Tariff classification of food products – meticulous care is required.

In Korea, meticulous care is required in classifying food products. Depending on the processing method and degree, ingredient, composition, use, etc., we can consider several HS codes belonging to different Chapters with huge difference in tariff rate.

 

So, prior to importing food products to Korea, it is required to confirm tariff classification ruling of similar food products. If it is found that the competent agency, CVCI (Customs Valuation & Classification Institute) has determined different HS codes for the similar food products or no relevant rulings are found, it is highly recommended to apply for advance ruling on tariff classification. No processing fee is levied for the application. Only KRW 30,000 shall be paid as analysis fee if any physical or chemical analysis is required.

 

It shall be noted that analysis performed by a lab inside a customs office is not considered as such advance ruling. Only through the application for tariff classification filed with CVCI, we can have binding ruling pursuant to Article 86 of the CUSTOMS ACT.

 

Under Article 85 of the CUSTOMS ACT,  the MOEF (Minister of Economy and Finance) may establish standards necessary for applying tariff classification and such standards are notified as the RULES ON STANDARDS FOR APPLYING TARIFF CLASSIFICATION PURSUANT TO ARTICLE 85 OF THE CUSTOMS ACT (관세법 제85조에 따른 품목분류의 적용기준에 관한 규칙).

 

While there are limited kinds of agricultural, forest, livestock and fishery products Korean government intends to protect complying with the Marrakesh Agreement Establishing the World Trade Organization, the explanatory notes of Chapters and Headings where such products can be classified are not specific enough to reflect Korean government’s intention. Thus, lots of standards included in the Rules are for classifying agricultural, forest, livestock and fishery products appropriately.

 

Ignoring such rules can be fatal. For example, when classifying roasted quinoa, 1904.10 would seem the most appropriate because the description of the subheading is “Prepared foods obtained by the swelling or roasting of cereals or cereal products”.

 

However, in Korea, the following standards shall be checked as well:

ü  The shapes of the starch granules inside was completely destroyed to the center and pore was formed to the center if they are examined on cross section by electron microscope; and

ü  The crystal structures are modified to an amorphous substance with X-ray diffraction analysis.

 

Only if the standards are all met,  roasted quinoa can be classified in 1904.10-9000 to which 5.4% tariff rate applies. If not, it shall be classified in 1104.29-9000 as other worked grains to which 800.3% tariff rate applies in the case of not receiving recommendation within the limit of the market access volume.

Without reference for comparison, determining whether the standards are met can be subjective. So, applying for advance ruling prior to importing roasted quinoa and acquiring the pictures of cross section and X-ray diffraction analysis report for each shipment can be the way to hedge against tax collection resulting from inappropriate tariff classification.

 

Food products are more influenced by regional culture and practices than industrial products. That’s why we should take extra care in classifying food products.