The session built on the WCO report published in April 2023 summarizing the outcomes of a series of symposia on “Visualising a greener HS” from October 2022 to January 2023. These events sought to discuss and identify potential changes to the HS in order to make it more supportive of environmental policy needs in future editions and included participation from WCO members and various stakeholders.
The report was previously presented by the WCO Secretariat during the meeting of the Market Access Committee in April 2023. At this meeting, Ecuador expressed an interest to continue analysing this topic so that WTO members can have a better understanding of what can, and cannot, be done by the HS in the context of environmental challenges, taking into account the nature of the HS. The system establishes classes of goods based on the characteristics of the products when presented to customs at the border.
The HS is a multipurpose international product nomenclature developed by the WCO. It comprises more than 5,000 commodity groups or categories, each of them identified by a six-digit code. These are arranged in a legal and logical structure and supported by well-defined rules to achieve uniform classification. See here for the current HS 2022 nomenclature.
The system is used by 212 economies as a basis for their customs tariffs and for the collection of international trade statistics. Over 98% of the merchandise in international trade is classified in terms of the HS.
The event was moderated by Carlos Guevara, Counsellor at the Mission of Ecuador. He noted that the session provided WTO members the opportunity to have a general overview of the areas under consideration on this issue. This would allow them to plan future discussions on more specific topics and tools that can contribute to supporting their common environmental goals, he said.
The WTO Secretariat gave a presentation on the interaction between the HS and the work of the organization. It emphasized the crucial role the HS plays in determining product classification, collection of statistics for policy making, and more broadly for international trade in general. It also noted that the HS could be used, and had been used in the past, to allow members to achieve environmental objectives, in particular by identifying specific products covered by certain multilateral environmental agreements.
However, the Secretariat noted that it was challenging, or even impossible, for the HS to identify products based on process and production methods, or the end-use or the intent of the importer, when these factors were not verifiable through the characteristics of the product or through testing facilities available to all customs administrations. It also stressed that the HS is only one important instrument that could be used by members in pursuing their environmental objectives. There are also other tools that could be more effective to meet these objectives, it said.
Gael Grooby, Director of the Tariff and Trade Affairs Directorate at the WCO, noted that the HS has been amended several times to better assist members in dealing with environmental objectives, in particular when these had resulted from international environmental agreements or proposals by international organizations.
The WCO has worked on specific recommendations to enhance environmental policy in the HS classification system, including the need for classification criteria to be verifiable at the border, simplifying and clarifying provisions, and addressing organizational level policy issues.
Ms Grooby underscored that despite the existing hurdles, refining the HS for better alignment with environmental objectives remains a priority for the WCO's Harmonized System Committee. Recent revisions considered included the creation of new categories to better monitor some types of waste products, such as electronic waste (e-waste) and hydrofluorocarbons (HFCs), aimed at improving regulation and administration.
Sabine Altendorf, Economist at the FAO Markets and Trade Division, addressed the need for better data quality in global agricultural commodity markets and trade. She emphasized the importance of the HS for standardized statistical data, ensuring comparability and adequate trade monitoring.
Ms Altendorf provided an example of an FAO proposal to spell out separately tropical fruit — mangoes, guavas and mangosteens — to better monitor trade in these goods. She stressed the need to create synergies among international organizations involved in trade monitoring and analysis. She also called for stakeholders' collaborative work in the HS revision and the promotion of HS relevance for statistical purposes.
Melisa Tin Siong Lim, Program Officer at the Secretariat of the Basel, Rotterdam and Stockholm Conventions, discussed the importance of international conventions and HS codes in managing hazardous chemicals and waste. She said that these conventions revolve around the idea of having prior informed consent (PIC) procedures before goods could be exported, imported or in transit. The implementation of these procedures rely on national legislations and require precise identification of specific types of substances relating to dangerous products or hazardous wastes.
She stressed the need to harmonize international trade and waste management through the HS and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal. However, she noted that this is not always easy because both systems have different scopes and approaches to defining product categories, with the HS focusing on physical and technical characteristics and the conventions taking into account “intent”. Amending the HS would contribute to better managing hazardous waste and plastic waste trade, she said.
The event ended with experience sharing by Ecuador, which talked about customs challenges in the application of international instruments and agreements. These include the Montreal Protocol on Substances that Deplete the Ozone Layer, a landmark multilateral environmental agreement that regulates the production and consumption of nearly 100 man-made chemicals referred to as ozone depleting substances (ODS).
Pedro Velasco, Director of Customs Techniques at the National Customs Service of Ecuador, spoke of the importance of implementing the HS General Rules for the Interpretation. He also stressed the need to undertake the necessary changes in the national tariff structure to make certain goods more visible and adopt coordinated action by all the government agencies involved.
Members stressed the value of working together and of creating synergies both at the national and international level. They agreed on the importance of involving customs in this process and understanding the challenges faced when it comes to HS implementation, particularly in developing economies and least developed countries. They also noted the need to establish clear scope and criteria that contribute to a smooth and efficient HS goods identification beyond the “border limit vision”.
The interim Chair of the Committee, Nicola Waterfield of Canada, thanked panellists for their presentations and Ecuador for organizing and moderating the event. As has been the case for previous thematic sessions, she tasked the WTO Secretariat with the preparation of a factual summary report on the basis of the information shared.
