Harmonized System Code For Goods
A multifunctional foreign commodity nomenclature established by the World Customs Organization is a harmonized system for the designation and code of commodities, usually called “Harmonized System” or simply “HS” (WCO). It consists of over 5 000 product classes, each classified by a six-digit code, structured according to legal and logical standards to achieve a consistent classification.
The scheme is being used as a basis for its customs duties and the compilation of foreign trade data by over 200 countries and economies. In foreign trade, over 98 percent of goods are listed under the HS standard.
Harmonized System (HS) codes are usually used during the whole export process for products within the industry classification schemes. A systematic numerical classification process for traded goods is the harmonized system. Customs departments around the world are used to classify goods as taxes are assessed and figures are collected.
The HS is administered and updated every five years by the World Customs Organization (WCO). It is the basis of the schemes used in the United States and by several trade partners for the classification of importations and exports.
For different classifications and commodities, the HS assigns a special six-digit code. Countries can incorporate longer codes for additional classification in the first six digits.
The US uses a 10-digit code that classifies export goods, known as Schedule B, with the first 6 digits as HS. For each physical product, from papers to aircraft, there is a Schedule B number. Schedule B is managed by the Foreign Trade Division of the U.S. Census Bureau.
How to apply the HS code
During the export process, you will need the US Schedule B Number and the variant of the foreign country HS code for your product.
• Classification of natural products to be exported abroad.
• Automatic Export System (AES) reporting shipments if the amount is more than $2.500 or a license is needed.
• Complete documents required for shipments, such as shipper’s instruction letter, business invoice, or certificate of origin.
• Determine (duty) import tariff thresholds and determine whether a commodity counts under a free trade agreement as a preferential tariff.
• Market analysis and trading figures are obtained.
The harmonized system is regulated by the “International Convention for the Description and Coding of Harmonized Commodities.” In the Explanatory Notes issued by the WCO, the HS is officially interpreted. The Explanatory Notes are also present in the Hsn code search online and on the CD-ROM.
WCO priorities are the management of the HS. Included in this operation are steps to ensure consistent HS interpretation and its frequent updates in light of technological advances and improvements in business patterns. This mechanism is managed through the WCO by the Harmonized System Committee, which discusses policy issues, decides on questions concerning classification, resolves disagreements, and makes explanatory notes modifications to them. The HS Committee prepares changes every 5 to 6 years to update the HS.
The effect for e-commerce retailers of the HS classification
In certain contexts, it is important to know HS codes for particular markets. You will, for example, decide whether your goods qualify under a free trade agreement for preferential (lower) tariffs. You should quantify the overall cost of the landing, ensuring your customer the right price.
You will have products on DDP terms by assignment of HS codes and calculation of taxes and taxes at checkout time.
This allows you to track import clearance and payments, and the sudden expense of receiving a plot would not surprise your consumers.
