The Harmonized system is an internationally accepted method to describe a commodity being exported and imported. But can be a challenge for e-commerce sellers shipping cross border. The system is maintained by the World Customs Organization (WTO) and serves to standardize the description of items that would otherwise be obscured by language and industry nomenclature. Specific items are "translated" assigned into a universally accepted numerical value.
The key data elements to determine admissibility duty include value (see our blog on valuation), country of origin and HS Codes. This post reviews the concept of HS Codes. The information presented in all Jet Worldwide posts are for general information only and not intended as legal /tax advice.
The HS is administrated by the World Customs Organization (WCO) and assigns specific six-digit codes to products and commodities. Countries are allowed to add longer codes to the first six digits for further classification.
E-commerce online orders - especially from Shopify, eBay and other independent platforms - do not consider H.S. Codes when either selling or shipping. Depending upon the country of destination, the HS Codes can have a varying degree of importance.
General Rule of HS codes and Shipping Online orders:
The three main factors in determining duty include:
Complete Guide for International Shipping From Canada
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The low value duty free threshold to the USA is US$800. Most clearance express (ECCF) and cargo (CFS) processes do not require an HS Code. However, US CBP often holds shipments for inadequate descriptions.
Using Section 321 type 86 entries, e-commerce merchants can clear e-commerce orders via more traditional automated brokerage systems (ABI/ ACE) which require HS codes.
Above the duty free low value thresholds of €150 and £150 to EU countries and the UK, respectively, HS codes are needed to determine the rate of duty. Goods may qualify for duty free entry regardless of value if country of origin rules via free trade agreements are met.
HS Code Explained with recent Updates
The system used by worldwide customs authorities to classify goods, the Harmonized System (HS) are updated regularly. The HS serves as a way for customs to translate product descriptions into commonly agreed nomenclature. The classifications are then used to determine tariffs, admissibility, quotas (if applicable), and trade statistics.
READ MORE: IMPORT DUTY AND HOW IT IS CALCULATED
See section below on HS Codes for 2022.
The International Convention on the Harmonized Commodity Description and Coding System (HS Convention) entered into force in 1988 with major updates around every 5 years.
The next major update from the World Customs Organization (WCO) of the six digit level nomenclature is scheduled for 2022. See section below on 2022 HS Code updates.
An example of why HS Codes are important:
While a description of "shoes" is understood by most to be footwear, "shoes" can also mean parts of machinery, brakes, precision measuring equipment, and cameras.
Example of HS Codes for Shoes:
While the theory of HS Codes is easily understood, specific classifications can become incredibly complex. Applying the wrong HS Code can have significant tax and other regulatory implications. Importers often ask US Customs for clarification via their "commodity specialists" to ensurethe correct HS Code.
Harmonized Code can be 6 to 12 digits:
The HS System generally classifies goods based on their level of processing, with raw materials appearing early in the early chapters and highly processed goods in the later chapters. Agricultural products are generally provided for in chapters 1-24, with a few products such as wood, wool and cotton appearing in later chapters.
The challenge for e-commerce merchants - including Shopify sellers - is how to manage the descriptions of their catalogue of products and understanding the import costs to their international customers.
Best Advice for Manifesting e-commerce Parcels to the USA
The most important advise for describing items for import to the USA is to simply describe the item. Sounds simple! Yet, due in part to language barrier and sheer volume of items, one of the biggest issue with e-commerce imports to the USA is that they lack a clear description.
Our import specialists advise e-commerce merchants on the best way to phrase a product description for a Section 321 entry*. As in the above example of sending shoes, we advise shippers to use the phrase "footwear" , "brake shoes", and "mounting bracket for camera" rather than simply shoe.
Updating codes to better define product categories that have increased in importance either by reason of growth, technical advances, or regulatory concern. The changes are made to better reflect technological advances and improve trade statistics important to government and industries.
Products and categories subject to change include:
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