Harmonised (Commodity Description and Coding) Systems, or HS Codes, are essential for importing and exporting goods but can often be challenging to understand. Whether you’re someone in the business of imports and exports, a customs broker or agent, or the logistics or e-commerce industry, you need to correctly classify your products with an HS code when they cross borders.
In this article, we’ll take you through:
- What are HS Codes, and Why Do Countries Use It?
- Why is it Important to Declare Items with the Correct HS Codes?
- How Luwjistik Helps?
What are HS Codes, and Why Do Countries Use It?
The Harmonised System (HS) is a numerical classification method devised and maintained for classifying traded products by the World Customs Organisation (WCO). This system is utilised by customs authorities worldwide to identify items while assessing duties and taxes and for compiling statistics.
More than 200 countries utilise HS Codes as the basis for their customs duties and trade statistics collection. It is the most widespread method for classifying goods in international trade to influence and harmonise customs and trade procedures, lowering international trade costs.
The HS Code uses a sequence of 6 digits to form a unique number that identifies each merchandise unit. In essence, the HS Code:
- Is a unique 6-digit identification code
- Is organised into 21 sections and 99 chapters
- Has more than 5000 commodity groupings in total
- Is structured according to strict legal and logical parameters
- Is defined by rules that support consistent and uniform global classification
Therefore, for a good to be legally imported into a country, the HS Code of that good must be listed on the commercial invoice. You must also list a unit of measure for each commodity in a package so customs officials can quickly identify it when exported or imported.
As a result, the HS Code is seen as an essential instrument for international trade, a global economic language, and commodity coding. The structure of the HS Code is as follows:
- The first two digits represent the Chapter the goods fall into
- The second two digits represent the Heading
- The last two digits represent the Subheading
Why is it Important to Declare Items with the Correct HS Codes?
With strict guidelines and filtration conducted by customs authorities, any discrepancy will cause severe consequences. The complications consist of but are not limited to the following:
- The customs authorities impose excessive fines and penalties for the hassle.
- Risk of rejection during import and export.
- Lengthy processes to claim refunds.
- If paid extra duty, denial of refund is more likely than a claim for that refund.
- If underpaid, the duty is a penalty, and the difference is levied with interest.
- Risk of confiscation; in a few countries, spending more and providing more documentation is necessary to authenticate the legitimacy of your package claim.
As previously outlined, the consequences range from hefty fines and delays to potential confiscation of shipments. You must have a firm grasp of HS Codes or partner with a knowledgeable service provider like Luwjistik to safeguard your business interests and ensure the efficient movement of your products.
How Luwjistik Helps?
Luwjistik recognises the pivotal role of correct HS Code declaration in the global supply chain. We understand that the landscape of international trade is nuanced, with varying regulations and requirements from country to country. As such, we have developed a comprehensive solution to simplify and expedite the customs clearance process—our Node calculator.
To learn more about our node calculator and how Luwjistik can benefit your shipping needs and explore the platform’s offerings, contact our representative at commercial@luwjistik.com or visit our website at luwjistik.com.
