What are Harmonized System (HS) Codes?

According to the International Trade Administration the Harmonized System is ‘a standardized numerical method of classifying traded products. It is used by customs authorities around the world to identify products when assessing duties and taxes and for gathering statistics. 

Here is a helpful intro video to begin understanding what an HS Code is and how it affects your products:

Understanding Your HS Code

One of the first things you should understand about HS Codes is that each code contains 6 digits, which is broken down into 3 separate pairs.

First two digits – Chapter

Second two digits – Heading

Third two digits – Subheading

For example if your HS code is 2004.10

• 20 = Chapter “vegetables, fruits, nuts, prepared or preserved”
• 2004 = Heading  ”Other vegetables prepared or preserved otherwise than by vinegar or acetic acid, frozen …”
• 2004.10 = Subheading “potatoes”

The first 6-digits of an HS code usually stay the same no matter what country you are in.  But additional digits can be added to end of the code by individual countries for further classification.

For example in the U.S. we add 4 additional numbers to the end of the HS code to create a 10 digit schedule B number.  Schedule B numbers are used solely by the U.S. to help monitor the types of products being exported from the country.

 

Why are HS Codes Important?

HS Codes are important for a variety of reasons. They are used extensively by governments, the private sector, trade organizations, etc.  The code of your product determines applicable overseas duties, taxes & other fees on products.

You can research the HS codes and schedule B numbers of your products at the Bureau of the Census website – http://www.census.gov/foreign-trade/schedules/b/index.html

HS 2022 Changes

HS codes are updated every 5 years by the World Customs Organization (WCO). HS 2022 is the seventh edition of the Harmonized System nomenclature and entered into force on January 1, 2022.

The new HS 2022 edition makes some major changes to the Harmonized System with a total of 351 sets of amendments covering a wide range of goods. 77 of those amendments, or 22% of the overall total, are related to the agricultural sector.

Changes to the HS codes are generally made on ‘product streams’.  They can either be a result of new and developing impact on international trade, or changes in existing trade patterns which call for more of a focus on tracking.

The 2022 amendments fall into the following high-level categories:

• New product streams (e.g., e-waste, drones, novel tobacco and nicotine products, smartphones)
• Technological advances (e.g., glass fibers, metal forming machinery)
• Health and safety (e.g., diagnostic kits, placebos, clinical trial kits, cell cultures, cell therapy)
• Human security (e.g., toxins, laboratory equipment)
• Protection of society (e.g., radioactive materials, detonators)

How to Prepare for HS 2022 Changes

Changes to the HS system often present more work and challenges for importers than exporters. This is because duties and taxes and other tariff treatments are applied, so especially for companies who import a long line of products there can be a lot of reorganizing to do.

If your products have been affected by these recent changes there are a number of steps to take in order to proceed with confidence.

• Compare the 2017 and 2022 HS versions for amendments and changes that might affect you.
• See how other countries are implementing the amendments. Not all countries around the world will manage the changeover to HS 2022 at the same time, so there may be delays.
• Advise your customers of any changes in coding and see how it lines up in their tariff
• Be proactive in your outreach by communicating your HS codes with your international freight forwarder. They should be made aware if there are any changes to the Schedule B number they use to file the Electronic Export Information or “EEI” on your behalf

 

What To Do Next

Want to learn more details about the changes to the HS Codes in 2022 and how to prepare for them? 

You can access the recording of HS 2022: New Changes to the Harmonized System at this link.