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HS-CODE

HS-CODE

In the HS code, HS stands for the harmonized system. The HS was constructed by WCO (World Customs Organisation). The code was constructed for multipurpose international product nomenclature that explains the type of shipped goods. Any product that enters or crosses international borders then it mandatory for the customs officer uses HS code to give it clearance.

Before going further you must know HS code meaning to clearly understand its importance and how it works. Hs code is also known by the name of HTS which means Harmonized Tariff Schedule code. This was created for categorizing goods into 5,000 commodity groups approximately, which has been accepted and implemented by more than 200 countries worldwide.

STRUCTURE OF THE CODE

The following contains the information regarding the structure of the HS code:

  • It is a six-digit identification code.
  • It has 5000 commodity groups.
  • Those groups have 99 chapters.
  • Those chapters have 21 sections.
  • It’s arranged in a legal and logical structure.
  • Well-defined rules support it to realize uniform classification worldwide.

Kyoto Convention of 1974 is a major source of the code. Facilitating simplification and harmonization of the Customs Procedures. The application of efficient procedures, as well as new and obligatory rules for their implementation, are conducted by the Kyoto Convention.

In electronic messages like the EDIFACT extensively utilises HS codes. HS code has made it easier for the system to get addressed worldwide a standard unit for describing goods for multiple platforms. HS code gives universal identification to the products, making it easier for the authorities to recognise the product.

Usage of HS code

There are more than 200 countries and other economies around the globe uses HS code for their collection of international trade statistics and the customs tariffs. More than 98% of the goods are classified on the bases of HS code for global trading.

Apart from governmental organisations, HS code is also utilised by international and private sector firms. The following contains the major operations of the HS code:

  • monitoring
  • updating
  • optimizing
  • controlling goods
  • internal taxation
  • follow the rules of origin
  • trade policies
  • transport statistics
  • freight tariffs
  • compilation of national accounts
  • quota controls
  • price monitoring
  • traffic statistics
  • economic research
  • analysis

HS code performs multiple activities and it is regarded as an indispensable tool for global trading, universal economic language and the coding of commodities.

Classification and maintenance of HS Code:

The International Convention on the Harmonized Commodity Description and Coding System governs the maintenance of the HS code, although its official interpretation of the HS provided in the explanatory notes. WCO publishes those Explanatory Notes.

HS code has been used for multiple purposes, therefore, the WCO gives priority to the maintenance of HS code. Prioritising the maintenance includes some of the important measures such as securing the uniform interpretation as a well periodic update in the shadow of development in technology and fluctuations in trade platforms.

With the help of the Harmonized System Committee that represents the Contracting Signatories/Parties to the HS Convention, WCO manages the entire process. Following are roles played by the committee:

  1. Decides the classification of the goods
  2. Examination of policy matters
  3. Settling the disputes
  4. Preparation of amendments for explanatory notes

As per Wikipedia, 6 general rules have to complete for the consecutive order. They include:

  • GRI 1 prescribes how to classify products at the four-digit Heading level, based on the wording of the headings and the relative HS Section and Chapter Notes.
  • GRI 2 prescribes how to classify both incomplete and unassembled goods and mixtures, as well as combinations of goods.
  • GRI 3 prescribes how to classify products that are, prima facie, classifiable under two different HS
  • GRI 4 prescribes how to classify products that cannot be classified according to GRI’s 1, 2, and 3.
  • GRI 5 prescribes how to classify packaging.
  • GRI 6 prescribes how to classify products at the six-digit subheading level, based on the wording of the subheadings and the relative HS Section and Chapter Notes.

Challenges in the classification of companies:

Usage of incorrect code may be considered by customs as non-compliance, misleading or misdeclaration – each of which comes with its associated penalties, therefore, is essential for the importers to use correct HS code and its right interpretation has the utmost importance.

Although utilising correct HS code is very essential but it can be tricky at specific instances. Thus, appropriate HS code search is important for global trade. The interpretation of HS codes may or may not vary in different countries and their customs authorities. If the code is correct, then it would lead to the implication of improper tariff applied by customs, which increases the cost of imports to the customer exponentially. You can even use HS code finder available over internet for making the task much easier and accurate.

Therefore, if the clients are confused about the HS codes, then they should confer with the expert or their agents.