Mar 31, 1984

PROPOSED CHANGE IN TARIFF NOMENCLATURE MAY IMPACT ON GSP.

GENEVA, MARCH (IFDA/CHAKRAVARTHI RAGHAVAN) -- The proposed change-over from the present "CCCN" tariff nomenclature for customs to the "HS" nomenclature may have implications for imports from Third World countries under the General System of Preference (GSP) schemes, according to a study by the UN conference on Trade and Development.-

The changeovers are to be effected from January 1, 1987.-

The changeover will have implications for applying the "processing" criteria for rules of origin under GSP schemes, and transposition of particular products from CCCN to HS should be done "in a neutral manner", and ensuring that it does not result in "more restrictive rules", the study suggests.-

The CCCN is a uniform 4-digit tariff nomenclature for customs purposes established under the "nomenclature convention of the Customs Cooperation Council".-

It is now in use in virtually all parts of the world, with 31 countries as formal Contracting Parties to the convention, and some 150 countries and territories applying it without formally joining the convention.-

But some like Canada, U.S.A. and the USSR however apply their own national tariff nomenclatures.-

The CCCN contains some 1.011 tariff headings, and seeks to ensure classification of goods in customs tariffs of countries as systematically and precisely as possible.-

Such a standard international tariff nomenclature greatly facilitates international trade, international tariff negotiations, comparison of trade statistics, and work of international organisations in the field of trade policy.-

To keep pace with increasing changes of technology and international trade patterns, a new "harmonised commodity description and coding system for the classification and coding of goods in customs tariffs and statistical nomenclatures for external trade", or HS in short, has been agreed upon and details are being technically worked out.-

The HS classification will have l.241 headings at 4-digit level and 5.019 sub-headings at 6-digit level.-

Each of the four and six digit headings will in effect differentiate between products on the basis of the level of processing change effected.-

The HS code is tentatively set to come into force on January l, 1987.-

States that accept the HS will be obliged to build their customs tariffs and statistical nomenclatures in conformity with it, use all the headings and sub-headings without addition or modification, and apply the general rules for the interpretation of the HS and its notes.-

They will also have to make their import and export trade statistics publicly available in conformity with the 6-digit codes of the HS. Only in exceptional circumstances, such as commercial confidentiality or national security, is publication to be precluded.-

The HS is being introduced in the belief that it would better meet the needs of various parties involved in international trade operations – carriers, customs administrations, statisticians, insurance companies, etc.-

Under the various GSP schemes now in force, the preference giving countries base their product coverage according to the CCCN nomenclature.-

When the HS comes into force, the lists of product coverage under the GSP schemes would have to be adapted to the new nomenclature.-

UNCTAD says that it would be important to ensure that changes in lists do not result in a restriction of the product coverage, and the transposition of individual items would be as neutral as possible.-

The present product coverage, it suggests, should in any case be maintained, and where a transposition brings the products into a new heading or sub-heading having a broader product classification, it should be used to increase the product coverage of the scheme.-

The GSP schemes also have "safeguard" (protective restrictive action) measures on the basis of CCCN headings now. The changeover to HS should not also result in more restrictive application of these measures.-

This is particularly important, UNCTAD says, where quotas or ceilings are expressed in terms of value or volume of preferential imports, and where products falling under quota or ceiling according to the CCCN in its present form will be transposed to another quota or ceiling according to the HS.-

Under the GSP schemes, the CCCN is of paramount importance in regard to the "defining of substantial transformation" for the application of processing criteria in rules of origin.-

This, UNCTAD notes, will have more far-reaching effects when the full HS version at the 6-digit code level is used.-

While "neutral" transposition requirement should apply here too, its practical application might be extremely complicated.-

Perhaps a simplification might be for the GSP lists of each scheme to continue to use the 4-digit nomenclature. The more specified items of the structured nomenclature could be grouped under the relevant 4-digit CCCN headings.-

The lists could thus be kept relatively short in spite of the binding character of the HS at the 6-digit level, UNCTAD suggests.-

Many problems could be avoided by taking a "dynamic rather than static approach" for the necessary transpositions from CCCN to HS, in order to lessen the rigidity of rules of origin and liberalising them.-

Also, since the introduction of the HS will in any case lead to substantive changes in rules of origin of many preference-giving countries, the opportunity could be used to achieve greater harmonisation in the GSP rules of origin than at present.-

Currently with their differing rules of origin and interpretations, a product exported may be eligible for GSP benefits of rules of origin about processing in one country but not in others, and often involves considerable detailed paper-work.-

It could not be excluded, UNCTAD says, that the introduction of the HS, would lead to rules of origin which, because of their length and complexity, would be almost inoperative for both administrations and trading circles.-

In this event, it might be advisable to abandon the tariff nomenclature altogether as a basis of determining origin. Countries using the "process" criteria (percentage of value added in the exporting country) for determining origin could consider introducing the percentage criteria for determining substantial transformation.-

While the main work would have to be done by the national administrations of the preference-giving countries, UNCTAD suggests also consideration of the problems in the working group on rules of origin for GSP schemes.-