Republic of the Philippines

BATANGAS STATE UNIVERSITY

Pablo Borbon Main I
Rizal Avenue, Batangas City
COLLEGE OF ACCOUNTANCY, BUSINESS, ECONOMICS AND
INTERNATIONAL HOSPITALITY MANAGEMENT
Customs and Public Administration Department

Module 2
Harmonized System (HS) and ASEAN Harmonized Tariff Nomenclature (AHTN)
WEEK 2-4

Part 1. Introduction
This module introduces the concept of The Harmonized Commodity Description and Coding
System (HS) as a critical instrument in the international trade facilitation and monitoring systems
recast since the late 1980s. Students will be able to understand its importance and uses as well as
applicability to the profession, also, they will be able to discern the reason behind the HS as the
"true language of international trade".
Furthermore, it contains discussion and information on Association of Southeast Asian Nations
(ASEAN) Harmonized Tariff Nomenclature or AHTN, adopted by the ASEAN Member States in
2004 to facilitate trade within the region. It will also discuss the AHTN Protocol and the different
institutional arrangements that oversee the Protocol.

Part 2. Learning Objectives

After studying this module, students should be able to:
ILO 1. Understand and discuss the concept and vitality of Harmonized System (HS) and ASEAN
Harmonized Nomenclature (AHTN), its relationship and key differences.
ILO 2. Identify the relevance of AHTN Protocol and it’s implementing power in AHTN
ILO 3. Familiarize with the structure and composition of the HS and AHTN codes.

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Part 3. Discussion
Harmonized System (HS)
The Harmonized System is an international nomenclature for the classification of products. It
allows participating countries to classify traded goods on a common basis for customs purposes.
At the international level, the Harmonized System (HS) for classifying goods is a six-digit code
system.
The Harmonized System was introduced in 1988 and has been adopted by most of the countries
worldwide. It has undergone several changes in the classification of products. These changes are
called revisions and entered into force in 1996, 2002, 2007, 2012 and 2017.
Structure of the HS
The HS comprises approximately 5,300 article/product descriptions that appear as headings and
subheadings, arranged in 99 chapters, grouped in 21 sections. The six digits can be broken down
into three parts. The first two digits (HS-2) identify the chapter the goods are classified in, e.g. 09
= Coffee, Tea, Maté and Spices. The next two digits (HS-4) identify groupings within that chapter,
e.g. 09.02 = Tea, whether or not flavoured. The next two digits (HS-6) are even more specific, e.g.
09.02.10 Green tea (not fermented)... Up to the HS-6 digit level, all countries classify products in
the same way (a few exceptions exist where some countries apply old versions of the HS).

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Beyond this point, every country using the HS is allowed to assign its own coding system reflecting
further disaggregation for supplementary classification of commodities of national importance. 
Many countries have adopted eight and even ten-digit level classification for exports and imports.
 For example, India has adopted eight-digit level classification based on HS (2002) since 2003-
04.

The main objectives of such disaggregation are essentially twofold: (i) Easy customs
administration; and (ii) Multilateral or regional trade negotiations on goods of national
importance apart from capturing relevant data on the same.

Uses of HS

A. Customs tariffs/Tariff nomenclature

B. Collection of international trade statistics/Statistical nomenclature
C. Determination of Rules of Origin (ROO)
D. Collection of internal taxes
E. Trade negotiations
F. Transport tariffs and statistics
G. Monitoring and control of wastes, narcotics, chemical weapons and endangered species
H. Areas of customs controls and procedures (Special Duties)

Composition of HS
A. General Rules for the Interpretation of the System (GRIS)- these rules were provided to
ensure uniform classification of goods in one and the same heading and subheading, to the
exclusion of any others which appear to merit consideration. (Harmonization)
B. Section and Chapter Notes, including Subheading Notes- form an integral part of the HS
and have the same legal force as General Rules. It gives definitions of the terms used in the
nomenclature, criteria for classification within each Chapter, heading, subheadings, and
enumeration of products that are classifiable or excluded within Chapters, headings or
subheadings.
C. List of headings arranged in systematic order (i.e. degree of processing) and, where
appropriate, subdivided into subheadings.
Publications complementing the HS Code
A. Explanatory Notes- constitute international interpretation of the HS at international level.
B. Alphabetical Index- alphabetical list of the articles mentioned in the HS and Explanatory
Notes.
C. Compendium of Classification Opinions- HS advised opinions adopted by WCO.
Harmonized System 2017

Amendments to Harmonized Commodity Description and Coding System, which have been
accepted as result of the Customs Co-operation Council Recommendation of 27 June 2014 and 11
June 2015, will enter into force on 1 January 2017 and 1 January 2018, respectively. The
complementary amendments (of 11 June 2015) is to take into account of the necessary corrections

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and some further amendments in respect to heading 44.01 and certain subheadings of Chapter 44,
inadvertently omitted from the Council Recommendation of 27 June 2014. The HS Contracting
Parties are, however, encouraged to apply these amendments from 1 January 2017.

The recommendations include 242 sets of amendments in various sectors as follows: agricultural,
chemical, wood, textile, base metal, machinery, transport and other sectors. The amendments were
not only motivated by changes in technology (i.e., addition of heading for light-emitting diode
(LED) lamps) or patterns of international (i.e., deleting of some subheadings due to low trade
volume) trade but also to clarify certain texts to render them more consistent with scientific or
customary terminology of with trade practice.

HS Convention

The intergovernmental commitment of the contracting parties to abide by its provisions, one of
which is to agree to use the HS up to 6-digit level as the basis for their national customs tariff and
statistical nomenclature.

HS Committee (Article VI, HS Convention)

1. There shall be established under this Convention a Committee to be known as the Harmonized
System Committee, composed of representatives from each of the Contracting Parties.

2. It shall normally meet at least twice each year.

3. Its meetings shall be convened by the Secretary General and, unless the Contracting Parties
otherwise decide, shall be held at the Headquarters of the Council.

4. In the Harmonized System Committee each Contracting Party shall have the right to one vote;
nevertheless, for the purposes of this Convention and without prejudice to any future Convention,
where a Customs or Economic Union as well as one or more of its Member States are Contracting
Parties such Contracting Parties shall together exercise only one vote. Similarly, where all the
Member States of a Customs or Economic Union which is eligible to become a Contracting Party
under the provisions of Article 11 (b) become Contracting Parties, they shall together exercise only
one vote.

5. The Harmonized System Committee shall elect its own Chairman and one or more Vice-
Chairmen.

6. It shall draw up its own Rules of Procedure by decision taken by not less than two-thirds of the
votes attributed to its members. The Rules of Procedure so drawn up shall be approved by the
Council.

7. It shall invite such intergovernmental or other international organizations as it may consider

appropriate to participate as observers in its work.

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8. It shall set up Sub-Committees or Working Parties as needed, having regard, in particular, to the
provisions of paragraph 1 (a) of Article 7, and it shall determine the membership, voting rights and
Rules of Procedure for such Sub-Committees or Working Parties.

Functions of the Committee (Article VII, HS Convention)

1. The Harmonized System Committee, having regard to the provisions of Article 8, shall have the
following functions:

(a) to propose such amendments to this Convention as may be considered desirable, having regard,
in particular, to the needs of users and to changes in technology or in patterns of international trade;

(b) to prepare Explanatory Notes, Classification Opinions or other advice as guides to the
interpretation of the Harmonized System;

(c) to prepare recommendations to secure uniformity in the interpretation and application of the
Harmonized System;

(d) to collate and circulate information concerning the application of the Harmonized System;

(e) on its own initiative or on request, to furnish information or guidance on any matters concerning
the classification of goods in the Harmonized System to Contracting Parties, to Members of the
Council and to such intergovernmental or other international organizations as the Committee may
consider appropriate;

(f) to present Reports to each Session of the Council concerning its activities, including proposed
amendments, Explanatory Notes, Classification Opinions and other advice;

(g) to exercise such other powers and functions in relation to the Harmonized System as the
Council or the Contracting Parties may deem necessary.

2. Administrative decisions of the Harmonized System Committee having budgetary implications

shall be subject to approval by the Council.

ASEAN Harmonized Tariff Nomenclature (AHTN)

 8-digit commodity nomenclature that is based on the Harmonized System of the World
Customs Organization. (WCO)
 Conceptualized by the ten (10) ASEAN Member States (AMs), namely, Brunei
Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore,
Thailand, and Viet Nam, in order to have a common tariff nomenclature to facilitate trade
within the region.
 The first AHTN Code using the HS 2002 edition was adopted in 2004, incorporating
products that are significantly traded by AMSs.
 The AHTN is used as:

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  uniform tariff nomenclature within ASEAN
 base for preferential tariff purpose in the ASEAN Free Trade Area (AFTA)
 base for the collection of trade statistics.

 Next cycle of review of the AHTN- Amendments to the HS are implemented every four to
six years by the WCO. Since the AHTN follows the amendments of the HS, the next cycle
of review is expected to be conducted before 2020.

Structure of AHTN

AHTN is comprised of:

 General Rules for the Interpretation of the HS

 Section and Chapter Notes, including Subheading Notes
 List of headings arranged in systematic order and where appropriate, subdivided into
subheadings

Note:

 Six-digit Code- Harmonized System Code (exclusive for usage of countries in concession
with HS)
 Eight-digit Code- AHTN Code (assigned to ASEAN subheadings; reflects the products of
interest to the ten AMSs
 Alpha Code- Alphanumeric Codes (beyond the 8-digit AHTN level. Each AMS can create
national tariff lines through its domestic procedures; the Philippines assigns alpha-numeric
codes to denote its national tariff lines.)

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Advantages of AHTN

 Establishes uniformity of application in the classification of goods in ASEAN

 Enhances transparency in the classification process for goods in the region
 Simplifies the tariff nomenclature system of AMSs to facilitate trade in the region

AHTN Protocol

 Defines the legal framework governing the implementation of the AHTN and its
implementing rules and explanatory notes
 Signed by the Governments of Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, Philippines, Singapore, Thailand and Viet Nam on August 7, 2003 in Manila
 The Second Protocol to amend the Protocol Governing the Implementation of the AHTN
was signed on April 8, 2010 in Viet Nam
 Institutional Arrangements that oversee the AHTN Protocol:

 ASEAN Directors- General of Customs- responsible for monitoring, reviewing, and

supervising all aspects relating to the implementation of the AHTN Protocol
 ASEAN Finance Ministers Meeting- forum for all decisions relating to the
implementation of the AHTN Protocol
 ASEAN Secretariat- provides the necessary support for supervising, coordinating, and
reviewing the implementation of the AHTN Protocol and assists the ASEAN Directors-
General of Customs on matters relating thereto; and responsible for assisting the
experts’ panel and AMSs in monitoring and reviewing the AHTN.

Protocol Governing the Implementation of the AHTN

The objectives of the Protocol are as follows, (ARTICLE 1):

a) to establish and implement the AHTN so as to facilitate trade in the region;

b) to establish clear rules which govern the implementation of the AHTN, its explanatory
notes, and their amendments;

c) to establish uniformity of application in the classification of goods in ASEAN;

d) to enhance transparency in the classification process for goods in the region;

e) to simplify the AHTN; and

f) to create a nomenclature which conforms to international standards, which is a model of

technical excellence and which reflects the changing patterns of international trade and technology.

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Structure of the ASEAN Harmonized Tariff Nomenclature (ARTICLE 3)

1. The AHTN shall be an 8-digit nomenclature, consisting of the latest version of the
Harmonized Commodity Description and Coding System (hereinafter referred to as “HS
Code”) of the World Customs Organization and the amendments thereto, with the addition
of the seventh and eighth digits and commodity descriptions for tariff purposes (the seventh
and eighth digits and commodity descriptions hereinafter referred to as “ASEAN
subheadings”).
2. The AHTN and the Supplementary Explanatory Notes (SEN) relating to the ASEAN
subheadings are annexed to the Protocol. The SEN shall form an integral part of the AHTN.

Obligations of Member States (ARTICLE 4)

1. Member States shall abide by the HS Code, including its General Rules for the Interpretation of
the Harmonized System, Section, Chapter and Subheading Notes, and its amendments thereto.

2. Member States shall apply the AHTN, up to the 8-digit level, for all trade transactions for tariff,
the collection of statistical data and other purposes.

3. Member States may further sub-divide the AHTN, beyond the 8-digit level, for the collection
of statistical data or other non-tariff purposes.

4. Amendments to the AHTN shall only be made in accordance with Articles 5 and 6 of the
Protocol. Notwithstanding any provision to the contrary, no ASEAN subheading already
incorporated in the AHTN can be removed without the consent of the affected Member State.

Amendments to the ASEAN Harmonized Tariff Nomenclature (ARTICLE 5)

1. Procedures for amendments to the AHTN, as set out in Article 6 of the Protocol, may be
effected if:

a) amendments have been made to the HS Code and/or descriptions;

b) amendments to the ASEAN subheadings in the AHTN for the purposes of simplification
are being proposed;
c) amendments are proposed which arise from the requirements of Member States, changes
in technology or in patterns of international trade, or in other circumstances deemed
desirable in accordance with the objectives of this Protocol as set out in Article 1.

2. The AHTN shall be continuously reviewed and amended with the view to simplifying the
nomenclature, so as to facilitate trade. Member States shall regularly review their national
tariff requirements and forward proposals for simplification of the AHTN.

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Responsibilities of the ASEAN Secretariat (ARTICLE 8)

1. The ASEAN Secretariat shall provide the necessary support for supervising, coordinating
and reviewing the implementation of the Protocol, and shall assist the ASEAN Directors-
General of Customs on matters relating thereto.
2. The ASEAN Secretariat shall have the responsibility of assisting the experts panel,
whenever it is convened, especially on procedural aspects of the matters dealt with, and of
providing secretarial and technical support.
3. The ASEAN Secretariat shall have the responsibility of assisting Member States in
monitoring and reviewing the AHTN with the view to simplification.

Dispute Settlement (ARTICLE 9)

1. Member States shall, at the written request of a Member State, enter into consultations with
a view to seeking a prompt, equitable and mutually satisfactory solution, if that Member
State considers that:

A. an obligation under the Protocol has not been fulfilled, is not being fulfilled or may not
be fulfilled; or
B. any objectives of the Protocol are not being achieved or may be frustrated.

2. Any differences between Member States concerning the interpretation or application of the
Protocol shall, as far as possible, be settled amicably between the Member States. If a
settlement cannot be reached, the dispute shall be submitted to the ASEAN Directors-
General of Customs. If a settlement still cannot be reached by the ASEAN Directors-
General of Customs, the dispute shall be referred to the ASEAN Finance Ministers
Meeting.

Obligations of ASEAN Member States

 They shall abide by the HS Code

 Apply the AHTN up to the 8-digit level for all trade transactions for tariff, the collection
of statistical data, and other purposes.

Instances the AHTN may be Amended

 Amendments to the HS Nomenclature

 Amendments to the ASEAN codes for purposes of:
 Simplification
 Arising from the requirements of the AMSs
 Reflect changes in technology and trade, among others

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Criteria Used for Providing a Subheading in the AHTN

 Different rate of duty across products within the heading or subheading of MFN or ASEAN
Trade in Goods Agreement
 Import and/or export for the product amount to at least US$1 Million for the last three years
preceding the review
 Subheadings should reflect a single, unique code for a defined commodity
 Classifications can be based on the criteria which have been utilized by a majority of AMSs
 Classifications for national statistical and other non-tariff-purposes maybe dealt with at the
national level
 Classifications should take into account international conventions
 Classifications based on seasonal tariff rates should be dealt with through domestic
procedures of the affected AMS
 Classifications for tariff purposes and which are country-specific should be dealt with the
procedures in Article 5 and 6 of the protocol
 Classifications can be created for purposes of tariff reduction

Legal Basis of the Philippines for the Implementation of the AHTN

 Tariff Commission mandated by EO 688, dated May 1, 1981

 Section 1608 of the CMTA
 NEDA Board approval of the adoption of the 2017 version of the AHTN in June 27, 2017,
and pursuant to the provisions of EO 688 (series 1981), the Philippines implemented
AHTN 2017 starting July 28, 2017.

Actions Taken by the Tariff Commission in Spearheading Philippine Adoption of AHTN

2017

 Notification to the Secretary of Finance and the BOC Commissioner about the Philippine
Adoption of AHTN 2017
 Publication of notice in two (2) newspapers of general circulation about the implementation
of AHTN 2017 and the consequent non-validity of tariff classification rulings based on
AHTN 2012; uploading of notice to the Commission’s website:
www.tariffcommission.gov.ph
 Transposition from AHTN 2012 to AHTN 2017 of the Philippine MFN tariff schedule,
ensuring that there were no changes in MFN tariff rates and that Philippine requirements
were provided for
 Transposition from AHTN 2012 to AHTN 2017 of all Philippine tariff reduction schedules
under the different FTAs, ensuring that there were no changes in tariff concessions
 Correlation of Schedule LXXV-Philippines under the WTO to AHTN 2017 to ensure that
Philippine binding commitments are faithfully reflected
 Update of the Supplementary Explanatory Notes
 Preparation of two (2) way correlation tables between AHTN 2012 and AHTN 2017, which
were uploaded to the Commission’s website

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  Publication of Tariff Book containing the latest nomenclature, which was also uploaded to
the Commission’s website
 Updating of the Philippine Tariff Finder to the latest nomenclature
 Provision of the latest Tariff Book and soft copies of AHTN 2017 to the Bureau of
Customs, the Philippine Statistics Authority, and other concerned government agencies
 Technical verification of the HS 2017 tariff reduction schedules of FTA Partners under the
different FTAs to determine whether their staff commitments were faithfully reflected
 Alignment/integration of the Philippine Standard Commodity Classification (PSCC) Code
to incorporate the amendments to the AHTN
 Information dissemination and training on AHTN 2017 offered to the private sector and
fellow government agencies

Publications and Databases for the Implementation of AHTN 2017

 Tariff Administration and Policy including the ASEAN Harmonized Tariff Nomenclature
2017 (AHTN 2017)- Commission publication providing the MFN and ATIGA tariffs based
on AHTN 2017; also posted on the Commission’s website
 Supplementary Explanatory Notes (SEN)- a compilation of the official interpretations of
ASEAN subheadings and included in this publication
 Correlation Tables- an essential guide/reference for transposing from AHTN 2012 to
AHTN 2017; posted on the Commission’s website
 Philippine Tariff Finder (PTF)- free online tariff search facility on the Commission’s
website which provides access to multi-year tariff schedules and the Rules of Origin for
FTAs

AHTN Break-down of Chapters

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Part 4. Assessment

A. Give the meaning of the following acronyms:

1. WCO
2. GATT
3. TCROO
4. HS
5. WTO
6. SITC
7. NEDA
8. CCCN
9. CITES
10. ICAT

B. Determine which Chapter below commodities belong to:

1. Cotton
2. Great Grains Cereals
3. Adidas Adilette Aqua Slides
4. Swine
5. Grassoline All-purpose Fish Fertilizer
6. Asbestos
7. GUCCI Dabbing Unicorn Shirt
8. Kirkland 100% Colombian Coffee
9. Beech Logs
10. Yacht

C. Answer the following questions:

1. What are the two (2) most important uses of Harmonized System (HS)? Provide a brief
explanation of each answer.
2. How do HS structured?
3. Why do HS up to 6-digit sub-heading cannot be altered?
4. Who shall propose amendments or changes to HS convention and how these changes are
being implemented?
5. Enumerate the vital functions of HS Committee.
6. How do WCO Technical Committee work?
7. How do HS relate to WCO?
8. How do HS become the "true language of international trade"?
9. Determine the Heading number of below HS code:
 1704.90.20
10. Determine the Sub-heading number of below HS code:
 1704.90.10

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 D. Discuss the following:

1. Key differences of AHTN and HS

2. AHTN Protocol and its implementing power over AHTN
3. Advantages of having AHTN exclusive among the 10 AMSs

E. Identify or Name the following structures of AHTN:

Part 5. References

tariffcommission.gov.ph
asean.org
unstats.un.org
wcoomd.org
Primer on New Developments in Trade and Tariff Policy

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