HS codes stand for Harmonization System (fully called “Harmonized Commodity Description and Coding System”) codes used by customs authorities worldwide to identify and levy duties on products crossing international borders. The HS system was first introduced in 1983 by the World Customs Organization (WCO) and is now used by more than 200 countries worldwide to classify over 98% of the merchandise in international trade. The WCO HS Committee updates the HS every 5 - 6 years to account for developments in technology and changes in trade patterns.
So what are HS codes?
Simply put, HS codes are a numerical way of referring to the goods in foreign trade. They are primarily used to collect duties and taxes on goods moving across borders. HS codes, along with invoice value, dictate the ultimate price you pay for clearing your goods through import customs. HS codes are also useful for a number of other purposes, including regulating external trade, collecting trade statistics, controlling the flow of goods, economic policy making (such as free trade agreements), etc.
Structure of HS codes
HS code consists of a 6-digit number representing the product’s main category, which is harmonized worldwide. The numbers following the first 6 digits are for subcategories and may vary from country to country.
● Section 11: Textiles and textile articles
● Chapter: 50 - Silk
● Heading: 5004 - Silk yarn
● Subheading: 500400 - Silk yarn (excl. that spun from silk waste and that put up for retail sale)
● National subheading: 50040010 - Silk yarn, unbleached, scoured or bleached (excl. that spun from silk waste and that put up for retail sale)
Why HS codes are important
Customs authorities in import countries rely on HS codes and invoice value to determine duties and taxes on your goods or apply duty exemptions. HS codes also often determine if certain categories of goods can be legally imported or exported, required permits and documentation procedures. Before moving the goods, it is important that you carefully check the applicable HS codes for your product in the import country’s customs database (remember that codes may vary from country to country). Misidentifying HS codes for your products can have negative duty / tax implications at destination - consignees may end up paying fines or higher levels of duties.
What happens if you ship without HS codes and/or invoice value
If you are importing or exporting goods, you must use HS codes on commercial invoices. When you export without identifying HS codes or invoice value for your goods in the shipping documents, you basically leave it to the import country’s customs authorities to determine the HS code and/or value of your products. Remember that this may not always work out well since mislabeling your product with a wrong code may lead to higher duties or outright rejection of entry for your shipment. Accurate classification of HS codes for your products is critical to the success of your import or export business.
How we can help
Our foreign trade experts at Xscale have a wealth of knowledge and local experience dealing with customs clearance in the countries within our network. When you are not sure which code to assign to your goods, consulting Xscale customs specialists is a good idea. Working with customs brokers well versed in forein trade practices will ensure that you will not have to worry about customs compliance and can avoid costly penalties and time lost trying to navigate all the red tape.
Xscale is a logistics and supply chain management company headquartered in Singapore. We operate out of our hubs in Singapore, Tashkent, Frankfurt and London, providing a complete range of logistics and procurement services to businesses around the world. We combine our global network, industry expertise and highly competent professionals to work alongside our customers and solve their supply chain challenges. Contact Us if you require any assistance.