COMMODITY CLASSIFICATION SYSTEM – MODULE 1

THE HARMONIZED COMMODITY DESCRIPTION AND CODING SYSTEM

TOPIC OUTLINE

I. The HS Nomenclature
II. Uses of the HS Nomenclature
III. History (Development) of the HS Nomenclature
IV. The Harmonized System Convention
V. Composition and Structure of the HS Nomenclature
VI. HS Explanatory Notes and Compendium of Classification Opinions
VII. 2017 HS Amendments

TOPIC ANNEXES: The International Convention on the Harmonized System List of Contracting Parties to the HS Convention

I. THE HS NOMENCLATURE

The Harmonized Commodity Description and Coding System commonly referred

to as the “harmonized System” or simply “HS” is a multipurpose product
nomenclature developed by the World Customs Organization (WHO) (formerly
the Customs Cooperation Council) and used by more than 200 countries primarily
for customs tariffs and international trade statistics. It is a universal economic
language and code for goods, and an indispensable tool for international trade.

Products are systematically grouped; each assigned a six digit code, arranged in
a logical structure and supported by well-defined rules to achieve uniform
classification.

The structure of the HS Nomenclature incorporated with the HS 2012

amendments consists of 21 Sections divided into 97 Chapters (Chapter 77 is
reserved) with1, 231 4-digit headings and 5,212 6-digits subheadings.

On the other hand, the latest iteration of the HS Nomenclature incorporating the
HS 2017 amendments still consists of 21 Sections divided into 97 Chapters (Chapter 77 is still reserved for future use) but this time with
1,222 4- digit Headings and 5,387 Subheadings.

The Nomenclature is maintained by the WCO to ensure its uniform interpretation and undergo periodic updating to keep it abreast of
advancements in technology and changes in trade patterns.

The latest HS nomenclature incorporating the 2017 amendments is currently incorporated under the Philippines tariff nomenclature- the
Tariff Administration and Policy including the ASEAN Harmonized Tariff Nomenclature 2017 (or simply, TAP- AHTN 2017).

II. USES OF THE HD NOMENCLATURE

The HS Nomenclature, particularly the commodity codes are used by Customs authorities statistical agencies, and other government
regulatory bodies, as a basis of:
- Customs Tariff
- International Trade Statistics
- Rules of Origin
- Trade Negotiations (e.g., WTO Schedule of Tariff Concessions)
- Monitoring prohibited and restricted goods
- Other uses (e.g., internal taxes, price monitoring, compilation of national accounts, economic research analysis, etc.)

Companies use HS codes (where goods are classified to determine applicable import duty rate) to calculate the total landed cost of
imported products and to identify selling and sourcing opportunities abroad.

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III. HISTORY OF STHE HS NOMENCLATURE

As the level and importance of international trade continued to increase, every trading nation became aware of the inconsistencies in the
national customs tariffs. There were differences in the description of product coverage of headings and subheadings and in the methods
use in the classifications of products. These inconsistencies gave rise to trade delays and inefficient statistical gathering, recording,
among others.

Thus, it became apparent that there is a pressing need for a standard customs classifications system to address the following concerns:

- systematic and uniform classification of all tradable goods;

- to provide a common internationally-accepted customs language easily understood and implanted by the international trade
community; and
- to facilitate the conduct of international trade

1931 - The “Geneva Nomenclature” was developed. It was prepared by a committee of experts under the auspices of the League of
Nations.

1959 - The “Brussels Tariff Nomenclature” came into force. It was created by the European Customs Union Study Group using the
Geneva Nomenclature as base.

1974 - The “Customs Cooperation Council Nomenclature” was the new name given to the BTN to avoid any confusion as to the
international organization responsible for its development. The Customs Cooperation Council was created in 1952 as an independent
intergovernmental body to enhance the effectiveness and efficiency of Customs administrations.

1988 – The “Harmonized Commodity Description and Coding System” entered into force. It was based on the Standard International
Trade Classification (SITC) which is a product of the United Nations and the CCCN, and incorporated updates for modern technology
and trade patterns.

Revisions (Amendments) to the HS Nomenclature were undertaken in 1992, 1996, 2002, 2007, 2012 and 2017.

The latest amendments to the HS nomenclature became effective starting 01 January 2017.

IV. THE HS CONVENTION

The HS Nomenclature is governed by the “The International Convention on the Harmonized Commodity Description and Coding System”
done at Brussels on 14 June 1983, entered into force on 01 January 1988, and amended by the Protocol adopted on 24 June 1986 which
entered into force on 05 June 1989.

It was developed to facilitate the conduct of 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 and to use the General Rules for the interpretation of the HS (GRIs/GIRs) as the basis of classification, although parties
set their own rates of duty.

The Legal Texts of the Nomenclature comprised of the texts of the headings and subheadings and their related numerical codes, the
Section, Chapter and Subheading Notes and the GIRs which are all annexed to the HS Convention.

The HS nomenclature is used by 207 countries and economic unions (155 of which are Contracting Parties to the HS Convention as of
18 January 2017).

Executive Order No. 688 (s. of 1981) mandated the Tariff Commission to align the TCCP with the CCC Nomenclature and all its
subsequent amendments.

The Philippines implemented the use of the HS nomenclature on 01 July 1988 in accordance with NEDA Board Resolution dated 25
November 1987. Although at that time, the Philippines , not officially a Contracting Party to the HS Convention, opted to adopt the HS on
a de facto (actually existing, especially when without lawful authority) basis to be in line with the latest internationally-accepted
nomenclature used in goods classification.
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The Philippine Instrument of Accession to the HS Convention was signed by President Joseph E. Estrada on 23 September 1998 and
concurred in by the Senate on 05 February 2001. The Instrument of Accession was formally deposited to the WCO on 25 June 2001.

Contracting Parties to the HS Convention are not permitted to alter in any way the descriptions associated to a heading or a subheading
nor can the numerical codes up to the six-digit level be altered. This is what keeps the Harmonized System harmonized. However,
Contracting Parties may extend a HS code beyond the six-digit level to accommodate their national requirements.

V. COMPOSITION AND STRUCTURE OF THE HS NOMENCLATURE

1. Composition of the HS Nomenclature

HS NOMENCLATURE

GENERAL 21 SECTIONS
INTERPRETATIVE HS EXPLANATORY (1 to XXI)
RULES (GIRs) NOTES and Section Notes
COMPENDIUM OF
Rules 1 to 6 CLASSIFICATION 97 CHAPTERS (Ch.
OPINIONS 77 is not used
(Reserved)
Chapter and
Rules 1 to 5: Rule 6: Subheading Notes
Govern Governs
classification at classification at the 4-digit Headings with
the 4-digit or 6-digit or Descriptions
heading level. subheading- level.

6-digit Headings with

Descriptions

2. Structure of the HS Nomenclature Section No. and Title of

the Section
- For ease of
HS SECTION
reference only

Section Notes
- With legal bearing

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Section No. and Title of

HS CHAPTER the Section
- For ease of
reference only

HS HEADING AND SUBHEADING

4-Digit HS Heading

6-Digit HS Subheading

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Illustration 1: Comparison between the HS Nomenclature and the Philippine tariff nomencalture.

HS Nomenclature:

2309.10 - Dog or cat food, put up for retail sale

Philippine tariff nomenclature:

2309.10 - Dog or cat food, put up for retail sale:

2309.10.10 - - Containing meat
2309.10.90 - - Other

Note that the HS Subheading for “Dog or cat food, put up for retail sale” was extended beyond the six-digit level (from 2309.10 to
2309.10.10 and 2309.10.90) to incorporate the domestic requirement of the Philippines (as part of ASEAN; the eight-digit code is an
ASEAN subheading) to make a distinction for “Dog or cat food, containing meat, put up for retail sale”.

Additional Information: Subheading 2309.10.90 (“Other”) covers “Dog or cat food, put up for retail sale, other than those containing
meat”.

Illustration 2: Harmonized Classification of Contracting Parties

Product: Sweet corn

HS Nomenclature classification: 0711.90
Contracting Parties classification:
Japan (9-digit code) 0711.90.099
USA (10-digit code) 0711.90.65.00
Bangladesh (8-digit code) 0711.90.00
South Africa (8-digit code) 0711.90.90
Philippines (8-digit code) 0711.90.10

- Except for Bangladesh, the other Contracting Parties have classifies sweet corn under a subheading beyond the six-digit level
of the HS.
- Notice that the classification of all Contracting Parties is the SAME up to the SIX-DIGIT subheading level (harmonized
classification).
- Harmonized classification is achieved through the use of the classification principles of the GIRs.

VI. HS EXPLANATORY NOTES AND COMPENDIUM OF CLASSIFICATION OPINIONS

The HS Explanatory Notes contain the official interpretation of the HS nomenclature which
consist of 5 volumes and are published by the WCO.

The Explanatory Notes contain additional relevant and detailed information about
commodities, processes and terms used in the HS Nomenclature. The Notes also provide
detailed explanation as to the proper application of the GIRs in ther classification of goods.

These Notes are not legally binding but these are important and indispensable tool in the
correct interpretation of the HS Nomeclature.

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Sample of Explanatory Note Provision:

01.03 Live swine.
0103.10 - Pure-bred breeeding animals
- Other:
0103.91 - - Weighing less than 50 kg
0103.92 - - Weighing 50 kg or more

This Heading covers both domestic pigs and wild pigs (e.g., wild boars).

Subheading Explanatory Notes.

Subheading 0103.10

For the purpose of subheading 0103.10, the expression “pure-bred breeding animals” covers only those breading
animals which are regarded as “pure-bread” by the competent national authorities.

Subheadings 0103.91 and 0103.92

For the purpose of subheadings 0103.91 and 0103.92, the specified weight limits relate to the weight of each animal.

These are the information provided by the HS Explanatory Notes for Heading 01.03 – specifiying
the coverage of the heading and defining “pure-bred breeding animals”.

The Compendium of Classification Opinions contains a list of classification ecisions discussed and
approved by ther HS Committee and adopteed by the WCO Council. The list includes the
description of the product, HS 6- digit code and the GIR/s used.

It serves as a reference laying out the procedures and basis used in the classification of difficult or
controversial goods thus providing a helpful guide in the classification of similar goods.

VII. HS 2017 AMENDMENTS

The latest set of amendments to the HS nomenclature entered into force starting 01 January 2017 with major changes to address
environmental and social issues of global concern.
It includes 233 sets of amendments, divided as follows: agricultural sector 85; chemical sector 45; wood sector 13; textile sector 15; base
metal sector 6; machinery sector 25; transport sector 18; other sectors 26.
For fish and fishery products – further enhanced the coverage of species and product forms which need to be monitored for food security
purposes and for better management of resources.
For forestry products – enhancement of the coverage of wood species in order to get a better picture of trade patterns, including
endangered species.
For environmental issues – introduction of new Subheadings for specific chemicals controlled under the Chemical Weapons Convention
(CWC), for certain hazardous chemicals controlled under the Rotterdam Convention and for certain persistent organic pollutants
(POPSs) controlled under the Stockholm Convention.
REFERENCES:

HS Nomenclature wcoomd.org
HS Covention tariffcommission.gov.ph
HS Explanatory Notes E.O.No.688(s. of 1981)
HS Compendium of Classification Opinions Tariff Administration and Policy including the AHTN 2017,
HS 2017 Amendments CMTA Secs.1600 to 1612
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