How the Harmonized System Smoothes International Shipments

International shipping is tricky to navigate for many eCommerce businesses. To ship internationally, you’ll need to figure out if your products are even allowed into the destination country. Then you want to learn the country’s taxes and duties (also known as customs tariffs) to see if you owe any money to clear customs.

To simplify matters, countries adopted an international system for categorizing items, or the harmonized system (HS). Implemented in 1988, the system was designed to make international shipping more manageable. The system uses six-digit codes to identify different product categories, which are required by customs authorities for most imports and exports.

Here's all you need to know about the HS code system for international shipping.

What is the Harmonized System?

Often referred to as the HS code, the harmonized system is an internationally accepted list of commodity descriptions and codes that help classify products being traded across borders. It helps different countries easily identify products and categories being shipped and figure out what taxes to impose.

This system was developed by the World Customs Organization (WCO) and is now used by more than 200 countries around the world. Approximately 98% of international trade uses the HS tariff code to classify shipments.

The harmonized system has unified the customs process for many countries and created a standard procedure for sharing trade information. It’s helped customs departments deal with shipping in a faster and more efficient manner.

The maintenance of this system and the harmonized code list is the responsibility of the WCO. The institution also oversees security and ensures the uniform interpretation of the code list throughout the world. The HS code is periodically updated to reflect developments in technology and trade patterns. The harmonized system committee is responsible for these amendments; they update the HS tariff code every five or six years.

How is the Harmonized System Used

The system uses six-digit codes to identify different product categories. Each country can then add an extra code of two to four digits to allow them to better identify the categories of goods being imported into the country. In total, the HS code is made up of some 5,300 product descriptions. These are displayed as headings and subheadings in a tome of 99 chapters and 21 sections.

The basic six-digit codes are made up of three groups of two digits each. The first two numbers represent the product chapter the item belongs to - for example, leather, tea, or coffee. The second two digits identify the product group within the chapter - i.e. handbags or suitcases, or flavored or unflavored tea. The last two digits represent even more specific information, such as if a product’s outer layer is leather or whether a tea product is fermented.

What is an HS Code for Shipping?

The basic six-digit HS code is the same no matter what country you’re operating in. However, each country can add a few additional digits to clearly specify the product. For example, the US adds a further four digits after the basic HS code in order to specifically explain what product is being shipped; Japan uses unique three-digit codes for this purpose.

Some simple examples of the HS code are 660110, which is the code for garden umbrellas (or similar), and 660199, the code used for sun umbrellas. It’s easy to see that in this case, the 6601 code refers to umbrellas, while the last two digits specify what type of umbrellas are being shipped.

Harmonized shipping codes can usually be found on a country’s customs website. These will contain each country’s specific codes. However, the universal harmonized code list can be found on many websites as it’s widely shared through freight companies and third-party trading companies.

For example, if you Google “Harmonized code FedEx,” you will be able to find the courier’s list of codes for each country. Once you have the required HS code, you’ll need to enter this - along with other relevant information - into your customs form or shipping label. The harmonized shipping code or HS tariff code will be displayed on the left box of your international customs form.

Which Countries Use the Harmonized System?

More than 200 countries use the harmonized commodity description and coding system for international trade. This includes all major shipping countries such as the US, the UK, Australia, China, Japan, the European Union, Canada, and Turkey.

How Useful is the System For eCommerce Retailers?

Of course, the system can be very useful for online merchants - but it also has some drawbacks. Below, we break all of these down for you.

Advantages

• A standardized process for identifying products precisely makes trading easier
• Evaluating customs and duties becomes easier
• Shipping is faster and easier
• Trade data can be easily collected
• eCommerce retailers fulfill a legal responsibility by using these codes
• Increases productivity in the shipping process
• It’s easier to train employees
• Ensures that trade policies are updated and relevant
• Forms a common language in commercial practices and trade negotiations

Disadvantages

• If HS codes aren’t used properly, incorrect duty and taxes can be levied, making products more expensive for consumers
• The last digits after the HS code are different for different countries, so if you mention it on your commercial invoice, you might end up defining a different product for your customer’s country
• It can result in cases of fraud if the wrong HS code is used

Ship Better With Harmonized Codes

All eCommerce retailers who want to sell internationally have to deal with customs taxes and duties. To ease the process for both sellers and authorities, the WCO has developed a harmonized system where a six-digit code is used to identify what products are being shipped. This code not only identifies the product being shipped but also decides what duties are levied.

Easyship can help make the international shipping process smoother by automatically generating the customs forms and other documents required for shipping around the world.

Sign up for a free account today to see how we can help!

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