What is an HS code? | FlavorCloud
Preparing to ship products across borders can seem daunting. But if you’re doing so, you’ve probably come across the term ‘HS codes’. If you haven’t, we’re glad you’ve found yourself here—HS codes are fundamental to shipping internationally, as is getting them right on your international shipping documents.
If you get your HS codes wrong, you increase your risk of potential shipment delays, unexpected fees, and penalties, leading to a poor customer experience and decreased revenue.
Fortunately, FlavorCloud automates customs compliance through our managed service—it’s like TSA pre-check for your package—so your shipments sail through customs. This means your customers receive their orders speedily and without surprise duty bills.
But what IS an HS code, how do customs use it, and how is it relevant for shipping?
What is an HS Code?
Bear with us—HS codes aren’t the most fascinating of topics, but it’s important to understand the concept.
Harmonized System (HS) code, also known as Harmonized Commodity Description and Coding System code, is a universal tariff code used to define a commodity for cross-border trade. It is an international nomenclature (a naming system) created by the World Customs Organization (WCO), which is updated every five years. This classification system is recognized in 98% of world trade.
HS codes consist of six-digit numbers enabling the more than 200 participating countries and territories worldwide to classify goods accurately through a shared system. Countries can introduce additional tariff designations beyond the six-digits for a total of up to 10 to 13 digits for further classification and categorization.
Now no one is expecting that you have HS codes memorized (that’s what we’re here for), but it’s good to understand the components that make them up.
- The first two digits, called the Chapter, which indicates the category of goods.
- The second two digits, called the Heading, which designate the specific category within the Chapter.
- The third two digits, called the Subheading, which define the particular subcategory of products.
For example, an HS code for a women’s cotton dress is 620442. In this case:
- 62 is the Chapter (apparel articles and accessories, not knit)
- 04 is the Heading (women’s or girls’ suits)
- and 41 is the Subheading (cotton)
As you can see, it can get complicated. Each frequently traded product has its own unique HS Code. Customs officials use these codes to determine duties and taxes plus applicable regulations based on the specific product being shipped internationally. FlavorCloud can automate HS codes and customs documentation, and offer guaranteed DDP. This means your merchandise moves through customs via an expedited service, with no surprise fees for you or your customers.
HS, HTS, and Schedule B Codes—What’s the Difference?
The terms HS, HTS, and Schedule B codes are often used interchangeably, but although they are similar, they are not the same.
As described above, an HS code is the six-digit number used worldwide by customs authorities to determine duty and tax rates for each specific product type. HS numbers are a universal classification tool used on most international export documentation.
However, Harmonized Tariff Schedule (HTS) codes are 10-digit import classification numbers specific to the United States. The HTS code consists of the six-digit HS code with an additional four-digit designation for the item being imported into the United States.
The HTS system is managed by the U.S. International Trade Commission (ITC), and U.S. importers must select and use correct HTS codes to ensure accurate duties are assessed.
A Schedule B code is also a 10-digit code. This consists of the six-digit HS code plus an additional four-digit Schedule B code. Schedule B codes are used by the U.S. government to monitor U.S. exports and are maintained by the U.S. Census Bureau instead of the ITC.
Some merchants use HTS classification for all their products instead of classifying them under both HTS and Schedule B. But it’s essential to be aware that not all HTS codes can be used for exporting, and Schedule B codes cannot be used in place of HTS codes for import classification.
So, to sum up, the key differences between HS, HTS, and Schedule B codes are:
- HS codes are used for import and export around the globe and are the first six digits of the HTS and Schedule B codes.
- HTS codes are used for import purposes into the United States
- Schedule B codes are used for export and company or internal government purposes within the United States.
How is an HS Code Used with Customs?
What if you wanted to ship a sweater to Thailand? How will customs know what’s inside your package? This is where everything you’ve read becomes relevant. An HS code is used by customs authorities worldwide to determine the duty and tax rates for specific products. Using the correct HS code is essential for importers. After all, you don’t want customs opening your parcels to find out if the sweater it contains is cotton, wool, or cashmere! Besides, using the incorrect code can be viewed by customs as non-compliance, deception, or an inaccurate declaration. And this results in an incorrect tariff being applied by customs, significantly increasing the cost of imports to the consumer, and causing other penalties.
FlavorCloud can help you avoid these risks through our managed service, automating HS code, taking on the importer of record, and dealing with customs on your behalf. Once your merchandise is shipped, we ensure it safely navigates customs and is seamlessly delivered to your customer.
Why is an HS Code Relevant for Shipping?
HS codes are used to classify physical goods for international shipment. They should be used on most international export documentation such as shipper’s letter of instructions, commercial invoices, or certificates of origin. FlavorCloud can take care of this for you, so you don’t need to worry about costly errors, thanks to our guaranteed DDP service.
The correct HS Code needs to be used on each line of your commercial invoice. Using an HS Code on a commercial invoice ensures that exports make it through customs without delay.
Failure to place the HS Code on the commercial invoice could lead to a payment of the incorrect amount of tax. This can also result in paying interest on back payments for incorrect classification, fines for incorrect classification, or your shipment may even be seized. FlavorCloud can automate all shipping documents, so we’ve got you covered.
The merchant is responsible for determining the HS Code suitable for the destination country of the international shipment. Avoid potential errors when selecting HS Codes for your shipments and allow FlavorCloud to manage the entire process from start to finish so that you can expand your business globally—hassle-free.
Learn more about FlavorCloud’s international shipping solution. We have the world’s largest cross-border carrier network offering the best shipping rates and routes. FlavorCloud makes cross-border ecommerce easy, affordable, and friction-free