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Philip Sutter,
Director – Governance Policy
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Every five years, the World Customs Organization (WCO) makes an update to the Harmonized Commodity Description and Coding System or “Harmonized System”. The next Harmonized System (HS) update is coming up soon – 1 January 2017. There are 153 contracting parties to the HS[1] each with their own country specific tariff. It is used by 206 countries. All will require updates; translation – it’s a big deal!
The HS is a multipurpose international product nomenclature employed as a basis for countries’ to assess Customs tariffs, collect international trade statistics, designate preferential trade program rules of origin, track quotas, and many other purposes.
The HS is organized into 21 sections and 96 chapters. To ensure harmonization, the contracting parties must employ the HS six-digit provisions and international rules and notes. Each country is free to adopt additional subcategories and notes, usually out to eight or ten-digits. Chapter 77 is reserved for future international use only. Chapters 98 and 99 are reserved for national use.
The 2017 HS changes encompass 233 sets of amendments to the Harmonized System nomenclature relating to a wide range of products and products groups, including: fish and fishery products; forestry products, including tropical wood and certain bamboo and rattan products; antimalarial products; substances controlled under the Chemical Weapons Convention; hazardous chemicals controlled under the Rotterdam Convention; persistent organic pollutants controlled under the Stockholm Convention; ceramic tiles; newsprint; light-emitting diode lamps; monopods, bipods, and tripods; multi-component integrated circuits; and hybrid, plug-in hybrid, and all-electric vehicles.
Whether your company is a big or small international trader, you should be aware of what is changing and make plans to prepare in 2016 as appropriate. The place to start is with your product classification database. On 1 January 2017, or such other date the country you import to or export from designates to adopt the changes, your product numbers will need to have the latest HS code.
The WCO provides a six digit correlation table showing the expiring classification and the one or more new classifications to be considered for that product. This is available now[2]. Also, the US has already published (subject to further refinement) a 10-digit correlation[3]. Other countries may wait until very close to the deadline.
By comparing the product database to the correlation table, you can assess the degree of difficulty to make the necessary changes. Typically, it involves obtaining some new piece of information. This information may or may not be evident in the description or audit trail for the existing record. So, you may need to review material specifications, engineering drawings, product bills of material, or other information to make an accurate update. If possible, segregate out obsolete product numbers for archiving. Be careful to collect any new part numbers classified between now and the adoption date. Each of these will require a new classification as well.
It is necessary to study and absorb the details in the correlation table. Also, there are critical section and chapter note changes that require close scrutiny. Finally work closely with your classification subject matter experts to ensure accuracy. Once you analysis is complete, you can stage the changes for the adoption date. Having taking these proactive steps, you will be glad that you planned ahead!
[1] Interestingly, only 118 of the 153 have made the 2012 HS updates as of 8 October 2015.
[3] U.S. International Trade Commission
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