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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 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.
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) .
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.
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.