The International Convention on the Harmonized Commodity Description and Coding System (“HS Convention”) was amended on January 1, 2022.  An amendment to the HS Convention typically involves an amendment to the HS Nomenclature, which is an annex to the HS Convention.  The HS Convention can be amended when there are requests from governments, customs agencies, or traders that use Harmonized System (“HS”) codes, or when an amendment becomes necessary as a result of  technological developments or changes in international trade patterns.  Generally speaking, the HS Convention is amended every five years.

In accordance with the 2022 amendments to the HS Convention, Korea has also amended the Tariff Schedule, the Harmonized Tariff and Statistical Schedule (Notification of the Ministry of Strategy and Finance; “HSK”), and the HS Commentary (Notification of the Korea Customs Service (the “KCS”)), which are included in the annex of the Customs Act.  These amendments took effect on January 1, 2022.  The HSK is a 10-digit HS classification table that categorizes products according to the needs in Korea, and is based on the six-digit HS codes established by the World Customs Organization.  As a result of the amendment, the number of products listed in the HSK has decreased, from 12,242 to 11,293 (341 products newly added and 1,290 deleted).

The key amendments to the HS Nomenclature are as follows.
 

1.   Amendments to HS Classification of Industrial Waste Under Basel Convention

Amidst ongoing industrial development, various types of waste that are difficult to dispose of are being generated globally.  In recognition of the need for international norms that control and restrict the transfer and disposal of waste, in 1992, the Basel Convention was enacted to control the cross-border movement and disposal of hazardous waste.  

The HS Committee reviewed an amendment that proposed to include waste relating to machinery, electrical machinery and equipment and parts thereof (“e-Waste”) in Chapter 85.  Based on its review, Heading 8549 was newly added and, among other things, waste of electrical and electronic assemblies, printed circuit boards, or electrical and electronic products were classified under this heading. 
 

2.   Amendments Relating to New Products

The HS Committee also discussed Electrically Heated Tobacco Products (“EHTP”), which are used in the method of smoking in which tobacco is placed in a specialized device (also known as an e-tobacco vaporizer) and electrically heated to generate vapor containing nicotine.  The HS Committee newly added Heading 2404 to classify new types of tobacco and nicotine products in Chapter 24, and amended the HS Nomenclature to classify solutions for e-tobacco and smoking cessation products (e.g., nicotine products for oral or transdermal application).  In addition, vaporizers for inhaling such tobacco substitutes were classified under Subheading 8543.40 and hence newly added under Heading 8543.
 

3.   Amendments to Latest Information and Communications Technology 

• Establishment of a heading for flat panel display module
  Korea submitted a proposed HS amendment to the World Customs Organization’s (the “WCO”) HS Committee in relation to flat panel display modules, for which there have been numerous international disputes about HS classification.  As a result, this year, flat panel display modules were integrated under the newly added Heading 8524 and its components were classified under Heading 8529, allowing for clearer HS classification.  This is expected to go far in helping to resolve international disputes and inconsistencies in HS classification based on the four-digit HS classification of flat panel displays.

• Establishment of a subheading for smartphones
  In line with the development of information technology, amendments have been made to clearly define smartphones in the HS Nomenclature.  Note 5 to Chapter 85 was newly added to define smartphones and subheading of 8517.13 was also newly added to classify them.  In addition, antennas were classified as parts for communication devices under Subheading 8517.71.  However, with recent improvements in the technology and performance of smartphones, the distinction between portable automatic data processing machines (tablet computers) under Heading 8471 and smartphones under Heading 8517 has become increasingly vague.  Consequently, it is expected that HS classification disputes will continue.

• Other
  In addition, the six-digit subheading system classifying photosensitive semiconductor devices and LEDs was amended.  LEDs, non-modulized photovoltaic cells, and modular photovoltaic cells are now classified under Subheadings 8541.41, 8541.42, and 8541.43, respectively.
   

4.   Amendments to Labeling of Transportation Equipment

• Establishment of subheadings for electric and hybrid vehicle tractors and trucks
  Reflecting the trend of ongoing development of electric and hybrid vehicles, the proportion of electric and hybrid vehicles has gradually increased not only for passenger vehicles and motorcycles, reflected in the amendments under HS 2017, but also for tractors (Heading 8701) and trucks (Heading 8704).  As a result, a subheading was added to distinguish electric and hybrid tractors (Heading 8701) and trucks (Heading 8704), based on their driving methods.

• Unmanned aircrafts and drones
  Heading 8806 was added to allow for unmanned aircrafts and drones to be categorized under one heading, regardless of their use.  However, flying toys, which are designed and manufactured only for amusement purposes, are still classified under Heading 9503.  An “unmanned aircraft” under the newly-added Heading 8806 refers to an aircraft that is remotely controlled without a pilot or controlled through a pre-set automatic flying program.  As such, an unmanned passenger aircraft that carries passengers without a pilot is also classified under Heading 8806.  In addition, aircraft components which were previously classified under Heading 8803 are now classified under Heading 8807.

The above amendments to the HS Nomenclature are being made five years after the last amendments and can be viewed as relatively significant.  Changes in the HS codes may affect tariff rates and FTA preferential tariff and import requirements.  Therefore, companies should pay close attention to whether any changes are being made to the HS codes of products they deal with.  If a company finds it difficult to determine the correct HS classification for a product, it can consider making use of KCS’s “Preliminary Review on HS Classification” system.