“How can the HS identify the green status of equipment?” was the fundamental question of the fifth Symposium on Visualising a greener HS to support environmentally sustainable trade

The fifth symposium in the WCO Symposia Series on “Visualising a greener HS to support environmentally sustainable trade”, supported by the European Union, was held on 23 January 2023.  

These symposia have looked at the role that the Harmonized System (HS) can play in supporting environmental policy: aiming to provide new perspectives to assist the HSC Members in their considerations on what changes are needed to make the HS increasingly greener in its future editions.

The theme of this event was “The environmental credentials of technology - can we identify the green status of equipment?”,  This recognised the difficulties in identifying what goods were “green technology” that should be highlighted within the HS and asked how can we improve in this.

The symposium was attended by a broad range of HS users, including representatives of international and regional institutions, the private sector, civil society associations and Customs administrations, who discussed needs and the role of the HS in this area.

In his opening address, Mr. Konstantinos Kaiopoulos, Director of the WCO Tariff and Trade Affairs Directorate, noted that the world is facing major transformations and production is organized into global value chains trying to produce more sustainable goods to support a circular economy transition. Given this, the WCO Secretariat believes that the HS must be adapted to environmental issues and actively participate in this ecological awakening. The benefits of including specific environmentally preferable machinery and equipment in the HS could therefore range from reducing duties rates, through having better information on these goods and onto helping countries and industry to establish policy measures at national level to facilitate trade in ‘environmentally friendly’ machinery and equipment.  He indicated the challenges in this area include that the technology sector is a rapidly changing area, meaning that today’s environmentally preferable technology can quickly become obsolete and overtaken by newer and better technology, and that there is no agreed understanding on the green status of machinery and equipment. 

Acting as moderator during the Panel Discussion, Ms. Gael Grooby, Deputy Director of WCO Tariff and Trade Affairs Directorate, noted in her introductory remarks that the identification of green machinery, appliances and equipment is fundamental to HS consideration in this area for many reasons, but two stood out.  One was prioritization.  It is not possible to separately identify all goods in the HS, so to include anything, it was necessary to know what was of most importance to include.  Another was that the process of understanding why something is important in terms of the effect of its use on the environment helps to give a better chance of developing an HS description that captured the right types of goods and was workable at the border.

The first presentation was delivered by Mr. Richard Ferenc Szucs, Policy Officer, DG TAXUD Unit B5, European Commission, who spoke about “Preservation of the environment – Identifying areas to be further developed in HS mechanical Chapters”. He demonstrated the principles of a “Greener HS” in the context of the EU approach and the understanding of what kind of goods, in the mechanical Chapters of the HS, fulfils environment protection purposes, for example, water preservation, energy saving, thermal insulation, hydroelectric power generation and the like. He concluded by illustrating some possible areas for the improvement of the HS by distinguishing what was environmentally better equipment, such as in relation to the areas of biomass boilers, heat recovery steam generators, pumps, electric motors and generators, etc.

The second presentation, on “Green Technology and the Harmonized System”, was delivered by Mr. Carlos Kuriyama, Director, Policy Support Unit Asia-Pacific Economic Cooperation (APEC) Secretariat.  He noted that the monitoring of the trade of the green technologies is crucial for meeting certain policy objectives, such as environmental protection and carbon neutrality.  However, he discussed how much of the green value involves the concept of “externalities”, such as excessive water consumption or carbon dioxide emissions in production.  But these externalities are not currently taken into account in the HS since commodity classification is normally based on characteristics or functionality. Based on the experience of APEC, he presented three possible options to better distinguish the green products in the HS, which includes publishing a reference list using ex-outs, categorising goods based on production externalities, and classifying goods based on environmental end-use.

The third presentation, made by Ms. Alev Somer, Trade and Environment Deputy Director,  Bureau of International Recycling (BIR), dealt with “Green technologies: enablers of sustainable and circular economy”. She spoke about BIR’s proposal to consider recycled materials and machinery and equipment used in the recycling industry as environmental goods. She noted that recycled materials contribute to resource efficiency, minimising the pressure on natural resources, enabling carbon emission savings, and promoting a more sustainable and circular economy.  However, equipment for recycling was not generally distinguished within the HS and this made it more difficult to classify and to track the trade.  For example, they had found problems with the classification of ‘reverse vending machines’ that pay for deposits of recyclables.  After giving a range of practical suggestions on what might be covered, she noted the particular importance for developing countries in increasing their capacity for recycling by having access to modern equipment.  She concluded that no tariffs and no non-tariff barriers on both recycled commodities and on machinery and equipment used by the recycling industry will improve the market for secondary resources, promote circular economy and benefit the environment by minimising waste and reducing dependency on natural raw materials.

In his presentation, entitled “Composition, process and function: challenges to identifying the environmental credentials of equipment within the HS”, the fourth speaker Mr. Adrian Whiteman, Energy Statistician from International Renewable Energy Agency (IRENA), explained what IRENA does in the field of renewable energy, with special regard to solar energy technologies. He presented the current status of renewable energy and addressed the concepts of environmental goods in terms of renewability, energy efficiency, low carbon/pollution, and energy transition. He was of the view that the biggest challenges is possibly that products in the HS cannot be classified based on how a product is made, noting that the HS principally classifies products based on observable characteristics. He gave some practical and useful examples of where possible new provisions could be made, looking in terms of product composition, processes and functions.  As part of this, he also gave interesting examples of how provisions could become dated and miss new products, noting, as an example, HVO biodiesel, which does not meet the definition for classification as a biodiesel in the HS.   Finally, he gave a list of what he considered high priorities to identify in terms of environmental performance, being some of the solid and liquid biofuels, solar devices, induction stoves and batteries.

The fifth speaker, Ms. Martina Kavanagh, Executive Program Manager of IBM, and Co-Chair ICC Working Group on Circular Economy, delivered the presentation on “A spotlight on industry challenges for greener technology”. She presented on the importance of classifying goods according to their status (i.e., new, used, available for repair, remanufactured, waste, etc., while acknowledging that the addition of new HS codes for the statuses of goods could be very complex.  Ms Kavanagh presented some of the challenges in trading refurbished or remanufactured goods.  She wondered if the solution might consist in adding a new Chapter to identify the status of goods or amending current Chapters in order to capture the status of goods.  Regardless of how changes were made, she emphasised the importance of education for all parties in trade on changes to ensure that they were used as intended and achieved their purpose.  To this end, she also remarked on the problems of fragmentation of regulation across countries and between agencies in relation to defining these goods.  She noted the general terms for the new Circular Economy Law (LGEC) as an example of the type of joined up thinking required, and emphasized the importance of the involvement of different sectors of production, legislation and regulatory in order to achieve a full and successful implementation of the circular economy scheme.

The panel further expanded on these topics in the Q&A.

After thanking the speakers and participants, Ms. Grooby encouraged ongoing discussion of these matters, and invited participants to continue to reflect deeply on the approaches that might be adopted with a view to creating a greener HS. 

In his closing remarks, Dr. Kunio Mikuriya, WCO Secretary General, remarked that the HS is an obvious tool for Customs to support policies aiming to respond to environmental challenges related to international trade. He noted that there is still a long way ahead to address gaps and opportunities in classification under the HS and other trade measures to achieve environmental objectives. He also highlighted that, even with this positive mind-set, not all of the needs to identify goods at the border can be solved through the HS and that the HS needs to be seen as part of the suite of tools that Customs has and how other methods of identifying and declaring goods at the border could be used to complement the HS work. He concluded by recalling the content of the series of five symposia and by congratulating everyone for the successful completion of the Symposia series with more than 25 distinguished speakers and around 700 participants joined in person or online, who were from Customs administrations, international governmental organizations (IGOs), non‑governmental organizations (NGOs), academia and the private sector.