As an importer, you are responsible for ensuring your products are coded properly when they arrive at the shores of the country you’re importing into. But, there are so many acronyms and other terms that importers have to know that it can become challenging to understand what numbers actually need to be on your shipments. So, before you learn how to find an HTS code, you need to know the difference between the HS and an HTS code.
The Harmonized System (HS)
The Harmonized System, which is abbreviated as HS, is a product classification system that was developed by the World Customs Organization in 1988. It serves as the basis of all international trade because all 200+ countries that participate in the WCO use this system to classify their goods. The HS uses a six-digit code to classify products, in which the first two numbers are a “chapter,” the second two numbers are a “heading,” and the last two numbers are a “subheading.”
Most products can be placed in a six-digit chapter, heading, and subheading, so many countries do not have further numbers that importers have to use to import their products. Essentially, the chapter is a broad category, the heading narrows the product’s classification a little more, and the subheading narrows it even further. However, countries have the option of expanding the HS code from six digits to up to 10 digits. This is where the HTS comes in.
Harmonized Tariff Schedule (HTS)
The Harmonized Tariff Schedule (HTS) is specific to the country you’re importing into. In the United States, this is actually called the Harmonized Tariff Schedule of the United States or HTSUS. The first six digits of an HTS code are the same as the HS numbers for all countries. This is what makes it “harmonized.” Because these numbers are the same for all 200+ countries that participate in the HS, there is no confusion about what products are being imported.
Since countries can add up to four extra numbers to the HS, they often do so to create their own codes that help determine tax and duty rates. In fact, the sixth and seventh numbers in the HTSUS are called the “rate line.” These two numbers narrow down a product even further to distinguish those products that have a different rate. An example of this is cross-country skis and all other types of skis. The import rate for cross-country skills is different from that for downhills skis, for instance.
The final two numbers the United States uses in its HTS code are for statistical and data purposes. Many products don’t even have digits nine and 10, which means you would enter 00 in the slots for those numbers. However, if they are present for your products, you need to include them. It allows Customs and Border Protection to really pinpoint certain products that are entering the country.
Conclusion
Knowing your HTS codes is important for all importers. Not only do these codes help identify your products so they move quickly and efficiently through the customs process, but they also ensure you pay the correct amount in tax so that you don’t overpay or underpay and become exposed to penalties.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin