By Philip Sutter, GTM Governance, Global
Every five years, as with the return of the swallows to Capistrano, the World Customs Organization (WCO) updates the Harmonized System (HS). And so, on 1 January 2017, customs veterans will witness another HS update. Rather than perching on the walls of an old mission church, however, this update will land in the work queue of anyone maintaining a classification database.
The HS is a multipurpose international product nomenclature employed as a basis for countries to assess Customs tariffs, collect international trade statistics, administer preferential rules, track quotas, and so on.
The origins of the HS can be traced back to 1973 when the WCO authorized its development. The WCO study that launched the HS, examined a universal commodity code (created by the League of Nations between the world wars) and a common commodity nomenclature from the Customs Cooperation Council.
Representatives from seventy-five countries toiled for fifteen years, meeting three or four times per year, until the HS finally came into force, in 1988. The drafters sought perfection, crafting the hierarchal document, from live animals in Chapter 1 to antiques in Chapter 97. They included known commodities, with provisions to cover those not explicitly described. Periodic updates would be a necessity.
Those of us who use the HS every day, might argue the perfection comment. Special interests, trade associations, and private sector lobbyists caused the plan to divert from total, statistical commonality among all countries to the creation of unique, statistical, country-tariff catalogues, using additional tariff code digits. The result was an industry unto itself that employs many customs professionals to interpret not only the HS, but the country tariff catalogues.
I once asked one of the original HS negotiators whether classification was intended to be difficult. He said, “No, but you should always remember that the detail in a nomenclature is usually there because someone, in government or industry, thinks it is necessary.” The details account for duty, statistics, trade agreements, origin, trade negotiations, quotas, anti-dumping, and national security.
The 2017 HS changes encompass 234 sets of amendments relating to a wide range of products and product 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.
It’s time to get ready. Begin by reviewing your product classification database. On 1 January 2017 your product numbers will need to have the latest HS code and additional country statistical digits.
The WCO published a six-digit correlation table[1] showing the expiring classification and the one or more new classifications to be considered for that product. As the U.S. has done[2], each country will be publishing details to help you. Unfortunately, many countries will wait until very close to the deadline.
My recommendation is to start as soon as possible. With the WCO information, the analysis can at least be organized. Usually, the update analysis will require you to identify a new product attribute. 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. Work closely with your classification subject matter experts to ensure accuracy.
With that preparation, you can rest easy and look ahead to 2022, when the next round of HS updates will surely return to your work queue!