Explanatory Notes — Product Classification

Both export and import statistics are classified and published according to the "Harmonized Commodity Description and Coding System or Harmonized System (HS)" and country-specific extensions thereof.

The Harmonized System (HS) is an international commodity classification (with six-digits codes) developed under the auspices of the World Customs Organization (WCO), an independent intergovernmental body formerly called the Customs Cooperation Council.

In practise, what happens is that Canada and U.S. Customs use the Harmonized System as the basis for their import (tariff) and export classifications. The categories defined under the Harmonized System (which are identified by a six-digit code) are further broken down and additional country-specific digits are added to the 6-digit code. This is discussed in further detail in the section Application of the Classification.

The classification is reviewed and revised every 5 years.

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Basis of Nomenclature

The Harmonized System is based on a fundamental principle that goods are classified by what they are and not according to their stage of fabrication, "made in Canada" status, or any other such criteria. In some cases, end-use is considered when a product is specifically constructed for it.

The Harmonized System nomenclature is logically structured by economic activity or component material. For example, animals and animal products are found in one section; machinery and mechanical appliances which are grouped by function are found in another.

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Structure of the Harmonized System

The nomenclature is divided into 21 Sections, which (in general) group goods produced in the same sector of the economy.

Each Section is comprised of one or more Chapters, with the entire nomenclature being composed of 97 Chapters. Chapter 77 is reserved for possible future use; and Chapters 98 and 99 are used for administrative purposes to record special transactions.

The chapters of Sections I to XV (except Section XII) are grouped by biological genus (e.g. live animals, animal products, fish, dairy products, etc.) or by the component material from which articles are wholly or mainly made (e.g. Section VIII contains Chapter 41 - Raw Hides and Skins and Chapter 42 - Articles of Leather, etc.).

In Sections I to XV (except Section XII), the groups of products formed according to their basic material are structured or divided in two ways:

• Horizontal - For the groups of products formed according to their basic material, there is no apparent hierarchical order (e.g. Chapter 39 - Plastics and Articles Thereof or Chapter 44 - Wood and Articles of Wood); i.e. there is no discernable reason why plastic should precede wood.
• Vertical - For those chapters in which goods are grouped by raw material, there is, however, a vertical structure in which articles are often classified according to their degree of processing. For example, Chapter 44 contains items such as rough wood, wood roughly squared and some wooden finished products such as wooden tableware.

Articles may also be classified according to the use or function. This classification (i.e. by function), mainly occurs in Section XII and Sections XVI - XXI. For example, Section XVII contains:

• Chapter 86 - Railway Locomotives, etc.
• Chapter 87 - Vehicles other than Railway, etc.
• Chapter 88 - Aircraft, etc.
• Chapter 89 - Ships, etc

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Illustrative Example

In order to illustrate the hierarchical structure of the HS, the following example is given:

HS 06 - Chapter (HS2)

Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage;

HS 0601 - Heading (HS4)

Bulbs, tubers, tuberous roots, corms, crowns and rhizomes,dormant, in growth or in flower; chicory plants and roots other than roots of heading (HS 1212)

HS 060110 - Subheading (HS6)

Bulbs, tubers, tuberous roots, corms, crowns and rhizomes, dormant;

The codes are often written with periods to separate chapter, heading and sub-heading. For instance, HS 06.01.10 instead of HS 060110. Periods are not used on this site.

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Administrative Codes

Chapters 98 and 99 of the Harmonized System are used to record special transactions such as:

• low value transactions
• repairs to equipment
• goods returned to the country of origin
• confidential transactions
• private donations and gifts
• military equipment and supplies
• settler's personal and household effects
• articles sent to diplomatic posts
• duty-free shop item purchases
  and so on.

Trade for these will always be reflected in the total, but no details on these is available as this information is not recorded against any specific product (HS) code in Chapters 1 to 97.