Harmonized codes when shipping international can be both simple and incredible complex. The challenge for parcels is how to assign individual H.S. codes for thousands of parcels being imported daily.
The HS codes are one of the three elements used for assessment of duty.
The three elements to determining the duty rate:
- Valuation of the Goods for shipping and import
- Origin of the Goods
- Customs tariff classification / HS Code (discussed below)
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.
See section below about HS Code update 2022.
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The concept of the Harmonized System is easily explained:
The Harmonized system is an internationally accepted method to describe a commodity being exported and imported. The system is maintained by the World Customs Organization (WTO) and serves to translate descriptions of items, that are often obscured by language and industry nomenclature, into a universally accepted numerical value.
For example: A toothbrush is translated into the numerical code of 9603.20; A DVD equals 8523.40.
The first 6 digits of the harmonized code is the internationally accepted standard. The following 2 to 6 digits are reserved for use by a specific country. The Harmonized 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.
Importers and exporters are most often legally required to declare their products to Customs by means of HS codes. HS classification determines a product's rate of duty, its import and export admissibility, and whether or not it should be physically examined. In some countries, importers are required to report HS codes to Customs before their products are loaded for export. In the United States, this mandatory advanced cargo reporting program is called "ISF", or "10+2".
Resources for finding the correct HS Code
- Custom's websites
- Licensed customs brokers
- Carrier's websites and shipping systems
- Independent on-line resources
Even with the many resources provided on line - including those from the carriers, finding the correct code can prove frustrating. For example: An electric toothbrush = "Electro-mechanical domestic appliances, with self-contained electric motor, other than vacuum cleaners of heading 85.08. Other."
H.S Codes: Useful for Export and Import
It is also a good idea to confirm with your international customer which HS Code should be used before sending the parcel. Although the exporter is responsible for declaring the correct HS code, the larger burden is with the importer as the code used will determine critical elements such as admissibility, regulatory restrictions and duty rate.
HS classification is difficult for two main reasons.
First, the HS itself is very complex. Product descriptions are distributed among more than 4,000 headings and subheadings. The HS also contains section and chapter notes, which must be consulted in order to assign a proper HS code. Finally, classification is governed by a strict set of rules called the "General Rules of Interpretation" (GRI). The average national tariff schedule is more than 2,000 pages.
Second, product descriptions in the HS do not usually match everyday product descriptions. For example:
While a description of "shoes" is understood by most to be footwear, "shoes" can also mean parts of machinery, brakes, precision measuring equipment, & cameras.
If you wish to send an international courier shipment, most important is to include a clear, detailed description and include what the item will be used for. International couriers have developed the ability to efficiently assign HS Codes. It is best, however, to try to provide at least the first 6 digits of the HS Code.
Updates for HS Code 2022
The system used by worldwide customs authorities to classify goods, the Harmonized System (HS), will be updated in 2022. The updates present an opportunity to better define product categories that have increased in importance either by reason of growth, technical advances, or regulatory concern.
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
For e-commerce companies, having a corresponding HS code for all products is critical for the efficient clearance and to be able to capture the duty charges upfront before customer checkout. The biggest single obstacle to e-commerce solutions is to have the duty charges determined in advance.
E-commerce companies who have predetermined the HS Code and duty charges, can easily access the various countries and determine the likely rate of duty.
The HS Coding system is an incredible feat of international cooperation to facilitate international trade. Understanding the basic concepts are critical to everyone sending or receiving international shipments - whether via international courier or mail, truck or ocean.
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REMINDER: The information in this blog is for general information only. Producers, shippers, exporters, importers should confirm their processes with their customs brokers, carriers and regulating authorities.