In a world governed by numerous languages and vibrant cultures, HS codes serve as a unified language that legally and logically links worldwide trade. It is implemented by 200 nations, accounting for nearly 98% of global trade. Harmonised System (HS) codes identify items exported or imported across international borders. Different items fall into different tax bands; therefore, HS codes assist customs officials in determining the appropriate charges and taxes for them.
HARMONISED SYSTEM: HOW IS IT STRUCTURED?
The Harmonised Commodity Description and Coding System (or, more simply, the Harmonised System) is controlled by a convention designed by the World Customs Institution (WCO), an international institution tasked with coordinating global customs regulations. The system is updated every five years to reflect the changes in the worldwide market and the items traded within it. The HS standardises the identification of the same goods traded between several nations by issuing a six-digit code. Individual country authorities may add additional digits for statistics and analytical purposes. In the European Union, for example, the Commission yearly updates the so-called Combined Nomenclature (CN), which is based on eight digits and used for intra-Union commerce. The code assignment follows the idea of increasing relevance. What exactly does this mean? The number of digits in the code determines its specificity in characterising the product. However, only the first six numbers are legally accepted globally; therefore, buyers in other nations sometimes fail to recognise the codes used by exporters. HS codes are currently used for over 5,000 product categories organised into 21 divisions. Governments require HS codes to improve openness and accountability when levying taxes on imported and exported products.
WHY ARE LOCAL BUSINESSES NOT HAPPY WITH IT?
When importing a new type of raw material that is not on the National Board of Revenue’s (NBR) list of harmonised system codes, bureaucratic tangles arise, forcing exporters with bond permits to go through the process of enlisting. For example, a seven-day task can take up to two months to harmonise the coding of new goods. Furthermore, NBR authorities’ reluctance to approve the use of bond facilities by a small number of dishonest enterprises causes additional delays for people in need.
A few months ago, leaders of Bangladesh’s garment sector said customs officials harassed them when importing raw materials for export items and putting them in bond permits. The heart of the problem is the addition of new items to the export item and the time-consuming procedure of adding raw imported components to the bond license. A bond licence is necessary to import duty-free items. There are several bond licences, including exporter, manufacturer, and commercial. RMG exporters import products, primarily raw materials, for export purposes under the bond licence. When enterprises appeal to customs officials to have imported goods included in the bond licence, there have been accusations that NBR only allows a subset of the imported goods. Several RMG leaders have reported experiencing bribery requests, delays in entrance for newer items, and the resulting problems and demurrage.
Products and their HS codes vary throughout time, but each time there is one, firms must pass customs, where more clarifications are required. Customs creates several issues while attempting to enter the new HS code. Large bribes are frequently needed to release these items from customs. People may ask why firms fail to follow the system, yet doing so results in enormous delays in product release, which typically leads to shipment deadlines expiring.
SOLUTION TO THE HS CODE DILEMMA
The intricacy of the NBR’s HS Code is a significant issue that must be solved quickly if Bangladesh is to achieve product variety. The problem that firms confront is the requirement for fresh materials to create new goods. This backward connection has not yet been fully established in Bangladesh. Thus, owners must import these items. While doing so, they encounter HS Code problems when clearing the products via customs. There is no room for even a slight error in HS codes. When customs officers determine that a shipment of goods does not match HS codes, they promptly cancel its duty-free status and charge an average tariff under a different HS code.
According to industry experts, a continually changing market necessitates acquiring new types of raw materials that are not on the NBR’s standardised list. Many businesses have difficulty importing raw materials due to HS code-related complications produced by numerous loose threads in authorising HS codes. It isn’t easy to get away with mistyping an HS Code for shipment. With stringent standards and filtering undertaken by customs officials, any discrepancy will have profound implications. According to business executives, all HS code concerns should be automated. An integrated system might alleviate the issues. The system must be improved so that it can automatically identify changes in specific machines without the need for human intervention. Simplifying the legal framework, as well as officials’ more honest and helpful attitudes, can help to reduce difficulties.
Author: Amar Chowdhury
