Text 5.2. Keeping the harmonized system alive

The Harmonized Commodity Description and Coding System generally referred to as «Harmonized System» or simply «HS» is an internationally standardized system of names and numbers for classifying traded products developed and maintained by the World Customs Organization (WCO). The Harmonized System is used by more than 200 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics. Another important area is the tracking and control of goods of environmental and social concern, for which the application of the HS as an indispensable tool has been widely recognized.

The HS Nomenclature comprises about 5,000 commodity groups which are identified by a 6-digit code and arranged according to a legal and logical structure based on fixed rules.

The first four digits are referred to as the heading. The first six digits are known as a subheading. Countries that have adopted the Harmonized System are not permitted to alter in any way the descriptions associated to a heading or a subheading nor can the numerical codes at the four or six digit level be altered. This is what keeps the Harmonized System harmonized.

Individual countries may extend a Harmonized System number to eight or ten digits for Customs purposes, and to eight or ten digits for export purposes.

Given that the sphere of influence of the HS as the common economic language for goods is ever expanding, its uniform application (interpretation of the text) by all users is the key to its success. Correct and uniform application of the HS in an efficient manner facilitates international trade and investment and promotes compliance with fiscal and trade rules or laws. Misclassification of goods could lead to loss of revenue, evasion of trade controls, delays in clearance and distortion of trade data.

Timely implementation of the HS is very important, in order to avoid having different versions in existence at the same time, and consequent confusions in trade circle which could affect the reputation of the HS. Equally important is the periodic updating of the HS in order to prevent it from becoming obsolete.

The updating of the HS is a continuous process, requiring constant effort by the WCO in a rapidly changing trade environment. A consi-derable amount of time and resources have to be devoted to this work in order to take account of the latest developments in technology, patterns of trade and the special needs of HS users. If the WCO fails to perform this task, the HS will soon become a useless, outdated instrument.

The WCO manages the HS review process through the Harmonized System Committee – representing the Contracting Parties to the HS Convention – and more specifically through its HS Review Sub-Committee. Generally, each Review Cycle lasts five years.

To date, the HS Committee deals with the settlement of international classification disputes and problems which need resolution at international level, thus contributing to achieving uniform classification and ensuring transparency with regard to HS classification.

The promotion of the HS in order to increase the number of HS users is one of the ongoing activities of WCO which contribute to the harmonization of Customs procedures and facilitation of international trade. The HS continues to widen its horizons as the number of users continues to grow. More vigorous efforts will be needed in the future to sustain this success, of which the WCO and its Members can justifiably be proud.

dispute (n) [dɪsˈpjuːt] – a serious argument or disagreement dispute (v) [ˈdɪspjuːt] – to argue or disagree with someone

tax avoidance - managing of financial matters so as tolower taxes as much as is legally possible.

tax evasion - not paying taxes owed. This is illegal.

Answer the following questions.

1. What is the HS?

2. What examples can you give to prove that the HS is now used for a variety of purposes?

3. Why is a uniform application of the HS by all users the key to its success?

4. What are the reasons for the periodic updating of the HS?

5. Why is the updating of the HS a continuous process? What should be taken into account in this process?

6. How does the WCO manage the HS review process?

7. What committees are responsible for the settlement of international classification disputes?

8. What is the WCO doing now in order to keep the HS from becoming a useless instrument?

9. How do you understand the expression «trade environment»?

FOLLOW-UP ACTIVITIES

I. Punctuate the following text.

SPANISH VERSIONS OF THE HS TO BE «HARMONIZED»

A single Spanish version of the Harmonized System has been finalized on the initiative of the Mexican Customs Administration the Mexican Administration in its capacity as Secretary of the Multilateral Agreement on Co -operation and Mutual Assistance among Latin American Spanish and Portuguese Customs Administrations has promoted a project to create the «Single Spanish Text» of the Harmonized System Spanish versions of the HS had been developed in the past by the Spanish Administration and by the Latin American Integration Association (ALADI) though both were based on the official English and French versions of the HS there were variations in the texts due to differences in interpretation the Mexican initiative which received the support of the Spanish Administration the Organization of American States OAS and ALADI was designed to resolve the interpretation problems through a series of seminars and workshops attended by Spanish-speaking HS experts and to arrive at an integrated version of the

HS in Spanish the new Spanish version is expected to facilitate the uniform application of the HS in all Spanish-speaking countries.

II. Find the headlines to the following five texts. Choose from:

NOTE! There are more headlines than texts.

a. The HS and Waste Control e. Management through HS

b. Notice to HS Contracting Parties f. On the Road to 1996

c. UN Trade Data g. Focus on HS

d. Now on Sale h. GATT

Text 1

At its session, the Harmonized System Committee agreed to proceed in the direction of examining specific categories of hazardous and other waste products, with a view to their separate identification in the HS for monitoring purposes.

Certain categories of waste products of urgent concern such as household/municipal waste, sewage sludge, laboratory and chemical waste, waste oil, etc. have been marked by the Committee for further studies to be conducted in consultation with administrations and concerned international organizations. The crucial role of the Harmonized System in the successful management of waste was underscored by the 2nd Conference of Contracting Parties and was echoed by the Representative of the Basel Convention Secretariat at the last meeting of the HS Committee.

Text 2

The first edition of the Harmonized System (HS) Commodity Data Base on CD-ROM (chemical sector) has been recently published by the CCC.

The CD-ROM contains English and French descriptions of about 112 000 chemical products – many with trade names – together with their 6-digit HS codes. The Data Base offers the most sophisticated search facilities. The HS code number can be ascertained by just keying in the description of the commodity or its trade name. The Data Base also incorporates the entire HS Explanatory Notes – over 1600 pages – in

both official languages of the Council. The CD-ROM contains the necessary software for adding the user's own remarks, for printouts, for direct retrieval of the Explanatory Notes and file transfers.

CCC Member administrations as well as the public can purchase the Data Base on CD-ROM with a comprehensive User's Guide for 4500 BF for the single user version and 10000 BF for the network version.

Text 3

The identification of important categories of waste in the Harmonized System in order to facilitate trans boundary movements will be one of the major points for the next HS review, which is expected to start shortly. Separate identification of certain specific waste, laboratory and chemical wastes, sewage sludge, waste oils, etc. is already on the Agenda.

The Secretariat has continued its consultations with other international organizations dealing with the question of waste, with a view to formulating appropriate proposals. One of the items under examination is the correlation between the HS and the OECD System of wastes for recovery (the green, amber and red lists of wastes).

The Harmonized System Committee is currently considering the timing, scope and procedure for the next review cycle; and certain policy issues and methodologies concerning the separate identification of waste products in the HS.

Text 4

The Harmonized System (HS) has been incorporated into the United Nations international trade data base (COMTRADE). COMTRADE is maintained by the Statistical Division of the United Nations (UNSTAT) and is based on the SITC.

An Interagency Task Force on International Trade Statistics was set up in 1992 for improving the flow of trade statistics and the international comparability of trade data.

The Task Force has been looking into the question of incorporating the HS format into the COMTRADE data base. Work has already started and a test data base, consisting of the SITC data for EFTA and Latin American countries reformatted into the HS, has been made available on line to authorized users of COMTRADE for some time. The trial has not

indicated any problems. It is expected that the production version of the modified COMTRADE data base will be ready for implementation shortly.

Text 5

Some 400 amendments have been made to the Harmonized System. In order to keep the Harmonized System truly harmonized it is necessary that Contracting Parties and other users of the HS implement the amendments in their Customs tariff and statistical nomenclatures on…, the date scheduled for simultaneous change – over to the new version.

In view of the extensive nature of the amendments, a large number of the present HS Codes will be non-existent in… , giving way to new codes and resulting in entirely different classifications for hundreds of products.

Thus, delayed implementation by administration could result in the existence of different versions at the same time. This would inevitably result in confusion in trade circles, delay and extra costs.

III. Read the following information:

More than 200 countries, Customs and economic unions, representing more than 98% of world trade, use the HS as a basis for:

· Customs tariffs;

· Collection of international trade statistics;

· Rules of origin;

· Collection of internal taxes;

· Trade negotiations (e.g., the World Trade Organization schedules of tariff concessions);

· Transport tariffs and statistics;

· Monitoring of controlled goods (e.g., wastes, narcotics, chemical weapons, ozone layer depleting substances, endangered species);

· Areas of Customs controls and procedures, including risk assessment, information technology and compliance.

Find 13 users of HS in the following list:

1. Customs administrations

2. Sportsmen

3. Customs brokers

4. Importers and exporters

5. Manufactures

6. Freight forwarders

7. Universities

8. Transport organizations

9. Intergovernmental organizations

10. World Health Organization

11. Pre-shipment inspection companies

12. Customs lawyers

13. Statisticians

14. Economists

15. Trade libraries

16. Police

17. Trade associations and organizations

18. Dog handlers

DO IT FOR FUN

I. Exercise your brains by solving these puzzles.

1.

2.

3.

4.

5.

II. Speculate about the following:

There is nothing more difficult to take in hand or more uncertain in its success than to take the lead in the introduction of a new order of things.

N. Machiavelli¹

III. Name the following terms:

1. The process of releasing goods from Customs.

2. A list of goods that have been supplied or work that has been done, showing how much you owe for them.

¹ Niccolo Machiavelli (1469–1527) – Italian writer and statesman. He was the first to propound the thesis of historical cycles; to built a political science based on the study of man.

3. The area in which sales are made.

4. A shop, company, or organization through which products are sold.

5. Money which has to be paid when goods enter a country.

6. A tax added to the price of goods and services in Britain and the EU.

7. Money added to someone's wages, especially as a reward for good

work.

8. Not paying taxes owed. This is illegal.

9. A company that is owned or controlled by another larger company.

10. Managing of financial matters so as to lower taxes as much as is legally possible.

IV. Explain the meaning of the following proverb in English and translate it into Russian:

Birds of a feather flock together .

V. Complete the sentence:

A bank is a place where _______________ Now read what R. Frost thought about it.

A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.

Robert Frost¹

VI. Solve the crossword.

Across:

1. Faults or weaknesses.

2. Avoiding something that someone is supposed to do or deal with.

3. Changing of something that is not true or not acceptable.

4. No longer needed because something better has been invented.

¹ Robert Frost (1875–1963) – US poet and poet-in-residence at a number of colleges and universities, best known for his use of colloquial language, familiar rhythms, and symbols taken from common life to express the quiet values of New England life.

6. Payment, tax.

7. Patronage, protection.

8. Collecting of a tax or another payment.

14. Giving a description or name.

Down:

5. Absolutely essential.

9. Preliminary plan or sketch of writing.

10. System of naming.

11. Basic structure, arrangement or system.

12. Correction, revision or change.

13. Any article of commerce.

15. Changing things so that they all have the same features.

UNIT 6. CUSTOMS VALUATION

Study the following words and word combinations from the text.

Customs valuation	таможенная стоимость / определе-
	ние таможенной стоимости
assessment of Customs duties	определение / оценка таможенных
	пошлин
licensing arrangements	порядок выдачи лицензий
application of preference
пр менен е	системы преферен-
system	ц й
to have restrictive effects on
иметь ограничительное воздейст-
international trade	вие на международную торговлю
major trade policy initiatives	важные инициативы в области тор-
	говой политики / главные вехи
to dismantle	устранение, разрушение
obstacles	преграда, помеха, барьер
the price actually paid or	фактическая	цена/действительная
payable = actual price	цена
to conform	соответствовать, согласоваться
to outlaw	запрещать
arbitrary or fictitious	спорная или фиктивная таможен-
Customs value	ная стоимость
to lay down	формулировать
to stipulate	предусматривать, оговаривать
adjustment	регулирование

transaction value	стоимость сделки /	определение
	таможенной стоимости по цене
	сделки с ввозимыми товарами
transaction value of identical	метод	определения	таможенной
goods	стоимости по цене сделки с иден-
	тичными товарами
transaction value of similar	метод	определения	таможенной
goods	стоимости с однородными това-
	рами
deductive method	метод на основе вычитания стои-
	мости
computed method	метод	определения	таможенной
	стоимости на основе сложения
fall-back method	резервный метод
to deem	считать
to provide for	предусматривать

TEXT. VALUATION OF GOODS

Customs valuation is a major feature of modern Customs tariff systems. Customs valuation is a Customs procedure applied to determine the Customs value of imported goods¹. It is important for the assessment of Customs duties, whether for purposes of producing revenue or as a means of encouraging and protecting domestic industry. It is also a significant element in a variety of other aspects of international trade such as statistics, quota and licensing arrangements, taxes and other charges levied at importation and in the application of preference systems.

Customs valuation systems have been the subject of a number of international harmonization and standardization efforts. International efforts toward harmonization began in the early 20th century, but significant results did not come until the 1947 General Agreement on Tariffs and Trade (GATT).

The Tokyo Round of multilateral trade negotiations (1973–1979) recognized that certain valuation practices can have restrictive effects on

¹ GATT/WTO Customs valuation.

international trade. These negotiations were one of the major trade policy initiatives of our time; they were intended «to achieve the expansion and ever-greater liberalization of world trade, inter alia, through the progressive dismantling of obstacles to trade».

One of the results of the trade negotiations was the adoption of the Agreement on Implementation of Article VII of the GATT which entered into force on 1 January 1981. The Agreement established a positive system of Customs valuation based on the price actually paid or payable for the imported goods («transaction value»). It provides a fair, uniform and neutral system for the valuation of goods for Customs purposes, conforming to commercial realities; a system which outlaws the use of arbitrary or fictitious Customs values.

The Agreement laid down the general principles for an international system of valuation.

The Agreement stipulates that Customs valuation shall be based on the actual price of the goods to be valued, which is generally shown on the invoice. This price, plus adjustments for certain elements, is called the transaction value. This is the first and most important method of valuation set out in the Agreement.

For cases in which there is no transaction value, or where the transaction value is not acceptable as the Сustoms value because the price has been distorted as a result of certain conditions, the Agreement lays down five other methods of Сustoms valuation, to be applied in the prescribed hierarchical order. Overall the following six methods are considered in the Agreement:

Ø Method 1:transaction value

Ø Method 2:transaction value of identical goods

Ø Method 3:transaction value of similar goods

Ø Method 4:deductive method

Ø Method 5:computed method

Ø Method 6:fall-back method

The Agreement also contains certain other provisions concerning, for example, currency conversion, the right of appeal to a judicial authority, the publication of law and regulations concerning Customs valuation, and the prompt clearance of goods.

In addition to the Agreement itself, a Protocol, which is deemed to be part of it, contains provisions for the special problems and training needs of developing countries, permitting them some flexibility in applying the

Agreement. The Agreement also provides for technical assistance to these countries to help them set up new valuation systems based thereon.

The Agreement establishes a Committee on Customs Valuation composed of representatives from each of the Member States for the purpose of consulting on matters concerning its management.

The Agreement also establishes a Technical Committee on Customs Valuation under the auspices of the World Customs Organization with a view to ensuring, at the technical level, uniformity in interpretation and application of the Agreement

A uniform Customs valuation system enhances transparency and predictability of international transactions and contributes to the preparation of good trade statistics.

EXERCISES

I. What are the synonyms from the text of the following words?

1. estimation	5. regulation, fitting	9. to aim
2. use	6. openness, publicity	10. correspond
3. talks	7. limiting	11. deformation
4. unreal	8. to remove (obstacles)	12. prohibit

II. Match the words/phrases from the text with their corresponding definitions.

1. assessment a. problems, difficulties

2. to levy b. to take apart

3. inter alia c. to be in agreement with

4. to dismantle d. deciding the amount of taxes/duties

5. obstackles e. countries that belong to a political,

economic, or trade organization

6. to conform to smth. f. among other things

7. to implement g. to declare illegal

8. Member States h. helped and favoured by

9. under the auspices i. to impose

10. to outlaw j. to apply/put into effect

III. Make phrases by matching words from the left with words from the right and translate them.

A

to levy committee

to encourage expansion of world trade

to achieve goods (2)

to set up valuation systems

to value taxes and duties

assessment of agreement (3)

application of Customs duties

clearance of domestic industry

implementation of charges

adoption of

B

1. Customs valuation is very important for …

2. A Committee on Customs Valuation has been established to supervise …

3. Developing countries are supposed to get technical assistance in order …

4. The government adopted these restrictive measures ….

5. All participants at the talks worked very hard ….

6. Certain provisions of the Valuation Agreement contain regulations concerning …

7. One of the results of the negotiations in Geneva between 1973 and

1979 was …

8. The Agreement is intended to provide a fair, uniform and neutral system ...

9. The protocol contains provisions for training needs of developing countries which delayed ...

10. Authorities have always ... on goods being moved across their territorial boundaries.

IV. Fill in the gaps to make the sentences complete.

Reference words: base, apply, call, recognize, accept, levy, influence, adopt, intend, protect, establish

1. Taxes and other charges … at importation.

2. The Agreement … in Geneva, as a result of the negotiations between 1973 and 1979.

3. Now the new system of Customs valuation … on the actual price of the imported goods.

4. Domestic industry should … by modern systems of Customs valuation.

5. Recently a Committee on Customs Valuation … under the agreement.

6. The Agreement provides for five other methods which should … in a prescribed order.

7. That certain valuation practices can have restrictive effects on international trade … at the Tokyo Round of negotiations.

8. The negotiations in Geneva … to achieve the expansion and liberalization of world trade.

9. The price actually paid for the goods being valued … the transaction value.

10. The transaction value cannot … if the price … by distortions resulting from certain conditions and restrictions.

V. Make sentences by matching the figures (1-11) with the letters (a-k).

1.	Customs valuation	is a	of	a. dismantling	obstacles	to
major feature ...		of	trade.
2.	They did it for the	b. providing a new system for
purpose ...		of	the valuation of goods.
3.	It	introduces	new	c. studying Customs	valuation
practices ...		in	of goods.
4.	All	countries	were	d. encouraging	and	protecting
interested ...		in	domestic industry.
5.	Talks resulted ...		e. providing assistance to deve-
				for	loping countries.
6.	The	Agreement is	not	f. regulating trade policy.
only ...			of
7. Everybody liked the idea ...	g. determining Customs value.

8. After	the first	meeting	for	h. signing the Agreement.
the participants went ...	for
9. The Protocol is used ...	i. achieving the expansion of
			in	world trade.
10. It constitutes the basis ...	j. establishing a Committee on
			on	Customs Valuation.
11. The	methods	can be	k. producing revenue.
applied…

VI. Translate into English.

1. Каким образом таможенная оценка сможет влиять на оте-чественную промышленность?

2. Почему Женевские переговоры стали главной вехой в торго-вой политике нашего времени?

3. Какое соглашение устанавливало новую систему таможенной оценки, основанной на действительной стоимости импортных

товаров?		товаров
4.	Какую систему оценки	для таможенных целей пред-
полагается ввести данным		ем?
5.		соглашен
Чем должна определяться там	женная стоимость?
6.	В каких случаях С глашение предусматривает использование
пяти других методов определения таможенной стоимости?
7.	Что также предусма ривает Соглашение в отношении разви-
вающихся стран?
8.	Какой	тет был создан под эгидой Совета таможенного
	ком
сотрудничества?

FOLLOW-UP ACTIVITIES

I. Punctuate the following text.