Classification

A worldwide uniform system of classification has been adopted in order to ease the process of classification and provide uniformity.The common classification simplifies and provides a common and uniform classification of goods in world trade. The goods must be classified in accordance with the relevant tariff in order to apply the relevant treatment.

Several European countries had adopted a commons system of customs nomenclature (classification) even prior to the formation of the EEC. They had established a Customs Cooperation Council  which sought to for uniform application of custom practices of the state parties. This included common coding and naming conventions for products.The Convention establishing the Customs Co-operation Council  which was signed in 1953.

CCC membership subsequently expanded to cover all regions of the globe. In 1994, the organization adopted its current name, the World Customs Organization. WCO members are responsible for customs controls in 182 countries representing more than 98 per cent of all international trade.

Customs Valuation

A Customs Valuation Code was entered in 1994 as as result of the Uruguay round. Different approaches had been taken by  major states, including the EU and USA to valuation. A modified version of the US measure of valuation was accepted.

GATT (as restated) requires that imported goods be valued on the basis of their actual market value. The value of goods should be based on their actual value as defined under the Customs Valuation Code. Goods are not to be valued on the basis of their origin or other hypothetical or artificial valuation.

The  transaction value is the principle measure of value. It is the price paid for the goods at the point of sale import together with certain further elements, such as packaging and items provided together with it at a discount or free of charge. There are other alternative mechanisms of valuation where this cannot be readily calculated or where it is inappropriate.

States must not charge administrative costs in processing imported goods more than the approximate costs concerned.

Trade Facilitation

The 2013 Trade Facilitation Agreement seeks to reduce formalities and delays in customs processing at borders. The TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit.

The FA  seeks to increase efficiency and transparency and to improve infrastructure. There are policies which seek to facilitate the entry of goods and the ascertainment recording and communication of information.

It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It contains provisions for technical assistance and capacity building in this area.

Rules of Origin

Different tariff treatment may apply depending on the origin of goods. Rules of origin may have to be applied to determine the origin, where it is unclear. Rules of origin may be very complex and artificial in their application in some cases. The GATT has not succeeded in fully harmonizing rules of origin and different rules may apply under different agreements.

The general rates may apply to the small number of states that are not members of GATT/WTO. The general tariff may apply to other GATT/WTO states. The most favoured nation principle may displace this rate under GATT rules.

Other rates may apply under local free trade agreements (e.g. NAFTA). The Generalized System of Preference rates may apply to imports from developing countries.  Other historical pre-GATT preferences may arise is in some cases.

See the other sections which deal in detail with Rules of Origin issues.

CIS System

EU Regulation sets up a customs information system (CIS). This common computer network is set up and maintained by the Member States’ customs administrations and the Commission in the form of a central database accessible via terminals in each Member State and at the Commission.

The CIS system helps to prevent, investigate and prosecute breaches of Community customs or agricultural legislation. It increases the effectiveness of the cooperation and control procedures of the customs authorities by disseminating data and information quickly. The system also enables both regular and occasional data exchange on goods moving between the customs territory of the Community and third countries.

The conditions on the use of information technology within customs are strictly defined. As such the data entered into the CIS shall only be related to:

• goods;
• means of transport;
• businesses;
• people;
• trends in fraud;
• available competencies;
• goods detained, seized or confiscated;
• cash detained, seized or confiscated.

Only the authorities designated by the Member States and the Commission have direct access to the data contained in the CIS. These authorities are designated after a list has been sent to the Commission, which also details specific conditions regarding each authority’s access to the data.

International or regional organisations can access the CIS by special dispensation. In exceptional circumstances, certain data can be sent to other national authorities or to third countries.

Data protection

The CIS contains data only, including that of a personal character , necessary to achieve the system’s objective and which are provided by measures such as sighting, surveillance, specific checks and operational analysis *.

The personal details which can be entered into the CIS are detailed in a limited list. They are only entered if there are real indications that the person concerned has breached, is breaching or will breach customs or agricultural legislation. Any person has the right to access the data concerning them to check that they are accurate and what is being made of them. This information could be used in legal proceedings.

The data in the CIS is confidential and may only be reproduced for technical reasons such as in cases justified by the information search. On the authorisation of the authority that entered them, personal data can be transmitted to systems of risk management used for national customs controls or to operational analysis systems used at Community level.

The Customs Files Identification Database (FIDE) is a database which has been added to the CIS to facilitate investigations carried out by the Commission and the national competent authorities. It brings together files relating to persons and businesses that have been suspected of or found guilty of offences.

Quota Import Licensing

Import licensing may be permitted for vital public interests under the WTO Agreements. The  administration of quotas requires licensing. The contracting parties were to provide all relevant information in connection with import restrictions to other interested parties. This is to include all information on the administration of the system.

19 parties entered a Code on Import Licensing during the Tokyo Round. In the Uruguay round, the agreement became binding on all members and subject to the understanding on dispute settlement. The basic principle is that import licensing must be neutral in application and administered in a fair and equitable manner.

In the case of automatic licensing systems, applications must be approved immediately if this is feasible and in any event within 10 working days.   In the case of non-automatic systems, they must not have trade restrictive or distortive effects. They must be no more administratively burdensome than absolutely necessary.

The period for processing applications must be no longer than 30 days or 60 days. 30 days if applications are considered as and when received, or 60 days if all applications are considered together. If a license is denied, the applicant must be given an explanation and have a right to appeal.