Global Trade Braces for a Mini Y2K With Customs Code Overhaul

Picture by Kyle Glen

The following article was published in Supply Lines, Bloomberg

As if the foot soldiers of global trade needed more complications this holiday season, many logistics managers and customs brokers are starting to brace for a mini Y2K moment come Jan. 1.

That’s when changes will take effect to the official nomenclature for hundreds of product groups used to classify imports and exports. So-called Harmonized System numbers — known as HS codes — exist on more than 5,000 product categories developed by the World Customs Organization, an intergovernmental group in Brussels that updates them every five years or so.

In 2022, the biggest changes are coming for electrical machinery and parts, wood, textiles, fish and organic chemicals.

More than 350 global HS codes are getting updated, and some 1,500 harmonized U.S. tariff codes are subject to revisions, according to a recent webinar from Flexport. The categories are important, if a little wonky, because most items of international commerce fall into one and they can determine tariff levels.

Some codes are disappearing. After a respectable run through the 1970s and ‘80s, answering machines are about to lose their HS code. Made obsolete by voicemail, they rank 5,296th among 5,832 U.S. imports this year, according to Flexport data.

Globes — those spinning spheres that taught geography to schoolkids of the 1970s — will have their number (4905.10) retired, too.

“The trade in globes is not quite what it used to be,” Marcus Eeman, a global customs manager with Flexport, lamented about the U.S.’s 4,025th-biggest import.

Chemical Weapons?

Some new HS codes will appear, like one for pomace oil, a lower-grade form of olive oil.

Among the more intriguing additions, Flexport says there’ll be a “new code created for petroleum resins and other organic chemical compounds used in the manufacture of chemical weapons.” That should make it easier for authorities to track which countries are importing it and potentially using them illegally.

Other categories are getting renamed. Lamps will no longer fall under “lamps,” they’ll be classified as “luminaires.” There will be new subheadings for popular gadgets like smart phones, high-speed digital cameras and flat panel displays.

Economies preparing for the changes include the U.S., China, the European Union, Canada and Australia. The U.K., meanwhile, is still “finding their footing with Brexit and we expect them to get their act together by the end of the year,” Eeman said.

For all the changes to take effect on Jan. 1 in the U.S., there will need to be a presidential proclamation published in the Federal Register with the required 30 days of advanced notice.

So it’s worth looking out for that in coming days.

“My fear is that Dec. 1 will come and the presidential proclamation will be published and that’s when people will start to scramble,” said Tom Gould, Flexport’s vice president of global customs. “Then Jan. 1 will hit and you’ll have a bunch of people that have products that they need to import but they don’t know the classification, because the code that they’ve used in the past is no longer a valid code.’’

Source: Bloomberg, authored by Brendan Murray, 24 November 2021

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