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HARMONIZED SYSTEM 2017 AMENDMENTS
The HS 2017 amendments have been published and entered into force with
effect from 1 January 2017. The amendments have been sent to subscribers
under cover of Supplement 1081.
This article will provide you with background information about the
amendment process and should assist you to identify potential transposition
errors which will also be discussed.
Goods are
classified in tariff subheadings to compile trade statistics, monitor the
movement of specific goods and to determine customs and excise duties and
other levies, value-added tax (VAT) and other levies or charges (such as
environmental levy and fuel and road accident fund levy as well as rebates,
refunds or drawbacks on any of these charges. It is necessary to monitor and
control the movement of goods to determine whether it may be imported into a
country or not, and subject to which the goods may be imported. Sometimes
there may be uncertainty about classification of goods. Then it may be
necessary to amend the HS Nomenclature.
Only one
tariff subheading may apply in respect of a specific commodity. The
determination of the appropriate tariff subheading may give rise to
questions of interpretation.
This
document provides general background information on international customs
tariffs and explains the basic rules for the interpretation of the
Harmonized System in order to give an understanding of the obligations which
customs administration and importers and exporters must comply with to
comply with the international convention.
A national
or regional customs tariff schedule, which must be based on the
international Harmonized Commodity Description and Coding System essentially
comprises three elements: a goods nomenclature, statistical codes and a list
of tariff (duty) rates.
All these
elements are linked: in order to determine tariff rates for different
categories of goods or to compile accurate trade statistics, those
categories must be defined by first determining a heading in which a product
would fall and then by determining the subheading in which the goods would
fall. This is the purpose of a goods nomenclature. It is important to
note, however, that the goods nomenclature and the tariff duty rates are
different issues. The nomenclature is purely a customs issue, the
determination of the duty rates is subject to investigations by the
International Trade (Administration) Commissions which normally report to
the Minister of Trade and Industry.
More than
98% of goods classified in the goods nomenclature is based on the Harmonized
System.
The
Harmonized System or HS is a goods nomenclature that is developed and
maintained by the World Customs Organization (WCO), and is governed by an
international convention. The International Convention on the Harmonized
Commodity Description and Coding System is available at
http://www.wcoomd.org/ie/En/Topics_Issues/HarmonizedSystem/Hsconve2.pdf.
Almost 200
countries and economies use the HS as a basis for their customs tariffs and
for the collection of international trade statistics. More than 98% of the
merchandise in international trade is classified in terms of the HS, which
can thus truly be labelled the “language of international trade”.
The HS
Convention requires in particular that the texts of 4-digit headings and 5
and 6 –digit subheadings and numerical codes be used without addition or
modification, and that the General Rules for interpretation are used for its
uniform application. Within these limits, textual adaptations are allowed
if necessary to give effect to the HS in domestic law, as well as further
subdivisions beyond the level of the six-digit HS codes. In this regard see
Article 3 of the Convention.
For
instance, a country would be allowed to create further subheadings for any
HS code provided the classification under the 6-digit subheading is
correct.
The HS
provides a logical structure in which over 1,200 headings are grouped in 96
international Chapters, some of which are further divided into
sub-Chapters. The Chapters are arranged in 21 Sections. Each heading is
identified by a four-digit code, the first two digits indicating the Chapter
wherein the heading appears, the latter two indicating the position of the
heading in the Chapter. In addition, some of the headings are subdivided
into 1-dash subheadings which, where necessary, are further subdivided into
2-dash subheadings, identified by a 6 digit code (HS code).
The HS
classifies all transportable goods. Goods must be classified uniformly to
accomplish the ambition of the HS as the most successful multi-purpose goods
nomenclature. A number of tools are built into the HS system to accomplish
this ambition.
The six
General Rules for the interpretation (GRI 1 to 6) are the main tool for the
daily application of the HS, and form an integral part of the HS Convention.
The Rules
provide for:
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1 |
Classification is determined according to the terms of the headings
and of any relevant Section or Chapter note. |
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The
titles of the Sections, Chapters and sub-Chapters are provided for
ease of reference only. If classification cannot be so determined,
GRI 2 through GRI 5 must be applied in consequential order. |
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2 |
Incomplete, unfinished goods; Unassembled, disassembled goods. |
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3 |
Mixtures or combinations of materials or substances and goods are
prima facie classifiable under two or more headings. |
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4 |
If
goods cannot be classified under the provisions of any of the above
Rules they are classified under the same heading of goods which they
are most akin to. |
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5 |
Classification of packing containers/materials. |
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6 |
GRI
1 through GRI 5 apply mutatis mutandis at subheading level,
insofar as only subheadings of the same level are comparable. (1
dash subheadings are comparable with 1-dash subheadings and if
further subdivided 2-dash subheadings are comparable with 2-dash
subheadings, etc.). |
In most
cases classification is determined on the basis of GRI 1 (in combination
with GRI 6), i.e. according to the terms of the (sub)-headings, and any
relative Section and Chapter notes.
The HS
Committee is set up under the HS Convention. The committee convenes
regularly to update the Explanatory Notes to the HS and to issue
Classification Opinions and Rulings on specific goods. These notes,
opinions and rulings provide useful and authoritative guidance for the
application of the HS. (See Articles 6 and 7 of the Convention).
Despite its
comprehensive scope and the aforementioned tools for its application,
constant change and evolution in international trade patterns and policy
require the HS to be regularly updated. The current version of the HS, HS
2017 is the 6th edition of the HS since 1 January 1988.
When
preparing the transposition of one version of the HS to a new version (as
with the HS 2012 version which was applicable until 31 December 2016 to HS
2017 which is the current version and is effective from 1 January 2017 to 31
December 2021 when HS 2022 will take effect). Customs administrations are
faced with many challenges. The HS codes and descriptions in the old HS
version need to be transposed precisely into those in the new version of HS
nomenclature in order to maintain the status quo and retain any commitments
under the HS including the duty position.
South
Africa published the notices to introduce the amendments for the
implementation of the 6th version of the Harmonized System (HS 2017) in
various notices in Government Gazette No. 40460 of 2 December 2016.
The notices are published on the SARS website at
http://www.sars.gov.za/Legal/Primary-Legislation/Pages/HS-2017.aspx. |
