The World Customs Organization (WCO) Harmonized System (HS) of Classification provides the customs tariff base for all member countries. The first six digits of the ten-digit classification, section and chapter notes are uniform for all countries. The final four digits are determined by each country along with the rates of duty associated with each tariff classification. Each country also has supplementary notes in certain chapters of the customs tariff that indicate the classification policy for that country’s customs regime.
Every five years, the WCO updates the customs tariff by adding in new tariff items that are germane to modern global commerce and revises the nomenclature of the tariff to accommodate current business practices and commodities. For example, the classification for typewriters was eliminated and consolidated within another classification.
In Canada, the changes to the customs tariff were published in the Canada Gazette on September 23, 2016. With the published changes, the Department of Finance provided their input and made their revisions to the Canadian version of the Customs Tariff and established the HS classification up to eight digits along with the rates of duty applicable to those classifications. Statistics Canada then applied their revisions to the Customs Tariff adding the final two digits of the HS classification otherwise known as the statistical code portion of the ten-digit classification. This resulted in what is known in Canada as the Departmental Consolidation of the Customs Tariff.
The nature of the changes in the 2016 Customs Tariff, compared to 2017, range from one-to-one, many-to-one or one-to-many. While the first two types of change can be done automatically by referencing the concordance table provided by the Canada Border Services Agency (CBSA), the latter requires an analysis before the 2017 HS classification can be determined.
Notable changes to the classifications of commodities include the addition of tariff items for vehicles based on the type of engine: engines powered by fuel (gasoline or diesel), hybrid engines or electric motors. The most significant commodity classification change is the classification of integrated circuits. As a result of changes to the chapter notes for chapter 85, the definition of integrated circuits covered by tariff heading 85.42 have been revised. Previously, an integrated circuit could have been classified as a part of the machinery for which it is designed, now they’re classifiable under heading 85.42.
The evidence of this classification policy change is found in the chapter notes for chapter 85 and the removal of any reference to integrated circuits parts for various machinery in the 2016 version of the Customs Tariff. For example, printed circuit assemblies for telecommunication machinery were referenced in 8517.70 in the 2016 Customs Tariff as telecommunication parts. In the 2017 version of the Customs Tariff, all reference to printed circuit assemblies was removed from this tariff item.
Paul J. Diamond heads GTM Governance, Canada at Livingston International.