What are the common challenges or pitfalls of using the HTS for cross-border trade?

It is significant to note that periodic audits and inspections by customs officials may be carried out to confirm the authenticity and accuracy of HTS declarations and associated paperwork. Therefore, HTS records, documentation, and communications with clients and suppliers should be kept current and accessible by customs brokers and traders. Customs brokers and traders should immediately notify the appropriate authorities and take corrective action in the event of any anomalies or irregularities. Additionally, customs brokers and traders should ensure compliance with any regional or bilateral trade agreements whose provisions may have an impact on how HTS codes and duties are applied.

Firstly, it is important to know that there are many different abbreviations for "customs (tariff) classification" by which this topic is known. The abbreviation "HTS" (="Harmonised Tariff Schedule") actually represents the complete US customs tariff number. The customs tariff nomenclature of the WCO is officially called the "Harmonised System" and has the abbreviation "HS". Again, some experts know the abbreviation "CTN", which stands for "Customs Tariff Number". The "Harmonised System" (HS) is updated every 5 years (most recently in 2022). Individual (sub-)headings are added to the nomenclature, while others are deleted. The (sub-)headings of the Harmonised System (HS) consist of 6 digits. (Example: Code 8702.00 stands for bicycles)

Before you classify a product, you must always ask yourself the following questions: - What is the description of the goods, asked from the perspective of an informed layperson? - What materials / composition does a product consist of? - What is the function of this product? Searching by means of search terms in the respective local customs tariffs is dangerous because the classification covers many different aspects. Always pay attention to the so-called "Notes" and, if applicable, "Explanatory Notes", which are visible in almost every local customs tariff. The "Notes", which include or exclude certain goods from individual chapters or sections, are always legally decisive. The goods descriptions of the first four digits are decisive.

For a long time, customs classification has been unjustly marginalized. Laypeople were quick to think that it was merely a statistical declaration. In the wake of many cross-border laws, it is now quickly becoming apparent how customs classification has gained in importance. When various nations have developed sanctions since spring 2022, when Russia invaded Ukraine, many goods were sanctioned in one fell swoop with their customs tariff numbers as distinguishing features. Well-prepared companies were able to quickly determine which goods were still allowed to be shipped at the click of a mouse. For example, the EU's Carbon Border Adjustment Mechanism (CBAM) also lists affected customs tariff numbers in its annexes.

Navigating the Harmonised Tariff Schedule (HTS) for cross-border trade can be complex due to classification errors, constant updates, and varying interpretations across countries. Misclassification and compliance issues can lead to fines and delays. Integrating AI into customs processes enhances accuracy and reduces risks, making international trade smoother and more efficient. It can help by accurately classifying goods, providing real-time updates, predicting disputes, automating documentation, and ensuring regulatory compliance.