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WCO General Interpretive Rules (GIR) Explained FIRST STEPS TO CREATE AN INTERNATIONAL CODIFIED LANGUAGE General Interpretive Rules (GIR) 1 to 3: • GIR 1 is the foremost rule of classification. It specifies the elements that can legally be used to classify products. • GIR 2 is in two parts. It seeks to ensure that articles and products are not left unclassifiable by reason of being incomplete, unfinished, unassembled or disassembled, mixed or made of multiple materials. • GIR 3 provides classification principles for goods which, prima facie (on face value / at first glance), fall under two or more headings. It has three parts which are applied sequentially until a classification is determined. 52 hs-compendium.pdf (wcoomd.org)
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WCO General Interpretive Rules (GIR) Explained First Steps to create an International Codified Language (Continued) General Interpretive Rules (GIR) 4 to 6: • GIR 4 deals with goods which (for example because they have just appeared on the world market) are not covered by any heading of the Harmonized System, even by the material that they are made from. In the unlikely event it is needed, this GIR provides for classification with the goods to which are most similar in nature. • GIR 5 relates to containers and packaging for goods. Few goods are traded without being packed in some way. This leaves the question of how to account for these packing materials and containers. • GIR 6 requires the whole process to be repeated again as a separate exercise to choose the five-digit subheading and then again for the six-digit subheading level as required. 54
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WCO Section Notes Explained NEXT STEPS TO CREATE AN INTERNATIONAL CODIFIED LANGUAGE • Certain Sections and Chapters are preceded by Notes which, like the General Interpretative Rules, form an integral part of the Harmonized System and have the same legal force. • Some of these Notes, grouped under the title “Subheading Notes”, refer solely to the Interpretation of subheadings. • The function of these Notes is to define the precise scope and limits of each subheading, heading (or group of headings), Chapter or Section. This has been achieved, depending on the circumstances, by the following means: ◦ Definitions ◦ Inclusions ◦ Exclusion ◦ Method of Classification 56
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WCO Heading & Subheading Notes Explained Next Steps to create an International Codified Language (continued) • In the Harmonized System, the headings (with their subheadings) are arranged in 97 Chapters, which are themselves grouped in 21 Sections. • As a general rule, goods are arranged in order of their degree of manufacture: raw materials, unworked products, semi-finished products, finished products. Example: Live animals fall in Chapter 1, animal hides and skins in Chapter 41, and leather footwear in Chapter 64. • The same progression also exists within the Chapters and Headings. • Under GIR 1, the Chapter and Section titles are not legally binding. They are provided for ease of reference only, and have therefore been drawn up in concise and very general terms. 58
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Structure of the Harmonised System 60 GIR 1 GIR 2-5 GIR 6 Section Notes Chapter Notes Subheading Notes 4-Digit Headings 5-Digit Subheadings 6-Digit Subheadings GIR = General Interpretation Rules (6 Rules for Tariff Classification) The 3 Components of the HS: 1. General Interpretation Rules (GIR 1 – 6) of the HS 2. Section & Chapter Notes 3. The list of headings arranged in a systematic order, and subdivided into subheadings 84.71 – Automatic Data Processing Machines (Computers) 8471.4 – OTHER Automatic Data Processing Machines 8471.41 – Comprising in the same housing… (Laptop)
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RSA Customs & the Harmonised System (HS) • On 1 January 1988, South Africa officially adopted the new harmonised tariff system and the harmonised system as structured for use in South Africa is set out in Schedule 1 Part 1 of the Customs and Excise Act. • The legal use of the harmonised system and its interpretation in terms of the Explanatory Notes is embodied in Section 48(1)(c) of the Customs and Excise Act, reading with Section 47(7) and 47(8). • Below is an extract taken from the SARS Customs website. 62 HS 2012 – South African Revenue Service (sars.gov.za)
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LESSON 2 64 Essential Knowledge Introduction to the Tariff: Schedule 1
Lesson 2 Essential Knowledge Component HS Classification Rules The Structure of the RSA Customs and Excise Act Tariff Headings, Sub-headings & Codes (Understanding the Codified HS) First Steps to Tariff Classification Basic Tools and Know-how General Notes A to Q & Articles to Schedule 1 General Interpretation Rules (GIR) (aka GRI) Section and Chapter Notes to Schedule 1 Part
The Structure of the RSA Customs and Excise Act • There are ten (10) Schedules to the Act of which eight (8) are presently in use, all link with Schedule 1, where tariff classification takes place • Schedule 7 is void, and Schedule 9 has been withdrawn • Trade Agreements (Schedule 10), consist of 8 Parts (Trade Agreements) 66 https://www.sars.gov.za/legalcounsel/primarylegislation/schedules-to-thecustoms-and-excise-act-1964/ Schedule 1 The Tariff Part 1 Ordinary Duties Part 2A Excise Duties Part 2B Ad-valorem Duties Schedule 2 “Protection Duties” Anti-dumping Duties Countervailing Duties Safeguard Duties Rebate Schedules Refund & Drawback Schedules Schedule 3 Industrial Rebates Schedule 4 General Rebates Schedule 5 General Refunds & Drawbacks Schedule 6 Excise Refunds & Drawbacks Other Matters Schedule 8 Licensing Schedule 10 Trade Agreements Trade Agreements Parts 1 - 8
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Additional (Tax) Parts to Schedule 1 68 Schedule 1 The Tariff Part 1 Ordinary Duties Part 2A Excise Duties Part 2B Ad-valorem Duties Schedule 2 “Protection Duties” Anti-dumping Duties Countervailing Duties Safeguard Duties Rebate Schedules Refund & Drawback Schedules Schedule 3 Industrial Rebates Schedule 4 General Rebates Schedule 5 General Refunds & Drawbacks Schedule 6 Excise Refunds & Drawbacks Other Matters Schedule 8 Licensing Schedule 10 Trade Agreements Trade Agreements Parts 1 - 8 Levies Parts 3 to 5 & 7 to 8 Part 6 Export Duties Schedule 1 in fact contains more parts, other than Parts 1 & 2 only. • Part 3 to 5, and Parts 7 to 8, are levies (additional taxes) payable on top of the duties in Parts 1 and 2. • Each type of levy has its own codified system, LINKED to the tariff classification code located in Schedule 1 Part 1. • Export duties in Part 6 are levied against scrap metal (6 A) and the export duty item starts with code 193.00. Once again, it is linked to the classification code of such scrap metals indicated in Schedule 1 Part 1. (see examples on next slide)
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Examples of Additional (Tax) Parts to Schedule 1 70 IMPORTANT: The 1st number of the codified system, indicates under what specific schedule such an items is applied to Examples: Schedule 1 = Levy Code starts with a 1 (147.00), Schedule 3 = IR starts with a 3 (317.06), Schedule 4 = GR starts with a 4 (470.00) Levy / Export Duty Codes are linked to the Tariff Classification Codes
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The Tariff – Schedule 1 Part 1 Structure BACKGROUND INFORMATION https://www.sars.gov.za/wp-content/uploads/Legal/SCEA1964/LAPD-LPrim-Tariff-2012-04-Schedule-No-1-Part-1-Chapters-1-to-99.pdf • In the RSA Customs context, there are a total of 22 Sections devised into 99 Chapters for tariff classification purposes. • In the WCO HS structure, there are a total of 21 Sections devised into 97 Chapters. • In the RSA Customs context, Chapter 98 is dedicated to the automotive industry and describes the classification of Original Equipment Components (OEC) supplied by Original Equipment Manufacturers (OEM) to Motor Vehicle Manufacturers (MVM). Chapter 98 was thus created for the old Motor-vehicle Industrial Development Programme (MIDP), which is now known as the Automotive Production Development Programme (APDP) (Phase II). • Chapter 99 covers miscellaneous articles such as hand-made articles, household consumables, ship’s and aircraft’s stores, and personal and household effects (new or used).
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The Tariff – Schedule 1 Part 1 Structure SECTIONS Classification Sections 1 to 22 I – IV - agricultural products, food, beverages V – VII - mineral products, chemicals, plastics, rubber VIII - hides, skins, leather articles IX – X - wood, cork, paper, paperboard XI - textiles XII - footwear, headgear, umbrellas XIII - articles of stone, plaster, cement, ceramics, glass XIV - pearls, precious stones XV - base metals, articles of base metal XVI - machinery and electrical goods XVII - vehicles, aircraft, vessels XVIII - optical, photographic, medical XIX - arms, ammunition XX - miscellaneous manufactured articles XXI - works of art, antiques XXII - special classification provisions (motor vehicle manufacturing) and miscellaneous
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The Tariff – Schedule 1 Part 1 Structure SECTIONS DEVISED INTO GROUPS OF CHAPTERS SECTION CHAPTER SUMMARY OF CONTENTS / CHAPTER HEADINGS I. 1 – 5 Live animals; animal products II. 6 – 14 Vegetable products III. 15 Animal or vegetable fats, oils and waxes IV. 16 – 24 Prep foodstuffs; beverages, spirits and vinegar; tobacco V. 25 – 27 Mineral products – fuels, oils, lubricants VI. 28 – 38 Products of Chemical or allied industries VII. 39 – 40 Plastics, rubber and articles thereof VIII. 41 – 43 Raw hides/skins, leather, fur skins, travel goods, handbags; IX. 44 – 46 Wood, cork, straw, basket-ware and wickerwork X. 47 – 49 Pulp of wood; paper and paperboard and articles thereof XI. 50 – 63 Textiles and textile articles XII. 64 – 67 Footwear, headgear, umbrellas, walking sticks, whips, feathers, artificial flowers, articles of human hair Next…
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The Tariff – Schedule 1 Part 1 Structure Sections devised into Groups of Chapters Next… SECTION CHAPTER SUMMARY OF CONTENTS / CHAPTER HEADINGS XIII. 68 – 70 Articles of stone, plaster, cement, asbestos mica, ceramics, glass and glassware XIV. 71 Natural or cultured pearls, precious stones and metals, imitation jewellery, coin XV. 72 – 83 Base metals and articles of base metal XVI. 84 - 85 Machinery and electrical equipment and parts; sound recorders and reproducers, television image and sound recorders and reproducers and parts XVII. 86 – 89 Vehicles, aircraft, vessels and associated transport equipment XVIII. 90 – 92 Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; clocks and watches; musical instruments; parts and accessories thereof XIX. 93 Arms and ammunition; parts and accessories thereof
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The Tariff – Schedule 1 Part 1 Structure Sections devised into Groups of Chapters SECTION CHAPTER SUMMARY OF CONTENTS / CHAPTER HEADINGS XX. 94 – 96 Miscellaneous manufactured articles (furniture, bedding, mattresses, cushions, lamps, light fittings, toys, games, sports equipment etc.) XXI. 97 Works of art, collectors’ pieces and antiques XXII. 98 - 99 Original Equipment Components and Miscellaneous • The Sections are representative of various types of industries following in a progressive order. • The Chapters, or groups of Chapters, therefore refers to specifics pertaining to those industries. This is best displayed when consulting Schedule 3 – Industrial Rebates, for a better understanding.
Example of the Tariff: Schedule 1 Part 1 81
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Tariff Headings, Sub-headings & Codes (Understanding the Codified HS) 83
The RSA Tariff Structure – Schedule 1 Part 1 TARIFF HEADINGS, SUB-HEADINGS & RATES OF DUTY Tariff Classification Codes • Column 1 – Heading & Subheading • Column 2 – CD (Check digit) • Column 3 – Article Description • Column 4 – Statistical Unit Duty Tariff (Rates or Duties) • Column 5 – Ordinary Rate of Duty • Column 6 – EU Rate of duty • Column 7 – EFTA Rate of duty • Column 8 – SADC Rate of Duty • Column 9 – MERCOSUR • Column 10 - AfCFTA 84 1 2 3 4 5 6 7 8 9 10 https://www.sars.gov.za/wp-content/uploads/Legal/SCEA1964/LAPD-LPrim-Tariff-2012-04-Schedule-No-1-Part-1-Chapters-1-to-99.pdf
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The Logical Sequencing of the HS Tariff and Code • The Tariff Heading is the main classification of the item (international TH = 4 digits): Expressed as 40.09 • The Level 1 Tariff Sub-heading covers a range of items (international TH = 5 digits): Expressed as 4009.1 • The Level 2 Subheading is the item qualifier (international TH & Code = 6 digits): Expressed as 4009.11 • The Level 3 Sub-subheading is the item specific (local TH & Code = 8 digits): Expressed as 4009.21.10 Check Digit (CD): To complete the Tariff Classification, a 9 th digit called a “check digit” is added (this is for computer verification only). In this case to complete the full tariff heading and code will be 4009.21.10/9 (the 9 is the CD). EXAMPLE: 86
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RSA Tariff Structure – Headings & Sub-headings 88 Tariff Sub-Heading (5 digits) Sub-heading Sub-heading Sub-heading Tariff Heading Tariff Heading = Main Heading (4 digits)
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Tariff Code Sub-heading RANGE Indicators 90 The Range Indicator tells us where the sub-heading is starting, and within that range we will find the Level 2 Sub-headings and the Level 3 Sub(sub)-Headings Range 1 Range 2 Range 3
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Levels (Main, Level 1 – 3) Headings and Sub-headings Level Ind. Heading / Sub-heading Description Main Heading 0207 Meat and edible offal, of the poultry of heading 01.05, fresh, chilled or frozen: Sub-heading (1st Level) 0207.1 - Of fowls of the species GALLUS DOMESTICUS: Item Qualifier (level 2 subheading) 0207.11 - - Not cut in pieces fresh or chilled Item Qualifier (level 2 subheading 0207.12 - - Not cut in pieces frozen: Item Specific (level 3 subheading) 0207.12.10 0207.12.20 0207.12.90 - - - - - - - - - Mechanically deboned meat Carcasses (excluding necks and offal) with all cuts (e.g. thighs, wings, legs and breasts) removed Other Item Qualifier (level 2 subheading) 0207.13 - - Cuts and offal, fresh or chilled Item Qualifier (level 2 subheading) 0207.14 - - Cuts and offal, frozen: Item Specific (level 3 subheading) 0207.14.10 0207.14.20 0207.14.90 - - - - - - - - - Boneless cuts Offal Other 92
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International Tariff Headings I. INTERNATIONAL TARIFF HEADINGS (TH) (MAIN HEADING = 4-DIGITS) Example: Natural cork, raw or simply prepared; waste cork; crushed, granulated or ground cork. • The first 2-digits of a heading relate to the Chapter in which the heading appears (45.01). • The last 2-digits therefore relate to the description of separate articles pertaining to the Chapter (45.01). These last 2-digits complete the Tariff Heading and they always commence with .01 and advance numerically upward without any omissions (i.e. 45.01 – 45.04) 94
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Subheadings – Level 1 Codes II. INTERNATIONAL CHAPTER SUBHEADINGS (RANGE = 5-DIGITS) Example: Tariff Heading 46.01 with Sub-heading .2 (written as 4601.2) • Chapter 46 = Manufacturers of straw, of esparto or of other plaiting materials; basketware and wickerwork. • The 1 st main tariff heading 46.01 covers, “Plaits and similar products of plaiting materials, whether or not assembled into strips; plaiting materials, plaits and similar products of plaiting materials, bound together in parallel strands or woven, in sheet form, whether or not being finished articles (for example, mats, matting, screens):” • The Level 1 Sub-heading, indicated as 4601.2, covers “Mats, matting and screens of vegetable materials:”. It is indicated with a single dash (-), telling us there is range of item qualifiers to follow, indicated as: ◦ 4601.21 - - “of bamboo”, 4601.22 - - “of rattan”, and 4601.29 - - “Other” 96
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Example of International Level 1 Chapter Subheadings (RANGE = 5-digits) 98 Level 1 Subheading (Range) Indicator (one dash) Range of Products
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Subheadings – Level 2 Codes III. INTERNATIONAL CHAPTER SUBHEADINGS (ITEM QUALIFIERS = 6-DIGITS) Example (continued): Tariff Heading 46.01 with Sub-heading .93 (written as 4601.93) Chapter 46 = Manufacturers of straw, of esparto or of other plaiting materials; basketware and wickerwork. • Main tariff heading 46.01 covers, “Plaits and similar products of plaiting materials, whether or not assembled into strips; plaiting materials, plaits and similar products of plaiting materials, bound together in parallel strands or woven, in sheet form, whether or not being finished articles (for example, mats, matting, screens)”, and in the sub-heading, .93 “Of rattan”. • The international harmonised system provides for the subdivision of the 4-digit Tariff Headings up to a maximum of six digits (i.e. 4601.93). The international system ends here and plays no further role in the structure of individual tariffs. 100