What is the Harmonized System (HS Code)?
What is the Harmonized System (HS)?
The Harmonized System is a standardized system that allows different countries to identify the same product using the same code. The Harmonized System entered into force on January 1, 1988. It is administered and updated every five years by the World Customs Organization (WCO) in Belgium. The Harmonized System is used by more than 200 countries and economies and covers over 98% of goods traded internationally.
It is used to categorize goods that are exported and imported and is a globally accepted classification method. Its main function is to help customs authorities identify products and determine the correct duties and taxes applied to them. In the Harmonized System, each product is assigned a unique numerical code known as an HS Code. This code consists of at least six digits.
When exporting or importing goods, it is mandatory to include your product’s HS Code (GTIP Code) on shipping documents such as the commercial invoice, packing list and shipping invoice. As an exporter or importer, it is your legal responsibility to determine the correct HS code for your product. Incorrect classification may lead to legal issues.
The primary function of the Harmonized System is to provide a foundation for customs tariffs worldwide. However, it also serves several other important purposes, such as:
- Collecting international trade statistics
- Collection of internal taxes such as excise duties and value added tax (VAT)
- Serving as the basis for freight and transportation tariffs
- Providing a basis for rules of origin (criteria used to determine a product’s national source)
- Determining preferential tariffs under free trade agreements and MFN (Most Favored Nation) tariffs
- Providing a basis for governments to make trade policy decisions
- Monitoring controlled goods (such as drugs, chemical weapons, endangered species, waste, etc.)
- Facilitating customs controls and procedures such as risk assessment and compliance
The Harmonized Commodity Description and Coding System, commonly known as HS, is an international nomenclature developed by the World Customs Organization (WCO) for the classification of goods. It is a system designed to identify and classify products traded between countries.