HS code: a harmonised system at the heart of the import process

Although used by customs authorities the world over, the HS code remains a complex system nonetheless. A closer look at a harmonised system designed to streamline your export procedures abroad.

Understanding the HS code

Definition

The HS code refers to a six-digit sequence used to precisely determine the exact nature of an imported product. The Harmonised System (“Harmonized System”), which underpins this coding, thereby facilitates customs clearance procedures for international imports and exports.

Used in particular by import-export companies and in the development of international e-commerce websites, the HS code is included in the documentation accompanying the goods and checked by the customs authorities at the borders of the importing territory, who then proceed with customs clearance.

The value of the HS code in the shipping procedure is threefold:

• it allows customs authorities to determine the duty applicable to the type of goods;
• it allows customs authorities to verify that the goods are authorised to move within the territory;
• it allows the territory’s administration to enrich its statistical data on goods imports.

Good to know: The HS code is governed by the International Convention on the Harmonized Commodity Description and Coding System.

Harmonisation system

Having been ratified by 176 countries to date, the HS code, which came into force in 1983, standardises customs procedures on a worldwide scale. It is managed by the World Customs Organization (WCO), a body behind numerous guidelines that make this coding system easier to understand.

Indeed, the sheer diversity of goods that may be imported from one country to another makes the high level of complexity of the Harmonised System unavoidable. Nevertheless, it offers a single export code across all continents and the majority of territories.

For this reason, 98% of all goods imported worldwide are governed by this harmonised system – that’s more than 200,000 product types!

Since using the HS code is now almost essential for exporting companies wishing to access new markets with ease, it is vital to understand how it works. Indeed, this code will be requested every time your goods cross a border.

Please note: The latest version of the HS code was published on 1 January 2017. Its nomenclature is updated every five years.

Composition of the HS code

First six digits

The HS code consists of six digits and takes the form: XXXX.XX. 

For each type of product, this numerical sequence identifies:

• its characteristics;
• its components;
• its nature.

Section

Ahead of the six digits, it is necessary to specify the section to which the goods belong. There are 21 sections in total, each subdivided into several chapters.

Example:

Section V is entitled “Mineral products” and contains Chapters 25, 26 and 27.

Please note: The section does not appear in the HS code itself; however, it must be specified so that the six digits it contains can subsequently be entered.

Chapter

There are 99 chapters, representing the first two digits of the HS code. They are directly visible within the sections and list in detail the types of products likely to be found there.

Example:

Chapter 26 is entitled “Ores, slag and ash”.

Note that both sections and chapters follow a classification according to the goods’ degree of manufacture. In other words, the more complex a product is deemed to be in its manufacture, the further down the list it will appear.

Title

The third and fourth digits of the HS code represent the product’s heading. There are 1,244 in total, each specific to the chapter selected.

Example:

Heading 03 (found within Chapter 26) designates “Copper ores and their concentrates”.

Subheading

Although the section and the first four digits (chapter and heading) are sometimes enough to identify a product precisely, the HS code always ends with a subheading in the form “.XX”, containing the last two digits. In total, there are no fewer than 5,244 available subheadings.

Example:

Copper ores and concentrates found under HS code “Section V: 2603” have no derivatives. Their subheading will therefore be “.00”, giving the following HS code: “Section V: 2603.00”.

Other digits and specific cases

Because certain territories, such as China, the United States, the European Union and the member countries of Mercosur, have their own nomenclature systems that supplement the HS code, exporters need to carry out thorough research into these other coding systems.

Many codes therefore have 8 digits, or even 13 in the case of China. These are known as national subheadings.

These combinations allow the countries in question to gather more precise statistics on the types of goods imported. In addition, the level of taxation may vary depending on the associated suffix.

Using the HS code

Terms of use

Always required, in legible form, on the commercial invoice as well as on customs documents, the HS code is primarily used by:

• customs authorities;
• government regulatory bodies;
• statistical agencies.

Because any inaccuracy is liable to a fine for non-compliance, to be borne by the customer, it is essential to be familiar with the nomenclature of the host country.

Swiss and foreign national customs authorities, the WCO, online resources and search tools provided by your carrier… so many resources to help you assign the right code to your goods, until this practice becomes more familiar to you.

Good to know: If, despite thorough research, your product does not have a suitable HS code, it can be placed in the residual basket (the “Other goods” category).

Commercial interests

In addition to the benefits the HS code offers importing regions as well as customs authorities, the compliance of your documentation impacts the quality of your business relationships.

Indeed, compliant coding will improve the smoothness of your international deliveries, whereas any inaccuracy is liable not only to a fine, but also to a possible refusal of import.

A central element of your export policy, compliance with the Harmonised System will optimise your logistics costs as well as your customer relationships. To take this optimisation further, b-sharpe supports you in simplifying your foreign exchange operations.