Chapter 1- Refresher in tariff laws and regulations

CMTA tariff provisions

Tariff Commission

Chief officials of the Tariff Commissions and Qualifications

- The officials of the Tariff Commission shall consist of a Chairperson and

two (2) Commissioners to be appointed by the President of the Philippines,
The Chairperson and the Commissioners shall be natural-born citizens of the
Philippines, of good moral character and proven integrity, and who, by
experience and academic training possess the necessary qualifications
requisite for developing expert knowledge of tariff and trade related matters.
During their terms of office, the Chairperson and the Commissioners shall not
engage in the practice of any profession, or intervene directly or indirectly in
the management or control of any private enterprise which may, in anyway,
be affected by the functions of their office. They shall not be, directly or
indirectly, financially interested in any contract with the government, or any
subdivision or instrumentality thereof.

Appointment and Compensation of Officials and Employees

- All employees of the Commission shall be appointed by the Chairperson

in accordance with the Civil Service Law except as the private secretaries to
the offices of the Chairperson, Commissioners and Executive Director.

Functions of the Commission

The Commission shall have the following functions:

- Adjudicate cases on the application of trade remedies against imports

pursuant to Sections 711, 712 and 713 CMTA

- Study the impact of tariff policies and programs on national

competitiveness and consumer welfare in line with the economic objectives
of the government;

- Administer the Philippine tariff schedules and tariff nomenclatures;

- Issue advance rulings on tariff classification of imported goods and

render rulings on disputes over tariff classification of goods pursuant to
Section 1100 of this Act, except in cases involving goods on which the
Commission has provided advance ruling on tariff classification:

- Provide the President and Congress with independent analysis,

information and technical support on matters related to tariff and nontariff
measures affecting Philippine industries and exports for policy guidance;

- Analyze the nature and composition, and the classification of goods

according to tariff commodity classification and heading number for customs
and other related purposes, which information shall be furnished the NEDA
DTI, DA, DOF, DENR, and BSP;

- Review the trade agreements for negotiation and trade agreements

entered into by the Philippines and make recommendations, if necessary, on
the consistency of the terms of the agreements with the national policy
objectives;

- Conduct public consultations and public hearings pursuant to its

functions; and

- Deputize or delegate, to appropriate government agency its function of

rendering rulings on disputes over tariff classification of goods, until the
plantilla positions necessary for undertaking such function have been
approved and filled-up; Provided, That such delegation of function shall not
extend beyond three (3) years from the effectivity of CMTA.

Reports of the Commission

- The Commission shall place at the disposal of the President and

any Member of the Congress of the Philippines all information at its
command. It shall conduct such investigation and submit reports as may be
required by the President and the Congress of the Philippines. It
shall likewise report to the President and Congress on the first Monday of
December of each year and hereafter, a statement of methods adopted
and a summary of all reports made during the year.

Access to Documents and Assistance to the Commission

- The Commission or its duly authorized representative shall have

access to any document, paper or record pertinent to the subject
matter under investigation, in the possession of any person, firm, co-
partnership, corporation, or association engaged in the production,
importation, or distribution of goods under investigation, and shall have
power to summon witnesses, take testimony, administer oaths, and to
issue subpoena duces tecum requiring the production of books, papers, or
documents relating to the matter under investigation. The Commission may
also request the views, recommendations, and assistance of any government
office, agency, or instrumentality who shall be expected to cooperate fully
with the Commission.

Sworn and Verified Statements

- The Commission may order the taking of sworn statements at

any stage of any proceeding or investigation before it. The sworn
statements must be made before a person duly authorized to
administer oaths.

- The Commission is authorized to require any importer, grower,

producer, manufacturer or seller to file with the Commission a
statement, under oath, giving the selling prices in the Philippines of goods
imported, grown, produced, fabricated or manufactured by such person.

Implementing Rules and Regulations.

- The Commission shall promulgate and adopt such rules and regulations
as may be necessary to carry out the provisions of CMTA.

WTO Valuation concepts and principles

ARTICLE VII GATT 1994- Valuation for Customs Purposes

1. The contracting parties recognize the validity of the general principles

of valuation set forth in the following paragraphs of this Article, and they
undertake to give effect to such principles, in respect of all products subject
to duties or other charges or restrictions on importation and exportation
based upon or regulated in any manner by value. Moreover, they shall, upon
a request by another contracting party review the operation of any of their
laws or regulations relating to value for customs purposes in the light of
these principles. The CONTRACTING PARTIES may request from contracting
parties reports on steps taken by them in pursuance of the provisions of this
Article.

2. (a) The value for customs purposes of imported merchandise

should be based on the actual value of the imported merchandise on
which duty is assessed, or of like merchandise, and should not be
based on the value of merchandise of national origin or on arbitrary
or fictitious values.

(b) "Actual value" should be the price at which, at a time and place
determined by the legislation of the country of importation, such or
like merchandise is sold or offered for sale in the ordinary course of
trade under fully competitive conditions. To the extent to which the
price of such or like merchandise is governed by the quantity in a particular
transaction, the price to be considered should uniformly be related to
either (i) comparable quantities, or (ii) quantities not less favorable
to importers than those in which the greater volume of the
merchandise is sold in the trade between the countries of
exportation and importation.

(c) When the actual value is not ascertainable in accordance with

sub-paragraph (b) of this paragraph, the value for customs purposes
should be based on the nearest ascertainable equivalent of such
value.

3. The value for customs purposes of any imported product should not
include the amount of any internal tax, applicable within the
country of origin or export, from which the imported product has
been exempted or has been or will be relieved by means of refund.

4. (a) Except as otherwise provided for in this paragraph, where it is

necessary for the purposes of paragraph 2 of this Article for a contracting
party to convert into its own currency a price expressed in the currency of
another country, the conversion rate of exchange to be used shall be
based, for each currency involved, on the par value as established
pursuant to the Articles of Agreement of the International Monetary
Fund or on the rate of exchange recognized by the Fund, or on the
par value established in accordance with a special exchange
agreement entered into pursuant to Article XV of this Agreement.

(b) Where no such established par value and no such recognized rate
of exchange exist, the conversion rate shall reflect effectively the
current value of such currency in commercial transactions.

(c) The CONTRACTING PARTIES, in agreement with the International

Monetary Fund, shall formulate rules governing the conversion by
contracting parties of any foreign currency in respect of which multiple rates
of exchange are maintained consistently with the Articles of Agreement of
the International Monetary Fund. Any contacting party may apply such rules
in respect of such foreign currencies for the purposes of paragraph 2 of this
Article as an alternative to the use of par values. Until such rules are adopted
by the Contracting Parties, any contracting party may employ, in respect of
any such foreign currency, rules of conversion for the purposes of paragraph
2 of this Article which are designed to reflect effectively the value of such
foreign currency in commercial transactions.
(d) Nothing in this paragraph shall be construed to require any contracting
party to alter the method of converting currencies for customs purposes
which is applicable in it territory on the date of this Agreement, if such
alteration would have the effect of increasing generally the amounts of duty
payable.

5. The bases and methods for determining the value of products

subject to duties or other charges or restrictions based upon or
regulated in any manner by value should be stable and should be
given sufficient publicity to enable traders to estimate, with a
reasonable degree of certainty, the value for customs purposes.

Notes to Article VII

Paragraph 1

The expression "or other charges" is not to be regarded as including internal

taxes or equivalent charges imposed on or in connection with imported
products.

Paragraph 2

1. It would be in conformity with Article VII to presume that "actual value"

may be represented by the invoice price, plus any non-included charges for
legitimate costs which are proper elements of "actual value" and plus any
abnormal discount or other reduction from the ordinary competitive price.

2. It would be in conformity with Article VII, paragraph 2 (b), for a contracting

party to construe the phrase "in the ordinary course of trade ... under fully
competitive conditions", as excluding any transaction wherein the buyer and
seller are not independent of each other and price is not the sole
consideration.

3. The standard of "fully competitive conditions" permits a contracting party

to exclude from consideration prices involving special discounts limited to
exclusive agents.

4. The wording of sub-paragraphs (a) and (b) permits a contracting party to

determine the value for customs purposes uniformly either (1) on the basis
of a particular exporter’s prices of the imported merchandise, or (2) on the
basis of the general price level of like merchandise.

GATT WTO Valuation Agreement, methods of valuation

Agreement on the Implementation of GATT Article VII

Rules on Customs Valuation

Article I

1. The Customs value of imported goods shall be the transaction value, that
is the price actually paid or payable for the goods when sold for export to the
country of importation adjusted in accordance with the provisions of Article
8, provided :

(a) that there are no restrictions as to the disposition or use of the goods by
the buyer other than restrictions which :

(i) are imposed or required by law or by the public authorities in the country
of importation;

(ii) limit the geographical area in which the goods may be resold; or

(iii) do not substantially affect the value of the goods;

(b) that the sale or price is not subject to some condition or consideration for
which a value cannot be determined with respect to the goods being valued;

(c) that no part of the proceeds of any subsequent resale, disposal or use of
the goods by the buyer will accrue directly or indirectly to the seller, unless
an appropriate adjustment can be made in accordance with the provisions of
Article 8; and

(d) that the buyer and seller are not related, or where the buyer and seller
are related, that the transaction value is acceptable for Customs purposes
under the provisions of paragraph 2.

2. (a) In determining whether the transaction value is acceptable for the

purposes of paragraph 1, the fact that the buyer and the seller are related
within the meaning of Article 15 shall not in itself be grounds for regarding
the transaction value as unacceptable. In such case the circumstances
surrounding the sale shall be examined and the transaction value shall be
accepted provided that the relationship did not influence the price. If, in the
light of information provided by the importer or otherwise, the Customs
administration has grounds for considering that the relationship influenced
the price, it shall communicate its grounds to the importer and the importer
shall be given a reasonable opportunity to respond. If the importer so
requests, the communication of the grounds shall be in writing. 5

(b) In a sale between related persons, the transaction value shall be

accepted and the goods valued in accordance with the provisions of
paragraph 1 whenever the importer demonstrates that such value closely
approximates to one of the following occurring at or about the same time :

(i) the transaction value in sales to unrelated buyers of identical or similar

goods for export to the same country of importation;

(ii) the Customs value of identical or similar goods as determined under the
provisions of Article 5;

(iii) the Customs value of identical or similar goods as determined under the
provisions of Article 6; In applying the foregoing tests, due account shall be
taken of demonstrated differences in commercial levels, quantity levels, the
elements enumerated in Article 8 and costs incurred by the seller in sales in
which the seller and the buyer are not related that are not incurred by the
seller in sales in which the seller and the buyer are related.

(c) The tests set forth in paragraph 2 (b) are to be used at the initiative of
the importer and only for comparison purposes. Substitute values may not
be established under the provisions of paragraph 2 (b).

Article II

1. (a) If the Customs value of the imported goods cannot be determined

under the provisions of Article 1, the Customs value shall be the transaction
value of identical goods sold for export to the same country of importation
and exported at or about the same time as the goods being valued.

(b) In applying this Article, the transaction value of identical goods in a sale
at the same commercial level and in substantially the same quantity as the
goods being valued shall be used to determine the Customs value. Where no
such sale is found, the transaction value of identical goods sold at a different
commercial level and/or in different quantities, adjusted to take account of
differences attributable to commercial level and/or to quantity, shall be used,
provided that such adjustments can be made on the basis of demonstrated
evidence which clearly establishes the reasonableness and accuracy of the
adjustment, whether the adjustment leads to an increase or a decrease in
the value.

2. Where the costs and charges referred to in paragraph 2 of Article 8 are

included in the transaction value, an adjustment shall be made to take
account of significant differences in such costs and charges between the
imported goods and the identical goods in question arising from differences
in distances and modes of transport.
3. If, in applying this Article, more than one transaction value of identical
goods is found, the lowest such value shall be used to determine the
Customs value of the imported goods.

Article III

1. (a) If the Customs of the imported goods cannot be determined under

the provisions of Articles 1 and 2, the Customs value shall be the transaction
value of similar goods sold for export to the same country of importation and
exported at or about the same time as the goods being valued.

(b) In applying this Article, the transaction value of similar goods in a sale at
the same commercial level and in substantially the same quantity as the
goods being valued shall be used to determine the Customs value. Where no
such sale is found, the transaction value of similar goods sold at a different
commercial level and/or in different quantities, adjusted to take account of
differences attributable to commercial level and/or to quantity, shall be used,
provided that such adjustments can be made on the basis of demonstrated
evidence which clearly establishes the reasonableness and accuracy of the
adjustment, whether the adjustment leads to an increase or a decrease in
the value.

2. Where the costs and charges referred to in paragraph 2 of Article 8 are

included in the transaction value, an adjustment shall be made to take
account of significant differences in such costs and charges between the
imported goods and the similar goods in question arising from differences in
distances and modes of transport.

3. If, in applying this Article, more than one transaction value of similar
goods is found, the lowest such value shall be used to determine the
Customs value of the imported goods.

Article IV

If the Customs value of the imported goods cannot be determined under the
provisions of Articles 1, 2 and 3 the Customs value shall be determined
under the provisions of Article 5 or, when the Customs value cannot be
determined under that Article, under the provisions of Article 6 except that,
at the request of the importer, the order of application of Articles 5 and 6
shall be reversed.
Article V

1. (a) If the imported goods or identical or similar imported goods are sold
in the country of importation in the condition as imported, the Customs value
of the imported goods under the provisions of this Article shall be based on
the unit price at which the imported goods or identical or similar imported
goods are so sold in the greatest aggregate quantity, at or about the time of
the importation of the goods being valued, to persons who are not related to
the persons from whom they buy such goods, subject to deductions for the
following :

i. either the commissions usually paid or agreed to be paid

or the additions usually made for profit and general expenses in connection
with sales in such country of imported goods of the same class or kind;

ii. the usual costs of transport and insurance and associated

costs within the country of importation;

iii. where appropriate, the costs and charges

iv. the Customs duties and other national taxes payable in the
country of importation by reason of the importation or sale of the goods.

(b) If neither the imported goods nor identical nor similar imported goods are
sold at or about the time of importation of the goods being valued, the
Customs value shall, subject otherwise to the provisions of paragraph 1 (a)
be based on the unit price at which the imported goods or identical or similar
imported goods are sold in the country of importation in the condition as
imported at the earliest date after the importation of the goods being valued
but before the expiration of 90 days after such importation.

2. If neither the imported goods nor identical nor similar imported goods
are sold in the country of importation in the condition as imported, then, if
the importer so requests, the Customs value shall be based on the unit price
at which the imported goods, after further processing, are sold in the
greatest aggregate quantity to persons in the country of importation who are
not related to the persons from whom they buy such goods, due allowance
being made for the value added by such processing and the deductions
provided for in paragraph 1 (a).

Article VI

1. The Customs value of imported goods under the provisions of this Article
shall be based on a computed value. Computed value shall consist of the
sum of :
(a) the cost or value of materials and fabrication or other processing
employed in producing the imported goods;

(b) an amount for profit and general expenses equal to that usually reflected
in sales of goods of the same class or kind as the goods being valued which
are made by producers in the country of exportation for export to the
country of importation;

(c) the cost or value of all other expenses necessary to reflect the valuation
option chosen by the Member under paragraph 2 of Article 8.

2. No Member may require or compel any person not resident in its own
territory to produce for examination, or to allow access to, any account or
other record for the purposes of determining a computed value. However,
information supplied by the producer of the goods for the purposes of
determining the Customs value under the provisions of this Article may be
verified in another country by the authorities of the country of importation
with the agreement of the producer and provided they give sufficient
advance notice to the government of the country in question and the latter
does not object to the investigation.

Article VII

1. If the Customs value of the imported goods cannot be determined under

the provisions of Articles 1 to 6, the Customs value shall be determined using
reasonable means consistent with the principles and general provisions of
this Agreement and of Article VII of GATT 1994 and on the basis of data
available in the country of importation.

2. No Customs value shall be determined under the provisions of this

Article on the basis of :

(a) The selling price in the country of importation of goods produced in such
country;

(b) A system which provides for the acceptance for Customs purposes of the
higher of two alternative values;

(c) The price of goods on the domestic market of the country of exportation;

(d) The cost of production other than computed values which have been
determined for identical or similar goods in accordance with the provisions of
Article 6;
(e) The price of the goods for export to a country other than the country of
importation;

(f) Minimum Customs values; or

(g) Arbitrary or fictitious values.

3. If the importer so requests, the importer shall be informed in writing of

the Customs value determined under the provisions of this Article and the
method used to determine such value.

Article VII

1. In determining the Customs value under the provisions of Article 1, there

shall be added to the price actually paid or payable for the imported goods :

a. the following, to the extent that they are incurred by the buyer but are not
included in the price actually paid or payable for the goods;

(i) Commissions and brokerage, except buying commissions;

(ii) The cost of containers which are treated as being one for Customs
purposes with the goods in question;

(iii) The cost of packing whether for labour or materials;

b. the value, apportioned as appropriate, of the following goods and services

where supplied directly or indirectly by the buyer free of charge or at
reduced cost for use in connection with the production and sale for export of
the imported goods, to the extent that such value has not been included in
the price actually paid or payable;

(i) materials, components, parts and similar items incorporated in the

imported goods;

(ii) tools, dies, moulds and similar items used in the production of the
imported goods;

(iii) materials consumed in the production of the imported goods;

(iv) engineering, development, artwork, design work, and plans and sketches
undertaken elsewhere than in the country of importation and necessary for
the production of the imported goods;
c. royalties and licence fees related to the goods being valued that the buyer
must pay, either directly or indirectly, as a condition of sale of the goods
being valued, to the extent that such royalties and fees are not included in
the price actually paid or payable;

(d) the value of any part of the proceeds of any subsequent resale, disposal
or use of the imported goods that accrues directly or indirectly to the seller.

2. In framing its legislation, each Member shall provide for the inclusion in
or the exclusion from the Customs value, in whole or in part, of the
following :

(a) The cost of transport of the imported goods to the port or place of
importation;

(b) Loading, unloading and handling charges associated with the transport of
the imported goods to the port or place of importation; and

(c) The cost of insurance.

3. Additions to the price actually paid or payable shall be made under this
Article only on the basis of objective and quantifiable data.

4. No additions shall be made to the price actually paid or payable in

determining the Customs value except as provided in this Article.

Article IX

1. Where the conversion of currency is necessary for the determination of

the Customs value, the rate of exchange to be used shall be that duly
published by the competent authorities of the country of importation
concerned and shall reflect as effectively as possible, in respect of the period
covered by each such document of publication, the current value of such
currency in commercial transactions in terms of the currency of the country
of importation.

2. The conversion rate to be used shall be that in effect at the time of

exportation or the time of importation, as provided by each Member.

Article X

All information which is by nature confidential or which is provided on a

confidential basis for the purposes of Customs valuation shall be treated as
strictly confidential by the authorities concerned who shall not disclose it
without the specific permission of the persons or government providing such
information, except to the extent that it may be required to be disclosed in
the context of judicial proceedings.

Article XI

1. The legislation of each Member shall provide in regard to a determination

of Customs value for the right of appeal, without penalty, by the importer or
any other person liable for the payment of the duty. 2. An initial right of
appeal without penalty may be to an authority within the Customs
administration or to an independent body, but the legislation of each
Member shall provide for the right of appeal without penalty to a judicial
authority.

3. Notice of the decision on appeal shall be given to the appellant and the
reasons for such decision shall be provided in writing. The appellant shall
also be informed of any rights of further appeal.

Article XII

Laws, regulations, judicial decisions and administrative rulings of general

application giving effect to this Agreement shall be published in conformity
with Article X of GATT 1994 by the country of importation concerned.

Article XIII

If, in the course of determining the Customs value of imported goods, it

becomes necessary to delay the final determination of such Customs value,
the importer of the goods shall nevertheless be able to withdraw them from
Customs if, where so required, the importer provides sufficient guarantee in
the form of a surety, a deposit or some other appropriate instrument,
covering the ultimate payment of Customs duties for which the goods may
be liable. The legislation of each Member shall make provisions for such
circumstances.
Article XV

1. In this Agreement :

(a) "Customs value of imported goods" means the value of goods for the
purposes of levying ad valorem duties of Customs on imported goods;

(b) "country of importation" means country or Customs territory of

importation; and

(c) "produced" includes grown, manufactured and mined.

2. In this Agreement :

(a) "identical goods" means goods which are the same in all respects,
including physical characteristics, quality and reputation. Minor differences in
appearance would not preclude goods otherwise conforming to the definition
from being regarded as identical.

(b) "similar goods" means goods which, although not alike in all respects,
have like characteristics and like component materials which enable them to
perform the same functions and to be commercially interchangeable. The
quality of the goods, their reputation and the existence of a trademark are
among the factors to be considered in determining whether goods are
similar.

(c) The terms "identical goods" and "similar goods" do not include, as the
case may be, goods which incorporate or reflect engineering, development,
artwork, design work, and plans and sketches for which no adjustment has
been made under paragraph 1 (b) (iv) of Article 8 because such elements
were undertaken in the country of importation.

(d) Goods shall not be regarded as "identical goods" or "similar goods"

unless they were produced in the same country as the goods being valued.

(e) Goods produced by a different person shall be taken into account only
when there are no identical goods or similar goods, as the case may be,
produced by the same person as the goods being valued.

3. In this Agreement "goods of the same class or kind" means goods which
fall within a group or range of goods produced by a particular industry or
industry sector, and includes identical or similar goods.

4. For the purposes of this Agreement, persons shall be deemed to be

related only if :
(a) they are officers or directors of one another's businesses;

(b) they are legally recognized partners in business;

(c) they are employer and employee;

(d) any person directly or indirectly owns, controls or holds 5 percent or more
of the outstanding voting stock or shares of both of them;

(e) one of them directly or indirectly controls the other;

(f ) both of them are directly or indirectly controlled by a third person;

(g) together they directly or indirectly control a third person; or (h) they are
members of the same family.

5. Persons who are associated in business with one another in that one is the
sole agent, sole distributor or sole concessionaire, however described, of the
other shall be deemed to be related for the purposes of this Agreement if
they fall within the criteria of paragraph 4.

Article XVI

Upon written request, the importer shall have the right to an explanation in
writing from the Customs administration of the country of importation as to
how the Customs value of the importer's goods was determined.

Article XVII

Nothing in this Agreement shall be construed as restricting or calling into

question the rights of Customs administrations to satisfy them as to the truth
or accuracy of any statement, document or declaration presented for
Customs valuation purposes.

The International Convention on the Harmonized Commodity Description and Coding System (HS
Convention) entered into force on 1 January 1988. The objectives of the HS Convention are (i) to
facilitate international trade and the collection, comparison and analysis of statistics by harmonizing
the description, classification and coding of goods in international trade; (ii) to reduce the expenses
related to international trade and (iii) to facilitate the standardization of trade documentation and the
transmission of data.
The HS Convention comprises a Preamble, 20 Articles and an Annex. The Preamble sets out why the
international community supported the adoption of the HS. The 20 Articles include provisions for
obligations of Contracting Parties, role of the Council and the Harmonized System Committee,
settlement of disputes between Contracting Parties, and the amendment procedure. The Annex is the
HS Nomenclature itself.. Contracting Parties are obliged to ensure that their Customs tariffs and
statistical nomenclatures for both imports and exports are in conformity with the Harmonized System.
They should also make publicly available their import and export trade statistics in conformity with the
six-digit codes of the Harmonized System, or on their initiative, beyond that level.
After its implementation, the use of the HS quickly spread and there are now more than 200
economies and Customs or Economic Unions currently using the System as a basis for their national
Customs tariffs. However, its use is not confined to Customs tariffs. It is also used for many other
purposes. Among the most important uses of the HS are the following:
 As a basis for Customs tariffs;
 As a basis for the collection of international trade statistics;
 As a basis for rules of origin;
 As a basis for the collection of internal taxes;
 As a basis for trade negotiations (e.g., the WTO schedules of tariff concessions and Free Trade
Agreements);
 As a basis for transport tariffs and statistics;
 As a basis for the monitoring of controlled goods (e.g., wastes, narcotics, chemical weapons,
ozone layer depleting substances and endangered species);
 As a vital element of core Customs process areas of Customs controls and procedures,
including risk assessment, information technology and compliance.
The text of the HS Convention
- pdf version -
 Preamble
Article 1: Definitions Article 2: The Annex
Article 3: Obligations of Contracting Parties Article 4: Partial application by developing
countries
Article 5: Technical assistance for Article 6: Harmonized System Committee
developing countries
Article 7: Functions of the Committee Article 8: Role of the Council and re-
examination procedure
Article 9: Rates of Customs duty Article 10: Settlement of disputes
Article 11: Eligibility to become a Article 12: Procedure for becoming a
Contracting Party Contracting Party
Article 13: Entry into force Article 14: Application by dependent
territories
Article 15: Denunciation Article 16: Amendment procedure
Article 17: Rights of Contracting Parties in Article 18: Reservations
respect of the Harmonized System
Article 19: Notifications by the Secretary Article 20: Registration with the United
General Nations
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(Done at Brussels on 14 June 1983)
(As amended by the Protocol of Amendment to the International Convention on the Harmonized
Commodity Description and Coding System of 24 June 1986)
Preamble
The Contracting Parties to this Convention, established under the auspices of the Customs Co-
operation Council,
Desiring to facilitate international trade,
Desiring to facilitate the collection, comparison and analysis of statistics, in particular those on
international trade,
Desiring to reduce the expense incurred by re-describing, reclassifying and recoding goods as they
move from one classification system to another in the course of international trade and to facilitate the
standardization of trade documentation and the transmission of data,
Considering that changes in technology and the patterns of international trade require extensive
modifications to the Convention on Nomenclature for the Classification of Goods in Customs Tariffs,
done at Brussels on 15 December 1950,
Considering also that the degree of detail required for Customs and statistical purposes by
Governments and trade interests has increased far beyond that provided by the Nomenclature
annexed to the above-mentioned Convention,
Considering the importance of accurate and comparable data for the purposes of international trade
negotiations,
Considering that the Harmonized System is intended to be used for the purposes of freight tariffs and
transport statistics of the various modes of transport,
Considering that the Harmonized System is intended to be incorporated into commercial commodity
description and coding systems to the greatest extent possible,
Considering that the Harmonized System is intended to promote as close a correlation as possible
between import and export trade statistics and production statistics,
Considering that a close correlation should be maintained between the Harmonized System and the
Standard International Trade Classification (SITC) of the United Nations,
Considering the desirability of meeting the aforementioned needs through a combined tariff/statistical
nomenclature, suitable for use by the various interests concerned with international trade,
Considering the importance of ensuring that the Harmonized System is kept up-to-date in the light of
changes in technology or in patterns of international trade,
Having taken into consideration the work accomplished in this sphere by the Harmonized System
Committee set up by the Customs Co-operation Council,
Considering that while the above-mentioned Nomenclature Convention has proved an effective
instrument in the attainment of some of these objectives, the best way to achieve the desired results in
this respect is to conclude a new international Convention,
Have agreed as follows:
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ARTICLE 1
Definitions
For the purpose of this Convention:
(a) the "Harmonized Commodity Description and Coding System", hereinafter referred to as the
"Harmonized System", means the Nomenclature comprising the headings and subheadings and their
related numerical codes, the Section, Chapter and Subheading Notes and the General Rules for the
interpretation of the Harmonized System, set out in the Annex to this Convention;
(b) "Customs tariff nomenclature" means the nomenclature established under the legislation of a
Contracting Party for the purposes of levying duties of Customs on imported goods;
(c) "statistical nomenclatures" means goods nomenclatures established by a Contracting Party for the
collection of data for import and export trade statistics;
(d) "combined tariff/statistical nomenclature" means a nomenclature, integrating Customs tariff and
statistical nomenclatures, legally required by a Contracting Party for the declaration of goods at
importation;
(e) "the Convention establishing the Council" means the Convention establishing a Customs Co-
operation Council, done at Brussels on 15 December 1950;
(f) "the Council" means the Customs Co-operation Council referred to in paragraph (e) above;
(g) "the Secretary General" means the Secretary General of the Council;
(h) the term "ratification" means ratification, acceptance or approval.
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ARTICLE 2
The Annex
The Annex to this Convention shall form an integral part thereof, and any reference to the Convention
shall include a reference to the Annex.
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ARTICLE 3
Obligations of Contracting Parties
1. Subject to the exceptions enumerated in Article 4 :
(a) Each Contracting Party undertakes, except as provided in subparagraph (c) of this paragraph that
from the date on which this Convention enters into force in respect of it, its Customs tariff and
statistical nomenclatures shall be in conformity with the Harmonized System. It thus undertakes that,
in respect of its Customs tariff and statistical nomenclatures:
(i) it shall use all the headings and subheadings of the Harmonized System without addition or
modification, together with their related numerical codes;
(ii) it shall apply the General Rules for the interpretation of the Harmonized System and all the Section,
Chapter and Subheading Notes, and shall not modify the scope of the Sections, Chapters, headings
or subheadings of the Harmonized System; and
(iii) it shall follow the numerical sequence of the Harmonized System;
(b) Each Contracting Party shall also make publicly available its import and export trade statistics in
conformity with the six-digit codes of the Harmonized System, or, on the initiative of the Contracting
Party, beyond that level, to the extent that publication is not precluded for exceptional reasons such as
commercial confidentiality or national security;
(c) Nothing in this Article shall require a Contracting Party to use the subheadings of the Harmonized
System in its Customs tariff nomenclature provided that it meets the obligations at (a) (i), (a) (ii) and
(a) (iii) above in a combined tariff/statistical nomenclature.
2. In complying with the undertakings at paragraph 1 (a) of this Article, each Contracting Party may
make such textual adaptations as may be necessary to give effect to the Harmonized System in its
domestic law.
3. Nothing in this Article shall prevent a Contracting Party from establishing, in its Customs tariff or
statistical nomenclatures, subdivisions classifying goods beyond the level of the Harmonized System,
provided that any such subdivision is added and coded at a level beyond that of the six-digit numerical
code set out in the Annex to this Convention.
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ARTICLE 4
Partial application by developing countries
1. Any developing country Contracting Party may delay its application of some or all of the
subheadings of the Harmonized System for such period as may be necessary, having regard to its
pattern of international trade or its administrative resources.
2. A developing country Contracting Party which elects to apply the Harmonized System partially
under the provisions of this Article agrees to make its best efforts towards the application of the full
six-digit Harmonized System within five years of the date on which this Convention enters into force in
respect of it or within such further period as it may consider necessary having regard to the provisions
of paragraph 1 of this Article.
3. A developing country Contracting Party which elects to apply the Harmonized System partially
under the provisions of this Article shall apply all or none of the two-dash subheadings of any one one-
dash subheading or all or none of the one-dash subheadings of any one heading. In such cases of
partial application, the sixth digit or the fifth and sixth digits of that part of the Harmonized System
code not applied shall be replaced by "0" or "00" respectively.
4. A developing country which elects to apply the Harmonized System partially under the provisions of
this Article shall on becoming a Contracting Party notify the Secretary General of those subheadings
which it will not apply on the date when this Convention enters into force in respect of it and shall also
notify the Secretary General of those subheadings which it applies thereafter.
5. Any developing country which elects to apply the Harmonized System partially under the provisions
of this Article may on becoming a Contracting Party notify the Secretary General that it formally
undertakes to apply the full six-digit Harmonized System within three years of the date when this
Convention enters into force in respect of it.
6. Any developing country Contracting Party which partially applies the Harmonized System under the
provisions of this Article shall be relieved from its obligations under Article 3 in relation to the
subheadings not applied.
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ARTICLE 5
Technical assistance for developing countries
Developed country Contracting Parties shall furnish to developing countries that so request, technical
assistance on mutually agreed terms in respect of, inter alia, training of personnel, transposing their
existing nomenclatures to the Harmonized System and advice on keeping their systems so transposed
up-to-date with amendments to the Harmonized System or on applying the provisions of this
Convention.
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ARTICLE 6
Harmonized System Committee
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.
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.
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ARTICLE 7
Functions of the Committee
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.
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ARTICLE 8
Role of the Council and re-examination procedure
1. The Council shall examine proposals for amendment of this Convention, prepared by the
Harmonized System Committee, and recommend them to the Contracting Parties under the procedure
of Article 16 unless any Council Member which is a Contracting Party to this Convention requests that
the proposals or any part thereof be referred to the Committee for re-examination.
2. Subject to paragraphs 3 to 6 of this Article, with respect to the Explanatory Notes, Classification
Opinions, other advice on the interpretation of the Harmonized System and recommendations to
secure uniformity in the interpretation and application of the Harmonized System prepared by the
Harmonized System Committee, any Contracting Party to this Convention may enter a request for (i)
re-examination of the matter by the Harmonized System Committee or (ii) referral of the matter to the
Council. No Contracting Party may request a re-examination by the Harmonized System Committee or
a referral to the Council of a matter under this paragraph if the matter has been re-examined two times
by the Harmonized System Committee.
3. The Explanatory Notes, Classification Opinions, other advice on the interpretation of the
Harmonized System and recommendations to secure uniformity in the interpretation and application of
the Harmonized System, prepared during a session of the Harmonized System Committee under the
provisions of paragraph 1 of Article 7, shall be deemed to be approved by the Council if, as of the end
of the second month following the month during which that session was closed, no Contracting Party
to this Convention has notified the Secretary General that it enters a request for re-examination by the
Harmonized System Committee or referral to the Council in accordance with paragraph 2 of this
Article.
4. Once a matter has been referred to the Council under the provisions of paragraph 2 of this Article,
the Council shall approve such Explanatory Notes, Classification Opinions, other advice or
recommendations, unless any Council Member which is a Contracting Party to this Convention
requests that they be referred in whole or in part to the Harmonized System Committee for re-
examination.
5. The Harmonized System Committee shall consider a matter in respect of which a request for re-
examination has been made at its first session after that matter has been referred to it under
paragraphs 2 to 4 of this Article and shall take a decision at the same session unless circumstances
require otherwise.
6. Under the provisions of paragraph 2 of this Article, the Harmonized System Committee may re-
examine any Explanatory Note, Classification Opinion, other advice on the interpretation of the
Harmonized System or Harmonized System related recommendation, no more than two times after it
is first prepared by the Harmonized System Committee.
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ARTICLE 9
Rates of Customs duty
The Contracting Parties do not assume by this Convention any obligation in relation to rates of
Customs duty.
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ARTICLE 10
Settlement of disputes
1. Any dispute between Contracting Parties concerning the interpretation or application of this
Convention shall, so far as possible, be settled by negotiation between them.
2. Any dispute which is not so settled shall be referred by the Parties to the dispute to the Harmonized
System Committee which shall thereupon consider the dispute and make recommendations for its
settlement.
3. If the Harmonized System Committee is unable to settle the dispute, it shall refer the matter to the
Council which shall make recommendations in conformity with Article III (e) of the Convention
establishing the Council.
4. The Parties to the dispute may agree in advance to accept the recommendations of the Committee
or the Council as binding.
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ARTICLE 11
Eligibility to become a Contracting Party
The following are eligible to become Contracting Parties to this Convention:
(a) Member States of the Council;
(b) Customs or Economic Unions to which competence has been transferred toenter into treaties in
respect of some or all of the matters governed by this Convention; and
(c) any other State to which an invitation to that effect has been addressed by the Secretary General
at the direction of the Council.
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ARTICLE 12
Procedure for becoming a Contracting Party
1. Any eligible State or Customs or Economic Union may become a Contracting Party to this
Convention:
(a) by signing it without reservation of ratification;
(b) by depositing an instrument of ratification after having signed the Convention subject to ratification;
or
(c) by acceding to it after the Convention has ceased to be open for signature.
2. This Convention shall be open for signature until 31 December 1986 at the Headquarters of the
Council in Brussels by the States and Customs or Economic Unions referred to in Article11.
Thereafter, it shall be open for their accession.
3. The instruments of ratification or accession shall be deposited with the Secretary General.
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ARTICLE 13
Entry into force
1. This Convention shall enter into force on the earliest first of January which falls at least three
months after a minimum of seventeen States or Customs or Economic Unions referred to in Article 11
above have signed it without reservation of ratification or have deposited their instruments of
ratification or accession, but not before 1 January 1988.
2. For any State or Customs or Economic Union signing without reservation of ratification, ratifying or
acceding to this Convention after the minimum number specified in paragraph 1 of this Article is
reached, this Convention shall enter into force on the first of January which falls at least twelve months
but not more than twenty-four months after it has signed the Convention without reservation of
ratification or has deposited its instrument of ratification or accession, unless it specifies an earlier
date. However, the date of entry into force under the provisions of this paragraph shall not be earlier
than the date of entry into force provided for in paragraph 1 of this Article.
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ARTICLE 14
Application by dependent territories
1. Any State may, at the time of becoming a Contracting Party to this Convention, or at any time
thereafter, declare by notification given to the Secretary General that the Convention shall extend to all
or any of the territories for whose international relations it is responsible, named in its notification.
Such notification shall take effect on the first of January which falls at least twelve months but not
more than twenty-four months after the date of the receipt thereof by the Secretary General, unless an
earlier date is specified in the notification. However, this Convention shall not apply to such territories
before it has entered into force for the State concerned.
2. This Convention shall cease to have effect for a named territory on the date when the Contracting
Party ceases to be responsible for the international relations of that territory or on such earlier date as
may be notified to the Secretary General under the procedure of Article 15.
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ARTICLE 15
Denunciation
This Convention is of unlimited duration. Nevertheless any Contracting Party may denounce it and
such denunciation shall take effect one year after the receipt of the instrument of denunciation by the
Secretary General, unless a later date is specified therein.
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ARTICLE 16
Amendment procedure
1. The Council may recommend amendments to this Convention to the Contracting Parties.
2. Any Contracting Party may notify the Secretary General of an objection to a recommended
amendment and may subsequently withdraw such objection within the period specified in paragraph 3
of this Article.
3. Any recommended amendment shall be deemed to be accepted six months after the date of its
notification by the Secretary General provided that there is no objection outstanding at the end of this
period.
4. Accepted amendments shall enter into force for all Contracting Parties on one of the following
dates:
(a) where the recommended amendment is notified before 1 April, the date shall be the first of January
of the second year following the date of such notification,
or
(b) where the recommended amendment is notified on or after 1 April, the date shall be the first of
January of the third year following the date of such notification.
5. The statistical nomenclatures of each Contracting Party and its Customs tariff nomenclature or, in
the case provided for under paragraph 1 (c) of Article 3, its combined tariff/statistical nomenclature,
shall be brought into conformity with the amended Harmonized System on the date specified in
paragraph 4 of this Article.
6. Any State or Customs or Economic Union signing without reservation of ratification, ratifying or
acceding to this Convention shall be deemed to have accepted any amendments thereto which, at the
date when it becomes a Contracting Party, have entered into force or have been accepted under the
provisions of paragraph 3 of this Article.
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ARTICLE 17
Rights of Contracting Parties in respect of the Harmonized System
On any matter affecting the Harmonized System, paragraph 4 of Article 6, Article 8 and paragraph 2 of
Article 16 shall confer rights on a Contracting Party :
(a) in respect of all parts of the Harmonized System which it applies under the provisions of this
Convention; or
(b) until the date when this Convention enters into force in respect of it in accordance with the
provisions of Article 13, in respect of all parts of the Harmonized System which it is obligated to apply
at that date under the provisions of this Convention; or
(c) in respect of all parts of the Harmonized System, provided that it has formally undertaken to apply
the full six-digit Harmonized System within the period of three years referred to in paragraph 5 of
Article 4 and until the expiration of that period.
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ARTICLE 18
Reservations
No reservations to this Convention shall be permitted.
ARTICLE 19
Notifications by the Secretary General
The Secretary General shall notify Contracting Parties, other signatory States, Member States of the
Council which are not Contracting Parties to this Convention, and the Secretary General of the United
Nations, of the following :
(a) Notifications under Article 4;
(b) Signatures, ratifications and accessions as referred to in Article 12;
(c) The date on which the Convention shall enter into force in accordance with Article 13;
(d) Notifications under Article 14;
(e) Denunciations under Article 15;
(f) Amendments to the Convention recommended under Article 16;
(g) Objections in respect of recommended amendments under Article 16, and, where appropriate, their
withdrawal; and
(h) Amendments accepted under Article 16, and the date of their entry into force.
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ARTICLE 20
Registration with the United Nations
This Convention shall be registered with the Secretariat of the United Nations in accordance with the
provisions of Article 102 of the Charter of the United Nations at the request of the Secretary General of
the Council.
In witness thereof the undersigned, being duly authorized thereto, have signed this Convention.
Done at Brussels on the 14th day of June 1983 in the English and French languages, both texts being
equally authentic, in a single original which shall be deposited with the Secretary General of the
Council who shall transmit certified copies thereof to all the States and Customs or Economic Unions
referred to in Article 11.