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On January 1st 2022, the World Customs Organization (WCO) will
once again institute a new revision to the Harmonized Schedule (as
it does every five years); certain commodity categories will have
extensive revisions while others change very little. Whether you're
an importer, exporter, analyst or even consumer, such revisions
have widespread implications for how trade is measured, controlled,
and taxed. Here we examine how the system has traditionally
attempted to keep up with more innovative commodities and forward
look to some of the categories undergoing more significant changes
in just a few short months.
A review of the 2022 code changes over the previous 2017 edition
reveals a focus on code changes to better track the trade of such
innovative goods such as unmanned drones, smart phones, 3-D
printers, electric vehicles and security sensitive goods like
so-called dual-use goods that can be used for either benign or
sensitive purposes depending on the application. As always, IHS
Markit will be carefully tracking these code changes and providing
context in our ongoing reporting to show where new codes are
introduced, or old codes discontinued or changed.
The Harmonized system (HS) is made
up of 21 Sections, 97 two-digit chapter headings that represent the
whole of merchandise trade. This coding system was set up and
entered into force in 1988 and since then has been used by nations
around the world in assigning an internationally standard code to
imported or exported goods for the tracking of those goods &
the collecting of tariffs. Each chapter represents a segment of
product types and then those chapters are broken down with more and
more detail by the addition of digits to the code from 2- to 4- to
6-digit codes universal across all the world's reporting
authorities. Country-specific tariff-line codes may offer more
granularity at the 6+-digit level such as 8- or 10-digit codes at
the behest of individual countries.
For example, the designation for Edible Fruits and Nuts is HS 08
in the Harmonized Schedule, with that chapter being broken down
into fourteen different four digit codes that break down different
types of fruits and nuts based on fruit & nut type and
preparation. Within these four-digit codes (Headings), HS 0808 is
the break out for Apples, Pears and Quinces, under which are three
further breakouts, each with its own six digit designation and each
containing the one of the three fruit types with apples being HS
080810. This is the lowest level of international standardization,
but each customs agency is given license to further breakout this
six-digit codes (Subheadings) as best suits its needs. For
instance, the United States adds four additional digits to create a
ten-digit code (Tariff Lines/National Codes) and in the case of
apples, further divides apple imports, by price per kilo and by
whether or not they are certified organic.
With clear cut commodities like apples, the changes to the
Harmonized Schedule tend to be limited as the product itself is
generally unchanged over time, but with some of the products of
focus in the 2022 changes, the WCO must adjust the coding to give a
view goods that have become more prevalent over the past decade. A
few examples are:
Creation of a new 4-Digit category for machines for additive
manufacturing, more commonly known as 3-D printers with multiple
subcategories according to type
New
HS 84.85 - Machines for Additive Manufacturing
8485.10 - By Metal Deposit
8485.20 - By Plastic or Rubber deposit
8485.40 - By Plaster, Cement, Ceramics, or Glass Deposit
8485-50 - Other
8485.90 - Parts
Discontinuing using the single use code for cell phones and the
creation of two new codes to give visibility into the trade of
smart phones
Discontinued
HS 8517.12 - Telephones for Cellular Networks or for Other
Wireless Networks
New
HS 8517.13 - Smartphones
HS 8517.14 - Other Telephones for cellular networks or other
wireless networks
The general code for Electrical Machines Having Individual
Functions, Not Elsewhere Specified will be redefined with the
introduction of a new code for the trade of electronic cigarettes
and personal electric vaporizing devices
Scope Changed
HS 8543.70 - Electrical Machines and Apparatus, Having
Individual Functions, NESOI
New
HS 8543.40 - Electronic cigarettes and similar personal electric
vaporizing devices
Because the changes to technology and the needs in tracking
trade can change over time, the World Customs Organization has a
regular schedule of updating the Harmonized System updating it
every five years. Sometimes the changes for a single product can
stretch over time, making the tracking of its trade a complex
prospect. One example is optical discs used in the publishing of
music, video, and software. Below is an overview of how the trade
of this product has been tracked over the years.
Initially trade for these products fell under two broad codes
(HS 852390 & 852490) between 1990 and 1995
Changes in the Harmonized Schedule in 1996 saw trade for HS
852490 for recorded media broken into three new codes - HS 852431,
852432, & 852439. These new code as well as 852390 were used to
track optical disc trade for the next 10 years
In 2007, all of these codes were discontinued and a single code
HS 852340 was created consolidating all optical disc trade
Five years later in 2012, HS 852340 was discontinued and
replaced with two new codes HS 852341 for unrecorded optical discs
and HS 852349 for recorded optical discs
The tracking of trade over a long historical span can at times
be a complex process and requires diligent research to insure that
the codes tracked are current and correct for the products of
interest.
The World Customs Organization does not simply make changes to
give greater visibility into new products, but also adjusts the
Harmonized Schedule to aid in efforts around clean energy,
environmental protection, and even international security. Some of
the changes for the upcoming 2022
amendment that support such efforts are:
The creation of a series of codes under HS 2903 for Halogenated
Derivatives of Hydrocarbons to aid in the monitoring and control
substances that deplete the ozone layer in keeping with the Kigali
Amendments to the Montreal Protocol
The creation of a new code (HS 293010) for the monitoring of
and control of 2-(N,N-Dimethlyamino) ethanethiol as well as a
series of new codes under HS 2931 (Organo-Inorganic Compounds,
NESOI) in keeping with the Chemical Weapon Convention
The creation and expansion of codes under HS 2933 and HS 2934
to track fentanyls and fentanyl derivatives to monitor and control
the trade of these goods under the United Nations Single convention
of Narcotic Drugs
Multiple changes to track the movement of metal, mineral,
electrical, and electronic waste as proposed by the Secretariat of
the Basel Convention
Creation of codes to provide visibility into the trade of goods
around solar energy products as proposed by the International
Renewable Energy Agency
The creation and redefinition of numerous codes to give a
greater view into the monitoring and control of goods that can be
used for both benign and sensitive purposes, also called dual use
goods
With the coming changes to the Harmonized System being overseen
by the World Customs Organization, the trade community receives
another opportunity to gain better visibility and insight into the
movement of goods. IHS Markit will continue to provide the most
up-to-date and accurate data, giving visibility into these code
changes and helping our client base best navigate the changing
trade landscape.
