Harmonized System Overview

Harmonized System-Classification and Tariff System

• The Harmonized System (HS) is a standardized numerical method for classifying traded products.
• It is used worldwide for uniform identification and description of products.
• This method is used for assessing duties and gathering statistics.
• The HS is a multipurpose international product nomenclature used for classifying products.
• It is considered a universal economic language for goods.
• The HS is organized progressively, comprehensively, and systematically based on easily understood principles.
• The World Customs Organization (WCO) sets the schedules and explanatory notes for the HS.
• Every 5-6 years, the HS is updated with amendments and explanatory notes.
• The current version of the HS is the Ninth (9th) Edition from 2022.
• The Belize Customs Tariff and Trade Classification is governed by the International Convention and Chapter 48 of the Customs & Excise Duties Act Section 3(1) First Schedule & (10), 8, 12.
• The HS codes consist of 6 digits (heading and sub-heading) and can be extended to 10.

Outline/Objectives

• The presentation outlines the structure and purpose of the HS.
• Identify and define Harmonized System (HS).
• Describe the purpose and importance of the HS.
• Understanding the structure of the HS is critical to understanding GIR.
• List and state the Rules (GIR).
• Interpret and explain the six rules of interpretation.
• Analyze and apply the rules to classify goods.

The Law that Governs Us

• The Belize Customs Tariff and Trade Classification is governed by the International Convention.
• The legal authority is Chapter 48 of the Customs & Excise Duties Act Section 3(1) First Schedule &(10), 8, 12.

What is the Harmonized System (HS)?

• The Harmonized Commodity Description and Coding System.
• A standardized numerical method of classifying traded products.
• Used by countries to uniformly identify and describe products for assessing duties and gathering statistics.
• Multipurpose international product nomenclature for product classification.
• Universal economic language for goods.
• Provides a code for goods.

Harmonized System (HS) Governing Bodies

• Governed by "The International Convention on the Harmonized Commodity Description and Coding System".
• Council for Trade and Economic Development (COTED) established the HS in 1988.
• Responsible for the schedule of rates.
• The World Customs Organization (WCO) Harmonized System Committee.
• Administers, develops, and maintains the HS system.
• Responsible for nomenclature and legal notes.

Function of the Harmonized System Committee

• To propose amendments to the Convention on the Harmonized system.
• Considers user needs and changes in international trade.
• To prepare explanatory notes, classifications, and other advice for interpreting the Harmonized System.
• To prepare recommendations for uniformity in interpreting and applying the Harmonized System.
• To collate and circulate information concerning the application of the Harmonized System.
• On own initiative or on request, provide information or guidance to Members of the Council.

Harmonized System Committee

• Representatives from each of the Contracting Parties form the Committee.
• The Committee was established under the International Convention for the Harmonized Commodity Description and Coding System.
• The HS has undergone several revisions and updates.
• Revisions and updates entered into effect in 1966, 2002, 2007, 2012, 2017/2018, 2022.

Why Created and Used by WHO: Harmonized System (HS)

• Harmonizes Customs and trade procedures.
• Facilitates non-documentary trade data exchange.
• An essential tool for international trade.
• Extensively used by governments and international organizations as well as the private sector.

Why is it important : Purpose of the Harmonized System (HS)

• Purposes such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, and economic research and analysis.
• Transport statistics.
• Price monitoring.
• Quota controls.
• Compilation of national account.
• Economic research and analysis.

HS-Tariff System-CET

• Common External Tariff (CET).
• A uniform tax or tariff applied to imported goods from outside a customs union or common market (e.g., CARICOM).
• Applies the same duties, import quotas, preferences, or non-tariff barriers to all goods entering the area.
• Contracting parties are obligated to base their tariff schedules on HS nomenclature.
• Each party can set their own rates of duty.
• Parties are free to adopt additional subcategories and notes.

The Belize Customs Tariff and Trade Classification

• National tariff prepared to implement the Common External Tariff (CET) of CARICOM.
• Based on the 9th edition of the Harmonized System, 2022.
• Customs tariff schedule consists of two elements: goods nomenclature (WCO) and a list of tariff rates (COTED).
• Nomenclature comes from the Latin word for name and is a system for naming items in specific disciplines.

Tariff Rates

• A tariff is a tax on imported or exported goods and services.
• National tariff has two types of rates:
  • Specific tariff.
  • Ad valorem. Specific tariff- based on weight or volume of the item. Ad valorem tariff- based on the cost of the item (e.g., 5%, 10%, 15%). Examples of Specific Tariff:
  • Liquor, fuel, cigarettes, cigars, onion, and potato.

Calculating Specific Tariff

• Laws governing specific duties calculations are outlined in Chapter 48 Section (8) and (12) of the Customs and Excise Duties Act.

Mode of ascertaining specific duty

• "reputed pint," "split," or "quart" measurement.
• Legal bearing: Customs and excise duties act chapter 48 revised edition 2000.
• Reputed split: 5 fluid ounces to 6 2/3 fluid ounces.
• Reputed pint: 8 2/3 fluid ounces to 13 1/2 fluid ounces.
• Reputed quart: 20 fluid ounces to 26 2/3 fluid ounces.
• Actual volume ascertained by measurement when container is different from reputed measurements.
• Malt liquor is ascertained by actual volume.

What liquors may be classed as wine or malt.

• Liquors containing more than 42% proof spirit (by Sykes' hydrometer or Government Analyst certification) are deemed wine.
• Liquors containing more than 20% proof spirit (by Sykes' hydrometer or Government Analyst certification) are deemed malt liquor.
• All other liquors containing more than 42% are deemed spirits (excluding medicinal spirits).

Structure of the HS

• Consists of Sections, Chapters, Headings, and Subheadings.

Harmonized System - Tariff & Classification

• Comprises over 5,000 commodity groups as headings and subheadings.
• Organized into 21 sections.
• 99 chapters, of which only 96 are currently in use; chapter 77 is reserved for future use; chapters 98 & 99 are reserved for national use.
• Chapter 98 covers special classification provisions and is currently for personal and household effects.
• Chapters are broken down into headings and further subdivided into subheadings.

Harmonized System (HS)

• Each subheading is identified by a six-digit code (HS code).
• Legally and logically structured.
• Supported by well-defined rules to achieve uniform classification and explanatory notes.
• Products are assigned to sections, headings, and subheadings.
• List of rates used to classify traded products.

Harmonized System - Tariff & Classification Code

• International level, six-digit code system.
• The six digits are broken down into three parts: (Chapter, Heading, Subheading).
• CHAPTER: (HS-2), the first two digits indicate the Chapter into which the goods belong.
• HEADING: (HS-4), the next two digits show the grouping(s) within that chapter.
• SUBHEADING: (HS-6), the next two digits identify more specific groupings.

HS Assigns

• Assigns up to a total of 8 digits at the tariff-rate (legal) level.
• Two extra digits may be assigned to statistical reporting numbers for a total of 10 digits to be listed on entries.

HS Sections

• There are 21 sections in the HS, identified by Roman numerals.
• Titles identify special or general categories of goods.
• Provides ease to locate products in the HS.

Titles of the Sections

(These titles or sections summarize the categories of goods in the Harmonized System) ...(All the previous titles are included)...

HS Chapters

• Located within HS sections.
• 96 chapters, numbered 1-97.
• Chapter 77 is reserved for future use.
• Product descriptions related to the chapter are listed with a corresponding numerical code.

...(All the previous sections are included)...