Harmonization HS codes compliance and classification

Mastering Harmonized System Codes: A Guide to Compliance and Classification for International Trade

What are Harmonized System (HS) codes?

HS codes (Harmonized System codes) are a standardized system used to classify traded goods based on their nature, composition, and intended use. The system consists of six-digit codes that provide a common language for customs officials, importers, and exporters to identify products during international trade.

In simple terms, HS codes are used to classify almost everything that is being manufactured/produced in the world today. With codes ranging from live animals and animal products like swine (0106.10) in the first chapter to musical instruments, their parts, and accessories (9997.00) in the last chapter, virtually all products can be identified and categorized for international trade purposes. In this article, we will explore more about how HS codes work and why they’re essential for navigating the complexities of global commerce.

Why HS codes are created?

The HS code system has been in use for many years as an internationally recognized classification system for traded goods. Before its development, different countries had their own nomenclature, creating confusion and making trade difficult. The system was born in 1952 when 17 founding countries, including Australia, Belgium, Canada, and others, signed the Convention Establishing a Customs Cooperation Council in Brussels, Belgium, leading to the formation of the World Customs Organization (WCO). Today, the WCO has 183 member countries that use the same HS code nomenclature. As an international intergovernmental organization, the WCO maintains the HS code system, which facilitates efficient and accurate customs clearance procedures, import and export data collection, and duty and tax determination.

How to read HS codes

The HS code system is structured hierarchically, with products being classified into categories and subcategories based on their characteristics. The first two digits of the code indicate the broadest category, with subsequent digits providing greater detail. There are 21 sections in the HS code system, each corresponding to a particular group of products. These sections are further divided into chapters, which group products based on common characteristics. Chapters are then subdivided into headings, subheadings, and further levels of detail as needed. This hierarchical structure allows for easy classification of products into categories that are consistent across countries, making it an essential tool for international trade.

Struggling to choose HS codes for European imports? CAPLINQ offers an entire Order Fulfillment service where we help customers establish their presence with local inventory, proper import taxes, and available stock in Europe.

Chapters in HS codes:

  1. Live animals; animal products
  2. Vegetable products
  3. Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal or vegetable waxes
  4. Prepared foodstuffs; beverages, spirits, and vinegar; tobacco and manufactured tobacco substitutes
  5. Mineral products
  6. Products of the chemical or allied industries
  7. Plastics and articles thereof; rubber and articles thereof
  8. Raw hides and skins, leather, fur skins, and articles thereof; saddlery and harness; travel goods, handbags, and similar containers; articles of animal gut (other than silk-worm gut)
  9. Wood and articles of wood; wood charcoal; cork and articles of cork; manufactures of straw, of esparto or of other plaiting materials; basketware and wickerwork
  10. Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard; paper and paperboard and articles thereof
  11. Textiles and textile articles
  12. Footwear, headgear, umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding crops, and parts thereof; prepared feathers and articles made therewith; artificial flowers; articles of human hair
  13. Articles of stone, plaster, cement, asbestos, mica, or similar materials; ceramic products; glass and glassware
  14. Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, and articles thereof; imitation jewelry; coin
  15. Base metals and articles of base metal
  16. Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles
  17. Vehicles, aircraft, vessels, and associated transport equipment
  18. Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; clocks and watches; musical instruments; parts and accessories thereof
  19. Arms and ammunition; parts and accessories thereof
  20. Miscellaneous manufactured articles
  21. Works of art, collectors’ pieces and antiques

Variations in HS codes:

However, as each country has its own unique trade practices, many countries have chosen to further divide the HS codes into sub-categories that are specific to their own industries and regulations. A few examples of these sub-divisions are followed in the EUCN(European Union combined nomenclature) used by all the EU member states and HTS system (Harmonized tariff schedule) which is followed by all the USA.

By doing so, countries can more accurately track and manage imports and exports, ensure compliance with domestic regulations, and make informed decisions about tariffs and trade policies. Additionally, sub-categorization can help streamline customs procedures, reduce the risk of misclassification, and make it easier for businesses to navigate the complex world of international trade.

While sub-categorization may add an additional layer of complexity to international trade, it ultimately serves to facilitate smoother and more efficient trade relations between countries.

HS code systems across the world:

1.European Union Combined Nomenclature (EUCN)

The EUCN is used by the member states of the European Union for both import and export trades. It adds additional digits. To give an example of an HS code under EUCN, take into consideration 8473.30.90.00. The HS corresponds to Thermal Interface Materials (example: PTM7900SPM). In the above code, 8473.30 is common in any HS code-based system but the other additional 4 digits correspond to other materials under the parts used for the machinery subchapter. The digits 90.00 might be exclusive to EUCN.

The website where you can check the EUCN is called TARIC.

2. Japanese Tariff Schedule (JTS)

The Japanese Tariff Schedule (JTS) is a sub-division of the Harmonized System (HS) codes used in Japan, which provides more detailed information on traded goods by including additional digits. For instance, the HS code 3907.30.00.90 corresponds to Coil Insulation epoxy coatings (EPIFORM F-6975) under the European Union Combined Nomenclature (EUCN). However, in the JTS system, it falls under the broader category of Epoxide resins with sub-categories based on the physical form of the product. The EUCN system categorizes the same HS code based on the chemical composition of the Epoxide resins. These differences in sub-categorization based on different attributes still follow the same base nomenclature

Click here to check the HS code of JTS

3. China Customs Tariff (CCT)

The CCT is a sub-division of the HS codes used in China. It includes additional digits that provide more detailed information on the nature of the goods being traded, such as the brand name of the product or the production method used.

4. HTS & Schedule B system (USA)

The Schedule B system and the Harmonized Tariff Schedule (HTS) are two classification systems used by the United States Customs and Border Protection (CBP) to categorize and regulate imports and exports.

The Schedule B system is a 10-digit code that is used to classify goods that are exported from the United States. It is based on the international system of classification, known as the Harmonized System (HS), but is tailored specifically to U.S. exports. The Schedule B code is used to determine statistics on U.S. exports and to enforce U.S. export regulations.

On the other hand, the Harmonized Tariff Schedule (HTS) is a system used to classify goods that are imported into the United States. It is based on the International Harmonized System (HS), which is used by most countries in the world. The HTS is used to determine the rate of duty that must be paid on imported goods, as well as to enforce U.S. import regulations.

Both systems are critical to the functioning of U.S. international trade, as they help to ensure that goods are classified accurately and that tariffs and other import/export regulations are applied appropriately. The use of these classification systems helps to ensure that the U.S. is able to compete in the global marketplace and that consumers are protected from harmful or dangerous goods.

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Did you know that you can sell your products directly to your customers in Europe without the need to create and maintain a legal entity in Europe? To learn more CAPLINQ’s Order Fulfillment service or if you are interested to understand more about the CAPLINQ’s order fulfillment pricing for foreign companies, please visit the links provided. You can always contact us for any questions related to Order Fulfillment.

About Sasank Grandhi

Sasank is a Logistics specialist with be the ability to efficiently and effectively manage the flow of goods and materials. This includes overseeing transportation, warehousing, inventory management, and distribution operations, all while ensuring timely delivery and minimizing costs.

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