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P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Presenters: Preston Barton
Item Compliance, Research, Classification
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
• Why is Classification Important?
• Define “Best in Class Global Classification”
Process – establishing a process that demonstrates “reasonable care”
Research/Support – being able to support your classification determination with product details/spec sheets, GRIs, rulings, EN’s, and other legal basis (court cases, publications, etc.)
Documentation – a system of documenting the support from above to meet the importing country’s recordkeeping requirements.
• Benefits of Automation
Reduce Labor (Initial and Ongoing)
Reduce Risk
Increased efficiency (KPI’s/time per classification)
Decrease in classification errors and inconsistencies
Improved recordkeeping
Decrease in duty spend due to improved visibility and item compliance management
Agenda
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
• Reduce Risk
• Reduce Labor
• Increase visibility
• Increase speed and efficiency of compliance functions and supply chain
Why do we care about classification solutions?
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Comprehensive Reach Supporting Worldwide Trade
152Countries & Territories
Duty & TaxMultiple Languages
220CountriesRegulatory
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Provide Increased Visibility and Service to your customers via Descartes Global Trade Content
Country Trade Data Other Trade Data e-Commerce
• Global Tariff Codes, Duty & Tax data
• Export Control Classification Number (ECCN) /Dual Use Codes – approximately 20 countries in current library
• Rules of Origin Data for around the globe, including NAFA, US-KR and EU-Mercosur
• World Customs Organization (WCO) Explanatory Notes
• Rulings & Country Regulations
• Measures
• Military Lists
• Sanctioned Party Screening
• Food and Drug Administration (FDA) –Customized
• Customs Offices
• Shipping Rates
• Shipping Velocity
• Deminimis
• Import and Export Regulations/Restrictions
• Landed Cost Data
• Duty Rate Analysis
Digital Global Trade Data01010101101010 110101011110100
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Classification drives the entire import transaction since it determines,
identifies or impacts:
• Admissibility into destination country
• Duties owed
• Quotas
• Content requirements
• Special trade program eligibility
• Licensing
• Anti Dumping Duty / Countervailing Duty
• Can also trigger PGA requirements
Why is Classification Important?
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Why is Classification Important?
One of the most highly scrutinized area in a Customs Audit due to it’s subjective nature.
Not about right vs. wrong but being able to defend and support your classification determination.
More important than ever to demonstrate reasonable care with a solid process of support and documentation.
1 2 3
Top three reasons why classification matters
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
• Classification is subjective
• Complexity of classification and difficulties with tariff descriptions
• Classification is an extremely complex task and the tariff schedules do
not necessarily keep pace with technology
Issues with Global Classification
• Should this be classified as a speaker or as a playback device?
• Speakers are classified in 8518.21.0000at 4.9% duty
• Playback devices are classified in 8519.81.4050 at 0% duty
• Customs Ruling Reference: NY N182121, NY N243484 and NY N243110
Example: Sound bar (speaker) with internal circuit for playback capability
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Issues with Global Classification
• According to CBP, it depends on how they are torqued (See Customs Rulings HQ H100095)
• Per HQ H10095, “A bolt is an externally threaded fastener. . . and is normally intended to be tightened or released by torqueinga nut. A screw is an externally threaded fastener… being tightened or released by torqueing the head.”
Example: Are these items screws or bolts?
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Different Interpretations of Classifications Between Countries and Among
Auditors Within the Same Country
• Different customs authorities in different countries interpret the tariff
differently for the same item (despite it being harmonized to the 6
digit level for WCO countries)
• Example: Tablets or iPad, - most WCO countries classify these items
as automatic data processing machines (computers) under HS Code
subheading 8471.30, however, this hasn’t always been the case since
some countries still classify these items as cell phones or other
electronic devices.
• WCO Opinions Compendium
• EU Binding Tariff Information Reference: GB123491487
• U.S. Customs Ruling Reference: HQ H075336
Issues with Global Classification
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
• Compartmentalize - Break down the item universe into groups
• Research – always research even if you think you know how the item is classified
• Identify – Locate the necessary information you need in order to obtain the best
classification determination, i.e. – material, dimensions, etc.
• Documentation – In order to demonstrate reasonable care you need to be able
to support your classification determination
• Automation – Implement a classification tool to allow you to quickly and easily
map classifications to other countries & improve productivity and efficiency
• Maintenance/Monitoring - Consistently review HTS changes, binding rulings,
and changes to your products
Establishing A Process
Q:How do you implement Best Practices to design a classification process that meets your compliance obligations, ensures you are using the lowest possible duty rate for your item and is efficient and cost effective?
A: Start with one country, determine a methodology and map to other countries
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
• Research. CustomsInfo.com is a great resource for obtaining
rulings, Explanatory Notes, GRI’s, and even Informed
Compliance publications to help you identify the best possible
classification with the lowest possible duty rate for your item.
• Make sure you take the time to research your item.
Whether you are just starting out and don’t know where to begin or if you’ve classified this item hundreds of times and know it like the back of your hand.
• Why?
Customs logic is constantly changing (i.e. – digital still image cameras with camcorder capability, rulings NY R04381, R04507, R04505 revoked by HQ H046643 4 years later)
Technology is constantly changing and the tariff doesn’t necessarily keep up with technology (example – sound bar speakers from above, taking the time to research resulted in over $1M in duty savings)
Importance of Research
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Issues with Global Classification
• Do you classify as a plastic figurine or a “festive article”?
• Plastic figurines are classified in 3926.40.0000 at 5.3% duty
• “Festive articles” are 9505.10.2500 at 0% duty
• Per ruling HQ H167996, to be a festive article items must satisfy two criteria:
1. Must be closely associated with a festive occasion
2. Be used or displayed during that festive occasion
• Language is not in tariff or EN’s but only in rulings
Example: Plastic holiday figurine
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
It’s important to be able to support
your classifications and detail how you
came to your classification determination
by including:
Spec sheets/drawings/photos
Information requests to/from engineers, scientists, chemists, etc.
Chapter and Section Notes that apply
Explanatory Notes (not legally binding)
Informed Compliance Publications
Rulings used for applied logic or binding rulings specific to your company
Justifying the Classification Determination
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
• In the U.S., under the (a)(1)(A) list, (Section 509(a)(1)(A) of the
Tariff Act), importers must maintain all import related documents for
a period of no less than 5 years
• This includes any spec sheets, drawings, or material information that
allowed you to make a classification determination, along with any
other rulings or internal advice that you received from Customs in
making your classification determination. Other countries have similar
recordkeeping requirements
• For exports it may be even longer, exporters must maintain records
and license information 5 years from the date the license expires
Where are you storing this information now?
How long does your company maintain spec sheets or product specific information on a product that has been determined to be “end of life”?
Documentation & Recordkeeping Management
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Benefits of Automation
Increased efficiency (KPI’s / time per
class-ifcation
Improvedrecord-keeping
Reducedclass-
ificationerros
Decreasedduty-spend
Why automate?
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
KPI’s - Increased Efficiency
Companies who automate their global classification process, on average can classify 25% more items than those with a manual classification process.
0
5
10
15
20
25
30
35
40
45
Number of classifications completed per
hour (manually):
Number of classifications completed per
hour in GTD:
Items Classified Manually vs. automated with Customs Info Manager™
(automated)(manually)
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
KPI’s - Increased Efficiency
How does this translate into resources needed?
1
0,00 2,00 4,00 6,00 8,00 10,00 12,00
Number of FTEs Needed for Classification
Number of FTEs needed to classify items in GTD (assume 40 hours / week, 50 weeks / year)
Number of FTEs needed to classify items manually (assume 40 hours / week, 50 weeks / year)
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
• Decrease in classification error
rate and inconsistencies within
a product grouping
• Improved record retention
capabilities and the ability to
produce documents when
requested by Customs officials
or during a Customs audit
Overall Improved Compliance
A Better Way to Work!
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
• We understand that most customs compliance departments are
strapped for resources and time
• It is not unusual for managers/directors to spend 50% or more of
their time on classification determinations
• Automating this process can free up management time and resources
to focus on other important compliance issues or more strategic areas
to reduce duty spend such as:
Valuation
Special Trade Programs
Special Duty Provisions (9801/9802)
Minimizing Duty Spend
Strategic Planning, Cost Reduction & Improved Compliance
What are you going to do with your free time?
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Website Research1
Item Classification/Compliance Software2
e-Commerce Websites3
Other Lines of Business
Our comprehensive offering includes the following and more
Classification Services/Support4
Global Trade Management Schemas5
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Descartes Customs Info™ Reference - Reduce labor and effort involved in classification research
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Descartes Customs Info™ Manager - Speed Up Global Tariff Mapping to Other Countries & Assign Duty Rates and Taxes
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Global Trade Content Solution Footprint
Back Office Systems
GTMSystems
Trading Partner Systems
TMS eCommerceOther
Applications
Reference AuditManager
CountryData
Content Update
Mechanism
Global Trade Content
Import/Export ControlsHS / ECCN / Schedule B Trade Agreements Restricted Parties
Rules of OriginEmbargoesDocumentation Requirements
Rulings
Content
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
API Services Example:
Client system passes the following data elements (may vary based on client’s needs)
COD= AR
COO=China
Code=85171100110M
Descartes Customs Info system returns:
Duty Rate = .20 (percent)
VAT Tax = .21 (percent)
VAT Calculation Basis = CIF +Duty
Direct Loading into Client System:
Full Tariff files can be delivered, linked and housed in your system. Data includes
Full tariff codes for any required country,
Duty rates, including preferential treatments
Multiple taxes and fees
Landed Cost Data Services for Brokers
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Landed Cost Data Example
Calculable Data is also available
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
What do you do if you don’t have a fully qualified tariff code
assigned to your catalogs?
Mode Rate Analysis – Cover your costs
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
e-Commerce Country Restrictions
Examples of some Australian Restricted Goods
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Regulations for Commercial Products:
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
DeMinimis information can save you time and money
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
Q&A
P r o p r i e t a r y a n d C o p y r i g h t o f T h e D e s c a r t e s S y s t e m s G r o u p I n c . A l l r i g h t s r e s e r v e d .
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