HS stands for Harmonized System. it had been developed by the WCO (World Customs Organization) as a
multipurpose international product nomenclature that describes the sort of excellent that's shipped. Today, customs officers must use the HS code to clear
every commodity that enters or crosses any international borders.
HS Code Structure
The HS code is often described as follows:
- It is a six-digit identification code.
- It has 5000 commodity groups.
- Those groups have 99 chapters.
- Those chapters have 21 sections.
- It’s arranged during a legal and logical structure.
- Well-defined rules support it to understand uniform classification worldwide.
The code follows from the Kyoto Convention of 1974 and
facilitates the simplification and harmonization of Customs procedures. The
Kyoto Convention details the appliance of efficient procedures, also as new and obligatory rules for his or her implementation. As of January 2017, this
convention has about 106 Contracting Signatories/Parties.
Today, HS codes are used extensively in electronic messages just like the EDIFACT. This has made it easier for the system to
become a worldwide standard for describing honest across various platforms. Its nearly universal
usage allows authorities like Port and Customs departments to spot the products.
HS Code Usage
The HS system is employed by over 200 countries and other economies around the world for the gathering of international trade statistics and as a basis for customs
tariffs. Over 98% of the products involved in international trade are classified in terms of
the HS Code.
In addition to governments, the code is additionally employed by private-sector firms and international organizations. it's utilized to watch, update, and optimize controlled goods, internal
taxes, rules of origin, trade policies, transport statistics, freight tariffs,
compilation of national accounts, quota controls, price monitoring, traffic
statistics, and economic research also as analysis.
Thus, the HS code is considered an important tool for international trade, universal economic language,
and coding for commodities.
Maintenance and Classification of HS Code
The Harmonized System is governed by The International
Convention on the Harmonized Commodity Description and writing. The official interpretation of the HS is given within the Explanatory Notes published by the WCO (World
Customs Organization).
The WCO prioritizes the upkeep of the HS code. This includes some measures to secure
uniform interpretation of the HS code also as its periodic updates in light of developments
in technology and fluctuations in trade patterns.
The WCO manages the whole process through the Harmonized System Committee
that represents the Contracting Signatories/Parties to the HS Convention. The committee takes decisions on classification questions, examines policy matters,
settles disputes, and prepares amendments to the Explanatory Notes. This
committee also prepares bills that update the HS System every 5-6 years.
HS Classification is that the process by which HS codes are assigned. All commodities are
classified within the HS by using GRI (General Rules of the Interpretation
of the Harmonized System).
According to Wikipedia, HS applications involve 6 General
Rules that have got to be completed in consecutive order. They include:
- GRI 1 prescribes the way to classify products at the four-digit Heading level, supported the wording of the headings and therefore the relative HS Section and Chapter Notes.
- GRI 2 prescribes the way to classify both incomplete and unassembled goods and
mixtures, also as combinations of products.
- GRI 3 prescribes the way to classify products that are, clear, classifiable under two different HS headings.
- GRI 4 prescribes the way to classify products that can't be classified consistent with GRI’s 1, 2, and 3.
- GRI 5 prescribes the way to classify packaging.
- GRI 6 prescribes the way to classify products at the six-digit subheading
level supported the wording of the subheadings and therefore the relative HS Section and Chapter Notes.
Challenges within the Classification of Companies
The acceptance and flexibility of the HS code is a universal economic language and code for
goods have made it an important tool for international trade, incorporated into many customs
clearance systems around the world.
Using the right HS code and therefore the right interpretation is of utmost importance for an importer,
as usage of incorrect code could also be considered by customs as non-compliance, misleading or
misdeclaration – each of which comes with its associated penalties.
Using the right HS code are often quite tricky in specific instances, as an
interpretation of the codes may vary between countries and customs authorities.
Improper usage of the HS code could end in an improper tariff being applied by customs, which may increase the value of imports to the customer exponentially.
If you’re unsure about the right HS codes to use, it’s prudent to consult customs
directly or ask experts in customs clearance companies for advice.
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