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The Harmonized System

The Harmonized System of designation and coding of goods, more simply known as the Harmonized System (HS CODE), is a recognized and internationally used system for commercial purposes, the function of which is to catalogue and classify goods according to the World Customs Organization (WCO). Products are divided into approximately 5,000 categories and identified with a basic 6-digit code common to all countries. The HS allows for the unique identification of the same product with a specific numeric code, facilitating the work of economic operators such as legislators and customs officials. Over 200 countries develop their own customs tariffs and statistical data based on the Harmonized System, and approximately 98% of traded goods fall into this classification, which is periodically and constantly updated to reflect market and technological changes or the emergence of new products. The tariff code is associated with a description of the goods with precise but general characteristics (for example, the material composition is specified but not the colour – which does not determine the tariff heading), and it is complemented by a system of explanatory notes that provide further details on the various possible characteristics of the goods to be classified.

Utility of the Harmonized System

In addition to uniquely classifying products on an international level, the HS is useful for simplifying international trade by employing a common language for all players in the global trade scenario. It also provides statistical information on the commercial performance of specific products and international dynamics to understand the relationship between supply and demand. Other fiscal, commercial, and legal measures depend on this classification. The main information conveyed by the code is the import duty rate to be applied and any suspensions or reductions thereof. It is also possible to determine which VAT rate – normal or reduced – to apply to certain products, or to learn about any political measures or restrictions to be applied depending on the type of goods. In Switzerland, for example, specific customs codes require the declaration to the authorities of the entry of items containing precious metals into Swiss territory, leading to documentary checks and potential physical inspections of the goods. The HS also helps identify prohibited goods in each state or items subject to CITES regulations or restrictions on specific quotas, even during specific limited time periods. For example, in Switzerland, during the Covid pandemic, masks were exempt from duty collection until the state of emergency ended.

Difference between Switzerland and the European Union

As mentioned at the beginning, the HS uses numeric codes. The first six digits of the code are common to all countries. They can then add another 2 or 4 digits to provide further details about a single item and provide specifications that describe it more accurately to distinguish it from similar goods. In the European Union, the Integrated Tariff of the European Communities (TARIC) is applied, which includes, in addition to the 6 digits, additional codes related to EU customs policies and regulations, up to a maximum of 10 digits. Switzerland adds 2 national digits to the international 6 digits and 3 digits (the so-called conventional number) for further statistical sub-division. Specifically, the Swiss instrument used for classification is the TARES, which contains all tariff rates, general tariff notes for chapters, explanatory notes for sub-chapters, and, very useful because they are updated for the latest articles, decisions: these are specific cases of particular products that confirm, by the authority, the classification of a specific product, constituting a practical precedent for the future classification of similar products.

Past – Present – Future

From the various articles published in the customs field, we have understood that it is difficult to draw precise and definitive conclusions on different topics because, especially today, we are living in a continuously evolving market scenario. Consider, for example, in the fashion industry, that there is no longer a real distinction between clothing items for men or women, as today’s world presents almost no defined boundaries in terms of male or female clothing, as it was until a few years ago; potentially, everything could be considered unisex. Furthermore, compared to the past, the speed of developing new products or new features for existing products is decidedly high, almost frenetic, and various stakeholders struggle to update information, laws, systems, and programs in real-time. Therefore, all matters related to customs are always evolving to adapt to commercial changes, and achieving a clear and definitive resolution appears not impossible but incredibly difficult without a revolution in the short term.

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