A harmonized system is a type of numerical code by which trading products are classified. Goods and products are imported and exported all over the world which promote the business outlook. In order to understand and know these business products, they are classified which is a standardized numerical method by which the products are identified. With regard to industry, Harmonized System (HS) codes are commonly used throughout the export process for goods worldwide, in systems of product classification. . The Harmonized System (HS) code is mainly used while estimating the duties and taxes levied on the goods as decided by the Customs authorities and to collect the tax wise data and to identify the exported products is done for.
The HS Code is administered primarily by the World Customs Organization (WCO) and the system is fully updated every five years. These Harmonized System (HS) codes are used by trading partners in the United States and many countries, and Harmonized System (HS) codes serve as the foundation for classification systems for importing and exporting goods.
The HS Code refers to the different classification of goods and is made up of a six digit code specific to the item. Next to these numbers, countries are allowed to add longer codes to their classification to obtain a complete classification of goods.
The United States uses a 10-digit code, also known as a Schedule B number, to classify products for the goods it exports. The first six digits in this classification are the HS numbers. From products like paperclip to large industrial airplanes, a Schedule B number is created for all types of physical products to make things easier to understand and retrieve. Thus, HS codes are those numbers from which complete details of the goods and products to be imported and exported can be obtained and it is easy to classify them.
How to use HS code
- To classify the product during the export of goods to the U.S. Both the Schedule B number and the foreign country’s version of the HS code are required. You use the HS code when:
- Classifying those products as physical goods for shipment to a foreign country
- Must report shipment to the Automated Export System (AES) when the value at the time of export exceeds $2,500, or the exported item requires a license.
- Must have completed all required shipping related documents such as instruction letter from the shipper, commercial invoice or certificate of origin;
- Determine the duties and rates associated with the importing products and whether any products under the trade agreement qualify for the preferential tariff product of free trade.
- Conduct market research and obtain accurate statistics on how to do business ie follow US law where applicable.
The true meaning of HSN code is mainly “harmonious system of nomenclature”. Through this system, systematic classification of goods imported and exported all over the world is done. The HSN code assigned to the commodity is a 6 digit uniform code that classifies more than 5000 products and this HSN code is accepted all over the world. This HSN code was developed by the World Customs Organization (WCO) and has been in force for goods since 1988.
Working Mode of HSN Code –
The HSN code has been assigned with a group of about 5,000 commodities, each of which is identified by their six digit code, arranged according to a legal and logical structure. This leads to uniform classification of goods and is supported by well-defined rules for products.
It is through HSN that goods from all over the world can be classified in a systematic and logical manner. With the help of this code, there is a uniform classification of goods and through this it facilitates international trade.
Form of HSN in India
This organization basically categorizes Duty of Customs and Central Excise and uses 6 digit HSN codes to classify the goods. This was followed by the addition of two more digits to give a more accurate form of Customs and Central Excise duties, which led to the 8 digit classification of the code.
how to understand HSN code
- The structure of the HSN consists of 21 volumes, categorized with 99 chapters, approximately 1,244 titles and 5,224 subtitles.
- Each section is divided into chapters and each chapter is divided into headings and each heading into its sub-headings.
- The given section and chapter headings describe broad categories of imported and exported goods, while headings and subheadings describe the extent of the products.
62.13.90 this is the code for cloth handkerchiefs
- The first two digits of the product (62) designate the chapter number for apparel and clothing accessories not knitted or crocheted.
- The next two digits (13) indicate the number of the title associated with the handkerchief.
- The last two digits (90) indicate the product code for handkerchiefs made of other textile related materials.
- India has 2 more points for a deeper assortment of products.
- If the handkerchief made is made from man-made fiber then the HSN code is 22.214.171.124.
- But if the handkerchief is made from silk or from silk waste, then the HSN code is 126.96.36.199.
An example to know the HS code
If you want to find the HS code for a guitar you can use the UK tariff and you will get the code 920290. The complete classification of the products is done in the given code itself. It has the following description in relation to the guitar itself from these code numbers.
- 92 – Denoting a product relating to musical instruments and parts and accessories of such articles
- 02 – Some other types of musical instruments attached to strings (eg, guitar, violin, harp)
- 90 – other –
- Additional codes are used to add the details of some additional products for some other countries. So it is important to keep in mind whether this applies to your product or not.
If you need full details and more information about other major export related processes, you can get the information through the ‘Introduction to Exports’ course from the Institute of Export and International Trade.