What is the harmonized and commodity description classification system (HS)?
The HS system for classification of goods underpins global trade. WCO is the governing body for the HS system. HS codes are used to classify goods primarily for:
- Valuation by Customs for tariff duty and tax collection.
- Risk management by over 100 plus Customs agencies and many more specialist border agencies.
Worldwide, freight forwarding companies employ thousands of staff to enter HS codes based on shipment descriptions. This cost of trade is climbing with the explosion of e-commerce low value goods shipped in parcels. The HS code is already a requirement for fast freight parcels and is now also included in Universal Postal Union (UPU) e-commerce parcel data standard agreed between the UPU and WCO.
What is the relationship between the HS and the GPC classification systems?
- The GPC has a much finer level of granularity providing more precise information on goods
- The granularity results in a one-to-many mapping in some instances
- The GPC is a required field in the GDSN, and the GDSN provides an optional field for HS
- The HS is largely if not exclusively used for business to government data transactions
Can GPC codes replace HS codes?
It highly unlikely the GPC will replace the HS in the foreseeable future. Even though border agencies might find HS codes not fit for purpose (e.g. for risk management), HS codes are now an international requirement for:
- the construction of free trade agreements
- data collection for the statistical measurement of international trade flows.
So, the GPC would act in complementary manner to the HS, rather than a replacement.
What’s the opportunity for GS1?
The opportunities for GS1 are to:
- Progressively gain adoption and use of GS1 standards by border agencies worldwide, thereby driving the greater use of GS1 standards for export industries around the world.
- Reduce costs on GS1 members who are required by law to use HS codes, through the automation of HS lookups e.g. from the GPC codes in the GDSN or GS1 Cloud or web lookup.
- In future, members would be able to transmit trade data directly into border agencies (concept pilot in development between New Zealand and Australia) if the HS code is included.
What is the opportunity for WCO and border agencies?
The intention is not to challenge WCO’s HS code, but rather to assist border agencies. Use of GPC codes in unison with the HS codes would assist border agencies in many ways:
- Duty and tax collection: As HS codes operate at broader level than GPC, it not uncommon for traders to choose the HS code that lowers their duty or tax liabilities
- Risk management: The more granular and contextual GPC descriptions would enable border agencies to undertake better risk assessment than the HS code (it was designed for duty collection)
- Support anti-counterfeiting measures: Access to the combination of product GPC, GTIN and the GLN of the brand owner in the GS1 Cloud would support anti-counterfeiting measures
This visibility at the border would in turn support private sector supply chain traceability applications.