Ref.: Tariff classification

International trade is becoming increasingly complex and intricate. The tariff classification of traded goods has historically been a complicated but fundamental technique for conducting trade transactions between all countries on the planet. A few years ago, customs professors argued that the interpretation of the rules of the Harmonized Commodity Description and Coding System (HS) would always be reserved for humans, that is, for professionals specializing in merchandise and tariff classification. But, as nothing lasts forever and the world evolves, the 21st century marks new directions and potential disruptions to old paradigms.

Just a few weeks ago, the trivialization and viralization of ChatGPT-Open AI sparked a huge global debate about the use of artificial intelligence for various purposes.

ChatGPT defines itself as a model that “can generate coherent and natural responses to questions and comments in real time, making it useful for applications such as chatbots, virtual assistants, and dialogue systems.” Many users who have tried its conversational interface emphasize one point: ChatGPT’s ability to offer very human-like responses. (Taken from https://blogs.funiber.org/)

Just as there are virulent detractors, there are also fervent fans of this new technological tool. In the midst of the Industry 4.0 era, it doesn't seem like a good time to question technological advances, nor to elevate it to the pedestal of the Olympian gods. We must be pragmatic and use technology as a support tool, as a means and not as an end in itself. We mustn't fall into the trap of blindly believing everything a machine tells us, but neither should we waste its advantages to support human expert judgment. So far, we are still necessary. Tomorrow, we don't know!

 Regarding tariff classification, three simple examples using ChatGPT: One wrong answer, one indeterminate answer, and one correct answer.

 

**********************

ChatGPT response type: Undetermined.

Correct answer: The classification of a “non-living edible insect” does not depend on the country and legislation, since according to Legal Note 2 b) of the HS, these insects are classified in the HS under heading 04.10.

 

********************

 

ChatGPT response type: incorrect

Correct answer: The classification of “fresh pineapple” by RG1 is subheading 0804.30.

 

 

ChatGPT response type: correct

Correct answer: like ChatGPT, the classification of “cell phones”, according to RG1, is subheading 8517.12

 

Corollary. Regarding tariff classification when using ChatGPT, for now, neither everything is true nor everything is false. Determining whether an answer is correct or incorrect is up to you, not the artificial intelligence tool.

 If you have any questions or require advice on this or other topics, please contact us.costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All rights reserved.

Traditional agriculture must be integrated into the technological revolution. The planet, markets, and consumers demand it. Agricultural ventures are emerging every day. Central America should be a key player in this process of change. It's not easy, but the challenge promises excellent returns in the short and medium term.

The agritech and the foodtech These are global megatrends that, rather than being a source of concern, should be part of the agenda of countries that continue to depend on agriculture and aspire to improve their productivity. State policies related to agricultural trade, aimed at agricultural, livestock, and fisheries production, the development of new products, the promotion of investment, and foreign trade, should be closely linked to new data science technologies, such as blockchain, bigdata, augmented reality, robotics, among others.

If governments, academia, and businesses don't embrace new trends, we in the region will continue to be "recipients" of new advances. Others will reap the benefits. Just remember how the Swiss became world leaders in chocolate production. gourmet without having a single cocoa tree in their territory, or how the Italians and French process millions of tons of coffee and have sophisticated the production of machines linked to that industry, while many developing countries in America, Africa, and Asia continue to export the golden bean without added value. We must work hard to change history and avoid the effect déjà vu.

various organizations and startup are researching and developing in the field of agriculture and the food tech, inventing products from soil technology, through precision technology, to solutions for big data to help distribute local food. The region's Agritech market was valued at $1.21 billion in 2021, with projected growth to $2.13 billion in 2026.https://www.entrepreneur.com/es)

Consumers are increasingly sophisticated and concerned about the environment and eating healthier foods with less polluting packaging. Food traceability, from farm to table, is now more appreciated and better rewarded. Fair trade is the reason for thousands of certifications. It's not unusual to find sneakers made from coffee grounds on store shelves or online platforms, kitchen utensils made from sugarcane bagasse or wheat fiber, foods processed with insect flour, lab-grown meats, tablets or pills containing turmeric, ginger, acerola, and dozens of superfoods, including fruits, spices, and other agricultural products.

The region's potential is enormous. It's now or never!

If you have any questions or require advice on this or other topics, please contact us. costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All Rights Reserved.

Ref.: Tariff classification

To import or export goods, member countries of the World Customs Organization (WCO) use an international instrument called the Harmonized Commodity Description and Coding System (HS). This instrument allows for the uniform identification of the numerical code and description (classification) at the six-digit level (subheading) applicable to any merchandise subject to international trade. 

The objective of the HS is to facilitate the exchange of trade and information among the countries that use it by harmonizing the description, classification, and coding of goods subject to international trade. The following questions arise: Do countries apply the HS in a harmonized manner? Is the objective of harmonization promoted by the HS being lost? And is it inconsistent to call the instrument the HS, given the frequent differences between countries when classifying certain goods?

To answer this question, it must be acknowledged that, currently, it is not difficult to identify specific cases of goods for which the customs authorities of different countries have issued divergent classification criteria. Examples include: medicines for human or veterinary use, food supplements, cosmetic preparations, liquid crystal displays, paints, alcoholic beverages, transportation vehicles, high-tech equipment, among others. This is a reality in Costa Rica and in all countries around the world, one that we cannot ignore, but that we must confront. Rather than worrying, we must address it and approach it based on the specific case at hand.

A reasonable way to do this is within the hands of Costa Rica's customs authorities. Customs policy actions should be implemented aimed at processing and issuing advance rulings on tariff classification, ideally through digital platforms. This would help generate greater legal certainty in this area. However, if in a specific case there is a discrepancy between a tariff classification criterion issued by the customs authorities of a foreign country and a criterion issued by our customs authorities, the International Convention on the Harmonized System establishes that "any dispute not resolved through good offices may be submitted by the disagreeing Parties (Governments) to the Harmonized System Committee of the World Customs Organization (WCO), which shall examine it and make appropriate recommendations for resolution."

 

If you have any questions or require advice on this or other topics, please contact us. costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All Rights Reserved.

In Costa Rica, since the early 1980s, government policies have focused on trade liberalization, export promotion, and foreign direct investment. This path led us to develop one of the most successful free trade zone (FTZ) regimes in Latin America and, arguably, in the world, which, after more than 30 years, has become the cornerstone of the national economy.

In this context, Law 7210 (Free Trade Zone Regime Law), enacted in the late 1990s, gave a boost to the manufacturing industry (processing of goods) and promoted the emergence of many service companies.

Although hundreds of manufacturing companies established themselves in the country in the first two decades, logistics services remained lagging and anchored in traditional warehousing and logistics models, such as bonded warehouses. Furthermore, logistics services were not covered under the umbrella of the free trade zone regime. This imbalance, sooner or later, would be resolved, as the growth of manufacturing companies must necessarily be accompanied by a modernization of logistics services and the emergence of a vigorous and modern logistics cluster. 

Fortunately, in the last decade, there have been important regulatory changes that have allowed Logistics Service Companies, known as "SEL Companies," to operate under the Free Trade Zone Regime. SELs are companies dedicated to providing comprehensive logistics services, such as inventory planning, control, and management; as well as selection, packing, packaging, fractionation, invoicing, labeling, unpacking, division, classification, repackaging, repacking, rebranding, grouping, and distribution of goods. 

The first reform, motivated by visionaries from the public and private sectors, occurred in July 2011 (DE 36725-COMEX-H) and aimed to add a chapter to the current regulations governing SELs. Faced with the urgent need to modernize the logistics sector, several pioneering companies became the first SELs between 2012 and 2018. Despite bureaucratic obstacles, cumbersome procedures, and limitations in public management, which have impeded the further development of SELs, seven years later, in November 2018, DE 41263-COMEX-H was published to clarify, organize, and update the SEL regulations. 

Almost four years after this latest regulatory reform, and practically eleven years after the birth of the SELs, there are still obstacles and pending tasks that state institutions have not been able to address more quickly, for example, the modernization of customs procedures, the connection of companies' inventory systems with the TICA information system, the elimination of unnecessary Technical Notes (permits or authorizations), the possibility of distributing merchandise from the SELs destined for the Golfito Free Trade Warehouse and the IMAS Stores, among others.

If you have any questions or require advice on this or other topics, please contact us. costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All Rights Reserved

Ref: CAUCA, LGA and RLGA

 

An Authorized Economic Operator (AEO) is a legal entity trusted by customs authorities and receives preferential treatment. Becoming an AEO entails being authorized or recognized by the customs authority as a company that demonstrates its commitment to security throughout its supply chain, through the adoption of practices based on improving and complying with security requirements, for the implementation of security measures in the logistics chain of goods, and for the control, streamlining, and facilitation of trade.

To become an AEO, a series of procedures and requirements must be met, such as having a satisfactory tax and customs compliance record, being up to date with tax and customs obligations, having adequate administrative and logistical management, etc. Once these conditions are verified, the General Directorate of Customs (DGA) issues the corresponding certification so that the company can enjoy the benefits established in current legislation.

Obtaining AEO status entails benefits such as streamlined customs procedures; deferred payment of customs duties without the need for a guarantee; cumulative declaration of goods, without the need for a minimum monthly import; greater security in trade; priority in the application of customs controls; payment facilities; the possibility of mutual recognition between countries; personalized and priority attention to customs procedures; authorization for the reception and physical inspection of goods at the company's facilities, among others. In turn, obtaining this certification is evidence and a symbol that the company complies with appropriate security standards and the guidelines proposed by the World Customs Organization (WCO).

This is an initiative to facilitate international trade, created with the aim of promoting agility, transparency, and security in the exchange of goods. Opting to be recognized as an AEO becomes a viable option for companies to benefit from customs procedures and to generate greater trust with the customs authority and their clients.

If you have any questions or require advice on this or other topics, please contact us. costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All Rights Reserved

On January 23, 2018, in Tokyo, Japan, 11 countries concluded negotiations for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), also known as TPP-11. The full member countries of the agreement are: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Representatives of these countries subsequently signed the agreement in Santiago, Chile, in early March 2018.

Just one year earlier, in January 2017, the United States government, led by President Donald Trump, had opted to withdraw as a signatory to the TPP-11, despite it being the most significant global trade agreement, encompassing eleven of the world's most dynamic economies. 

In September 2021, CPTPP members met to discuss the United Kingdom's membership application. At that same meeting, as a demonstration of the progress made in that membership, the Ministers of the 11 countries agreed to the creation of an E-Commerce Committee. This new Committee will promote digitalization in the region and play a central role in developing global standards in the field of e-commerce.

Costa Rica has Free Trade Agreements in force with five of the 11 CPTPP countries, four of them in the Americas (Canada, Chile, Mexico, and Peru) and one in Asia (Singapore); while Costa Rica does not have very active foreign trade with the remaining six countries (Australia, Brunei Darussalam, Japan, Malaysia, New Zealand, and Vietnam), and even with some of them, it is of little significance.

On August 10, 2022, Costa Rica's Minister of Foreign Trade, Manuel Tovar, signed a letter requesting accession to the CPTPP. Because this is such a recent request, the CPTPP Ministers have not yet had the opportunity to review it in a formal meeting.

If the application to join the Pacific Alliance (PA), made up of four Latin American countries (Chile, Colombia, Mexico, and Peru), presents an enormous challenge for President Chaves' government, a possible negotiation with the TPP-11 countries would constitute one of the greatest challenges for Costa Rican trade policy in the last 25 years.

If you have any questions or require advice on this or other topics, please contact us. costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All Rights Reserved.

The regional bloc made up of Chile, Colombia, Mexico, and Peru allows three different levels of participation for its trading partners: observer state, associate state, or party state (full member).

 An observer state can be any country that shares the principles and objectives established in the PA Framework Agreement, such as respecting the rule of law, maintaining a democratic regime, and guaranteeing fundamental freedoms, among others. These states may participate in meetings only with the right to speak, provided they are invited by the full members. Currently, the PA has 61 observer states, located on five continents, although European countries participate more heavily.

 To become an Associate State, it is necessary to negotiate a binding, high-standard economic and trade agreement with the PA—as a bloc—that favors market openness and integration. Of the four nations aspiring to this position—Australia, New Zealand, South Korea, and Singapore—the latter managed to sign a free trade agreement with the PA countries in January 2022, which will allow it to become the Alliance's first Associate State. Meanwhile, in June of this year, negotiations began on a trade agreement with South Korea, a process that, once completed, would allow the Asian country to also become an Associate State.

 The third level is accession, a process that would allow a country to become a State Party or a full member of the Alliance. To achieve this, applicants must not only express their interest in joining in writing, but also sign a free trade agreement with each of the Alliance's full members; negotiations that should focus primarily on issues related to tariffs, rules of origin, and services. Furthermore, interested countries must accept, without reservation, the provisions of the Framework Agreement of this trade bloc, as well as the instruments and commitments agreed upon by the Council of Ministers.  

 Costa Rica and Ecuador are the countries that have expressed interest in joining the Alliance as full members. In July 2022, the Costa Rican government, through the Ministry of Foreign Affairs, submitted its application to join the Alliance presidency; at the same time, it announced that it would begin negotiations for a trade agreement with Ecuador. Ecuador, for its part, is in the final stages of negotiations for a free trade agreement with Mexico after three years of discussions.

If you have any questions or require advice on this or other topics, please contact us. costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All Rights Reserved.

Ref: Pacific Alliance (PA)

 

On July 8, the Presidency of the Republic announced its decision to resume the process for Costa Rica to join, through negotiations, the Pacific Alliance bloc of countries, currently comprised of Chile, Colombia, Mexico, and Peru. In addition, a month ago, government officials had already expressed their intention to begin talks to negotiate a Free Trade Agreement with Ecuador. After eight years of hiatus, Costa Rica's trade policy has taken a significant turn.

More than just a free trade agreement, the Pacific Alliance is a mechanism for political, economic, and cooperative integration that seeks to boost the growth and competitiveness of its member countries. To achieve this goal, the member countries rely on the free movement of goods, services, capital, and people.

Since its inception, Latin America's largest trading bloc has sought to establish a presence, through joint and coordinated work, in the Asia-Pacific region, one of the regions with the greatest growth and opportunities in the global economy. 

Although we have spent many years mired in political indecision, it's never too late! We hope that Costa Rica's entry into the PA will help balance the scales and boost membership, which currently consists of four Latin American countries with left-wing governments.

If you have any questions or require advice on any other topics, please contact us. costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All Rights Reserved.

Ref: Reform Law to the General Customs Law from Costa Rica (Law No.10271)  

Importing a ship, aircraft, machinery, or equipment into Costa Rica can be very expensive because the taxes applicable upon customs clearance are calculated based on the value of the merchandise. For example, if a backhoe loader had a CIF value (cost, insurance, and freight) of US$$ 303,000,, The amount of taxes payable would be approximately US$$ 43 thousand. Until now, companies have opted to import this type of merchandise under the temporary import scheme to save taxes, although this is not always the case. this It is feasible, since this customs regime is restricted to temporary imports made by state institutions or under contracts with state institutions, called the state category.

The difficulties that companies have faced could be eliminated or reduced, since the recent reform to the General Customs Law made in Costa RicaArticle 137 bis of the Constitution creates a modality, under the import regime, that allows the introduction into the national customs territory of goods (ships, aircraft, machinery, and equipment) rented or under a leasing contract. In light of comparative customs law, this import modality is quite atypical, given that we are not dealing with a customs operation subject to the definitive import regime, since the goods entering the country are not considered to be in free circulation, nor would they be classified under the temporary import regime.

This new provision would allow the introduction into the national customs territory for a maximum period of five (5) years, of ships, aircraft, machinery and equipment, for use and destination in productive activity and under a rental or leasing contract. Consequently, a company could enter the aforementioned merchandise to be used for a productive activity, for example, construction, agriculture, industry, navigation, fishing, among others, and taxes must be paid on the value of the "lease" and not on the customs value of the merchandise.

If you have any questions or require advice on this or other topics, please contact us. costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All Rights Reserved.

Ref: Tariff Classification

 

Technology influences every aspect of our lives. In the past, customs experts pointed out that tariff classification, being a highly complex technique, would always require human intervention to interpret the rules of the Harmonized Commodity Description and Coding System (HS), and that automation would be impossible or unlikely. That perception is changing with the advent of artificial intelligence (AI).

The American company 3CE Technologies is using AI to classify goods through its Smart HS tool. According to the company, the tool is constantly learning and becomes more accurate as users use it.

Meanwhile, researchers at the University of the Netherlands are exploring the possibility of automating HS code classification to increase productivity and address the growing workloads of importers and customs agencies. To achieve this, they have tested a deep learning model called a neural machine translation model, which has so far achieved an accuracy of 85%.

At the British University in Dubai, UAE, other researchers have been exploring ways to reduce complexity in determining HS codes at Dubai Customs, using a case study approach and an HS code prediction model based on six machine learning models. 

This type of tool is likely to surpass human capacity to classify goods in the short term. Adaptation and reinvention skills for experts in this field will be the solution. Technology evolves, and customs is no exception!

If you have any questions or require advice on this or other topics, please contact us. costarica@catradeconsulting.com 

© 2022 Catrade Consulting. All Rights Reserved.