Challenges in the area of Material Masters
Most trading companies maintain Material Masters, or article databases, in their ERP system or even outside such a system. Odd enough, you can hardly find a proper definition of a ‘Material Master’. You might find something about the purpose of a material master. In any case, it turns out to be a source where information about materials can be found. These Material Masters have usually been assigned with an unique material or item number.
Material Masters are of utmost importance for an adequate business administration and should make it easy to see what has been purchased and/or sold. Material Masters consist of information such as the description of the product, the price, quantity and weight. Customs experts expect that Material Masters contain data that is necessary for customs processes like the Commodity Code (HTS), Country of Origin and even the Export Control Number (if applicable).
However, don’t be surprised if this data is not included at all in the Material Masters. The possibility is there that some of this data is included but unfortunately is unreliable. This is quite logical, because this data usually has little to do with the core activities of a company. Moreover, feeding and maintaining Material Masters is not so easy, as the data is often subject to changes. It becomes even more complex when multiple (sub-)suppliers are related to a Material Master.
Company X uses a Material Master 1234 for a Brand A claw hammer: a product within their sales portfolio. It is purchased in stock from various suppliers and appears to be produced in several countries. The question is: "How do you deal with this Material Master regarding the country of origin?
In any case, it is important to know that Material Masters (should) represent important data needed for a cross-border transaction. By supplementing this with data necessary for customs clearance, you can seamlessly connect declaration procedures to applications that contain Material Masters.
It is interesting to see that many customs initiatives in the context of simplified supervision are based on the (re-)usage of data originating from commercial transactions of importers and exporters. Material Masters are part of this data and as said, the data can be unreliable. Specifically if Commodity Codes etc. can be assigned to Material Masters by employees that do not possess proper customs know-how. Customs experts will have nightmares about such a scenario, whereas this scenario appears to be more a rule than an exception.
Classification of goods
Assigning customs related data (a.k.a. Foreign Trade Data) to Material Masters is in practice often being called ‘classifying goods’. In that sense, this is not limited to the so-called classification of goods according to customs tariffs (HTS). Elements that could be assigned to the Material Masters are:
- Country of Origin indicator
- Preference in the context of free trade agreements indicator
- HTS (HS) code
- Export Control Number (ECN)
- US Export Control Classification Number (US ECCN)
- CAS number
- UN number (DG)
- Sales price
Example article master 5678: Product: a controlled spark gap with an anode delay time of 13 microseconds and 500 A manufactured in the USA.
Be aware that creating, feeding, maintenance and usage of Material Masters contain risks and challenges, for example:
- Delayed adjustments (due to changed regulations) can lead to violations
- Incorrect classifications (spot checks on correctness remain necessary)
- Multiple sourcing (purchasing at multiple suppliers for one and the same material master or supplier itself applies multiple sourcing)
- E-commerce sourcing
However, there is additional important information about materials needed, in order for the import and export to proceed smoothly. For instance, Conformity Certificates, Environmental Classifications for specific goods, Transport Data (dangerous goods) and quality-related designations.
Authorization of Material Masters
Usually, several departments within an organization have a (in)direct relation with Material Masters and might have authorization to change data of Material Masters. This means that to a certain extent, such departments should also possess customs and trade know-how.
A selection of such departments:
|- Shipping (transport)||- Customs||- Inbound/Outbound|
|- Sales||- Supply Chain||- Tax|
|- Procurement||- Engineering||- Dispatch|
|- EHS||- Quality (QM)||- Customer Service|
|- Legal and Compliance||- Finance & Accounting|
|- Trade Compliance||- Logistics|
Pincvision can support you in classifying your products in the area of:
- HTS (HS)
- Export Control numbers
- Rules of Origin
- Free Trade Agreements
If you have any questions about this article please feel free to contact us. Our Customs Compliance Manager Yuri Florentinus is more than happy to help. He also speaks about this topic on several upcoming events, among others the Pincvision Compliance Cruise (Sept. 20) and the Nationaal Douanecongres (Oct. 11). You can contact us by calling +31(0)88-4321800 or send an email to firstname.lastname@example.org.
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