What is an HS Code in Shipping: A Guide to International Trade Classification and Customs Clearance
We live in a world of shrinking borders where global trade facilitation is encouraged to boost economic growth and opportunities. However, the details behind international logistics requires some forms of trade harmonisation. This is where HS codes come into play. These codes are used in product classification and product categorisation. And they require that you know the different HS codes’ meaning for more accurate, faster and efficient customs clearance. In this article, we explore the HS codes’ meaning, discuss their importance in international trade as well as show you some of the best ways in which you can make use of them. Let’s get started.
What is an HS code in shipping (harmonised system code)?
Because international trade can be a highly complex field to navigate, it is essential that there is international consistency in terms of the products being imported and exported. For this purpose, there is the need for a product classification system. And this is where the harmonised system code (HS code) system comes into play.
This system has a hierarchical structure that uses the principles of harmonisation for customs and trade purposes. As such, when looking at HS codes, the HS code definition can be considered to be the foundation of the import and export classifications system that is administered by the World Customs Organisation (WCO) and it is updated every five years. As part of the HS code definition, different commodities are classified with a six-digit code, although some countries add longer codes to these six figures for even further classification.
The HS code system is internationally recognised and enables countries to recognise where a shipment is going, who is responsible for it and what category of goods it falls under as well as its various subcategories. In addition to this, the first six digits in an HS code are the same across 183 countries.
The remaining digits are usually country specific and define tax or preferential rates. For example, in the European Union, European export declarations usually require eight digits while import declarations require around 10 digits. The HS code, along with a value and a currency determines duty and tax rates.
The importance of HS codes in shipping and trade
There are important purposes of a World Customs Organisation HS code, not least of which is assisting with customs clearance and duties and taxes. In addition, these codes help importers and exporters with compliance and documentation with regard to logistics operations and trade regulations. As such, some of the benefits and purposes of a World Customs Organisation HS code include the following:
- Prevent payment of the wrong tax and/or tariff
- Prevent higher import costs due to incorrect classification
- Prevent shipment delays
- Facilitate international trade
- Compliance with customs requirements
- Avoidance of misleading/misdeclaration penalties
- Helps with tracking trade statistics by private and government organisations
- As part of market analysis, they help to monitor, update and optimise controlled goods, internal taxes, rules of origin, trade policies, transport statistics, freight tariffs, a compilation of national accounts, quota controls, price monitoring, traffic statistics and economic research and analysis
- Transferring trade information to determine global trade trends
- Easier identification of products
HS codes and customs clearance
HS codes and customs clearance go hand in hand. The correct code for goods is required by customs authorities for import-export verification and for calculating customs duties and tariffs. This is a part of a wider system of regulatory requirements.
The HS code system also prevents shipment delays and penalties. And it can help in terms of resolving customs disputes because customs documentation such as a commercial invoice and a bill of lading are often required in applying for trade finance and are used in legal and commercial documents when undertaking trade.
As a closing comment, HS codes and customs clearance facilitate the harmonisation of international trade through standardisation of product description codes.
Partnering with MBE Denmark for seamless customs clearance
When you begin the process of preparation for international shipping from Denmark for your import/export business, you will need thorough and professional HS code classification and customs clearance. If this is something that you are struggling with or are finding it hard to understand and navigate, you can always turn to us at Mail Boxes Etc. At our Copenhagen office, our experienced, knowledgeable and helpful team will be able to provide you with full assistance with regard to customs clearance and HS code classification so that you can proceed to enjoy seamless international shipping from Denmark.