Classification is where risk begins, and compliance can come unstuck. It's where costs can quietly mount and where seemingly small decisions can have big regulatory consequences.
Particularly when two near-identical products land under completely different tariff codes. That’s why classification is increasingly seen as a strategic consideration in international trade operations.
It is also the focus of an upcoming webinar the Chartered Institute of Export & International Trade is hosting with TariffTel’s head of customs and compliance, Elizabeth Davies, next week (21 October): ‘It all starts with a code’.
This session is designed to help anyone dealing with classifications to better understand the commercial, compliance and operational impact of ensuring accurate classification, and why confidence in your codes is critical.
With estimates suggesting that 2 in 5 classifications are incorrect, Davies says “misclassification is a daily threat hiding in plain sight but can be avoided if you know where the risks lie”.
Ahead of the webinar, the Daily Update caught up with Davies to explore some of the most common dangers and discuss how customs professionals can protect their operations with accurate tariff codes.
Daily Update (DU): Why is accuracy in classification important?
Elizabeth Davies (ED): Accurate classification is central to every customs declaration. In 2024 alone, over 84 million import and export declarations passed through UK borders, each one reliant on the correct tariff code. Yet many businesses still rely on manual processes or inaccurate answers from AI, leaving them exposed to costly errors and possible incorrect duty rates.
It’s not uncommon for companies to overpay £100,000 or more in duties each year and when misclassification happens, often undetected for years, this mounts up. As HMRC itself recommends, “You must identify the correct commodity code before you start completing your import or export declaration.” Everything starts with the correct code.
DU: Is classification straightforward?
ED: Classification requires human judgement, and solid documentation for audit purposes. Sometimes there can be a difference in interpretation across regions which adds greater complexity and requires investigation.
For example, with Halloween approaching, many seasonal products come through customs, and some may not have a straight-forward route to a code. A US cross ruling on four polyethylene “assorted rats in aggressive poses” determined that the rats were too realistic to be considered toys and were instead classified under 9505.90.6000 as “festive articles”. Whereas, in contrast, the EU classified a single plastic rat with red eyes under 3926.40 as an ornamental plastic article.
These products were strikingly similar in both appearance and purpose. Yet they received different classifications due to differing interpretations of what qualifies as a “festive product”.
The EU Explanatory Notes only reference ‘Jack-O-Lantern’ pumpkins as products that meet the definition of ‘festive articles’. Within binding rulings, this means that often products without a “Jack-O-Lantern” element are not considered “festive articles”.
The US interprets the wording of the tariff and Explanatory Notes more broadly, thereby allowing more Halloween products to be classified as “festive articles”. The same decorative rat may be duty-free in the US but attract a 6% duty in the EU. This difference in duty can have a significant impact on profit margins.
DU: What common mistakes do you see in classification?
ED: The most common mistakes affecting tariff code accuracy often stem from teams trying to be efficient and classify quickly.
A ‘Copy‑paste culture’, reusing old codes without checking updates to the tariff book, GIR notes, or regulations, is one of those easy to make mistakes.
Small product tweaks, like an added pocket or a change in fabric, can also shift a code, yet often go unnoticed. Incomplete or inaccurate product data from suppliers or brokers leaves teams classifying with only part of the picture.
That’s why involving your suppliers through a central classification system such as TariffTel can be beneficial. Everyone’s classifying with up-to-date, detailed data about a product.
Shifting trade agreements and regulatory updates further complicate matters, and without a system to track these changes, and send immediate notifications, it's easy to fall behind. Lastly, while AI tools can support the process, over-reliance leads to generalisations and often leaves teams without the documentation they need to be audit ready.
As the Halloween rat example shows, the interpretive nature of the tariff means that products can be classified differently based on region, and there is a great deal of nuance within the tariff that AI systems simply do not have the ability to understand at this stage. Human insight remains essential if you’re to have confidence in your codes.
Classification decisions affect many aspects of trade. They underpin duty rates, compliance and competitiveness.
Small mistakes can lead to major costs. Get the tariff code right at the start and it’s the recipe for a more streamlined and efficient supply chain which means products arrive on shelves on time, and don’t run any compliance risk.
You can sign up for the public webinar, here.
