Leveraging Artificial Intelligence for HTS Classification Determination in Global Trade

by | Apr 25, 2024 | Trade Data

Recently, artificial Intelligence (AI) has been revolutionizing industries across the globe, and it is starting to make its mark across global trade and supply chain processes. AI was a big focus during this year’s International Compliance Professionals Association (ICPA) conference in San Diego, California, and there was a significant amount of interest surrounding its potential in Harmonized Tariff Schedule (HTS) classification and determination.  

In this article, we will explore the benefits and challenges of using AI for HTS classification determination. 

HTS classification of global trade goods

What is HTS Classification?   

Harmonized Tariff Schedule (HTS) classification is a standardized system used to classify goods traded internationally. Each product is assigned a specific HTS code which determines the duties and taxes that apply to the product when imported or exported. The classification process involves analyzing the characteristics of the product, such as its composition, usage, and function, to determine the most appropriate HTS code. 

Challenges Facing HTS Classification Determination   

HTS classification determination can be a complex and time-consuming process, for several reasons: 

Subjectivity: Classifying products requires expert knowledge of rules and regulations governing HTS codes, which can often be subjective and open to interpretation. 

Product Diversity: Companies that deal with a wide range of products may struggle to accurately classify each item due to the sheer volume of goods. 

Changing Regulations: HTS codes are subject to change, and staying up to date with the latest regulations can be challenging. 

Human Error: Manual classification processes are prone to errors, which can result in incorrect HTS codes being assigned, leading to compliance issues and potential penalties. 

Benefits of Using AI for HTS Classification Determination 

AI offers several advantages when it comes to HTS classification determination: 

Speed: AI systems can analyze vast amounts of data and make accurate classifications based on predefined rules and criteria. It can also provide important questions that need to be answered for appropriate classification and provide the documents you will need to import or export. 

Automation: AI algorithms can automate classification processes, saving time and reducing errors that can occur with manual analysis. 

Scalability: AI can handle large amounts of data to rapidly classify products at scale, making it suitable for businesses with diverse, high-volume product ranges. 

Challenges of Using AI for HTS Classification Determination  

While AI offers many benefits for HTS classification determination, there are also challenges that need to be addressed: 

Data Quality: AI algorithms rely on high-quality data for accurate classification, and inconsistent or incomplete data can lead to errors. 

Training AI Models: Training AI models for HTS classification determination requires expertise and domain knowledge to develop reliable algorithms. 

Interpretability: Understanding how AI algorithms arrive at a particular classification can be challenging, especially for complex products or cases.   

Due to these reasons, AI does pose a risk for businesses that choose to use it. When AI fails to provide the correct HTS classification, the importer or exporter on record is liable for the misclassification of goods and subject to the related fines. 

Misclassification of global trade goods

Conclusion 

As covered at this year’s ICPA conference, AI is transforming the way businesses approach HTS classification determination in global trade. By leveraging AI technologies, companies can crunch large amounts of data and help automate and optimize the classification process, improving accuracy, efficiency, and compliance.  

While AI will save companies both time and money, there is NO replacement for human expertise and experience, which will always be needed.  

Datamyne: Setting the Bar for AI Powered Trade Data 

As the premier provider of global trade data, Descartes Datamyne is pioneering advanced data processing methodologies. Harnessing the capabilities of cutting-edge artificial intelligence, Datamyne excels in accurately classifying U.S. imports. With an eye toward the future, Datamyne remains committed to enhancing its AI-driven features, ensuring users receive even greater insights and utility. 

Author 

Chris Kahan, Senior Account Executive

Chris Kahan 
Senior Account Executive – Global Sales 
Descartes 

[email protected] 

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