Primer

HARMONIZED SYSTEM 

1. What is the Harmonized System?

The Harmonized Commodity Description and Coding System or, simply,  Harmonized System (HS) is an international product nomenclature based on the Customs Cooperation Council Nomenclature (CCCN) and the Standard International Trade Classification (SITC) Revision 2.  The CCCN was the product nomenclature authored by the then Customs Cooperation Council (CCC) now known as World Customs Organization (WCO), while SITC Revision 2, drafted by the United Nation (UN), is used in trade statistics.

2. What is the structure of the HS?

            The HS comprises the following: 

(a)  General Rules for the interpretation of the System;

(b)  Section and Chapter Notes, including Subheading Notes; and

(c)  A list of headings arranged in systematic order (i.e., degree of processing) and, where appropriate, subdivided into subheadings.

The General Rules are provided to ensure that a given product is always classified in one and the same heading (and subheading), to the exclusion of any others which might appear to merit consideration.

The Section and Chapter Notes (including Subheading Notes) form an integral part of the HS and have the same legal force as the General Rules.

The 1,240 headings are arranged in 96 Chapters which are themselves grouped into 21 Sections.

The HS comprises a total of  5,108 separate groups of goods by a 6-digit code.

3. What is the significance of the HS in our Tariff and Customs Code?

The HS is reflected as Sections 103 and 104 in the Tariff and Customs Code, Volume I, which provide the General Rules for the Interpretation of the Harmonized System and the list of  headings and the legal Notes, respectively.

The HS effects uniformity in the classification of goods and standardizes commercial documents which  ultimately enhances customs administration.

4. What are the uses of the HS?

a.  As a tariff nomenclature.

b.  As a statistical nomenclature.

c.  As a base for the harmonization of economic classification, e.g., market surveys and data collection.

d.  As a multipurpose nomenclature by international unions of  shipping and transport organizations.

e.  As an international language and code for customs purposes.

f.   As a base for the determination of the Rules of Origin (ROO) for non- preferential trade purposes such as the MFN treatment, anti-dumping and countervailing duties, safeguard measures and origin marking.

5.                 5. When did the government implement the HS and what is the legal  basis?

The HS was implemented in October 1988.  This is in accordance with the NEDA Board Resolution dated November 25, 1987 and Executive Order No. 688, dated May 1, 1981 mandating the Tariff Commission to align the Philippine Tariff and Customs Code with all future amendments to the CCCN.

6. What is the International Convention on the HS?

The HS Convention is the intergovernmental commitment of the contracting parties to abide by its provisions, one of which is to agree to use the 6-digit HS as the basis for their national customs tariff and statistics nomenclature.

7. Is the Philippines a contracting party to the Convention?

The Philippine Instrument of Accession  to the HS Convention was signed by then President Joseph E. Estrada on September 23, 1998 and was concurred in by the Senate on February 5, 2001. The Instrument of Accession was formally deposited to the WCO on  June 25,  2001.

8. Why did we adopt the HS?

The Philippines, before the approval of the Instrument of Accession, opted to adopt the HS on a de facto basis to keep abreast of the latest internationally-accepted nomenclature in goods classification which is the basis for the conduct of our trade with the rest of the world.

9. What are the functions of the HS Committee?

The functions of the HS Committee, one of  three (3) committees of the WCO created under the Convention, are as follows:

(a)      To prepare amendments to the Convention having regard, in particular, to the needs of users and to changes in technology or in patterns of international trade;

(b)      To prepare explanatory notes, classification opinions or other advice or guides to the interpretation of the HS;

(c)      To prepare recommendations in order to ensure uniformity in the interpretation and application of the HS;

(d)     To collate and circulate information concerning the application of the HS;

(e)      To furnish information or guidance on any matters concerning the classification of goods in the HS to Contracting Parties,  Members of the Council and to such intergovernmental or other international organizations as the Committee may consider;

(f)      To present reports to every Session of the Council concerning Committee activities, including proposed amendments to the Explanatory Notes, Classification Opinions and other advices; and

(g)      To exercise such other powers and functions in relation to the HS as the Council or the Contracting Parties may deem necessary.

10. What is the frequency of amending the HS?   

Considering the advancement in technology and new trading practices, among others, amendments to the HS are scheduled to be adopted every four (4) years.  Since its inception in 1988, the HS had undergone revisions in 1992 and 1996 which were incorporated  in our Tariff and Customs Code.  The next round of amendments, however, is scheduled to be done in year 2002, instead of 2000.

11.                11. Why are we using the 8-digit and  not the 6-digit HS ?

Every country using the HS is allowed to assign its own coding system  only after the HS 6-digit level.  Hence, the 8-digit is adopted to accommodate  specific nomenclature for the purpose of  reflecting our national requirements (e.g., for tariff protection, incentives).

12.               12. How do countries provide for national subdivisions?

Although no changes may be made to the HS itself, there is nothing to prevent a Contracting Party from establishing additional subdivisions in its nomenclature to identify certain goods which could not be given separate status in the Harmonized System Nomenclature.  It must, however, ensure that the mandatory subdivisions (i.e., up to the six-digit level subdivisions) remain unchanged.

Example:  (Country-Philippines)

In the case of HS heading 17.04, subheading 1704.90 is further subdivided as shown below to provide a separate identification for white chocolate

13.             13. What are the important dates for the Philippines in relation to  the HS?

1.       The Philippines adopted the Harmonized System on July 1, 1988 per decision of the NEDA Board on  November 25, 1987.

2.       The Philippines adopted the 1992 amendments to the HS per NEDA Board Resolution No. 3(s.1992) dated  February 14, 1995.

3.       The Philippines adopted the 1996 amendments to the Nomenclature effective  January 1, 1996 per NEDA  Board Resolution No. 26 (s.1995) dated October 25, 1995.

14.             14. What other publications complement the HS Code?

a.       Explanatory Notes -  These do not form an integral part of the HS Convention although they constitute the official interpretation of the Harmonized System at international level.  They must always be read in strict conformity with the texts of the System itself, from which they cannot be dissociated, and in particular with the Interpretative Rules and the Section, Chapter and Subheading Notes.

b.       Alphabetical Index – This is an alphabetical list of the articles mentioned in the HS and the Explanatory Notes. It facilitates the location of references in the HS Nomenclature or in the Explanatory Notes to any of the products or articles mentioned therein.

c.       Compendium of Classification Opinions – This consists of the Classification Opinions adopted by the WCO on the advice of the HS Committee on Opinions and arranged in the order of the headings of the HS Nomenclature.

15.             15. How does the HS deal with new products and trade practices?

The Preamble to the HS Convention emphasizes the importance of ensuring that the HS is kept up-to-date in the light of changes in technology and in patterns of international trade.

At its first session (1988), the HS Committee agreed to allow an interval of  four (4) to five (5) years between amendments.  There were two (2) amendments made since 1988: one (1) in 1992 and one (1) in 1996.  The latest major amendment is expected to be implemented in 2002.

16.             16. What are the changes in the HS Nomenclature in 2002?

The changes in the HS for 2002 are grouped into three categories:

1.       Goods of social and environmental concerns involve the creation of new subheadings to facilitate the monitoring and control of:

a. Certain species covered by the Convention on International Trade in Endangered Species of Fauna and Flora (CITES);

b. Fish falling under the International Convention of Atlantic Tuna (ICAT);

c. Specific categories of waste as identified by the Basel Convention;  and

d.  Narcotic drugs and psychotropic substances falling within the purview of the Single Convention on Narcotic Drugs (1961), as amended by both the 1972 Protocol and the 1971 Convention on Psychotropic Substances.

              Examples of these products are:

>       Endangered species and their meats (01.06, 02.08 and 0210.10)

>       Salmon and tuna (03.03)

>       Municipal waste (3825.10)

>       Sewage sludge (3825.20)

>       Clinical waste (3825.30)

>        Waste organic solvents (3825.40)

>       Ash and residues containing toxic metals and their compounds (Chapter 26)

>        Waste petroleum oils (27.10)

>        Waste pharmaceuticals (3006.70)

>        Waste and scrap of toxic metals (Chapter 81)

2.       Editorial amendments are made to clarify the text to ensure the uniform application of the HS.  Thus, clarification of text is intended to define the scope of heading nos. 29.22, 84.43, 90.32 and 95.03 and to ensure the uniform application of  heading nos. 1702.90, 28.19, 28.30, 28.35, 29.23, 29.34, 29.40, 84.71 and 90.21. Likewise, current terminologies are used in subheading nos. 8415.81, 8484.30 and  87.13.

3.       Other amendments are intended to reflect trade patterns and technology progress, and to make certain that the Nomenclature keeps abreast of existing trade practices.  Such amendments include:

(a)      New subheadings for products with trade volumes exceeding 20 million US dollars, such as fruit juices (20.09) and knitted or crocheted fabrics (60.02, 60.03, 60.04, 60.05 and 60.06);

(b)      Deletion of several subheadings because of low volume of trade;

(c)      The tariff restructuring of hormones (29.37), conveyor or transmission belts (40.10), tires (40.11), oriented strand board (44.10) and electric hand tools (84.67) to reflect new technology or industry practice; and

(d)      Provision of a separate heading   for   military goods under Chapters 88, 89 and 93.

17.             17. How will the changes in the HS be implemented?

The changes will be subjected to the process stipulated in Section 401 of the Tariff and Customs Code.  An Executive Order will be issued to implement the changes.

18.             18. When will these be implemented?

The amendments are expected to be implemented in year 2002.

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