Harmonized System and Customs Tariff

Harmonized System and Customs Tariff

Harmonized System

The Harmonized Commodity Description and Coding System is an international nomenclature of various usages developed under the auspices of the World Customs Organization (WCO) (formerly the Customs Cooperation Council), an independent intergovernmental organization based in Brussels.

The HS was adopted by the International Convention on the Harmonized Commodity Description and Coding System of 14 June 1983 and entered into force on 1 January 1988. The EU, along with its member states, is a party to this convention. In Germany, the HS was introduced by ordinance of 10.12.1986 (BGBI. II 1986, p. 1067 of 19.12.1986).

Since then, the HS has been further developed and maintained by the WCO. The Convention currently has 157 contracting parties, but it is used by more than 200 administrations worldwide (about 98% of world trade is covered by the HS), mainly to establish their respective national customs tariffs and to collect economy-related statistical data. Where they use the same version of the HS, the first six digits of a tariff number of the participating parties are identical.

The HS nomenclature includes about 5000 commodity groups, designated by a 6-digit code and arranged according to fixed rules in a legal and (more or less) logical structure. The Combined Nomenclature (CN) of the European Union integrates the HS Nomenclature and includes additional 8-digit subdivisions and notes created in view of the Community requirements.

The official interpretation of the HS Nomenclature, which ensures its uniform application worldwide, is made by the HS Committee, which is composed of representatives of the Contracting Parties to the HS Convention. Other administrations, international organizations, international trade and industry are represented in the role of observers.

Due to the largely uniform interpretation of the HS nomenclature worldwide, products are classified under the same HS code in almost all countries of the world.

The HS Convention provides for two types of decisions to be taken by the HS Committee:

Decisions amending the Convention as well as its nomenclature (Article 16 procedure) and Decisions intended to "administer or interpret" the Convention, generally in the form of classification decisions, Explanatory Notes or Tariff Notices (Article 8 procedure). The amendments to the HS Explanatory Notes, as well as the Tariff Advices, are presented on the WCO website.

In both cases, the EU and its member states have only one vote. Both types of decisions can be subject to a "reservation" by the contracting parties. A "reservation" against an amendment to the Convention (Article 16) cancels the decision taken. However, the legal effect of a "reservation" in the context of a procedure under Article 8 of the Convention is limited to the suspension of a decision, which must then be discussed a second time at a subsequent meeting of the Committee. In practice, this usually means only a postponement of the final decision by six to twelve months.

Amendments to the HS Convention generally become legally binding on all Contracting Parties two years after promulgation by the Secretary General of the WCO. However, decisions concerning the administration and interpretation of the Convention are generally considered to be adopted by all Contracting Parties two months after the decision by the HS Committee.

World Customs Organization toolset for tracking changes to the Harmonized System: HS Tracker (https://hstracker.wto.org).

The HS Tracker is a toolset developed by the World Trade Organization (WTO) Secretariat, with the support of the World Customs Organization (WCO), to enable various stakeholders (e.g., customs and trade officials, statisticians, lawyers, researchers, etc.) to track changes to specific headings or subheadings in different versions of the Harmonized Commodity Description and Coding System (HS).

The subheading visualization feature graphically displays how a particular HS code has changed in different versions of the Harmonized System (e.g., mergers, splits, and complex cases), including the WCO's explanation of why the changes were made under a particular amendment. The English and French versions of these explanations and the correlation tables were taken directly from the WCO website. However, the information in Spanish is an unofficial translation from the WTO Secretariat.

The HS at a Glance feature provides a comprehensive overview of the HS amendments by summarizing the different versions of the HS in a combined structure developed by the WTO Secretariat based on the information provided by the WCO and adapted according to the different implementation measures of the WTO schedules of concessions. The filter and search functions allow to search several HS nomenclatures at the same time for a specific group of codes and to determine if they are affected by a specific amendment to the HS.

Structure of the Harmonized System

The HS is logically organized by industry or material component. For example, animals and animal products are found in one section of the HS, while machinery and mechanical equipment are found in another. The HS is divided into 21 sections, which are in turn divided into 96 chapters (Chapters 1 through 97, with Chapter 77 reserved for possible future use by the HS). The 96 HS chapters are further divided into 1,228 headings and 5,612 subheadings in the current 2022 edition of the HS.

Section and chapter headings describe general commodity categories, while headings and subheadings describe commodities in more detail. In general, the HS sections and chapters are arranged in order of the degree of manufacture or technological complexity of a commodity. For example, natural commodities such as live animals and vegetables are described in the first sections of the HS, while more sophisticated commodities such as machinery and precision instruments are described in later sections. Chapters within each section are also usually arranged according to complexity or degree of manufacture. For example, within Section X (Pulp of wood or other fibrous cellulosic material; Paper or paperboard for reclamation (waste and scrap); Paper, paperboard, and articles thereof), Chapter 47 covers pulp of wood or other fibrous cellulosic material, while Chapter 49 covers printed books, newspapers, and other printed matter. Finally, the headings within each chapter follow a similar sequence. For example, the first heading in Chapter 50 (Silk) covers cocoons of silkworms, while articles of silk are covered by the later headings in the chapter.

The HS code consists of 6 digits. The first two digits designate the chapter in which the headings and subheadings appear. The second two digits designate the position of the heading within the chapter. The last two digits designate the position of the subheading within the heading. For example, HS code 1006.30 represents chapter 10 (cereals), heading 10.06 (rice), and subheading 1006.30 (Semi-milled or wholly milled rice, whether or not polished or glazed).

In addition to the HS codes and commodity descriptions, each section and chapter of the HS is preceded by legal notes to clarify the proper classification of the goods.

To ensure harmonization, the Contracting Parties to the Convention on the Harmonized Commodity Description and Coding System have agreed to base their national customs tariffs on the HS nomenclature and legal notes. Contracting Parties are allowed to subdivide the HS nomenclature beyond the 6-digit level and add their own legal notes according to their own tariff and statistical requirements. Parties often set their tariffs at the 8-digit "tariff code" level. Statistical suffixes are often added to the 8-digit tariff code to make it a total of 10 digits. When the number of digits exceeds 6, the additional digits are referred to as the national breakdown.

Chapter 77 is reserved for future use by the HS. Chapters 98 and 99 are reserved for internal use by the Parties to the HS Convention.

Classification of goods

The process of assigning HS codes is referred to as "HS Classification." All products can be classified into the HS using the General Rules for the Interpretation of the Harmonized System ("GRI"), which must be applied in strict order. HS codes can be determined by a variety of factors, including a product's composition, form, and function. An example of a product classified by its shape would be whole potatoes. Classification also depends on whether the potatoes are fresh or frozen. Fresh potatoes are classified in heading 07.01 (potatoes, fresh or chilled), more specifically in subheading 0701.90 (other), and frozen potatoes are classified in heading 07.10 (vegetables, uncooked or cooked by steaming or boiling in water, frozen), more specifically in subheading 0710.10 (potatoes).

An example of an article classified according to its material composition is a picture frame. Picture frames of tropical wood are classified in heading 44.14 (frames of wood for paintings, photographs, mirrors or similar articles), more specifically in subheading 4414.10 (of tropical wood). Picture frames of plastics are classified in heading 39.24 (Tableware, kitchenware, other household articles, sanitary articles or toilet articles, of plastics), more specifically in subheading 3924.90 (other). Picture frames of glass are classified in heading 7020.00 (Other articles of glass), the ".00" at the end indicating that the heading is not further subdivided.

An example of a product classified by shape is soap for personal hygiene. In the form of bars, cakes or moulded articles, it is classified in heading 34.01 (soaps and the like), then in subheading 3401.1 (soaps and organic surface-active agents and preparations, in the form of bars, cakes, moulded articles or moulded pieces, paper, wadding, felt and nonwovens, impregnated, coated or covered with soap or detergent), and in subheading 3401.11 (soaps for personal hygiene, including medicaments) with two dashes. On the other hand, liquid personal care soap, depending on what it contains, is classified in either subheading 3401.20 (Soap in other forms) or subheading 3401.30 (Organic surface-active products and preparations for washing the skin, in liquid or cream form, put up for retail sale, whether or not containing soap).

An example of a product classified by function is a carbon monoxide (CO) detector. When the CO detector detects and displays gas readings, it is properly classified in subheading 9027.10 (Gas or smoke analysis apparatus) of heading 90.27 (Instruments and apparatus for physical or chemical analysis (e.g. Polarimeters, refractometers, spectrometers, gas or smoke analyzers; instruments and apparatus for measuring or testing viscosity, porosity, elongation, surface tension or the like; instruments and apparatus for measuring or testing heat, sound or light (including exposure meters); microtomes). If the CO detector does not detect and display gas measurements, it is properly classified in subheading 8531.10 (Burglar or fire alarms and similar apparatus and appliances) of heading 85.31 (Electrical sound or optical signalling apparatus (e.g., bells, sirens, scoreboards, burglar or fire alarms), other than those of heading 85.12 or 85.30).

Although any article or part of any article may be classified in the HS, very few are specifically described in the HS nomenclature. Any article for which there is no explicit description may be classified in a "remainder" or "catch-all" heading or subheading intended for "other" articles. Remaining codes are normally placed last in the numerical order of their associated headings and subheadings.

An example of a product classified in a residual heading is a live dog, which must be classified in heading 01.06, "Other live animals," since dogs are not covered by headings 01.01 to 01.05, which specifically include live horses, live cattle, live swine, live sheep and goats, and live poultry, respectively.

TARIC (Tarif Intégré de la Communauté)

TARIC (Tarif Intégré de la Communauté) is the official name of the EU's Common Customs Tariff. It is administered by the European Commission and used by all EU member states, including Germany.

TARIC is an electronic database and information system that contains the EU customs tariff. It contains information on tariff rates, customs regulations, import restrictions, commodity codes and other relevant information for trade in goods between the EU and third countries.

TARIC is updated regularly to reflect changes in the EU Customs Tariff. These updates may include new tariff rates, changes in the classification of goods, or other relevant information. TARIC ensures that all EU member states have uniform information and rules for the movement of goods.

In Germany, TARIC is administered and implemented by German Customs. When importing goods into Germany, the appropriate TARIC codes must be used to correctly classify the goods and apply the correct customs rates.

EZT-online information application

The Customs Administration offers the Electronic Customs Tariff (EZT) as "EZT-online" on the Internet (https://auskunft.ezt-online.de). The EZT contains the data of the TARIC (Tarif Intégré des Communautés Européennes, Integrated Tariff of the European Community), supplemented by national data (e.g. import turnover tax and excise duty).

The user is enabled to classify or select goods up to the 11-digit code number in the import area or up to the 8-digit commodity code number in the export area in various ways. He is assisted in the classification by various text documents (e.g. explanatory notes on the Combined Nomenclature, notes on the section).

For the selected code or commodity number, all relevant measures and notes (e.g. third-country duty rate, import or export license requirement, export refund measures) are displayed that must be observed when importing or exporting goods. In addition, an excise duty nomenclature is integrated in the import area, which makes it possible to determine the corresponding excise duty rate.

To support the work with the EZT, an extensive help program is already available on the EZT start page as well as an "EZT User Manual" under "Texts".