What is an HS Code and why does it matter?

Posted by Delarae Ritchie on

Details are important, especially when shipping items across international borders.

The "HS Code" (Harmonized Item Description and Coding System) is an international standard that is constantly changing and evolving. There are several components to the HS system, but the one that is generally used for shipments and manifests is a 6 digit standard classification of goods (sometimes called a "sub-heading"). 

A single item may qualify under multiple codes but there is usually one that is the best fit.  The US CBP (Customs and Border Protection) agency states that there is only one classification for any given product that is considered accurate.   In some cases, this has led to legal appeals and court cases (see the "Snuggie" reference from Purolator International at the end of this blog).   

Choosing a less than optimal code can result in higher than necessary taxes, duty, fees and delays at the border.  It is the legal responsibility of the person or company originating the shipment to ensure that the codes and classifications are correct.   Most companies will require that the HS Code is confirmed in writing by the importer because of the legal implications if this information is inaccurate.  

It is also important to note that although the HS Code is considered an international standard, there are differences by country.  All countries that have adopted the HS Code system have agreed to use a single standard uniform set of codes depending on the type of goods.   Individual countries can add additional 'qualifying codes' to be able to capture more specific data.   As a result, the code to export a product from Canada to the USA may be different from the code to import that same product from the USA to Canada.   This is in part to accommodate for special conditions related to permits, tariffs or other levies that are specific to the country.   Some countries require 6, 8, 10 or 12 digit codes depending on the origin, destination, and contents.   The WCO (World Customs Organization) establishes unique 6 digit codes for roughly 200,000 different commodities and accounts for roughly 98% of the world's trade merchandise (source). 

Graphics Source: Wikipedia

If there are material errors or deliberate misrepresentation it can result in additional inspections, fines, penalties, seizures and/or delays to your shipment.   

When the HS Code is correctly selected and the most accurate representation for the shipment, it can result in faster border inspections and reduced taxes, tariffs or duties.  

International HS Codes are subject to updates or revisions every five years.   National tariff codes can change multiple times in a single year.   

If you ship frequently or high-value items, it is worthwhile to familiarize yourself with the HS Codes and keep up to date with applicable updates. 




Here is an interesting reference article from Purolator International:
(Published June 12, 2019: https://www.purolatorinternational.com/proper-tariff-classification-a-vital-part-of-customs-compliance/)

The Snuggie, a fleece blanket with sleeves, became a cultural phenomenon in 2009, even gaining Oprah Winfrey’s “seal of approval” and a segment on Saturday Night Live. But the garment became ensnarled in an international trade dispute over whether it should be classified as a “blanket” or an “article of apparel.”

The reason it matters has to do with tariff rates. Every product entering or leaving the United States must be assigned a tariff classification code which, for imports, determines the product’s tariff rate.

If, as determined by U.S. Customs and Border Protection (CBP), the Chinese-made Snuggie qualified as a “sleeved polyester fleece wrap,” it would be subject to a 14.9 percent import duty. But if, as its manufacturer claimed, the Snuggie actually met the definition of a blanket, the rate would be a significantly lower 8.5 percent.

The dispute was escalated to the U.S. Court of International Trade where, in March 2017, the court ruled the Snuggie was, in fact, a blanket.


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