Dossier

The HS lights the way for traders

By Beth Jenior, Attorney-Advisor, Office of Trade, U.S. Customs and Border Protection

As industry continues to innovate, the work on amending the Harmonized System is never complete. This article looks at the origin and evolution of LED products to illustrate how the System can adapt to product developments over time, lighting the way for traders and guaranteeing the flow of legitimate trade across international borders.

The international Harmonized Commodity Description and Coding System, also known as the Harmonized System or HS, is a powerful instrument of trade. Every five years after the conclusion of the WCO’s review cycle, each Contracting Party to the HS Convention implements amendments to the System. These amendments are the result of meetings of both the WCO’s HS Committee and the HS Review Subcommittee. HS Contracting parties may submit a draft amendment for consideration to these two working bodies. Proposals to amend the HS often arise when the domestic industry raises an issue with its home Customs administration. The industry representatives may specifically request an amendment to the HS Nomenclature to solve a specific problem, or may request a tariff classification decision which ultimately reveals a challenge best addressed by amending the legal text.

At the beginning of every HS review cycle, the U.S. International Trade Commission (USITC), which is charged with maintaining updates to the Harmonized Tariff Schedule of the United States, publishes a request for amendment proposals in the Federal Register. The Federal Register is a daily publication of proposed and final administrative regulations of U.S. federal agencies. In addition, U.S. Customs and Border Protection (CBP) publishes its own weekly bulletin, which contains agency rulings, domestic court decisions on trade, and the agenda for the HS Committee. This is one of the ways in which the U.S. Administration communicates with its domestic industry about particular agenda items before the WCO working bodies, or identifies areas where the HS may be improved.

Developments and history

The U.S. lighting industry reached out to CBP and USITC when light emitting diode (LED) products appeared on the HS Committee agenda in 2012. Over the course of the next several years, we had regular meetings with representatives of the lighting industry to further our understanding of the development of LED technology, which informed our approach to these products in the context of the upcoming HS amendments. The origin and evolution of LED products provide the perfect example of how the HS can adapt to product developments over time.

In order to understand LED products, it is helpful to understand the history and evolution of electric lights. On 14 October 1878, American inventor Thomas Edison filed his first patent application for an electric filament lamp, or light bulb. By 1880, Edison’s company was selling its lamps to the public. In 1892, the Edison General Electric Company merged with its main competitor, the Thomas-Houston Company, to form the General Electric Company. The companies’ directors agreed that they could advance lighting technology faster if they worked together. By 1904, engineers at General Electric had developed a tungsten filament lamp, which lasted longer and shone brighter than the original carbon filament lamps.

In 1939, engineers from General Electric and Westinghouse introduced fluorescent lamps at both the New York World’s Fair and the Golden Gate Exposition in San Francisco. The need for efficient lighting in World War II factories resulted in the rapid expansion of fluorescent technology. In 1962, researchers at General Electric invented the first visible-spectrum LED in the form of red diodes. LEDs are semiconductor devices which emit light when electric current passes through them. Pale yellow and green diodes were invented next. As companies continued to improve red diodes and their manufacturing, they began appearing as indicator lights and calculator displays in the 1970s.

As the lighting industry expanded its development of LED products, their applications remained limited. Before the advent of the blue LED, manufacturers were unable to produce white light. In the early 1990s, approximately 100 years after Edison’s patent, Professors Isamu Akasaki and Hiroshi Amano of Nagoya University, and Shuji Nakamura of Nichia Corporation, concurrently discovered that gallium nitride was the key ingredient in producing blue LEDs. Now, blue LEDs are easily altered to provide white light. These three Japanese scientists won the 2014 Nobel Prize in Physics for their discovery.

The invention of blue LEDs led to an explosion in breakthroughs using LED technology. Blue, red and green LEDs can now be combined to make any colour of light. This has led to the development of screens for cell phones, computers, televisions, tablets, and many other electronic devices in today’s world.

In addition to coloured light advancements, LEDs are also more energy efficient than traditional lighting. A modern white LED lamp converts more than 50% of the electricity it uses into light. By contrast, a traditional filament lamp only has a 4% conversion rate. LED lamps last up to 100,000 hours, compared to 10,000 hours for fluorescent lights and 1,000 hours for filament lamps. As consumers switch to LED lamps, global consumption of electricity and materials for lighting will reduce dramatically.

Classification journey

As technology advanced, the HS also progressed through the hard work of WCO Members. For the 49th Session of the HS Committee in March 2012, the European Union (EU) submitted a request for the Committee to classify certain LED lamps, which in the U.S. are referred to as “light bulbs.” They also introduced a draft amendment pertaining to these products. The EU delegate noted that lamps were generally classified under heading 85.39, which provided for “Electric filament or discharge lamps, including sealed beam lamp units and ultraviolet or infra-red lamps; arc lamps.”

The EU delegate pointed out that the text of heading 85.39 did not cover lamps incorporating LED technology. Consequently, most WCO Members were classifying LED lamps under heading 85.43, a basket provision, which provides for “Electrical machines and apparatus, having individual functions, not specified or included elsewhere in this chapter.”

Given the growing use of LED lamps, the EU delegate stated that it would be useful to classify them together with the other lamps covered by heading 85.39. The lamps of heading 85.39 were being replaced by LED lamps at an astonishing pace. Indeed, the manufacture and sale of filament lamps were reduced substantially in the EU following the coming into force of legislation that was applicable throughout the European Community. Finally, the delegate noted that LED lamps were of paramount economic and ecological importance.

Noting the short time frame left to finalize amendments for the 2017 version of the HS (the HS Committee needed to finalize these amendments by March 2014), the majority of the delegates expressed the view that LED lamps should be provided for in the Nomenclature as soon as possible. Therefore, the Committee decided to send the draft amendment to the HS Review Subcommittee for discussion while the Committee continued to examine the classification of the LED lamps under the 2012 HS text.

At the 43rd Session of the HS Review Subcommittee in April 2012, the Subcommittee examined two proposals for LED lamps. The EU proposal involved adding the term “semiconductor lamps, including light-emitting diode (LED) lamps,” to heading 85.39, as well as subheadings for “LED lamps” and “other” semiconductor lamps. The proposal submitted by Korea was to add the term “light-emitting diode (LED) lamps” to heading 85.39, and to add one new subheading, which provided for the same.

The EU delegate explained that their proposal was worded broadly in order to cover products such as organic light-emitting diodes (OLED), or phosphorescent organic light-emitting diodes (PHOLED), which may not be covered by the term “LED lamps.” Some delegates agreed with the EU delegate’s observation. The delegate of Korea stated that the term “LED lamps” could be read broadly to cover goods such as OLED and PHOLED products. Several delegates agreed with this interpretation.

At the 44th Session of the HS Review Subcommittee in November 2012, the Subcommittee agreed to proceed with Korea’s proposal. Several delegates noted that the HS Explanatory Notes could clarify that the term “LED lamps” also covers similar LED technologies such as OLED and PHOLED. The Explanatory Notes are the official interpretation of the HS. The Review Subcommittee sent the proposal to the HS Committee, which provisionally adopted the amendment for inclusion in the 2017 version of the HS.

Continuing innovation and the future

However, as industry continues to innovate, the work on amending the HS is never complete. Given that LED products are manufactured in a wide array of configurations, the HS Review Subcommittee is working on additional amendments to clarify their classification for the 2022 version of the HS. In consultation with their domestic lighting industries, the U.S., the EU and Japan have all submitted draft amendments to the HS Nomenclature. These amendments cover the following products: LED modules, or lamps equipped with electrical connectors other than a cap, of heading 85.39, assemblies of individual light-emitting diodes of heading 85.41, and luminaires and lighting fittings designed for sole use with LEDs of heading 94.05.

This illustrates the beauty and challenge of the HS review cycle. Very soon, these new LED technologies will have a home in the text of the HS Nomenclature. As a living, breathing document, contracting parties to the HS can continuously update the nomenclature to cover new products and advancements in technology. And the global Customs and trade community can rely upon its text to guarantee that legitimate trade continues to flow across international borders.

More information
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