HS Codes are present in the history of Global Trade Data for longer than 33 years. Hence, before you begin an import-export firm in any country, HS Codes are required for successful foreign trade of goods. To begin with, HS Codes stand for a harmonized system. The world customs organization introduced it in 1988 to build harmonization routes for customs and trade undertakings. For the most part, these codes are validated to use for foreign exchange of goods between more than 200 countries.
Thus, Cybex Exim Solutions (Cybex.in) carries out a small guide on what HS Codes are and why the harmonized system is important? This guide will help fresh importers and exporters in the international markets exporting under the HS commodity groups' guidelines.
Introduction to HS Codes or harmonized coding system
Harmonized commodity description and coding system or HS is a term used for the classification of globally traded products by names and numbers. AHS Code is generally 6 digits long. Further, these 6 digits are divided into three pairs of 2 digits each. This is called the structure of the HS Code. AHS Code is written in the following manner: 420222. Each pair of 2 digits provides a description of the product imported or exported. Here's how:
- First 2 digits: HS chapter (the type of commodity)
- Second 2 digits: HS heading (raw material information)
- Third 2 digit: HS subheading (finished or non-finished good)
For example, HS Code 420222 is strictly used to import surface plastic sheeting, textile materials, and handbags. This code is used in countries like France, China, Italy, Burma, Hong Kong, Canada, Cambodia, Japan, and Indonesia to exchange respective commodities.
Note: In a few countries, HS codes can be longer than six digits. THE maximum HS Code length is 10 digits. 10 digit HS Code might help to describe the imported/exported product further.
Why are HS Codes important for the import and export of Goods?
HS harmonized system code is crucial because it interprets the product's information and allows both parties to avoid unwanted catalog based confusion during the exchange. Following are the other elements where HS Codes are significantly required:
- Import and export tariff rates specific to the product category.
- Collect and analyze international trade data.
- Internal taxes and liability to pay.
Finally, the
HS Code list also helps importers and exports avoid common foreign exchange challenges such as exchange interruptions on the border, non-approval to access import privileges, and additional penalties.