1. According to IMTS 2010, monetary gold (as defined in BPM6) and issued banknotes and securities and coins in circulation are excluded from merchandise trade statistics. In practice this means that Comtrade excludes everything under HS codes 7108.20 and 7118.90 due to their functions as legal tender (see definitions below).
71.08 Gold (including gold plated with platinum) unwrought or in semi-manufactured forms, or in powder form.
BPM6 treatment of this issue
5. BPM6 specifically states that "some countries issue gold coins, which are held for intrinsic value, or commemorative coins, which are held for numismatic value. If not in active circulation, such coins are not classified as financial assets but as goods (except for gold coins that are classified as monetary gold)."
6. The IMF’s Monetary and Financial Statistics Manual and Compilation Guide further clarifies, stating that “commemorative coins and gold or precious metal coins, which are held for their numismatic and intrinsic value, are excluded from broad money as they are classified as nonfinancial assets rather than as financial assets.” The only exception is when these coins “differ only slightly from the standard coins in circulation, are issued at or near their face value, are fungible with the standard coins in circulation, and for which the issuing authority has a liability to redeem them.” Such coins are then “included in broad money”. However, according to the IMF, it is unlikely that someone would exchange those coins at their (much lower) face value and, therefore, they should be classified as nonfinancial assets, i.e., goods in BOP terminology.
WCO’s opinion on classification on coins of legal tender
7. According to the WCO, all legal tender gold coins (including collectors’ coins) are part of 711890 (regardless how they are being traded/used). While there is no further legal definition for “coin” in the HS classification, there is some guidance in the Explanatory Note (EN) for heading 71.18. The EN to heading 71.18 tells us that, in essence:
- coins can be made of any metal (including gold, silver and platinum);
- coins are of an officially prescribed weight and design;
- coins are made by stamping out blanks from sheet metal, which are then “ struck ” with the appropriate dies to produce simultaneously the designs on the two faces; and
- coins are issued under government control for use as legal tender.
8. Furthermore, the coins in question having higher metal value than face value would not fall under subheading 7118.10. Specifically, according to the Subheading Explanatory Note (SEN) for that code, the subheading includes:
(ii) coins struck in one country to be put into circulation in another country and at the time of crossing the frontier, they are not yet issued as legal tender by the competent authority.
9. So any other coin falling under subheading 7118.90 is considered legal tender. There are limited exceptions:
(c) Finally, if the coin is so battered or bent that it is only fit for re-melting or other recycling, it would go under the appropriate waste or scrap provision.
10. In conclusion, according to WCO rules, coins in 7118.90 are considered legal tender no matter their intrinsic value. But WCO has further commented that there is a possibility of requesting an amendment of HS code 7118.90 to split it in two: “for circulation” and “non-circulating legal tender” (defined below).
Types and terminology of legal tender
11. Further research on this topic points to the fact that there are two types of legal tender: for circulation and for collection (“non-circulating legal tender” (NCLT)). According to online source Wikipedia, “sometimes currency issues such as commemorative coins or transfer bills may be issued that are not intended for public circulation but are nonetheless legal tender…some countries issue precious-metal coins which have a currency value indicated on them which is far below the value of the metal the coin contains: these coins are known as ‘non-circulating legal tender’ or ‘NCLT’”.
12. More specifically, the Royal Canadian Mint describes the types of legal tender as follows:
The Mint has a process in place to reimburse financial institutions the face value of redeemed NCLT coins, once they have accepted them from a customer and returned them to the Mint…As collector coins can only be redeemed at face value by businesses and financial institutions willing to accept them, it is recommended that individuals wishing to sell a collector coin first consult with a coin dealer, who is more likely to offer a price above face value.”
13. The South Africa Krugerrands is used as legal tender under South African legislation, but does not have a specific value. This was done to emphasize that the value of the Krugerrand is directly related to the prevailing value of its gold content. The Krugerrand is considered as the world’s first gold bullion coin with world-wide recognition. It is not normally used as collector coins where value id determined by their rarity and condition.
Is it possible to distinguish coins of non-circulating legal tender at Customs?
14. According to the United States Mint, uncirculated coins may have the following meanings:
15. This unique type of manufacturing process and the quality enhancements may be visible and easily detected at Customs.
16. The United States separately identifies the Canadian Maple Leaf collectors’ coin in its national tariff-line trade data, as shown below in the U.S. extended HS nomenclature:
17. China Customs does separately identify the Chinese Gold Panda coin and confirms this coin is considered legal tender and is classified under HS 711890. However, China Customs excludesit from trade statistics, as according to China Customs “the Chinese Gold Panda is designed and positioned as gold for investment [and so the] invoice value is based mainly on the gold value and the actual weight of gold it contains, which is much more expensive than its face value.
18. In South Africa, the Krugerrand is considered as coins of legal tender and it is currently included in South Africa’s trade statistics under code711890.
19. In addition, the compilation practices on HS code 7118.90 may differ in exporting and importing countries. For example, if China excludes Chinese Gold Panda in their export statistics, but it is imported to Switzerland, it will be classified under tariff code 7118.9010 as gold coin, and it would be included Switzerland import statistics. This would contribute to bilateral trade asymmetry.