At BCR we undertake a review of previously lodged Import Declarations for new customers. I am always surprised how often we discover products that had been incorrectly classified! As the National Customs Manger, when I inform our new customers of how much money they have overpaid due to incorrect classifications, most of them are shocked and frustrated with their previous Customs Broker.
Read what tariff classifications are, why it is important to classify correctly and which questions to ask yourself to feel confident you are not overpaying duty and taxes and ensure you are compliant.
What is a tariff classification and what are the outcomes for you as an importer?
Tariff classification refers to the customs identification of any product imported into Australia in order to pay the appropriate duties and taxes. These classifications and the duty payable are determined by the Australian Government through the Australian Customs & Border Protection Service (ACBPS). The Customs Tariff Act 1995 requires that “Goods imported into Australia require classification”. The tariff classification is accomplished by the classification provider, which in most cases is a Customs Broker selected by the importer.
Why is the correct tariff classification so vital?
An accurate tariff classification of goods is necessary to ensure compliance with government requirements and community protection, and to ensure the correct duty and taxes paid. The correct tariff classification is also required to take advantage of any preferential and concessional rates available.
A number of DAFF Biosecurity (formerly Quarantine) and Imported Foods conditions are linked to certain tariff classifications. It is crucial the correct tariff classification is applied to ensure these conditions are adhered to which will minimise bio-security risk.
It may be of benefit to have the classification of new products completed prior to their arrival in Australia to avoid possible delays and unplanned expenses. Therefore obtain the classification from your Customs Broker when a product is first being sourced so you are aware of any restrictions, obligations, and conditions, and if any applicable duty and taxes are payable. It is also vital to understand the documents required to complete import formalities.
How can classification reviews help your business?
In many cases, without a classification review of imported products, compliance issues can arise and avoidable payments can be levied. Importers could find themselves liable for any errors declared to ACBPS on Import Declarations and similar for exporters on Export Declarations, both of which can lead to penalties involving high costs.
ACBPS is constantly performing assessments and can review your declarations for the previous four years. Where fraud is involved, there is no limit on the time period ACBPS can go back. Make sure your products are classified correctly as ignorance of the law is no defense. If your products are classified incorrectly and you are not paying the required amount of duty and tax, through lack of knowledge, you will still be obliged to pay the short paid amount plus possible penalties.
Another advantage of a classification review is to search for other legitimate means of reducing the duty paid on goods such as the use of Tariff Concessions. If there are currently no existing concessions, there may be an option to pursue an application for the goods in question. For further details please contact us.
7 questions to ask yourself as an importer
Here are 7 questions to ask yourself about your tariff classifications:
- 1. Are you taking advantage of all legal avenues to reduce your import duties and taxes?
- 2. Do you import a product no one in Australia can manufacture? Are you paying import duty on it?
- 3. Do you feel confident that your Customs Broker is getting the most out of available concessions?
- 4. How often does your Customs Broker perform internal audits? (Concessions are constantly being added and classifications are frequently updated)
- 5. lIf you have a large range of products, does your Customs Broker perform targeted reviews to reduce the risk of compliance issues and find avenues to reduce duty paid?
- 6. Is your Customs Broker working transparently and involving you? Do you entirely trust in their expertise?
- 7. Have you chosen your current provider with a huge focus on price? Do you have the cheapest clearance rate in the market? If so, you may be getting less expertise and paying too much in duty or not the required amount. (Tariff classification is a very time-consuming process, but the costs will pay off in the end)
Recently, we were able to save for a new customer over $60,000 and for SCA over $6 million. BCR has an established quality assured procedure for tariff classification. If you do not feel confident about the duties you pay and the advice you receive or if you are planning to import products, contact us today to discuss what we can do for you.
Have you ever had a Tariff Advice Application completed for a product of yours? How did it impact on the duty payable?