Harmonized Tariff Code of the United States and Tariff Code in the Philippines: A Brief Overview

August 27th, 2009

Customs Tariff code HarmonizedHarmonized Tariff Schedule and Code in the United States In the United States, the Harmonized Tariff Schedule (HTS) was adapted in 1989 as a way of describing all goods in trade for duty purposes. The HTS is based on the Harmonized Commodity Description and Coding System (HS) when is administered by the Worlds Custom Organization in Brussels. There are 8-digit US rate lines and 10-digit non legal statistical reporting categories. In general, a customs officer will be responsible for administering these codes to certain imports that arrive in the United States. There are over 200 countries that participated in the HS system and over 98 percent of world trade is taxed using this system. The Tariff code is responsible for customs tariffs, collection of international statistics, rules of origin classification, collection of internal taxes, trade negotiations within the World Trade Organization, transport tariff and statistics and controlled good monitoring.

Customs Control and the Tariff Codes It is important to classify goods by tariff codes for protection and economic policy within countries. There are several different tariffs depending on the good being imported or exported. An ‘ad valorem tariff’ is a set percentage of the value of the good being shipped. This can bring a lot of confusion as often the market value is higher than the production value and the value of goods can fall and rise in different countries. However, the general rule is that when the price of a good rises on the international market, then so does the tariff regardless of what the importing country’s price is. There are also ‘specific tariffs’ for certain products where the price does not vary no matter what the international market value is. A ‘revenue tariff’ is designed to raise money for the government for an industry where a good is not normally grown while a ‘protective tariff’ artificially inflates import prices to protect the domestic industry from their foreign export competition. In a sense, this tariff ‘protects’ the domestic market from foreign takeovers. Finally, a ‘prohibitive tariff’ is a tax put into place on certain items that are prohibited. They are so high that no one can afford to import the item.

Tariff Codes in the Philippines In the Philippines the tariff code is entitled Tariff and Custom Code of the Philippines (TCCP) and, like the United States and most other nations, follows the HS system. There are 96 different chapters and over 1,000 tariff headings for certain goods being imported and exported. The recent TCCP was put into effect in 2001 and is determined by the Asia Pacific Economic Commission (APEC). APEC includes 21 other Pacific Rim countries and handles their trades and tariff information as well.

Tariff Code and NAFTA Involvement The North American Free Trade Agreement was put into effect in 1994 and allows for free trade between the United States, Canada and Mexico on good originating in and traded between these countries over a fifteen year period. These trades are monitored regularly through registered Customs Brokers.