With global trade being more prominent than ever, it is critical that countries rely on a universal system that classifies goods and expedites their processes through customs. This set of guidelines is known as the Harmonized Commodity Description and Coding System (HS Systems).
The World Customs Organization (WCO) is responsible for developing and maintaining the system, making adjustments to improve the network, and introducing new products and technologies over the years. With over 180 nation members, this system has become internationally recognized as a standard for global trade. The agreement amongst WCO members was implemented in the late 1980s and is now used in almost all international trade, encompassing nearly 97 percent of trade worldwide.
How HS Classification Codes Work
Since the beginning of the HS classifications, several changes have occurred throughout the years to keep the network updated – with the latest revisions occurring in 2017. The current HS classifications are as follows:
01-05 Animal and Animal Products
06-15 Vegetable Products
25-27 Mineral Products
28-38 Chemicals and Allied Industries
39-40 Plastics and Rubbers
41-43 Raw Hides, Skins, Leather, and Furs
44-49 Wood and Wood Products
64-67 Footwear and Headgear
68-71 Stone and Glass
84-85 Machinery and Electrical
The classification system works by designating a six-digit code to organize goods by categorizing them into 99 chapters that are further grouped into 21 sections.
To fully understand how the codes work, they must be split up into three sections. The first two numbers of the code pertain to the chapter to which it belongs – this is a general description of the products. The middle two digits refer to the heading within the chapter, further specifying the item. The last two digits are related to the subheading of the product, which should particularize that product to a specific niche. Some HS classification may have more numbers after the original six, but those typically pertain to local laws and regulations, such as regional and national tariffs.
The HS classification system has numerous other advantages other than organizing and identifying products during the trade process. Multiple trade organizations can analyze the data collected using the Harmonized System to make informed decisions on trade policies and practices, such as collecting and determining tariffs. Tariffs are a form of taxation used by many nations as an institutional instrument to regulate trade. By having a particular HS classification code, certain foreign products can be taxed to ensure a nation’s local industry keeps a competitive edge in the local market.
Another function of Harmonized Systems is providing oversight on specific trade goods that are hazardous or controlled materials, often shipped worldwide with great care. These materials can be further safeguarded by having the appropriate classification ensuring that the required measures are taken to ensure proper storage and security around specific products.
Further analysis of the data provided by the HS produces a detailed image of trade patterns and trends of how goods are moved around the globe. Organizations privy to this information can quickly identify which goods are sold, in what quantities, and where their final destination lies. This identification system helps aid the development of trade policies and practices globally.
Ultimately, HS Classifications are another method of simplifying that massive, complex web of global information, shipping, and logistics.
The A Customs Brokerage Team Is Here To Help
Our team of global shipping professionals has been navigating the HS Classification Codes for decades. We’ve worked with the system on countless scales, in a myriad of contexts, and for businesses across many different industries – and we understand its advantages and pitfalls. We are here to help you and your business work within the system to see what the HS Classification Codes mean for your goods and operations.
Ready to have a more specific discussion about HS Classification Codes and your international; shipping needs? Say hello.