Impact of classification of goods on customs duties – opinion of the Advocate General of the CJEU in case C-104/23

On January 18, 2024, the Advocate General of the Court of Justice of the European Union issued an opinion on the customs classification of prefabricated buildings. The case focuses on whether these buildings, which are mainly made of plastics, should be classified as “prefabricated buildings” under tariff heading 9406 or as “other articles of plastics” under heading 3926.

Features affecting classification

According to the Advocate General, the classification criteria for a good to particular tariff code, should be based on a detailed analysis of the characteristics of the product and its intended use, in particular:

1. material of manufacture, where the key role is played by the distinction of materials between plastics and other construction materials.
2. purpose and functionality, in particular determining whether the product is used as a building.
3. the possibility of assembly and disassembly, where attention should be focused on the object’s ability to be easily assembled and disassembled and its portability.
4. durability and nature of use, i.e. whether the product is intended for temporary or permanent use.

The Advocate General points out in his opinion that these criteria should be crucial in deciding on the appropriate tariff code, and thus have a significant impact on the determination of customs duties. The difference in customs duty rate between different classification categories, such as “prefabricated buildings” and “other plastic articles,” can be remarkable. Typically, different product categories are subject to different customs duty rates, which can affect the total cost of importation.

What should entrepreneurs pay attention to?

The consequences of the Advocate General’s opinion and, possibly, the CJEU’s judgment are primarily related to the correct customs classification of goods. Depending on the classification of the goods in question, entrepreneurs should pay attention to:

1. different rates of customs duties – different classification of goods may entail consequences related to incorrect determination of the amount of customs duties, which will consequently affect the cost of importing products and potential penalties for misclassification of goods,
2. individual regulatory requirements – misclassification may involve failure to meet requirements related to non-tariff import restrictions,
3. business relations – tariff misclassification can also affect the communication process with Customers both financially and operationally.