FACT SHEET

Harmonized System Nomenclature - 2007 Amendment

(The Fourth Edition of HS 2007)

Background to the updating

The World Customs Organization (WCO) has released its latest amendment to the Harmonized Commodity Description and Coding System (HS). The third major amendment to the HSwill take effect from 1 January 2007.

The HS nomenclature is a goods classification system used by Thailand and more than 190 other countries as a basis for their Customs tariffs and for the collection of international trade statistics.

The WCO is responsible for the HS and revises the system at regular intervals (every four to five years) to ensure it reflects changes in technology or in patterns of international trade.After the implementation of the HS in 1988, two major reviews of the HS have been undertaken resulting in the 1996 and 2002 versions. The next revision will enter into force on 1 January, 2007, and will be the third major change to the convention.

WHAT’S NEW IN THE 2007VERSION

HS 2007 includesmore than 350 sets of amendments to the Nomenclature mainly related to:

i)Recording Technological progress in the nomenclature

Today, a vast number of available electronic goods are capable of performing several functions. The mobile phone with a built-in camera is a classic example of such a product.These phones could also include an MP3 player or a multi-functionoffice machine capable of scanning, printing, copying and sometimes even faxing. The third major amendments therefore have recorded this technological progress in the nomenclature. Fore example, there is the amendment of the Notes 9 to Chapter 84expanding the scope of “semiconductor devices” of heading 84.86 to cover photosensitive semiconductor devices and light emitting diodes. Also there is the amendment of the text of heading 84.43 to include printers, copying machines and facsimile machines.

ii)Adapting the Nomenclature to reflect current trade practices

Whilst some products being traded internationally become obsolete,others rise in importance.

To reflect these changes in trade patterns, a number of headings and numerous subheadings have been deleted,whilst new headings or subheadings have been created or restructured.For example new subheadings have been inserted to heading 06.03 (fresh flower), headings 03.01-03.04 (live fish), and heading 09.06 (cinnamon).

iii)Clarifying the texts of the nomenclature to ensure uniform application

During their daily work the users of the HS come across terms and expressions that may be interpreted differently and which could lead to the non-uniform application of the HS.

Since uniform classification in the HS is one of the WCO’s main objectives, the wording has been improved where necessary to prevent misclassification and misunderstandingsfrom arising.In this third amendment, there is, for example,clarification of the texts of heading 39.24 relating to the classification ofhygienic articles.

iv)Catering for social and environmental concerns in the nomenclature

The HS as a multi-purpose nomenclature is also used to monitor and control various products of social and environmental concern.

To accommodate these important issues, often at the request of other international organizations, new subheadingshave been created for certain goods. Example is creation of new subheading notes to Chapter 38 for insecticidesunder the Rotterdam Convention, and bamboo products.

AHTN & WCO HS NOMENCLATURE

As the ASEAN member countries, Thailand has adopted the Protocol Governing the Implementation of the ASEAN Harmonized Tariff Nomenclature (the AHTN Protocol)to harmonize the tariff nomenclature at the eight-digit level.It adheres to the six-digit commodity classification code of the HS Code of the World Customs Organization but adds two digits or level codes that represent ASEAN subheadings. Thailand therefore currently applies 2 types of commodity classification code: the six/seven digit commodity classification code for general imports and the eight-digit commodity classification code for intra-ASEAN trade.

However, Thailand and all ASEAN countries are scheduled to apply the AHTN 2007 for both intra-extra ASEAN trade on 1 January 2007.

IMPACTS ON Thailand’s HS Nomenclature

Outcomes from the HS 2007 amendment will result in amendments to:

  • Part II and IV of the Customs Tariff Decree B.E. 2530
  • Notification of the Ministry of Finance granting duty exemption and reduction under the Section 12 of the Customs Tariff Decree B.E. 2530 (MFN Rate)
  • Notification of the Ministry of Finance granting duty exemption and reduction of Customs Duty under the Section 14 of the Customs Tariff Decree B.E. 2530 (Preferential rates under international trade agreements e.g. AFTA, WTO, FTA, etc.)

IMPACTS ON IMPORTERS

The initial impact upon importers will be the administrative burden of updating your classification databases. Also there is legal obligation to properly classify imported and exported products as fines and penalties for incorrect classifications are levied upon the importer and rarely upon the broker or forwarder.

Importers, in particular, should review the 2007 HS Amendment for the potential classification and duty affect upon their firms. All importers should take measures to ensure the transition between the old edition and the new revisions is a smooth one.

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As of 31 Aug 2006

Nitaya T.

Source: Tariff Structure Division, Planning and International Affair Bureau

Standard Customs Procedures and Valuation Directorate

The Royal Thai Customs