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Tuesday, October 31, 2017

Global Trade Powered by AI

Another example of Analytics, AI and the supply chain.   We were winning awards for applications in this area back in the 90s,  always glad to see new examples.

Global Trade Is Powered by Artificial Intelligence

By Steve Banker , Contributor to Forbes

I’ve been researching the use of Artificial Intelligence (AI) in supply chain applications.  As I’ve written articles on this topic, vendors have reached out to me to explain what they are doing in this area.  Randy Rotchin, the CEO of 3CE Technologies, is one example.  3CE is a Montreal-based global trade management (GTM) software company. 3CE specializes in automating the processes of Harmonized System (HS) commodity classification and HS code verification.

The HS is a commodity description and coding system, which forms the basis upon which all goods are identified for customs, and is used by customs authorities worldwide.  Using the right HS code allows companies to pay the correct tariffs. And paying the right tariffs are necessary to avoid government fines, which in some cases can run into the millions of dollars, calculating the true landed cost of products, and identifying promising selling and sourcing opportunities abroad.  The problem, Mr. Rotchin pointed out, “is that there is an incredible gap between how products are described commercially by trade and how they are expressed in the national customs tariff schedules. ” This has resulted in error rates of 30%, according to several government sources. Worse, every country or trading bloc has its own taxonomy beyond the international 6-digit level.

Mr. Rotchin gave me several examples of the non-intuitiveness of HS codes.  What a regular person would describe as “baby food” in HS speak is known as a “homogenized composite food preparation;” a “hair blower” is an “electrothermic hair dressing apparatus;” before you can classify “rayon” you have to know whether this is an “artificial” or a “synthetic” fiber; and if you were classifying an automotive part, like a car alarm, you might think you would go to the section of the HS code focused on automobiles, but no – this is an electronic signaling device.

Traditionally, HS classification has been a manual exercise performed by highly-trained experts.  When a big importer loses one of their trade classification staff, they’ve lost domain knowledge that is difficult to replace. Smaller companies often rely on custom brokers to do this, but if the custom broker classifies an item incorrectly, it is the importer of record that is legally liable. .... " 

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