The Harmonized system is an internationally accepted method to describe a commodity being exported and imported. But can be a challenge for e-commerce sellers shipping cross border. The system is maintained by the World Customs Organization (WTO) and serves to standardize the description of items that would otherwise be obscured by language and industry nomenclature. Specific items are "translated" assigned into a universally accepted numerical value.
The key data elements to determine admissibility duty include value (see our blog on valuation), country of origin and HS Codes. This post reviews the concept of HS Codes. The information presented in all Jet Worldwide posts are for general information only and not intended as legal /tax advice.
The HS is administrated by the World Customs Organization (WCO) and assigns specific six-digit codes to products and commodities. Countries are allowed to add longer codes to the first six digits for further classification.
HS Codes and E-Commerce Online Orders
E-commerce online orders - especially from Shopify, eBay and other independent platforms - do not consider H.S. Codes when either selling or shipping. Depending upon the country of destination, the HS Codes can have a varying degree of importance.
General Rule of HS codes and Shipping Online orders:
- If the HS Code is known, it should be used
- If the HS Code is not known, a specific description (which could include how the product is being used) is recommended.
- For shipments valued under "duty free low value thresholds," an HS code are usually not required
- Without HS codes, import brokers often defer to the code with the highest duty (to avoid customs issues). This can lead to over payment of duty.
HS Codes and Duty for online orders
The three main factors in determining duty include:
- HS Code Classification
- Value (see our blog on valuation)
- Country of Origin
Disclaimer: The information in Jet Worldwide online content, including this post, is for general information only and is not intended to, constitute legal and/or tax advice. All liability with respect to actions taken or not taken based on the contents of this site are hereby expressly disclaimed. The content on this posting is provided “as is”; no representations are made that the content is error-free.
HS Codes for e-commerce shipments to the USA
The low value duty free threshold to the USA is US$800. Most clearance express (ECCF) and cargo (CFS) processes do not require an HS Code. However, US CBP often holds shipments for inadequate descriptions.
Using Section 321 type 86 entries, e-commerce merchants can clear e-commerce orders via more traditional automated brokerage systems (ABI/ ACE) which require HS codes.
HS Codes and Shipping to the UK and European Union
Above the duty free low value thresholds of €150 and £150 to EU countries and the UK, respectively, HS codes are needed to determine the rate of duty. Goods may qualify for duty free entry regardless of value if country of origin rules via free trade agreements are met.
HS Code Explained with recent Updates
The system used by worldwide customs authorities to classify goods, the Harmonized System (HS) are updated regularly. The HS serves as a way for customs to translate product descriptions into commonly agreed nomenclature. The classifications are then used to determine tariffs, admissibility, quotas (if applicable), and trade statistics.
READ MORE: IMPORT DUTY AND HOW IT IS CALCULATED
See section below on HS Codes for 2022.
The International Convention on the Harmonized Commodity Description and Coding System (HS Convention) entered into force in 1988 with major updates around every 5 years.
The next major update from the World Customs Organization (WCO) of the six digit level nomenclature is scheduled for 2022. See section below on 2022 HS Code updates.
An example of why HS Codes are important:
While a description of "shoes" is understood by most to be footwear, "shoes" can also mean parts of machinery, brakes, precision measuring equipment, and cameras.
Example of HS Codes for Shoes:
- Shoe for wearing (footwear) = HS Code 6404.19
- Shoe breaks in a truck = HS Code 8708.30
- Shoe used in camera equipment = HS Code 8529.90
- Shoe used in a resistor: HS Code 8533.90
While the theory of HS Codes is easily understood, specific classifications can become incredibly complex. Applying the wrong HS Code can have significant tax and other regulatory implications. Importers often ask US Customs for clarification via their "commodity specialists" to ensurethe correct HS Code.
Harmonized Code can be 6 to 12 digits:
- First 6 digits are internationally accepted
- The following 2 to 6 digits are reserved for use by a specific country
The HS System generally classifies goods based on their level of processing, with raw materials appearing early in the early chapters and highly processed goods in the later chapters. Agricultural products are generally provided for in chapters 1-24, with a few products such as wood, wool and cotton appearing in later chapters.
HS Codes and importing e-commerce parcels
The challenge for e-commerce merchants - including Shopify sellers - is how to manage the descriptions of their catalogue of products and understanding the import costs to their international customers.
Jet Worldwide works with e-commerce merchants to develop efficient parcel import processes for online orders shipped cross borders
Best Advice for Manifesting e-commerce Parcels to the USA
The most important advise for describing items for import to the USA is to simply describe the item. Sounds simple! Yet, due in part to language barrier and sheer volume of items, one of the biggest issue with e-commerce imports to the USA is that they lack a clear description.
Our import specialists advise e-commerce merchants on the best way to phrase a product description for a Section 321 entry*. As in the above example of sending shoes, we advise shippers to use the phrase "footwear" , "brake shoes", and "mounting bracket for camera" rather than simply shoe.
HS Code 2022 Update:
Updating codes to better define product categories that have increased in importance either by reason of growth, technical advances, or regulatory concern. The changes are made to better reflect technological advances and improve trade statistics important to government and industries.
Products and categories subject to change include:
- Electronic waste (e-waste)
- novel tobacco nicotine (vaping) products
- unmanned aerial vehicles (UAVs)/ drones
- smartphones (gain a subheading and note)
- The category fo glass fibres (heading 70.19) and metal forming machinery (84.62) have been refigured
- Flat panel display modules will be classified as a product in their own right
- A greater focus on the classification of multi-purpose intermediate assemblies
- Classifications for tools needed for rapid diagnosis of infectious diseases has been simplified
- New subheadings for specific dangerous chemicals
- New subheadings have been introduced for the monitoring and control of fentanyl
- Attempts to clarify text to facilitate better global understanding