G/VAL/W/249  
 
7 October 2014  
(14-5660)  Page: 1/6  
Committee on Customs Valuation    
 
IMPORTS OF PRODUCTS TH AT COULD BE USED AS 
MEDIA TO TRANSPORT SOFTWARE 
NOTE BY THE SECRETARIAT1 
1  INTRODUCTION 
1.1 At its meeting of 12 May 2014, the Committee on Customs Valuation requested the 
Secretariat to provide information on the volume of trade of products that could be used as media 
to transport software2, and in particular "USB flash drives or similar devices".3 It was considered 
that such information could be relevant to assess the proposal by Uruguay (G/VAL/W/241/Rev.1) to update the "Decision on the valuation of carrier media bearing software for data processing equipment" ("the Decision").
4 
 
1.2 This note provides a statistical overview of th e issue. It should be noted from the outset that 
the numbers reached by the Secretariat do not nece ssarily reflect the actual value of international 
trade in products that could be used as a media to transport software. This is because: (i) there is 
no exact definition of such products in term s of the Harmonized System (HS) Nomenclature; 
(ii) although different types of media can be iden tified at the six-digit level of the HS, recorded 
devices are often grouped together, irrespective of the type of content. In other words, it is not 
possible to identify media recorded with "softwar e" from those media with a different type of 
content (e.g. audio CDs, DVDs with movies, etc.); and (iii) the aggregation of import figures disregards the fact that, according to the Decision, Members have different approaches for valuing 
software (i.e. while some Members determine the value based solely on the cost or value of the 
carrier media, others add the cost or value of the instructions or data recorded therein).
5 
 
1.3 Bearing in mind these limitations, the WTO Secretariat prepared this paper based on the 
methodology and assumptions explained in Section 2. Section 3 provides an overview of the results. It concludes that, although there has been a marked increase in the relative importance of 
trade in semiconductor media between 2007 and 2013, it is not possible to determine the degree 
to which USB flash drives are being used as media to transport software in international trade.  2  HS CLASSIFICATION AND OTHER METHODOLOGICAL ISSUES 
2.1 Given the lack of a precise HS definition, it was necessary to make an assumption in this 
respect. In 2012, when the issue was raised by Uruguay at the Technical Committee on Customs Valuation (TCCV), Members requested to have more information on the tariff classification of "USB 
flash drives". In a background note that was prepared for the 35
th Session of the TCCV6, the 
Secretariat of the World Customs Organization (WCO) explained that the Decision had been 
typically applied by customs administrations to compact discs  (e.g. CDs, CD-ROMs and DVDs) and 
magnetic tapes , both of which are classified under  HS2012 Heading 85.23 (Discs, tapes, 
solid-state non-volatile storage devices, "smart cards" and other media for the recording of sound 
                                               
1 This document has been prepared under the Secret ariat's own responsibility and is without prejudice 
to the positions of Members or to thei r rights and obligations under the WTO. 
2 The Decision describes software as "instructions or data for automatic data processing machines". 
3 See G/VAL/M/57, paras. 3.14-3.15. 
4 Section A.4 of G/VAL/5. This Decision is sometimes referred to as "Decision 4.1". 
5 Members that determine the value exclusively on th e basis of paragraph 2 of the Decision (i.e. only 
take into account the cost or value of the carrier medium) are required to make a notification. 
See G/VAL/W/5/Rev.24. 
6 WCO document VT0863E1a. G/VAL/W/249 
 
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  or of other phenomena, whether or not recorded, including matrices and masters for the 
production of discs, but excluding products of Chapter 37).7 The WCO Secretariat explained further 
that "USB flash drives" are classified under the same heading and, more specifically, under subheading 8523.51 (semiconductor media: Solid-state non-volatile storage devices). 
 
2.2 Although Heading 85.23 appears to cover most of the relevant products, and for this reason this background note is circumscribed to this HS code, it should be noted that there are other 
products which may eventually be used as media to transport software that are classified under a 
different heading.
8 Based on the above-mentioned WCO note, and because magnetic media plays 
a smaller role than it used to do in the past, this paper focuses on imports of optical media (e.g. CDs, DVDs, etc.) and "solid-state non-vo latile storage devices". Annex 2 provides an 
overview of world imports under Heading 85.23 for the period 2007-2013, and confirms that most 
of the imports (approximately 68%) under this  heading fall into these two categories. 
 
2.3 It should, however, be noted that there are a number of technical limitations that complicate 
the analysis. Firstly, subheading 8523.51 (semicon ductor media: Solid-state non-volatile storage 
devices) does not distinguish between recorded and unrecorded media. Secondly, although a 
distinction is made in the case of optica l media, it was only introduced in HS2012
9, which means 
that import statistics collected prior to 2012 grouped together both recorded and unrecorded media (i.e. under HS2007 subheading 8523.40). Finally, as explained in the introduction, even in those few cases where recorded media are clearly identified, the type of content is not 
differentiated. 
 2.4 The Secretariat tried to overcome these limitations by studying the more detailed import 
statistics that have been notified to the WTO Integrated Database (IDB) by the top 10 importers of 
these products.
10 These Members accounted for approximately 74% of world imports of 
Heading 85.23 in 2013, which means that the results are largely representative of the overall 
situation. IDB data are typically disaggregated beyo nd the HS six-digit level (e.g. eight-digits or 
more), which in some cases allowed the Secretariat to distinguish between recorded and unrecorded media at the national tariff line level.
11 In a second step, imports of recorded media 
were then divided into three subcategories: (1) recorded with software; (2) recorded with other 
content; and (3) unknown content. The results are presented in the following section. 
 3  WORLD IMPORTS IN HEADING 85.23 
3.1 The overall picture, based on UN COMTRADE data, shows that imports under 
HS Heading 85.23 grew until 2011, when it peaked at $43,313 Million (see Annex 2). Imports subsequently fell to $35,317 Million in 2013 (a reduction of approximately -18% in value terms). 
Explaining the reason behind such reduction in the overall value is not a straightforward matter, 
because it could be the consequence of a number of factors. On the one hand, it could be the result of a lower number of units being traded due to a reduced demand for these products (e.g. downloads from the Internet and other forms of wireless communications progressively 
replacing the need to use physical media). On the other hand, it could also be explained by a 
reduction in the average price of these goods (e.g . the IT sector is characterized by significant 
downward price movement, which means that more units could be sold at a lower overall value). 
The WTO Secretariat does not have sufficient information to determine which is the most likely 
explanation.  
                                               
7 See Annex 1. 
8 For example, HS Explanatory Note (D)(d) to Headin g 85.23 explains that "data-bearing paper tapes or 
punch cards" are classified in Chapter 48. There is also the possibility that devices under Heading 84.71 could be used as a medium to transport software, including:  (1) automatic data-processing machines with a storage 
unit (e.g. classifiable in subheadings 8471.50/60) or (2) separately presented storage units classifiable under subheading 8471.70, including solid-state disks (SSDs) and hard disk-drives (HDDs). 
9 For a detailed description, see Annex 1. 
10 The top 10 importers of Heading 85.23 with the co rresponding market share are: (1) China (17%); 
(2) European Union (12%); (3) United States (12%); (4) Japan (6.5%); (5) Hong Kong, China (5%); (6) Thailand (4.8%); (7) Canada (4.6%); (8) Chinese Taipei (4.6%); (9) Singapore (3.7%); and (10) India (3.6%). 
11 HS Contracting Parties are free to introduce subdivisions at the national tariff line level, beyond the 
six-digit level of the HS. These often differ from country to country. Some of the descriptions used by Members 
to identify software at the national level include, inter alia : "containing computer software", "for use in 
machines of Heading 84.71", and "for reproduc ing phenomena other than sound or image".  G/VAL/W/249 
 
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  3.2 A closer look at the disaggregated data shows that semiconductor media grew faster than 
the other categories, to the point that in 2013 it became the largest category under Heading 85.23 (see graph 1). Imports increased most significantly for the "solid-state non-volatile storage devices" of subheading 8523.51, which in 2013 accounted for almost 36% of imports under this 
Heading 85.23. In contrast, the relative importance of optical media fell from 37% in 2007 to 31% 
in 2013. This may be at least partially explained by a technological innovation where some computers, and in particular laptops and other mobile computers, are increasingly sold without an 
optical drive. As a result of this and other changes in the market, users have increasingly relied on 
alternative methods for purchasing and installing software in their computers. 
Graph 1 – World imports under HS Heading  85.23, by type of media (2007-2013) 
 
Source:  WTO Secretariat based on UN COMTRADE. See Annex 2. 
 
3.3 A deeper examination based on the eight-di git data notified to the IDB by the top 10 
importers reveals some interesting results. For example, approximately 78% of the 2013 import value of "optical media" was "recorded" (see graph 2). Of these, at least 30% were recorded with software, while more than 54% contained other types of content (e.g. sound recordings). The 
Secretariat was not able to identify 15% of those imports because a distinction is not made at the 
national tariff line level. Although not necessarily conclusive, these results may provide an idea of the manner in which semiconductor media might eventually be used to transport software. 
Graph 2 –Imports of "optical media"
/1 by the top 10 importers (2013 or latest available 
data) 
 
Source:  WTO Secretariat based on notifications to the Integrated Database (IDB). 
/1  Refers to imports under HS2012 subheadings 8523.41 (optical media; unrecorded) and 8523.49 (optical 
media; recorded). 
G/VAL/W/249 
 
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  3.4 Notwithstanding the best efforts by the Secret ariat to perform the same type of analysis for 
imports of "solid-state non-volatile storage devices" under subheading 8523.51, the results were inconclusive. Unlike in the optical media category, the Secretariat was only able to attribute 2.7% of the imports to "recorded" category, with a pproximately 35% of 2013 imports corresponding to 
the "unknown" category (see graph 3). This is because Members do not make a relevant 
differentiation at the national level. 
Graph 3 –Imports of "solid-state non-volatile storage devices"
/1 by the top 10 importers 
(2013 or latest available data) 
 
Source:  WTO Secretariat based on notifications to the Integrated Database (IDB). 
/1 Refers to imports under HS2012 subheading 8523.51. 
3.5 Given these limitations, the WTO Secretariat could not arrive at a reasonable estimate of the 
share of imports of "solid-state non-volatile storage devices" that are recorded, which makes it impossible to assess the degree to which they are being used as media to transport software. 
 
 G/VAL/W/249 
 
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  ANNEX 1 
Structure of Heading 85.23 in the 2012 and 2007 versions  
of the Harmonized System 
A. 2012 version of the Harmonized System 
HS2012 Product description 
85.23 Discs, tapes, solid-state non-volatile storage devi ces, "smart cards" and ot her media for the recording 
of sound or of other phenomena, whether or not recorded, including matrices and masters for the 
production of discs, but excl uding products of Chapter 37 
 -Magnetic media: 
8523.21 -- Cards incorporating a magnetic stripe 
8523.29 -- Other 
 - Optical media: 
8523.41 -- Unrecorded 
8523.49 -- Other 
 - Semiconductor media: 
8523.51 -- Solid-state non-volatile storage devices 
8523.52 -- "Smart cards" 
8523.59 -- Other 
8523.80 - Other 
 
B. 2007 version of the Harmonized System 
HS2007 Product description 
85.23 Discs, tapes, solid-state non-volatile storage devi ces, "smart cards" and ot her media for the recording 
of sound or of other phenomena, whether or not recorded, including matrices and masters for the 
production of discs, but excl uding products of Chapter 37. 
 - Magnetic media: 
8523.21 -- Cards incorporating a magnetic stripe 
8523.29 -- Other 
8523.40 - Optical media 
 - Semiconductor media: 
8523.51 -- Solid-state non-volatile storage devices 
8523.52 -- "Smart cards" 
8523.59 -- Other 
8523.80 - Other 
 
C. Correlation between HS2012 and HS2007 
2012 Version 2007 Version Remarks 
8523.41 
 8523.49 ex8523.40 
 ex8523.40 Subheading 8523.40 has been subdivided to provide separately for 
unrecorded optical media. 
Source:  WCO Secretariat, Introduction of Harmonized System 2012 Changes, Table I: Correlating the 2012 
version to the 2007 version of the Harmonized System. See WTO document G/MA/W/105. 
 
  
  G/VAL/W/249  
 
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World/1 merchandise imports of products of HS 8523/2, 
2007-2013 
 
HS2007  Product Description  2007  2008  2009  2010  2011  2012  2013/3 
A. Value (Million US dollars) 
85.23 Discs, tapes, solid-state non-volatile storage devices, "smart cards" and 
other media for the recording of sound  or of other phenomena, whether 
or not recorded, (…) 34,588  37,656 36,402  40,363  43,313  39,260  35,317 
8523.21 Magnetic media: Cards incorporating a magnetic stripe 399  362 317  320 384 326 345 
8523.29 Magnetic media: Other 7,124  6,940 5,166  5,542  5,621  5,009  5,098 
8523.40 Optical media 12,962  14,101 12,435  13,512  14,014  12,426  11,076 
8523.51 Semi-conductor media: Solid-state non-volatile storage devices 9,339  11,173 11,907  14,618  15,957  14,944  12,835 
8523.52 Semi-conductor media: "Smart cards" 2,483  2,984 2,861  3,644  3,725  3,984  3,731 
8523.59 Semi-conductor media: other 427  430 507  747 807 781 879 
8523.80 Other 1,853  1,668 3,208  1,981  2,805  1,791  1,352 
B. Share of annual imports under Heading 85.23 (Percentage) 
85.23 Discs, tapes, solid-state non-volatile storage devices, "smart cards" and 
other media for the recording of sound  or of other phenomena, whether 
or not recorded, (…) 100.0  100.0 100.0  100.0  100.0  100.0  100.0 
8523.21 Magnetic media: Cards incorporating a magnetic stripe 1.2  1.0 0.9  0.8 0.9 0.8 1.0 
8523.29 Magnetic media: Other 20.6  18.4 14.2  13.7 13.0 12.8 14.4 
8523.40 Optical media 37.5 37.4 34.2  33.5 32.4 31.7 31.4 
8523.51 Semi-conductor media: Solid-state non-volatile storage devices 27.0  29.7 32.7  36.2 36.8 38.1 36.3 
8523.52 Semi-conductor media: "Smart cards" 7.2  7.9 7.9  9.0 8.6 10.1 10.6 
8523.59 Semi-conductor media: other 1.2  1.1 1.4  1.9 1.9 2.0 2.5 
8523.80 Other 5.4 4.4 8.8  4.9 6.5 4.6 3.8 
Source:  WTO Secretariat based on UN COMTRADE database. 
/1  Sum of available reporters, excluding re-exports of  Hong Kong, China and excluding EU (28) intra-trade. 
/2 Data is presented in HS2007. /3  The number of available reporters for 2013 is slightly lower than that of the other years. 
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