HS Code: How to choose the right one?

HS code refers to the World Customs organization’s harmonized tariff schedule. This nomenclature is used to classify products into a numerical system that Customs authorities around the world recognize. HS codes can sometimes be referred to as tariff codes, HTS codes, or HSNs. These all mean the same thing. No single country owns administrative rights over HS codes, as each country maintains its own local version of the tariff book and text. For example, the HS classification for eye makeup for imports into Singapore is 33042000, while the HSN classification for the same product in the United States of America is 3304200000. HS codes are used for both import and export and in theory, are supposed to be harmonized globally at the first 6 digit level. This article describes the process of determining the HS code for a product using the 6 general rules of interpretation that are published by the WCO. It is mandatory to use these rules as prescribed when classifying products.

The 6 rules governing the HS code determination of products are:

  1. General Rule of Interpretation 1: Classify by name, the most specific description is used over a general description unless Chapter, Section or Heading notes determine otherwise
  2. General Rule of Interpretation 2: Classify unassembled or incomplete products as finished products if the parts contain the essential character of the FG
  3. General Rule of Interpretation 3: Mixtures, composite products and allows are classified according to the aspect of the product that confers essential character to the goods. The HSN of the component that appears last in the tariff is used if all components confer equal essential character
  4. General Rule of Interpretation 4: When no suitable Heading exists, use a similar product as the basis of classification
  5. General Rule of Interpretation 5: Packaging material is classified separately if meant to be reused
  6. General Rule of Interpretation 6: Classify at the correct dash level

Customs will levy duties and determine license requirements based on the HS code of a product. Hence it is important to get these codes correct. HS code information is often shown on invoices and other shipping documents.

The text of WCO’s HS system consists of 21 Sections. These include a full 99 Chapters that in turn include more than 200 5100 Headings. More than 200 countries all over the world have developed highly localized versions of WCO’s HS nomenclature. In theory, the sections and chapters in the nomenclature have been arranged in increasing levels of complexity. This means that raw materials and livestock appear in the earliest chapters while computers appear towards the end.

If traders face problems with determining the correct HS codes for their products, in many countries they can request Customs for a pre-classification or advanced ruling. The result of this ruling is binding and protects the trader from future challenges from Customs on the Hs code used for any product. When in doubt it is always best to seek a professional’s or Customs advice on HS classification since duty rates can vary wildly based on the code declared to Customs. If Customs determines that a wrong HS code was used for import declaration resulting in short paid import duties compliance issues will follow. In most countries, Customs can claw back the short-paid duty from traders over the past several years of imports.