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.
HS stands for Harmonized System. It is an internationally controlled and accepted series of numbers and various names that was introduced in 1988. These days, it is controlled by the World Customs Organization. The main purpose of HS is to classify the products. The full name of HS is actually the International Harmonized System and it is used by all countries in the world, for the aforementioned reason.
In simple terms, you will need and you must use HS code when you are planning or sending parcels to another country. It is irrelevant which type of product you are sending. All items must have a specific HS code. It uses 6 characters.
There are 3 groups of HS, each containing 2 codes. The first 2 are used to define the type of product. For instance, it is computer equipment. The second 2 are used to classify the product even more. In this example we can see that they will define packages as RAM memory. The last 2 will provide additional information. For instance, 8GB RAM modules.
Item classification in the Harmonized System
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.
GHS and Schedule B codes: Additional codes
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 and it is another 10 digit number you can see on the package. It is used when importing the items to the United States. The first 6 figures are used as the same HS code while the other 4 will be used to provide more details about the parcels.
We can give you one example, but keep in mind that each good has its own code. The code for coffee is 09. If you see a code 090111 you will important non roasted, with caffeine coffee.
Once again, we can see that those of you who will import goods to the United States must use schedule B codes. All HTS codes are controlled by the U.S. International Trade Commission. The main Idea here is that HS codes are used for exporting the goods while HTS is used for importing the goods.
Why is using HS codes so important?
Using HS codes and also HTS codes is mandatory! If you fail to provide these codes to your parcels you can encounter a serious issue. We will count only the main issues. However, there are many more issues that may be applied to your packages and your business in general. These problems can be:
Differences you need to understand
When exporting the goods you need to use a proper code, accurate code. Using a generic HS code is a common mistake and it won’t help you. In fact, your shipment will be declined. What you need to use is a proper HTS code with schedule B additional code.
If you are exporting umbrellas to Germany, you will use the 6603.20.0000 code. However, the code for the same product for the United States is 6603.20.3000. If you use the first code as we have mentioned above, your shipment won’t be accepted. Now you can understand why HTS and schedule codes are mandatory for exporting businesses.
Classifying and maintaining the HS codes
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.
The final word
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.