Trading Thoughts Blog
Permanent link for Big Changes Are Coming: Huge Drop in the Monthly U.S. Trade Deficit on June 15, 2022
by Natalie Bremmer
Big news rocked the trading world recently with the announcement of the monthly goods and services trading deficit dropping a staggering 19.1% for the United States.
April 2022’s numbers were just released on June 7th, 2022 stating that the $107.7 billion trade deficit from March 2022 had dropped by $20.6 billion down to $87.1 billion in April 2022.
More specifically, U.S. April exports were $252.6 billion, roughly $8.5 billion more than March, and about a 3.5% increase between those two months. U.S. April imports were $339.7 billion, which is a $12.1 billion or 3.4% decrease from the previous month of March.
Though April was a great month, in the big picture the United States is still feeling the effects of the Covid-19 pandemic. Between April 2021 and April 2022, the goods and services deficit increased by 41.1% totaling $107.9 billion. This is essentially due to exports increasing by 18.8%, coming in at $151.3 billion, and imports simultaneously increasing by 24.3%, totaling $259.2 billion within this timeframe.
Three Month Trends
On a more positive note, the U.S. three-month trade deficit average is starting to look a lot more promising. Between February 2022 and April 2022, the average goods and services deficit fell by $0.3 billion, down to a total of $94.3 billion. During this time period, U.S. exports increased by $8.3 billion for a total of $242.2 billion, and imports increased by a marginal $8.0 billion totaling $337.4 billion.
Monthly Export Trends
In April 2022, the U.S. export of goods increased by a substantial $6.1 billion to a total of $176.1 billion. The largest portions of this increase came from industrial supplies as well as food and animal feed, accounting for about $4.5 billion combined. Another large portion of the increase was due to the export of capital goods– namely civilian aircraft.
During the same month, the U.S. export of goods also increased by roughly $2.4 billion, totaling at $76.5 billion. The main categories that caused this increase were travel and transport which increased by $1.5 and $0.3 billion respectively.
Monthly Import Trends
In April 2022, U.S. imports of goods actually decreased in comparison to the prior month by $13.0 billion, with a sum of $283.8 billion for the month.
Some of the largest contributors to this decrease were consumer goods, industrial supplies, and capital goods which all decreased by $6.3, $5.4, and $2.6 billion respectively. However, U.S. imports of automotive vehicles rose by roughly $1.4 billion.
Alternatively, the import of services during the same month increased by $0.9 billion compared to the month prior, capping out at $55.9 billion. The largest contributors to this increase were travel, with a $0.6 billion dollar increase, and other business services at $0.2 billion.
For the full report, you can find the U.S. Census post here.
Keep up with VAGTC’s Trading Thoughts Blog for additional updates covering the trade deficit information released in July.
Natalie Bremmer is a Student Assistant at GVSU’s Van Andel Global Trade Center . She is a Junior currently pursuing undergraduate degrees in Finance and Human Resource Management at Grand Valley State University. She enjoys lifting weights, getting lost in a good video game, spending time with friends, and going on long hikes.
What is the Harmonized System (HS) and the HS Classification?
The Harmonized System (HS) is a globally recognized way to identify goods being imported and exported by assigning a standardized classification. The HS classification is used for declaring goods at the time of export in export declarations and for the purpose of filing customs entries at the time of import in the country of destination. The HS classification is used to determine duty rates and collect duties, taxes, and fees for the imported products.
The Harmonized System (HS) is something every importing and export company will need to understand so proper HS classifications can be assigned to their products. Companies need to take great care in assigning HS classification and understand the compliance risks associated with their HS classification decisions. Exporters and importers alike have a legal responsibility to properly claim and classify goods/products.
The Harmonized System (HS) Breakdown
The Harmonized System (HS) is a very structured classification system made up of sections, chapters, notes, headings, and subheadings.
The United States has two published versions of the Harmonized System (HS). For imports, the U.S. publishes the Harmonized Tariff Schedule (HTS) of the U.S. for the HS classification of imported products and the assignment of duty rates. For exports, the U.S. publishes the Schedule B for export HS classifications and the collection of statistical data.
The Harmonized System (HS) is broken down into 22 sections which act as groupings of similar chapters.
There are 97 chapters of products that are organized from least manufactured to more manufactured and logically group classifications by make or by use. The first two digits of each HS classification are the chapter number. Within each chapter, the Harmonized System (HS) provides a four-digit heading with the primary legal definition of what is to be included in that heading. Those headings are further broken down into six-digit subheadings. The heading and subheading legal definitions are universal and all countries agree to use the same legal definitions.
While the globally recognized headings and subheadings remain
constant, each country can further break down the subheadings with
country-specific suffixes. In the U.S. two digits (digit 7 and 8) are
added as the duty rate suffix and two digits (digit 9 and 10) are
added as a statistical suffix – making the U.S. classification a
See the photo above for an example using Coffee.
Why is HS Classification Important for your Business?
First of all, for importers, the HTS classification determines the duty rates and the duties paid at the time of import so it has immediate revenue implications. Non-compliance can result in fines, penalties, and the back payment of additional duties owed.
Paying duties is a non-negotiable, so proper classification can reduce your compliance risk in the short and long run. The result will never be good when using the wrong classification. If your misclassification caused you to overpay in duties, you won’t receive a refund. If you are underpaid in duties, you are required to pay the difference, and customs will decide if you will need to pay interest, and whether or not fines and penalties will be imposed.
For exporting, HS classification is used in:
- Export documentation (ex. Commercial Invoice)
- Export Declaration
- Import customs entry in a country of destination
For importing, HS classification is used in:
- Customs and Border Protection (CBP) for customs clearance and entry
All in all, use the HS classification to your advantage. Generate proper classifications and importing and exporting will be smooth sailing.
Are You Interested in Learning More?
GVSU's Van Andel Global Trade Center offers a yearly Fundamentals of Harmonized System (HS) Classification Training. Check out our Events page to register for this upcoming event!
About the Contributor
Jenna Hoover is working as a student assistant for GVSU’s Van Andel Global Trade Center. She is a junior at GVSU currently studying Finance and Supply Chain Management within the Seidman College of Business. You can find her visiting local coffee shops as she studies for classes or checks in on her Roth IRA. In her free time, she enjoys walking her dog, Gertrude, and hanging out with friends along the beautiful beaches of West Michigan.
The 7th edition of the Harmonized System (HS) nomenclature will enter into force on January 1, 2022.
Why is this important to your business?
The Harmonized System (HS) nomenclature allows for goods to uniformly be imported and exported to/from countries around the globe, 211 economies participate in this system. The Harmonized System allows for customs tariffs international trade statistics to be tracked and reported as goods flow throughout the global supply chain.
The 7th edition of the HS will include 351 amendments to the current system according to the World Customs Organization.
Some of the major changes include classifications that deal with advancing technology, health & safety equipment, and society protections.
Technological advances are occurring daily. Thus, current heading classifications and provisions are not able to properly track new technology that is being created and traded around the world. Updated 2022 HS provisions and classifications will include e-waste, tobacco products, drones, smartphones, and other multifunctional devices.
Health & Safety Equipment
Recent years have highlighted the need for a quicker and more streamlined way to deploy tools that help diagnose and treat infectious diseases. Classification for these tools has been simplified and provisions have been put into place in the 7th edition for supporting medical research occurring on a global scale.
Protecting Society from Dual-Use Goods
The World Customs Organization has increased its efforts to combat world terrorism. Subheadings within the HS have been created for dual-use goods that could potentially be converted to an unauthorized use product such as an explosive device.
Conventions & Clarifications
A number of goods controlled by global Conventions such as chemicals controlled under the Chemical Weapons Convention and the Rotterdam Convention to name a few, have also been updated and reflect clarifications of verbiage to ease the process in classifying products correctly.
Van Andel Global Trade Center recommends companies review the United States HS for 2022 and be ready for any changes that may be implemented on January 1, 2022, that could impact the products your business buys and sells globally. Communicate 2022 changes to suppliers, export customers, dealers/distributors, customs brokers, and international freight forwarders. In some cases, it may be beneficial to obtain binding rulings from Customs to ensure there are no issues/delays moving goods around the world.