Tariff Changes 1 January 2017

The World Customs Organization has published the 2017 edition of the Harmonized System Nomenclature, which will enter into force Jan. 1, 2017. This edition comprises a total of 5,387 separate groups of goods identified by a six-digit code, up from 5,205 in the 2012 edition.  The HS is reviewed every 5 years and this is its fifth major revision since it was approved by the Council in 1983 and implemented in 1988.

The 2017 HS includes approximately 242 amendments, including 85 in the agricultural sector, 45 in the chemical sector, 22 in the wood sector, 15 in the textile sector, six in the base metal sector, 25 in the machinery sector, 18 in the transport sector, and 26 in other sectors.

Environmental and social issues are the main targets of the HS nomenclature 2017 amendments. Most amendments of this edition were recommended by the United Nations Food and Agriculture Organisation (FAO) and focus on food security and the early warning system of the FAO.

In Australia we are implementing the changes by way of the Customs Tariff Amendment (2017 Harmonized System Changes) Bill 2016, which contains amendments to the Customs Tariff Act 1995 to implement the WCO review.  According to the DIBP website, this Bill makes approximately 950 changes to the Tariff Act by creating, amending and clarifying tariff classifications. Further details are at http://www.border.gov.au/Busi/Tari/harmonized-system-2017. This page then provides further links to the Bill and Explanatory Memorandum and, importantly, a link to a concordance between the 2012 and 2017 tariffs.

Duty rates and margins of tariff preference for the majority of the amendments should not change, except for amendments to the scope of heading 8542, which may result in a change of tariff classification of certain goods from Chapters 84, 85, 90, 93 and 95. These amendments are required as a result of the coming into force of the expanded Information Technology Agreement (eITA), to which Australia is a signatory. The eITA is also expected to come into effect on 1 January 2017, and the goods above will become duty free as a consequence.

Highlights (NB highlights) of these changes in the Australian legislation include the following:

Fish and Fishery Products. Amendments for fish and fishery products are aimed to improve the coverage of species and product forms which can then be monitored for food security and resource management through trade statistics.

The many changes include a further split for more detailed product forms for crustaceans, molluscs, and other invertebrates such as cuttlefish and squid. There are changes in tariff classification, principally at the subheading level, for some products. This will require review of TLFs for importers of these goods.

Dairy Products (Chapter 4). Note 4 has changed.

Products of Animal Origin NESOI (Chapter 5). Note 4 has an expanded definition

Industrial or medicinal plants (Chapter 12) Tariff changes as a result of an expanded heading to 1211 may change classification of some goods of 14049000 and 20089900 to 1211.

Forestry Products. The amendments for forestry products include better coverage for endangered species and further separation of non-tropical timber and tropical timber. The intent is to thereby provide a better picture of trade flow, as separating data on tropical woods should both aid in focusing attention on the issue of tropical wood use and clarify data on non-tropical hardwoods.

There are new subheadings and Additional Notes defining terms. To coincide with the commencement of HS 2017, the WCO is publishing the 2017 Explanatory Notes that lists over 400 wood types considered to be “tropical wood” for the purposes of Chapter 44. These tropical woods are identified by their “pilot-names”, scientific names and local names. Additional Notes 1 and 2 list only the pilot-names for the relevant wood types as listed in the 2017 HSEN.

New subheadings have also been added for a number of bamboo and rattan products. These were requested by the International Network for Bamboo and Rattan (INBAR).

Chemicals. New subheadings have also been created for specific chemicals controlled under the Chemical Weapons Convention, hazardous chemicals controlled under the Rotterdam Convention, and certain persistent organic pollutants controlled under the Stockholm Convention.

At the request of the International Narcotics Control Board, new subheadings have also been created for the monitoring and control of pharmaceutical preparations containing ephedrine, pseudoephedrine, or norephedrine and for alpha-phenylacetoacetonitrile, which is a pre-precursor for drugs.

Pharmaceuticals (Chapter 30). New subheading notes. Some tariff changes.  One amendment aims at detailed information for several categories of products that are used as anti-malarial drugs.

New Tyres (4011). You will now need to determine the type of machine with which these tyres are used to correctly classify them.

Ceramic Products (Chapter 68). Headings 6907 (unglazed ceramic products) and 6908 (glazed ceramic products) have been merged, meaning a distinction is no longer required between glazed and unglazed ceramic products. New products with a very high trade volume are classified under subheadings 6907.90 and 6908.90 as “other”.

Paper (Chapter 48). Tariff and Note changes, including some to reflect advances in technology for newsprint.

Chapter 84. The exclusions in Note 1 have been expanded to included radiators for articles of Section XVII. Some other changes to Notes and at subheading level.  May I recommend that you review applicable TCOs also move or are duplicated?

Chapter 85 New notes. Advances in technology are reflected in the amendments for a number of goods. For example, light-emitting diode (LED) lamps, which will transfer from subheading 8543.70.00 to new subheading 8539.50.00. Similarly, multi-component integrated circuits (MCOS) will now be classified to 8542.

As a consequence of the expanded Information Technology Agreement (eITA) to which Australia is a signatory there will be a change in tariff classification of a number of goods from Chapters 84, 85, 90, 93 and 95 to heading 8542. This may include the possible transfer of certain goods from headings 8422, 8431, 8443, 8450, 8466, 8473, 8476, 8504, 8517, 8518, 8522, 8529, 8530, 8531, 8535, 8536, 8537, 8538, 8543, 8548, 9025, 9026, 9030, 9031, 9032, 9033, 9305, 9306 and 9504 and to subheadings 8542.31, 8542.32, 8542.33 or 8542.39. Note that heading 8542 is duty free on 1 January 2017.

Chapter 87. Changes descriptions and new subheadings.  Advances in technology are also reflected in the amendments for hybrid, plug-in hybrid, and all-electric vehicles.

Chapter 95. The exclusions contained in Note 1 have been amended at (e)  to clarify that sports clothing and special articles of apparel of textiles, of Chapter 61 or 62 may also include incidentally protective components such as pads or padding the elbow, knee or groin areas.

New Heading 9620 Monopods, Bipods and Tripods. New tariff heading. The subheadings under heading 9620 have been created to maintain the existing customs duty rates for these goods. Notes of exclusion have been added to other Chapters. Note this now if your clients import these as it’s easy to miss the change in an existing TLF.

Given the Infringement Notice Scheme can impose penalties whether or not duty has been shortpaid it is imperative that brokers review the tariff changes on or before 1 January (but maybe not 1 January if you’re partying the night before). In reviewing the changes may I suggest you cross check that applicable TCOs are also carried across? It is to be hoped that DIBP will provide some time for these changes to be implemented and that the changes have been designed where possible to cause old classifications to bounce but mistakes do happen.  As always, I’m happy to offer my services should anyone require assistance in this matter.