I’ve recently been scolded for suggesting that technology might help importers and exporters deal with the complexity of the Harmonized System (HS). My critic, a director of global customs for a multinational corporation, took exception to my call for the World Customs Organization to embrace intelligent software as a way of encouraging wider HS usage and ensuring greater accuracy in HS classification.
“’Everyday traders’ may want to focus on trade and leave classification to those who were decently trained to interpret the meaning of ‘homogenized composite food preparations’ through the use of the GIR and Section/Chapter notes,” he said.
Actually, the vast majority of importing and exporting companies already contract out the classification of their products to professionals, precisely because they do not have in-house expertise.
But what if these “decently trained” professionals are wrong? Who pays the price for their mistakes?
As far as Customs is concerned, the importer/exporter of record does. Importers and exporters remain solely liable for errors committed by their professional service providers.
This point is underscored by the typical customs brokerage contract. The Canadian Society of Customs Brokers’ Standard Trading Conditions, for example, stipulates: “the client shall be solely liable for any Customs Duties, fines, penalties or interest imposed by Canada Customs with respect to the client’s goods.”
And don’t think there aren’t a lot of mistakes committed by decently-trained classification experts.
According to a variety of government reports, 30% of all entry lines are misclassified. It is also worth noting that fines associated to classification errors can reach many times the value of the merchandise itself. Sterling Footwear, Inc., for example, was recently fined $1.5 million by the U.S. Court of International Trade for “grossly negligent product classification”, and could face additional penalties of up to $20.8 million once the liability of the company’s owner and a related company are determined at trial.
U.S. Customs and Border Protection (CBP) warns importers that “errors also result when importers assume their broker is correctly classifying or valuing imported merchandise”, in its Focused Assessment Guidebook.
The Department’s Reasonable Care Checklist further cautions:
“Importers should not rely exclusively on their customhouse broker to process their imports.
If the entry documentation is prepared outside of your organization, your company should have a reliable system in place which ensures that information submitted to U.S. customs is reviewed for accuracy.
Non-compliance often results when an importer fails to have a responsible and knowledgeable individual within the importer’s organization review the customs documentation prepared on behalf of the importer by their customhouse broker.”
So, unless you are a multinational corporation with an in-house team of decently-trained HS classification experts, you might be well-served to adopt tools and practices that increase your capacity to ensure the accuracy of customs declarations made on your behalf… and not just leave it to the professionals.