Artificial intelligence (AI) has been transforming all sectors of the economy over the last couple of years - and international trade is no different. While there are several ways in which this technology can be used to automate processes and streamline operations, one of the main areas where it has already proven beneficial is in assigning customs tariff classifications to goods.
At MIC, we've been developing a powerful AI tool to assist with this process and ensure that all shipments are compliant with local regulations. Already, we've been able to save our customers huge amounts of time while also delivering very high levels of accuracy. Here's why this matters and how it works.
The challenges of customs tariff classification
While there are several systems for customs tariff classification in use, the most common is the Harmonized System (HS), which is used for the vast majority of trade. In principle, this offers a clear system for classifying goods, with more than 5,000 commodities identified by a six-digit code.
However, it's not always easy to determine which code should be applied to a specific item. Manufactured goods that contain multiple components can be hard to accurately classify. As a result, checking and assigning codes can be a complex, time-consuming process with much manual effort involved.
Yet the consequences for errors can be high, ranging from delays at customs to businesses paying incorrect rates for their shipments. AI offers the opportunity to not only speed up the process, but make it more accurate.
How AI streamlines the classification process
There are two options for how AI can be integrated into a customs tariff classification system, using either discriminative or generative AI.
Discriminative AI works by identifying and analyzing data based on pattern recognition. AI solutions that are trained on a company's products can use a range of tools to examine the information provided and compare it to historical examples. The AI can then recommend a list of the best-matching classification codes that can either be applied automatically or reviewed by human oversight before being assigned.
Another option is to use generative AI. This works much like a ChatGPT or Gemini chatbot and allows employees to have a more human interaction with the AI. For example, they can start by describing the item in question and then have a conversation to establish details and narrow down code options. Users of these tools can ask the chatbot for explanations to justify its recommendations in order to further their understanding of the decision-making process, or use its feedback to refine their input prompts and ensure a more accurate classification.
The benefits to importers and exporters
Whichever option employees prefer, the outcome should be a much speedier, more accurate process for customs tariff classification. Key benefits businesses can expect to see when adopting this technology include:
- Time saving: Automation of these tasks frees up employees to focus on other areas.
- Improved accuracy: AI increases consistency and reduces the risk of mistakes.
- Better knowledge sharing: The tools can be used by any employee, even those without great experience of customs classification, while the results can help with their own learning.
- Scalability: AI tools can be used on even the biggest projects without difficulty.
By taking advantage of advanced AI capabilities, businesses can make the complex and time-consuming task of tariff classification much faster, more efficient and more accurate.
As well as ensuring compliance with all local rules and regulations, this enables firms to take advantage of any available trade incentives and improves productivity. In the coming years, as AI becomes more embedded in every aspect of the economy, firms that don't use this technology may find themselves quickly falling behind.
Want to know more about how MIC uses AI to improve processes for our customers? Sign up here to download our white paper, Customs Tariff Classification and how to Benefit from AI Integration.