HTS changes will be here on Jan. 1, 2012 — are you preparing?

The following post has been contributed by the CUSTOMS Info/Global Data Mining (CiGDM) team:

As you may be aware, the World Customs Organization’s (WCO) reform of the Harmonized Tariff Schedule will be implemented on January 1, 2012.  The new version includes hundreds of amendments to the HS nomenclature and will trigger a massive chain reaction of critical trade data changes that, if not managed effectively, may threaten first quarter or even 2012 profit projections.

HS 2012 includes 220 sets of accepted amendments, divided as follows:

• 98 relate to the agricultural sector;

• 27 to the chemical sector;

• 9 to the paper sector;

• 14 to the textile sector;

• 5 to the base metal sector;

• 30 to the machinery sector; and

• an additional 37 that apply to a variety of other sectors.

Environmental and social issues of global concern are the major feature of these amendments, particularly the use of the HS as the standard for classifying and coding goods of specific importance to food security and the early warning data system of the Food and Agriculture Organization of the United Nations (FAO).

The 2012 HS Reform will affect each of the 177 member countries of the WCO and may result in thousands or even hundreds of thousands of updates, corrections and changes in current corporate databases housing HTS data, critical to the flow of the global supply chain. For large multi-national corporations, this will impact an enormous amount of data.

It is expected that many more shipments will be detained by customs agencies around the globe compared to the previous tariff reform five years ago. Significant changes in world trade volume, computer automation, and enhanced government oversight and enforcement have created conditions that can impact the supply chain. While automation means we become more efficient, it also means we can make mistakes faster.

Delays in the supply chain hit the bottom line. A Purdue University study has concluded the average cost per day of shipping time is approximately 0.5 percent ad-valorem. For a company importing $500 million of goods annually, an average delay of just one additional day could squander as much as $2.5 million per year from the bottom line, not including the operational costs associated with late shipments, inventory outages, and lost sales.

With the deadline for this enormous task just a few months away, brokers, forwarders, and other trade professionals can easily become overwhelmed with the scope of reclassifying and re-documenting thousands or hundreds of thousands of items for multiple countries, updating enterprise-wide computer systems, notifying all trading partners and service providers, and managing differing government regulations and effective dates. All these are necessary steps to assure a smooth transition and an uninterrupted chain of supply.

Get involved now to determine the scope of the 2012 HS Reform on your global business.  View the WCO correlation tables to understand the scope of the changes and how they might affect your business. Finding which HTS codes your company will need re-classification ahead of time will help companies update their systems when the new HTS codes are released. Stay tuned for more blog posts from CiGDM and webinars on upcoming services to ease the 2012 WCO transitions.

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