Asialaw - Clarity for Corporate Counsel

The ASEAN Harmonized Tariff Nomenclature

Date: November 2004

The Philippines, in compliance with its undertaking (under the ASEAN Agreement on Customs which was signed on March 1 1997) to adopt a tariff nomenclature common to all the ASEAN member countries at the eight-digit level, finally adopted the ASEAN Harmonized Tariff Nomenclature (AHTN) on March 11 2004 with the issuance of Customs Memorandum Order No. 6-2004. The AHTN supplements the Harmonized Commodity Description and Coding System (HS Code).

The AHTN is an eight-digit commodity nomenclature adopted by the ASEAN member countries (i.e. Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) to harmonize their tariff nomenclature at the eight-digit level. It adheres to the six-digit commodity classification code of the HS Code of the World Customs Organization but adds two digits or level codes that represent ASEAN subheadings. It is comprised of (a) the General Rules for the Interpretation of the Harmonized System, (b) the Section, Chapter and Subheading Notes, and (c) the list of headings and subheadings with their corresponding rates of duty.

The implementation of the AHTN is governed by the Protocol Governing the Implementation of the ASEAN Harmonized Tariff Nomenclature (the AHTN Protocol) which took effect on August 7 2003. The objectives of the AHTN Protocol are to: (a) establish and implement the AHTN so as to facilitate trade in the ASEAN region, (b) establish clear rules which would govern the implementation of the AHTN, its explanatory notes and their amendments, (c) establish uniformity of application in the classification of goods in the ASEAN region, (d) enhance transparency in the classification process for goods in the ASEAN region, (e) simplify the AHTN and (f) create a nomenclature which would conform to international standards and reflect the changing patterns of international trade and technology. Annexed to the AHTN Protocol are Supplementary Explanatory Notes that clarify or explain the ASEAN subheadings. The AHTN Protocol may be amended, but only by mutual agreement of all the ASEAN member countries.

Under the AHTN Protocol, the ASEAN member countries are obliged to abide by the HS Code and apply the AHTN up to the eight-digit level for all trade transactions for tariff, collection of statistical data and other purposes. However, they are allowed to create their own national subheadings beyond the eight-digit level. They are also allowed to amend the AHTN under the amendment procedures of the AHTN Protocol. These procedures may only be effected if: (i) amendments have been made to the HS Code and/or descriptions, (ii) amendments to the ASEAN subheadings for purposes of simplification are being proposed; or (iii) amendments are proposed which arise from the requirements of the ASEAN member countries, changes in technology or in patterns of international trade, or in other circumstances deemed desirable by ASEAN.

In case of dispute between the ASEAN member countries in the interpretation or application of the AHTN Protocol, the AHTN Protocol provides that such a dispute should, as far as possible, be settled amicably. If settlement cannot be reached, the dispute should be submitted to the ASEAN Directors-General of Customs, which is the body charged with monitoring, reviewing and supervising the implementation of the AHTN Protocol. If settlement still cannot be reached, the dispute should then be referred to the ASEAN Finance Ministers Meeting. The AHTN Protocol also provides that the ASEAN member countries should, at the written request of an ASEAN member country, enter into consultations if that requesting ASEAN member country considers that any of the objectives of the AHTN Protocol is not being achieved or may be frustrated, or that an obligation under the AHTN Protocol has not been fulfilled, is not being fulfilled or may not be fulfilled.

The harmonization of the tariff nomenclature of the ASEAN member countries up to the eight-digit level should facilitate trade within the ASEAN region since it helps settle disputes or differences in the classification of commodities that were not clearly or specifically classified by the limited six-digit level codes of the HS Code. To further minimize, if not eliminate, classification differences or disputes in the ASEAN region, the ASEAN member countries should also endeavor to create a body that would make binding and conclusive AHTN classification rulings for specific commodities that could be enforced through local legislation or regulation.