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National Product Classification (NPC)

• Introduction :• The requirement for a standard classification

of products originates from the need to study the flow of output through the economic system, input-output transactions, inter-industry relationships etc.

• Enables the long felt need of harmonisation of activity, production & trade data. It makes possible to cross-classify the activity and product data.

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• CSO issued two versions of Common Product Nomenclature (CPN)-product classifications in 1978 and 1988 & 1990.

• The 1978 version of CPN was restricted to only transportable goods whereas the second version which was issued in 1988 & 1990 all the economic activities i.e.transportable goods and services sector were covered.

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CPN - 1978

• The first product level classification was developed by CSO in 1978.

• The International Classification of Goods and Services (ICGS) provided the basic guidelines.

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• Products of an industry classified by output criteria i.e. by specifying a product under the industry group which primarily produces it rather than that which mainly uses it;

• Each product classified uniquely under the industry which produces it.

• The Product Classification was built upon the foundations of the existing Industrial Classification (which in case of India was NIC-1970);

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• Items were assigned 7-digit code numbers, the first 3-digits of the code indicate the NIC industry group under which the item is classified.

• The last 3-digit identify the item under that industry.

• The 4th-digit is an auxiliary one, and meant for facilitating computations.

• No attempt was made to sub-group the items by stage of fabrication or by end-use.

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• The nomenclature consists of 4611 commodities shown under the 238, 3-digit industry groups relating to Divisions ‘0 to 3’ of NIC- 1970.

• There are 4354 specific headings and 257 omnibus headings.

• A unit of measurement was also indicated against each item, taking into account the normal production and trade practices.

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CPN - 1988

• Considerable changes in structure and organisation of industries resulting in substantial diversification and change in product-mix and technologies of production, since 1978, necessitated the revision of CPN-1978.

• Further, the revision of NIC from 1970 to 1987, which formed the basis of CPN, emphasised the need for revision.

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• Criteria :• CPN is an industry-linked classification of

products. • To the extent possible, the product has been

uniquely placed in only one NIC industry group, which accounts for the bulk of the output of the product. Further classification of a product is done with respect to its physical properties.

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• The description of product has been made as close as possible to the HS 1986.

• Structure :

• The ‘3+1+3’ arrangement in CPN-78 did not provide enough flexibility.

• Deviating from the structural arrangement, a ‘3+2+2’ system was adopted in CPN-88.

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• In the new structure “3+2+2’, the first 3-digits represent the 3-digit code of NIC industry group.

• Middle 2-digits are reserved for creation of sub-groups of items based on stage of fabrication, raw material used, end-use etc.(HS 4-digit heading/sub-heading)

• The last 2-digits are meant for identifying items.

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• For the purpose of International Comparability, the HS has been used for deciding the nomenclature as much as possible. More specifically, a 4-digit HS generally represents a product group or a combination of product groups of the CPN.

• In as much as ITC developed by DGCI&S is based on the HS, it is possible to establish a link between the ITC and the CPN.

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• The nomenclature consists of 9771 commodities shown under 1341, 5-digit groups which were created under 247, 3-digit industry groups relating to Sections ‘0,1,2 & 3’ of NIC-1987. There are 8429 specific headings and 1342 omnibus headings.

• A unit of measurement was shown against each item in the nomenclature.

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Developments at the International level

• The Custom Co-operation Council (CCC) revised its nomenclature (CCCN) and extended it from the 4-digit system to a 6-digit system.The new nomenclature called the Harmonised Commodity Description and Coding System came into force in 1988.

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• The final CPC version 1.0 was considered and approved by UNSC at its 29th session in 1997 and the document was printed by UN in 1998.

• CPC and ISIC are both general-purpose classifications, with ISIC representing the activity side and CPC representing the product classification.

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• Relationship to HS :• A very close relationship exists between

CPC and HS, with regard to transportable goods, as CPC sub-classes in Sections ‘0 to 4’ constitute grouping and re-arrangements of complete categories of HS 96.

• There are more than 5000 headings and sub-headings in HS 96 which serves as the building block.

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Developments at National level

• Revision of NIC from 1987 to 1998, which form the basis of CPN, emphasised the need for revision.

• Development of CPC by UNSD, both for transportable goods and services sector also necessitated the need to revise the product classification.

• The revised product classification can be developed following one of the approaches.

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CPC Extension Approach

• Product Classification can be developed by extending the CPC. The proposed system would have a 5+2+2 coding system.

• Adopt first 5-digit of CPC in to-to and then extend it to 5+2 to accommodate the no. of HS sub-headings shown against the 5-digit CPC code to ensure 1-1 correspondence between 7-digit codes of NPC and 6-digit entries in ITC (which is based on the HS).

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• Further extend NPC to 5+2+2 and create equal number of 9-digit level entries as appear in the ITC, so that, there is 1-1 relationship between 9-digit level of NPC and 8-digit of ITC.

• The use of HS headings/sub-headings makes it possible to develop concordances between NPC and NIC-98 at 4-digit level, NPC and HS, NPC and SITC, at appropriate levels.

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Industry Origin Approach

• A product classification can be developed keeping in view the uniqueness of our commodity classification, which integrates the industry classification with its characteristics products.

• The proposed system will have 4+3+2 structure. • The first 4-digits of the proposed system will

correspond to NIC-98 class appended by next 3-digit for the HS heading/sub-heading and the last 2-digits will be for ITC system.

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Integrated Approach

• One of the limitation of the two approaches mentioned earlier is either of them do not meet simultaneously the international as well as national requirements. However, one can develop the concordance from one classification to another making use of HS headings/sub-headings, which serves as building blocks in the two classifications.

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• Adopt NIC-98 class (4-digit level) in to-to and extend it to 4+2 to accommodate the number of CPC sub-classes shown against each 4-digit NIC code to ensure 1-1 correspondence between 6-digit codes of the NPC and the NIC & CPC taken together. It may be noted that all the CPC sub-classes at 5-digit level will be included in the proposed 6-digit NPC code with the first 4-digit being in to-to with NIC and the next 2-digit will encompass all the 5-digit sub-classes of CPC but in running serial number.

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• Further extend NPC to 4+2+2 to accommodate the number of HS sub-headings shown against the 5-digit CPC code to ensure 1-1 correspondence between the 8-digit codes of the NPC and 6-digit entries in ITC (which is based on the HS).

• Thereafter extend NPC to 4+2+2+2 and create equal number of 10-digit level entries as appear at the 8-digit level in the ITC so that there is 1-1 relationship between 8-digit of ITC and 10-digit level of NPC.

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• Integrated Approach would not only retain the uniqueness of the commodity classification like earlier versions of CPN but will also contain a special feature of linking CPC and NIC with further categorisations of HS headings/sub-headings. This approach would meet the national requirements and at the same time would enable us to supply the data to international organisations as per CPC by making use of a simple concordance.