HARMONIZED COMMODITY DESCRIPTION and CODING SYSTEM or HARMONIZED

SYSTEM(HS) &

ASEAN HARMONIZED TARIFF NOMENCLATURE(AHTN)

(General Interpretative Rules)By: Evan Jasper C. Nebreja

Harmonized Commodity Description and Coding System or Harmonized System(HS)

Origin and Development of the Harmonized Commodity

Description and Coding System?1950 - the Customs Cooperation Council was formed in Brussels, Belgium.

1968 – Study on the facilitation of trade procedure showed the need of a Harmonized System (HS) for use in international trade by the Economic Commission for Europe.

1970 – Customs Cooperation Council set up a study group to examine the possibility of preparing a Harmonized System(HS)

1973 May – Customs Cooperation Council approved the preparation of the HS.

1976 – HS format taking place, U.N Statistical Commission recognized the importance of the HS and submitted proposal.

1983 June – Customs Cooperation Council approved the HS Draft and Opened it for signature.

1988 Jan.1 – HS convert came into force after acceptance by 29 contracting parties.

It was developed and presently maintained by the World Customs Organization (WCO) (formerly known as the Customs Cooperation Council (CCC)) headquartered in Brussels, Belgium.The HS nomenclature is annexed to the International Convention on the Harmonized Commodity Description and Coding System.

What is Harmonized Commodity Description and

Coding System?The Harmonized Commodity Description and Coding System or simply Harmonized System (HS) is an internationally standardized system of names (description) and numbers (codes) for classifying traded goods. The HS is a product nomenclature where each product is assigned its corresponding “6-digit” code.

It was developed to facilitate international trade by establishing a uniform system for the collection, comparison and analysis of international trade statistics. Under this Convention, contracting parties are obligated to base their tariff schedules on the HS nomenclature, although parties set their own rates of duty. Countries that have adopted the Harmonized System are not permitted to alter in any way the descriptions associated to a heading or a subheading nor can the numerical codes at the four or six digit levels be altered. This is what keeps the Harmonized System harmonized. The Philippines began implementing the harmonized tariff coding system back in 1989 - the 104th country to do so. Individual countries may extend a Harmonized System code to eight or ten digits for customs purposes.

More than 200 countries, customs and economic unions, representing more than 98% of world trade use the HS

Uses of the Harmonized System

a. As a tariff nomenclature;

b. As a statistical nomenclature;

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

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

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

What are the Composition of the

Harmonized System? General Interpretati

ve Rules (GIRs)

Sections

21 Section

s

Chapters

99 Chapter

s

Chapter 77 is reserved for future use

Chapters 98 & 99 are reserved for special uses by contracting

parties to the HS Convention

6 Rules

Headings

Subheadings

approximately

1,200approximately

5,000

21 SECTIONS OF HSSECTION I – LIVE ANIMALS; ANIMAL PRODUCTS

SECTION II – VEGETABLE PRODUCTS

SECTION III – ANIMAL OR VEGETABLE AND OILS AND THEIR CLEAVAGE PRODUCTS; PREPARED EDIBLE FATS; ANIMAL OR VEGETABLE WAXES

SECTION IV – PREPARED FOODSTUFFS; BEVERAGES, SPIRITS AND VINEGAR; TOBACCO AND MANUFACTURED TOBACCO SUBSTITUTES

SECTION V – MINERAL PRODUCTS

SECTION VI – PRODUCTS OF THE CHEMICAL OR ALLIED INDUSTRIES

SECTION VII – PLASTICS AND ARTICLES THEREOF; RUBBER AND ARTICLES THEREOF

SECTION VIII – RAW HIDES AND SKINS, LEATHER, FURSKINS AND ARTICLES THEREOF; SADDLERY AND HARNESS; TRAVEL GOODS, HANDBAGS AND SIMILAR CONTAINERS; ARTICLES OF ANIMAL GUT (OTHER THAN SILK-WORM GUT)

SECTION IX – WOOD AND ARTICLES OF WOOD; WOOD CHARCOAL; CORK AND ARTICLES OF CORK; MANUFACTURED OF STRAW, OF ESPARTO OR OF OTHER PLAITING

MATERIALS; BASKETWARE AND WICKERWORK

SECTION X – PULP OF WOOD OR OF OTHER FIBROUS CELLULOSIC MATERIAL; WASTE AND SCRAP OF PAPER OR PAPERBOARD; PAPER AND PAPERBOARD AND ARTICLES

THEREOF

SECTION XI – TEXTILES AND TEXTILES ARTICLES

SECTION XII – FOOTWEAR, HEADGEAR, UMBRELLAS, SUN UMBRELLAS, WALKING-STICKS, SEAT-STICKS, WHIPS, RIDING-CROP AND PARTS THEREOF; PREPARED FEATHERS AND ARTICLES MADE THEREWITH; ARTIFICIAL FLOWERS; ARTICLES OF HUMAN HAIR

SECTION XIII – ARTICLES OF STONE, PLASTER, CEMENT, ASBESTOS, MICA OR SIMILAR MATERIALS; CERAMIC PRODUCT; GLASS AND GLASSWARE

SECTION XIV – NATURAL OR CULTURED PEARLS, PRECIOUS OR SEMI-PRECIOUS STONES, PRECIOUS METALS, METALS CLAD WITH PRECIOUS METAL AND ARTICLES THEREOF; IMITATION JEWELLERY; COIN

SECTION XV – BASE METALS AND ARTICLES OF BASE METAL

SECTION XVI – MACHINERY AND MECHANICAL APPLIANCES; ELECTRICAL EQUIPMENT; PARTS THEREOF; SOUND RECODERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCER, AND PARTS AND ACCESSORIES OF SUCH ARTICLES

SECTION XVII – VEHICLES, AIRCRAFT, VESSELS AND ASSOCIATED TRANSPORT EQUIPMENT

SECTION XVIII – OPTICAL, PHOTOGRAPHIC, CINEMATOGRAPHIC, MEASURING, CHECKING, PRECISION, MEDICAL OR SURGICAL INSTRUMENTS AND APPARATUS; CLOCKS AND WATCHES; MUSICAL INSTRUMENTS; PARTS AND ACCESSORIES THEREOF

SECTION XIX – ARMS AND AMMUNITION; PARTS AND ACCESSORIES THEREOF

SECTION XX – MISCELLANEOUS MANUFACTURED ARTICLES

SECTION XXI – WORKS OF ART, COLLECTORS’ PIECES AND ANTIQUES

01 04. 20Chapt

erLive animals

Heading Live sheep and goats

SubheadingGoats

SECTION ILIVE ANIMALS; ANIMAL

PRODUCTS

ASEAN Harmonized

TariffNomenclatur

e ( A H T N )

What is ASEAN Harmonized Tariff

Nomenclature (AHTN)?The Association of Southeast Asian Nations (ASEAN) comprising of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, agreed to adopt a common tariff nomenclature to facilitate the flow of trade within the region. The AHTN is the harmonization of each ASEAN member country’s customs nomenclature.

The AHTN is based on the Harmonized System up to the 6-digit subheadings. It is supplemented with the national requirements of each of the 10 ASEAN member countries in the form of 8-digit subheadings. Any amendments on the Harmonized System would also be reflected on the AHTN.

8703.90.12ACompletely knocked down electrically powered go-cart

6-digit HS code 8-digit AHTN

Code

Alpha Code

SECTION

SECTION TITLE

SECTION NOTE

CHAPTER TITLE

CHAPTER NOTE

SUBHEADING NOTE

USES OF THE AHTN

• As a uniform tariff nomenclature within ASEAN

• As a base for preferential tariff purposes in AFTA

What are the advantages of the AHTN?• It establishes uniformity of application in the classification of goods in

ASEAN

• It enhances transparency in the classification process for goods in the region

• It simplifies the tariff nomenclature system of ASEAN Member States to facilitate trade in the region

WHEN WILL THE GOVERNMENT IMPLEMENT THE AHTN AND WHAT IS THE LEGAL BASIS?

The Tariff Commission is mandated by Executive Order No. 688 dated 01 May 1981 to align the Philippine Tariff Nomenclature with all future amendments to the Customs Cooperation Council Nomenclature. Subsequently, a NEDA Board Resolution and/or an Executive Order will be issued upon the completion of the required procedures to adopt the AHTN.

    Further, the Philippines is bound by Article 4 of the ASEAN Agreement on Customs dated 01 March 1997 and the AHTN protocol to be signed by the Member States within 2002.

    The Philippines is scheduled to implement the adoption of the AHTN by 01 January 2003.

PROTOCOL GOVERNING THE IMPLEMENTATION OF THE ASEAN HARMONISED TARIFF NOMENCLATURE

The Governments of Brunei Darussalam, the Kingdom of Cambodia, the Republic of Indonesia, Lao People’s Democratic Republic, Malaysia, Union of Myanmar, the Republic of Philippines, the Republic of Singapore, the Kingdom of Thailand and the Socialist Republic of Viet Nam of the Association of South East Asian Nations (hereinafter referred to as “ASEAN”): RECALLING the mandate of the Fifth ASEAN Summit to harmonise tariff nomenclature among all ASEAN Member States so as to enhance the flow of goods in the region; DESIRING to promote regional economic integration, and in particular, to support the establishment of the ASEAN Free Trade Area (AFTA) which envisages tariffs of 0-5% in the year 2002 for the original six ASEAN Member States, 2006 for Viet Nam, 2008 for Lao PDR and Myanmar, and 2010 for Cambodia, and further reduction to end tariffs of 0% by 2010/2015;

GENERAL INTERPRETATIVE

RULES(GIRs)

There are 6 General Rules The first five Rules relate to classification in the 4- digit headings.

Rule 6 relates to classification in the subheading level.The Rules set out the principles for classification in the HS nomenclature.

They are an integral part of the Nomenclature, providing uniform application and interpretation.

THINGS TO REMEMBER

The application of the GIRs (1-4) should always be in SEQUENTIAL ORDER:

Rule 1 is to be taken into consideration first.If classification is not covered by the provisions of Rule 1, then apply Rule 2, and so on.Goods must first be classified in the 4-digit HS heading whose terms most specifically describe the goods (unless otherwise required or directed by the GIRs) and

Only 4-digit headings are comparable:Do not compare a heading description with a subheading description.

Example:

Classification of an electric toothbrush.

? Heading 85.09 as an “Electro-mechanical domestic appliances with self-contained electric motor,….”

OR

? Subheading 9603.21 which provides for “Toothbrushes,…”.(Heading 96.03 provides for “Brooms, brushes…”)

GIRSRule 1 Terms of the Headings, Section/Chapter Notes Rule 2 (a) Incomplete or unfinished; Unassembled or disassembled Rule 2 (b) Mixtures or combinations Rule 3 2 or more headingsRule 3 (a) Most specific Rule 3 (b) Essential character Rule 3 (c) Last in numerical order Rule 4 Most akin Rule 5 (a) Special containers Rule 5 (b) Packing materials & containers Rule 6 Subheading rule

RULE 1The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal purposes, classification shall be determined according to the terms of the headings and any relative Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to the following provisions:

Example: Live poultry (heading 01.05)

RULE 1: Terms of the heading and any relative Section or Chapter Notes

RULE 2(a)

(a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete or unfinished, provided that, as presented, the incomplete or unfinished article has the essential character of the complete or finished article. It shall also be taken to include a reference to that article complete or finished (or falling to be classified as complete or finished by virtue of this Rule), presented unassembled or disassembled.

Example: Preform bottle – Unfinished (heading 39.23 covers plastic bottles)

Wrist watch without strap - Incomplete (heading 91.02 covers wrist watches)

Unassembled office chair (heading 94.01 covers seats)

RULE 2(b)Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or combinations of that material or substance with other materials or substances. Any reference to goods of a given material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or substance. The classification of goods consisting of more than one material or substance shall be according to the principles of Rule 3.

RULE 3When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two or more headings, classification shall be effected as follows : RULE 3(a) The heading which provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to part only of the materials or substances contained in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.

RULE 3(a) : Example - Chair/ladder

Wooden ladder (heading 44.21- Other articles of wood);

Wooden chair (heading 94.01 - Seats) Rule 3(a): Principles

Relative Specificity A description by name is

more specific than a description by class.

A description that more clearly identifies a product is more specific than one which is less complete.

RULE 3(b)

Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3 (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable.

MIXTURE: Mixture of barley (60%) of heading 10.03 and oats (40%) of heading 10.04

COMPOSITE GOOD: Combined wrist watch of heading 91.02 and lighter of heading 96.13 (both contained in the same housing).

SET: Hairdressing kit consisting of an electric hair clipper of heading 85.10, a comb of heading 96.15, a pair of scissors of heading 82.13, and a brush of heading 96.03

RULE 3(c) When goods cannot be classified by reference to 3 (a) or 3 (b), they shall be classified under the heading which occurs last in numerical order among those which equally merit consideration.

Electric lamp (heading 94.05) with alarm clock (heading 91.05)

Chandeliers (heading 94.05) with electric fan (heading 84.14)

RULE 4

Goods which cannot be classified in accordance with the above Rules shall be classified under the heading appropriate to the goods to which they are most akin. EXAMPLE: Exhaust Air Jack (heading 84.25)

RULE 5(a)

In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to therein : (a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for long-term use and presented with the articles for which they are intended, shall be classified with such articles when of a kind normally sold therewith. This Rule does not, however, apply to containers which give the whole its essential character;

Violin with case (heading 92.02)

Packing materials and packing containers entered with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods

RULE 5(b)

Subject to the provisions of Rule 5 (a) above, packing materials and packing containers presented with the goods therein shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision is not binding when such packing materials or packing containers are clearly suitable for repetitive use.

Example:MEN’S SHIRTS INDIVIDUALLY SEALED IN A POLYBAG THEN

PACKED IN CARDBOARD BOXES

Entirety Classified As Shirts

Packing materials or containers designed for REPETITIVE USE.Example:

Gumball dispensing machine (predominantly of zinc alloy) imported with gumballs. It is designed to accept a coin and release a candy. Gumballs (17.04)

Dispenser (79.07)

These Packing materials or containers are to be classified SEPARATELY with their content.

RULE 6

For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis, to the above Rules, on the understanding that only subheadings at the same level are comparable. For the purposes of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise requires.