What is HS Code?
HS Code stands for Harmonized Commodity Description and Coding System Code, also commonly known as the Harmonized System Code. It is being developed and handled by the World Customs Organization (WCO) [put WCO hyperlink].
HS Code characteristics:
- The worldwide standard for the product description
- Utilizes 6-digit code
- Consists of 5,000 commodity groups
- The groups are covered by 99 Chapters
- The chapters are contained within 21 sections
- The arrangement is in a legal and logical structure
Example of HS Code arrange
Why is HS Code So Important?
The shipper will need to assign HS Code before importing or exporting goods. Assigning correct HS Code to the product is important in the following:
- Custom duty – will be affected by the HS Codes and providing incorrect HS Codes could lead to extra charges
- Potential delays – This will increase the chances of charges on goods storage and delay in shipment caused by customs brokers are unable to classify the product
- Regulatory Risk – assigning incorrect HS Code could potentially lead to being fined
Challenges of HS Code Classification
Although HS Code is being used for international trade, assigning the correct HS Code to your product could be tricky.
A few reasons:
- There is no single common HS list. Despite WCO member standardizing their HS code up to the 6 digits, every country has their standard after the 6-digits
- HS Code is being updated every 5 years, so there could be changes to the product your handling
- As HS Code is complex, without extensive training the user might be prone to classification errors
- HS Explanatory Notes - important for the user as it acts a guidebook on HS Classification, but it is not free of charge
With the challenges posed by HS Code, the importer/exporter will waste more time than necessary on assigning the correct HS Code and in the event of assigning wrong HS Code will incur more losses.
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