Identifying goods traded under preferential trade agreements

Role of Customs in facilitation of trade in the region Implement tariff liberalization commitments under the different Regional Trade Agreements. Authority to enforce Certificate of Origin Customs Cooperation Customs procedures and trade facilitation The role of customs in the 20th and 21st centuries has evolved in many respects.  With the proliferation of regional trading arrangements (RTAs) whose main objective is to increase trade between the parties through elimination of tariff and non-tariff barriers to trade, the role of customs in trade facilitation has gained increasing prominence in most regional trade agendas. This is largely because it is a customs responsibility to implement the tariff liberalisation commitments under the RTAs. Equally important is the undeniable fact that burdensome customs procedures have been cited as one of the huge non-tariff barriers (NTBs) to trade. In addition, customs cooperation is an important aspect in the successful implementation of RTAs. It is not surprising therefore that most preferential trade agreements now include provisions on customs in the areas of simplification and harmonisation of trade procedures, documentation and customs cooperation. In addition, most of the RTAs now contain specific provisions on trade facilitation; however, in most such RTAs the details on the specific measures for achievement of the facilitation are usually either sketchy or non-existent.

Role of the Harmonised System (HS) in Trade Agreements HS is of fundamental importance in the tariff schedules attached to FTAs FTA provides preferential tariff treatment on goods originating in and traded among countries covered by the agreement(s) The process for determining whether or not goods “originate” and therefore are eligible for duty- free entry or other preferential treatment depends on (or is linked to) the Harmonized System Classification number HS Classifications assist to correctly identify goods. More precise than attempting to describe products : Labels : Paper labels - heading 48.21 Paper labels that have been printed - 49.11 Textile labels - heading 58.07 Labels incorporating electronic reading / scanning circuitry - heading 85.23 The tariff classification assists in providing a more precise description Knowledge of compilers about the HS. It is good practice for compilers to have a close dialogue with customs on implementation of the HS, and familiarize themselves with the HS so that they can review, for statistical purposes, classification assignments made by customs and assign appropriate HS codes to commodities not labelled by customs.  Measures to ensure proper classification.  Goods need to be properly classified in the HS, not only in order to ensure effective revenue collection, but also for the compilation of consistent international trade statistics. The HS, when incorporated in the national tariff, becomes a national law. Correct goods classification is a legal obligation of declarants and entering wrong codes in the goods declaration may entail legal consequences.  Training and tools for customs officers and traders. Another important means of ensuring proper goods classification is organizing training for customs officers, traders and trade statisticians in the application of the HS. 

Rules of Origin - Product Specific Rules From a ROO perspective, a good using materials outside of the region will be able to receive a preferential rate of duty if it meets the relevant product specific rule of origin (PSR) Region is to use a single schedule of PSR Dependent on HS classification numbers.

An incorrect classification number within a FTA creates a domino effect Product qualified incorrectly Exporters certificate of origin prepared incorrectly Goods entered under incorrect classification Border customs may dispute the number. Import clearance delays may occur Buyer incur additional costs. Importing country may begin an investigation. Goods may be denied preferential duty treatment. Penalty action may be taken May lead to external review - possibly court action. If an incorrect classification number is assigned to the product, it may result in an incorrect rule of origin being applied. This leads to :

What To Do All members must use the same version of the HS / Tariff document To properly classify the products that are imported / exported. Also the materials or ingredients used in production of the goods. This is required to ensure the correct FTA rule of origin. Because the HS keeps changing

FTA tariff schedules need to be updated to HS 2017 If not then there will be potential confusion in FTA tariff schedules as classifications of goods may well have changed

HS Issue in Region Most of the Pacific Island Countries and Territories (PICTs) did not implement HS17 when it came to force 1.1.17 Most Customs administrations don’t have the resources to nationalise their classification The need for ALL PICTs to adopt the HS17 is necessary and can be done if the international HS is regionalized to the Pacific Harmonized Commodity Description and Coding System (PACHS17) Collaboration work with SPC and HS Experts in the region

The PACHS17 is a multipurpose goods nomenclature that forms the basis for Customs Tariffs and International Merchandise Trade Statistics. The PACHS17 is a multipurpose goods nomenclature that forms the basis for Customs Tariffs and International Merchandise Trade Statistics.

Pachs17 Development Criteria 1. Derived from WCOs HS 2017 The basic HS criteria of grouping commodities according to their degree of manufacture, material of which the goods are composed and by similar generic description maintained. HS SECTION HS CHAPTER HS HEADING HS SUB-HEADING REGIONAL SUB-HEADING DESCRIPTION SITC 4 CODES I   LIVE ANIMALS; ANIMAL PRODUCTS 01 Live animals. 0101 Live horses, asses, mules and hinnies -Horses : 0101.21 0101.21.00 -- Pure-bred breeding animals 0015 0101.29 0101.29.00 -- Other 0101.30 0101.30.00 -Asses 0101.90 0101.90.00 -Other

REGIONAL Heading 3-dash used for identifying regional commodities 8-digit used Notes: Rules and explanatory notes to assist in classification remain the same as in international HS. Additional notes will be given to “Regional” where necessary. Total number of chapters increases from 96 (international) to 97 (Regional): 1-97 (ex 77 which is reserved) + HS 99 which contains LIST OF COMMODITIES AND TRANSACTIONS NOT CLASSIFIED ACCORDING TO KIND 0810   Other fruit, fresh 0810.10 0810.10.00 - Strawberries 0810.20 0810.20.00 -Raspberries, blackberries, mulberries and loganberries 0810.30 0810.30.00 -Black, white or red currants and gooseberries 0810.40 0810.40.00 -Cranberries, bilberries and other fruits of the genus Vaccinium 0810.50 0810.50.00 -Kiwifruit 0810.60 0810.60.00 -Durians 0810.70 0810.70.00 - Persimmons 0810.90 -Other 0810.90.10 ---Breadfruit 0810.90.20 ---Jackfruit 0810.90.30 ---Noni fruit (Morinda citrifolia L.) 0810.90.40 ---Tamarind 0810.90.90 ---All Other fruit, fresh

LIST OF COMMODITIES AND TRANSACTIONS NOT CLASSIFIED ACCORDING TO KIND: HS SECTION HS CHAPTER HS HEADING HS SUB-HEADING REGIONAL SUB-HEADING DESCRIPTION SITC 4 CODES APPENDIX   COMMODITIES NOT SPECIFIED ACCORDING TO KIND 99 Commodities not specified according to kind 9999 9999.99 Goods imported by parcel post 9999.99.11 ---Books, publications, periodicals and magazines, of any value, imported by parcel post 9310 9999.99.12 ---Private and commercial parcels, of any value, imported by parcel post Goods imported by air freight 9999.99.21 ---Books, publications, periodicals and magazines, of any value, imported by air freight 9999.99.22 ---Private and commercial parcels, of any value, imported by air freight

Summary Benefits of the PACHS is that it would assist OCO members in particular the non-WCO members to adopt HS 2017 Commodities specific to the Pacific that are traded can be correctly classified, like kava Enable regional comparison and international comparison Monitor goods traded under the different Agreements Work so far: Kiribati, Cook Islands, Niue, FSM (March) The benefits of the PACHS is that it would assist OCO members in particular the non-WCO members to adopt HS 2017 and one that also reflects key tradeable commodities for the Pacific region. Through the ANZ funding under PACER Plus, the OCO is assisting members in implementing HS 2017 and the PACHS 17 has enabled; (i) Commodities specific to the Pacific that are traded can be correctly classified, like kava, (ii) New products coming into the country will be able to be correctly classified and (iii) Enable regional comparison and international comparison

Process

Key Issues Data generally perceived as a component of an IT system Complete and correct electronic customs data Information that is not mandatory but is important, for example, supplementary quantity & net weight Pinpoint where data quality issues exist Leveraging big data Until recently, data was generally perceived by most organizations as a component of an IT system. In the digital era, however, data has become a significant business asset - the more organizations know and use, the better. Opportunities - Leveraging big data The term ‘Big Data’ embraces a broad category of data or datasets that, in order to be fully exploited, require advanced technologies to be used in parallel. Customs administrations will face multiple challenges as they try to keep apace with developments in data analysis. Big data requires certain capabilities including tools for analytics, in addition to an infrastructure with relevant technologies

Members presentation Process of claiming preferential rates under this Agreement (for example the ROO process, EU process) How is this recorded when declaration is entered into the system Process of providing monthly statistics to Bureau of Statistics Challenges in compilation of trade statistics.