Customs

A Customs code is a unique numeric value that identifies a certain product category in international trade. The Customs code was introduced to simplify the transit of goods in foreign trade by classifying the goods according to a worldwide shared nomenclature system. The nomenclature system covers an ever-growing and updated number of product categories. 

The Customs code is vital for governments and businesses alike. It allows businesses engaged in foreign trade to ascertain the import or export requirements applicable to their products, including duties, restrictions, and licenses. For governments, the Customs code is vital for enforcing compliance with internal taxes, Customs tariffs, and trade policies, as well as for economic monitoring, research and analysis purposes. 

The CEFTA Parties follow the headings and the subheadings used in the Harmonised System (HS).  

The Customs code typically consists of six or eight numerical digits, although countries and economies may add supplementary numbers up to 10 or even 12 digits in order to provide more detailed and precise classification of goods or to subject certain products to particular trade measures (e.g., trade defence mechanisms like antidumping duties, safeguards and/or end use requirements). The Harmonized Commodity Description and Coding System commonly referred to as “Harmonized System” or simply “HS” is a multipurpose international product classification developed by the World Customs Organization(WCO) and applied by most trading countries and economies. 

It comprises more than 5,000 commodity groups, each identified by a six digit code, arranged in a legal and logical structure, and is supported by well-defined rules to achieve uniform classification. The system is universally recognised and utilised by more than 200 countries and economies (including the CEFTA Parties and the European Union) as a basis for their Customs tariffs and for the collection of international trade statistics. The HS is thus a universal economic language and code for goods, and an indispensable tool for international trade. Over 98% of the merchandise traded internationally is classified in terms of the HS. 

The Harmonized System is governed by the International Convention on the Harmonized Commodity Description and Coding System (HS Convention). The official interpretation of the HS is in the Explanatory Notes issued by the WCO and is available on the WCO’s HS Database, which groups all the available HS Tools, including the information on the HS Nomenclature, the Compendium of Classification Opinions, the Explanatory Notes, the Alphabetical Index, and the Brochure on Classification Decisions taken by the Harmonized System Committee. 

The HS code determines the specific product requirements for exports or imports, and the related tariff rates. Incorrect classification of the goods can lead to delayed clearance, overpayment of duties or taxes, fines and penalties, or enhanced regulatory requirements.

For its Customs rules, the EU relies on the Combined Nomenclature (CN). The Combined Nomenclature is the EU’s numeric coding system comprising the six digits from the Harmonised System (HS) codes with further EU subdivisions, i.e., 10 or even 12 digits.  

An example of EU product classification based on the CN and the related HS codes is provided in the table below: 

Unlike the EU, which is a Customs Union, the CEFTA Parties do not have a single unified Customs law at the CEFTA level. To ensure proper classification of goods, it is important to refer to the respective CEFTA Parties’ Customs laws, as relevant. 

The CEFTA Parties shall provide Party-specific information regarding their Customs laws. See Annex 1 for the specific information to be provided.

In international trade, the Customs duties that must be paid upon importation or exportation of goods, and any related requirements, such as import or export certificates, depend on the tariff classification applicable to the specific product being traded across borders. 

In order to have legal certainty that a trader is applying the correct classification on the goods being traded, an application may be lodged in advance of exportation or importation for a Binding Tariff Information (BTI) decision to be made by the competent Customs authorities. Binding Tariff Information relates to a legal decision by the Customs authorities on the classification of the traded product. 

Binding tariff information is: 

In order to obtain a Binding Tariff Information (BTI) certificate for a given product, an application should be made with the competent Customs authority in the importing or exporting Party. After obtaining the BTI certificate, this document must be declared in at time of exportation or importation and it shall facilitate trade, providing a higher degree of legal certainty and commercial predictability.. 

The CEFTA Binding Tariff Information (BTI) Database, which was launched in 2020, is a regional platform that aggregates all the information related to the Advance Rulings (i.e., tariff description and classification) from the CEFTA Customs administrations. Once the CEFTA Parties’ BTI decisions are published, they are also available on the CEFTA BTI Database, meaning that the regional database contains BTI data from 7 databases administered by the Customs authorities of the CEFTA Parties.  

The CEFTA BTI Database provides businesses and other interested stakeholders with an opportunity to view currently-valid BTI decisions issued by the CEFTA Parties. The CEFTA BTI Database ensures transparency and predictability for businesses, as well as providing a guarantee for the equal treatment of traders in their dealings with the CEFTA Customs authorities. 

The CEFTA BTI Database is available to traders and Customs officers for searching, consulting, and viewing. 

More information is available here.

In general terms, import and export procedures concern the completion of formalities for entry or exit of goods in a Party and include the submission of the relevant documentation, the payment of duties and other levies, and the application of trade policy measures by Customs authorities in accordance with the applicable regulations. 

Subject to the specific CEFTA Party requirements, importers and exporters are required to submit the following documents to the relevant Customs administration: 

• Customs declaration: An official document that lists and gives details on the goods that are being imported or exported. 
• Commercial invoice: A record or evidence of the transaction between the exporter and the importer. Once the goods are available, the exporter issues a commercial invoice to the importer in order to charge for exportation of the goods. The invoice must contain the basic elements of the transaction, such as the date of issue, invoice number, the name and address of the purchaser, the name and address of the seller, an accurate description of the goods (including the HS code, the quantity, unit of measure, unit value, total item value, total invoice value, and currency of payment), the terms of payment, the terms of delivery according to the appropriate incoterm, and the means of transport. 
• Certificate of origin: This is not an obligatory document, but it is necessary when the importer seeks to benefit from the tariff preferences offered with respect to the goods to be imported, for example under a free trade agreement between the importing and exporting economy. This document varies between free trade agreements. 
• Import or export licence: This is a document required in order to import or export certain specific products. It must be applied for and issued by the competent authority of the concerned CEFTA Party (see the details on import or export licences (Hyperlink)). 
• Transport documents: Depending on the means of transport used, transport documents must be completed and presented to the Customs authorities of the importing CEFTA Party upon importation or exportation in order for the goods to be Customs cleared. A transport document is issued by the carrier that transports the goods. The type of transport document to be used will depend on the means of transport utilised. These include: 
  • Bill of Lading: The Bill of Lading (B/L) is a document issued by the shipping company (the carrier) to the shipper (the person or company sending the goods), which acknowledges that the goods have been received on board. In this way, the Bill of Lading serves as proof of receipt of the goods by the carrier, obliging the carrier to deliver the goods to the consignee (the recipient of the goods). The Bill of Lading contains the details of the goods, of the vessel, and of the port of destination. The Bill of Lading evidences the contract of carriage and conveys title to the goods, meaning that the bearer of the Bill of Lading is considered to be the owner of the goods. The payment of the goods between the shipper and the recipient of the goods is facilitated by the use and exchange of ownership of the Bill of Lading. The shipping company does not take part in the change of ownership of goods, as it merely acts as an enabler in the transportation of cargo from one location to another; 
  • The FIATA Bill of Lading: This is a document designed to be used as a multimodal or combined transport document with negotiable status, which has been developed by the International Federation of Freight Forwarders Associations (FIATA); 
  • Road Waybill (CMR):  This is a document containing the details of the international transportation of goods by road, set out by the Convention for the Contract of the International Carriage of Goods by Road 1956 (the CMR Convention); 
  • Air Waybill (AWB): This is a document required for the transportation of goods by air and issued by the carrier’s agent. It is regulated by the Warsaw Convention (Convention for the Unification of Certain Rules relating to International Carriage by Air, 12 October 1929); 
  • Rail Waybill (CIM): This is a document required for the transportation of goods by rail. It is regulated by the Convention concerning International Carriage by Rail 1980(COTIF-CIM); 
  • Temporary Admission (ATA) Carnet: The carnets are international Customs documents issued by the chambers of commerce in the majority of the industrialised world to allow for the temporary importation of goods, free of Customs duties and taxes. The ATA carnets can be issued for the following categories of goods: commercial samples, professional equipment, and goods for presentation or use at trade fairs, shows, exhibitions and the like. Further information may be obtained in the International Chamber of Commercewebsite; and 
  • International Road Transport (TIR): TIR carnets are Customs transit documents used for the international transport of goods, a part of which has to be made by road. They allow the transport of goods under a procedure called the TIR procedure, laid down in the Customs Convention on the International Transport of Goods under Cover of TIR Carnets(TIR Convention, 1975), signed under the auspices of the United Nations Economic Commission for Europe (UNECE). The TIR system requires the goods to travel in secured vehicles or containers, all duties and taxes at risk throughout the journey to be covered by an internationally valid guarantee, with the goods to be accompanied by a TIR carnet, and the Customs control measures at the point of departure to be accepted by the points of transit and destination. 
• Packing list or cargo list or manifest of goods: This is a commercial document accompanying the commercial invoice and the transport documents. It provides information on the imported items and the packaging details of each shipment such as weight, dimensions, and handling issues. It is required for Customs clearance as an inventory of the incoming cargo.  The packing list generally includes: 
  • Information on the exporter, the importer and the transport company; 
  • Date of issue; 
  • Number of the freight invoice; 
  • Type of packaging (drum, crate, carton, box, barrel, bag, etc.); 
  • Number of packages; 
  • Content of each package (description of the goods and number of items per package); 
  • Marks and numbers; and 
  • Net weight, gross weight and measurement of the packages 

The CEFTA Parties should be mindful of the following obligations set out in the Additional Protocol 5 to the Agreement on Amendment of and Accession to the Central European Free Trade Agreement (CEFTA), relevant to import and export procedures:

• Article 7.2 on the “Publication of Fees and Charges Imposed on or in Connection with Importation and Exportation and Penalties”, which states that: “7.2. Information on fees and charges shall be made electronically available by the competent authorities of each CEFTA Party, and shall be published in accordance with Article 1 of the WTO Agreement on Trade Facilitation. This information shall include the fees and charges that will be applied, the reason for such fees and charges, the responsible authority, and when and how payment is to be made”; 
• Article 8.3 on the “Formalities Connected with Importation, Exportation and Transit”, which states that: “8.3. Each CEFTA Party shall, where appropriate, endeavour to accept paper or electronic copies of supporting documents required for import, export, or transit formalities by customs authorities and other competent authorities”. 
• Article 9 on the “Common Border Procedures and Uniform Documentation Requirements”, which statesthat: “9.1. Each CEFTA Party shall, subject to Paragraph 9.2, apply common customs procedures and uniform documentation requirements for the release and clearance of goods throughout its territory. Nothing in Paragraph 9.2 shall be implemented to constitute an arbitrary or unjustifiable discrimination or a disguised restriction between CEFTA Parties where the same conditions prevail.  9.2. Nothing in this Article shall prevent a CEFTA Party from:  
  • (a) differentiating its procedures and documentation requirements based on the nature and type of goods, or their means of transport;  
  • (b) differentiating its procedures and documentation requirements for goods based on risk management;  
  • (c) differentiating its procedures and documentation requirements in order to provide total or partial exemption from import duties or taxes;  
  • (d) applying electronic filing or processing; or 
  • (e) differentiating its procedures and documentation requirements in a manner consistent with the WTO Agreement on the Application of Sanitary and Phytosanitary Measures”. 

The Customs value is the value of the goods imported or exported from the Customs territory of the CEFTA Party. The Customs value is vital for charging the Customs duties and other taxes that must be paid to the Customs Administration of the CEFTA Parties. Customs valuation is the process of assessing the actual value of the transaction in order to fix the Customs value (taxable value) of the traded goods. 

The Customs value corresponds to the transaction value of the goods, including all the costs incurred, for example the commercial price, transport and insurance costs, until the first point of entry in the import destination. In general, the Customs value is calculated using the transaction value (i.e., the price actually paid or payable for the imported goods). 

In certain cases, the transaction value of the imported goods may be subject to an adjustment, which would involve additions or deductions. For example: 

• Commissions or royalties may need to be added to the price;  
• When there is no agreement between the trader and the Customs authorities on the transaction value of the goods and, therefore, the Customs value must be constructed or computed; or 
• The internal transport (from the entry point to the final destination in the import destination) may be deducted. 

It must be noted that the Customs law of the importing CEFTA Party may allow the Customs authorities to waive the requirement of all or part of the Customs value where: 

• The Customs value of the imported goods of a given shipment does not exceed a specified amount, provided that the goods are not split into multiple shipments from the same sender to the same receiver; or 
• The goods being traded are of a non-commercial nature; or 
• Where the Customs duties applicable under the respective Customs law are not chargeable pursuant to specific Customs provisions. 

Rules of origin are crucial for both businesses and governments because they ensure that only eligible products benefit from reduced tariffs or other trade advantages, as well as possible trade restrictions (e.g., sanctions, import prohibitions, etc.). Rules of origin typically safeguard local industries (or those situated in preferential trading partners) and promote local manufacturing by ensuring that imported (non-preferential) products do not take unfair advantage of trade preferences.  

In addition, rules of origin enable Customs authorities to enforce and ensure compliance with trade regulations. Understanding and complying with rules of origin is vital for businesses to remain competitive and to navigate the complexities of global supply chains. 

Rules of origin can either be “non-preferential” or “preferential”.  

• Non preferential rules of origin are used to determine the origin of goods for general purposes, such as applying standard tariffs, trade statistics, and compliance with trade regulations, such as anti-dumping measures. 
• Preferential rules of origin are used to determine whether goods qualify for reduced tariffs under specific trade agreements (typically free trade agreements, like CEFTA, or other forms of preferential trade arrangements, such as the Comprehensive Economic Partnership Agreements, but even unilateral trade preferences like the European Union’s Generalised System of Preferences (GSP) or other arrangements).  

Binding Origin Information (BOI) refers to the written, binding answer from a Customs authority to a trader interested in ascertaining the origin of a product. The trader can submit a request for a BOI decision to the concerned Customs authority, which must contain a detailed description of the nature and composition of the good. BOI decisions are binding on the holder and on the issuing Customs authority and are valid for specified period of time. 

Notably, a BOI decision does not exempt the trader from the requirement to provide proof of origin. 

The World Trade Organization (WTO) Agreement on Import Licensing Proceduressets out rules for administrative procedures requiring the submission of an application or other documentation (other than that typically required for customs purposes) to a designated administrative body as a prior condition for importation. The Agreement requires WTO Members: 

An import license plays a vital role in several aspects, such as 

An export license serves several important functions, including: 

An export or import license is a shipping document issued by government agencies that authorise the trade of certain goods across borders. The issuing agencies vary depending on the type of goods to be traded. Before shipping goods, the type or category of goods being traded must be carefully established. 

Where necessary,  the competent government ministry or agency must be identified and contacted to ascertain whether the traded goods require a license to be exported or imported. 

Additionally, import or export licenses tend to be valid for a fixed period of time and to entail administrative costs and complexities, so the applicable requirements must be understood. It is also important to follow the regulatory procedures set by the respective Party for obtaining an export or import license.