What is the Harmonized System Code (HS Code)?
The Harmonized System Code provides an internationally recognized classification system for identifying and categorizing traded products.
The World Customs Organization develops and maintains the HS to establish a common framework for international trade and customs procedures.
Each HS Code consists of a series of digits assigned to a specific class of products, ensuring uniform classification across borders.
This standardization simplifies international trade by precisely determining import duties, taxes, and other requirements.
HS Codes play a crucial role in facilitating smooth customs processes, minimizing delays, and ensuring accurate documentation.
For companies, finding the right HS Code in each transaction to avoid any fines and smoothness in international trade.
Topshipping helps clients identify the correct HS code for their shipment to make sure the cargo passes through customs smoothly in Canada and facilitate seamless delivery from China to Canada.
Donlowad Harmonized System Code
How is the HS Code Structured?
The HS codes fall in a structured hierarchy from 2 to 10 digits. The classification of such goods takes place in international trade using the structure below.
Chapter:
The first two digits specify the chapter, which broadens the classification of goods into sections, determined according to nature and use. Twenty-one such sections exist that classify the chapters from 01 to 99.
Heading:
The first four digits denote the heading, a further classification within each chapter, narrowing down further the types of goods.
Subheading:
The first six digits denote the subheading, further classification within each heading, giving in precise detail the description of the goods.
Item:
The HS code is usually completely six digits, but countries can extend it up to 10 digits for even further detail. Extra digits provide more detailed information about the product, such as its composition, form, or function.
Example:
Consider the HS code for coffee:
- Chapter: 09 (Coffee, tea, mate, and spices)
- Heading: 0901 (Coffee; coffee husks and skins; coffee substitutes containing coffee)
- Subheading: 0901.21 (Coffee, not roasted, not decaffeinated)
- Item: 0901.21.10 – Coffee, not roasted, not decaffeinated, not flavored
Whereas the item classification gives increasing detail on the product from Chapter 09’s general product, coffee, down to the very detailed type of coffee at the line-item level.
This makes for a hierarchical structure in which goods can be particularly specific and uniformly classified for the purpose of international trade and simplified customs procedures accordingly.
How Do the HS Codes work?
Uniform Classification:
To begin with, the HS code provides a uniform classification system in the case of goods being traded across boundaries.
Almost all customs authorities around the globe have adopted this system in order to classify products under one uniform classification, which helps in the smooth flow of international trade.
Hierarchical Structure:
The HS codes follow a hierarchical structure. These codes range between 2 and 10 digits.
Each digit represents a different level of classification, moving from the highest, the chapter, to the most detailed, the item.
Broad Categories (Chapters):
The first two digits of the HS code are known as the chapter and are determined by the nature of the goods or their use.
There are 21 chapters on various products, which include everything from live animals to foodstuffs, machinery, textiles, and many more.
Detailed Classification:
As one moves further along in the HS code, classification becomes increasingly detailed.
Further, beyond the chapter level, the digits become progressively narrower in describing the product and material composition, form, function, or processing.
Global Standardization:
These are used and recognized by customs administrations, traders, and every other party engaging in international trade.
This standardization ensures that goods being classified should be consistent around all countries in terms of country of origin and destination.
Tariff Determination:
Now, the HS code plays a very important role in identifying which tariffs, duties, and taxes both imports and exports are liable to.
The HS code allows the customs authorities to correctly compute the tariff rates applied while enforcing the rules of trade accordingly.
Trade Statistics:
HS codes form part of this basis for collecting trade statistics. These HS-coded data are used by the respective governments and international organizations in order to analyze flows of trade, monitor trends, and develop appropriate trade policies.
Harmonization Updates:
The WCO regularly updates the HS system to reflect changing technology, trends in international trade, and product innovation. This type of update has kept the HS relevant and versatile amidst constantly changing global trade practices.
On the whole, HS codes are an integral part of any smooth and efficient flow in international trade, as they provide a unified language through which traded goods are classified and regulated.
Why Are HS Codes Important for Global Trade?
The HS Codes are very indispensable for smoothening worldwide trade. Since it is a standardized means of classifying goods, they greatly work towards lessening complications in international trade and customs clearances.
Custom Clearance Smoothing
This code helps customs officials easily identify the type of goods being imported or exported and facilitates faster clearances, likely reducing border congestion.
Exact Duty Calculation
Authorities calculate import duties and taxes based on the HS Code assigned to a product. Using the correct code ensures that a business pays the exact amount required—no more, no less.
Ensuring Compliance with Trade Laws
HS Codes match up with international trade agreements and regulations. Proper classification enables any business to observe legal requirements that include import restrictions or special tariffs.
Failure to comply may lead to fines, delays, or shipment rejections due to incorrect usage of the HS Code.
At Topshipping, accuracy and compliance with the right HS Codes for their shipments are made with priority, so that we can make trade from China to Canada smooth and seamless for our clients.
What is the HS code on Commercial Invoice?
Harmonized System code, as the HS code is officially known, lies at the heart of a commercial invoice when it comes to international trade.
It is the language that, customs and delivery personnel of various countries use to obtain vital information about the nature of merchandise being shipped.
It is, therefore, very important that the HS code is accurate on the invoice.
Here is a step-by-step explanation of how the HS code should appear on a commercial invoice:
Description of Goods:
Under the “description of goods” section of the invoice, write a full and accurate description of the shipped goods. This should include the name, characteristics, and quantity of the product to give customs a full idea of what shipment cargo is in the consignment.
HS Code:
Also, beside each product description, write down the HS code allocated for that product. Normally, the number of digits for an HS code is six, although some countries make use of more detailed systems of classification. It is not by any means less important to make sure the allocated HS code correctly represents the product being shipped.
Country of Origin:
Specify the country of origin for each of the items on the invoice. This is vital information that will be used in importing taxes, duties, trade agreements, and regulations.
Value of Goods:
Please do not forget to include in the invoice the monetary value of each item. This valuation forms the very basis for the calculation of applicable tariffs, taxes, and customs duties during the clearance process.
Total Invoice Value: Add the individual product prices and any shipping cost associated with them to arrive at the total invoice value. This all-inclusive number will give customs a complete picture of the financial transaction involved.
Note: In case you engage the services of a professional freight forwarder, they will manage these chores professionally and efficiently for you and see that the shipment is properly compliance-heavy.
How to Find the Right HS Code for Your Product?
Correct identification of the proper HS Code for your product is indispensable in facilitating seamless international trade.
Here are some practical suggestions to ensure exactitude.
Utilize Online Tools
Most countries make searchable databases for HS Codes. An example is the website of Canada’s customs; it includes an online tariff tool where you can directly search by product description or keywords.
Consult Government Databases
Consult official tariff schedules or trade directories obtained from the WCO or your target country’s customs authority.
There one can find more detailed classifications in those resources.
Seek Expert Help
Customs brokers and logistics providers, including Topshipping, are experts in assisting businesses to determine the appropriate HS codes for their products.
Our team will analyze product details and advise on proper classification in compliance with the requirements.
Cross-Check Product Details
Now, break down the specifications of your product composition, purpose, and dimensions, for example, cross-check them against the headings and subheadings in the HS Code system to find the closest match.
Using the appropriate HS Code avoids errors, delays, and miscalculations of duties. At Topshipping, we make this process easy for our customers.
We ensure the correct classification of your goods and smooth delivery from China to Canada.
Using correct HS codes in shipping
Correct HS codes are used in shipping for the following reasons:
Customs Clearance:
Customs classify all imported and exported goods under the HS code for customs clearance purposes. Proper classification of goods through the Harmonized System Codes facilitates expediting customs clearance with due compliance to import/export regulations.
Tariff Determination:
HS codes help determine the tariffs, duties, and taxes levied on exported or imported goods. Proper classification with accurate HS codes ensures correct tariff calculations, avoiding both underpayment and overpayment of duties.
Trade Statistics:
The HS-coded data form the basis of national and international trade statistics compilations.
When HS code reporting is accurately done, it offers possibilities for analysis of trade flows, market trends, and other economic indicators that inform decisions at both levels of policy formulation: micro and macro.
Risk Management:
Customs also use HS codes in their risk management strategies for identifying high-risk shipments, detecting smuggling, and preventing illegal trade in restricted or prohibited goods. Accurate HS code classification mitigates any potential security risks and ensures supply chain integrity.
Compliance:
Correct application of the HS code ensures that trade regulations are complied with, agreements are adhered to, and customs requirements are met.
Non-compliance with the classification of the HS code may result in punishments, fines, or for that matter, the confiscation of goods by customs.
To this effect, a business needs to be perfectly aware of the nature and characteristics of its merchandise and check official HS classification sources issued by the customs authority or international organization for proper application of HS code shipment.
Use web tools and databases to locate and verify HS codes. Consult with customs brokers, trade consultants, or attorneys who are experienced in international trade and customs regulations. Periodically verify HS code classifications, as products and regulations change.
This way, a company using the proper HS code will be able to efficiently ship goods while minimizing compliance risk and ensuring that international transactions go smoothly.
Differences Between Global and Local HS Codes
The HS Code system is universally standardized, yet there exists a huge difference between the global and local adaptations of the codes:
Global Standard (First Six Digits)
The first six digits of any HS Code, as provided by the WCO, are the same across the globe. These digits categorize goods into chapters, headings, and subheadings. International trade would be impossible if these digits failed to uniform.
Local Extensions
Many regions or countries extend the HS Code beyond six digits to meet their specific trade and regulatory requirements:
- European Union: EU adds two to four extra digits with the purpose of detailed tariff classification and trade statistics.
- United States: It extends the code to 10 digits under the Harmonized Tariff Schedule to get to more precise duty rates.
- Canada: Additional digits are used for unique tariff rates and import/export monitoring, among other things.
Purpose of Extensions
Localized codes allow governments to:
- Apply region-specific tariff rates.
- Monitor imports and exports more precisely.
- Impose trade policies, quotas, or restrictions.
Here at Topshipping, we make sure your shipments comply with both global HS standards and local extensions to simplify customs clearance and avoid delays when shipping from China to Canada.
