The technology sector rapidly evolves with new technologies such as the Internet of Things and intelligent systems. The technological evolution calls upon new regulations globally and across various industries. This is to ensure data privacy and safeguard against the negative potential of the technologies.
Take, for instance, the emergence of digital platforms and online marketplaces. Small to medium-sized businesses can tap into new markets and reach a global audience with these platforms.
However, the developments challenge policymakers to rapidly evolve regulations to cater to the risks associated with the seemingly uncontrollable use of the platforms. And the challenge is not on the policymakers only. If you are a technology developer or provider, coping with the rapidly evolving regulations can be challenging. You can easily fall prey to non-compliance unaware, which makes customs compliance in the tech industry a hot topic.
This article discusses what customs compliance in the tech industry implies. You will learn the technology customs compliance challenges and how to ensure compliance within the tech sector.
Let’s dive in!
What are ICT standards in international trade?
Due to the fast-paced technological advancements, ICT standardisation has become essential in protecting users and the global economy. They are coordinated non-tariff rules and guidelines for interfaces, devices, and networks.
ICT standards rule digital markets to ensure secure use of the technical infrastructure and model a safe ecommerce environment. They also serve as barriers and enablers of cross-border technology transactions and can even lay a foundation for promoting national values at the global level.
ICT standards differ from country to country since the private sector sets them, and the WTO has no control over them. They are beneficial in protecting the local economy and serve as a measure of preferred quality when trading in these markets.
Hence, they are an added compliance requirement besides the WTO’s customs regulations for technology. This is why, if you are importing technology, you must ensure compliance with the destination country’s local standards and you must also comply with the WTO customs regulations.
Leading technology customs compliance issues
Most companies, if not all, know the intricacies of trading technology, whether hardware or software. Even companies anticipating to venture into cross-border trading in this sector may know the process is complex.
But how challenging is moving technology across borders?
Let’s face it. Should software products delivered in physical form count as goods or services of trade when assigning classification codes? Is the World Trade Organization (WTO) the only authority responsible for technology licensing requirements?
If you run an IT company internationally, you can attest to the growing complications of ensuring accurate tariff classification and customs valuation.
Country-specific regulatory issues
One of the leading challenges in technology compliance is product valuation for customs declaration.
Technology has been evolving faster than customs regulations are being updated. Different countries are formulating varied licensing requirements to ensure security, safety, and data privacy when using the technology.
As a result, an importer has to deal with varied country-specific IT regulations rather than international trade customs.
Meeting country-specific regulations means fulfilling various unique procedures, some of which are manually executed. Hence increasing the risk of non-compliance.
For instance, China has two sets of export and import control regimes for technology. One for civilian technologies and the other for sensitive technology-related items, including biological supplies and missiles. The regulations are based on three types of technology—prohibited, restricted, and free. China lists items for each category that meet the defined characteristics.
Items in the prohibited category cannot be exported or imported into China. Items not listed in the prohibited and restricted technologies can freely move in and out of China, but you must register the transaction with the government.
Restricted technologies demand accompanying licenses approved by China’s government. You must possess a relevant license to export or import an item in the category.
Acquiring a relevant license demands an understanding of the accurate classification of the technology. Then, you can navigate the process of applying for the export or import license.
Considering China is just an instance, importing into various countries with such varied procedures can be daunting.
Issues with customs valuation for software products
Software installed in other devices, such as a server, operating system, or personal computer, differs from physical media such as a CD/DVD. The physical media is considered a carrier, while the software device isn’t.
When classifying these media devices, importers find it challenging to determine the correct classification code. This is because the software or instructions in a carrier should be valued rather than the carrier, although the carrier crosses the border.
The ICT services complementary grouping constitutes four categories:
- Telecommunication services: telecommunication services, internet communication and broadcasting services.
- Computer services: computer software originals, downloads, online software and in-line software.
- Other computer services: IT consulting and support services, application design and development and network design and development.
Hosting and IT infrastructure provisioning, network management, maintenance and repair, education and training also fall into this category. - Licenses to produce or reproduce computer software: Licensing services for the ethical use of the software.
The ICT goods categories and composition (HS 2017) are even more complicated. The classification constitutes 93 items under unique codes for the varied ICT products.
The concern arises with the ICT services and goods categories:
Should software shipped as physical items be classified as goods or services?
Also, given the complexities, how long should an importer take to ensure accurate classification of ICT products or services?
Although the UNCTAD has been proposing revisions for the Harmonised classification codes, importers still find it challenging to classify technology correctly. Incorrect technology classification can lead to duties, tariffs, and tax overcharges. It can also lead to the seizure of IT hardware or prohibition of the import transaction.
How do you ensure compliance within the tech industry?
Ensuring compliance for the successful importation of technology requires understanding various aspects.
Here are some of the questions you can attempt to answer if you are planning to import technology:
- What customs regulations exist for the IT products I want to import?
- What IT products are prohibited in the destination country?
- What IT products or services are restricted in the destination country?
- Are there any licensing requirements for the IT products I want to import?
- How can I apply for relevant technology licenses (if any)?
- What are the ICT standards in the destination country?
- What is the accurate classification code for the products I want to import?
With the answers to these questions, you will be better positioned to comply with licensing requirements and standards. It also saves you unnecessary costs that may arise from non-compliance or incorrect classification of your products.
Ace the tech customs compliance with an IOR
Importing technology shouldn’t be as challenging as discussed in this article with an importer of record. This is because an established IOR has the experience and expertise to navigate cross-border restrictions and regulations seamlessly.
There are various ways in which an importer of record can help you ace the technology customs compliance, even the import transaction.
Here are the six key benefits of choosing Blackthorne’s IOR services for technology compliance:
- Technology expertise: Blackthorne has over 25 years of experience helping technology companies ship their IT equipment successfully. They have mastered the nuts and bolts of a successful technology import transaction.
- Licensing compliance: Blackthorne offers export licensing services for restricted IT products, ensuring your products are delivered on time and with minimal costs.
- Multifaceted tech complaince: Blackthorne offers guidance in ensuring compliance for physically imported goods, plus compliance on digital platforms such as social media.
- Logistics management: Navigating the compliance procedures is already enough hassle. You don’t want your IT equipment damaged while in transit. Blackthorne ensures the safety of delicate equipment with vetted logistics service providers.
- Entity representation: If you’re just expanding your business overseas, say establishing a data centre, you need a local representation for ease of customs compliance. Blackthorne has established its entity in over 200 countries to facilitate your importation.
- ICT maintenance and support: Blackthorne does more than deliver your IT equipment. If you have a data centre abroad and do not have staff residing on-site, we can take care of that. We have tools to monitor the status of your IT equipment, from licensing expiration to technical glitches. What’s more, if there are any issues, our technology experts residing in various parts of the world take care of them, too!
So, tell us, what is your technology compliance need? Let us know, and we will discuss how we can help. You can also explore the diverse ways Blackthorne benefits the technology sector.
