Are you interested in international trade? As an international trader, you need to become familiar with is HS Code? The code has made it trading a lot less confusing and is a uniform way of classifying products. In this blog, we will explain- what is harmonized system code? Decode the code and understand its uses? How do you search HS code for products online?
What is HS Code?
The World Customs Organization developed the HS Code, which is an internationally accepted standardized system of classifying products traded internationally. The code came into effect in 1988.
This code was started with the vision of classifying commodities around the world in a systematic manner. The WCO presently has 200 member countries. The World Customs Organization maintains and updates the HS Code.
The WCO has formulated Harmonized system nomenclature Committee. It takes policy decisions regarding classifications, prepares amendments, and updates the code to keep up with changes in technology. It has been updated five times. The latest update was of the code in 2017.
The WCO will release the next version of the harmonized system code in 2022. Be sure the use HSN Code search to ensure you are using the latest code in the documentation.
Understanding the HS Code?
The HS Code is a 6-digit code used to classify over 5000 products. It is arranged logically and is legally binding. It is comprehensive and covers 98% of commodities traded internationally.
The harmonized system code contains 21 sections that are divided into 99 chapters. The chapters are sub-divided into 1244 headings and 5224 sub-headings. The first two digits of the code denote the Chapter, the third and fourth digits denote the Heading, and the fifth and sixth digits represent the sub-heading.
Finding the numerical code for your product can be confusing. Harmonized system codes are a function of several factors such as composition, form, and function. For E.g. Wooden picture frames are classified as 4414.00 while plastic picture frames are classified as 3924.90.
Several countries have modified this code by adding additional digits, for further classification and to suit their national requirements. The first six digits remain the same.
E.g. India’s HS Code is called the ITC-HS Code (Indian Trade Classification). The code has two sections – Schedule 1 (for import rules) has 8 digits, and Schedule 2 (for export rules) has 6 digits. The DGFT maintains the code and modifies it periodically.
Similarly, The United States has a ten-digit code harmonized system code called Schedule B. Schedule B is maintained and administered by the U.S. Census Bureau Foreign Division.
Uses of the Harmonized Code
Government departments like the customs department, revenue department, statistical agencies, and private companies use the harmonized codes to monitor entering or leaving the country. The code has standardized the classification of products leaving no room for confusion. Businesses today accept it as a logical way to transport goods domestically and internationally.
We use the HS Code for –
- To collect customs taxes
- Collect international trade and transport statistics
- Economic research and analysis
- Rules of origin
- Collect internal revenue
- During trade negotiations
- Decide transportation tariff
- Monitor controlled goods
- Risk assessment when goods are customs control
Private companies use the import export trade data compiled to create and advocate trade policy and monitor prices. Shipping companies decide on freight charges and how they will transport the commodity. Traders pay customs duties based on this code.
Countries use the data to formulate macro-economic policies, during trade negotiations, and to predict revenue earned from import duty.
Challenges in classifying your product as per Harmonized Code
HS Code has become an indispensable tool for economic trade and is accepted by customs officials all over the world. But traders must use the correct harmonized system code in all their documentation.
However, this code can be confusing and subjective. E.g. Automobile parts are not automatically classified under the expected Parts and accessories of motor vehicle headings (87.01 to 87.05). Car seats for example are classified under furniture 94.01. This can confuse international traders unfamiliar with the numerical representation of code.
It can lead to unintentional errors code. The onus and penalties of incorrect filling are on the trader. Luckily, there are many resources available to help traders, and they can always ask experts for advice. It is practical to search code of product before you fill in your paperwork.
Why must I be careful while filing HS Code?
If you are an importer or exporter, you use the harmonize nomenclature code in the import-export documentation. While shipping cargo overseas is imperative you use the correct HS Code in your commercial invoice.
Writing the wrong harmonized system code can be viewed by the officials as misdeclaration, misleading, or non-compliance. It can result in fines, paying the incorrect duty, delay, or authorities may seize your shipment. Repeat offenders may lose their license to import or export.
How can I do an HSN Code Search?
There are two primary sources to search this code- the customs import database in the country you are trading, customs experts, and the internet. There are several websites like market research company websites, tax websites, etc. One of the best resources for HSN Code search is Seair Exim Solutions.
Seair Exim Solution is a leading provider of export-import data solutions for over ten years. It is simple to use, and you can perform the HSN Code search depending on the country you have business with. We regularly update our databases; you are sure that you have the latest and updated HS Code. We pride ourselves on our accuracy.
There two ways to search HS Code of your product –
- Search by product name
- Search by HSN Code
Benefits of search HS Code
Use the information learned to get the latest import duties and determine if your product qualifies for preferential treatment under trade agreements.
Search HS Code before filing your paperwork to ensure your shipment passes through customs seamlessly without delay. The importer will receive their consignment faster, and the exporter will receive their dues faster.