ABOUT THE HARMONIZED COMMODITY DESCRIPTION AND CODING SYSTEMTHE HARMONIZED SYSTEMThe Creation of the Harmonized System: The beginning The League of Nations Draft Nomenclature Brussels Tariff Nomenclature (BTN) The Customs Co-operation Council Nomenclature (CCCN) The Development of the Harmonized System The Technical Work Involved The Harmonized System CommitteeThe International Convention on the Harmonized SystemThe WCO Publications Supporting the Harmonized SystemList of Countries, Territories and Customs or Economic Unions Applying the Harmonized System

THE CREATION OF THE HARMONIZED SYSTEM The beginning From early beginnings, and since the infancy of trade between countries, there has existed an interest for national authorities to classify goods which arose from a desire to impose taxes or tolls on goods being moved within their territories or across their territorial boundaries, and, with the development of somewhat more mechanised societies, and with the advent of the industrial revolution, a need to know the nature and level of traded goods, even in cases where there was no imposition of taxes or tolls. This need of trade statistics was generated by both national governments and industries.

The first goods classification systems were very simple in nature, consisting, in many cases, of only an alphabetical list of goods to which a particular tax or toll applied or which were exempted from levies. Other systems were even more crude, e.g., tariff or tolls based on animal, vegetable or mineral. However, duty rates or exemptions eventually became based on specific or families of goods, causing individual countries' alphabetical list to increased in size and complexity. It was generally recognized that a goods classification system based on criteria other than tax treatment would be advantageous. Customs tariffs based on, e.g., the nature of the goods rather than their duty status, began to emerge. In this way, many countries developed their own classification system which could be used, not only for the collection of duties or tolls, but also as a basis of their own trade statistics. As the level and importance of international trade continued to increased, everyone concerned became aware of the difficulties caused by differences in national Customs tariffs. These differences involved, for example, the way items or headings within a Customs tariff was presented, that is, the names and definitions of the products, or even the basis of fundamental classifica-tion principles. Some national tariffs were drawn up empirically; others, although originally based on a methodical, were subsequently amended and altered to give effect to subsequent national protective measures, international com-mercial arrangements or multilateral tariff agreements. It became apparent, therefore, that a pressing need existed for a standard Customs classification system to ensure: the systematic classification of all goods found in international trade. internationally uniform classification of all goods on a sound basis in the tariffs of all countries adopting the same system. the adoption of a common internationally accepted Customs language so that Customs terminology would be understood by everyone in the international trade community, thereby simplifying the task of importers, exporters, producers, carriers and Customs administrations. simplicity and certainty of meaning in the negotiation, application and correct interpretation of bilateral or multilateral Customs agreements. an internationally uniform collection of trade data to facilitate analysis and comparison of world trade statistics.

The efforts to produce a common world nomenclature designed to facilitate international trade lasted for more than a century, from the mid-1800's.. They have led to the introduction of nomenclatures that at times have been used for both tariff and statistical purposes. At world level, a number of international economic congresses were convened between 1853 and 1908 to prepare an interna-tional statistical nomenclature. The earliest among these, convened at Brussels in 1853, favoured a uniform international tariff nomenclature as a prerequisite to an international statistical nomenclature. The 1853 Congress believed that, because the statistical nomenclatures employed by most nations were modelled closely on their tariff nomenclatures, changes in one brought about changes in the other.One of the questions was whether it would not be in the interest of all nations to adopt comparable classifications and uniform vocabularies in their Customs tariffs and in their official statistics. But the earliest uniform statistical system to have been approved by international Convention appears to have been adopted at the Second International Conference on Commercial Statistics, held in Brussels in 1913. This Convention was signed by 29 countries on 31 December 1913. The Nomenclature itself consisted of 186 items, arranged in five groups: live animals, foods and beverages, raw or simply prepared materials, manufactured products, and gold and silver. It served as the basis for the first compilation of commercial statistics by the International Bureau of Commercial Statistics in 1922. It was also used, more or less, for tariff purposes by some 30 nations.

League of Nations draft Customs nomenclature In May 1927 the idea of a common framework for Customs tariffs was put forward in a Recommendation made by the World Economic Conference convened under the auspices of the League of Nations. A Committee of Experts then prepared a Draft Customs Nomenclature, the first version of which was completed in 1931 and revised in 1937. This Nomenclature, which came to be known as the "Geneva Nomenclature", comprised 991 four-digit headings, arranged in 86 Chapters which were themselves grouped in 21 Sections. In addition to the main or basic headings, consecutively numbered from 1 to 991, there were secondary and, in some cases, tertiary and even quaternary headings. In principle, the main headings were obligatory, but countries were free either to reduce the number of subheadings by grouping several of them together, or to create new distinctions in addition to those provided. The object was to ensure that all tariffs would be sufficiently detailed, while further distinctions could always be introduced as long as that they did not destroy the uniformity of this standard Nomenclature. Although used as a basis for several Customs tariffs, the Geneva Nomenclature was never influential enough to bring about a real standardization of Customs nomenclatures. And, the collapse of the League of Nations did not help the Nomenclature's chances of success.

Brussels Tariff Nomenclature (BTN) The drive for economic reconstruction and the desire for greater freedom of trade which characterized the post-war period created favourable conditions for the standardization of Customs tariffs. The need for an internationally common nomenclature was recognized once again. The work done from 1948 onwards by the European Customs Union Study Group in preparing a common Customs tariff was based on the Geneva Nomenclature. It was the only standard framework of its kind at that time. Nonetheless, considerable amendments were made to the Geneva text, partly to reflect technical progress and partly because of shortcomings revealed by the experience of countries which had already adopted Geneva-type tariffs. A preliminary draft containing headings and subheadings was first produced. But at the end of 1949, the Study Group decided that, irrespective of the progress which might be made on the European Customs Union project, the very valuable results already attained in the field of nomenclature should be turned to advantage. It was decided that the headings of the Nomenclature (but not the subheadings, which were left to the initiative of individual countries), should be established by a Convention. Therefore, a 1949 draft which, rearranged, abridged and simplified, was incorporated into the Brussels Convention of 15 December 1950 on Nomenclature for the Classification of Goods in Customs Tariffs. This Convention was opened for signature at the same time as the Convention establishing a Customs Co- operation Council and the Convention on the Valuation of Goods for Customs Purposes. It came into force on 11 September 1959.

The Customs Co-operation Council Nomenclature (CCCN) This text was initially known as the "Brussels Tariff Nomenclature" (BTN), but in 1974 it was renamed the "Customs Co-operation Council Nomenclature" (CCCN), to avoid any confusion as to the international organization responsible for its creation. Eventually, fifty-two countries became Contracting Parties to the four-digit Nomenclature Convention. They were required, under the terms of that Convention, to frame their Customs tariffs in accordance with this new CCC Nomenclature. By 1970, about 150 countries and territories, together accounting for 80 % of international trade, used the CCC Nomenclature as a basis for their Customs tariffs. They all used the four-digit headings of the CCCN, and then subdivided those headings at the national level depending on their own tariff or statistical needs. In this way, Customs tariffs and trade statistics were standardized internationally at the four-digit level for the signatories of the Convention. The CCC Nomenclature took the form of a systematic list of goods; it comprised 1,011 four-digit headings divided among 99 Chapters themselves arranged in 21 Sections. Each heading was identified by two groups of two-digits each: the first group represented the Chapter in which the heading appears, while the second indicated its position in that Chapter. The CCC Nomenclature was supported by: Explanatory Notes which, constituted the official interpretation of the Nomenclature, an Alphabetical Index, a Compendium of Classification Opinions, arrived at during discussions by the Nomenclature Committee. Development of the Harmonized Commodity Description and Coding System In the late 1960's there was a growing awareness amongst all concerned with international trade of the need to rationalize and harmonize trade documentation data and, in particular, to harmonize the designation and coding of countries, units of quantity, modes of transport, transport handling requirements and commodities. Indeed, it had been found that a commodity could be designated up to 17 times in the course of a single international transaction, by the exporting administrations, by inland, air or vessel transporters and by the importing administrations. The development of automatic data transmission techniques did offer a solution to this problem, but only if an internationally recognized code was available for identifying the goods. Early in 1970, representatives of the Customs Co-operation Council discussed these developments with other international organizations and, at a meeting of the Economic Commission for Europe, it was agreed that the Council was the organization best suited to sponsor a study of the problems related to developing a finer commodity description and coding system. In June 1971, a Study Group informed the Council that there was a reasonable possibility of developing a Harmonized Commodity Description and Coding System for use in international trade. In its final Report, approved by the Council in May 1973, the Study Group concluded, in particular, that: the development of a Harmonized Commodity Description and Coding System (eventually called the Harmonized System) was not only feasible but essential in the longer-term interests of the facilitation of international trade; the System should be developed from the existing four-digit CCCN and from the SITC (Standard International Trade Classification). However, the work done to date demonstrated a need for some changes in these two instruments, to bring them into step with current trade patterns and to account for new products in trade; in addition, it would be advisable to modify some parts of the CCCN to facilitate establishment of the Harmonized Commodity Description and Coding System.; the CCCN would constitute the core of the Harmonized System. during the development of the System, account should be taken of existing nomenclatures and commodity description systems which were primarily representative of Customs, statistical and transport requirements; the System should be developed under the auspices of the Customs Co-operation Council, but an international inter-organizational body should be maintained in existence throughout the development period to ensure that the needs of all interests involved were fully taken into account and plan the implementation of the Harmonized System. When the Council approved the Study Group's Report, it also decided to set up a Harmonized System Committee to prepare this new system and to draft the text of the instrument under cover of which it would be implemented. It also set up a special unit in the Council's Secretariat, known as the Technical Team, to service the new Committee. The Deputy Secretary General (and later an Assistant Secretary General) of the Council was put in charge of the Technical Team. As the principal objective of the Harmonized System is to meet the needs of all those concerned with world trade (Customs, international trade statistics, transport), it was important that the Harmonized System Committee set up by the Council to prepare the System should be representative of all the interests involved. Consequently, in addition to delegates from the Customs administrations of various Council Member States, the Committee included representatives of a number of national or international organizations.

The Technical Work Involved In carrying out the technical work involved, the Committee was assisted by a Working Party, made up of members of the Committee itself together with representatives of other countries (some of them not even Members of the Council) and of other organizations. The fact that almost 60 countries and more than 20 international and national organizations took part in the activities of the Harmonized System Committee and its Working Party (with their proposals, comments on proposals or participation in the decision-making procedure) is a measure of the very broad interest generated by this project and the support it received. Participants in the preparatory work of the System included, in particular, representatives of national administrations using tariffs not based on the CCCN, together with the United Nations Statistical Office, the United Nations Conference on Trade and Development (UNCTAD), the General Agreement on Tariffs and Trade (GATT), the International Organization for Standardization (ISO), the International Chamber of Commerce (ICC), the International Chamber of Shipping (ICS), the International Air Transport Association (IATA) and the International Union of Railways (UIC). In accordance with the general principles established by the Study Group, the Harmonized System not only had to be developed from the four-digit-based CCCN and SITC, but account had also to be taken of a wide range of other classification systems. These included, on the one hand, tariff or statistical nomenclatures, some of which were based on the CCCN (Customs Tariff of Japan, Tariff Nomenclature for the Latin American Free Trade Association (NABALALC), Nomenclature of Goods for the External Trade Statistics of the European Community and Statistics of Trade between Member States (NIMEXE), whilst others had been developed independently (Customs Tariff of Canada, Customs Tariff of the United States, Import Commodity Classification and Export Commodity Classification (Canada), "Schedule B Export" (United States)), and, on the other hand, transport nomenclatures such as the International Union of Railways' Standard Commodity Nomenclature (NUM), the International Air Transport Association's "Worldwide Air Cargo Commodity Classification" (WACCC), the Freight Tariff of the Association of West India Trans-Atlantic Steamship Lines (WIFT) and the "Standard Transportation Commodity Code" (STCC). Thus, in some respects, the draft Harmonized System developed as a nomenclature structured to several different levels based principally on a thoroughly revised CCCN with 4-digit headings supplemented by subheadings. While carrying out its work, the Harmonized System Committee made considerable changes to the CCCN four-digit headings, adding some, deleting others, or making significant changes to several chapters and headings to ensure that they became more up-to-date with modern technology and trade patterns. As for the breakdown of the headings into subheadings, the latter were coded by two additional digits, i.e., the subheadings being identified by a 6-digit code. The separate identification in the Harmonized System of goods or groups of goods was, as a general rule, approved only if there was agreement amongst participants that the goods or groups of goods concerned gave rise to significant international trade based on statistical data from the Committee members' national statistical agencies and from international sources. By adopting a strictly disciplined approach to the task, the Harmonized System Committee was able to complete the preparatory work on the entire System by the beginning of 1981. Only then the true nature of the System began to reveal itself with its full importance and implications. While in some respects it might be regarded, as has been pointed out, as an offshoot of the present CCCN and of the SITC, Rev.2, it was in fact a new generation multipurpose 6-digit nomenclature for transportable goods. As such, in due time it would replace the CCCN internationally and the necessary provisions had to be made to meet the new situation, namely, the drafting of an International Convention for the Harmonized System. Between the remainder of 1981 and June 1983 (the date fixed by the Customs Co-operation Council on which the System had to be submitted for approval), the Committee was able to carry out a full revision of the texts, already provisionally adopted and to find final solutions to many outstanding technical problems. While this work was going on, participants were also engaged at different levels in difficult negotiations which resulted in general agreement regarding the provisions of the Convention under which the Harmonized System would be implemented. One of the most important results achieved by the Committee in this respect concerns the opportunity for developing countries to apply the Harmonized System at less than 6-digit level while their pattern of international trade or their administrative resources justified such partial application, the 4-digit level being the absolute minimum. In May 1983 the Harmonized System Committee and its Working Party held their 31st and last Session. Since not all the ancillary work had been finished (notably the Explanatory Notes and the Classification Opinions), it was also agreed to recommend several measures to the Council. One was the establishment by the Council of an Interim Harmonized System Committee for the management and care of the HS and its interests until the new Convention with its Committee entered into force. Another was the establishment by this Interim Committee of a Working Party to finalize the proposals for the Explanatory Notes, and to update the Classification Opinions and the Index to the System. In June 1983, during its 61st and 62nd Sessions held in Brussels, the Customs Co-operation Council approved the Harmonized System Committee's draft International Convention on the Harmonized Commodity Description and Coding System and opened it for signature. It also approved the remaining proposals of the Committee. The Convention was designed to enter into force on a 1st January which falls at least 12 months but not more than 24 months after it has met the condition of a minimum of 17 Contracting Parties, but not before 1 January 1987. This was intended to ensure that the HS begins its life with a sufficiency of Contracting Parties both in numbers and in terms of international trade to justify its ambition to replace the CCCN, and to give governments and administrations enough time for the necessary and extensive effort of Customs tariff transposition and consequential amendment. The time lag also takes very much into account the problem of the transposition of tariff concessions (i.e., GATT concessions), which may require time and in certain cases perhaps some renegotiation.

The Harmonized System Committee Its task is to administer the "International Convention on the Harmonized Commodity Description and Coding System" and to ensure that the Harmonized System is amended to keep abreast of technical progress and international trade developments. It also resolves specific classification problems and has an arbitration role in customs disputes between countries and takes decisions regarding the tariff code applicable to goods. The Committee, which normally meets twice each year in Brussels at the WCO Headquarters, is composed of a representative from each of the Contracting Parties to the Harmonized System Convention; adviser of those representatives are also allowed to attend. All meetings are convened by the Secretary General of the Council and are held at the Headquarters in Brussels. Each Contracting Party has the right to one vote on technical or administrative matters regardless of the country's size in relation to any other member. The Committee elects its own Chairman and one or more Vice-Chairmen. Rules of Procedures have been drawn up and were approved by the Council at the outset of the Committees functions. Sub-Committees and Working Parties are set up as needed to fulfil its functions and deal with issues falling under its responsibility. Proposals from Sub-committees or Working Parties are submitted to the Harmonized System Committee for decisions or approvals. Having regard to Article 7 of the Convention, the Harmonized System Committee has, among other, the following functions: to propose such amendments to the Convention as may be considered desirable, having regard, in particular, to the needs of users and to changes in technology or in patterns of international trade, which gave rise to the Amendments of 1992, 1996, 2002 and 2007 (the next amendment is due in 2012); to prepare Explanatory Notes, Classification Opinions or other advice as guides to the interpretation of the Harmonized System; to prepare recommendations to secure uniformity in the interpretation and application of the Harmonized System; on its own initiative or on request, to furnish information or guidance on any matters concerning the classification of goods in the Harmonized System to Contracting Parties, to Members of the Council and to such intergovernmental or other international organizations as the Committee may consider appropriate;

In accordance with Article 10 of the Harmonized System Convention, when a dispute arises between two or more Contracting Parties regarding the interpretation or application of the Harmonized System, the administrations concerned should, in the first instance, endeavour to reach agreement among themselves. Classification disputes which cannot be settled by direct negotiation will be referred to the Committee through the Secretariat. Following an eventual vote, if the countries involved in the dispute do not agree with the Committees decision they can enter a reservation with the Council; this solution is as a last resort. The Council will make recommendations with a view to resolving the conflict. Whatever the decision, and by whom, countries will generally accept it. However, they must accept it if the legal text is amended to account for the commodity involved. One of the major objectives of the Harmonized System is international harmonization of Customs tariffs. It is the legal instrument that is the universal basis for Customs tariffs and the international trade statistical system.