PART TWO — TARIFF NOMENCLATURE |, The World Customs Organization II, The Harmonized System Ili, The ASEAN Harmonized Tariff Nomenclature IV. Advance Rulings on Tariff Classification Tariff Commission | Page 33 - almmimmasst Scanned with CamScannerThe World Customs Organization What is the World Customs Organization? ion (WCO) is an independent intergovorny works in areas covering the ‘on topics such as commodity cl faluation, rules of origin, t n, Tules of origin, collection af cy ssification, valuation, rules i i topics such as commodity classi ay trade facilitation, customs enfgres™ hain security come revenue, our Ni counterfeiting in support of earl proporty fights, inaget activities, can mated Custainable capacity building 10 assist wilh Customs reform an promotion, ani 9 sus modernization. opera il (CCC) >) as the” Customs Co-operation Counci ). the 10s) ax wd a Description and Coding System (Hg) ede snemanclature, and administers tho technical aspecrs > @ fi Established. in{ maintains the Harmon leh internationally accepted ote Valuation and Rulos of Origin. It adopted the WTO Agreements Or Tetoms Organization” in order to indicate more clearly its na working name ‘Wore ver, tho Convention establishing the GCC has not been a ido status. men word wig ee Co-operation Council remains its official name. Wed, thus Customs Co-ope 1 182 Customs administrations ac ICO has worldwide membership of vos Ire Meatvely process approximately 98% of world trade. As the global canter aetfoms expertise, the WCO is the (only) international organization with compete customs, matters and (can rightly call self) the voice of tho international cuten” communi. Ithas its headquarter in Brussels, Belgium. informay ture ay (2) What are the vision and objectives of the WCO? The WCO is internationally acknowledged as the global center of customs expert and plays a lead role in the discussion, development, promotion and implementation of modern customs systems and procedures. Its primary objective is to enhance the effi and effectiveness of member customs administrations, thereby assisting them to contibuis success{uly to national development goals, particularly revenue collection, national security, trade facilitation, community protection and collection of trade statistics. (3. What are the main functions of the WCO? a) To study all questions relating to cooperation in customs matters b) To examine the technical aspects, as well as the economic factors related thereto, of customs systems with a view to proposing to its Members practical means of attaining the highest possible degree of harmony and uniformity, ©) To prepare draft Conventions and amendments to Conventions and to recommend their adoption by interested Governments 9) To make recommendations to ensure the uniform interpretation and application of the Conventions concluded as a result of its work as well as those concerning the Nomenclature for the Classification of Goods in "WO in brie (htp:/www.weoome.org/en/about-us/whats-thesweo aspx) Tariff Commission | Page 34 Scanned with CamScanner9) h) Customs Tariffs and the Valuation of Goods for Customs Purposes and, to this end, to perform such functions as may be expressly assigned to it in those Conventions in accordance with the provisions thereof To make recommendations, in a conciliatory capacity, for the settlement of disputes concerning the interpretation or application of the Conventions referred to in paragraph (d) above To ensure the circulation of information regarding customs regulations and procedures. On its own initiative or on request, to furnish interested Governments information or advice on customs matters within the general purposes of the present Convention and to make recommendations thereon To cooperate with other intergovernmental organizations as regards matters within its competence 4, How does the WCO fullill its mandato? Establishes, maintains, supports and promotes international instruments for the harmonization and uniform application of simplified and effective customs systems and procedures governing the movement of commodities, people and conveyances across customs frontiers, thus contributing 0 the development of trade and the economic and social well-being of nations Reinforces its Members’ efforts to secure, through control and enforcement, compliance with their legislation, in particular by endeavoring to maximize the level and effectiveness of the Members’ co-operation with each other and with international agencies in order to combat customs offenses Assists its Members in their efforts to meet the challenges of the modem environment and adapt to changing circumstances, thus promoting communication and co-operation among Members and with other international organizations Helps foster human resource development and improve management and working methods of customs administration 5. How does the WCO operate? The WCO is the only international organization dealing exclusively with customs matters. It provides for a forum where delegates representing a large variety of members could tackle customs issues on equal footing. Each member has one representative and is entitled to one vote. ™® (8) What are the different working bodies in the WCO? a < Council - highest body composed of the Directors-General of Customs from all members and is assisted by the Finance Committee (17 members) and by the Policy Commission (24 members). The Council meets once a year with the aim of securing the highest degree of harmony and uniformity in the customs systems of Member Governments, and especially to study the Tariff Commission | Page 35 Scanned with CamScannerTariff Commission | Page 36 problems inherent in the development and improvement of ‘customs techniques and customs legislation in connection therewith Policy Commission - established to act as 8 dynamic steering group 10 the Council Finance Committee - acts under the overall direction of he WCO Council with aoa naius suppor provided by the WCO Secretariat Tariff and Trade Affairs: mmittee - administers the International ized System to ensure that the HS ke ‘ternational trade developm abreast of technical progress and in! ones aoretels epecii classification problems: and acts as an arbitrator in restns dleputes between countries and makes decisions regarding the tariff code applicable to goods lem Review Sub-Committee - acts under the overal Nmonzed System Committee on the review and '§ having regard to the needs of the users and to aremges in technology or in patterns of international trade, and on the preparation of consequential amendments to the Explanatory Notes nd Compendium of Classification Opinions = | Harmonized System Co! Convention on the Harmoniz + Harmonized Syst direction of the Ha amendments of the H! «Scientific Sub-Committee - assists the Harmonized System Committee and the Review Sub-Committee in their technical work, particalarly on the draft HS legal texts and Explanatory Notes involving CSentife issues, and with regard to questions involving the Classification of chemical products and those involving scientific issues «Harmonized System Working Party - under the overall direction of the Harmonized System Committee, drafts the texts of possible amendments to the HS Nomenclature, Explanatory Notes and Compendium of Classification Opinions before their final adoption by the Harmonized System Committee = Technical Committee on Rules of Origin - together with the WTO Committee on Rules of Origin, is charged with the implementation of the work program on the harmonization of rules of origin; examines specific technical problems arising in the day-to-day administration of the rules of origin of Members and gives advisory opinions on appropriate solutions based upon the facts presented: and furnishes information and advice on any matter concerning the origin determination of goods as may be requested by any Member * Technical Committee on Customs Valuation - responsible for matters pertaining to customs valuation; and prepares opinions, commentaries, explanatory notes, case studies and surveys + Focus Group on Transfer Pricing. Procedures and Facilitation — consists of the Permanent Technical Committee, Information Management Sub-Committee, the Revised Kyoto Convention Management Committee, SAFE Working Group, Istanbul Scanned with CamScannerConvention Administrative Committee, Contracting Parties to the ATA Convention, Air Cargo Security Technical Experts Group, the Contact Committee for the WCO/IATAICAO Guidelines on Advanced Passenger Information (API) and Passenger Name Record (PNR) Data, the UPUMWVCO Contact Committee, the Administrative Committee for the Customs Convention on Containers, 1972, and Ad Hoc Group on Globally Networked Customs (GNC) Enforcement and Compliance - consists of the Enforcement Committee, Working Group on Commercial Fraud, Global Information and Intelligence Strategy Project Group, Customs Enforcement Network Management Team, WCO Counterfeiting and Piracy Group, Electronic Crime Expert Group and Global RILO Meetings Capacity Building ~ consists of the Capacity Building Committee and Integrity Sub-Committee [Page 37 Scanned with CamScannerCOI The Atupinng oy oF Pewee Wor Il. The Harmonized System 1. What is the Harmonized System? The Harmonized Commodity Description and Coding oe cenmey Harmoninny System (HS), is a multipurpose product nomenclature esi Danae an ines internationally standardized and accepted coding system being malta” Products 2 ‘order to facilitate international trade. It was developed and lsat tg mala ined by the wy |tis also the amalgamation of the Customs Co-operation Council ature (Coy) 3° the Standard International Trade Classification (SITC) Revision 2. The HS is used by more than 200 countries for customs tanif purposes ang 4, collection of international trade statistics. Itis also used as a . tariff nomenclature; . statistical nomenclature; base for the harmonization of economic cassifeation, ©.9., market sures, and data collection; . multipurpose nomenclature by international unions of shipping and tra organizations; . international language and code for customs purposes; * base for the determination of the Rules of Origin (ROO) for non-preferenta trade purposes such as MEN eatment, antidumping and counterating duties, safeguard measures and origin marking; and * basis for trade negotiations. What is the structure of the Harmonized System? All traded products can be classified in the HS utilizing the General Rules for the Interpretation of the HS (GIR). The product listing in the HS is generally arranged according to the degree of processing categories, with increasing complexity. The HS is organized ing 21 Sections subdivided into 97 Chapters (with Chapter 77 reserved for future international use), The product listing is number coded. The first four digits having the broadest Coverage are referred to as the heading which is further subdivided into the 6-digit level called the subheading. The first two digits in the subheading indicate the Chapter number, While the next two digits indicate the numerical position of the heading in the Chapter. The last two digits indicate the subheading number within the heading. It is mandatory for WCO member countries to adopt the HS up to the 6-digit subheadings. Any modifications should be done beyond the 6-digit level. In particular, to ensure harmonization, the Contracting Parties must employ all 4- and 6-digit levels, the GIRs, and legal notes without deviation, but where needed, are free to assign two more digits, for a total of eight (8) at the tariff-rate line (legal) level. Two final (non-legal) digits are assigned as statistical reporting numbers if warranted, for a total of 10 digits to be listed on the entries. Tariff Commission | Page 38 Scanned with CamScanner(3) What are the legal texts that comprise the Harmonized System? . General Rules for the Interpretation of the Harmonized System (GIR) = provide six (6) rules that establish classification principles throughout the HS to ensure uniform classification of goods in one and the same heading (and subheading). They should be applied in hierarchical order . Section and Chapter Notes, including Subheading Notes - form an integral part of the HS and have the same legal force as the GIR, The Notes provide definitions of the terms used in the nomenclature, criteria for classification within each chapter, heading or subheadings, and enumeration of products that are classifiable or excluded within the chapters, headings or subheadings + Allist of headings arranged in systematic order, generally according to degree of processing and, where appropriate, further subdivided into subheadings 4, Whatis the International Convention on the Harmonized System? The International Convention on the Harmonized System (HS Convention) is the intergovernmental commitment of the contracting parties to abide by its provisions, one of Which is to agree to use the HS up to the 6-digit level as the basis for their national customs tariff and statistics nomenclature. 5. What is the Harmonized System Committee? ‘A working body of the WCO, the Harmonized System Committee is composed of representatives from each of the WCO contracting parties and is convened by the Secretary General twice a year to update the HS regularly. ts functions are as follows: + prepare amendments to the Convention having regard, in particular, to the needs of users and to changes in technology or in pattems of international trade: + prepare explanatory notes, classification opinions or other advice or guides to the interpretation of the HS; + prepare recommendations in order to ensure uniformity in the interpretation and application of the HS; * collate and circulate information concerning the application of the HS; + furnish information or guidance on any matters concerning the classification of goods in the HS to contracting parties, members of the Council and to such intergovernmental or other international organizations as the committee may consider; + present reports to every session of the council concerning: committee activities, including proposed amendments to the Explanatory Notes, classification opinions and other advices; and ‘exercise such other powers and functions in relation to the HS as the council or the contracting parties may deem, Scanned with CamScannersl nillee havi Administrative decisions of the Harmonized System Comm ing bu i A9etary incl. implications shall be subject to approval by the Cou! 6 Is the Phitippines a contracting party to tho F n to the HS Convention wag Sign Philippine Senate on February go to the WCO on June 25, 20947 ** 2001, Yes. The Philippine Instrument of fae September 23, 1998 and was concurred in by to The Instrument of Accession was formally depos! 7.) Why died the Phitiopines adopt the Harmonized System? its Instrument of Accession, opteg Philippines, before the approval of i the HS on pps basis for the conduct of trade vith the rest ne cai to kee, of the latest internationally-accepted nomenclature in goods . {0 ado, HS Convention? | P abroaey 8. When did the Phiippines adopt and implement the HS and what is the togat basigy July 1, 1988 and implomented th The Philippines formally adopted the HS on a in October 1988, ‘This isin accordance wilh a NEDA Board Resolution datod November 25 1987 and EO 688 dated May 1, 1981 mandating the Tanff Commission to align tha Toss (now CMTA) with all future amendments to the CCCN (now HS). What is the significance of the HS in the Customs Modernization and Tarit act? The HS is reflected in Sections 1610 and 1611 of the CMTA which provide forthe GIR and the list of headings with corresponding rates of import duly, respectively. The 4a effects uniformity in the classification of goods and standardizes commercial documene which ultimately promote trade facilitation. (10. Why is the Philippines using 8-digit codes in its tariff lines? Every Country using the HS is allowed to assign ils own coding system beyond the HS 6-digil level to accommodate specific nomenclature for the purpose of reflecting nations requirements (e.g., differences in tariff rates, incentives). The ten (10) ASEAN Member States (AMSs), including the Philippines, adopted in 2004 the S-digit ASEAN Harmonized Tarif Nomenclature (HTN) rflecting “AMSC requirements, ” 11. How do countries provide for national subdivisions? Although no changes can be made to the HS itself, nothing prevents a contracting Perey fom establishing additional subdivisions in its nomenclature to identify certain goods which are not given separate status in the HS Nomenclature. It must, however, eewuc ina the mandatory subdivisions (i. up to the six-dialt level subdivisions) remain unchanged. Tariff Commission | Page 40 ne incense Scanned with CamScannerTable 4. Sample Subdivision of HS Code ____Description Sugar confectionery (including white chocolate), not containing cocoa, | ~ Chewing gum, whether or not sugar-coated =| | - Other: | | ++ Medicated pastiles and drops = White chocotate + Other: Soft. containing gelatin +++ Otmer ‘The 6-dait level subdivisions pertain to the AHTN lines agreed by AMSs. 12, How are the amendments implemented and how often? The preamble to the Intemational Convention on the Harmonized System emphasizes the importance of ensuring that the HS is kept up to date in the light of changes in technology and pattems of intemational trade. Article 7 of the HS Convention further states that itis for the Harmonized System Committee to propose such amendments to the HS Convention as may be considered desirable. having regard, in particular. to the needs of users. At its first Session, the Harmonized Harmonized System Review Sub-Committee. accordance wih the Committee's general indications and preparing the necessary amendments to the HS Nomenciature. The Committee also agreed to allow an interval of four (4) to six (6) years between each recommendation amending the HS Nomenclature under Article 16 of the HS Convention System Committee decided to set up the which has the task of revising the HS in 13. What are the amendments to the HS end when were they approved for adoption by the NEDA Board? Table 5. HS Amendments Approved by the NEDA Board: 1992-2017 Amendments to HS | Date of Approval for Adoption | NEDA Board Resolution 1992 [February 14, 1995 | No. 3 (5.1992) 1996 [October 25, 1895 | No. 26 (8.1995) 2002 [March 20, 2003 | No. 2 (8.2003) 2007 September 18, 2007 | No. 9(s.2007) 2012 | September 18, 2012 | No. 6 (s. 2012) t 2017 | June 27, 2017 | File No. 291-062717-12 14. What are the changes in the HS 2017 nomenclature? ‘There are 233 sets of amendments in the HS 2017 which covered: environmental and social issues - use of the HS as the standard for Classifying andlor monitoring (i) goods of importance to the food security information for action programme of Food and Agriculture Organization (FAO), (i) anti malarial commosities; (ji) bamboo and rattan products as Fequested by Intemational Network for Bamboo and Rattan (INBAR): (iv) Tariff Com ision | Page 41 Scanned with CamScannershemicats Weapon Convention (Cy; the Rotierdam Convention: (vi) persistent 2 aie precuren at Pos, controlled under Stockholm Conventeh =< {i PECUFSOTS reQUastes, y the Intemational Narcotics Contre! Board NCS) chemicals controlied under hazardous chemicals and pes! the erwation of Hines for light-emitting g: axed rorcuits (MCOS). and hybrig wees db. advances in technology, such & Bogs, (LED) lamps. muitti-component hybrid and all-electric vehicles: practices and pattems: jon of subheadings With & OW volume. ’ ©. reflection of current trade d. simplification including the delet trade: ©. alignment between the English and French versions of the text: and f. editorial amendments / clantfications. 15. Howare changes in the HS implemented? When did the Phillopines implement the HS 2017 amendments? stipulated in Section 4 ‘The amendments are subjected to the process StIp\t 1605 oF the MTA. A public consultation is conducted to disseminate the adoption of the amendments ty the HS Nomenclature. A NEDA Board resolution is issued fo formally adopt the Hg amendments. Following NEDA Board approval ofthe adoption of the HS 2017 amendments in Jung 27, 2017, and pursuant to the provisions of EO 688 (s. 1981), the Philippines implementa the 2017 version of the HS starting July 28, 2017. 16. What other publications and databases complement the HS Nonenclature? = Explanatory Notes — consists of five (5) volumes in English and French. They do not form an integral part of the HS Convention but they constitute the Official interpretation of the HS at intemational level, They must ahvays be read in strict conformity with the texts of the HS, from which they cannot be dissociated, and in particular with the Interpretative Rules and the Section, Chapter and Subheading Notes. Together with the HS nomenclature ‘amendments to the Explanatory Notes are also made when necessary. = Alphabetical index - an alphabetical list of the articles and products mentioned in the HS and its Explanatory Notes. It facilitates the location of references in the HS Nomenclature or in the Explanatory Notes to any of the products or articles mentioned therein. = Compendium of Classification Opinions - includes a list of the most significantdifficult classification decisions taken by the Harmonized System Committee and adopted by the WCO in order of the headings and subheadings of the HS Nomenclature. «HS Database online - available online by subscription, it allows for fast access and flexible search routines. It contains the HS Nomenclature (2002, 2007, Tariff Commission | Page 42 Scanned with CamScanner2012 and 2017 versions), the HS Explanatory Notes for each edition of the HS Nomenclature, the Classification Opinions, the Alphabetical Index, he Classification Decisions (from 2001 to the most recent available), the amendments to the HS, and the correlation tables. Classification Decisions - contains all classification decisions taken by the Harmonized System Committee and is presented in tabular form pe er cuubinlt Celt op the Avlippact 1 Neural Peorome J Uryelapment Aubert Pah Nereshet Conkal Boor Coteura! Mopn Cyaseatin Drenphin ancl Cding Sy cfem Scanned with CamScanner