In 2017, world trade in goods was estimated to be over $17 trillion. As you can imagine, that’s a lot of products changing hands and crossing countries.
Without a code and/or system in place, it’d be extremely difficult to track logistics. If every country were left to its own devices, then what would read as a sneaker in one country would read like a cow in another.
Thankfully, we have HS codes to rely on.
Are you wondering: what is an HS code? Then keep reading. We’ll give you a thorough guide on everything you need to know about HS codes.
Related: The Global Ecommerce Evolution
What Is an HS Code?
The “HS” in HS code stands for “Harmonized System.” This was first developed by the World Customs Organization (WCO) in 1988 and helps immensely, as it gives a universal code for all goods shipped globally.
You can describe it as nomenclature for goods, as it helps users understand what the commodity is with a simple code. Currently, it’s used by over 200 countries and economies, and over 98% of everything traded internationally is named with the HS code.
Currently, there are over 5,000 commodity groups, and within these groups, you name goods with a 6-digit code. As you may have guessed, there’s a certain way to order these 6-digit codes.
How Do You Use HS Codes?
You’ll need to use HS codes if you’re working with customers and/or vendors outside of the US.
The categories (chapters) for HS codes are:
- Live animals or animal products
- Vegetable products
- Animal or vegetable fats and oils, prepared edible fats, animal or vegetable waxes
- Prepared foodstuffs, beverages, spirits, vinegar, tobacco (and tobacco substitutes)
- Mineral products
- Products of the chemical or allied industries
- Plastics and rubber
- Raw hides and skins, leather, furskins, travel goods, handbags, articles of animal gut (excluding silkworm gut)
- Wood, wood charcoal, cork, straw, esparto, basket ware, wickerwork
- The pulp of wood and other fibrous cellulosic material, paper, paperboard
- Footwear, headgear, umbrellas, walking sticks, whips, riding-crops, artificial flowers, human hair
- Stone, plaster, cement, mica, asbestos, ceramic, glass, glassware
- Pearls, precious metals, imitation jewelry, coins
- Base metals
- Machinery, electrical equipment, sound recorders, television recorders
- Vehicles, aircraft, vessels
- Equipment for photography, cinematography, measuring, checking, precision, medical (or surgical), clocks, watches, musical instruments
- Arms and ammunition
- Miscellaneous manufactured goods
- Art, collectors’ pieces, antiques
- Special classification provisions
The Structure of HS Codes
There’s a certain order in which you have to structure your HS codes. You cannot go out of order, as this will create a code that’s unreadable, no matter where the user is located.
The order is as follows:
Determine the 4-digit heading
- Classify if your goods are incomplete, unassembled, a mixture, or combination of different goods
- Classify if your goods can fall under 2 different HS headings
- Classify if your goods can’t follow rules 1 through 3
- Classify your packaging
- Classify at the 6-digit subheading level
For example, the first 2 digits of an HS code specifies the chapter. Then, the first 4 digits (including the first 2) indicate the heading. The last 2 digits (5th and 6th) indicate the subcategories of your goods.
All 6 digits together indicate the subheading. If there are any additional numbers past the 6th, then they may be used to indicate categorizations that are specific to a certain country.
Who Uses HS Codes?
Based on the information above, you might’ve inferred that basically all businesses involved in trade (such as eCommerce business owners) use HS codes. That’s true, and we can help eCommerce business owners with all their shipping needs at Parcll Delivery. However, there are many other entities that use HS codes as well.
For example, governments, organizations, and the private sector will use HS codes for various tracking reasons. These include trade policies, rules of origin, internal taxes, freight tariffs, and quota controls, as well as for economic research and analysis.
As you’d expect, international trade is constantly changing, including advances in technology and changes in products shipped. This means some codes may become hard to use or outdated.
Plus, each country may interpret the goods differently. The codes are quite tricky as well. As a result, goods may be improperly classified, which may result in unexpected penalties.
In addition, there are the basic 6-digit codes used for standard categories. However, each country can decide to add more digits on their own, which may make the numbers 8 to 10 digits long. So what may read as an item in one country may read differently in another, due to the differences in the last few digits?
Overcoming HS Code Challenges
To overcome HS code challenges, the HS Committee is dedicated to continually analyzing and amending these codes. Every 5 to 6 years, they prepare amendments that update HS codes, which means anything that’s obsolete or unintuitive will be either removed or improved upon.
To help users find the correct codes, there are many HS code lookup and finder tools online now.
To further ensure you’re using the right HS codes, you can also consult with customs or professional customs clearance companies. Both can advise you further on the HS codes you should use for your goods.
Use HS Codes for Smoother Shipping
What is an HS code? For anyone involved in trade, it’s outstanding nomenclature that helps unify and consolidate how goods are named across the world.
While it’s not without its flaws, overall, HS codes are excellent to use when you’re shipping products across the globe. There are plenty of free and easy to use online tools, so if you’re an eCommerce business owner, utilizing HS codes is a must.
Are you looking for a quality DDP shipping solution where you can ship all over the world? Then check out our services now.