I've worked with hundreds of European importers over 20 years. The most expensive mistake they make isn't freight, insurance, or even supplier fraud.
It's the HS code.
Six digits. Ten in the EU. A seemingly bureaucratic detail that most businesses treat as "something the supplier handles."
Until customs sends a bill for €89,000.
A mid-sized Dutch lighting distributor imported 10,000 LED ceiling fixtures from Taiwan. €320,000 shipment. Standard transaction.
Supplier provided HS code: 9405.40 (Electric lamps and lighting fittingsStatus).
Importer filed customs declaration using that code.
Shipment cleared. No issues.
Three months later, Dutch customs sent a letter:
"Routine audit. Your HS classification for shipment [ID] is incorrect. Duty underpayment: €28,160. Penalties: €84,480. Total: €112,640. Payment due in 14 days."
Then they triggered a 3-year lookback audit.
Found 6 previous shipments with the same error.
Additional penalties: €47,000.
Total exposure: €159,640.
The business had €31,000 in cash reserves.
Here's exactly what went wrong—and the systematic framework for avoiding it.
What HS Codes Are (And Why Everyone Gets Them Wrong)
HS = Harmonized System
It's a global product classification system maintained by the World Customs Organization (WCO).
Every product crossing a border must be classified:
- First 6 digits: Global standard (same everywhere)
- Digits 7-8: Regional (EU adds specificity)
- Digits 9-10: National (each EU country can customize)
Example: LED ceiling lights
- 9405 = Lamps and lighting fittings (global)
- 9405.10 = Chandeliers and ceiling lights (EU)
- 9405.40 = Other electric lamps (EU)
Same product family. Different duty rates.
9405.10 duty rate: 12.5% 9405.40 duty rate: 3.7%
Difference: 8.8 percentage points.
On a €320,000 shipment:
- 9405.10 duties: €40,000
- 9405.40 duties: €11,840
- Difference: €28,160
That's the underpayment.
The penalty is 3x that amount: €84,480.
Total bill: €112,640.
The Mistake: Trusting the Supplier's HS Code
Taiwan's tariff schedule is different from the EU's. The same product can be classified differently in different jurisdictions. Your supplier doesn't know (or care) about EU classification rules. They're classifying for export, not import.
How Customs Caught the Error
Dutch customs (like most EU customs authorities) uses risk-based auditing.
They don't inspect every shipment. They use algorithms to flag suspicious declarations:
- HS codes that seem too broad for the product description
- Duty rates significantly below similar imports
- High-value shipments from high-risk suppliers
- Importers with no customs broker (self-filing)
This company triggered three flags:
- €320,000 shipment (high value)
- Self-filed (no broker)
- Duty rate 8.8% below similar LED imports
Customs pulled the shipment documentation:
- Commercial invoice: "LED ceiling fixtures, recessed mounting"
- Product photos: Ceiling-mounted, recessed installation
- HS code declared: 9405.40 (general electric lamps)
Customs classification: 9405.10 (chandeliers and ceiling-mounted lights)
Reasoning:
- The product is designed for permanent ceiling installation
- It's not a portable lamp (9405.40)
- EU classification prioritizes mounting type over technology
Result: Reclassified. Underpayment assessed. Penalties applied.
The 3-Year Lookback: How €28K Became €159K
| Shipment Date | Value | Declared HS | Correct HS | Underpayment | Penalty (3x) |
|---|---|---|---|---|---|
| Jan 2023 | €320K | 9405.40 | 9405.10 | €28,160 | €84,480 |
| Sep 2022 | €180K | 9405.40 | 9405.10 | €15,840 | €47,520 |
| Mar 2022 | €140K | 9405.40 | 9405.10 | €12,320 | €36,960 |
| Nov 2021 | €95K | 9405.40 | 9405.10 | €8,360 | €25,080 |
What This Teaches B2B Importers
Never copy-paste a supplier's HS code. Always verify it against the EU TARIC database (free, online). If your product doesn't fit neatly into one category, hire a customs broker to classify it before you ship.
The Systematic Fix: How to Classify Correctly
A professional overseas invoice collection service does more than send reminder emails. Here's the real workflow:
Get a product sample
Physical inspection is the only way to classify accurately
The best agencies don't just chase—they diagnose why you're not getting paid first.
The Bottom Line: HS Codes Are Not Administrative Details
4 practices that drive results
Never trust the supplier's HS code
Verify every code in TARIC before you ship
Hire a broker for complex products (electronics, textiles, machinery)
Request a BTI ruling for high-value, repeat imports
These patterns are based on successful recoveries—implementation requires adapting to each debtor's specific situation.
Sarah Lindberg
International Operations Lead
Sarah coordinates our global partner network across 160+ countries, ensuring seamless cross-border debt recovery.
