HS Code by and large is little unattended issue in Indian contextbut has the capability of becoming extremely serious when some show cause notice is issued by customs department. Given the fact that, HS code or HSN is economic language of the world for the purpose of statistics, preferential treatment and identification of goods,it is extremely important that, we must look at the latest development in this area.
The first major news comes from WCO.
“HS 2022, which is the seventh edition of the Harmonized System (HS) nomenclature used for the uniform classification of goods traded internationally all over the world, has been accepted by the all Contracting Parties to the Harmonized System Convention. It shall come into force on 1 January 2022.
The HS serves as the basis for Customs tariffs and for the compilation of international trade statistics in 211 economies (of which 158 are Contracting Parties to the HS Convention). The new HS2022 edition makes some major changes to the Harmonized System with a total of 351 sets of amendments covering a wide range of goods moving across borders.
Adaption to current trade through the recognition of new product streams and addressing environmental and social issues of global concern are the major features of the HS 2022 amendments.”
The second news comes from Shri. Piyush Goyal, Union Minister of Commerce & Industry. While speaking at the 6th National Standards Conclave on the subject of Standards for Trade Facilitationon 15th January 2020, he said that, “No imports on “Others” category will be allowed without HSN code into the country”.
Sometimes back, Shri. Ajay Shrivastava, Additional DGFT had written an article stating that, there are almost 2,300 HS Codes under the description “Others”.
All these latest updates on the HS codes bring into light some serious issues. Some of them are as follows: -
1. Industry’s reliance on intermediaries in respect of HS codes create serious problems particularly when duty paid is less than actually payable.
2. The Standard Input Output Norms as published by DGFT, do not have HS Codes hence, there are interpretation problems.
3. All the HS codes where description is “others”, need to be properly codified.
4. While codes at 6 digits are universal, some countries follow 8 digits and some countries follow 10 digits. This gives further room for interpretation.
5. Sometimes wrong HS codes are used in order to save the duty or to claim incentives like MEIS.
6. The preferential or Zero duty under FTA is based on HS Code. There is also possibility of misuse of FTAs by putting wrong HS code or not adhering to the rules of origin.
7. HS codes also play a major role in country’s Non-Tariff barriers, and hence, exact HS classification is must.
HS codes therefore needs to be seriously reviewed by each company for the product they export or import, particularly on account of technology upgradation like use of Artificial Intelligence and Blockchain in customs operations.
This issue is of prime importance from the point of compliance, correct declaration, duty treatment andmost importantly identification of your product in international market. Section 46 and section 50 of Customs Act 1962, specifically talk of responsibilities of importers/ exporters in this respect.
Looking forward to your views!!!
Sudhakar Kasture
Director, EXIM Institute (A Division of Helpline Impex Pvt. Ltd.)
Mumbai.
E-mail:sk@helplineimpex.co.in