It may be surprising to discover how often imported goods are incorrectly classified, attracting incorrect rates of customs duty. This can result in importers either paying a higher amount of duty or being exposed to penalties at a later date and demonstrates how critical this is to get right.
Here are a few questions to ask yourself to ensure you are not overpaying duty and taxes.
What is a tariff classification and what are the outcomes for you as an importer?
Tariff classification refers to the identification of an imported product into Australia and applies the corresponding tariff rate of customs duty and taxes. Classifications and the application of rates of customs duty are determined by your Customs Broker (in most cases) and enforced by the Australian Border Force (ABF) using the Customs Tariff Act 1995.
Why is the correct tariff classification so critical?
Accurate tariff classification of goods is critical to ensure compliance with government requirements and community protection, whilst ensuring the correct duty and taxes paid. Correct tariff classification not only protects the importer from legislative penalties, but it also allows importers to utilise concession and exemptions were legally available.
The Department of Agriculture (DOA) and Imported Food also have biosecurity conditions linked to tariff classifications. Applying the correct tariff classification ensures all conditions are adhered to which to manage any biosecurity risk.
It is beneficial to importers to have the classification of new products completed before arrival into Australia. This assists in avoiding possible delays and unplanned costs that may arise as a result of your Customs Broker completing the classification process.
Advance notice provides your Customs Broker with the opportunity to thoroughly research and classify new products, so you are aware of any restrictions, required documentation, import conditions and the correct rate of duty and taxes.
To ensure legal protection for importers, it may be recommended to apply for a Tariff Advice with the ABF. This procedure will result in delivering a legal ruling to support the use of tariff classification and/or corresponding tariff concession. For further details please contact us.
How can classification reviews help your business?
In many cases, a classification review of imported products can mitigate many compliance issues that may result in future penalties. Importers could find themselves liable for any errors declared to ABF on Import Declarations (and similar for exporters on Export Declarations) which can lead to costly penalties and duty back-payments.
The ABF is constantly performing assessments and can audit Import Declarations for the previous four years. When ABF detects incorrect classification, the importer may be liable for paying the required amount of duty and tax in addition to potential penalties.
Under the Customs Act, errors of this nature that are detected fall under the Strict Liability category where neither intention nor negligence is considered.
Another advantage of a classification review is to search for legitimate opportunities to reduce the duty paid on imported goods through 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 opportunities to reduce your import duties and taxes?
2) Do you import a product that cannot be manufactured in Australia? Are you paying import duty on this?
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?
5) If you have a large range of products, does your Customs Broker perform targeted reviews to reduce the risk of compliance issues and find legal opportunities to reduce duty paid?
6) Is your Customs Broker working transparently and seeking your input?
7) Have you chosen your current provider with a focus on price? If so, you may be getting service with less expertise and paying too much in duty or exposing yourself to penalties.
BCR has an established quality-assured procedure for tariff classification and product database review. 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.