A Guide to Understanding HS Codes

The logistics industry operates like a finely tuned watch. Every aspect–from businesses and suppliers to carriers and regulations–plays a crucial role in maintaining the smooth functioning of global supply chains to ensure customer satisfaction and foster business success. Among these critical processes is the tariff classification of commodities, facilitated by the Harmonized System (HS), which provides a standardized nomenclature for organizing the trillions of dollars worth of goods traded internationally each year.

• The Harmonized System (HS) Code Explained
• The Structure of an HS Code
• HTS, TARIC and other HS-based instruments: What are These?
• Latest Updates and Changes in 2022
• Conclusion

Let’s delve deeper into this fundamental aspect of shipping and logistics.

The Harmonized System (HS) Code Explained

HS codes are widely utilized across the export and import processes as a standard industry classification system. The Harmonized System provides a universally accepted numerical method for categorizing traded products. Adopted by over 200 countries and economies worldwide, it serves as a crucial tool for identifying products and determining their treatment in customs tariffs, as well as for compiling statistics.

The essence of the HS lies in its name: harmonizing the flow of goods across the globe requires a standardized approach to understanding these products and distinguishing between various categories. This enables customs authorities to efficiently identify each product and apply the appropriate tariff rates, ultimately reducing costs and facilitating international trade for all parties involved.Established in the 1980s by the World Customs Organization (WCO), HS codes undergo periodic reviews approximately every five years to accommodate new technologies, evolving patterns and trends, and the introduction of new goods into the global market that are traded in substantial volumes.

The Structure of an HS Code

An HS code is a six-digit number representing one of over 5,000 commodity groups defined in the HS. Here’s how it breaks down:

• The first two digits denote the HS Chapter, offering broad categorization. For instance, Chapter 70 relates to glass and glassware.
• The next two digits indicate the heading within that Chapter, specifying a particular category of products. For example, heading 70.09 refers to glass mirrors.
• The final two digits represent the subheading, further delineating the product category. In the case of rear-view mirrors for vehicles, the subheading would be reflected by the last two digits (10).

For example, consider the HS code 7009.10 for rear-view mirrors:

• Chapter: 70 (Glass and Glassware)
• Heading: 70.09 (Glass mirrors)
• Subheading: 10 (Rear-view mirrors for vehicles)

Combining these elements results in the HS code: 7009.10.

For some headings that aren’t subdivided further into subheadings, the final two digits of commodity codes are “00” (e.g., 0504.00).

We recommend you use the World Customs Organization’s (WCO) handy tool for searching and exploring goods and commodities to easily determine their appropriate HS code.

HTS, TARIC and other HS-based instruments: What are These?

The Harmonized Tariff Schedule (HTS) of the USA, Integrated Tariff of the European Union (TARIC) of the EU, and other goods nomenclatures are other instruments used alongside the HS for commodity classification.Albeit the six-digit HS code serves as a global standard and lays the foundation of national and regional tariff and statistical nomenclatures, these regional and national systems often include supplementary subdivisions beyond the HS six-digit level. These subdivisions may extend to subheadings consisting of eight, 10, or even more digits.

Latest Updates and Changes in 2022

Typically, the HS Nomenclature undergoes updates every five years at the conclusion of each review cycle. During these reviews, certain HS codes may be eliminated, new codes introduced, and existing codes or provisions modified. This review mechanism is crucial for ensuring the HS remains relevant and user-friendly, adapting to the evolving needs of traders and the dynamic landscape of international trade.The most recent version of the HS came into effect on January 1, 2022. This update brought significant changes, including 351 sets of amendments.

• Creation of New Provisions – A new heading 88.06 was established for unmanned aerial vehicles (drones). Introduction of the new subheading 8517.13 to cover smartphones.
• Amendments for New Technologies – 3D printers, previously classified under various headings within Chapter 84, have been consolidated into a single new heading (heading 84.85).
• Specific Provisions for Infectious Diseases – Provisions have been created for diagnostic reagents and kits, including malaria diagnostic kits, under heading 38.22 to facilitate their classification and streamline processes amid the global spread of infectious diseases.

Conclusion

Commodity codes are subject to change. Thus, it’s important to regularly verify them for accuracy. Given the heightened emphasis on precise commodity classification by customs authorities, HS codes have become a compulsory component of shipping instructions for all global cargo movements with Total Freight International (TFI).

If you require assistance in navigating the intricacies of customs procedures, our in-house team of certified and experienced customs brokers have got you covered. Whether you need import or export customs clearance, our knowledgeable professionals can assist you every step of the way.

Get in touch with us now!