If you plan to ship products from China to the United States, Europe, or other countries/regions, correctly handling customs formalities is paramount. In this regard, the HS code (Harmonised System code) or tariff code ensures your products are seamlessly identified in international markets and establishes a globally universal language.
Please note that the U.S. ended the de minimis exemption for products originating in China and Hong Kong effective May 2, 2025. This will directly impact the prices that Chinese sellers can charge for their products and the profits they can make. If you don’t select the correct HS code, you may be charged the incorrect tariff rates. This could result in additional costs and delays to your shipment. Therefore, it is crucial to be very careful when selecting an HS code.
Our blog post explains how to find HS codes, their impact on business processes and costs, and what you should be mindful of to ensure uninterrupted, secure international trade transactions.
Customs officials are checking the HS codes on the customs declaration forms
What is the HS Code?
The HS code is at least six digits long. It is used to classify products in global trade. This enables goods to be categorised according to their shared characteristics. This enables products worldwide to be classified, thereby streamlining customs procedures and improving efficiency and accuracy. The HS code comprises 21 major categories and 99 chapters, though variations may exist between countries. Many countries extend the code by adding extra digits (usually eight or more) to accommodate national regulations, taxation or reporting requirements. Although seemingly complex, this coding system enables standardised product categorisation and streamlined customs clearance procedures, facilitating the smooth flow of international trade.
It operates effectively across nearly all regions of the world. It was developed according to the nomenclature rules of the Harmonised System, which was established by the World Customs Organisation (WCO). It has significantly facilitated global trade and has been adopted by over 180 WCO member countries.
How are HS codes structured?
HS codes have a standardised structure that makes it easier to identify and classify goods in international trade. Although they may vary slightly in length depending on the country or region, they are all based on the Harmonised System (HS) Code, which is an international standard for classifying products.
General structure of the HS code
The HS code is usually made up of between six and ten digits and is organised hierarchically. Here’s how it’s structured:
First 6 digits – Harmonized System (HS):
These represent the international classification of goods.
They are identical in all member countries of the World Customs Organization (WCO).
They are divided into:
- Chapter (2 digits): General category of the product.
- Heading (4 digits): Specification within the chapter.
- Subheading (6 digits): More detailed classification.
Additional digits – National Extensions:
Each country or region can add additional digits to adapt the codes to their local needs:
- TARIC in the European Union (up to 10 digits).
- HTS in the United States (10 digits).
These additional digits allow for the application of specific regulations, tariffs, restrictions, or trade measures.
What is the purpose of the HS code?
The HS code makes sure that customs duties, trade statistics and rules are all the same, which makes trade processes easier. The HS code provides important information about goods, such as what they are, what type they are, and how they are used. This helps customs authorities to calculate the correct taxes. The HS code also makes sure that the language used in international trade is the same, which makes it easier for countries to talk to each other. Using the right HS code in customs declarations helps to avoid delays and penalties. The HS code is like a passport for your product when it’s being traded internationally. Choosing the right code is important at every stage. This includes things like taxes, licences, reporting statistics and how long it takes to get things cleared.
Why is the HS Code Important?
In international trade, the HS Code is like a product’s “identity card.” It is used for many important things, such as:
- Determination of Customs Duties: You can find out how much tax and fees you have to pay on a product by looking up its HS code. This includes customs duties, VAT, excise duties and additional customs duty (ACD). Using the wrong HS Code could mean you pay too little or too much tax.
- Import/Export Regimes: Whether the import of a product is prohibited, subject to authorisation (supervision, import licence, etc.), or subject to a specific standard is checked via the HS code.
- Trade Agreements and Preferential Tariff Applications: Declaring the correct HS code is essential to benefit from reduced or zero customs duties under Free Trade Agreements (FTAs) in which the USA participates.”
- Statistical Data Collection: It enables countries to accurately collect and analyse their foreign trade statistics.
- Risk Analysis: Customs authorities use HS Codes to decide which products need closer inspection.
- Document Control: The HS Code will also indicate whether you need to provide any other documents, such as certificates of origin or health certificates, for import or export.
If you use the wrong HS Code, your goods could be held at customs, you might face heavy fines, or your goods could be sent back or destroyed.
Relationship between HS Code, taxes, and import costs
The HS Code directly affects:
- Import duty
- VAT or local taxes
- Additional fees
- Total product costs
A minimal change in the code can make a big difference in the final cost.
Incorrect HS codes: Risks and Avoidance
If you use the wrong HS codes, your business could run into problems.
- Delays in customs clearance: Your goods are being held at customs until the correct HS code is provided. This will cause delays and slow down your supply chain.
- Additional costs: Failure to declare an HS code correctly could result in your business being liable for higher taxes or penalties.
- Legal risks: Using the incorrect HS codes can result in legal issues, particularly if a business misrepresents them to evade taxes.
Best Ways to Avoid Late Fees and Penalties
Managing your HS code properly will make customs clearance faster and reduce costly mistakes. To make sure your shipments arrive on time and you don’t have to pay any fines, follow these simple steps:
- Use the Lookup Tools: HS code lookup tools let you search the web for the most up-to-date information. Enter keywords or product information to quickly find the right HS code. This makes sorting things easier and more accurate.
- Check product classifications regularly: HS codes are updated regularly to keep up with changes in global trade and new products. To ensure your goods are always correctly classified, you need to be aware of these changes.
- Work with freight forwarders: Freight forwarders or customs brokers know how to handle large shipments and complex regulations. They can save you time and help you avoid expensive mistakes.
Planning ahead for HS codes can help you save on shipping costs, ensure your shipments are legal, and give your customers a better experience.
