Global trade works in carefully organized ways. As there are billions of products with numerous types and sub-types, there was a dire need to classify items so they could be processed easily and appropriate taxes could be applied to them.
Such efforts to classify goods for inter-country trade gave birth to the HS and HTS codes. These codes are crucial in customs procedures, tariff determination, and statistical analysis.
In this article, you will learn about HS and HTS codes, their structures, purposes, and key differences. By the end of this article, you will have better clarity about most HS and HTS codes and be able to choose which type of code is more relevant to your business.
Let’s start.
What Is an HS Code?
HS code stands for Harmonized System code. It is a standardized numerical classification system used globally to classify products for international trade.
The HS code system was developed by the World Customs Organization (WCO) and is used by customs authorities worldwide.
Definition and Purpose of HS Codes
HS codes are a systematic way of identifying and classifying products into specific categories for global customs purposes, like calculating duty rates. They serve as a universal language for international trade and facilitate the smooth flow of goods across borders.
HS codes are used for various purposes, including customs declarations, tariff determination, trade statistics, and controlled or prohibited goods monitoring.
Structure and Components of HS Codes
HS codes are composed of six digits, with additional digits for more specific classifications.
Each digit in the code represents a specific category or subcategory of goods. The higher the number of digits, the more detailed the classification becomes.
For example, the code “8517” represents “Electrical apparatus for line telephony or line telegraphy.”
Further classification can be achieved by adding two more digits, such as “8517.62” for “Apparatus for carrier-current line systems.”
Benefits of Using HS Codes for International Trade
Using HS codes offers several benefits for international trade participants. The main benefits of using HS codes for international trade are as follows:
Universal Classification
HS codes are recognized and used worldwide, providing a standardized classification system that helps avoid confusion and misinterpretation of the products.
Customs Procedures
HS codes streamline customs procedures by enabling customs authorities to identify goods accurately, enforce trade regulations, and authorize products for clearance or objections.
Tariff Determination
HS codes are crucial for determining import duty and tax along with other trade-related charges. They help determine the correct tariff rates based on the product classification. The taxes or tariff suits are subject to import or export duties in a specific country.
Trade Statistics
HS codes allow for the collection and analysis of trade data at a global level. This information helps governments, businesses, and organizations monitor trade flows, identify market trends, and develop trade policies.
What Is an HTS Code?
HTS code stands for Harmonized Tariff Schedule Code. It is a specific classification system used in specific countries to give additional details about the traded products to calculate tariffs properly.
HTS codes are based on the international HS code system but include additional digits for more specific classifications.
Definition and Purpose of HTS Codes
HTS codes are used by specific countries to properly classify imported and exported goods for customs procedures and tariff determination.
They are an extension of the HS code system and provide a more detailed classification for products traded internationally.
The HTS codes developed by the US Customs and Border Protection (US CBP) are called HTSUS.
Structure and Components of HTS Codes
An HTS code is a 10-digit code, with the first six digits following the structure of the HS codes. The additional four digits in HTS codes allow for a more granular classification specific to a country.
For example, the HTS code “8517.62.0050” represents a more detailed product classification within the “8517.62” category, specifically for the U.S. market.
Relationship between HTS Codes and HS Codes
HTS codes are closely related to HS codes. The first six digits of an HTS code will correspond to the HS code, indicating the global classification.
The additional four digits in HTS codes are specific to a country and provide further tax or tariff determination details within that country’s market.
Key Differences: HS Code vs HTS Code
Let’s explore the three key differences between HS codes and HTS codes in the following for a clear demarcation between them.
Structure
HS codes have six digits, whereas HTS codes have ten digits.
Specific Details
HS codes broadly give an idea of the items, while HTS codes offer a more detailed classification system for goods as they include additional digits beyond the HS code.
Country-Specificity
HS codes are recognized and used globally, while HTS codes are specific to a country.
The Importance of Accurate Code Classification
Accurate code classification is essential for international trade. Proper classification ensures compliance with customs regulations, enables accurate tariff determination, and facilitates the collection and analysis of trade data.
Incorrect code classification can lead to delays, penalties, and disputes, impacting the smooth flow of goods and creating unnecessary costs for businesses.
When Should You Use These Codes?
HS and HTS codes should be used when engaging in international trade activities, including importing and exporting goods.
They are required for customs declarations, documentation, and tariff determination. It is essential to use the appropriate code for the specific country of import or export.
Common Mistakes When Using These Codes
The following are the common mistakes when using HS and HTS codes.
Incorrect Classification
Choosing the wrong code due to a lack of understanding or incomplete product knowledge.
Inconsistent Classification
Failing to consistently use the same code for a specific product, which can create confusion and difficulties in trade analysis.
Failure to Update Codes
Not keeping up with changes and updates to HS and HTS codes, leading to outdated or incorrect classifications.
Ignoring Country-Specific Requirements
Using HS codes without considering additional digits required by specific countries, such as HTS codes in the United States.
Resources and Tools for HS and HTS Code Classification
Several resources and tools that can help with HS and HTS code classification are briefly discussed below.
Customs authorities in each country provide guidance and resources for code classification. They can offer official publications, databases, and support for determining the correct code.
For example, you can get help from the international trade commission in the US. The US government has a dedicated website for all the important trade information.
Online Code Lookup
Online platforms and websites provide searchable databases where users can enter product descriptions or keywords to find the corresponding HS or HTS code.
For example, World Customs Organization (WCO) provides the official Harmonized System (HS) database, which includes the full HS code list and corresponding descriptions.
Trade Associations and Consultants
Trade associations and experienced consultants can offer guidance and expertise in code classification, especially for complex products or industries.
For example, you can look for the required information on the official website of the Taxation and Customs Union of Europe.
Customs Brokers
Customs brokers are experts in navigating customs procedures and can provide assistance in code classification and ensure compliance with regulations.
You can find a broker by port in the US on the official website of US Customs and Border Protection (CBP.)
Frequently Asked Questions
The following answers to the frequently asked questions about HS and HTS codes will further clarify your existing or potential queries.
Are HS Codes and HTS Codes the Same Worldwide?
HS codes are standardized and recognized worldwide. However, countries may add digits or modify the codes for their specific requirements.
Can HS Codes Change Over Time?
HS codes undergo periodic updates to reflect changes in products and trade patterns. You should keep yourself updated with the new editions of the HS code system every few years, incorporating amendments and new classifications.
What Is an HSN Code?
An HSN code, or Harmonized System of Nomenclature code, is another HS or HTS code variation. It is a standardized numerical classification system used by India to identify and categorize goods in international trade.
Summary
Understanding international nomenclature and coding system is essential for import and export businesses. A slight misunderstanding in international codes like HS code vs HTS code may seriously hurt your business.
Please note that specific regulations and practices may vary by country, and it is important to consult official sources and customs authorities for accurate and up-to-date information while marking a specific code for your products.
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