Knowledge

The Harmonised System (HS) was developed by the World Customs Organisation as a multipurpose international product classification that describes all products that may be internationally traded. For commodities to successfully cross international borders, the correct HS code (also known as an HTS code) must be declared. This code determines the appropriate duty and tax rate payable on the item.

The HS Code system uses an internationally applied 6-digit number as the basis for local country classification. The HS consists of 5,300 article or product descriptions that appear as ‘headings’ and ‘subheadings’. In theory, all countries using the HS agreement should classify a certain product with the same HS section, chapter, heading and subheading; though in practice conflicts can arise.

Unfortunately, not all countries apply the same HS versions, or apply the rules in an identical manner. This uncertainty, as well as the increasing complexity of products, historic ruling decisions and a lack of expertise concerning the technical aspects of a given product, combine to create complex, inconsistent and risky classification rules which can be difficult to navigate.

As an importer or exporter, it is your legal responsibility to correctly classify the goods being shipped. Sparkle Logistics then correctly declare that classification on your behalf to customs, acting in your name.

Why is HS classification such a risk area?

HS classifications are risky if you classify incorrectly, as you may be paying the wrong duty and tax on your products. This can result in a retrospective duty or tax bill for the back payment of all the goods you incorrectly classified. This can lead to substantial penalties and fines, and even cause your goods to be seized or destroyed.

An incorrect classification can also lead to overpayment of duty and tax, which has implications for your business’ cash flow. It is possible to make a retrospective claim for overpaid duties, but you must be able to fully back up your arguments for such a retrospective change and claim.

Tariff classification is a specialised skill that requires a broad knowledge base and experience. Not all importers or exporters necessarily have this expertise. At Sparkle Logistics, we have vast experience in shipping goods worldwide and declaring goods to customs agencies correctly is a key element of our services. The customs and trade compliance teams of Sparkle Logistics and our partners worldwide are up-to-date with all aspects of customs activity and we are efficient in HS classification, and are ready to support you with advice on how best to classify your products. Furthermore, we can identify where there may be risk in your classification and optimise your classifications, taking advantage of available benefits – such as legitimate re-classification and reduced duty rates – and duty suspensions.

Buying and selling goods in the international trade system can often be complicated with responsibilities, cost and risk to all parties needing to be determined. To help you in the import and export of trade, the International Chamber of Commerce (ICC) introduced the International Commercial Terms (Incoterms®), which act as the world’s essential terms of trade for the sale of goods. Whether you are completing a purchase order, packaging and labelling a shipment, or preparing a certificate of origin, these regulations have become part of our daily language of trade and are there to guide you.

Since the first publication of the rules in 1936, the ICC has been maintaining and developing them ever since. To help prepare businesses for the next century of global trade, the newest edition, Incoterms® 2020, came into effect on 1 January 2020 and should be referenced going forward.

The Incoterms® rules feature a series of three-letter trade terms which all have very precise meanings for the sale of goods around the world.

EXW – Ex Works (named place of delivery)

Often used when making an initial quotation for the sale of goods without any costs included, EXW means that the seller makes the goods available at their premises or at another named place (works, factory, warehouse etc). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export.

FCA – Free Carrier (named place of delivery)

FCA can have two different meanings, each with varying levels of risk and cost for the buyer and seller. FCA (a) is used when the seller delivers the goods, cleared for export, at a named place which is their own premises. FCA (b) is used when the seller delivers the goods, cleared for export, at a named place which is not their premises. In both instances, the goods can be delivered to a carrier nominated by the buyer, or to another party nominated by the buyer.

CPT – Carriage Paid To (named place of destination)

Under CPT the seller pays for the carriage of goods up to the named place of destination.

CIP – Carriage and Insurance Paid to (named place of destination)

Similar to CPT with the exception that the seller is required to obtain minimum insurance for the goods while in transit.

DAP – Delivered at Place (named place of destination)

The seller is deemed to have delivered when the goods are placed at the disposal of the buyer on the arriving means of transport and ready for unloading at the named place of destination. Under DAP terms, the seller needs to manage all risks involved in bringing the goods in.

DPU – Delivered at Place Unloaded (named place of destination)

This Incoterm requires that the seller delivers the goods, unloaded, at the named place. The seller covers all the costs of transport (export fees, carriage, unloading from main carrier at destination port and destination port charges) and assumes all risk until arrival at the destination place.

DDP – Delivered Duty Paid (named place of destination)

The seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. The seller is not responsible for unloading.

FAS – Free Alongside Ship (named port of shipment)

The seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer takes on responsibility for all costs from that moment onwards.

FOB – Free on Board

The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer takes on responsibility for all costs from that moment onwards.

CFR – Cost and Freight

The seller delivers the goods on board the vessel. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

CIF – Cost, Insurance and Freight

The same as CFR with the addition that the seller must also obtain minimum insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage.

SOLAS (International Convention for the Safety of Life at Sea) and VGM (Verified Gross Mass) – Let our global teams of experts help you ensure that all information is provided before any containers reach the carrier’s port terminal.

As a result of a number of major accidents being linked to inaccurate weight declarations of the shipping container, the International Maritime Organisation (IMO) in collaboration with industry representatives have adopted specific rules as part of the Safety of Life at Sea (SOLAS) Convention to ensure reliable weights of containers are provided.

Under these rules, the shipper has to provide the ocean carrier with the Verified Gross Mass (VGM) of the container, including cargo weight, weight of all loading equipment and materials, dunnage and the tare (weight of the container). These requirements will impact the communication, infrastructure and processes of all participants in the supply chain. Our global teams of experts are on hand to guide you through the regulations and ensure that all information is provided before any containers reach the carrier’s port terminal.

What is a carbon footprint?

A carbon footprint is the total amount of greenhouse gases (including carbon dioxide and methane) that are generated by our actions.

Globally, the average carbon footprint is closer to 4 tons. To have the best chance of avoiding a 2℃ rise in global temperatures, the average global carbon footprint per year needs to drop to under 2 tons by 2050.

Lowering individual carbon footprints to 2 tons doesn’t happen overnight! By making small changes to our actions daily, Sparkle Logistics strives to making a difference.

Calculate your carbon footprint! (https://www.nature.org/en-us/get-involved/how-to-help/carbon-footprint-calculator/)