COMMODITY CLASSIFICATION
- Imexway
- May 17, 2020
- 7 min read
Updated: Dec 12, 2020
The Historical background
First Statistical Nomenclature – Brussels in 1913 at second International Conference on Commercial Statistics
First international Customs nomenclature – Geneva in 1931 – Geneva Nomenclature
United Nations Standard International Trade Classification (SITC) in 1950
Customs Cooperation Council Nomenclature (CCCN) in 1974 with 21 Sections, 99 Chapters and 1,241 headings
Harmonized System (HS) – 1st January 1988
Harmonized Commodity Description and Coding System
An instrument of the World Customs Organization (WCO) with the objective of
Trade facilitation
Trade statistics
Standardization of trade documentation
Multipurpose Goods Nomenclature
More than 98% of the world trade
Implemented Internationally in 1988 by the HS Convention
Updates to HS
1st 1992 – 5,018 HS Sub headings
2nd 1996 – 5,113 HS Sub headings
3rd 2002 – 5,224 HS Sub headings
4th 2007 – 5052 HS Sub headings
5th 2012 – 5,212 HS Sub headings
6th 2017 – 5,387 HS Sub headings
Uses of HS
Levying of Customs duty
Providing statistics of international trade
Determination of the origin of goods
Monitoring of trade in controlled goods (i.e. narcotics, endangered species, etc)
Facilitating international trade
Removing trade barriers
Advantages of HS
Uniform and consistent classification
Standardized Customs terminology
Help in trade negotiations
International comparison and analysis of trade figures
Who is using HS
Governments
International Organizations
Manufacturers
Importers and Exporters
Shipping Agents
Traders
Transporters
Port Authorities
Statisticians, etc.
HS Structure
21 Sections (written in Roman numerals from Ito XXI)
99 Chapters (written in Arabic numerals from 01 to 99)
- Chapter 77 reserved for future use
- Chapters 98 and 99 reserved for special uses by contracting parties
- Examples
- Kenya: Chapter 99 for communication services
- Canada: Chapter 98 for goods declared by returning residents
1,222 Headings (4 digits)
5,387 Subheadings (descriptions of commodities) (6 digits)
HS Structure: Sections in the HS
Section I
Live Animals; Animal Products (Ch 1-5)
Section II
Vegetable Products (Ch 6-14)
Section III
Animal or vegetable fats and oils and their Cleavage products; prepared edible
fats; animal or vegetable waxes (Ch 15)
Section IV
Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured
tobacco substitutes (Ch 16 – 24)
Section V
Mineral products (Ch 25-27)
Section VI
Products of the Chemical or Allied Industries (Ch 28-39)
Section VII
Plastics and Articles thereof; Rubber and Articles thereof (Ch 39 – 40)
Section VIII
Raw hides and skins, leather, furskins and Articles thereof … (Ch 41-43)
Section IX
Wood and articles of wood; … (Ch 44-46)
Section X
Pulp of wood or of other fibrous cellulosic material; … (Ch 47 - 49)
Section XI
Textiles and Textile Articles (Ch 50 – 63)
Section XII
Footwear, headgear, umbrellas, sun-umbrellas, walking-sticks, seat-sticks, whips,
riding-crops and parts thereof; Prepared feathers and articles made therewith;
artificial flowers; Articles of human hair (Ch 64-67)
Section XIII
Articles of stone, plaster, cement, asbestos, mica or similar materials; ceramic
products; glass and glassware (Ch 65-70)
Section XIV
Natural or cultured pearls, precious or semi-precious stones, precious metals,
metals clad with precious metal, and articles thereof; imitation jewellery; coin (Ch
70 – 71)
Section XV
Base Metals and Articles of Base Metal (Ch 72-83)
Section XVI
Machinery and Mechanical Appliances; Electrical equipment; Parts thereof;
sound recorders and reproducers, Television Image and Sound Recorders and
Reproducers, and Parts and Accessories of Such Articles Vegetable Products (Ch
84-85)
Section XVII
Vehicles, Aircraft, Vessels and Associated Transport Equipment (Ch 86 -89)
Section XVIII
Optical, photographic, cinematographic measuring, checking, precision, medical
or surgical instruments and apparatus; clocks and watches; Musical instruments;
parts and Accessories thereof (Ch 90 – 92)
Section XIX
Arms and Ammunition; parts and accessories thereof (Ch 93)
Section XX
Miscellaneous Manufactures Articles (Ch 94-96)
Section XXI
Works of Art, Collectors’ pieces and Antiques (Ch 97)
HS Structure: Rational of Sections
Articles made of same materials are grouped together
- Section II: Vegetable products
- Section XV: Base metals and articles of base metal
Goods of the same use or function are put together
- Section XVII: Vehicles, aircrafts, vessels
- Section XIX: Arms and ammunitions
The stage of processing or degree of manufacturing of articles are put together
- Section V: ores, slag and ash
- Section XV: Base metal and articles of base metal (which are products of the
articles in Section V)
HS Structure Illustration
HS Structure: Chapters in the HS
Next level of sub-division after Sections
A Section may contain one or more Chapters
- Section I: has 5 chapters
- Section III: has 1 chapter
HS Structure: Sub-chapters in the HS
A subdivision of a Chapter to:
Clarify/underline the differences between products in the same Chapters
To arrange according to the characters and/or degree of processing
Chapters 28, 29, 39, 63, 71 and 72
Examples Chapter 71:
- Sub-Chapter I: Natural or cultured pearls and precious or semi-precious
stones
- Sub-Chapter II: Precious metal and metals clad with precious metals
- Sub-Chapter III: Jewelry, goldsmiths’ and silversmiths’ wares and other
articles
HS Structure: Headings in the HS
Denoted by four digit codes
Example: 01.01, … 97.06
First two digits: Chapter
Second two digits: Position of the heading within the Chapter
A heading may be further be sub-divided
HS Structure: Sub-headings in the HS
Are identified with additional two digits
Preceded with one or two dashes
One dash subheadings:
- Five digits numerical codes (appending one digit to the heading)
Two dash subheadings:
- Sub-division of one dash subheadings
- Six digits numerical codes (appending one digit to the one-dash subheading)
When heading is not further subdivided: Two zeros are appended
- Example: 3406.00 Candles, tapers and the like
When subheading is not further subdivided: One zero is appended
- Example:
01.01 Liver horses, asses, mules and hinnies (+).
0101.2 - Horses:
0101.21 -- Pure-bred breeding animals
0101.29 -- Other
0101.30 - Asses
0101.90 - Other
HS Structure: National/ Regional Subdivision
Further sub-division of subheadings by Appending 7th and 8th digits
For National/Regional requirements
Example:
0104.10 - Sheep:
0104.10.10 ---Pure-bred breeding animals
0104.10.90 ---Other
0104.20 - Goats:
0104.20.10 --- Pure-bred breeding animals
0104.20.90 --- Other
HS Structure: Notes
Section Notes
Chapter Notes
Subheading Notes
Defines meaning of particular terms
Defines respective scopes
Forms and integral part of the HS
Commonly known as “legal notes”
HS Structure: Section Notes- Examples
Note 1 to Section I: “Any reference in this Section to a particular genus or species of an animal, except where the context otherwise requires, includes a reference to the young of that genus or species.”
Note 2 to Section I: “Except where the context otherwise requires, throughout the Nomenclature any reference to “dried” products also covers products which have been dehydrated, evaporated or freeze-dried.”
Note 1 to Chapter 01:
“This chapter covers all live animals except :
(a) Fish and crustaceans, molluscs and other aquatic invertebrates, of heading
03.01, 03.06, 03.07 or 03.08;
(b) Cultures of micro-organisms and other products of heading 30.02; and
(c) Animals of heading 95.08.”
Note 1 to Chapter 02:
“This chapter does not cover :
(a) Products of the kinds described in headings 02.01 to 02.08 or 02.10, unfit or
unsuitable for human consumption;
(b) Guts, bladders or stomachs of animals (heading 05.04) or animal blood (heading
05.11 or 30.02); or
(c) Animal fat, other than products of heading 02.09 (Chapter 15).”
HS Structure: General Definitions
- Defines the meaning of particular terms
Note 1 to Chapter 4: “The expression “milk” means full cream milk or partially or completely skimmed milk
- Limiting the scope of a subheading or heading or the meaning of particular terms
Example:
1) Subheading Note 4 to Chapter 27 – “For the purpose of subheading 2710.12,
‘light oils and preparations’ are those of which 90% or more by volume
(including losses) distil at 210oC (ASTMD86 method)(American Society for
Testing and Materials)
2) Note 2 to Chapter 30 – definition of “modified immunological products”
- Non exhaustive (incomplete) list of products covered
Example:
- Note 4 to Chapter 33 – “perfumery, cosmetics or toilet preparations” of
heading 33.07
- Exhaustive (complete) list of goods covered by a heading or group of headings
Examples:
- Note 4 to Chapter 30 – “scope of heading 30.06”
- Exclusions (products not covered)
Example:
1) Note 2 to Chapter 29 – list of products not classified in Chapter 29 and
indication where to be classified
2) NB. Almost all chapters have an exclusion Note!
What Tax is payable?
For levying of duties and levies goods must be classified within HS Nomenclature.
Classification in accordance with General Interpretative Rules with due regard to the Explanatory Notes (i.e. Official interpretation)
When divided in to NSD classification down to the lowest hierarchical level
The classification of goods within the NSD, according to the text of the NSD; most specific text preferred.
Three dash NSD comparable with Three dash NSD
Four dash NSD comparable with four dash NSD
Conditions of Levying Customs Duty
Shall be levied with the General / Preferential Rate
Value is determined as per Schedule E of the Customs Ordinance
Calculation as per Formulae given
When more than one General rate is given: the rate accruing highest amount is applied, unless specified otherwise
Preferential rate on the satisfaction of the DGC (Rules of Origin)
Commodities qualifying under “List of Concessions” or “List of Exemptions” shall be levied accordingly. DGC is final authority
Machinery, plant and equipment, imported disassembled or unassembled … imported in same / several consignments , on prior approval, are to be classified as the commodity resulting after assembly.
Customs Duty shall not be levied when “Special Commodity Levy” is imposed.
Conditions of levying other taxes
Commodities shall be levied with:
Value Added Tax
Port and Airport Development Levy
Excise (Special Provisions) Duty
How to classify a commodity?
What is it?
What material or substance is it?
What is its function or use?
Under what form is it imported/exported?
Is it the only possible classification?
Classification: Examples
1) HS Classifications of the following?
Tea in bulk
Betel leaves
Fish
Prawns
Cut foliage
Books
2) Tea in bulk?
Green Tea/Black Tea?
Fermented / Non Fermented?
Packing <1Kg, <3Kg, <5Kg, 10Kg?
Wholly of Sri Lankan Origin?
Certified by Sri Lanka Tea Board?
Flavoured / Non Flavoured?
HS Heading 09.02
3) Betel Leaves
Vegetable products not elsewhere specified or included
Chapter Note 1
- This Chapter does not cover the following products which are to be classified in
Section XI: vegetable materials or fibers of vegetable materials of a kind used
primarily in the manufacture of textiles, however prepared, or other vegetable
materials which have undergone treatment so as to render them suitable for
use only as textile materials.
HS Commodity Code: 1404.90.20
4) Fish
Live/Not Live ?
Fresh / Chilled / Frozen?
Dried / Salted / In brine / Smoked / Cooked ?
HS Heading 0301 to 0305
5) Prawns
Frozen / Not Frozen ?
Live / Fresh / Chilled ?
HS Heading 03.06
6) Cut foliage
With flowers / without flowers ?
For ornamental purposes ?
Fresh / dried / dyed / bleached, impregnated or otherwise prepared ?
HS Heading: 06.04
7) Books
Registers / Account books / Note books…?
Printed books ?
Journals / Periodicals ?
Advertising / Pictures / Photographs ?
48.20, 49.01, 49.02 or 49.11
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