Any organization that is involved in international trade must ensure that their products are correctly classified. The commodity code is arguably the most important data element in international trade.
The Harmonized System was introduced in 1988 by the World Customs Organization (WCO), to serve as a standardized nomenclature for the classification of trade goods.
Each country’s tariff is uniformly structured in that all goods align or ‘harmonize’ through the tariff’s first six digits. This allows one country’s export classification to align with the importing country’s classification thus
facilitating the uniform identification and treatment of goods between customs regimes.
For importing companies with Importer of Record (IOR) responsibility, the most immediate impact of the assigned HS Code is with regard to duty liability. By ensuring the accuracy of its product classifications, companies are ensuring that they’re paying the correct amount of import duties – no more, no less. However, it also includes their ability to identify and enter qualifying products for duty-free treatment under an eligible Free Trade Agreement (FTA).
Conversely, there are numerous cases of companies which failed to apply the proper level of ‘Reasonable Care’, as required by US Customs, which were subsequently hit with actions for up to five years of additional back duties and interest, some equating to several hundreds of thousands of dollars.
Duties aside, an incorrect HS Code can subject a company to unnecessary quota, antidumping, or other Government admissibility requirements which could add damaging time, cost and oversight to its trade operations.
And then there’s potential penalties.
In the white paper, Jerry Peck, a global trade professional with more than 35 years of experience, describes why companies struggle with product classification, as well as common misperceptions and industry best practices.
Please CLICK HERE to download the white paper.