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

Although used by customs authorities around the world, the HS code remains a complex system. Here’s a closer look at this harmonised system, designed to streamline your export procedures.

Understanding the HS code

Definition

The HS code is a six-digit code used to precisely identify the exact nature of an imported product. The Harmonised System, which forms the basis of this coding system, 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 sites, the HS code is included in the documentation accompanying the goods and checked by the customs authorities at the borders of the importing country, who then proceed with customs clearance.

The HS code serves three purposes in the shipping process:

• to enable customs authorities to determine the tax applicable to the type of goods;
• to enable customs authorities to verify that the goods are authorised to move within the territory;
• enable the regional administration to enhance its statistical data on imports of goods.

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

Harmonisation system

Having been ratified by 176 countries to date, the HS Code, which came into force in 1983, serves to standardise customs procedures worldwide. It is administered by the World Customs Organisation (WCO), a body responsible for numerous guidelines designed to make this coding system easier to understand.

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

For this reason, 98% of all goods imported in global trade are covered by this harmonised system, amounting to more than 200,000 product types!

As the use of the HS code is now virtually essential for exporting companies wishing to gain easy access to new markets, it is vital to understand how it works. Indeed, you will be asked for this code every time your goods cross a border.

Please note: The latest version of the HS Code was published on 1 January 2017. The classification system is updated every five years.

Composition of the HS code

First six digits

The HS code consists of six digits and is formatted as: XXXX.XX. 

This digital suite enables the identification of the following for each product type:

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

Section

Before the six-digit code, it is necessary to specify the section to which the goods belong. There are 21 such sections, each of which is subdivided into several chapters.

Example: 

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

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

Chapter

There are 99 chapters, each corresponding to the first two digits of the HS code. They are clearly visible within the sections and provide a detailed list of the types of products likely to be included there.

Example: 

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

Please note that both sections and chapters are classified according to the degree of manufacture of the goods. In other words, the more complex a product is deemed to be in terms of its manufacture, the lower down the list it will appear.

Title

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

Example: 

Heading 03 (in Chapter 26) refers to “Copper ores and concentrates”.

Subtitle

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

Example: 

Copper ores and concentrates falling under HS code “Section V: 2603” have no subheadings. Consequently, their subheading will be “.00”, resulting in the following HS code: “Section V: 2603.00”.

Other figures and specific cases

As certain regions, such as China, the United States, the European Union and the Mercosur member states, have their own classification systems that complement the HS code, exporters need to carry out thorough research into these other coding systems.

Many codes therefore consist of 8 digits, or even 13 in the case of China. These are referred to as national subcodes.

These classifications enable the countries in question to collect more accurate statistics on the types of goods imported. Furthermore, the level of taxation may vary depending on the associated suffix.

Using the HS code

Terms of Use

The HS code, which must always be clearly stated on the commercial invoice and customs documents, is primarily used by:

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

As any inaccuracy is liable to result in a fine for non-compliance, which the client will be required to pay, it is essential to be familiar with the host country’s nomenclature.

Swiss and foreign customs authorities, the WCO, online resources and search tools provided by your carrier… All these resources will help you assign the correct code to your goods, until you become more familiar with the process.

Please note: If, despite thorough research, you cannot find a suitable HS code for your product, it can be placed in the ‘Other goods’ category.

Commercial interests

In addition to the benefits that the HS code offers to importing regions and customs authorities, ensuring your documentation is compliant has a significant impact on the quality of your business relationships.

Indeed, ensuring compliance with the relevant regulations will streamline your international shipments, as any deviation from the rules could result not only in a fine but also in the goods being refused entry.

As a key component of your export policy, compliance with the Harmonised System will optimise your logistics costs and enhance your customer relationships. To take this optimisation a step further, b-sharpe supports you in streamlining your foreign exchange operations.