If you are planning to import or export items to and from the United States, you already know that there are many requirements, advanced options and so much more. But, the most important of them all is the presence of HS and HTS codes. If you don’t comply with them and you make a mistake here, you will get penalties and your business may be doomed sooner than you think! In order to prevent that and help you with your business growth, we have decided to offer a complete explanation of HS and HTS codes. Without further ado, let’s begin.
In international trade, the use of standardized classification systems is essential for proper identification and tracking of products. One such system is the Harmonized System (HS) and Harmonized Tariff Schedule (HTS) code. The HS code is a standardized numerical method for classifying goods traded internationally, while the HTS code is a country-specific extension of the HS code used for calculating tariffs and duties.
The HS code is maintained by the World Customs Organization (WCO) and is currently in its sixth edition, known as HS 2022. The HS system contains over 5,000 headings and subheadings, each with a unique six-digit code, that classify goods based on their nature, composition, and intended use. The first two digits of the HS code represent the chapter, which broadly categorizes goods based on their nature. For example, Chapter 84 is reserved for machinery and mechanical appliances, while Chapter 85 is for electrical machinery and equipment.
The remaining four digits provide more specific details about the product, such as its material, function, and manufacturing process. For instance, HS code 8414.90 refers to "air or vacuum pumps, air or other gas compressors, and fans; ventilating or recycling hoods incorporating a fan, whether or not fitted with filters." Each digit in the code indicates a specific level of classification, with the first two digits providing the most general description and the last four digits being the most detailed.
By now you probably know that each item, each product has its own HS code. Now you believe that this is generic and for example all potato products have the same code. The code by the way is 0701. It isn’t as simple as it may sound.
If the potatoes are fresh the code will be 0701.90. If they are frozen, the code will be 0710.10. As we have mentioned earlier the first 4 digits of the code are used to define the product. In this case they are potatoes. The other two codes are used to explain the type and version of the product even more. These codes will change depending on the item state and the condition.
The idea is the same for all types of products. Each one can be described separately with the HS codes and each code has a separate meaning. You will need a complete code guide in order to understand the codes completely and to use them properly.
In most cases, additional codes are added to the main HS code to provide even more information to the package. The best additional code you will need to know about is Schedule B. It is a 4 digit code that is added to HS and makes it a 10-digit code.
This additional code is used by the Foreign Trade Division, US Commerce Department, and also Census Bureau. In a nutshell, this code used to provide export details needed for statistics per month or year. To get specifics about the codes, you can use HS Code Finder.
Keep in mind that if you are sending a parcel with a value of over $2500 you will need a license that is obtained from the Automated Export System.
GHS stands for Globally Harmonized System of Classification and Labelling of Chemicals and it is obviously used if or when you are sending hazardous materials to another country.
The following figure shows how to enter your commodity HS tariff number at ShipSaving:
HTS is known as Harmonized Tariff Code Schedule. The HTS code is a further extension of the HS code that is specific to each importing country. Each country has its own tariff schedule that provides more specific details about the duties and taxes that apply to each product. The HTS code includes the six-digit HS code plus an additional four digits that provide more detailed information about the product. The additional four digits can vary from country to country, depending on the specific needs of each country. For example, the United States uses a 10-digit HTS code, while the European Union uses an eight-digit code.
The HTS code is essential for calculating the customs duties and taxes that apply to each product when it enters a country. Customs officials use the HTS code to determine the appropriate duties and taxes that apply to each shipment. The amount of duty and tax varies depending on the product and the country of origin. The HTS code is also used to determine if any restrictions or regulations apply to the product. For example, some products may require a license or permit before they can be imported.
Using HS codes is essential for several reasons:
The HS code and HTS code are both classification systems used for international trade, but there are some differences between the two.
HS codes are classified and maintained by the World Customs Organization or WCO. They basically have a committee known as Harmonized System Committee that will settle disputes, examine additional facts, and also assign new codes to new products. The idea is that HS codes are updated every 5 years. New codes are obviously assigned to new products and they are properly maintained in order to make sure they are valuable, valid, and can be used for the future.
Each code will have to meet 6 separate guidelines in order for a code to become valid and therefore can be used internationally.
HS codes are used when you are sending parcels to another country. HTS codes are used when importing items. Each code is used to define the product inside, the state of it, and also additional descriptions of the product. Using the codes is mandatory and not using them will result in penalties. You must understand all of them.