The role of the Harmonized System in international trade

The Harmonized System (HS) of tariff nomenclature is used as a basis for the collection of customs duties and international trade statistics by almost all countries. Use of the HS ensures that a Customs administration produces statistics in exact accordance with international classification standards.

While the Harmonized System is today a valuable tool to ensure proper revenue collection, the initial impetus when it was developed during the 1970s and 80s was as a trade facilitative initiative. The Harmonized System has since become the true “language of international trade”.

Many studies have shown the heavy costs involved for both the public and private sectors in maintaining different product classification systems in different countries. The HS was designed to be an international standard system to avoid such duplication, but it was recognised that it could not be eliminated entirely. Developed as a multipurpose nomenclature, the HS is now used as the basis for:

  • Customs tariffs
  • Collection of international trade statistics
  • Rules of origin
  • Collection of internal taxes
  • Trade negotiations (e.g., the WTO schedules of tariff concessions)
  • Transport tariffs and statistics
  • Monitoring of controlled goods (e.g., wastes, narcotics, chemical weapons, ozone layer depleting substances, endangered species)
  • Areas of Customs controls and procedures, including risk assessment, information technology and compliance.

The HS is backed by Explanatory Notes and a Compendium of Classification Opinions. This helps to ensure a rational and uniform application of classification rules, and thus, trouble-free export and import clearance. It is a major element in good customs/trade working relationships.

All modern, computerized customs declaration systems depend on HS classification. Common use of the HS in such systems will be essential in the development of Customs-to-Customs information exchanges which trade interests see as the basis of the progressive elimination of unnecessary export/import requirements in favour of seamless end-to-end, integrated international transactions.