Global trade has always been a labyrinth of regulations, tariffs, and paperwork. But in the current trade climate, the rules of the game feel like they’re being rewritten on the fly. One day, a product is duty-free, and the next it’s slapped with a 25% tariff. For trade compliance professionals, this unpredictability is a nightmare.

Read also: Managing Risk With Trade Compliance In Global Supply Chains

At the heart of this chaos lies product classification, the process of assigning Harmonized System (HS) codes to goods. These codes dictate everything from duty rates to customs requirements. Get it wrong, and you’re looking at fines, delays, and a logistical headache that could derail your supply chain. 

Enter artificial intelligence (AI). In a world where trade rules feel like they’re being made up as we go, AI is emerging as a lifeline for compliance teams. In fact, AI is bringing a semblance of order to the chaos by automating product classification and duty determination. But can it keep up with the dynamic and constant developments of global trade? 

The Tariff Tango: Why Product Classification is a Minefield

HS codes are the DNA of global trade. They’re a universal language that tells customs officials what’s in a shipment and how much to charge. But here’s the catch: there are over 5,000 6-digit codes in the WCO’s HS 2022 edition. Every country then has the ability to further extend these codes for more granular classifications, particularly for tariff and statistical purposes. For example, the United States uses a 10 digit system for commodities. This means that each country’s tariff book can easily climb to tens of thousands of individual tariff codes, and they change often without warning.

Manual classification is a painstaking process. It involves sifting through dense regulatory documents, cross-referencing product descriptions, and praying you didn’t make a mistake. And in the current climate, where tariffs are widely unpredictable, the stakes have never been higher.

The challenges:

• Human Error: Misclassify a product, and you could be hit with hefty fines.
• Time-Consuming Research: Keeping up with regulatory changes is a full-time job.
• Regulatory Whiplash: One social media post from the White House can upend your entire compliance strategy.

The result? A system that’s ripe for disruption.

AI to the Rescue: Revolutionizing Product Classification

AI is stepping into the breach, offering a way to automate and streamline product classification. By leveraging machine learning models trained on historical classification data and relevant regulatory data, AI can analyze product descriptions and assign the most accurate HS codes in seconds. 

How it works:

• AI scans product descriptions, technical specs, and even images.
• It cross-references this data with historical classification records and existing regulations.
• It spits out a suggested HS code, complete with a confidence score.

The benefits:

• • Speed: What used to take hours now takes minutes.

• Accuracy: AI reduces the risk of human error.
• Consistency: No more guessing games, AI applies the same logic every single time.

AI isn’t just a tool for compliance teams, it is also a shield against uncertainty. In a world where tariffs can change overnight, AI’s ability to process vast amounts of data in real-time is a game changer. 

Duty Determination in the Tariff Twilight Zone

Duty determination is where things get really tricky. With President Trump’s tariffs targeting specific industries and countries, importers are scrambling to figure out how much they’ll have to pay and whether they can avoid it altogether.

AI is stepping up here, too. By analyzing Bills of Materials (BOMs), AI can determine duty eligibility and identify opportunities under free trade agreements (FTAs). It can even flag discrepancies in duty calculations before they’re submitted to customs.

For example, a US importer of steel components uses AI to analyze its BOMs. The AI identifies that some components qualify for duty-free treatment under the USMCA (United States-Mexico-Canada Agreement). The result? Thousands of dollars in savings and a lot less stress. 

But with tariffs changing at the drop of a hat, the question remains: Can AI keep up?

AI and the Human Factor: A Partnership, Not a Replacement

AI isn’t here to replace trade compliance teams. It’s here to make their lives easier. By automating repetitive tasks like product classification and duty determination, AI frees up compliance professionals to focus on higher value work. 

What’s left for humans?

• Risk Assessment: AI can flag potential issues, but humans need to interpret them. 

• Trade Strategy: Navigating the geopolitical outlook requires a human touch. 
• Regulatory Interpretation: When the rules are unclear, humans need to make the call.

In other words, AI is the co-pilot, not the pilot.

The Fine Print: What to Consider Before Adopting AI

AI isn’t a magic bullet. To be effective, it needs high-quality data, regular updates, and human oversight.

Key Considerations:

• Data Quality: Garbage in, garbage out. AI is only as good as the data it’s trained on.
• Regulatory Updates: AI models need to be updated constantly to reflect changing regulations.
• Integration: AI tools must work seamlessly with existing systems.
• Bias: AI can inherit biases from its training data, leading to flawed classifications.

And then there’s the elephant in the room: the unpredictability of global trade. Can AI adapt to a world where tariffs are used as political leverage?

Maneuvering the Unknown with AI

The world of trade compliance is more uncertain than ever. President Trump’s newest tariffs have thrown a wrench into the system, leaving importers scrambling to keep up. But in this chaos, AI is emerging as a beacon of hope. AI is helping importers navigate the complexities of global trade with greater accuracy and efficiency by automating product classification and duty determination, but it’s not a silver bullet. To truly succeed, AI needs high-quality data, human oversight, and the ability to adapt to an ever-changing regulatory landscape.

For trade compliance teams, the message is clear: Embrace AI, but don’t rely on it blindly. In a world where the rules are constantly shifting, the human touch is more important than ever. In these strange and uncertain times, one thing is absolute: AI is here to help. 

Now is the time for trade compliance teams to explore AI-powered tools and integrate them into their workflows. Because when they do, they can enhance efficiency, reduce costs, and ensure compliance, no matter what surprises world leaders throw their way.