WCO Strategic Review of the HS: Interim Report

The interim report on the strategic review of the Harmonized System (HS) provides an in-depth analysis of the current challenges and potential areas for improvement within the HS framework. The HS is a standardized nomenclature for classifying traded products, essential for international trade and customs processes. This strategic review aims to address emerging demands, simplify complex classification issues, and enhance the overall efficiency and accuracy of the HS.

Main Findings

1. Challenges with General Interpretive Rules (GIRs)
   • Usage and Visibility: Nearly half of the survey participants indicated limited use or understanding of the GIRs, essential rules for classifying goods under the HS. The GIRs are not prominently placed and are only explained in the Harmonized System Explanatory Notes (HSEN), which are not freely accessible.
   • Subjectivity and Ambiguity: Terms like “essential character” and “most specific” in the GIRs create ambiguity, making classification challenging and opening possibilities for misclassification and commercial fraud.
2. Complexity and Usability of Legal Notes
   • Awareness and Accessibility: Many users are unaware of or do not consult the legal notes essential for accurate classification. The complex relationship between the terms and notes, coupled with inconsistent placement and reference, exacerbates these issues.
   • Definitional Clarity: Legal notes defining specific terms are inconsistently clear and challenging to locate, often scattered across various sections and chapters without clear references.
3. Terms and Provisions
   • Incorporating New Provisions: The six-digit structure of the HS limits the addition of new headings, particularly for chemicals and fishery products, leading to complications in maintaining a logical order within chapters.
   • Drafting Conventions: There is a lack of understanding of the grammatical and stylistic conventions used in the HS, leading to inconsistencies and misinterpretations.
4. Verification and Classification Challenges
   • Laboratory Analysis: Many provisions require laboratory verification, increasing the burden on customs laboratories. This is particularly problematic for characteristics that are not discernible through visual inspection.
   • Certification: The report highlights the absence of references to certification in the HS, except in a few instances, complicating the verification of goods based on certification.
5. Review Cycles and Implementation
   • Frequency and Timing: The five-year review cycle is generally supported, but faster technological changes and the need for more frequent updates in certain chapters call for a potential review of this cycle.
   • Implementation Date: The January 1st implementation date poses challenges for businesses, particularly due to the coinciding holiday periods and late issuance of national amendments.
6. Correlation Tables
   • Detail and Accessibility: Concerns about the lack of detailed information in freely available correlation tables and their legal status were raised. The current format is not user-friendly and often lacks timely updates.
7. Explanatory Notes and Other Tools
   • Accessibility and Cost: The cost of HS tools and limited public access to Explanatory Notes hinder their use. The report suggests exploring different revenue models to enhance accessibility.
   • Standard References: There is a need for a formal policy on using standards and industry definitions, with clear records of when criteria are derived from specific standards.

Preliminary Recommendations

1. Enhancing GIRs Visibility and Understanding
   • Placement and Education: Improve the physical placement of GIRs within the HS and develop public guidance tools to explain their concepts.
2. Improving Legal Notes Usability
   • Clear Indications: Use methods like italics, footnotes, or grouping to indicate legally defined terms and relevant notes within the provisions.
   • Review and Standardization: Conduct a review for consistency in language, style, and clarity of the legal notes.
3. Addressing Verification and Certification
   • Alternative Methods: Consider incorporating alternative identification and verification methods into the HS, potentially referencing certification where globally recognized systems exist.
4. Review Cycle Adjustments
   • Flexible Cycles: Explore the feasibility of variable review cycle lengths for different sections based on the need for updates.
   • Improved Collaboration: Enhance collaboration with other international organizations and national administrations to ensure timely and relevant updates.
5. Enhancing Accessibility of Tools
   • Revenue Models: Assess financial implications of different models to make HS tools more accessible.
   • Centralized Databases: Consider maintaining a central page with links to published rulings and improving search functions for Classification Opinions.
6. Responding to Emerging Demands
   • Increased Specificity: Provide a higher level of granularity in the HS where needed, potentially expanding to an eight-digit nomenclature.
   • Global Policy Alignment: Improve alignment with global policy developments and ensure the HS can respond to new trade and environmental demands.

In conclusion, the strategic review identifies critical areas for improving the HS, focusing on enhancing clarity, usability, and responsiveness to emerging global demands. Implementing these recommendations will support more accurate and efficient classification, facilitating smoother international trade operations.