HS Codes: How Beginner Imports and Export Traders Can Utilize It?

Happily Trade September 2, 2021

It is vital for those importing and exporting goods, to be acquainted with the Harmonized System or HS. Also, referred to as the Harmonized Commodity Description and Coding System. The Harmonized System of Nomenclature is a universally acknowledged technique of categorizing traded items.

The main function of the HS code is to assist customs authorities in product identification and assessing the proper taxes and duties on them. A unique numerical code, also referred to as the HS code is assigned to each product. There is a minimum of 6 digits in this code but it can be up to 13 digits.

It is compulsory to include the HS code of your product in shipping documents while importing or exporting. Examples of shipping documents are shopping bills, packing lists, and commercial invoices. Additionally, it is the legal responsibility of an importer or exporter to identify their products’ HS codes correctly. Classifying incorrectly may result in problems such as incorrect shipments, delays and additional costs in re-shipment, incorrect taxes, penalties for re-assessment, and so on.

Given the criticality of the hs classification code list and its proper application in global trade, beginners in import and export traders should know how to utilize it. This article has all the relevant details that traders would find handy.

Defining the Harmonized System

This system came up as a solution to the expenses and complications associated with the existing product classification systems in different nations. Before its implementation, the same product could be categorized up to 17 times in just one transaction. The system has over 5,000 groups of items.

In this system, a 6–digit code identifies each product. The code is arranged in a specific logical and legal way based on a set of rules. The HS code’s 6 digits can be classified into 3 parts, which are as follows:

  1. The initial 2 digits are used for the identification of the chapter that the item falls under.
  2. The next 2 digits are used for the identification of that chapter’s heading.
  3. The final 2 digits refer to a sub-heading, making the classification more specific.

Importance of the Harmonized System for Beginner Import and Export Traders

The key function of the HS codes is to function as the basis for worldwide custom tariffs. However, it also has other uses, which are as follows:

  • Collecting international trade statistics
  • Acts as the basis for transport and freight tariffs
  • Collecting internal taxes like value-added-tax (VAT) and excise duties
  • Facilitator of customs procedures and controls like compliance and risk assessment
  • To monitor controlled goods such as waste, endangered species, chemical weapons, and narcotics
  • Helps governments to determine their trade policies
  • Helps in determining the most favored nation (MFN) and preferential tariffs under free trade agreements

Export-Import is one of the largest business segments in the world. It is also a highly efficient trade link that connects the various nations of the world through the export and import of different goods. An Import export hs code is used to identify a different group of items. It is categorized through a certain code. The same HS code grouping is followed by different nations to identify different products.

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