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Monday 4 May 2015

Forghing Trade Practice - Harmonized System

UA-29869588-1

“Commerce, trade and exchange make other people more valuable alive than dead, and mean that people try to anticipate what the other guy needs and wants. It engages the mechanisms of reciprocal altruism, as the evolutionary biologists call it, as opposed to raw dominance”.
                                                                        Steven Arthur Pinker (born September 18, 1954)

Introduction
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP).  Trading globally gives consumers and countries the opportunity to be exposed to new markets and products. Almost every kind of product can be found on the international market: food, clothes, spare parts, oil, jewelry, wine, stocks, currencies and water. Services are also traded: tourism, banking, consulting and transportation. A product that is sold to the global market is an export, and a product that is bought from the global market is an import. Imports and exports are accounted for in a country's current account in the balance of payments. Harmonized System (HS) is for classifying goods is a six-digit code system in international Market.
The Harmonized System (HS) is an international nomenclature defined by the World Customs Organization (WCO) for the classification of products. It allows participating countries to classify traded goods on a common basis for customs purposes. At the international level, the Harmonized System for classifying goods is a six-digit code system.
The HS comprises approximately 5,000 article/product descriptions that appear as headings and subheadings, arranged in 96 chapters (Chapter 77 is reserved for future use) and grouped into 21 sections.
Of the six digits, the first two digits identify the chapter the good is classified in, e.g. 09 = Coffee, Tea, Maté and Spices. The first four digits identify the heading, a finer breakdown of the chapter, e.g. 09.02 = Tea, whether or not flavoured. The full six digits identify the sub-heading, and are even more specific, e.g. 09.02.10 = Green tea (not fermented). Up to the HS-6 digit level, all countries using the Harmonized System have the same codes.
History
As early as a century ago, the lack of uniformity between the many different classification systems that had grown up throughout the world had become a major concern. Since that time, several attempts have been made to create an international system of classification.
In 1950, the Customs Cooperation Council was formed in Brussels. Shortly thereafter, the classification system it developed, known as the Customs Cooperation Council Nomenclature, came into use. By 1970, it became apparent that this system would have to be revised both in order to make it usable by more countries and to ensure compatibility with modern, computerized methods of doing business. Thus the development of the Harmonized Commodity Description and Coding System began.
On January 1, 1988 most members of the WTO adopted the new Harmonized System. In the United States, the HTSUS (Harmonized Tariff Schedule of the United States) was enacted by subtitle B of title I of the Omnibus Trade and Competitiveness Act of 1988, and became effective on January 1, 1989 – replacing the TSUS (Tariff Schedules of the United States).
There are now more than 200 countries using the international Harmonized Tariff. So are they all the same? Yes, and No. Yes to the 6 digit level. No beyond that level. Before being adopted into law by a country, the WTO Harmonized System is augmented to accommodate particular national goals. For example, most add additional levels to provide a finer breakout of products. Duty rates and units of measurement are added — generally at the 8th digit level, but often enough at the 10th digit level.

Harmonized System 
The Harmonized System is an international nomenclature for the classification of products. It allows participating countries to classify traded goods on a common basis for customs purposes. At the international level, the Harmonized System (HS) for classifying goods is a six-digit code system.
Under the HS Convention, the contracting parties are obliged to base their tariff schedules on the HS nomenclature, although parties set their own rates of duty. The HS is organized into 21 sections and 96 chapters, accompanied with general rules of interpretation and explanatory notes. First, the system assigns goods to sections, and then proceeds to assign these goods to their specific chapter, heading, and subheading, in that order, as necessary. The HS therefore assigns up to a total of 8 digits at the tariff-rate (legal) level. Two extra digits may also be assigned as statistical reporting numbers for a total of 10 digits to be listed on entries.
To ensure harmonization, the contracting parties must employ at least 4- and 6-digit provisions, international rules and notes, but are free to adopt additional subcategories and notes. Chapter 77 is reserved for future international use only. Chapters 98 and 99 are reserved for national use. Chapter 98 comprises special classification provisions, and chapter 99 contains temporary modifications pursuant to a parties' national directive or legislation.
The system is used by more than 200 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics. Over 98 % of the merchandise in international trade is classified in terms of the HS. 
The HS contributes to the harmonization of Customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade.
It is also extensively used by governments, international organizations and the private sector for many other purposes such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, compilation of national accounts, and economic research and analysis. The HS is thus a universal economic language and code for goods, and an indispensable tool for international trade.
Importance
For Government
For government, a tariff classification system enables "uniform identification of imported and exported goods for purposes of duty and tax collection, enforcement of national laws and international treaties, analysis for economic and business planning, and international trade negotiations."
For Companies
For users of the tariff (importers and exporters of all types and sizes), correct classification is a legal responsibility. Non-compliance can mean shipment delays, increased inspections, fines, and other administrative penalties.
Correct classification often saves money, both in the short and long term. When examining a company's past imports, customs consultants find that overall, too much duty has been paid, indicating that full advantage of provisions of the tariff were not taken. Making use of these provisions requires a precise knowledge of the product to be classified, something that the importer or exporter has, as well as knowledge of the Tariff and the principles of classification, something readily know-able.
Whether goods are eligible for any of the special provisions of the Tariff that allow for lower duty rates usually depends on the use or purpose for which they are being imported, or on the availability of certificates of origin. Again, the importer is in the best position to know these facts.
Verifying the classification decisions of customs brokers and professional classification suppliers is a good way of protecting both compliance records and revenue outlay in the form of duties and taxes. By understanding how the tariff classification process works, importers will be able to work together with their classification provider (usually a customs broker or consultant) to ensure that their goods are classified correctly.
An international "Harmonized System" for the description and classification of goods was created in 1988, and soon after adopted by nations around the world. The broad, core specifics and structure of Harmonized System classifications is universal, with each participating country eligible to add and define specific detail items, and to create and assign rates of duty in any required categories for all classifications.
Reff; http://www.globaltariff.com/; retried on 3rd may 2015