Everything you should know about Harmonized System (HS) code for shipping industry

As an integral part of the international shipping business, you must know all about its multifold book of documents and paperwork. It is one of the few industries that involve a lot of legalities and interference from government bodies. Here, learning everything about the Harmonised System (HS) will be a part of your growth process. If you are new in the import-export business, you must have heard of this term on several occasions. Some people may also refer to it as Harmonised System of Nomenclature (HSN) or Harmonised Commodity Description and Coding System. Well, it is not as complex as it sounds! Let us get to know all about the HS code and how you can use it in the shipping process. 

Harmonized System Code: All You Need To Know

The Harmonized System codes are standardised numerical figures used to classify traded products in the export process. The customs department of all the trading countries uses the same database of these codes to identify the category of the traded goods. If you are an exporter, you should know about all these codes, if not memorise them, to understand the classification. Let us understand the meaning and usage of the HS code in the international trade business. 

A combination of six to ten digits makes the harmonised system codes to categorise goods. 

Harmonized System: Definition, Importance & Description

The Harmonized System Codes are released by the WCO (World Customs Organisation) every five years. These codes specify the class of products to quantify customs duties and taxes without any complications. The customs departments use these codes and specify the duties you have to pay to get your goods exported to another country. 

The Structure of Harmonized System Codes

The basic structure of every HS code contains three parts: 

• The Chapter: The starting two digits of every Harmonized system code describe the chapter of the goods. It is usually the genre or quality of goods.
• The Heading: The next two or more digits of a code, depending upon its numerical figure, states the description of the goods. It is the detailed classification of the goods.
• The Subheading: Lastly, the subheading gives the leftover detail of the goods.

Most countries use a 6-10 digit code to classify their goods. For China, the Harmonized System has 13-digit codes. 

Significance of The Harmonized System In Exports

As we have figured out so far, the major purpose and use of the HS code is serving as the basis for classifying customs tariffs. But it also serves many other benefits to the shipping industry and its different departments. 

• It helps in the collection of VAT (Value-Added Tax), Excise Duties and trade statistics.
• It classifies transport tariffs and freight.
• Some countries may also use it to decide and quantify their trade policies.
• It also helps facilitate many customs procedures and controls like compliance and risk management.
• The harmonised system also serves as the basis for laying the criteria that help determine the nationality of a product.

General Rules Used For HS Code Interpretation

Certain rules determine how the World Customs Organisation (WCO) interprets the HS code. You cannot follow a basic pattern and guess them whenever there is any trouble in finding the code online. These rules ensure that every good that is exported or imported by a trading country falls under a defined heading or subheading suggested by the organisation. Therefore, you must not jump to conclusions without learning these rules. 

Ways To Find & Use The HS Code In The Shipping Process

Finding the accurate HS code for your product is an easy task, as long as you understand the classification. All you have to do is: 

• Visit the ICEGATE website or the Indian Trade Portal online and search for the codes of your products. This process will work for you as an Indian trader.
• Search for the codes by naming your goods on Google. However, make sure you follow the HS 2017 list, which is the currently active edition. HS 2022 may appear in the search results, but that list will be active from January 2022.

This process will help you find and use the code correctly. If you have any doubts or queries, contact the customer care department of a reliable shipping company. 

The Bottom Line: Use The Accurate Codes

If you are new in the business, understanding this classification process can take time. And you need to use the accurate HS Code. You can do so by taking the help of a reliable shipping service provider in the industry. There are plenty of options available. Analyse the background of your chosen shipping company and pick the best one out! 

This entire description is just the gist of what these codes are and what they entail to exporters and importers in the business. You must keep reading about them until the subject is clear, even if you have the best service provider monitoring your shipping process!