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Aug 26, 2011

Ready for Harmonised System 2012?

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Environment|Export|System|Product|Products|Service|Operations
Environment|Export|System|Products|Service|Operations
environment|export|system|product|products|service|operations
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By: Donald MacKay

Every five years, the ‘Harmonised System’, or HS, is updated to accommodate changes in the business environment. The HS is the coding system used to classify goods when you import or export and is the determiner of the level of duty you pay on the goods you import. Thus, any change to the HS may change the tariff classification of the goods imported and may, therefore, change the duty paid.

The HS code assigned to products also serves as the link to rebates accessed by importers on particular products as well as trade remedies imposed on the importation of certain products like anti- dumping or countervailing duties. Changes made to the HS may have unintended con- sequences if the HS code assigned to a particular product is affected. When such changes result in protection provided by a trade remedy being lost, the consequences for a business may be devastating.

The challenge facing importers and exporters is to assess the impact of the changes being made in HS 2012 to determine the extent to which they are impacted on. Certain industries, such as food and chemicals, will be much more significantly impacted on than others in HS 2012. The impact may not only change the tariff heading you clear your goods under, it may also change the duty you pay on those goods. The South African Revenue Service holds importers and exporters accountable for compliance with HS 2012, yet most companies have no idea how their HS classification currently being used will be impacted on and what they need to do to deal with the change.

The impact of a change to the tariff code is potentially far reaching in all sorts of unex- pected ways, such as:

  • One may lose eligibility to rebates one currently accesses.
  • One may find that goods that currently attract antidumping duties no longer have such protection. Such a change may force a local manufacturer to apply for a changed circumstances review. For an importer, the change in duty structure may suddenly cause goods to fall within the ambits of a duty that did not hitherto apply.
  • Any duty or trade remedy applications which are in progress at the time of the change in the tariff structure may no longer be applicable.
  • Any trends in imports or exports of a particular product you have been tracking in the past may be invalidated by the change in the tariff structure.

When the last structural change like this was implemented in 2007, a number of companies were unaware of the imminent change and simply reacted to it only after the change had already been implemented. In some cases, this can be quite a serious problem, especially for companies with fixed price contracts, where changes may result in cost escalations as a result of duty changes which are not built into the pricing of the contract.

With just more than four months left to the implementation of HS 2012, importers and exporters need to gain an understanding of the extent to which their businesses will be impacted on by the proposed changes to the HS. This will allow importers and exporters to act on unintended consequences, like lost import rebates or trade remedy protection, and, in so doing, limiting the impact on their profitability and day-to-day operations.

Xikhovha Advi- sory (with our partners, 3CE Online) is offering a free service to all companies wishing to assess the impact of HS 2012 on their businesses. Visit www.hs2012.co.za for a free assessment of the impact of the proposed changes to your business.

Edited by: Creamer Media Reporter
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