Calling all cross-border ecommerce retailers: The universal system for international product classification is getting a major update in the new year, and it will affect how the goods you ship globally are classified and taxed.
The World Customs Organization (WCO) announced that amendments to the Harmonized System (HS) Nomenclature will go into effect on January 1, 2017. Up to 233 sets of changes have been made to the HS standards, with the goal to offer greater detail and specificity around products in agriculture, chemicals, machinery and several other sectors.
For example, the HS 2017 amendments will change how certain fish products and species are classified, which will enhance food security monitoring and improve management of this food source. Similarly, changes to chemical classifications will help pharmaceutical businesses monitor and control products in their industry.
Here’s why these changes should matter if you’re a cross-border ecommerce merchant.
Explaining HS Codes
To understand the impact this will have on online retailers, you first need to know exactly what role HS codes already play in cross-border ecommerce.
Broadly, HS nomenclature is used to classify thousands of products and goods traded in more than 200 countries. Goods are divided into around 5,000 commodity groups, each of which are broken down into further subgroups. Countries use HS codes as the basis to set their duties and tax rates, as well as import restrictions.
In other words, HS codes ensure everyone, from regulators to retailers to shippers, have a standardized system to describe products across the spectrum of international trade.
Major changes by the WCO, like the one due next January, only occur every five or six years. However, individual countries will update their HS codes on a daily basis, putting even more pressure on merchants to abide by the latest classifications.
How will the HS code update affect ecommerce merchants?
As a retailer, it’s important to know whether you’re legally allowed to ship products to buyers in a certain country, and ensure that the proper duties and taxes are paid for those products. Since HS codes play a role in establishing those rules, you’ll need to make sure the systems you use to run your ecommerce business are updated with the latest classifications.
If you’re a Pitney Bowes Complete™ Trade API user, you’re already in the clear. Our system is updated on a daily basis in accordance with the latest HS data from individual countries and the WCO, meaning you’re always working with the most recent codes.
Pitney Bowes also simplifies product classification beyond the HS nomenclature. So, rather than identifying products by broad categories (such as “machinery” or “equipment”), we identify individual goods (“laptops” or “smartphones”) so you know how the classifications apply to real-life products in your catalog.
January 2017 may bring the biggest change to HS nomenclature in years, but staying on top of product classifications is a daily challenge for retailers. The right software solution can ensure that obscure code changes aren’t holding back the potential of your cross-border business.
Learn more about how Pitney Bowes Complete™ Trade APIs simplify international trade for nearly 900,000 products in 141 import countries. See how Complete™ Trade APIs helped Bucketfeet start off on right foot entering global market.