HS2022: The codes they are a-changin'

Posted by Marko Vuksanovic
Blog originally posted on 15/10/2021 10:30 AM

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… well, not all of them luckily!!! But, just like Bob Dylan's song that inspired the title, my less-so-poetic commentary is a rallying call for consideration of the impending changes in the HS2022 update.

Some background to set the mood: the Harmonised System is a convention comprising the nomenclature for the classification of products in cross-border trade. The nomenclature is a hierarchical structure consisting of product categories/subcategories and descriptions, represented in a six-digit numerical code (HS Code).   The HS Codes enable Customs and other governmental authorities to categorise what is being imported or exported. Within the 200+ countries adhering to the Harmonised System, the six-digit HS Code is expanded at a national tariff level and includes additional digits for further sub-categorisation. A Tariff Classification is commonly between 8-12 digits for most countries.

Every 5-6 years the World Customs Organization (WCO) updates the Harmonised System to accommodate new products, to more specifically categorise certain products, address environmental/social concerns, or to provide more clarity and transparency.On 1st January 2022, the codes they are a-changin'!

Major Changes
There are 351 amendments in HS2022.
The summary provided below, and especially the examples used, are not a comprehensive or exhaustive list of changes.
They are simply provided for illustration purposes.

Changes in HS2022 include:

  • Creation of new headings & sub-headings;
    • For example, smartphones, 3D printers, and drones now have a place to live.
  • Restructuring of existing headings & sub-headings;
    • For example, we no longer need to dispute whether edible insects are "edible products of animal origin, …", the heading is amended to cover "insects and other edible products of animal origin,…". Insects will also have a dedicated subheading.
  • Omission of existing headings & subheadings;
    • For example deletion of heading 81.07. Due to the low volume of trade in Cadium, it is relegated from heading to subheadings (8112.61, 8112.69)
  • Amendments to Chapter and Section notes
    • For example, a new Section Note (Section XI, Note 15) is created addressing the classification of textiles incorporating mechanical or electronic components (ie. Uncle Mike's [MV2] melodic jingle bells Christmas sweater)
Impacts to Traders
Although there are only 351 amendments in HS2022, when this is applied to national tariffs and further sub-categorisation and statistical itemising are introduced, the number of affected tariff classifications could be in the 1000's.

Any changes affecting Tariff Classifications could additionally affect:
  • tariff rates (duties);
  • other import taxes (ie import GST);
  • import/export restrictions;
  • anti-dumping/countervailing duties;
  • preferential treatment qualification;
  • …. the list goes on.

Importantly, come 1st January 2022 if you haven't considered the effects of the changes in HS2022 on your traded products, in each of the countries you operate, you may experience clearance delays resulting from the misalignment between HS2017 and HS2022.

Recommendations

Importers and Exporters should take necessary steps in analysing the effects of the impending changes for each country with which they import or/or export..   Multinationals operating in multiple countries may have a significant task ahead of them with timely implementation to avoid delays and associated risks.

If you have any questions or concerns reading this article, please feel free to reach out.
 

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Topics: Tradewin

Blog originally posted on 15/10/2021 10:30 AM

Marko Vuksanovic

Written by Marko Vuksanovic

As Principal of Tradewin in the Asia Pacific region, Marko manages Tradewin’s practices in Australia, Singapore, Thailand, Korea, China, Hong Kong and India. Prior to joining Tradewin, Marko worked in several capacities in the logistics industry including managing freight forwarding and customs operations. Marko has years of trade compliance experience and adding value to supply chains through various duty mitigation methods, involving Tariff Classification, Tariff Concession Orders, Valuation, Duty Drawback, Free Trade Agreements, and industry assistance schemes. Marko also assists clients in understanding the complexities of customs and trade compliance, and implementing programs to mitigate and manage associated risks, including AEO/Trusted Trader programs. Marko is a licensed Customs Broker in Australia and is fully accredited by the Department of Agriculture & Water Resources. He holds a Bachelor of International Business from the University of South Australia.