The logistics industry is like a finely tuned watch, with every business, supplier, carrier, regulation and process playing its part in keeping global supply chains ticking, customers happy and businesses thriving. Among those processes is the Harmonised System (HS) of codes that classify and organise the trillions of dollars of goods traded internationally every year. Let’s take a closer look.
What is a harmonised system (HS) code?
Among industry classification systems, HS Codes are commonly and universally used throughout the export process for goods. The Harmonised System is a standardised numerical method of classifying traded products. It is used by more than 200 countries and economies around the world to identify products when assessing customs tariffs and for gathering statistics.
The clue to this is in the name. With so many goods moving around the world, it’s important to know what they are and how to separate them, so that customs authorities can easily identify goods and apply the correct tariffs — thereby reducing costs and keeping international trade moving harmoniously.
Established in the 1980s by the World Customs Organization (WCO) – the HS codes are updated two times every year, with a bigger review every five years to reflect new technologies, trends and goods that have entered the global market.
What does an HS code look like?
In practice, an HS code is a six-digit code that represents a chapter, heading and sub-heading that together defines the good being imported/exported.
Let’s look at an example of a company shipping rear-view mirrors for vehicles, which has the HS code 7009.10:
- The first two digits in the HS code are the chapter – this is the broad categorisation of your commodity. In our case, this would be glass and glassware (chapter 70)
- The second two digits are the heading, which offers another layer of separation. In this case, we would need the glass mirrors heading (09).
- The final two digits are the sub-heading, which offers a final layer of clarification. In the case of our glass example, there is a sub-heading specific to rear-view mirrors for vehicles, which adds a final two digits (10).
Bringing all these components together gives you the HS code: 7009.10. Sometimes, a sub-heading isn’t needed, in these cases, the final two digits are 00.
The WCO has a handy tool that allows you to search and explore goods and commodities to identify the right HS code.
What are harmonised tariff schedule (HTS) codes?
You may have heard of harmonised tariff schedule (HTS) codes mentioned alongside or instead of HS codes. While the six-digit HS code is a global standard, some countries use another two to four digits for further classification.
So, the difference between an HS code and an HTS code is in how many digits are included. The term ‘HTS code’ is used particularly for US imports and is usually between eight and 10 digits. In the EU, as an alternative, you may hear TARIC mentioned — which is the 10-digit code for EU imports. All you need to know is what additional digits/codes are required from the country you’re importing to.
What changes happened in 2022?
Since establishing the HS codes in 1988, the WCO has updated them every five years. With each change, some HS codes are removed, and others have changes to their definitions.
The most recent changes in the HS system came into effect in 2022. There were a lot of changes in the latest update, over 350 amendments in fact.
Some of the changes:
- New chapters and headings were created to give increased visibility for high-profile products. For example, unmanned aerial vehicles (drones) and smartphones.
- Reconfigurations were made to provide better representation for new technologies. As an example, where once 3D printers were hard to categorise and could sit under numerous codes; now they have their own heading with different sub-headings for the materials used in the printing.
- Perhaps following the Covid pandemic, there is recognition that delaying the deployment of tools for the diagnosis of infectious diseases can be costly. As a result, alterations have been made for these kind of diagnostic kits to be classified more simply.
Using correct HS codes in shipping
- As you just read, commodity codes are dynamic. That’s why it’s worth checking your commodity codes regularly so you know you are using the correct codes.
- With an increased focus on accurate commodity classification from many customs authorities, the HS code has become a mandatory part of the shipping instructions for all global cargo movements with Maersk.
- If you'd like help navigating the complex world of customs, Maersk Customs Services provides local expertise with global reach. Whether you are looking for import or export customs clearance, our experts can guide you through the process.
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