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AANZFTA Parties Tackle Changes In Standard Classification Of Traded Goods

29 July 2016

The Department of Trade and Industry (DTI) of the Philippines and the ASEAN Secretariat jointly organized an ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) Regional Policy Dialogue held in Cebu, Philippines from 20 to 24 May 2016 to discuss how AANZFTA Parties can effectively prepare for and implement the changes related to the Harmonized Commodity Description and Coding System, generally referred to as the “Harmonized System (HS)”. 

HS is a system of names and numbers to classify over 98% of internationally traded products.  Over 200 countries use the HS as a basis for their customs tariffs and the collection of trade statistics. 

The World Customs Organization (WCO) maintains and updates the HS tariff nomenclature every five years, most recently from HS Code 2012 to HS Code 2017.   ASEAN Member States use the ASEAN Harmonized Tariff Nomenclature (AHTN), which is also revised periodically following changes to the HS.

About sixty-eight (68) trade, finance, and customs officials from the 12 countries comprising AANZFTA attended the regional policy dialogue to discuss country-specific plans, timeframes, and challenges in transposing AANZFTA preferential schedules and product-specific rules under AANZFTA Rules of Origin from HS 2012 into the updated HS 2017. 
The HS contributes to the harmonization of customs and trade procedures and facilitates international trade amongst AANZFTA parties by providing consistency of application in the classification of traded goods and simplicity for importers and exporters in accessing preferential tariffs and rules of origin concessions under the FTA.   

Varying timeframes across AANZFTA parties in shifting from HS 2012 into HS 2017 might cause confusion on how goods are classified and, correspondingly, in what tariff reduction schedule or rules of origin concession to apply for traded goods.  This confusion will increase the cost of doing business amongst importers and exporters within the AANZFTA region, which would prevent them from using and benefitting from AANZFTA.

This confusion might also disproportionately impact Small-Medium Enterprises (SMEs) who would have limited capacity to navigate the additional complexities of determining the appropriate HS Code of their imported or exported products. 

The meeting drafted a regional guideline outlining the general principles and approaches in the transposition of AANZFTA Tariff Reduction Schedules (TRS) and Rules of Origin (ROO) Product Specific Rules (PSRs) from HS 2012 into HS 2017.  AANZFTA parties can use the guideline to effectively manage their respective HS transposition process and also to mitigate any risks related to the uneven timeframes in countries’ implementation of the HS amendments.

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