HS Code System Explained
Is your eCommerce business ready to expand to new international markets? Exporting goods can be tricky when it comes to customs documentation. Unlike domestic, commercial shipping, International shipping requires you as a merchant to enclose the correct customs documentation to get your parcel cleared at customs and allow the carrier to calculate the valid tariff for the receiver.
To ensure that your product arrives as efficiently and quickly as possible, you should ensure that you are on top of the Harmonized System (HS), an international system of tariff codes.
Ship parcels internationally with the HS Code system
The Harmonised System (HS) can be pretty tricky to comprehend when you first grasp the system. Fortunately, with a small amount of research and practice, you can quickly master the system and start shipping your parcels to customers around the world.
I hope this guide will help you understand everything you need to know about the HS code system.
Table of Contents
What are HS Codes?
All goods imported or exported from outside the EU should be designated with a tariff number. A tariff number consists of 8 digits when exporting and 10 when importing. For this blog, I will only talk about export. The first six digits come from the international HS system (Harmonized System), Which is why the first six digits are called HS codes.
The HS-system is an international commodity nomenclature that is in use in about 200 countries around the world. The commodity Nomenclature is an extensive catalog including all internationally traded goods.
The next two digits are called CN (Combined nomenclature), which is the commodity nomenclature of the EU. The 8-digits code is used when exporting. Customs authorities worldwide check the codes on your custom documentation. They do this to determine taxation and tariff rules that might apply to the product.
HS codes are also used by the carrier to calculate customs duties for the recipient. The system is exceptionally detailed and hence very complicated to understand at first hand, but don’t worry – By the end of this blog post, you should have a much better understanding of the system and who it is essential to understand when shipping parcels internationally.
What is the structure of an HS code?
The HS-code consists of at least six-digits always written in the format “XXXX.XX”. These six digits consist of three sets of hierarchical two-digits codes that help the shippers find the correct HS code for their products.
The Harmonized System consists of 21 sections. The sections cover a comprehensive range of categories, such as Section I (Live Animals), Section V (Mineral products), or Section X1 (Textiles)
The section numbers help to categorize the products, but they are not included in the HS code and thus not included in the code written in your customs declaration.
Let’s pretend that you want to ship a T-shirt to a customer in the UK. To find the correct HS code, you would start by looking at the right section. For the T-shirt, it’s Section XI (Textiles). When you have identified the correct section, it is time to narrow down the product until you find the right six digits that best describe your product.
Chapter number (XXXX.XX)
Ok, so you have now identified the correct Section number. Now it time to narrow down your T-shirt with the Chapter numbers. The first two digits of the Hs code relate to the Chapter Number. The HS system consists of 98 Chapter numbers across the 21 Sections. In your case we are looking for a T-shirt, the Chapter code is 61, which stands for: “Articles of apparel and clothing accessories, knitted or crocheted”
After identifying The Chapter number, it is time to find the Heading numbers! There are more than a thousand heading numbers to choose from, so let’s examine the correct one for your T-shirt. The heading number consists of digits number three and four in the HC code. If we dive into Chapter 61 and scroll down to 6109, we will find the Heading including “T-shirts, singlets and other vests, knitted or crocheted” Now we know the Heading number. Let’s move on to The Sub-Heading.
The last two digits define your t-shirt even further. The final two digits refer to the Sub Heading, which should cover your T-shirt just right. There are more than 5000 subheadings in the HS code system, but that is not a problem because we managed to narrow it down via the chapter and Heading numbers. Under Chapter 61, Heading 09, we’ll find Subheading “10”: “Off cotton”. Telling you and us that your T-shirt a cotton t-shirt. If you combine all of these digits, you have the complete HS code, which is:
As you may have noticed, the code consists of 8 digits because this particular HS-code has added two extra digits (00) and, therefore, is eligible for an export declaration. This brings us back to the beginning of the article. Where I described how the extra two digits are necessary for export. When shipping to some countries, you need to include these two additional digits to define the product. For example, when shipping to the United States, you will need to have additional digits from the US Harmonized Tariff Schedule system. However, your t-shirt is ready to get shipped to the US. That’s because the US system uses the HS-code 6109.10.00 for cotton T-shirts. Similarly, if you look at the HS-system, you will discover that the last two digits are automatically added when you look up the six-digit code for t-shirts.
The American system has additional numbers that define the product even more, but it is unnecessary for this particular T-shirt. The two last digits are used to calculate customs duties, taxes, or for statistical purposes. I
t is essential for you as the exporter to research the country of destination’s code system. I pro tip is to ask your product manufacturer to provide a spreadsheet of HS codes for their products. You can then import them into your ERP or e-commerce system, which will eliminate the need to manually look up codes and save you tons of time and frustration. They may even have the correct HS-codes for all international markets 👍.
Which country’s tariff codes should I use?
Remember to use the extra digits and the six-digits HS-code and use the system used in the country you are shipping. It may sound not very clear, but most countries do not differ from the HS-code anyway. The Latin American countries use the Mercosur Common Nomenclature (NMC), which appears complicated. Still, for the t-shirt, the Tarifcode is the same as in Europe and the United States.
How to find HS-codes
It is pretty straightforward. Most countries have a local database, and you can use international code finders as well. I have assembled a list of relevant links where you can look up the HS-code.
- SKAT Denmark
- Norwegian Tax authorities
- Swedish Tax authorities
- European Customs Portal
- US Harmonized Tariff Schedule
How should I use HS codes?
Remember always to include HS codes in commercial invoices or your customs declarations. We have built a handy Customs Declaration Generator tool that enables you to create Customs declaration directly from your computer. Read more about how to use HS codes in our Ultimate guide to CN22 and CN23 Customs Declarations here.
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