The Harmonized Commodity Description and Coding System (HS) is a numeric language used by close to 200 countries to report goods to customs and other government agencies. Here’s a quick look at how Harmonized Codes help you categorize your products and avoid potential pitfalls with customs and other government agencies.
Who Establishes Harmonized Codes?
Created by the Brussels-based World Customs Organization (an independent intergovernmental group), HS brings standardization to international trade and is integral to the Harmonized Tariff Schedule (HTS) administered by the U.S. International Trade Commission and the U.S. export classification system. In addition, the HTS code establishes the rules of trade agreements, including the North American Free Trade Agreement (NAFTA).
What Are Harmonized Codes?
The HTS codes themselves indicate the description of import and export products for all participating countries, starting with crude and natural products and proceeding to categories of increasing complexity. The first six digits of the HTS Code, known as the heading, are universal, indicating the same description of the product for all participating countries; additional digits further break down product categories. With more than 17,000 unique 10-digit codes, you should be able to pinpoint exactly what your product is – right down to its materials, intended use and other features. For example, if your product is a necklace, include as many of its attributes as you can during your search: natural or synthetic gems, the type and composition of the chain, and any other identifying features.
Why Are Harmonized Codes Important?
Finding that exact code is crucial, and the burden is on you to ensure it’s correct, even if you’ve outsourced this task to a third party. Incorrectly classified cargo can delay your shipment and cost you big in higher duty and taxes, which could have a major impact on your bottom line – not to mention your customers’ faith in your description. If misclassification seems to be in your favor – meaning you’re paying less – be prepared for the possibility of investigation and stiff penalties.
Harmonized Codes Help Make Shipping Simpler
So what can you do to make sure your HS system is truly harmonious?
- Spend some time navigating census.gov and its searchable database, or register with the WCO website, wcoomd.org.
- Don’t skimp on details when you prepare your commercial documents.
- Double-check code numbers. It’s worth the extra step to avoid problems down the road.
Keep in mind that the HS is updated on a regular basis in order to keep up with technology and new trade partners, so stay on top of the changes as they occur, roughly every five years. In 2012, the WCO recommend 204 amendments in 53 different chapters, with a particular emphasis on food-related products. Using old HS codes past the grace period after a revision results in transaction failures for Automated Export System (AES) filings.