RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/271
6 July 2001
(01-3380)
Council for Trade in Goods
5 July 2001
CONCESSIONS UNDER THE HARMONIZED COMMODITY
DESCRIPTION AND CODING SYSTEM
A Procedure For Introducti on Of Harmonized System 2002
Changes To Schedules Of Concessions
Draft Decision
The General Council ,
Having regard to Articles IV:2 and IX:1 of the WTO Agreement;
Recalling  that the Contracting Parties of the GATT 1947 had originally agreed to a method for
introducing the Harmonized System (HS) into schedules by their Decision of 12 July 19831;
Recalling  that the Contracting Parties to GATT 1947, by their Decision of 8 October 19912, decided
on simplified procedures for the implementation of HS changes to Schedules;
Noting  the increased complexity of introducing HS changes into WTO schedules and the lengthy
period of time it has taken to introduce HS 1996 changes into WTO schedules;
Taking into account  the desire of Members to further facilitate and simplify the introduction of HS
2002 changes to WTO Schedules and that many WTO Members will need to implement HS 2002
changes into their customs tariffs on 1 January 2002 as a result of their commitments undertaken in
the World Customs Organization (formerly known as the Customs Co-operation Council);
Decides:
The proposed changes to schedules required to implement HS 2002, on the basis of
Attachment A to this Decision, shall be implemented pursuant to the Procedures contained in theAttachment B to this Decision.
                                                     
1 BISD 30S/17
2 BISD 39S/300G/C/W/271
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Attachment A
ELECTRONIC VERIFICATION
1. Overview of Harmonized System 2002 (HS2002) Changes and Electronic Verification
The changes proposed to the HS by the Harmonized System Committee (HSC) of the World
Customs Organization (WCO) for 2002 are similar to those introduced by the WCO in 1996. They
can be summarized as follows: (1) new break-outs of the nomenclature, (2) condensing of the
nomenclature, (3) textual changes of the nomenclature, and (4) typographical changes or corrections,
based on the information from the WCO (HS2002 ch anges in G/MA/W/24 and correlation tables in
G/MA/W/26).
The purposes of using electronic verification are to utilize the electronic means available in
order to aid Members in the work of verifying HS 2002 changes.  While, in all instances electronic
means cannot substitute for a manual verification, they  can help to speed up the process.  Electronic
verification would reduce considerably the volume of items to be verified individually by Members
and would thus bring this very time-consuming exercise within an easily manageable dimension.  This
section will set out the possibilities for electronic verification.  For the purposes of electronicverification, the HS2002 changes have been analyzed a nd delineated so as to better explain what will
be done in the electronic verification.  The br eak-down can be summarized as follows (also see
Summary table for full details in G/MA/W/27/Add.1):
 373       HS2002 changes or sets of changes
  87 New break-outs of the nomenclature (1)
   48 Condensing (or deletion) of the nomenclature (2)
130 Textual changes of the nomenclature (3)
108 Typographical changes or corrections (4)
Thus, there are textual changes that would need to be verified (item numbers 3 and 4), and
changes affecting tariff concessions (items 1 and 2).3
(a) Textual Changes
With respect to the textual changes for HS2002, the Secretariat could perform the verification
that all textual changes were made and included in the WTO schedules.
However, it should be noted that many of the textual changes solely involve changes to the
Chapter Notes or Subheading Notes.  In analyzing the existing WTO schedules of Members, it should
be noted that very few Members4 included these Chapter Notes or Subheading Notes in their WTO
schedules, therefore these items are not incorporated in the WTO schedules unless the Member
chooses to do so at the time of introduction of HS2002 changes.  Thus, the Secretariat proposes thatthese 103 items that are solely changes to Chapter Notes or Subheading Notes not be included in the
electronic verification, as there would be nothing to verify.  However, for the few Members that have
the Notes incorporated, the Secretariat could verify  these electronically if the Members so wished.
                                                     
3 In addition, there are a few textual changes in the nomenclature (3) that may also involve a
subsequent tariff change and verification, 14 items.  This is based on the information provided by the WCO.However, Members may wish to examine these on an individual basis (see table in G/MA/W/27/Add.1 and
inform the Secretariat if they believe there are other items that may have consequential tariff implications that
the WCO did not identify.
4 The Secretariat has only been able to identify 2 Me mbers that have included these notes in their WTO
schedules.  However, during the HS96 exercise, only one of these Members had the notes in its submission.G/C/W/271
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Thus, of the 238 textual changes, minus the 102 'Notes' items, the Secretariat would verify
136 textual changes electronically.
(b) Changes Affecting Tariff Concessions and Other Concessions
As noted previously, the verification that the appropriate tariff treatment is given to the tariff
lines/products concerned would require the use of a comparable electronic base, such as theConsolidated Tariff Schedules (CTS) database, in order to have a basis to compare rates. The CTS
database has no legal status.  However, for such an exercise, the CTS database could be used solely as
a tool to permit electronic verification.  Only the HS2002 changes which would be verified by WTO
Members and subsequently certified would have legal status after conclusion of the process.
It should be noted that there are other concessions granted in schedules.  These can be on a
tariff-line basis or included in other parts of the schedule.  Tariff-line concessions could include suchthings as initial negotiating rights (INRs), special safeguards (SSG), and other duties and charges
(ODCs).  Concessions in other parts of the schedule could include headnotes, tariff quotas, and other
commitments made under the agricultural parts of the schedule.  It should be noted that in the recent
HS96 process, most countries did not include these in their HS96 submissions,
5 so it is presumed that
these would not be submitted for HS2002, unless Members decide otherwise.
Therefore, assuming that the use of a comparable electronic base can be agreed, the
Secretariat could verify many of the tariff concessions as well.  To further explain, there are HS2002
changes that a) involve new breakout emanating from a single tariff line, b) transfers of a whole tariff
line or part thereof to an existing tariff line, c) conversion of a few or many tariff lines into a new orexisting tariff line or lines, and d) complex cases.
6
In the first example (a), the appropriate tariff concession would be quite clear and easily
identifiable in the electronic base, and thus the new tariff lines would appropriately have the rate from
the emanating tariff line.7
In examples (b) and (c), the situation is not entirely clear as there could be differing rates
from a number of different tariff lines.  There are 64 such items.  As is outlined in the 1983 Decision
Related to the Introduction of the Harmonized Syst em (BISD 30S/17), the basic principle was that
tariff bindings should remain unchanged.  This would normally involve a process that creates newbreakouts in the nomenclature to maintain the existing concession on the product or products
transferred.  However, the Decision notes that in the case where it was unavoidable to combine tariff
lines or parts of tariff lines, there were four basic methodologies for arriving at the new rate:  1)
applying the lowest rate of any previous tariff line to the whole of the new tariff line, 2) applying the
rate previously applied to the tariff line with the majority of trade, 3)  applying the trade weighted
average rate of duty for the new line, or 4) applying the arithmetic average of the previous rates of
duty where no basis exists for establishing reasonably accurate trade allocations.  It is recommendedthat a similar set of principles be applied here and  the Member making the submission provide the
details of which methodology (1-4 noted above) or 5) other (provide explanation) was taken for each
particular item.  In order for the electronic verification to proceed, if options 2) or 3) above were
indicated, and the Member concerned did not have a current IDB submission in the Secretariat, the
Member would also need to supply the necessary trade data.
                                                     
5 Some countries submitted tariff quota information, but hardly any submitted other information.
6 Those items where there are multiple conversions or break-outs and/or allowing for the possibility of
various options (e.g. transfer of certain wastes).  These would have to be handled manually.
7 The work has thus far been analyzed at the 6-digit HS level.  There may be ensuing difficulties if a
Member has a complex tariff system at the 8-, 9- or 10-digit tariff level, as the rate could emanate from anumber of tariff lines.G/C/W/271
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Finally, there are complex cases (d) (19 items), which would likely have to be dealt with
manually, without the use of electronic verification.
Thus, of the 149 changes that require verification of rates of tariff concessions, 67 have rates
that are easily identifiable (see (a) above) and could be electronically verified, 64 have a more
complex situation and as noted above may require additional information to electronically verify, and19 are complex cases that would have to be handled manually (no electronic verification).  After
electronic verification by the Secretariat, a verification sheet would be prepared outlining the
discrepancies found.
2. Documentation for HS2002 Changes
The documentation to be submitted for HS2002 changes would consist of two parts— 1) the
looseleaf schedule (LLS) and 2) concordance tables.  These would need to be submitted in electronic
form and hard copy, but the specific format is flexible.  While it is preferable that the documentation
be submitted in database (e.g. MS Access) or spreadsheet format (e.g. MS Excel), the Member could
also submit in a tabular text format (e.g. MS Word tables).  With technological developments of
standard software packages, the interchangeability has improved and thus the Secretariat is flexible
with any of these formats.
For the loose-leaf part of the schedule, the Member concerned would need to submit only the
items affected by HS2002 changes in the standard LLS format (see G/L/138).8  However, all the items
in the respective 4-digit category of the change would also need to be submitted for clarity.  As shown
in the example below, not only would the two tariff lines affected (0101.10 and 0101.90) need to beshown, but also the 4-digit level (0101) and any other applicable lines in the same 4-digit category.
HS Description Bound rate etc……..
0101 Live horses, asses, mules and hinnies
0101.10 - Pure-bred breeding animals 0
0101.90 - Other 5
For the concordance tables, the usual format (including rates)  would be followed.  This would
include the concordance from HS96 to HS2002, and HS2002 to HS96.9  This would be in a tabular 2-
column format.  See examples of documents to be submitted.
                                                     
8 Members are advised to add an additional column to in dicate the methodology involved in arriving at
the new tariff rate.  The items would be coded 1, 2, 3, 4, or 5 to correspond to the examples noted in the
paragraph at the bottom of page 3.
9 Correlation of the nomenclature that is in the old WTO schedule to the new nomenclature.G/C/W/271
Page 5Example – Loose-leaf part of the schedule
            Concession
        Present              first incorp.      INRs on       Rate
            Rate of duty        Implement-      concessi on                in GATT          earlier  Indication
HS2002         Description         Base Bound              ation       established         INR   schedule       concessions        ODCs      column
0101 Live horses, as..
0101.10 -Pure-bred bre..
0101.10.10 --Horses 0 0
0101.10.90 --Other 5 UR/94 0
0101.90.00 -Other 15 5 2002 UR/94 0
0106 Other live ani….
-Mammals:
0106.11.00 --Primates 10 UR/94 0
0106.12.00 --Whales,
dolphins and …10 UR/94 0 2
0106.19.00 --Other 10 UR/94 0
0106.20.00 -Reptiles …. 10 UR/94 0
-Birds:
0106.31.00 --Birds of prey 10 UR/94 0
0106.32.00 --Psittaciformes. 10 UR/94 0
0106.39.00 --Other 10 UR/94 0
0106.90.00 -Other 10 UR/94 0
Example – Concordance Tables
1996 to 2002
HS96 nomenclature   rate   HS2002 nomenclature rate
0101.11.00 0 0101.10.10 0
0101.20.10 5 0101.10.90 5
0101.19.00 5 0101.90.00 5
0101.20.90 5 0101.90.00 5
ex0106.00 10 0106.11.00 10
ex0106.00 15 0106.12.00 10
etc….G/C/W/271
Page 62002 to 1996
HS2002 nomenclature   rate   HS96 nomenclature rate
0101.10.10 0 0101.11.00 0
0101.10.90 5 0101.20.10 5
0101.90.00 5 0101.19.00 5
0101.90.00 5 0101.20.90 5
0106.11.00 10 ex0106.00 10
0106.12.00 10 ex0106.00 15
etc…G/C/W/271
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Attachment B
PROCEDURE TO INTRODUCE HS2002 CHANGES TO SCHEDULES OF CONCESSIONS
Contracting parties to the HS Convention are required, pursuant to Article 16 of the HS
Convention, to introduce HS changes into their national tariffs on 1 January 2002.  WTO Members
who are HS contracting parties should introduce these changes to their schedules of concessions.  In
addition, WTO Members applying the HS on a de facto  basis and who intend to implement HS
changes to their national tariffs  should also introduce the relevant changes to their WTO schedules of
concessions.  For the purpose of introducing HS changes to schedules of concessions, a decision
entitled "GATT Concessions under the Harmonize d Commodity Description and Coding System -
Procedures to Implement Changes in the Harmoni zed System" (Annex to L/6905, BISD 39S/300) was
adopted by the GATT Council on 8 October 1991.   However, for those Members intending to apply
HS2002 changes to national tariffs , specific procedures to introduce those changes to schedules of
concessions have been drawn up and are set out below.
Members should aim to complete the following procedures sufficiently in advance of their
implementation of the HS2002 changes so as to allow adequate time for required domestic
procedures.  They  should submit the documentation envisaged under paragraph 1 of the procedures as
soon as possible.
- Procedures
1. The Member shall submit the proposed change s to its loose-leaf schedule arising from
HS2002 (including the four digit HS tariff li nes), in hard copy and electronic form to
the Secretariat.  The submission shall  be circulated or made available to all Members in
hard copy and electronic form.
2. The Secretariat will review the proposed  changes using electronic verification as
provided for in Section I, paragraph 1 and will  prepare a verification sheet which will
be circulated or made available to all Members at the latest four weeks after the
circulation of the documentation under 1.
3. Multilateral review of the proposed chan ges shall take place in the framework of
informal dedicated sessions of the Committee on Market Access.  Such sessions shall
take place every second month or as required.
4. No earlier than six weeks  after the circulation of the verification sheet  under
paragraph 2, the Committee on Market Access will  meet as indicated under paragraph
3.  Specific queries by Members should, to the extent possible, be submitted  by that
meeting  with respect to a schedule, and the Member to which the questions are
addressed should, to the extent possible , respond by the time of the first multilateral
review session after the expiry of a six-w eek period following receipt of the query.
The status of bilateral discussions and consultations between Members including
Article XXVIII renegotiations10 should be reported  to other Members at these
Committee sessions to ensure full transparency11.  For this purpose, Members are
advised to keep the Secretariat informed, to the extent possible.
                                                     
10 In case where a request for renegotiation or consultation has been made under Article XXVIII, the
Procedures for Negotiations under Article XXVIII (BISD27S/26) shall apply.
11 Status reports by the Secretariat would include:   the number of countries objecting, the date of
objection(s), and the date of response(s).G/C/W/271
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5. Any revisions and addenda that a Member may wish to introduce to its original
submission  of proposed changes should be provided in hard copy and in electronic
form and they will  be circulated or made available to all Members by the Secretariat.
Revised verification sheets might need to be prepared in light of the new notification
and will  be circulated or made available to all Members by the Secretariat.   Steps  2
to 4 will apply to the new documentation, unless otherwise agreed by the
Committee12.
6. The Secretariat will maintain a written record (along the lines of the informal list
detailing the status of submissions of HS96 documentation)  of the  progress made on
each schedule which will  be circulated to all Members prior to the informal dedicated
sessions of the Market Access Committee.  Informal  records of these informal
dedicated sessions will  also be prepared by the Secretariat and will  be available for
consultation.
7. For introducing the proposed changes in the authentic texts of schedules, no later than
4 months after the circulation of the verification sheet by the Secretariat in paragraph2 above, and provided no specific queries are outstanding in relation to paragraphs 4-
5 above,  a final version of the schedule incorporating any corrections, revisions and
addenda shall be prepared by the Secretariat and certified by the Director-General.
8. Developing country Members  may request technical assistance from the Secretariat
for the preparation of the relevant documentation in hard copy and electronic form.
Bearing in mind that technical assistance takes many forms, it is possible for the
Secretariat to prepare a Member's documentation on proposed changes in Geneva
subject to the Member providing its national tariff schedule in the HS 2002
nomenclature.
9. In case a Member has a query or comment concerning another Member's HS2002
changes, but is unable to attend the meeting at which these changes are to be verified,
it may request, through a written communication to the Chair that the Chair make a
statement on its behalf at that meeting.
__________
                                                     
12 The Committee might agree that the changes introduced  to the original notification are so minimal in
nature so as to not warrant such lengthy time-periods for their review.