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.

There have been significant changes to global trade in recent years. Some will benefit manufacturers that work across multiple geographies, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Economic Partnership Agreement signed by the European Union and Japan, and Nafta 2.0 — the United States - Mexico - Canada Agreement.

Agreements like CPTPP, the USMCA and the EU-Japan deal seek to reduce or remove tariff barriers. However, in the last few years tariffs have been a recurring theme in the global trade space.

As well as tariffs, additional geopolitical issues have arisen in recent years. These include, new sanctions imposed on countries like Russia and Venezuela; the US withdrawal from the 2015 Iran nuclear deal; and Brexit — the UK’s withdrawal from the EU. 

Enterprises may not be able to do much about geopolitical changes and global trade uncertainties. What they can do is ensure their own operations are optimized to navigate dynamic trading environments. 

This white paper looks at best practices for global trade and transportation for manufacturers with multinational operations. Subject areas covered include free trade agreements, trade compliance and standardizing global logistics.

By optimizing their global trade and transportation operations, multinational companies gain a competitive advantage, ensure ongoing compliance and maximize logistics ROI.

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