Harmonized System Code Explained For You

The Harmonized system code that is also known as the Harmonized System (HS) of tariff nomenclature is defined as an internationally standardized system which uses names and numbers to classify all the traded products. 

So HS classification is defined as "Harmonized System Classification " which is a very unique way of classifying goods throughout the world.

As most of the people have no knowledge about HS Classification, in this article we will give you complete details about it.

So if you want to the details of Harmonized system code, HS classification, its major benefits and uses then read complete article.

Origin of Harmonized system code

Harmonized System Code 

Harmonized system code also known as Harmonized system (HS) was first introduced in 1988 and has since been regulated and developed by the World Customs Organization (WCO), which is regarded as an independent intergovernmental organization located in Brussels, Belgium, with more than 150 countries as its member.

So this is the basic origin information about Harmonized System.

What is HS Classification?

As we told you HS classification is "Harmonized System Classification " mainly used to classify various goods and products through out the world for smooth functioning of import export business.

In other words the process of process of assigning HS codes to the products is defined as HS classification.

Lets say for example the ex- take iron coils are classified as 7208 which is unique throughout the world and any country can recognize HS 7208 as iron coils.

These HS codes are mainly implemented by WCO( World Customs Organization) and their organization has been accepted in many major countries throughout the world.

Structure of Harmonized System Code and HS Classification

The HS is mainly organized by the virtue of economic activity or the use of its component material. For example, all the animals and animal based products are found in one section of the HS classification, while all the basic machinery and other mechanical appliances are found in a different HS. 

The structure of HS is defined and majorly organized into 21 sections, which are then subdivided into more minute 99 chapters. These minute 99 HS chapters are then organically subdivided into basic 1,244 headings and 5224 subheadings.

The HS classification codes aka Harmonized System Code mainly consists of  6-digits to 10-digits depending upon the country use. The first two digits of the HS designate the HS Chapter. 

The second two digits defined the HS heading. The third two digits are used to define the HS subheading.

Listing of HS Codes in India

All the Harmonized codes are listed in a typical section wise and chapter wise way based on the dependence and availability of the materials.

In India Harmonized System Codes are also called or defined as “ITCHS- INDIAN TRADE CLASSIFICATION HARMONISED SYSYTEM”.

The Harmonized System Code in India are of 8 digits and 72 - Chapter , 08- heading, 39- sub heading 40- tariff heading and this HS code classification exists in both imports and exports

Applications of the Harmonized System Code

Since the year 2015 more than 180 countries including major territories have applied the use of Harmonized System Code worldwide.

So the Harmonized code are mainly used by Customs authorities, statistical agencies, and other government regulatory bodies, to monitor and control the import and export of commodities through maintaining:

1. Collection of the overall trade data (international trade statistics)
2. Customs and base tariffs
3. Transport based tariffs and its major statistics
4. Monitoring of all the main controlled goods 
5. Areas of all the base Customs controls and procedures, including risk assessment, information technology and compliance.
6. Companies using HS codes to calculate the total landed cost of imported products and parts, and to identify selling and sourcing opportunities abroad.
7. Rules of substitute origin
8. Collection of all the basic internal taxes
9. Trade negotiations

Challenges in HS classification for companies

HS classification is not always very easy and straightforward. Many of the basic automotive parts, for example, are not easy to classify even under heading 87.08, which makes the provision for all the major Parts and accessories of the overall highly advanced motor vehicles of headings 87.01 to 87.05. 

In many advancing countries, traders alone bear all the basic and major legal responsibility to carry out the classification of their goods. But due to lack of knowledge about the rules of HS Classification traders make some bad mistakes that hurt their business. 

So to avoid this many expert advice to use the basic resources available to traders to assist them all in properly classifying the HS code of their goods via:

1. Binding Tariff Information (BTI), given by the European Commission
2. Informed compliance publications, mainly given by U.S. Customs and Border Protection
3. The Official Explanatory Notes to the Harmonized System, which is mainly published by the World Customs Organization
4. The US Census "Classify your Commodity" engine: defined on the website https://uscensus.prod.3ceonline.com/
5. Classify your Commodity video tutorial by US Census, defined on the website: https://www.census.gov/foreign-trade/data/video022.html
6. Explanatory notes by the Combined Nomenclature of the European Union by the International European Commission
7. Customs Rulings Online Search System (CROSS), provided by U.S. Customs and Border Protection
8. Classification Guides, provided by HM Revenue & Customs
9. Harmonized Tariff Schedule As the principal US page with updated info about Tariffs.

Other Major HS Classification Ways

The Integral System of Trade Information (SIICEX) provided by the Confederation of Associations of the guild of Custom Brokers of the Mexican Republic (CAAAREM), provides all the basic and useful updated information about the major tariffs and its basic explanatory notes in order to carry out the import and export goods from/to the country of Mexico. 

So every country has a trade information center that carries out the job of compiling the base information of many national and international legal regulations, which can be used by traders.

All the experts suggest the Traders to use HS code determination guides and other references to classify their base products traded commodities. 

Hence we would like to again say this that all the traders should try to get information about the harmonized system codes include local databases published by authorities in other countries for smooth work flow. 

This is all about Harmonized system codes and HS Classification.

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