On January 1st, 2018 the Harmonized System (HS) turned 30, and the time has come to admit that the HS might be suffering from its own “generation gap”.
Used by more than 200 countries, territories and Customs or Economic Unions, and covering 98% of global trade, the HS (in the apt words of the World Customs Organization) allows a world of many languages to speak with one.
As the foundational cornerstone of every cross-border transaction and trade strategy, Governments worldwide rely on HS codes for properly assessing duties and taxes, exercising control over the entry and exit of sensitive articles, collecting trade statistics which inform trade and public policy, and gauging risk for cargo security purposes. Companies use HS codes to assess the admissibility of their goods at destination; to determine the preferential and non-preferential origin of their goods; to evaluate selling and sourcing opportunities abroad; and to calculate the true landed cost of their imported component parts and/or finished articles.
Simply put, No HS Code means No Trade.
Despite the widespread availability of valuable information for traders (e.g. tariff schedules, import/export controls, trade measure, documentary requirement, etc.), access to relevant information remains elusive. This is because the HS code is the key, and little consideration has been given to providing traders practical HS classification assistance tools.
The World Customs Organization (WCO) promotes HS usage by providing materials and services to assist HS classification. However, these “tools” – which consist of training, classification opinions, Explanatory Notes, and similar technical resources – remain of limited use to most traders who are non-experts and who need reliable answers immediately.
Even with WCO support, HS classification remains a difficult and error prone task. The gap between how products are described commercially by trade (e.g. “baby food”) and how they are expressed in the HS (e.g. “homogenized composite food preparations”) often presents an insurmountable obstacle for the average trader. Furthermore, the General Interpretive Rules and HS Legal Notes are sufficiently complex that they are seldom considered or applied by small and medium size importers/exporters.
While the HS nomenclature has adapted well to change over the years, time has stood still for HS classification support tools. Visit nearly any government website (online Customs tariff schedule, Trade Hub, Electronic Single Windows, etc.), and you will find a classification search tool that uses the same technologies that were developed around the time the HS itself was launched three decades ago.
At 30, it is time for the WCO to acknowledge Charles Spurgeon’s notion that “every generation needs regeneration” by accepting and embracing the availability of technology-based tools which give everyday traders the ability to classify their goods instantly, consistently and accurately, and ensure the longevity and usefulness of the Harmonized System.