.
3. The commodities description and coding systems
3.1. The Harmonized System
The Nomenclature governed by the Convention on the Harmonized Commodity

Description and Coding System, commonly known as "HS Nomenclature", is an
international multipurpose nomenclature which was elaborated under the auspices of the
World Customs Organization (WCO). At present it is applied by more than 200
administrations worldwide, mostly to set up their national customs tariff and for the
collection of economic statistical data. The European Union and its member states
together represent a block of Contracting Parties to the aforementioned Convention.
The HS Nomenclature comprises thousands commodity groups which are identified by

a 6-digit code and arranged according to a legal and logical structure based on fixed
rules. The Combined Nomenclature of the European Union (EU) integrates the HS
Nomenclature and comprises additional 8-digit subdivisions and legal notes specifically
created to address the needs of the Community.
The official interpretation of the HS which provides for its uniform interpretation
worldwide is ensured by the HS Committee which comprises representatives from the
Contracting Parties to the HS Convention. Other administrations, international
organisations, international commerce and industry are represented as observers. The
HS Convention provides for decisions taken by the HS Committee which amend the
Convention including its nomenclature and decisions which "manage or interpret" the
Convention and which normally take the form of classification decisions, Explanatory

Notes or Classification opinions, an important aid for interpreting the scope of the
various tariff headings.
3.2. The Combined Nomenclature
When declared to customs in the EU, goods must generally be classified according to
the Combined nomenclature or CN. Imported and exported goods have to be declared
stating under which subheading of the nomenclature they fall. This determines which
rate of customs duty applies and how the goods are treated for statistical purposes.
The CN is a method for designating goods and merchandise which was established to
meet, at one and the same time, the requirements both of the Common Customs Tarif
and of the external trade statistics of the Community. The CN is also used in intra-
Community trade statistics.
The CN is comprised of the Harmonized System (HS) nomenclature with further

Community subdivisions. The Harmonized system is run by the World Customs
Organisation (WCO). This systematic list of commodities forms the basis for
international trade negotiations, and is applied by most trading nations. The CN also
include preliminary provisions, additional section or chapter notes and footnotes
relating to CN subdivisions. Each CN subdivisions has an eight digit code number, the
CN code, followed by a description. Changes may be required to reflect the evolution
of, for example, commercial policy, technology or statistical requirements.
3.3. Customs tariff database (TARIC)
TARIC is the integrated tariff of the Community, held in a Commission database

containing EC import and export measures applicable to specific goods, such as
tariff suspensions, tariff quotas, tariff preferences, anti-dumping duties,
quantitative restrictions, …
The online customs tariff database, also called the TARIC, is a multilingual database in
which are integrated all measures relating to tariff, commercial and agricultural
legislation. By integrating and coding these measures, the TARIC secures their uniform
application by all Member States and gives all economic operators a clear view of all
measures to be undertaken when importing or exporting goods. It also makes it possible
to collect EU-wide statistics for the measures concerned.
The TARIC contains the following main categories of measures:
Tariff measures:
✓ Third country duty rates, as defined in the Combined Nomenclature

✓ Suspensions of duties;
✓ Tariff quotas; and
✓ Tariff preferences.

Agricultural measures:
✓ Agricultural components;
✓ Additional duties on sugar and flour contents;
✓ Countervailing charges; and
✓ Refunds for export of basic and processed agricultural products.
Commercial measures:
✓ Antidumping measures; and

✓ Countervailing duties measure.
Measures relating to restriction of movements:
✓ Import and export prohibitions;

✓ Import and export restrictions; and
✓ Quantitative limits
Measures for gathering of statistical data:

✓ Import surveillances;
✓ Export surveillance
Daily transmissions of TARIC data via an electronic network guarantee immediate and
correct information for the national administrations of the Member States, who use this
data mainly to feed their national systems for customs clearance, with the goal of
maximising automatic customs clearance.
The same information is also disseminated towards third parties such as economic
operators, international organisations, and trade associations. The database is available
online on TARIC website. The TARIC does not contain information relating to national
levies such as rates of VAT and rates of excises.
3.4. Binding Tariff Information (BTI)
The European Community has created the Binding Tariff Information (BTI) system as a
tool to assist economic operators to obtain the correct tariff classification for goods they
intend to import or export.
Binding Tariff Information is issued on request to economic operators by the customs

authorities of the Member States. It is valid throughout the Community, regardless of
the Member State which issued it.
The main benefit to the holder is legal certainty with regard to tariff classification. This
is important as tariff classification is the basis for determining customs duties, export
refunds and the application of other related legal provisions (e.g. import/export
certificates).
A BTI is generally valid for 6 years. However, in certain cases (e.g. the publication of a
classification regulation, a change in the interpretation of the nomenclature at
international level or any other possibility laid down by the provisions for the
implementation of the Customs Code) a BTI may cease to be valid.
In such circumstances, the economic operator may request the customs authorities to
allow him to continue using the BTI for a transitional period (so-called "period of
grace"). Such a request will be granted provided the conditions laid down in the law are
met.
All BTIs issued by the national customs authorities are introduced into the European
Binding Tariff Information database (EBTI-database) run by the European Commission.
4. Customs Valuation
The value of imported goods is one of the three 'elements of taxation' that provides the
basis for assessment of the customs debt, which is the technical term for the amount of
duty that has to be paid, the other ones being the origin of the goods and the customs
tariff.
Most customs duties and value added tax (VAT) are expressed as a percentage of the
value of goods being declared for importation. Thus, it is necessary to dispose of a
standard set of rules for establishing the goods' value, which will then serve for
calculating the customs duty.
Therefore, it is vitally important that the value of commerce is accurately measured, for
the purposes of:
• economic and commercial policy analysis,

• application of commercial policy measures,
• proper collection of import duties and taxes, and
• import and export statistics.
These objectives are met using a single instrument - the rules on customs value.
The Customs Value: It is the value of goods established according to the customs rules
for the levying of ad-valorem duties
The WTO agreement on customs valuation aims for a fair, uniform and neutral system
for the valuation of goods for customs purposes — a system that conforms to
commercial realities, and which outlaws the use of arbitrary or fictitious customs
values.
The agreement provides a set of valuation rules.
➢ Transaction value (the importer or his agent shall furnish a declaration

disclosing full and accurate details relating to the value of imported goods). This
is the most common method and the one that must be applied in a first step.
➢ Transaction value of identical goods

➢ Transaction value of similar goods

➢ Deductive value
➢ Computed value
➢ Residual method
Customs administrations have the right to request further information in cases where
they have reason to doubt the accuracy of the declared value of imported goods. If the
administration maintains a reasonable doubt, despite any additional information, it may
be deemed that the customs value of the imported goods cannot be determined on the
basis of the declared value.
5. Duty relief
Common customs tariff duties are applicable to all goods imported into the EU.
However, in certain well-defined circumstances, such taxation is not justified, by virtue

of the special conditions (for instance when you move with your personal belongings to
a country outside the Union or when you come back) or under which goods are
imported (the usual need to protect the economy is absent).
In such circumstances, arrangements were made, both internationally and at the level of
the Community, to allow goods to enjoy relief from the application of import duties.
Council Regulation published in EU Official Journal codifies all cases of duty relief and
authorizes the Member States to grant these relieves, where necessary, by means of an
appropriate procedure instituted for this purpose.
This regulation sets out those cases in which, owing to special circumstances, relief
from import or export duties shall be granted respectively when goods are put into free
circulation or are exported from the Union.
5.1. Suspensions
The suspensions adopted on the basis of Article 31 of the Treaty of the Functioning of
the European Union (TFEU) constitute an exception to the normal state of affairs
(application of normal customs duty rate) since, during the period of validity of the
measure and for an unlimited quantity they permit the total (total suspension) or
partial waiver (partial suspension) of the normal duties applicable to imported
goods (anti-dumping duties are not affected by these suspensions).
In this context, it should be pointed out that goods imported under the suspension
arrangements are in free circulation and enjoy freedom of movement throughout the
EU. Furthermore, once a suspension is granted, normally any operator in any Member
State is eligible to benefit from it.
This means that the granting of a suspension has consequences for all Member States,
and that the sector should therefore be administered on the basis of close and extensive
cooperation between the Member States and the Commission so that the latter can see to
it that all Union interests are taken into consideration. Examples of suspensions are
those established for industrial purposes, or for outermost regions (implemented in to
offset the handicaps affecting these regions).
Industrial suspensions: The main purpose of tariff suspensions is to enable Union

enterprises to use raw materials, semi finished goods or components without being
required to pay the normal duties laid down in the common customs tariff.
Suspensions are proposed after a thorough examination of the economic reasons on
which the requests are based and only insofar as they seem likely to benefit the Union
economy.
For some economic sectors, it is necessary to stimulate competition by low tariffs, as we
find in the pharmaceutical and information technology sectors.
There are temporary or permanent duty suspensions (autonomous tariff suspensions)
which role is to stimulate economic activity of Union industries, improving their
competitive capacity, creating employment, modernising structures etc.
They are normally granted to raw materials, semi-finished goods or components not
available within the EU. But no suspensions are granted for finished products.
When identical, equivalent or substitute products are manufactured in sufficient
quantities within the EU or by producers in a third country with preferential tariff
arrangements (GSP), the granting of suspension is normally excluded. The same applies
where the measure could result in a distortion of competition in respect of the final
products. A list of the products currently under suspension can be found in EU Official
Journal L. It is regularly amended (in January and July each year) to take into
consideration new requests presented by the Member States.
5.2. Tariff quotas
Tariff quotas approved on the basis of Article 26 of the EC Treaty constitute an

exception to the normal state of affairs since they permit, during the period of validity
of the measure and for a limited quantity, the total (total suspension) or partial
waiver (partial suspension) of the normal duties applicable to imported goods
(antidumping duties are not affected by these suspensions).
Preferential: In the framework of several agreements that the European Community

has concluded with third countries, as well as in the framework of autonomous
preferential arrangements for some beneficiary countries, tariff concessions are
provided for a pre-determined volume of goods. These tariff concessions are called
"preferential tariff quotas".
Within these preferential tariff quotas, a predetermined volume of goods originating in a
specified country can benefit at import into the Community from a more favourable rate
of duty than the normal third countries duty mentioned in the combined nomenclature.
Entitlement to benefit from preferential tariff quotas is of course subject to presentation
of the necessary evidence of origin.
Autonomous: As stated already for suspensions, for some economic sectors, it is

necessary to stimulate competition by low tariffs, as we find in numerous industrial
sectors.

Their role is to stimulate economic activity of Community industries, improving

competitive capacity, creating employment, modernising structures etc.
They are normally granted to raw materials, semi-finished goods or components not
available in the EU (suspensions) or which are available but in insufficient quantities
(tariff quotas), but no tariff quotas are granted for finished products.
A request to open an autonomous tariff quota may be presented as such or result from
the examination of a suspension request. In this connection, account will be taken,
where appropriate, of consequential damage to any new production and of any
manufacturing capacity, which could be made available in the Community or in a third
country with preferential tariff arrangements.
When identical, equivalent or substitute products are manufactured in sufficient
quantities within the EU or by producers in a third country with preferential tariff
arrangements, the granting of a quota is normally excluded. The same applies where the
measure could result in a distortion of competition in respect of the final products.
The majority of tariff quotas are managed by the Commission's Directorate-General
responsible for Taxation and Customs Union on a 'first-come first-served' basis
irrespective of where the goods are imported into the EU.
5.3. Generalized System of Preferences
The Generalized System of Preferences (GSP) is a program designed to promote

economic growth in the developing world by providing preferential duty-free entry
for up to 5,000 products when imported from one of the designated beneficiary
countries and territories (more than a hundred in the last years).
The Generalized System of Preferences, or GSP, is a formal system of from the most
favored nation principle (MFN) that obliges WTO member countries to treat the imports
of all other WTO member countries no worse than they treat the imports of their "most
favored" trading partner.
In essence, MFN requires WTO member countries to treat imports coming from all
other WTO member countries equally, that is, by imposing equal tariffs on them, etc.
GSP exempts WTO member countries from MFN for the purpose of lowering tariffs for
the least developed countries, without also lowering tariffs for rich countries.
The principle of GSP was agreed at the United Nations Conference on Trade and
Development (UNCTAD), and is a facility granted to developing countries
("beneficiary countries") by certain developed countries ("donor countries"). It is not
negotiated with them: the preferential treatment is non-reciprocal. Facility granted
unilaterally to developing countries including the 'Everything but arms initiative' for
Least Developed Countries.
The GSP schemes offered by the various donor countries and their rules of origin differ
fundamentally. Goods complying with the conditions of the GSP of the USA , for
example, will not necessarily comply with the EU GSP.
5.4. Preferential arrangements
A preferential trade agreement, PTA, is a trading bloc that gives preferential access
to certain products from the participating countries.
This is done by reducing tariffs but not by abolishing them completely. A PTA can be
established through a trade pact.
Many individual arrangements are signed between the EU and certain territories, like
European Economic Area (the EEA (EC, Iceland, Norway and Liechtenstein) is
considered as a single territory with a common EEA originating status), Western
Balkans, The Countries of Africa, the Caribbean and the Pacific (ACP), The Overseas
Countries and Territories (OCT) (The EC grants unilateral trade preferences to the
OCTs. These are constitutionally linked to four of the Member States (Denmark,
France, the Netherlands and the United Kingdom), South Africa (the bilateral Trade
Development and Co-operation Agreement establishes a free trade area between the EC
and South Africa), and others.
6. Rules of Origin
Rules of origin are the criteria used to define where a product was made.
They are an essential part of trade rules because a number of policies discriminate
between exporting countries: quotas, preferential tariffs, anti-dumping actions,
countervailing duty (charged to counter export subsidies), and more. Rules of origin are
also used to compile trade statistics, and for “made in ...” labels that are attached to
products. This is complicated by globalization and the way a product can be processed
in several countries before it is ready for the market.
The Rules of Origin Agreement requires WTO members to ensure that their rules of
origin are transparent; that they do not have restricting, distorting or disruptive effects
on international trade; that they are administered in a consistent, uniform, impartial and
reasonable manner; and that they are based on a positive standard (in other words, they
should state what does confer origin rather than what does not, what is going to be
considered a cumulation or minimal operations made in a country that confere a new
origin to a certain raw material produced in another territory).
For the longer term, the agreement aims for common (“harmonized”) rules of origin
among all WTO members, except in some kinds of preferential trade— for example,
countries setting up a free trade area are allowed to use different rules of origin for

products traded under their free trade agreement. The agreement establishes a
harmonization work programme, based upon a set of principles, including making rules
of origin objective, understandable and predictable.
Note that operators who are unsure about the origin of their goods, or who simply want
legal certainty, may always apply for a Binding origin information (BOI). BOIs are
decisions by the competent authorities, which are binding on the customs authorities in
all Member States in respect of goods imported or exported after their issue, provided
the goods and the circumstances determining the acquisition of origin are identical in
every respect to what is described in the BOI. They are normally valid for three years
from the date of issue. Application should be made in writing to the competent
authorities. Note that the existence of a BOI does not exempt from the requirement to
provide proof of origin.
Accepting that origin is the "economic" nationality of goods in international trade, we

may find two kinds, non-preferential and preferential.
Non-preferential origin confers a nationality that is used for determining the origin of
products subject to all kinds of commercial policy measures (such as anti-dumping
measures, quantitative restrictions) or tariff quotas. It is also used for statistical
purposes. Other provisions, such as those related to public tenders or origin marking,
are also linked with the non-preferential origin of the products. In addition, the EU's
export refunds in the framework of the Common Agricultural Policy are often based on
non-preferential origin.
Preferential origin is conferred on goods from particular countries, which have

fulfilled certain criteria allowing preferential rates of duty to be claimed (in other words,
it confers certain benefits on goods traded between particular countries, namely entry at
a reduced or zero rate of duty.
In either case, an important element in determining the origin of goods is their tariff
classification. Goods in trade are identified in the Community by a code number in the
Combined Nomenclature (CN) and before trying to determine their origin it is essential
that their CN code has been identified.
Movement of goods within Customs unions is not based on their originating status but
on the fact that they comply with provisions on free circulation. However, some
products in trade with the countries concerned do not fall within the scope of the
customs union but remain subject to a preferential treatment based on origin.
7. Antidumping duties
We can define an antidumping duty as a penalty imposed on suspiciously low-priced
imports, to increase their price in the importing country and so protect local
industry from unfair competition.
Anti-dumping duties are assessed generally in an amount equal to the difference

between the importing country's FOB price of the goods and (at the time of their

importation) the market value of similar goods in the exporting country or other
countries.
Especially in the context of international trade, "dumping" is a kind of predatory

pricing that occurs when manufacturers export a product to another country at a price
either below the price charged in its own home market, or in quantities that cannot be
explained through normal market competition (in this case the company it is said to be
"dumping" the product).
The WTO agreement allows governments to act against dumping where there is genuine
("material") injury to the competing domestic industry. To do so, the government has to
show that dumping is taking place, calculate the extent of dumping (how much lower
the export price is compared to the exporter’s home market price), and show that the
dumping is causing injury or threatening to cause injury.
8. Customs clearance principles

Once certain goods arrive in a territory they need to be cleared by Customs.
The process involves a number of people: the importer or his customs broker; the
shipping company, agent or freight forwarder; and of course Customs itself.
Customs' initial clearance is done using the import entry clearance or electronic cargo
information, so it is important to make sure these are filled in correctly and fully.
Customs authority may examine the goods either in the warehouse or on the port or
point of entry.
All duties and charges, if they exist according to the customs procedure assigned, will
be accounted for (paid or guaranteed) before releasing the goods to the importer in order
to collect your goods.
8.1. Pre Arrival / Pre Departure Declarations
The Community Customs Code includes the measures designed to meet the need for
safety and security in relation to goods crossing international borders, including
requirements linked to US regulations and, at the same time, remaining in step with the
e-customs general rule.
Among other measures, the new Regulation requires traders to supply customs
authorities with advance information on goods brought into, or out of, the customs
territory of the EU. This will provide for better risk analysis, but, at the same time, for
quicker process and release upon arrival, resulting in a benefit for traders that should be
equal to, if not exceed, any cost or disadvantage of providing information earlier.
The measures will not apply, however, until the necessary implementing provisions
have also come into force. These provisions define

➢ the data elements to be included in the pre-arrival and pre-departure

declarations;
➢ the time limits for the provision of this information;
➢ the rules for variations and exceptions to these limits; and
➢ the framework for the exchange of risk information between Member States;
It is anticipated that a 24 hour deadline for prior declaration will apply to goods brought
into the customs territory of the EU by sea, where the voyage duration exceeds that
period, but in most other cases, prior notification will probably need to be given just 2
hours, if electronic, or 4 hours if on paper, before the goods are brought into, or out of,
the customs territory of the EU.
For goods leaving the Community under a customs procedure the customs declaration
itself, including the required security related data, will be used as the pre-departure
advice, so as not to place an additional burden on Community exporters.
8.2. The single administrative document (SAD)
The single administrative document is the documentary basis for customs

declarations in the EU and in Switzerland, Norway and Iceland.
The SAD form tries to take full account of today's customs environment and has been
adapted with the evolution that occurred since its inception, specially by introducing a
radical modernization of data collection on customs declarations (coded information
used by Member States for procedures, certificates, documents and authorizations)
aimed to rationalize and reduce administrative documentation, reduce the amount of
requested information and standardize and harmonize data.
The document covers the placement of any goods under any customs procedure (Export,
import, transit, warehouses, temporary import, inward and outward processing, etc.)
whatever the mode of transport used.
In the EU, the single administrative document is used within the framework of trade
with third countries and for the movement of non-EU goods within the EU.
The fundamental elements of the document are the codes set up to facilitate the
transmission of the information that they represent, playing their role on the
simplification of formalities.
It should also be pointed out that a number of countries use forms which are based on
the SAD.

9. Customs clearance: the procedures

9.0. Introduction: The temporary storage
Non-Community goods brought into the customs territory of the Community cannot be
released from the customs office or other approved place at which they are
presented until they are assigned to a customs-approved treatment or use. That’s
why a temporary storage system is necessary: because in the meantime, the goods
must remain under customs supervision (held in 'temporary storage') either at the
customs office of presentation or at any other place designated, approved and controlled
by that office.
The goods are normally placed in an approved temporary storage facility operated either
by the importer or by a storage-keeper; the person holding the goods may be required to
provide a guarantee to cover any customs debt that may arise. Where customs
authorities themselves maintain a warehouse, they can require storage of the goods at
this place, it is, a customs warehouse may also be used for temporary storage .
If goods are to be removed from the customs office of presentation for storage
elsewhere, i.e. at a storage facility designated and controlled by another customs office,
then the transit procedure must be used. The goods are then under temporary storage
again when the transit procedure has ended.
During the temporary storage the goods may only be handled or treated in order
to ensure their preservation (e.g. by cooling), but, with the permission of the customs
authorities, the importer may examine the goods or take samples.
Traditionally (in accordance with Article 49 CC), the goods must be assigned a
customs-approved treatment or use within a certain period of time:
✓ 45 days from the date on which the summary declaration is lodged in the case of
goods carried by sea;
✓ 20 days from the date on which the summary declaration is lodged in the case of
goods carried otherwise than by sea.
If the goods have not been assigned a customs-approved treatment or use within the
prescribed period, the customs authorities may, at the expense of the importer or the
holder of the goods remove the goods to a place under their supervision and /or:
➢ sell the goods, or

➢ destroy them.
The Community Customs Code provides for 8 customs procedures:
✓ release for free circulation
✓ transit
✓ customs warehousing
✓ inward processing
✓ processing under customs control
✓ temporary importation
✓ outward processing
✓ and exportation
9.1. Importation – Release for free circulation
The word 'importation' commonly refers to the bringing of goods into a customs
territory.
However this term is not used to describe the customs procedure relating to the
clearance of goods brought into the customs territory of the EU.
The procedure allowing third country goods to circulate freely throughout the EU
in the same way as goods made in the Community is called release for free
circulation.
From a customs point of view the release for free circulation changes the status of
non-Community goods to Community goods.
It must be clarifies that release for free circulation entails:
• both the collection of import duties where goods are liable to them according to
the Community Customs Tariff and no duty relief is applicable,
• and the application of commercial policy measures (such as the presentation of

an import authorisation for goods subject to quotas) and any other formalities
laid down in respect of the importation of such goods (such as the presentation
of a health certificate for certain animals).
Free circulation: EC Treaty stipulates free circulation for Community goods

throughout the European Community (EC). This principle applies not only to goods
made in the Community but also to imported goods which have been released for free
circulation after payment of the import duties to which they are liable.
The purpose of release for free circulation is to fulfill all import formalities so that the
goods can be sold on the Community market like any product made in the EC.
Imported goods are entered for the procedure by means of a customs declaration, in
the case of the EU, the Single Administrative Document.
The time of acceptance of the customs declaration for release for free circulation
determines, in principle, the date to be taken into account for calculating the amount of
import duties if the goods are liable to duties (as well as value added tax and, if
applicable, excise duty). This applies both to the nature, customs value and quantity
of the goods as well as the duty or taxrate to be applied. For certain cases in which
goods have been placed under another customs-approved treatment or use before being
released for free circulation, an earlier date may be taken into account.
Import licensing: keeping procedures clear
Import Licensing should be simple, transparent and predictable. The WTO agreements
requires governments to publish sufficient information for traders to know how and why
the licences are granted. It also describes how countries should notify the WTO when
they introduce new import licensing procedures or change existing procedures. The
agreement offers guidance on how governments should assess applications for licences.
Some licences are issued automatically if certain conditions are met. The agreement sets
criteria for automatic licensing so that the procedures used do not restrict trade.
Other licences are not issued automatically. Here, the agreement tries to minimize the
importers’ burden in applying for licences, so that the administrative work does not in
itself restrict or distort imports.
9.2. Temporary importation
Temporary importation means that goods may be used in the Community without
payment of duty or VAT under certain conditions and re-exported afterwards in the
same state as they were in at import.
The customs authorities may require an inventory supporting the declaration.
The A.T.A. carnet is an international Customs document used for the temporary
exportation, transit and temporary exportation, transit and temporary admission of
goods for specific purpose, e.g. for displays, exhibitions and fairs as professional
equipment and as commercial samples within the territories of the signing countries
9.3. Exportation
The export procedure allows exit of Community goods from the EC customs territory.
From a customs point of view, exported Community goods change their status to
non-Community goods. For non-Community goods, the operation is called 're-
exportation'.

The export procedure entails the application of all exit formalities, including, where
applicable, the payment of export refunds and the presentation of export licences.
The export procedure is obligatory for Community goods leaving the EC customs
territory, with very few exceptions. This is due to the fact that this procedure must
ensure the correct application of all export measures, e.g.:
• export restrictions and surveillance measures, and

• payment of export refunds for agricultural products.
The export procedure foresees, in principle, two stages:
➢ First the exporter/declarant presents the goods, his export declaration and,
where necessary, his export authorisation or licence at the customs office
responsible for the place where he is established or where the goods are packed
or loaded for export, or lodged with any customs office which is competent for
the operation in question. If no simplified procedure is used, the export
declaration is electronically made on the Single Administrative Document
(SAD). An oral (or sometimes implicit) declaration may also be made (at the
customs office of exit) in certain circumstances. However, neither an oral nor an
implicit declaration may be made for goods in respect of which export refund or
repayment of duties is claimed or which are subject to restrictions or other
special formalities. The customs office to which the goods and the export
declaration have been presented releases the goods for export on condition that
they leave the EC customs territory in the same condition as when the
declaration was accepted.
➢ Subsequently, the goods are presented to the customs office of exit which
satisfies itself that the goods presented correspond to those declared and
supervises their physical departure (in nature, amount, ...).
Where non-Community goods placed under a customs procedure with economic impact
are re-exported, the formalities for the export procedure will apply.
9.4. Processing under customs control
It means that goods may be processed into products which are subject to a lower duty
rate before they are put into free circulation (e.g. PVC materials subject to a duty rate of
8.3 % may be processed into film screens with a duty rate of 2.7%). The import duty
advantage obtained should contribute to creating or maintaining processing activities in
the Community. In certain cases an examination of the economic conditions is required.
Customs warehousing: Customs warehousing allows the owner to hold imported

non-Community goods in the Community and choose when he pays the duties or re-
exports the goods. The amount of working or processing allowed on goods held in

warehouses is limited essentially to keeping them preserved with a view to subsequent

distribution. However, it is possible to process goods under inward processing or
processing under customs control on the premises of a customs warehouse. Community
goods may be put in customs warehouses in order to benefit from Community
legislation governing export refunds or the repayment of import duties.
9.5. Free zones
Free zones are special areas within the customs territory of the Community.
Goods placed within these areas are free of import duties, VAT and other import
charges.
Free zone treatment applies to both non-Community and Community goods. Non-
Community goods stored in the zone are considered as not yet imported to the
Customs territory of the Community whereas certain Community goods stored in
free zones can be considered as already exported.
On importation, free zones are mainly for storage of non-Community goods until they
are released for free circulation. No import declaration has to be lodged as long as the
goods are stored in the free zone. Import and export declarations have only to be lodged
when the goods leave the free zone. In addition, there may be special reliefs available in
free zones from other taxes, excises or local duties. These will differ from one zone to
another.
The free zones are mainly a service for traders to facilitate trading procedures by
allowing fewer customs formalities.
9.6. Customs transit
Customs transit is a customs procedure used to facilitate the movement of goods

between two points of a customs territory, via another customs territory, or
between two or more different customs territories.
It allows for the temporary suspension of duties, taxes and commercial policy measures
that are applicable at import, thereby allowing customs clearance formalities to take
place at the destination rather than at the point of entry into the customs territory.
Customs transit is particularly relevant to the Community where a single customs

territory is combined with a multiplicity of fiscal territories: it allows the movement of
goods under transit from their point of entry into the Community to their point of
clearance where both the customs and national fiscal obligations are taken care of.
The Transit Administrative Document (TAD) accompanies the goods where a transit
declaration is processed at an office of departure.

There are another transit systems within the European Union apart from the Common
and Community transit: TIR Convention, ATA Convention, Rhine manifest, NATO
movements, and Post (including parcel post)
9.7. Inward processing
Inward processing allows imported raw materials or semi-manufactured goods to be

processed for re-export within the Community by Community manufacturers without a
requirement that the manufacturers have to pay customs duty and VAT on the goods
being used.
There are two variants:
-one allows the duty to be suspended,

-while under the other it is paid and later repaid.
9.8. Outward processing
Outward processing is the opposite of inward processing.
It allows Community goods to be processed abroad and, when they come back into the
Community to be put into free circulation, that duty has to be paid only on the value
added abroad.
Without such a system, duty would have to be paid on the goods as produced in the
Community as well as on the value added abroad.


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Tariffs & Customs Procedures

Tariffs & Customs Procedures

As trade relations often involve conflicting interests, agreements, including those

The World Customs Organization (WCO) is an independent

The main goals of WCO are:

✓ International Co-operation and Information Sharing; providing a forum for

✓ Harmonization and Simplification of Customs Systems and Procedures;

✓ Compliance and Enforcement; supporting Members through activities in the

IGEMA – Centre d’Estudis Universitaris

✓ Trade Facilitation; promoting the Revised Kyoto Convention to assist

✓ Supply Chain Security and Facilitation; enhancing Customs-to-Customs

The Authorized Economic Operator (AEO) can be defined as ‘a party

SAFE is based on four core elements:

1. harmonization of the advance electronic cargo information

The essence of the AEO-concept can be found in the Customs-to-Business partnerships.

IGEMA – Centre d’Estudis Universitaris

• Ensure the integrity of the information, i.e. what is said to be in a container,

IGEMA – Centre d’Estudis Universitaris

3. The commodities description and coding systems

3.1. The Harmonized System

The Nomenclature governed by the Convention on the Harmonized Commodity

The HS Nomenclature comprises thousands commodity groups which are identified by

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3.2. The Combined Nomenclature

The CN is comprised of the Harmonized System (HS) nomenclature with further

3.3. Customs tariff database (TARIC)

TARIC is the integrated tariff of the Community, held in a Commission database

The TARIC contains the following main categories of measures:

✓ Third country duty rates, as defined in the Combined Nomenclature

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✓ Antidumping measures; and

Measures relating to restriction of movements:

✓ Import and export prohibitions;

Measures for gathering of statistical data:

3.4. Binding Tariff Information (BTI)

Binding Tariff Information is issued on request to economic operators by the customs

• economic and commercial policy analysis,

The agreement provides a set of valuation rules.

➢ Transaction value (the importer or his agent shall furnish a declaration

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➢ Transaction value of similar goods

However, in certain well-defined circumstances, such taxation is not justified, by virtue

Industrial suspensions: The main purpose of tariff suspensions is to enable Union

5.2. Tariff quotas

Tariff quotas approved on the basis of Article 26 of the EC Treaty constitute an

Preferential: In the framework of several agreements that the European Community

Autonomous: As stated already for suspensions, for some economic sectors, it is

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Their role is to stimulate economic activity of Community industries, improving

5.3. Generalized System of Preferences

The Generalized System of Preferences (GSP) is a program designed to promote

5.4. Preferential arrangements

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Accepting that origin is the "economic" nationality of goods in international trade, we

Preferential origin is conferred on goods from particular countries, which have

Anti-dumping duties are assessed generally in an amount equal to the difference

IGEMA – Centre d’Estudis Universitaris

Especially in the context of international trade, "dumping" is a kind of predatory

8. Customs clearance principles