13.22. Benefits and challenges associated with the use of the HS. The HS has been in use since 1988. During this period, both benefits and challenges associated with its use became apparent. Compilers should be aware of them in order to enjoy the benefits to the maximum extent possible, while properly dealing with the challenges presented by its application, e.g., through the use of other classifications more suitable for particular needs (see chap. XXVII).
13.23. Benefits of using the HS. The HS is the only commodity classification recommended by the United Nations Statistical Commission for the collection and compilation of international merchandise trade statistics. It is also widely used for dissemination and analysis of these statistics for the following reasons:
(a) The HS encompasses a legal text and extensive explanatory notes which ensure the maximum possible uniformity in the interpretation of the definitions of commodity groups, thus creating a universal language applicable both in commercial practice and in trade negotiations;
(b) The HS enables international comparability of trade statistics at the six-digit level, facilitating detailed analysis of international trade and its role in the globalization of national economies;[11]
(c) The universal application of the HS allows the conduct of effective trade data reconciliation studies;
(d) As the HS contains detailed descriptions of commodities, its headings and sub-headings can be used as the building blocks of other product classifications;
(e) The HS Convention allows each country to introduce its own level of statistical detail beyond the six-digit level, thus providing the necessary flexibility in accommodating national needs;
(f) The establishment of data conversions from the HS to other classification and its widespread use in data collection allow information for various purposes to be easily provided (see chap. XXVII).
13.24. Challenges in the implementation and use of the HS. The most frequently cited challenges in the use of the HS include the following:
(a) The HS is relatively complex and difficult to implement without very extensive training, e.g., so as to avoid serious classification errors. Also, the HS Explanatory Notes, which are critical for classification guidance, are not cost-free, which may reduce the extent of their use by trade analysts;
(b) The HS does not provide stand-alone descriptors of its six-digit codes which can be used as metadata in trade statistics databases and publications; this leads to duplicative work, as many countries and international organizations develop such descriptors (see box XIII.10);[12]
(c) Definition of commodity groups in the HS is not always satisfactory for economic analysis, and it is therefore necessary to develop various analytical classifications (see chap. XXVII);
(d) Commodities are not always classified in such a way as to reflect countries circumstances and statistical priorities, particularly at the most detailed levels of classification. Many countries further divide HS subheadings to provide the detail required for tariff and statistical purposes; sometimes, countries use alternative groupings for certain commodities which better suit their analytical needs;
(e) As part of the application of the HS, WCO recommends the use of certain standard units of quantity for the six-digit HS level (see chap. XV for details). However, the recommended units of quantity are not always indicative of the quantity units used in industry practices (they might be different across countries), which in certain cases creates additional difficulties in HS implementation and analytical use;[13]
(f) Frequent revisions of the HS result in the discontinuation or merging of some codes every five years. This causes breaks in time series needed for analytical purposes.
13.25. It is recognized that, to a large degree, most of the challenges listed above are inherent and unavoidable in any multipurpose international commodity classification. Countries are advised to build upon the strengths of the HS while minimizing it weaknesses, e.g., by providing more detailed commodity breakdowns beyond the six-digit HS-level. Also, it is good practice to use other product classifications such as the Standard International Trade Classification (SITC), the Central Product Classification (CPC), and the Classification by Broad Economic Categories (BEC), as well as the International Standard Industrial Classification of All Economic Activities (ISIC), as applicable (see chap. XXVII for details).
[11] In this connection, it should be stressed that countries should avoid the use of simplified classification decisions as much as possible even if certain customs procedures and thresholds allow this.
[12] Countries are advised to consult the WCO website for additional materials on such descriptors.
[13] For example, natural gas traders work in British thermal units (BTUs), rather than in cubic metres (m3 ). This is also particularly true in the textiles area.