World Customs Organization (WCO) Meeting of the

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SUBJECT: World Customs Organization (WCO) Meeting of the
Thirty-Eighth (38th) Session of the Harmonized System Review
Sub-Committee (RSC).


1. BEGIN SUMMARY: The 38th Session of the RSC was held at the
headquarters of the WCO in Brussels, Belgium, from November 15
through 26, 2008. The meeting was chaired by Ms. Raili Mdntymaa
(Finland-European Community). Forty-one Contracting Parties to the
Harmonized System Convention (forty countries and one customs and
economic union) attended the session. In addition, 2 international
organizations (FAO and ICC) were represented as observers.


2. All matters of significant concern to the U.S. were either
resolved satisfactorily or deferred for further consideration at a
future session. In particular, the RSC reached consensus on a US
proposal to create a new separate heading 9619 for absorbent hygiene
products. This proposal will be submitted to the next session of the
Harmonized System Committee in March 2009 for provisional adoption.


3. Also of importance to the U.S. were pending proposals concerning
biodiesel, printer cartridges, video game machines and consoles and
certain multi-component integrated circuits. In addition, new
proposals of interest to the United States included those concerning
wood pellets, pumpkin seeds, and automated data processing systems.
The U.S. supported all issues that the RSC resolved by consensus in
this session.


4. This session was the last for the RSC to consider proposals for
the 4th Review Cycle, which targets amendments for implementation on
January 1, 2012. The next (5th) Review Cycle will begin in May 2009,
with a view to implementing HS amendments effective January 1, 2017.
END SUMMARY.


5. TECHNICAL QUESTIONS:


A. The RSC finalized a list of HS subheadings to be deleted
because of low cross-border trade in those subheadings over a given
3-year period.


B. The RSC continued development of a proposal by the Food
and Agriculture Organization (FAO-United Nations) to provide 6-digit
subheadings for numerous food products, in order to provide
statistics for the FAO to monitor world food supplies, especially in
developing countries. The RSC reached consensus on many particular
proposals, but left a number of unsettled technical issues for
finalization at the next session of the HSC (March 2009).


C. The RSC reached consensus on a proposal to create a new
subheading 2403.11 to cover water pipe tobacco products. The RSC
also reached consensus on a Subheading Explanatory Note describing
the products falling in the new subheading. The HSC, at its 42nd
Session (September 2008) had already provisionally adopted a
proposal to define scope of the new subheading.


D. The RSC agreed, in principle, on a Brazilian proposal to
provide separate HS provisions for "biodiesel" in HS chapters 27 and

38. The final wording of those provisions will be decided by the HSC
at its next session in March 2009. The Sub-Committee agreed that
biodiesel products "containing by weight 70% or more of petroleum
oils or of oils obtained from bituminous materials" should fall to a
newly created subheading 2710.20, while other biodiesel products
would be covered by a new heading 3826. The RSC nearly reached
consensus on a legal definition of the term "biodiesel" for the
purposes of the new subheading and heading, but also submitted the
definition text for finalization by the next session of the HSC. Of
particular importance to the US National Biodiesel Board (an
industry association) was that the definition should include a
reference to ASTM or similar standards to ensure that sub par
biodiesel products would not be covered by the new provisions.
However, several delegations opposed the inclusion of such
references in the legal note defining biodiesel, because of the
purported uses of biodiesel in applications other than diesel
engines.


E. The RSC agreed to suspend consideration, during the 4th
Review Cycle, of a Secretariat proposal to provide for a single
heading or subheading to cover all print cartridges. The U.S. and
Japan had opposed the proposal because of ongoing international
litigation concerning these products. It is anticipated that this
issue may be considered anew during the 5th Review Cycle, which
begins in May 2009.


F. The RSC reached consensus on a proposal (originated by
Australia) to insert a new legal note 6 to chapter 95 to define the
scope of "video game machines and consoles." As a basis for its
discussion, the Sub-Committee worked from a revised proposal set out
in a "non-paper" submitted informally by the U.S. This revised
proposal entailed a rearrangement of the structured nomenclature
already provisionally adopted by the HSC. The agreed proposal will
be submitted for provisional adoption by the HSC in March 2009.


G. The Australian Delegation withdrew its proposal to amend
Note 3 to chapter 4, directing the classification of concentrated
whey products. This was consistent with the U.S. position.


H. The Sub-Committee reached consensus on a U.S. proposal for
a new heading 9619 to cover sanitary pads, diapers and other
absorbent hygiene products. Given the varying composition of such
products on the market, the proposal was made to combine them all in
one heading in order to avoid difficulties in future classification.
The Sub-Committee also agreed to consequential amendments (mainly
exclusion notes) in other chapters, though the exact wording of two
such notes will be forwarded to the HSC in March 2009 for
finalization.


I. The RSC agreed to drop any consideration of amending Note
1(b) to Chapter 38. This Note has been used to examine the
classification of numerous and various products on a case-by-case
basis in the past, mainly to distinguish between products of chapter
21 and 38. This decision was consistent with the U.S. position.


J. The RSC decided that a proposal to amend the legal text of
Note 8 to Chapter 85, with a view to expanding the scope of heading
8542 to include certain "multi-component integrated circuits", was
not ripe for decision, as the 4th Review Cycle was nearing an end.
The original proposal was made by Japan at the 36th Session of the
RSC, but Japan did not follow up on it afterwards. The U.S.
Semiconductor Industry Association (SIA) asked the U.S. delegation
to pursue the question, which it did by organizing ad hoc
informational meetings between industry representatives and
delegates attending the 41st and 42nd sessions of the HSC. However,
agreement on a final text among other regional and national
semiconductor groups (SIA, the European Semiconductor Industry
Association (ESIA) and similar trade associations in Korea, China,
Taiwan and Japan) was slow in coming. Nevertheless, the U.S.
formally submitted the proposed text for discussion at the 38th
Session of the RSC. Given that a promised list of other headings and
specific products that would be affected by the proposal was also
slow in coming from the industry, the RSC was reluctant to forward
the proposal to the HSC for consideration, because members wanted
more time to study the question. Nevertheless, at the request of
several delegates, the RSC agreed to pursue the question in the
context of the 5th Review Cycle, which would begin at its next
session in May 2009.


K. The RSC did not reach consensus on a proposal to amend
Note 1(e) to Chapter 95 to clarify that sports clothing
incorporating reinforcements or protective accessories, and used,
e.g., in hockey, motocross, fencing, etc., were classifiable in
chapter 95 as "sports equipment", rather than in section XI as
wearing apparel. Given that a recent HSC classification decision on
certain such products was still subject to reservation, the
Sub-Committee decided not to pursue the question during the 4th
Review Cycle. It was agreed that Explanatory Note amendments could
be considered by the HSC in the meantime.


L. Following an HSC/41decision to classify certain a certain
"correction tape" dispenser in heading 3824, the HSC requested that
the RSC study a possible amendmen to Note 3(d) to chapter 38, with
a view to carifying the legal basis for the HSC decision. The RSC
reached consensus on this amendment and will forward it to the HSC
for provisional adoption. The Sub-Committee also agreed to address
proposals to amend the Explanatory Notes in this regard at a later
session.


M. The RSC agreed that possible misalignments between the
French and English versions of the HS with regard to fruit and nuts
did not, in fact, exist. The Sub-Committee did agree to insert the
word "nuts" in note 3 to Chapter 21 to clarify the English text.


N. The RSC reached consensus on a new proposal to insert a new
subheading 4401.31 to cover wood pellets made by compressing wood
shavings, sawdust or chips. A new Subheading Note was also agreed to
define the scope of the new subheading. Two options for amending the
Explanatory Notes in this regard would be sent to the HSC in March
2009 for decision.


O. The RSC agreed that there was no contradiction between the
legal text of heading 1209 (covering seeds for sowing) and the
Explanatory Note to that heading. It was agreed that this agenda
item should not be pursued in the future, unless a new request was
submitted by a Contracting Party.


P. The RSC could not reach consensus on amending subheading
note 1 to Chapter 84, either by changing "lecteur" to "scanneur" in
the French version, or by deleting the reference to "lecteur" in the
French and "scanner" in the English. Given that not all scanners are
"input units" for ADP systems, the U.S. position was to delete the
reference, which was only an example, in any case. When other
delegations balked at this, the U.S. proposed to compromise by
replacing the term "scanner" by the expression "scanner of
subheading 8471.60" in the present text. The RSC agreed to submit
this agenda item to the HSC in March 2009 for final decision.


Q. In response to concerns raised by the Secretariat, the
Sub-Committee concluded that there were no misalignments between the
English and French texts of headings in chapter 91 (Clocks and
watches and parts thereof). The RSC did agree to propose an
amendment to the French version of the Explanatory Note to align on
the English.


R. The RSC agreed with an EC proposal to amend the French
version of subheadings 8528.41, 8528.51 and 8528.61, in order to
obtain a better alignment on the corresponding English texts. Since
the amendments represented an oversight in translating new
amendments to the 2007 HS, the RSC agreed to ask the HSC to consider
implementing these amendments on a "fast-track" basis.


5. OTHER ISSUES: The Secretariat prepared an information document,
setting out all proposals on which the RSC had reached consensus or
near consensus so far during the 4th Review Cycle. This document
will serve as the basis for the Council Recommendation (to be issued
in June 2009) for HS amendments to be implemented on January 1,

2012.

MURRAY