HS Code – What is a harmonized code and the importance of classifying

Date: Wednesday, September 26th, 2018

HS Code for short, is a common standard worldwide for describing the type of commodity that is shipped and stands for The Harmonized Commodity Description and Coding System. Every item or commodity that enters or crosses most international borders has to be declared to customs using this code. In essence, the HS code helps to standardize and identify cargo in the same manner whether it is in Puerto Rico, Canada or Switzerland. The Kyoto Convention, The International Convention on the Simplification and Harmonization of Customs procedures, came into effect in 1974 and has revised and updated the code to ensure that it meets the current demands of governments and international trade.For example, it details the application of simple yet efficient procedures and contains new and obligatory rules for its application which all Contracting Parties must accept.

Background & Definition:

  • Description of the commodity type used as a standard Worldwide
  • Almost 100% of the merchandise in international trade is classified in terms of the HS code
  • Made up of over 5,000 commodity groups covered in 99 Chapters containing 21 Sections
  • Identifiable by a six-digit code
  • is arranged in a legal and logical structure
  • is supported by well-defined rules that allows for uniform classification all over the world

How is the HS Code Used?

The HS Code System is used by many economies around the world as a basis for their customs tariffs and collects data for international trade statistics.

Through its contribution to the harmonization of customs and trade procedures, the HS code reduces the costs related to international trade. Essentially there is no “translator” required for people to read and understand this code.

Comprised of 99 Chapters covering 21 Sections, and for a better understanding of what the HS code means, we can take 8207.19.6030 as an example:

  • 8 relates to Chapter 8 of Section VII– Interchangeable tools for hand tools, whether or not power operated, or for machine-tools (for example, for pressing, stamping, punching, tapping, threading, drilling, boring, broaching, milling, turning or screw driving), including dies for drawing or extruding metal, and rock drilling or earth boring tools; base metal parts thereof:
  • 07 relates to Rock drilling or earth boring tools, and parts thereof
  • 19 relates to other or, including parts of
  • 60.30 relates to percussion rock drill bits

Thus 8207.19.6030 = percussion rock drill bits

This code is used by various international organizations, governments for the purposes of taxes, trade policies, monitoring, the setting of freight and transport tariffs, gathering of transport and trade statistics and economic research and analysis among other uses.

Challenges in Classification for Companies

The HS Code is incorporated into many of the customs clearance systems in every country.  The wide acceptance and versatility of its use has become a universal and economic language and code for goods which deems it indispensable for international trade.

Interpretation of the HS Codes can be very tricky as it varies between countries and customs authorities.  Improper usage could also result in an item being improperly classified and an improper tariff being applied to your imports.

Improperly classifying with an incorrect HS code as an importer may be considered as non-compliance, misleading or misdeclaration by customs and ultimately could result in fines/penalties.  Using the correct HS code to classify goods is of utmost importance

If ever in doubt, it would always be prudent to consult with your customs broker at American Lamprecht Transport directly for advice on the correct HS codes to use.

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