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Classification Of Goods For Customs Purposes

Classification Of Goods For Customs Purposes

Classification Of Goods For Customs Purposes

There Are Two Important Domains That A Practitioner Of Customs Law Has To Master.  Classification And Valuation Of Goods Are The Two Domains.  Rest Of The Provisions In The Customs Act Is Only Procedural And Of Course Important To That Extent.  It Is Also Understandable That Rules Governing Classification And Valuation Are Universal.  It Means That There Are Set Of Rules That Govern Both Domains Universally.  These Are International Rules Valid Throughout The World.  While General Rules Of Interpretation (GRI) Deal With Classification Of Goods, Customs Valuation Rules 2007 Deal With Valuation Of The Goods. In This Article, We Will Examine The Classification Rules In Part.

Sections And Chapters

There Are 21 Sections That Contain Within Them 97 Chapters.  Whatever One Sees In This World Is Assignable A Classification Code, In India We Have A System Of Assigning An Eight Digit Code For Every Product.  There Are Countries That Assign 10-Digit Code For Products.  But There Is A Commonality Among Nations In Assigning Codes. Classification Up To 6 Digits Is Common Worldwide.

The List Of Sections With Their Chapters Are As Given Below:

Section I Live Animals 1 – 5
Section II Vegetable Products 6 – 14
Section IV Prepared Food Stuffs, Beverages 16 – 24
Section VII Plastics And Articles Thereof 39 – 40
Section XI Textiles And Articles 50 – 63
Section XVI Machinery, Electrical Equipment 84 & 85
Section XVIII Photographic, Cinematographic Equipment, Clocks, Musical Instruments 90 – 92
Section XXI Project Imports, Baggage Chapters 97 & 98
Section XXI Project Imports Chapter 98.01
Section XXI Laboratory Chemical Chapter 98.02
Section XXI Passenger And Crew Baggage Chapter 98.03
Section XXI Gift Articles By Post Chapter 98.04
Section XXI Ship Stores On Board The Vessel Or Aircraft Chapter 98.05

Each Section And Chapter Has Notes Providing Guidance To Exclude Or Include Some Items In Them.  One Has To Read The Relevant Section And Chapter Before Zeroing In On The Right Classification.

Headings And Sub Headings

Once The Relevant Section And Chapter Has Been Identified, The Next Step Is To Find Right Heading And Then Sub Heading Of The Product.  Some Times, Even Headings And Sub Headings Might Have Guidance Notes Either To Include/Exclude Articles From Them.  Therefore, Care Must Be Exercised In Reading Such Instructions Carefully.  It Is To Be Remembered That Classification Up To To The Sub Heading Level (Six Digits) Is Universally Applicable.  It Means That Variation At Classification Between The Nations Is Only At The Final Level That Is Either At The 8 Digits Or 10 Digits.


HSN Tariff Number – 8-Digit Entry

HSN Refers To Harmonized System Of Nomenclature.  When We Say 8 Digit Code Or Entry For A Product, It Means That The Product Has Been Identified With A HSN Tariff Number.  It Is Important To Note That Duty Is Leviable On The Final 8-Digit Entry Only And Not On Any Other Digit.  Also Importability Or Exportability Depends On This Tariff Number Or Item Only.  The Other Application Of HSN Entry Is The Availability Of Duty Drawback And Full Or Partial Duty Exemption Under Free Trade Agreements.

But Classification Of Goods Is Always A Challenge Both For The Assesse And The Government.  Whenever A New Product Is Released In To A Market, Fixation Of Classification Is A Tough Challenge.  The Natural Tendency For An Assesse Is To Fix A Code That Attracts Less Duty Whereas Governments May Try To Reverse The Same.  But Let Us Not Forget That Classification Is An Independent Domain And Should Not Be Seen In A Parochial View Of Duty.  After All, What Attracts Less Duty Today May Attract More In Future.

Let Us Now Dissect The 8-Digit Entry:

27011100 – Bituminous Coal

The Chapter Note Defines Bituminous Coal As:


  1. For The Purposes Of Sub-Heading 2701 12, “Bituminous Coal” Means Coal Having A Volatile Matter Limit (On A Dry, Mineral-Matter-Free Basis) Exceeding 14% And A Calorific Value Limit (On A Moist, Mineral-Matter-Free Basis) Equal To Or Greater Than 5,833 Kcal/Kg.

So To Be Classifiable As Bituminous Coal, The Item Must Satisfy Both The Conditions.  Now Let Us See The Structure Of The Chapter 27 For Better Understanding And Appreciation Of Classification.

The Coal Family Consists Of Anthracite, Bituminous, Sub Bituminous And Pith.  The Above Arrangement Is In The Order Of Their Calorific Value.  But The Chapter Structure Ends Up With Anthracite, Bituminous And Other Coal.  This Means That For Classification Purposes, Sub Bituminous And Pith Are To Be Categorized As Other Coal.

It Is Important To Recall Here That Classification At The Sub Headings Level Are Universal, But Further Classification At The Tariff Entry Level Is Left To The Decision Of The Individual Countries.  For Example, In The Above Classification Structure, In ‘Other Coal’ Category, We Have Steaming Coal.  In Countries Like, US, Russia And Some Other Countries There Is No Entry Like Steaming Coal.

Again, The Entry ‘Steaming Coal’ In The Indian Classification System Is Based On End Use Whereas The Entry ’Bituminous Coal’ Is Based On Technical Parameters As Mentioned Above.  It Is Another Matter That Exactly On This Issue Bituminous Vs Steaming Coal, The Issue Is Before The Honorable Supreme Court And So The Matter Is Subjudice.

One More Example Of Difficulty Is Classification Is That Of Item Sprockets.  These Sprockets Are Used In Motorcycles.  They Can Be Classified Either As Roller Chain Under The HSN No.73151100 Or As Subheading Of Toothed Vehicles Under 84839000.  In Terms Of Indo ASEAN Free Trade Agreement , The Former HSN Attracts Nil Rate Of Duty Whereas The Latter Attracts 5%.  But The Actual Classification Is 87141090 Falling Under The Sub Heading Of Parts And Accessories Of Vehicles.  These Are Not Eligible For Concession Under The Free Trade Agreement.





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