Correctly Classifying Import and Export Goods

Understanding Customs Classification of Imported & Exported Goods

Classifying Imported and Exported Goods Correctly

An essential and necessary part of successful importing and exporting is the correct classification of your products for customs clearance in accordance with the harmonised system used worldwide. The customs classification provides details of what the products are, what they are made of, how they are used and how they are packaged. In addition, the customs classification determines:

• Customs duties and taxes
• Import and export controls and limitations
• Documentation requirements
• Import or export licencing obligations
• Applicable preferential duty rates
• Security measures
• Commercial policy measures   

Incorrectly Classifying Goods with Customs

Classifying your goods correctly for import or export can be complicated and companies will require a good understanding of international trade regulations to get it right. The use of incorrect customs classifications can result in audits by customs authorities, customs clearance delays, seizure of the goods and / or sizeable financial penalties. You may also pay incorrect duties and taxes resulting in additional charges and fees.

Certain products can be liable to import or export controls and licencing, therefore making an incorrect customs classification will be seen as breaking the law. It is your responsibility to get your classification and licencing right, even if you use an agent or freight forwarder.

How to Classify your Goods 

The World Customs Organization (WCO) developed the Harmonized Commodity Description and Coding System, known as the "Harmonized System" or "HS". The WCO have classified more than 5,000 commodity groups at a 6-digit code level. Over 200 countries use the uniform 6-digit classification, as a basis for their own Customs tariffs and trade statistics records.

There are Commodity Description Codes for over 98% of products, classifying products from a pin to an elephant. These codes assist in identifying what the product is for customs clearance purposes, so that correct duties and taxes can be charged, preferential trade agreements can be applied, and import or export restrictions can be identified.

What are Commodity Description Codes?

When moving your products between different countries you must classify them correctly using the Harmonized System. Conversely, most countries require products to be classified at a more elevated level than the 6-digit Harmonized System and the codes can go up to a 14-digit level to allow for tariff policies.

Different countries tend to use alternative terms to describe these extended codes and some of these terms have become interchangeable within international trade. Your company should follow the requirements of the country they are importing or exporting too.

Examples:

HS Code

The HS Code is the World Customs Organization (WCO) Harmonized System code, which is the universal first 6-digits of most classifications.

Harmonized Tariff Schedule Code (HTS)

The Harmonized Tariff Schedule Code (HTS) is a 7 to 10-digit code, which is more specific to importing into the United States.

USHTS or HTSUS 

USHTS or HTSUS is the Harmonized Tariff Schedule of the United States, which is generally 10-digits in length.

Commodity Codes, Trade Tariff Commodity Codes and Tariff Codes

Commodity Codes (sometimes referred to as Trade Tariff Commodity Codes or Tariff Codes) are used within the United Kingdom and are generally 8 to 10-digits in length.

Commodity Codes 

Commodity Codes are used within the European Union (EU) and include additional Combined Nomenclature (CN) and Integrated Tariff (TARIC) digits. Most EU commodity codes have 10-digits, but certain goods are classified using 14-digits. Additional 4-digit codes are used mainly when the goods nomenclature needs to be further detailed for specific EU purposes. 

Structure of Tariff / Commodity Codes