You use it to:. Classify physical goods for shipment to a foreign country;. Conduct market research and obtain trade statistics;. Comply with U. The Schedule B search tool is the most commonly used method for classifying products.
All in all the Harmonized Commodity Description and Coding System or also known as the HS Codes is a common standard used all around the world with the aim of describing the type of commodity that is being transported.
Thereupon, as you had the chance to read that the codes help in the harmonization of customs and trade procedures by standardizing and identifying the cargo in the same manner regardless of the first or final destination. Hence, it is of great importance for all parties using HS codes to use it and implement it in the right form.
So, lets find out what HS codes are and how do they apply! What are HS Codes? How are HS Codes Used? These codes are mainly used by these bodies to: Monitor Update Optimize controlled goods International Taxes Rules of Origin Trade policies Transport Statistics Freight Tariffs Quota Controls Price Monitoring Traffic Statistics Economic Research By this you can see that the HS codes are seen as an indispensable tool that helps all bodies that are connected to international trade, coding for commodities as well HS codes are being used as a universal economic language.
In the real sense, traders in various countries may have no option than to depend on HS codes to get things running as far as freight shipping is concerned.
The importance of an HS Code can actually not be overemphasized. In simple term, HS Code is that 6 to 10 digit number that categorizes any imported or exported product.
It is used internationally to accurately track and tax goods coming in and going out of a country. HS Code classifies your product for international trade and international freight. Commodity groups of over in the nomenclature carry an HS code, whether you are trading textiles or tilapia. Effect on Duty Rates: The entire shipping process requires understanding standing duty tariffs.
And the HS Code is closely involved in determining duty rates, as well as antidumping and countervailing duties. To avoid a very dangerous commercial risk on your business, you want to ensure you get the HS codes of your goods right. Risk of Delays: One factor among many others responsible for the delayed arrival of shipment is incorrect HS Codes. When an importer fails to get right the HS Code, it posses a major challenge for the shippers as it risks delays. In connection, when customs brokers can not classify and identity a shipment correctly and the commodity respectively with its proper HS codes before the vessel arrives and free time at the terminal expires, the shipper faces storage charges.
Regulatory Intervention Risk: Shippers also risk regulatory intervention. It is critical to measure the impact of a penalty system on classification compliance. It is reasonable to suggest that if one is penalized financially for making an error in tariff classification, the same error is not likely to recur.
However, it is also reasonable to suggest that Customs administrations issue penalties for incorrect tariff classification only after careful scrutiny, within clear parameters, and that the mechanism to appeal a penalty should be simple and timely, with input from all parties.
Penalties should not be seen as the only way to promote compliance and deter non-compliance: countries should constantly strive to find the best possible mechanisms to resolve differences of opinion and to educate all who have responsibility for HS classification, both inside and outside Customs administrations.
The HS has not remained static and it must continue to evolve. What happens when changes are made to the HS, and what are the impacts for business and for national Customs administrations? We have just completed a review cycle, with the next one scheduled for Changes to the HS affect trade agreements, requirements of other government agencies, sourcing decisions by business, and changes to education programmes, information technology IT systems, and communication tools and websites.
Conversion is a significant cost for governments and the private sector alike. A single change to the HS can result in thousands of changes to product databases, especially for Customs brokers with hundreds of clients importing a wide variety of products. One tariff item may be split into two or more new tariff items, requiring the manual reclassification of all products from the old to the new.
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