The WCO Interim Report on the Exploratory Study of the Harmonized System (HS)

Dear IFCBA Members,

If there is one subject that customs brokers around the world can speak about – for hours! – it is the WCO’s Harmonized System of Tariff Classification. The IFCBA not only welcomed the WCO’s review of the HS, we participated as delegates and presenters in the conference in Brussels that launched the review,  we prepared a submission which was considered during the review, and we dedicated a half-day at our conference in Singapore to a detailed discussion of the HS, including practical classification debates. 

We have just received the interim report of the WCO’s Exploratory Study on A Possible Strategic Review of the Harmonized System.  Its summary is found below, but we know you’ll be interested in the full detailed report which is found here (French is available on request).

As January 26 approaches, which IFCBA is designating as International Customs Brokers Day, the relevance of this report to all IFCBA members is important to note. January 26 is also the day the WCO and its members celebrate International Customs Day.

We look forward to the opportunity for additional comment on this interim report from all IFCBA members. Please let me know what you think. Special thanks to the WCO’s Gael Grooby and Ye Ding for their leadership and collaboration during this review of a subject which is so important to customs brokers around the world. 

Best wishes,

Carol West
Secretary, IFCBA

Summary of the interim report.
1.   This document provides a report on the state of considerations to date. As this is a work in progress, this report does not present any final conclusions.  
2.   As an interim assessment, the Study notes that the HS still works as trade classification system and no better replacement system has been identified to date. 
3.   While the HS works, based on the preliminary analysis, improvements in the HS would be both highly desirable and beneficial to Customs and other users.  
4.   It is a complex system and, for many goods, requires a high level of skill to use appropriately.  This complexity creates difficulties for the increasingly diverse trading community, increases the time and resources required by administrations and the private sector to build up and retain expertise, and increases “accidental non-compliance” in classification.  In addition, the increasing pace of technological development, the growing volume of multi-functional, multi-purpose or composite goods, and the increasing diversification of product offerings on the market will all contribute to the challenges of classification increasing into the future, putting added strain on the work of Customs and trade. 
5.   The Study is looking at a range of possibilities to either reduce the complexity of the HS or to provide tools that mitigate some of that complexity, as outlined in the body of the interim report. 
6.   Looking to the future, many of the demands on the HS that are emerging from the whole-of-government and international policy spaces will also strain the HS and, in many cases, the HS will not be able to meet those demands as they require ways of classifying goods that go beyond the scope of the HS as it stands.  The analysis to date is looking at this from two approaches:  
•    How can the HS be strengthened to better meet future demands? 
•    To meet future demands that the HS is not able to meet on its own, can it be used in conjunction with other existing or new trade tools or with product identification systems? 
7.   The Study welcomes further input into the Study or comment on any of the matters discussed in this document.