The International Convention on the Harmonized Commodity Description and Coding System or simply the Harmonized System (HS) is used globally to achieve various objectives. These objectives include harmonizing the description, classification and coding of goods traded internationally, collection of revenues by Customs administrations, facilitation of international trade, collection of data for statistical and comparison purposes, easy transmission of data and standardization of documentation used in international trade by both public and private players.

As a multipurpose international product nomenclature, the HS generally refers to the standardized numerical approach and technique used in the classification of goods that are traded across the borders. Customs and other organizations primarily use the HS to categorize goods for the purposes of assessing and collecting customs duties and taxes. Other government ministries and organizations use the HS to inform Customs and other border authorities (by virtue of being located at the borders) about goods to control, restrict or prohibit on importation or exportation on their behalf in the interest of protecting environment and the societies. Chemical waste, ozone layer depleting substances, hazardous drugs, and endangered species are common examples of such controlled goods. Statisticians rely on the HS to gather trade data while policy makers use it to formulate new trade policies. For the purpose of determining transport tariffs in the course of their service provision, logistics sectors make use of the HS. The private sector uses the HS to make informed import and export decisions while investors use it to determine investment destinations. When negotiating economic integration arrangements, for example free trade areas or customs unions, Member States use the HS as the basis for negotiating rules of origin and tariff concessions.

The HS is managed by the World Customs Organization (WCO). WCO is an intergovernmental body with a global reach in Customs administration and management matters. Its aim is to broadly enhance the usefulness and efficiency of Customs administrations in the field of international cross-border trade. Consistent with this thrust, It’s focus and pursuit is usually on the correct and uniform global application and maintenance of the HS in transboundary trade. The correct and worldwide standard application of the HS in proficient ways reduces trade costs and expedite international trade and investment through predictability and improved compliance with the existing trade guidelines, rules and regulations. It is for this reason that, despite operating on the basis of Member States cooperation and consensus, to date, WCO represents 183 Customs administrations that altogether process an estimated 98 per cent of world trade^[1].

Since the HS came into force on the 1st of January 1988, the WCO carry out mandatory reviews of it in every five years. Through these periodic reviews, WCO is able to amend and update the HS so as to secure and guarantee uniform interpretation globally, reflect worldwide changes in technology, capture changes in manufacturing processes, address new trade demands and emerging trends in the international trade arena. Out of these five-year periodic reviews, the emerging economic, environmental and social issues of international concern are quickly identified and then accommodated in the HS. The current HS2017 expires on the 31^st of December 2021 and will be replaced by HS2022 (being the seventh edition). Given that it’s now less than a month before the curtains come down on HS2017, this Blog traces the key changes brought about by HS2022. This will be followed by outlining what needs to be done by the Member States to adapt and adequately get ready for its implementation as it comes into effect as from the 1^st of January 2022.

The new HS2022 Edition: What are the key changes?

HS2022 features amendments in number of forms and chapters. The new edition creates a number of new product streams. It introduces responses that address changes in environmental and social issues of global concern. It prominently captures worldwide changes in technological advancement in certain sectors. It further addresses the emerging international trade patterns, health and safety matters of worldwide concern, as well as the protection of the societies from various threats to humankind.

A detailed analysis of the World Trade Organization’s HS Tracker^[2] shows that the HS2022 edition has brought about a total of 351 amendments covering a broad assortment of goods involved in international trade. The wide range of products whose classification is affected by these amendments fall in the various sectors of the HS and these are disaggregated by selected sectors in the table below^[3].

Table showing total number of changes introduced by HS2022 by sector

Sector	Number of changes introduced by HS2022
Agriculture	77
Machinery	63
Chemical	58
Wood	31
Base Metal	27
Transport	22
Textile	21
Others	52
Total	351

Some of the key changes reflected in HS2022 are discussed below.

Included among the new products with some impact related to the environment are electronic waste (e-waste), novel tobacco and nicotine products. The new edition introduces a new note under Section XVI which defines electrical and electronic waste and scrap (e-waste) classifiable under a new heading 85.49. In addition to possessing high value of trade, until now, e-waste had been posing considerable policy concerns in international trade and other conventions –such as the Basel Convention^[4].

By covering novel tobacco and nicotine products under new sub-headings, the seventh edition provides for the need to collect trade statistics of these high monetary value products. The new sub-heading also extends the product coverage by incorporating tobacco, tobacco manufactured substitutes (whether or not containing nicotine intended for human inhalation without combustion) and nicotine based products.

Changes have also been introduced to cover some products of international health and safety concerns, for example cell cultures and cell therapy (now covered under Heading 30.02). Similarly, specific tariff classification of drones technically known as unmanned aerial vehicles (UAVs) have been introduced. The multi-functionality nature of smartphones has led to these products being defined under note 5 to Chapter 85 in HS2022. They are now classified under a specific tariff (new sub-heading).

The new HS edition brings about key changes that keep pace with technological advancement in international trade as well. Examples in this regard include the considerably reconfigured sub-headings under metal forming machinery (Heading 84.62) and those under glass fibres and articles thereof (Heading 70.19). By simplifying their exact classification, collection of trade data or statistics going into the future on these products have been made tenable.

As part of eliminating delays in the distribution of tools and testing kits for rapid diagnostic of pandemics and other related outbreaks, HS2022 has simplified their classification under new sub-headings so as to facilitate their clearances across borders. Faster cross-border movement of such products is very critical especially in times of pandemics such as Covid-19 and its related mutations. Similarly, new subheadings have been created for placebos and clinical trial kits for medical research to allow for their classification in the absence of information on the ingredients in placebos. Such changes are critical in facilitating and encouraging cross-border medical research. Under protection of society, the new HS edition has restructured heading 29.03 to distinctly identify hydrofluorocarbons (HFCs) and specific ozone depleting substances (ODS) as well as heading 38.27 to discretely establish mixtures containing HFCs.

Customs plays a key role in the fight against international terrorism. In view of this, various subheadings have also been created so as to split dual purpose goods that could be inadvertently side-tracked for international terrorism. Examples include specific provisions (sub-headings) for biological safety cabinets (under heading 84.14), detonators, and radioactive materials (various subheading under heading 28.44). The HS2022 also introduces new subheadings aimed at specifically controlling chemicals that are also controlled under the Chemical Weapons Convention.

The table below summarizes some of the changes in HS2022

Sector in International trade	HS2022 Changes
Environmental Impacts	New heading for e-waste and subheadings for the key categories of e-waste were created offer greater visibility and aid member countries in the charge of controlling the cross-border movement of hazardous wastes and their disposal
Combatting Terrorism	New subheadings were created for a number of dual-use goods (e.g. radioactive materials, biological safety cabinets) that could be diverted for mass disturbance of international peace and security once successfully cleared,
Shifting Trade Patterns	New subheadings have been incorporated for smartphones (including Chapter note), UAVs, novel tobacco and nicotine-based products for ease of simplified classification and statistical reasons
Restricted or Controlled Materials	New subheadings have been streamed so as to distinctively cover certain restricted, controlled or prohibited for certain hazardous chemicals, resilient organic pollutants, including fentanyl-opioid substances and their derivatives
Health and Safety Issues	New provisions have been provided for cell cultures and cells, therapy placebos and clinical trial kits as well as rapid diagnostic kits,:

What needs to be done domestically to implement HS2022 changes?

Contracting parties need to ensure that they incorporate all the deletions, insertions and any other new changes or amendments as they migrate from their current national HS2017 to HS2022. Contracting parties can either be in the form of an individual Member State to the HS Convention or regional economic community or bloc. To assist with the transpositions or migration processes, WCO Secretariat publishes correlation tables for each HS amendment which must be referred to or utilized as guideline(s) by the Contracting Parties as they come up with their new national HS. Use of these tables is critical for the National Committee of Experts in HS or regional economic community HS Committee of Experts. They assist with establishing the correlation between the expiring HS version (in this case HS2017) and the new edition (HS2022). To receive assistance in these iterative and complex processes of transpositions, WCO may offer capacity building on request by the affected Contracting Parties.

Upon the completion of the transposition or migration processes, the Contracting Parties send their new HS in draft form to WCO for review/checks and return. On return, the process of gazetting them into national laws must be done. The new HS edition must be gazetted in the Contracting Party’s national laws for them to be used. It is therefore very vital that Contracting Parties are able to complete these processes and steps well in time for gazetting them into their national laws before they can be published for implementation ahead of the date of entry into force (1st of January 2022 for HS2022).

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^[1] See Discover the WCO - http://www.wcoomd.org/en/about-us/what-is-the-wco/discover-the-wco.aspx

^[2] See HS Tracker on https://hstracker.wto.org/

^[3] See In Focus: Hundreds of Harmonized Tariff Changes Coming in 2022 - https://www.ghy.com/trade-compliance/hundreds-of-harmonized-tariff-changes-coming-in-2022/

^[4] Basel Convention which entered into force on the 5th of May 1992, is an international treaty that was designed to reduce the movements of hazardous waste between nations, and specifically to prevent transfer of hazardous waste from developed to less developed countries.