The intricate world of international trade can intimidate businesses involved in importing and exporting products. Achieving compliance with customs requirements and reducing the possibility of expensive delays, fines, and penalties are crucial aspects of this process, especially in trade classification.
Classifying imported or exported products is a complex endeavor. Numerous potential pitfalls can trip up even seasoned professionals. Some of the most frequent errors include incorrect or outdated product classifications, improper use of classification codes, and misinterpretation of classification guidelines.
While these mistakes might appear minor, they can lead to significant consequences, such as:
Delayed shipments: Improperly classified products may face hold-ups at customs until the correct classification is determined, delaying shipments and causing financial losses for importers or exporters.
Increased costs: For example, if importers or exporters pay the incorrect customs duty amount due to a wrong classification, they may need to pay the difference plus interest, which can become a substantial financial burden.
Potential legal issues: Importers or exporters who classify products non-compliantly may face fines or other penalties.
Reasons for trade classification mistakes and errors
Several factors contribute to the prevalence of trade classification errors, including the complex nature of international trade classification systems and constantly evolving procedures.
Manual processes and data entry errors also pose challenges in trade classification, particularly in systems like the Harmonized System (HS). A Thomson Reuters and KPMG study (as cited by the World Customs Organization) discovered that 95% of participants encountered difficulties with HS classification, emphasizing the challenges of predominantly manual classification processes.
The enormous volume of daily imported and exported products enables errors to slip through unnoticed in various trade classification systems. Additionally, insufficient internal procedures and control mechanisms worsen these problems, leaving inaccuracies undetected and unresolved.
Strategies successful global traders use to avoid mistakes and errors
Global traders avoid trade classification pitfalls by employing various strategies, including staying current with the latest classification guidelines and changes and ensuring their staff is well-informed and capable of classifying products accurately.
However, leading global traders understand the importance of establishing robust internal processes for classification and utilizing intelligent solutions like ClassifAI, a machine learning assist tool for trade classification.
ClassifAI significantly lowers the risk of human error by standardizing and automating much of the classification process and offering a more efficient method of handling classification tasks. It employs algorithmic intelligence and continually learns and updates its knowledge base to stay current with classification changes, ensuring that businesses using the platform comply with the latest requirements.
With ClassifAI, global traders can achieve the following:
- Predict trade classification with 99%+ accuracy
ClassifAI harnesses the predictive power of product-related supply chain data already existing in the company’s ERP system. It helps achieve 99% accuracy in predicting the correct classification for fully qualified HS codes and more than 99% for the 6-digit harmonized classification.
- Empower users to confidently choose classifications
ClassifAI’s predicted classifications are accompanied by predicted probabilities. When there is a high likelihood for a single AI-suggested classification, the tool assists users in reaching a decision, offering extra reassurance when selecting evident classifications.
- Avoid costly consequences
By improving classification accuracy, ClassifAI reduces the risk of delays and penalties associated with classification errors, saving businesses both time and money.
- Improve efficiency
The increased efficiency the tool provides frees up valuable resources, allowing staff to focus on other important tasks and responsibilities.
- Increase compliance
By staying up-to-date with the latest classification changes, the platform helps businesses reduce their audit risks and maintain a strong reputation within their industry. This can be particularly important for companies operating in highly regulated sectors, such as life sciences and chemicals.
ClassifAI supports multiple industries, catering to various sectors and ensuring that the platform is tailored to meet specific classification needs. This level of customization and adaptability is invaluable for companies dealing with diverse product lines and ever-evolving regulations.
Moreover, ClassifAI seamlessly integrates with existing systems and processes, allowing businesses to easily incorporate it into their current workflows without the need for extensive changes or overhauls.
In the competitive landscape of global trade, minimizing trade classification mistakes and errors is essential for ongoing success. By leveraging advanced technology like ClassifAI, businesses can simplify their classification processes, improve accuracy, and reduce the risk of costly mistakes.
Don’t let trade classification errors hold your business back. Learn more about how ClassifAI helps overcome common classification challenges and enhance your global trading capabilities. Request a demo today.