Many countries use a system of advance customs rulings (ACR), more properly known as advance rulings on classification, origin and valuation. The objective is to provide decisions on product classification, origin and valuation prior to their import or export. This offers traders certainty and predictability and allows them to make informed business decisions.
Advance rulings are issued on the request of the importer or exporter and are valid for a specific period of time. They are mostly sought by the importers on customs classification of goods, because import tariffs and other levies at the border are determined on the basis of the classification. Occasionally, advance rulings on customs classifications of goods are also sought by foreign exporters.
Advance rulings allow the importer to calculate the customs clearance costs well in advance, enabling negotiations with the exporter and ascertaining whether the price negotiated is competitive in the market. A well-defined and effectively implemented ACR system promotes consistent application of custom rulings and laws, thereby expediting the movement, release and clearance of goods, including goods in transit at the border point. A well-functioning system of ACR is widely recognized as one of the most impactful single trade facilitation measures which could result in substantially reducing transaction costs of trade. In a study by the OECD, it is estimated that approximately 5.4 per cent of trade transaction costs can be reduced by implementing an effective ACR system.