Customs Classification Disputes over IT Products and Implications for Global Trade

Disputes frequently arise between importers and customs authorities particularly when a new product is, prima facie, classifiable under two or more HS codes. By examining the dispute case of Multi-Chip Packages (MCPs) involving technological progress, this article identifies the problems of new product classification and provides implications for global companies and customs authorities. In examining the Multi-Chip Packages classification case, this research follows an interpretive approach. The case study on the MCPS dispute is conducted based on information collected by searching through related documents and interviewing appropriate individuals concerning MCPS classification. The court's decision on MCPs supported the business community’s argument, focusing on product characteristics. In addition, some indirect forces influenced the court’s classification decision. In particular, the mood in both the home country and abroad might have affected the court's decision to classify MCPs as HS 8542. The court's decision exhibits logical inconsistency and there is confusion in the courts regarding how to apply related laws and regulations to this case. Importers should use the Advance Ruling for Tariff Classification and should provide the latest information on their products to customs authorities. It is also essential for customs authorities to communicate through diversified information channels. The WCO and the WTO should take proper measures to ensure that IT products such as MCPs are classified in the ITA concession nomenclature. The ITA participants have failed to narrow the differences of their positions and as a result, ITA expansion negotiations are now on hold. To reach an agreement, a thorough study should be conducted on IT product classification disputes.