Import and export tariffs for dummies
So you’ve found the perfect widget to import to Australia or are getting increased interest in your innovative range of wadgets from offshore. You’ve done all your market research and are ready to start shipping but wait … have you considered tariffs?
Before you can think about importing or exporting a product, it so important to first understand how it is classified for customs tariffs/duty in each market of interest.
A tariff (or duty) is a tax on goods being imported into a country.
Why should you care about tariffs? Because, in simple terms, no matter how innovative a product is, excessive tariffs can make it too expensive to import into Australia or leave too little profit when exporting to another country.
All products shipped around the world are classified under the Harmonised Commodity Description and Coding system which is generally referred to as the “Harmonised System” (HS).
The Harmonised System comprises approximately 5,000 commodity groups, each identified by a six-digit code, arranged in a legal and logical structure. It is supported by well-defined rules in an attempt to achieve uniform classifications around the world. The system is used by more than 200 countries as a basis for their customs tariff and for the collection of international trade statistics and duty revenue.
"No matter how innovative a product is, excessive tariffs can make it too expensive to import into Australia or leave too little profit when exporting to another country."
It is ultra-important for both importers and exporters to know the specific HS codes for each of their products, (in each of the markets they deal with), to ensure they are aware of any tariff ‘booby traps’ that may exist. Below is some need-to-know information for companies new to the game:
Australia uses an eight-digit code to classify goods for export. The first six align with international classification standards, while the last two digits are specific to Australian exports. The classifications are not static and are subject to change. It is very important to keep up-to-date with any changes as they occur.
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The Australian Harmonized Export Commodity Classification (AHECC) is usually updated every January and July and up-to-date versions of the classifications can be found at the ABS Website.
Warning: Failure to properly classify your product could lead to incorrect taxation on your exports and the potential loss of the product.
Customs and Border Protection provides a formal AHECC Advisory Service. This service has been developed specifically for clients who require assistance with the classification of goods for export. For more information, go to AHECC Classification.
Goods imported into Australia require classification under the Customs Tariff Act 1995. Importers need to self-assess the correct tariff classification of goods they import. Penalties may apply for incorrect or misleading information.
Australian Border Force (formerly Australian Customs and Border Protection) has a range of information and resources that will assist you to classify goods including a free tariff advice service. For more information, go to Tariff Classification of Imported Goods.
Warning: Importers need to self-assess the correct tariff classification of goods they import. Penalties may apply for incorrect or misleading information. The penalty on imports can be much higher than exports due to the duty component.
If you have any more questions on tariff classification feel free to leave a comment below.