Why are some tariff codes changing on January 1 2012?
The Harmonised System is reviewed every five to six years and updated to reflect changes in international trade. For instance, to introduce new products or to remove obsolete products that are not traded anymore.
What are the major changes?
The HS2012 has two new purposes, it becomes the new standard for classifying goods of specific importance to food security under the United Nation Food Security Program. This afffects greatly classification in the food industry where substantial changes are introduced in chapter 3 “fish and crustaceans” but also in chapters 1, 2, 8, 9, 12, 16 and 17; all undergoing numerous changes.
HS2012 will also identify separately chemicals and pesticides controlled under the Rotterdam Convention and ozone depleting substances controlled under the Montreal Protocol. This has an impact on the chemical sector where amendments include the deletion of subheadings 2903.4 to 2903.69 which are being replaced by new codes.
Can we update records of all our Asian and global locations simultaneously?
Yes and no. The Harmonised System (HS) is a six-digit coding system used by 137 countries to classify goods. So at this level, it is possible to be harmonised, even if Customs authorities in different countries can disagree on tariff positions. However, countries can, and usually do, add further digits to suit their national specificities and domestic requirements. For instance, in the EU, tariff codes have eight digits for export and 10 for import. The changes will therefore create a cascade of further changes at the sub-levels. This will require an element of the classification to be local.
What is the impact on the business?
There are several possible impacts: – Classificaiton: the larger the variety of products and their bills of material, the more challenging the changes will be. – Duty rates: some products are likely to be reclassified under an HS code carrying a higher or lower duty rate than the initial tariff position. – Implementation: there could be some differences in implementation timescale between countries. Traders need to be prepared to use both the new and old version to resolve disagreements.
- Trade agreements: In Asia many trade agreements use tariff change as the main criteria to determine origin. This could impact on the Specific Rules of Origin and affect the originating status of products.
- Supply chain: the entire supply chain can be afftected by the changes. The food industry is particularly sensitive as the products involved are often both finished goods and intermediary products entering in the composition of other foodstuffs. The changes can therefore affect the entire food supply chain from commodities to finished goods.
Where can we find more information?
National Customs administrations will be implementing the changes and in many cases will have the details published on their websites. At an international level, the World Customs Organisation has posted all information relating to the changes on its internet site.