If you’re involved in international trade and shipping, you need to become familiar with the HS (Harmonized System) Code for your products. Let’s unpack shipping HS Codes (also known as HS codes or commodity codes) – what they are, how they work, and why they are important. We’ll also demystify HS Codes by addressing common questions that arise, and explain how an experienced customs broker can help you navigate the complexities.

What’s a Shipping HS Code?

HS Codes are an internationally accepted system used by more than 200 countries to classify products. They offer a standardized method for identifying goods, providing a consistency that is crucial for businesses, customs authorities, and governments. It enables them to communicate about products accurately, regardless of language or regional differences.

HS Codes simplify trade documentation, reducing the likelihood of errors or misinterpretations in cross-border trade – on everything from customs declarations to trade agreements to legal contracts.

The HS Code system is overseen and managed by the World Customs Organization (WCO).

How Many Shipping HS Codes Are There?

The HS Nomenclature comprises about 5,000 commodity groups which are identified by a 6-digit code. The first two digits designate the HS Code chapter, with the next four denoting product heading and subheading. 

Countries can add longer codes to the first six digits for further classification. For instance, U.S. Customs and Border Protection (CBP) requires a 10-digit number to classify imported and exported products under its Harmonized Tariff Schedule (HTS). US importers need to understand HTS Codes to ensure you’re not paying more duties than you should.

How Do I Find the Right HS Code?

Finding the right HS Code for your products is a key element to ensure smooth international trade. Here are some tips:

Use available resources

The WCO offers tools and resources on its website to help identify shipping HS Codes. In the US, The US Census Bureau offers a search tool for Schedule B classifications, as does the US International Trade Commission with its Harmonized Tariff Schedule search tool.

Seek expert guidance from a customs broker

For some products, determining the correct shipping HS Code can be challenging. An experienced customs broker can help you avoid misclassification that can lead to customs delays, penalties or overpayment of duties. They can assess all relevant factors and consult with customs authorities, if necessary.

Another resource could be your overseas supplier, who will know the commodity code its other customers use. That code could be helpful as a starting point, but you’ll want to verify it with your forwarder or customs broker.

What Other Resources Are Available for Products that are Hard to Classify?

For this, you’ll need to dig into the details. If you have the time, there are resources available. Here are a few:

• The Explanatory Notes (ENs) from the WCO provide official international interpretations of tariff classifications and are persuasive in US CBP decisions.
• The Customs Ruling Online Search System (CROSS) is an online database from CBP that provides access to official rulings on the classification of goods, interpretation of trade regulations, and other customs-related decisions from CBP. It can guide companies toward accurate and compliant codes. You might even spot rulings related to products that are quite similar to yours, such as those from competitors.
• Informed Compliance Publications (ICPs) from CBP provide detailed explanations for classifying complex commodities. They highlight minor adjustments that may be necessary to shift a product classification.

Realistically, small and mid-sized businesses don’t have the dedicated manpower to do the deep dive required by some of the above resources. That’s when the right customs broker partner can be invaluable. HS Code classification, trade compliance, customs duties… this is the world they live in every day. As a result, they can access relevant data faster than someone on your staff who handles shipping HS codes on a part-time basis.

What Is “Tariff Engineering” And How Can You Benefit? 

Tariff engineering refers to the practice of making small changes to the physical product that can potentially alter the HTS Code classification and lower a duty rate. If you import a large volume of products, even a small change to a duty rate could mean millions of dollars in savings.

In a famous case from 2015, Converse (now owned by Nike) reclassified its popular Chuck Taylor sneakers by adding a narrow ribbon of felt along the outline, heel and toe. This enabled the company to lower its HTS code duty rate from as high as 37.5% (shoes) to 3%-12% (slippers).

Similarly, Columbia Sportswear has been practicing tariff engineering for years. By redesigning women’s apparel to include a pocket below the waist, Columbia was granted an exemption that lowered the duty rate from 26.9% to 16%.

What Is the Impact of Incorrect HS Code Usage?

Incorrect use of shipping HS Codes carries significant financial risks, including fines and penalties from customs authorities. Misclassification can also result in delayed customs clearance and a disruption in delivery schedules. Additionally, errors in HS Codes can lead to incorrect duty and tax assessments, increasing costs and, potentially, legal exposure.

An experienced customs broker plays a crucial role in mitigating these risks. Their expertise helps you correctly classify goods, ensuring compliance with customs regulations.

What Are Best Practices for Managing HS Codes?

It’s important to keep detailed, accurate records of HS Codes for all products. You need to regularly review and update HS Codes, especially when new products are introduced or regulations change.

Logistics and shipping staff need to be trained on proper usage of HS Codes, with support from your freight forwarder or customs broker. There is also trade compliance software available that can automate certain processes and house vital information that is currently in someone’s head. Tribal knowledge is good – until the person in the know leaves the organization. In those times, having that central, shared repository for product and trade compliance-related data is critical.  

To Ensure HS Code Compliance, Partner with an Expert

Understanding and correctly using HS Codes for shipping is crucial for anyone involved in international trade. Ensuring accurate classification of your products helps avoid costly penalties and clearance delays. And, most importantly, you want to pay only the duties required and not a penny more.

Regularly evaluating your HS Code practices and staying up to date on changes is an essential ingredient for success. An experienced customs broker can help you navigate the labyrinth of HS Codes. Leaning on their expertise will safeguard your business from potential risks as you capitalize on growing global trade opportunities.

I.C.E. Transport can deliver peace of mind by helping you assign accurate commodity codes to your goods. A family owned, licensed freight forwarder/NVOCC that is focused on small and mid-sized shippers, I.C.E. also offers customs brokerage services to ensure your global shipping operation does not run afoul of CBP requirements. I.C.E.'s expertise in coordinating every detail of import and export logistics helps ensure a consistently smooth process and timely deliveries. Contact I.C.E. today to learn more.