What is the Harmonized System (HS Code)?
Harmonized System (HS Code) is a universal system of classifying shipments being traded worldwide and gathering statistical information through descriptions and codes. Its main function is to speed up the process of international shipping by getting products through customs and other regulatory agencies quicker.
How Do You Use An HS Code?
To use an HS Code you must have both the U.S. Schedule B number and the foreign country’s version of the HS Code for your product. An HS Code is made up of six-digit codes which help to identify different product categories. Each country can then add two to four digits to further identify the categories of goods being imported into the country. The codes are broken down into two sets and categorized as: Chapter, Heading, and Subheading.
For example, the first two numbers describe the product category, such as leather, and the second two digits would be the product group, such as suitcases or wallets. Then the last two numbers represent specifications about the product–whether the outer layer is leather and, similarly, for other types of goods.
Learning how to use an HS Code is good practice to properly and accurately include it on your invoice and avoid unintended duties and taxes, higher restrictions, or the potential for rejection of entry.
How to get an HS Code For Your Product
To get an HS Code for your product, you must first identify your product using the Schedule B search tool provided by the Census Bureau. There are also additional resources and customer support available on the site to help you identify your Schedule B number.
If you can’t find your product(s)’ code in the Schedule B search tool, there is the Customs Ruling Online Search System (CROSS) database that’ll contain legally binding rulings from other exporters’ and importers’ requests for Schedule B codes. The database will help you determine if a ruling was requested on that product and the results of the ruling.
There are special situations when shipping multiple items as a set and shipping textile/apparel as a set:
- Shipping Multiple Items As A Set
- An unassembled item may make it harder to identify, and thus, the Rule of 3 of the General Rules of Interpretation (GRI) of the Harmonized Tariff Schedule addresses composite goods, mixtures, and items that are sold in a set. The introduction to the official Schedule B publication has a three-step process established by the GRI for determining the Schedule B code.
- Textiles/Apparel Shipped As A Set
- The GRI Chapter 50, Note 14 has further information regarding the unique Schedule B codes for textiles and apparel sets
Countries That Use the Harmonized System
More than 200 countries use the harmonized system for trading across the world, and the list includes major shipping countries, such as the U.S. Japan, China, Australia, Canada, the European Union, and Turkey.
Pros and Cons of HS Codes for E-commerce Merchants
The pros of HS Codes:
- Trading is streamlined from using a standardized process for classifying products
- Evaluating customs and duties are easier
- Shipping is faster and easier
- Tracking of trade data
- Fulfilling a legal responsibility
- Increases productivity in the shipping process
- Easier to train employees
- Ensures that trade policies are updated and relevant
- Develops a common process in commercial practices and trade negotiations
The cons of HS Codes:
- Improper use of HS Codes incurs additional duties and taxes, which would make the cost of products more expensive for customers
- The possibility of defining a different product for your customer’s country if you happen to mention the last digits after the HS Code, which are different for different countries
- Fraud can result from the use of the wrong HS Code