Choosing the right software for your business can be daunting. Due diligence often involves such time-consuming exercises as performing credit checks to make sure that the vendor will be around for a long time, reading authoritative reviews to see how they stack up in their industry, and testing the application to see if it performs as promised and meets your requirements.
One quick and easy way to trim the list of potential candidates is to have a second, closer look at their sales materials.
Bad sign # 1 – The candidate’s website and promotional materials show misclassified products.
For companies looking for software to support their import/export business (often collectively described as Global Trade Management, or GTM applications), two bad signs in particular are worth looking out for.
Proper classification is so basic, so elemental to cross border trade, there’s no excuse for sales materials with commodity coding errors.
The most egregious example that I have discovered to date involves a GTM company whose product management table is comprised entirely of misclassified products. If that weren’t enough, 6 of the 10 codes assigned were not even valid HS codes – several of which appear to be totally random numbers! For example, “11301” was the “HTS” code assigned for a sofa. Other examples included Footwear that was classified under heading 8301 (Padlocks) and furniture knobs that were classified under heading 9003 (eyewear frames).
Here is a screenshot showing the misclassification of a “white desk with brown accent…” and a “round three-legged side-table”. In both cases, the “HTS” code is invalid. It is worth noting that heading 61.10 (used for the desk) provides for “Jerseys, pullovers, cardigans, waistcoats and similar articles, knitted or crocheted”, and chapter 93 (used for the side-table) provides for “Arms and Ammunition; Parts and accessories thereof.”
Bad sign # 2 – The company’s software displays national tariff information unfaithfully.
The Harmonized System (HS) nomenclature and national tariff schedules are comprised of hierarchically structured goods descriptions wherein every child inherits the attributes of its parent. A proper reading of any tariff schedules requires first navigating through the appropriate HS section, then 2-digit chapter, then 4-digit heading, then 6-digit subheading, then 8-digit national subheading, and so on. If any level of the hierarchy is missing, then it will be impossible to properly read the schedule and classify your product.
Too often, tariff codes are presented by GTM software companies in a flat table and without any hierarchical context. Even when a national tariff code explicitly describes a product, this can be deceiving. The Customs Tariff of Canada, for example, has 9 different tariff codes describing simply “doughs”. The only way to distinguish one dough from another is to see what attributes it inherits from its parents in the schedule.
Worse still, is when a GTM company presents the hierarchically structured schedule with levels missing. Even more serious than a complete flattening of the tariff schedule is the omission of descriptions at any of the levels. When a level of the tariff schedule is not presented, the illusion of context is created and misclassification is almost guaranteed.
To illustrate, one GTM software company’s tariff repository includes a hierarchically structured version of the European Union tariff schedule (TARIC). However, their presentation does not include any of the so-called “orphan headings”. Orphan headings are goods descriptions that have not been explicitly linked to a numerical code, but are no less critical to proper classification. The company’s presentation of subheading 9503.00, for example, shows the TARIC code for “Dolls”, but does not present the contextual “orphan” parent which stipulates that 9503 00 21 provides for “dolls representing only human beings”. Dolls that represent animals or non-human creatures are provided under an entirely different code, but the importer can hardly know that since there are no such indications in the company’s presentation of the TARIC. (Incidentally, the subheading denoting toys representing non-human dolls is also missing).
Of course, nobody is perfect… but some mistakes are forgivable, and others are not. Classification errors and unfaithful tariff information in a GTM software vendor’s sales materials should be viewed as giant red flags when considering their software.