The Harmonized Tariff Code is part of the Harmonized Commodity Description and Coding System used by over 200 countries to classify goods into approximately 5,000 commodity groups. The system is organized into numerical chapters and helps nations collect trade statistics, monitor controlled goods, and develop trade policies. Countries assign customs duties according to the product’s Harmonized Tariff Code, which can also be used to influence the flow of international goods.
A Harmonized Tariff Code is part of the Harmonized Commodity Description and Coding System created by the World Customs Organization (WCO). The system was introduced in 1988 and is also called the “harmonised system”. The system uses a logical nomenclature method to classify goods into approximately 5,000 commodity groups. More than 200 countries use the system to classify goods with a harmonized tariff code. As of August 2010, the Harmonized System was used in over 98% of international trade.
The Harmonized System is organized into numerical chapters which identify the type of goods. As of August 2010, there were 99 chapters. A harmonized tariff code contains at least six digits. Many countries add up to four additional digits to identify a particular product more specifically. This helps nations collect trade statistics, monitor controlled goods and develop trade policies.
An example of how the system works could be an exporter who needs to determine the correct Harmonized Tariff Code to be placed on the documents for a shipment of rear view mirrors. The first two digits of a code indicate the chapter in which the goods are classified. In this example, the exporter would start at Chapter 70, Glass and Glassware, where all codes start with ’70’. The next two digits refer to a product grouping in the chapter. If a code begins with “7009”, it refers to glass mirrors. The last two digits provide even more definition. A part number “700910” is for rear view mirrors used in vehicles.
One of the main purposes of using a harmonized tariff code is to ensure the consistency of international trade. The WCO promotes a uniform interpretation of the Harmonized System. To assist importers and exporters in determining the correct tariff code, the WCO publishes a reference called Explanatory Notes, a comprehensive set of guidelines and explanations. The Committee also resolves disagreements and interpretative questions and prepares periodic amendments to the Harmonized System and to the Explanatory Notes.
Countries assign customs duties according to the product’s Harmonized Tariff Code. Import tariffs and export tariffs generate revenue for nations. Countries also use tariffs to influence the flow of international goods. Tariffs could be lowered or removed to encourage trade with certain countries or certain products. Nations raise tariffs to discourage trade with certain countries as a punitive measure or to protect domestic production of a commodity.
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