This paper provides a general summary of the holistic Harmonized System (HS) update, and detailed information for Sections I-III and VII-X of the HS (only). This paper will be updated iteratively, with further HS Sections, as preparation for HS2022 progresses.
Updating the Harmonized Commodity Description and Coding System
Information regarding the adoption of the Seventh Edition of the Harmonized System (HS2022)
The Australian Bureau of Statistics (ABS) is partnering with the Department of Home Affairs and Australian Border Force (ABF) to implement the Seventh Edition of the Harmonized Commodity Description and Coding System (HS2022). This update of Australia’s customs operations and international merchandise trade statistics is due to commence on 1 January 2022.
- The World Customs Organisation is updating the Harmonized System which provides the basis for classification for Australia’s customs activities and the ABS’ international trade in goods statistics
- The update will commence on 1 January 2022, and is expected to impact approximately 1500 import commodities and 1000 export commodities
- This paper provides advance notice of changes to statistical items (for both imports and exports) and the anticipated statistical impact of these changes
- Concordances between HS2022 and the current edition (HS2017) can be found in the data downloads section of this paper
What is the Harmonized System?
The Harmonized Commodity Description and Coding System (Harmonized System, or HS) is a multipurpose international nomenclature for goods, developed and maintained by the World Customs Organisation (WCO).
The HS is used by over 200 countries as the universal basis for Customs tariffs and international trade in good statistics.
In addition, the HS is used for:
- internal taxes;
- trade policies;
- monitoring of controlled goods;
- rules of origin;
- freight tariffs;
- quota controls; and,
- transport statistics.
The HS provides a coding system, based on a hierarchical structure to classify international traded products (goods). The building blocks of the HS are sub-headings, identified by six-digit codes.
Why does the HS need an update?
Since the HS came into effect in 1998, it has been under cyclic review with new editions released approximately every five years.
These reviews account for:
- new products (e.g. drones and 3D printers);
- changes in global trading patterns; and,
- environmental and social issues of global concern.
Currently, as countries prepare to implement the 2022 edition, the review cycle for the 2027 edition is underway.
Scope of HS2022
The HS2022 includes major changes across over 300 sets of amendments.
Major features of the seventh edition include:
- new product streams: including for e-waste, novel tobacco and nicotine products, unmanned aerial vehicles (drones), for cell cultures and cell therapy, and for fentanyls (including their derivatives and precursors);
- extended coverage for sectors with significant technological advances (e.g. glass fibres and metal forming machinery), and for multi-purpose immediate assemblies (e.g. flat panel display modules);
- simplified classification for the deployment of tools for the rapid diagnosis of infectious diseases, placebos and clinical trial kits;
- further detail for dual use items related to human security (including for toxins, laboratory equipment and items required for the construction of improvised explosive devices);
- identification of goods controlled under various international conventions (e.g. Rotterdam Convention, Chemical Weapons Convention, and Montreal Protocol); and,
- clarification of text to ensure uniform application of the nomenclature, including for example additional explanatory notes, and changes for the clarification and alignment between French and English.
How is the update implemented?
The Department of Home Affairs are responsible for HS matters in Australia. These include classification, rulings by the WCO HS Committee, matters of general policy, as well as representing Australian interests in the cyclic HS review process.
The six-digit subheadings are the most detailed level of the HS, but many countries, including Australia, subdivide the HS into even more specific levels by adding additional digits.
For imports, the HS is extended to ten digits in the Harmonized Tariff Item Statistical Codes (HTISC). Tariff duties are designated in the seventh and eighth digits, while the ninth and tenth digits provide further detail for trade statistics.
Likewise, for exports, the HS is extended using the last two digits (seventh and eighth digits) to provide supplementary information for international trade statistics (import duties do not apply). The 8-digit extended HS classification for exports is called the Australian Harmonized Export Commodity Classification (AHECC).
Changes at the international level (six-digit HS subheading) are first mapped to the existing Australian classifications, and then impacts to the tariff and statistical levels are resolved. This work is undertaken in partnership by the Department of Home Affairs and the ABS.
Once the Department of Home Affairs has approved the changes to the tariff and statistical levels of the classifications, relevant legislation is updated, and the changes are advertised.
From here, IT infrastructure, and other procedures and agreements, are updated across government and the private sector. This includes the Integrated Cargo System which is used by Australian traders to submit customs declarations. All systems, processes and protocols must be updated by 1 January 2022 when the new codes take effect.
Updates of the HS are a significant cost for both government and the private sector. Changes to the HS affect trade agreements, permits, government activities including food safety and biosecurity measures, and result in (often manual) changes to IT systems, communication tools, and websites.
The Department of Home Affairs and the ABS have committed to streamlining tariff and statistical product streams where practical – reducing the burden on Australian traders and brokers, improving trade efficiency, while continuing to maintain the quality of customs and statistical processes.
Statistical impact of HS2022
The HS2022, extended to the AHECC and HTISC, is the basis of the customs collection in Australia, which in turn provides the input data for the ABS' international trade in goods (merchandise trade) statistics.
Statistical items of the AHECC and HTISC are mapped to other economic and industry classifications that are used in ABS international trade statistics (see International Merchandise Trade: Concepts, Sources and Methods for more information). These include other international classifications:
- Standard International Trade Classification (SITC)
- Broad Economic Categories (BEC)
as well as Australian standards and classifications including:
- Balance of Payments Broad Economic Categories (BoPBEC)
- Balance of Payments Classification for Exports (BoPCE)
- Australian and New Zealand Standard Industrial Classification, 2006 (ANZSIC 2006)
Any statistical item that is created, closed, or amended because of HS2022 must be (re-)mapped to these other classifications. Definitional changes to the inclusions/exclusions of categories in these classifications may result in breaks to time series, and care must be taken when comparing statistics from prior to the HS2022 update to those available after the update.
The collapsible sections below provide further detail on the conceptual changes within each HS Section as a result of HS2022. The downloadable Tables provide more detailed concordance and classification mapping information.
Section I Live animals; animal products
The amendments to Section I include conceptual treatment changes, increased detail for several commodities and new notes to clarify or otherwise aid classification. As the values of trade in impacted items is reasonably small, no significant statistical impact is expected to result from the HS2022 changes to Section I.
For example, edible insects have been transferred from meat (chapter 2) to edible products of animal origin (heading 0410). As Australia does not currently have significant trade in edible insects, the statistical impact of this change is expected to be negligible.
Other changes in Section I include new categories to increase the detail available for “flours, meals and pellets of fish and crustaceans, molluscs and other aquatic invertebrates, fit for human consumption” (0309), and streamlined treatment and references for scallops (0307.2), Alaska Pollock and bonito, and “yoghurt with added spices, coffee, plants, cereals or bakers wares” (0403).
Section II Vegetable products
The amendments to Section II are expected to have negligible statistical value impact but will increase the detail available for some products.
Classification changes include a restructure of subheadings to streamline treatment of broccoli (0704), and to increase the available detail for fresh and dried mushrooms (0709.59, 0712.34), pine nuts (0802.90) and bark of African Cherry (1211.60).
Section III Animal, vegetable or microbial fats and oils and their cleavage products; prepared edible fats animal or vegetable waxes
The amendments to Section III include identification of new products, and alignment of definitions and classifications for goods with considerable global trade volumes. The aggregate statistical impact of these changes is anticipated to be negligible.
Significant changes within Section III include:
- Separate provision for microbial fats and oils (1515.60) - noting that the Section, chapter 15 and other classification headings have been renamed to explicitly refer to microbial fats and oils.
- The classification treatment of olive oil will shift from how the product is transported (bulk or packaged) to the designation of the product itself (e.g. virgin or pomace olive oil). This change will align the HS with existing International Olive Council (IOC) Trade Standards.
Details for these Sections will be provided in a future update of this paper.
Section VII Plastics and articles thereof; rubber and articles thereof
Under HS2022, Section VII includes amendments to facilitate the monitoring and control of substances controlled under the Chemical Weapon Convention. This is achieved through the closure of subheading 3907.20 (Other polyethers) and the creation of new subheadings to identify specific products:
- Bis(polyoxyethylene) methylphosphonate 3907.21;
- Polyethers, in primary forms (excluding polyacetals and Bis(polyoxyethylene) methylphosphonate) 3907.29; and,
- Poly(1,3-phenylene methylphosphonate) 3911.20.
The other significant change within Section VII is for gloves, mittens and mitts of vulcanised rubber. Currently these products are classified according to their intended use for surgical, sports (imports only), or other, purposes. Under HS2022, vulcanised rubber gloves, mittens and mitts will be classified based on their use for:
- medical, surgical, dental or veterinary purposes;
- sport purposes (imports only); or,
- other purposes.
Section VIII Raw hides and skins, leather, furskins and articles thereof; saddlery and harness, travel goods, handbags and similar containers; articles of animal gut (other than silk-worm gut)
There are no changes to statistical items in Section VIII as a result of HS2022.
Section IX Wood and articles of wood; wood charcoal; cork and articles of cork; manufactures of straw, of esparto or of other plaiting materials; basketware and wickerwork
All of the changes to statistical items in Section IX are confined to chapter 44 Wood and articles of wood; wood charcoal. These changes should result in a greater level of detail for items of global interest to be available for statistical analysis.
Products which will now have separate provisions include:
- Wood briquettes 4401.32, Sawdust 4401.49, Wood charcoal of shell or nut 4402.20, S-P-F 4407.13 and Hem-fir 4407.14, as well as wooden coffins 4421.20;
- Laminated Veneered Lumber (LVL) and blockboard, laminboard and battenboards (to enhance global monitoring of the trade of these products); and,
- Teak and other tropical woods throughout the chapter (as a result of the Food and Agriculture Organization of the United Nations (FAO) proposal to enhance the data on global tropical wood trade).
HS2022 also requires changes to the classification structure for:
- subheadings under 44.03 Wood in the rough (whether or not stripped of bark) to align the English HS with the existing French text with regards to dimensions of cross-sections; and,
- certain engineered structural timber products, which will now be divided based on manufacturing process and size (including new specific subheadings for glulam, X-lam and I-beams).
Section X Pulp of wood or of other cellulosic material, recovered (waste and scrap) paper and paperboard, and articles thereof
The most significant change in Section X is the deletion of subheading 4905.10 (globes) due to low volumes of international trade. This is achieved through a restructure of heading 49.05 Maps and hydrographic charts, atlases, maps and globes. Australia's trade in globes is valued at approximately $1 million per year for imports, and less than $1 million per year for exports.
Details for these Sections and supplementary chapters will be provided in a future update of this paper.