Customs classification made easy: Tips for plastic and steel parts
5. November 2024
Published
5. November 2024
traide
info@traide.ai
Admittedly, customs classification is a hot potato that no one likes to handle for long. Misinterpretations of the customs tariff are understandably preprogrammed and the weighty notion still lingers in many minds that customs classification is primarily relevant for statistical purposes and therefore no significance is attached to it. During my time as a customs advisor, I have repeatedly observed that certain customs tariff numbers appear on supplier documents that often cannot be correct at first glance. I worked for various industrial companies and saw such supplier documents daily. As I consider myself a «customs tariff enthusiast» and even in my leisure time I like to deal with customs tariff issues (don’t worry, not around the clock), I would like to share some thoughts on this topic with you here.
Of ‘other goods made of plastics or steel’ in the engineering sector
When I examine the supplier invoices of companies that deliver steel or plastic parts for different machines and devices, I often see the customs tariff numbers or HS headings 3926.90 or 7326.90. The customs tariff states the following:
The descriptions are very generally held. When examining the adjacent headings of customs tariff chapters 39 and 73, it becomes apparent that the goods are described in more detail there.
HS Heading | Wordings of the heading according to WCO 1 |
|---|---|
3921 | Other plates, sheets, film, foil, and strip, of plastics |
3922 | Baths, shower baths, washbasins, bidets, lavatory pans, seats and covers, flushing cisterns and similar sanitaryware, of plastics |
3923 | Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics |
3924 | Tableware, kitchenware, other household articles and hygienic or toilet articles, of plastics |
3925 | Building materials, of plastics, not elsewhere specified or included |
3926 | Other articles of plastics and articles of other materials of headings 3901 to 3914 |
For C-parts, the situation is relatively simple. If it is a screw or a spring made of steel and a plastic pipe, there are specific headings for them, such as heading 7318 for steel screws and heading 3917 for plastic tubes.
On invoices, it is noticeable that the product descriptions often correspond to the information in the ERP systems of the customers or suppliers. These include terms such as »housing«, »side parts« or »component carriers«.
After reviewing the headings in chapters 39 and 73, it initially seems logical that only the category «other goods made of plastics or steel» might apply for such products.
But I quickly realize that I underestimated the situation. For accurate customs classification, one must not only know how to assign the goods to the individual wordings of the headings of the customs tariff. The so-called «notes» and «explanatory notes» are also important. Unfortunately, these are not immediately visible in the customs tariff. They are official legal texts and must be accessed separately.
Of exceptions or «exclusion notes»
The notes reflect the internationally valid legal texts of the Harmonized System (HS), which are applied in their respective customs tariffs by over 200 countries worldwide. The literal wording at the HS level (the first six digits of a customs tariff number) is maintained, with a meaningful translation being performed. The HS nomenclature is extended locally individually. This results in the remaining digits of a locally valid customs tariff number.
In most customs tariff chapters and sections, including chapter 39 and section XV (under which is chapter 73), the notes titled «To this chapter/section does not belong…» represent so-called «exclusion notes».
This means they want to indicate that certain plastic and steel parts are not classified in these chapters but rather in other chapters.
In the «German electronic customs tariff» (EZT) of the German Customs you first click on »Texts«:
A new tab or window opens. There you click on «Contents of the notes/explanatory notes».
Now the individual notes of the sections and chapters appear. Scroll down until chapter 39 appears or enter the number «39» in your browser's search function.
For example, note 2q) makes it clear that shoes made of or with plastics are not classified under chapter 39 but under section XII and there in chapter 64.
Upon further consideration of note 2, I also notice point s), which mentions «machines and apparatus». However, I cannot yet establish a direct connection between plastics and machines.
What do plastics and steel have in common with machines?
Meanwhile, if I enter customs tariff “84” for chapter 84 and look at some headings, particularly those like 8409 or 8431 stand out. They begin with the wording «Parts, identifiable as (…)”.
For me, the question arises: Do plastic and steel parts also belong here mentioned with machines?
To answer this question, we must once again look at the notes.
Note 2b) to section XVI, which includes chapters 84 and 85, provides clarity.
Other parts are to be assigned, if they are identifiable as solely or mainly intended for a specific machine or numerous machines covered by the same heading (also in heading 8479 or heading 8543), to the heading for that machine or machines or, where applicable, to heading 8409, 8431, 8448, 8466, 8473, 8503, 8522, 8529, or 8538. However, parts mainly intended for goods of heading 8517 and for goods of headings 8525 to 8528 belong to heading 8517, and parts intended solely or mainly for goods of heading 8524 belong to heading 8529 (RV C1602B00);
Despite the complex and convoluted structure of this note, the following significant passage can be extracted: «Parts other than those covered by the preceding paragraph, where it is apparent that they are solely or mainly intended for a specific machine (…).»
What does the customs tariff mean by an «identifiable as a sole or main part»?
Unfortunately, there is no precise definition within the Harmonized System as to what constitutes a «part».
However, there are individual court decisions on this definition. Next, I want to delve into a decision by the European Court of Justice (ECJ).
Excerpt from the ECJ judgment of 19.10.2000 Case C-339/98
The term «part» implies the existence of a whole for which this part is essential.
If you want to know whether a part exists, you can orient yourself by the following questions:
Is the part a component that arises or could arise when disassembling a good?
Is this component indispensable for the functioning of the next larger unit?
Was the component specifically manufactured for the next larger unit?
Does it have the appropriate characteristics?
Only if all questions can be answered with «Yes» it is a «part» in the sense of the customs tariff.
Plastic and steel parts clearly for machines belong in chapters 84 or 85
Companies that specifically manufacture plastic and steel parts according to drawings on behalf of their customers and which are not C-parts like screws, cannot simply work with the «collective headings» 3926 or 7326 without further clarifications.
According to note 2s) to chapter 39 and note 1f) to section XV, these specific plastics and steel parts must be classified in the relevant “subheadings for parts” of chapters 84 and 85.
It is clear that customers who commission such parts for production according to drawings should support their suppliers in customs classification. Ultimately, the customer knows best which machines the parts are intended for.
Correct customs tariff numbers are also crucial for free trade agreements
It is especially important that customers specify the customs tariff numbers for the parts when obtaining supplier declarations in the area of preferential origin. This allows the supplier to calculate the correct, product-specific origin rule. Without this information, the supplier may potentially calculate incorrectly or falsely use the origin rules intended for the headings 3926 or 7326.
Thus, the product-specific origin rules in the free trade agreement between the EU and Switzerland, for example, differ significantly for parts for household coffee machines (8516):
For heading 8516, a maximum of 50% non-originating materials or a change of heading is allowed.
For heading 7326, only the change of heading is provided.
For heading 3926, even specific manufacturing criteria need to be met.
Comparing these origin rules clearly shows why correct customs classification is so crucial.
And which goods truly belong to heading 7326 and 3926?
In the explanatory notes for these two headings, I find several product examples:
For 3926.90, for example, include: gaskets of plastics (not rubber), drive belts, plastic screws, plastic tool handles, and many other finished goods not primarily used in mechanical engineering
For 7326.90, for example, include: pipe clamps of all kinds of steel (not pipe couplings), steel toolboxes without inserts, and many other finished goods not primarily used in mechanical engineering
How does traideGo classify a housing part of a coffee machine made of PVC?
1. Product understanding:
Product: Housing part lower left
Material: PVC (Polyvinyl Chloride)
Use: For household coffee machine
The description is relatively clear, but it would be helpful to know more about the specific function and form of the housing part.
2. Tariff classification analysis:
Chapter 85: Electromechanical household appliances and their parts Note 2 to section XVI ([Notes for ‘section XVI (§ 3)‘]): Parts that are clearly solely or principally intended for a specific machine should be assigned to the heading for that machine.
Binding Tariff Information (BTI): [DEBTI30564/23-1]: Permanent filter for coffee machines was classified under heading [85169000], as it is a part that is evidently solely intended for coffee machines.
3. Tariff number:
[85169000]: Parts of electrical water heaters, room heaters, hair care appliances or hand drying appliances, electrothermic appliances for household use, and electrical resistance heating elements, N.E.S.
4. Justification:
Legal basis: WCO 1 and WCO 6: Classification is made according to the wording of the headings and the notes to the sections and chapters. Note 2 b) to section XVI ([Notes for ‘section XVI (§ 3)‘]): Parts that are specifically or mainly intended for a certain machine should be assigned to the heading for that machine. BTI [DEBTI30564/23-1]: A similar part (permanent filter) for coffee machines was classified under heading [85169000].
5. Inquiry about additional information:
Not required: The product description is sufficient for classification.
6. Summary:
The lower left housing part made of PVC, which is clearly solely intended for a household coffee machine, is classified under tariff number [85169000]. This classification is based on notes to section XVI and chapter 85 as well as a similar decision in the Binding Tariff Information.
