Timber has always been a global trade. Trading, development and innovation require knowledge of products, technical matters, markets and the legal issues of different countries. Applying this knowledge is fundamental to business growth and profit.
Against this background, it is vital for the timber trade to stay abreast of the current revision in international product codes.
All goods traded are allocated a classification code. Those for global trading are known collectively as the ‘harmonised system’ (HS) and have six digits. Within Europe, they are extended to eight digits and termed the ‘Combined Nomenclature’ (CN) (referred to in the UK as ‘prodcom’).
The CN comprises 96 chapters for different sectors. For the timber industry the relevant chapter is 44 which is divided into 21 main classifications, further sub-divided into 191 separate divisions. And that, in a nutshell, is why the World Customs Organisation has launched a revision of the whole coding system, due for completion by 2007.
Code overhaul
Over the years these complex codes have spawned a huge administrative bureaucracy. Moreover, the codes and product descriptions have failed to keep up with changes in the goods and trades they refer to and are often now antiquated and inaccurate.
The aim of the World Customs Organisation is to make the whole structure simpler and more relevant. Such are the current problems, it has decided that deleting just a few codes will not be enough. It is going for total overhaul with the goal of cutting the number – and related duties – by 44%.
It is vital that the timber trade is part of the revision process. It is an issue that affects the administration, education and development of the whole sector. The codes are the basis for many international and national statistics and the mechanism that customs organisations use to collect tariffs. They are an important part of the trading process influencing quality of market information, business administration and duties payable and impacting on market and product development, costs and profit.
TRADA Technology has been heavily involved in the revision of Chapter 44 and believes the root of the problem is the product descriptions. In just one of its product groups, softwood (accounting for £1bn worth of imports) it is impossible, using existing CN product definitions, to identify up to a third of imports. Under the current coding system, the category ‘Other Coniferous Not Elsewhere Specified’ is a dumping ground for all manner of products.
The muddled terminology of some of the product descriptions also leads to mis-coding and confusion. A prime example is code 44071093 which in 1999 constituted 35% of UK softwood imports by value. The Official Journal of the European Communities describes 44071093 as ‘Pine of the kind Pinus sylvestris L’. According to customs agents, this is translated into ‘wood sawn length-wise coniferous wood pine unsorted mixtures of spruce/pine and other coniferous wood’. It’s small wonder that this convoluted definition causes headaches.
Bewilderment
Existing CN plywood classifications also create bewilderment and, in the product descriptions for fibreboard, a wood science qualification would not help you identify MDF!
Although the whole of Chapter 44 needs revising, the sections of greatest concern relate to hardwood, softwood and panel products. With support from the timber trade and others, the Business Solutions Group of TRADA Technology has now lodged proposals for wholesale change with the European woodworking body (CEI-BOIS) for consideration by the various Eurostat and customs committees. Recommendations based on ‘trade practice’, following industry consultation, have been developed which will enable the trade to define, record and use more effectively data generated from import statistics. These are for:
UK plywood imports in 1998 were reported under the cumbersome current coding system (with almost half the total simply defined as ‘other’). The suggested restructuring reduces the number of codes within Chapter 44, section 4412 by 59%. Although no recommendation is given for the actual numbers, it would make sense to use existing ones where possible. The overriding consideration is simplification.
The duty levied on goods imported within section 4412 ranges between 6-10%. In 1998, 92% of plywood and blockboard was imported under a duty rate of 7% and included ‘hardwood plywood’, ‘other plywood’ and ‘plywood with one outer layer of tropical…’
Under the codes used in 1998, theoret-ically duty ought to have been paid on imports as follows:
The revisions will impact on the allocation of duty against imported plywood. However the changes will make the system clearer and help reduce the number of products liable for duty.
Benefits for business
It is true that the proposed changes will benefit customs authorities, but the real impact will be on business. Better information will help companies make better decisions and plot and understand the trends in a rapidly changing market.
A question often asked is, ‘How much coniferous plywood has been imported to the UK over the last…?’ Figure 1 represents the confused view obtainable from the current CN. The results under the revised code system are shown in Figure 2.
Under the revised system, a clear, concise analysis is possible and the easily reproduced information will enable companies to plot short and longer term trading trends, whether in volumes, values, prices, country of despatch or other measures.
If the TRADA proposals are accepted, timber companies will be able to gauge with much greater confidence what is actually happening in the market.
Related Files
Fig 1: Imports of plywood to the UK
Fig 2: Imports of plywood to the UK
