NAVIGATING THE MAZE OF HS CODES

30 Aug 2023
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KLN Team

Navigating the labyrinth of international trade can be a daunting task, especially when it comes to understanding the Harmonised Commodity Description and Coding System (HS). In this guide, we aim to simplify the complexities of this system, ensuring your products cross international borders smoothly and legally.

 

The Importance of the Harmonised Commodity Description and Coding System

The World Customs Organisation developed the Harmonised Commodity Description and Coding System (HS) as a universal product classification system. It covers all products that might be involved in international trade. For a commodity to cross international borders successfully, the correct HS code, also known as an HTS code, must be declared. This code determines the appropriate duty and tax rate payable on the item.

 

How Does the HS Code System Work?

The HS Code system uses a 6-digit number, internationally recognised, as the basis for local country classification. The HS consists of 5,300 article or product descriptions that appear as 'headings' and 'subheadings'. In theory, all countries using the HS agreement should classify a certain product with the same HS section, chapter, heading, and subheading. However, conflicts can arise due to differences in HS versions across countries, increasing product complexity, historic ruling decisions, and technical aspects of a given product (for example, countries in Mercosul in South America use NCM which is an 8-digit number. It can be translated into HS code by knowledgeable customs brokers in those countries, but make sure you pick a customs broker that knows what they are doing) .

 

The Risks of HS Classification

Incorrect HS classifications can lead to paying the wrong duty and tax on your products. This can result in a retrospective duty or tax bill for the back payment of all the goods you incorrectly classified. This can lead to substantial penalties and fines, and even cause your goods to be seized or destroyed.

An incorrect classification can also lead to overpayment of duty and tax, which has implications for your business’ cash flow. It is possible to make a retrospective claim for overpaid duties, but you must be able to fully back up your arguments for such a retrospective change and claim.

 

How Can Kerry Logistics Oceania Help You?

Our customs and trade compliance staff are up-to-date with all aspects of customs activity and are required to demonstrate professional competence in these areas in support of Authorised Economic Operator (AEO) authorisations.

We can identify where there may be risk in your classification and optimise your classifications, taking advantage of available benefits - such as legitimate re-classification and reduced duty rates - and duty suspensions. To find out more about our HS Classification advisory services and our wide range of customs and trade compliance services, please contact us.

 

FAQ

How do I classify my goods? ⏵

Not all products are simple to classify. Some items are simple to describe and such products can be searched for in the index of your local country tariff – often available online. You should always read the notes that appear in the tariff. These may specifically include or exclude certain items and provide other guidance.

How is the HS structured? ⏵

The HS assigns goods to one of the 21 sections, and then proceeds to assign these goods to their specific chapter, heading, and subheading, in that order.

What are some other purposes of the HS System? ⏵

HS classification is also used by governments and customs agencies worldwide for governing controlled goods, additional taxes, applying rules of origin, trade policies and trade statistics, quota controls and price monitoring; as well as analysis, security controls and risk profiling, and similar uses.

What are some examples of the General Rules of Interpretation? ⏵

These are 6 rules for the classification of goods under the HS. They intend to provide uniform legal interpretation of HS nomenclature for the proper classification of goods, although in practise there is some variation across countries.

What are some examples of inconsistent HS classifications? ⏵

HS classifications are intricate and their application can sometimes be perplexing. Here are two examples which illustrate the inconsistency of HS classifications.

How can I avoid the risks associated with HS classification? ⏵

By working with a trusted freight forwarder like Kerry Logistics Oceania, you can avoid the risks associated with HS classification. Our experienced customs brokers can help you navigate the complexities of the HS system and ensure your goods are correctly classified.

How can I get help with HS classification? ⏵

You can reach out to us at Kerry Logistics Oceania for assistance. Our team of experienced customs brokers is ready to help you navigate the complexities of HS classification.

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