Harmonized System 2022- How the change may affect trade

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Harmonized System 2022: The Harmonized System (HS) is governed by ‘The International Convention on the Harmonized Commodity Description and Coding System’. Harmonised System of Nomenclature (HSN) was introduced in 1988 by the World Customs Organization (WCO), representing a 6-digit code for systematic classification of goods comprising 1,241 headings divided among 96 Chapters, arranged in 21 Sections. HSN is used worldwide by governments, organisations, and non-public sectors for various purposes, like determining customs tariffs, monitoring goods under the Rules of Origin and trade negotiations between countries.

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The WCO reviews the HSN every five years; following this review cycle, all-contracting parties have accepted a new edition of the HSN to the Harmonized System Convention. The seventh edition – HSN 2022, came into force on 1 January 2022. Accordingly, a new HSN has been introduced with nearly 351 amendments at the six-digit level, covering a wide range of goods moving across borders.

India, a contracting party of the Harmonized System Convention, adopted this to align the first schedule of the Customs Tariff Act, 1975 (the Act) with the HSN 2022. Basis the changes in HSN, suitable amendments have also been made in GST notifications to align the goods classification under GST with HSN 2022.

HSN 2022 has been prepared to clarify several high-profile product streams to recognise the change in trade patterns. The new HSN has also provided an emphasis on the adaption of HSN by trade to identify new products and address environmental and social issues of global concern to introduce new products by following important conventions and methodology:

Basel Convention assigned a new Heading for electrical and electronic waste

Rotterdam Convention covers pesticides and industrial chemicals that have been banned or severely restricted for health or environmental reasons, and new sub-headings have been introduced for specific chemicals controlled under the Chemical Weapons Convention

Issues in the classification of nicotine products resulted in a new provision for tobacco and nicotine-based development by amendments in Chapter 21

Unnamed Aerial Vehicles (UAV’s), also known as Drones, gained a separate heading to simplify the classification of aircraft

Smartphones are also given their sub-headings

Multi-purpose intermediate assemblies are classified to avoid the unnecessary delay caused by deciding their end-use

Amendment to the HS to clarify the classification of diagnostic test kits, to facilitate cross-border transportation of such kits

HSN 2022 has introduced significant changes with 77 amendments in the goods from the agriculture sector, 58 and 52 modifications in the goods from the chemical and machinery sector respectively, 38 amendments in the goods from the wood sector, 27 amendments in the goods in the base metal, 22 amendments in the goods related to the transport sector, 21 modifications in the goods in the textile sector and a total of 56 amendments in other sectors

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