Harmonized System

Summary of Harmonized System

Known formally as the Harmonized Commodity Description and Coding System.. a product statistical classification system based upon the Customs Cooperation Council Nomenclature (CCCN) and designed to replace various statistical classification schemes now employed by various trading nations.

Currently several important statistical classification systems are in use globally. The absence of a uniformly applied system impedes comparison of trade data among nations. In some cases the statistical systems used by a given nation for capturing data on import and export transactions are not compatible with the system employed to monitor domestic output. (In the United States, for example, export data are captured under one classification, import data under another, and domestic production under yet a third.) To remedy these deficiencies, the Customs Cooperation Council has proposed that the harmonized system be used as the single product classification structure in international trade, and that all customs tariffs, tariffs of shipping lines, and similar classifications be based upon the harmonized system.

Although based upon the CCCN, the harmonized system is more detailed, embracing many new subdivisions reflective of changes in trading patterns, technological advancements, and user needs. The system is designed to permit further product subdivision by user nations to accommodate special customs or statistical requirements.

As proposed, the harmonized system identifies approximately five thousand articles, which appear as headings or subheadings. Articles are organized into ninety-six chapters grouped in twenty sections. Each heading is assigned a four-digit number: the first two digits represent the chapter within which the article is classified; the second two digits reflect the position of the article within the chapter. A subheading bears an additional two digits. Further subdivision beyond six digits is at the option of the user nation.

In considering the applicability of the harmonized system to U.S. statistical requirements, the president directed the U.S. International Trade Commission (USITC) to prepare a conversion from the U.S. Tariff Schedules into the harmonized system. The commission was directed to avoid, where practicable, changes in tariff rates and “to simplify the tariff where possible without rate changes significant for U.S. industry, workers, or trade.”The converted tariff was submitted by the USITC to the president on June 30, 1983. An act of Congress would be required to adopt the harmonized system in place of the current Tariff Schedules.

As an additional complication, section 484(e) of the Tariff Act of 1930 requires, inter alia, that statistical systems used for imports and exports shall comprehend “all merchandise imported into the United States and exported from the United States, and shall seek, in conjunction with statistical programs for domestic production and programs for international harmonization of statistics, to establish the comparability thereof.”The USITC interprets this section of the law to mean that should the United States adopt the harmonized system as the statistical classification system for imports, it will be necessary to convert the Statistical Classification of Domestic and Foreign Commodities Exported from the United States (Schedule B) into the format of the Harmonized System. Similarly, the commodity classification codes used for domestic production must be revised to improve their comparability with the domestic and international programs for imports and exports which are now being converted into the structure of the Harmonized System. (USITC Publication 1400, June 1983)

The president has not recommended legislation to adopt the harmonized system.

(Main Author: William J. Miller)

Harmonized System (HS) and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Harmonized System (HS): A system of tariff nomenclature for customs classification negotiated within the Customs Cooperation Council (Sec.III). Participating countries classify goods for customs purposes on the HS basis up to a level of product specificity denoted by six-digit codes. Countries are free to introduce national distinctions –for tariff or statistical purposes –for more detailed product breakdowns beyond the six-digit level. The United States adopted the Harmonized System in theTrade Act of 1988 (Sec. IV). The Harmonized System superseded the Brussels Tariff Nomenclature (BTN) classification system.

Harmonized System (HS) in International Trade

Meaning of Harmonized System (hs), according to the Dictionary of International Trade (Global Negotiator): A method of classifying goods in international trade developed by the World Customs Organization. The core system contains 96 chapters and classifies at six-digit lever, with the first two numbers indicating appropriate chapter, the second two numbers indicating the appropriate heading within the chapter and the third two numbers indicating the appropriate sub-heading within the heading. It is organized into 99 chapters arranged in 22 sections with sections generally covering an industry (e.g. Section XI, textiles and Textiles Articles) and the chapters covering the various materials and products of the industry (e.g. Chapter 50, Silk). Many countries place additional digits after the six-digit HS number to achieve greater classification precision. For example, the United States uses ten-digit numbers for export and import classification, of which the first six are harmonized. See also HS 6-digit. Harmonized System Classification.