How to Find the Right HS code for Your Products

Finding the right custom code for your products is crucial to trade. Learn how to find them and their impact on compliance and tariff rates.

The HS code is the first step for setting out for international trade. These codes help you prepare in advance for the transportation and placement of your goods across the borders, preventing delays and extra surcharges.

However, using the wrong code can lead to huge costs and legal implications, such as compliance issues or penalties. In this post, we will talk about what custom codes are, why they are important, and how you can find the right codes for your products.

What Are HS Codes? Understanding the Basics

HS codes, or tariff and classification codes, are used by customs authorities worldwide to categorize goods into imports and exports.

The codes standardize products according to their classification and streamline trade. They are important and, in fact, mandatory for compliance, tariff calculation, and reporting of goods.

So, every time you export or import products, you have to assign them a custom code, which will help the customs authorities calculate the exact duties, taxes, and compliance requirements for you.

What is the role of HS (Harmonized System) codes in international trade?

The HS code, or the Harmonized System code, is the most common classification system used in international trade. It was developed by the World Customs Organization and composed of six digits. Currently, it lists over 5000 product group categories.

Each category is subdivided for each country so the code matches their tariff schedules.

The first six digits of the code are consistent with worldwide; however, the subsequent digits are used by and specified for each country and the product details.

What are the differences between HS codes and HTS codes?

So, even though the HS code is the key code, many countries also use its variations for their products. Some of the variants used today are:

HTS Code Order: The HTS code order harmonizes the tariff schedule. This is the US version of the HS code, which has four additional digits.
ITC: Standard International Trade Classification is also used to categorize goods but is more focused on global trade statistics.
Regional Systems: Japan, the EU, and Canada all use the HS codes as the base classification, but they also have additional national and regional systems with further classifications.

How to Identify the Customs Code for Your Product

Let’s walk through the step-by-step guide to identify the right customs code for your products and country.

Step 1: Know Your Product Inside Out

Of course, the first step in classifying your products is to have detailed knowledge about them. You should know which materials they are made of, their functions, and how they can be used or work.

Custom codes vary depending on all of these factors. So, take the time to note the specific details of each product. For example, a rexine handbag and a leather one may look completely alike but will fall into different categories and have different codes.

Although both are handbags used for the same purpose and look identical, they are made of different quality materials.

Step 2: Use Online Tools and Databases

Today, many online tools will help you find the custom code for your product. Some of the most highly recognized and renowned ones are listed below.

WCO Harmonized System Database: The WCO HS Database is the official database that gives you access to the HS codes
US Customs and Border Protection: Local customs authority websites like this have a consolidated HTS code database. All you have to do is enter your product description and get a suggested code. (You can narrow it down to the most relevant one to your product.)

Step 3: Cross-reference with Local Regulations

The customs codes are also very specific to the destination country. Check the local customs regulation to find the base code and see if it is compatible with your line of products.

For instance, if you are shipping products to the US, the customs code for electronic products will differ from those in China or the EU.

Step 4: Consult the Official Tariff Classification Database

Always refer to official resources, such as the Harmonized Tariff Schedule (HTS) in the US, TARIC in the EU, and the General Administration of Customs China (GACC).

All of these are regulated databases that are updated timely and get you the correct codes.

Step 5: Seek Expert Assistance if Needed

If you are new to business or have a complex product with multiple materials as components, it is best to consult with a customs broker or legal experts.

They will offer accurate advice on your products and save you from penalties and other legal consequences due to the misclassification of goods.

How to find the customs code for a specific industry

Each industry has unique products that should be classified according to their description.

For instance, electronics have complex parts, often requiring multiple customs codes. Since the codes are determined based on the type of device and its specific parts or materials, numerous custom codes may apply to one product.

Then, in the garments or textile industry, you will have to classify the fabric and type of garment to determine the code.

Similarly, in machinery, your code will vary depending on the machine’s function. So, you need to know the specific functionality of the machinery and its purpose. Also, the better you know about how it is powered on and its components, the more easily you’ll be able to find the correct customs code for your product.

What is the role of customs code?

Once you find the correct customs code, you will be able to determine the exact amount of tariffs, taxes, or fees applicable to your goods. Thus, the customs code has many implications.

Here are some ways it affects the shipping process:

Duties and Taxes

The customs code will determine the tariff rate applicable to your goods, affecting your cost of imports. Some goods have higher taxes, and others have preferential tariffs. Each will impact your import and the total cost you’ll have to bear.

Compliance Requirements

You need to know the correct code for compliance purposes. If you fail to classify the product accurately, you may face a fine, delays in shipment, or even the seizure of your goods.

You can only pass all the legal obligations if you meet all the requirements to the best of your knowledge.

Penalties for Incorrect Codes

You must pay penalties if you write an incorrect code for your product or if the customs discover it. They may view it as an attempt to avoid tariffs intentionally, leading to investigation fines or even forfeiture of your products.

Conclusion

This is why looking for the right customs code is very important. It may be challenging to get into all the details and examine the product’s functions, components, and parts, but it is very important for a smooth shipping process.

If you have doubts about your product’s customs code, consult a professional like Gorto Freight. We provide end-to-end shipping processing and will help you avoid unexpected, unnecessary delays and costs and optimize your business.