Finished vs semi-finished product
Tariff distinction between ready-to-use articles and articles requiring further processing, affecting classification and duties.
The distinction between finished and semi-finished products is fundamental in tariff classification as it often determines the applicable heading and consequently the customs duty rate. As a general rule, semi-finished products benefit from lower duties than finished products, reflecting the desire to promote industrial processing within the EU.
GIR 2a plays an essential role: it provides that an incomplete or unfinished article is classified as the complete or finished article if it presents the essential characteristics of the complete article in its presented state. Thus, a car presented without an engine but with all other elements is classified as a car, not as vehicle parts.
Whether something is "finished" or "semi-finished" depends on the processing stage: blanks requiring substantial further machining are classified as such, while articles needing only minor finishing (polishing, painting) are classified as finished articles. Section and chapter notes often clarify these distinctions for specific materials.
Regarding customs duties, tariff escalation means raw materials are often subject to little or no duty, semi-finished products to moderate duty, and finished products to higher duty. This tariff structure incentivises importers to favour importing semi-finished goods for local processing.