Why being proactive on Commodity Codes is important

A recent Customs Duty case has highlighted the need for any businesses that import goods from outside the EU to be proactive when deciding on what commodity codes should be used. These determine the rate of duty payable and can be very complex and equally expensive if found to be incorrect.

In the case of SIR Fabrics, the declaration of the incorrect commodity code cost the business in excess of £218,000 which they could no recoup from their customers as HMRC assessed for underpaid duty going back several years.

At the Tribunal the company argued that they had used the wrong code for 10 years and that HMRC had visited the business several times over that period but had never said that it was incorrect. Whilst the business accepted that the wrong code had been used, they tried to argue that HMRC had made an error by not telling them that the code was wrong and that the assessment should be waived.

Although there is provision in Customs Law for duty to be waived where HMRC have made an ‘error’, it is incredibly difficult to succeed on this point and especially where HMRC have not actively advised a business i.e. just because they’ve visited and not picked something up does not mean they have made an error.

The moral is that all importers should set and regularly review the commodity codes they use to ensure that they are correct.

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