Getting ready to brace mini Y2K

There is no denying to the fact that Pakistan has to boost its exports to contain ever-growing trade deficit. Pakistani exporters have to get acquainted with Harmonized System numbers —known as HS codes. It is anticipated that changes will take effect to the official nomenclature for hundreds of product groups used to classify imports and exports. There exists more than 5,000 product categories developed by the World Customs Organization, an inter-governmental group in Brussels, which are updated every five years or so. In 2022, the biggest changes are coming for electrical machinery and parts, wood, textiles, fish and organic chemicals.

The prime area to be focused is new/revised HS codes for textiles and clothing. Two factors highlight the importance of knowing new HS codes: 1) nearly 60% of Pakistan’s export proceeds are generated from export of textiles and clothing and 2) bulk of these exports are to developed markets like United States and member countries of European Union and United Kingdom.

Export of textiles and clothing from Pakistan

Pakistan’s textile exports surged to an all-time high of US$6.04 billion in the first four months (July-October) of this fiscal year (FY22) led by value-added sector. Country’s textile exports were reported at US$4.76 billion in July-October period of last fiscal year, as per the figures of Pakistan Bureau of Statistics (PBS) and All Pakistan Textile Mills Association (APTMA). According to data, export of textile products registered 25.6% growth in October in FY22 as compared to the corresponding month of last fiscal year, whereas export of textile goods posted a growth of almost nine percent against US$1.49 billion export in preceding month of September of current financial year.

Global trade, still facing aftershocks of COVID-19 is likely to face more complications this holiday season. Many logistics managers and customs brokers are warning to get ready to brace for a mini Y2K, beginning January 01, 2022. That’s when changes will take effect to the official nomenclature for hundreds of product groups used to classify imports and exports. So-called Harmonized System numbers — known as HS codes — exist on more than 5,000 product categories developed by the World Customs Organization, an inter-governmental group in Brussels that updates these every five years or so.

More than 350 global HS codes are getting updated, and some 1,500 harmonized US tariff codes are subject to revisions, according to a recent webinar from Flexport. The categories are important, if a little wonky, because most items of international commerce falls into one and they can determine tariff levels.

Some codes are disappearing. After a respectable run through the 1970s and ‘80s, answering machines are about to lose their HS code. Made obsolete by voicemail, they rank 5,296th among 5,832 US imports this year, according to Flexport data.

Globes — those spinning spheres that taught geography to schoolkids of the 1970s — will have their number (4905.10) retired, too.

“The trade in globes is not quite what it used to be,” Marcus Eeman, a global customs manager with Flexport, lamented about the 4,025th-biggest import of United States.

Some new HS codes will appear, like one for pomace oil, a lower-grade form of olive oil.

Among the more intriguing additions, Flexport says there’ll be a “new code created for petroleum resins and other organic chemical compounds used in the manufacture of chemical weapons.” That should make it easier for authorities to track which countries are importing it and potentially using them illegally.

Other categories are getting renamed. Lamps will no longer fall under “lamps,” they’ll be classified as “luminaires.” There will be new subheadings for popular gadgets like smart phones, high-speed digital cameras and flat panel displays.

Economies preparing for the changes include the US, China, the European Union, Canada and Australia. The UK, meanwhile, is still “finding their footing with Brexit and we expect them to get their act together by the end of the year,” Eeman said.

For all the changes to take effect on January 01, 2022 in the US, there will need to be a presidential proclamation published in the Federal Register with the required 30 days of advanced notice.

So it’s worth looking out for that in coming days.

“My fear is that December 01, 2021 will come and the presidential proclamation will be published and that’s when people will start to scramble,” said Tom Gould, Flexport’s vice president of global customs. “Then Jan. 1 will hit and you’ll have a bunch of people that have products that they need to import but they don’t know the classification, because the code that they’ve used in the past is no longer a valid code.’’

Measuring the strains

The supply crunch that’s helped drive inflation to multi-decade highs shows some signs of easing in the US — but it’s still getting worse in Europe. That’s the takeaway from the latest readings on Bloomberg Economics’ new set of supply indicators. The US measure declined in October, while remaining at a historically elevated level, suggesting shortages are becoming less severe.

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