Customs transcodification: a technical challenge for international trade

As economic blocs redefine their trade policies - such as the updating of TARIC codes in the European Union, the overhaul of HTSUS in the USA, or the introduction of new customs subcategories in China - knowledge of customs transcoding becomes an inescapable necessity. For behind this technical term lies an imperative need for companies: to ensure that their goods are correctly classified in order to avoid blockages, additional costs or sanctions at the border.

Transcodification: a technical imperative in a world of shifting borders

Transcoding is the process of converting a tariff code from one country to another according to the customs nomenclature specific to each region.

If the?World Customs Organization (WCO) has set up the Harmonized System (HS), which forms the basis for classification in over 200 countries, this structure is not uniformly applied. Each nation, and even each economic union, adds its own specific features. Thus, a product classified under a code in the European Union may require a specific correspondence to be exported to the United States, China or South America.

"The same product may be subject to radically different tariff and regulatory obligations depending on the territory in which it is introduced. Transcoding is therefore not a simple mechanical correspondence: it requires an in-depth understanding of the legal and fiscal nuances inherent to each market", emphasizes Jean-Marc Vandenbussche, Customs Expert at MyTower

The diversity of tariff classifications: a challenge for companies

While the HS is based on a common six-digit base, many countries add several levels of detail. Among the most widely used systems :

• TARIC (Integrated Tariff of the European Community): used by the European Union, it incorporates sub-codes of up to ten digits to detail regulations specific to member states.
• HTSUS (Harmonized Tariff Schedule of the United States): a classification specific to the United States, incorporating distinctions tailored to the country's strategic needs.
• Mercosur Common Nomenclature (NCM): used in Brazil and the other Mercosur countries, it incorporates specific tax and tariff features for each federated state.

Beyond this diversity, each country can change its nomenclature at any time, adding further complexity for exporting companies.

The consequences of incorrect transcoding

Far from being a simple bureaucratic exercise, transcoding has a direct impact on the profitability and competitiveness of companies. An error in product classification can have immediate repercussions:

• Customs blocking: if goods do not meet the requirements of the importing country, they may be held back for inspection or reclassification, delaying deliveries and incurring additional costs.
• Financial penalties: incorrectly calculated customs duties can lead to retroactive adjustments and fines for inaccurate declarations.
• Impact on the supply chain: prolonged delays or contentious classifications can affect a company's reliability with its trading partners.

"Companies often underestimate the risks of misclassification. An incorrectly transcoded product can be requalified by local customs, leading to unforeseen costs and delays that are difficult to absorb", points out Jean-Marc Vandenbussche.

Changing regulations complicate the process

One of the major difficulties in transcoding is the frequency with which customs nomenclatures are updated.

A striking example is the Gulf Cooperation Council (GCC). In the space of a few weeks, this grouping changed its nomenclature from an eight-digit to a twelve-digit system.

"This sudden change forced companies to review their entire tariff classifications in record time. Those who were unprepared suffered major delays and additional costs", explains Jean-Marc Vandenbussche.

Conclusion

In a commercial landscape where regulations evolve in line with economic strategies and sovereignty imperatives, customs transcoding cannot be reduced to a mere administrative exercise. Behind the conversion of tariff codes lies a major strategic challenge for exporters, involving risk management, cost optimization and the fluidity of international trade. The example of the transition to a 12-digit nomenclature within the Gulf Cooperation Council bears witness to this: a company that is ill-prepared for regulatory changes exposes itself to logistical disruption and considerable financial repercussions.

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Article written by Jean-Marc Vandenbussche, Customs Consultant at MyTower