In the intricate world of international trade, where goods traverse borders and continents, there exists a universal language that keeps commerce flowing smoothly - Harmonised System (HS) codes. According to the Vietnamese Law on Customs (Article 4, Section 16), HS Code helps identify the name of the goods, describe the nature, structure, uses, packaging specifications and a few different attributes of the goods.
These seemingly cryptic strings of numbers play a pivotal role in the global trade landscape, ensuring that products being imported or exported are classified and understood consistently across borders. Not only that, HS codes enable regulatory bodies to formulate tariffs and control the flow of imports and exports. If you're a business in Vietnam engaged in international shipping, understanding HS codes is not just beneficial; it's indispensable.
In this comprehensive guide, we will unravel what the meaning of HS codes is, exploring their origin, structure, uses, and most importantly, why they are a crucial element in your overseas shipping endeavours.
The origin and purpose of HS codes
Let's start at the beginning. What exactly are HS codes, and why were they created? The HS code, which stands for Harmonised Commodity Description and Coding System in full form, is an international nomenclature for the classification of products. These codes are globally recognised and provide a standardised way of categorising and identifying goods in shipping.
Born in 1988 under the auspices of the World Customs Organisation (WCO), the mission was clear: to harmonise and standardise product classification worldwide. This harmonisation not only streamlines the classification process but also fosters consistency across the 200-plus member countries. It's akin to creating a common thread that weaves through the diverse fabric of international trade, ensuring that everyone speaks the same language when it comes to assessing harmonised tariffs. These codes, with their structured numeric sequences, might seem complex, but they play a vital role in making global trade smoother and more efficient.
The structure of HS codes
Now that we know what HS codes are and why they exist, let's delve into their structure. HS codes are composed of digits, and each digit holds a specific significance. While the WCO HS code system involves only 6 digits, countries can extend this structure according to their own goods classification needs. For example, Vietnam deploys 8-digit HS codes – adding 2 extra digits at the end of the international HS code system.
Here's a breakdown of how they work:
- Chapter: The first two digits represent the chapter, offering a broad categorisation of products into 21 main sections.
- Heading: The following four digits are the heading, which further narrows down the category.
- Subheading: The last digits, ranging from one to as many as six (two digits in the case of Vietnam), specify the sub-category with utmost precision.
Here's an example to illustrate this structure:
HS Code | Description |
44211000 | Clothes hangers |
84211200 | Clothes dryers |
08045030 | Mangosteen |
You can utilise a trusted HS code finder like the Viet Nam National Trade Repository, and through the General Department of Vietnam Customs website, which allow you to easily access the comprehensive HS code list and to look up the precise code that corresponds to your product. By using these search tools, you can navigate the intricacies of HS codes with confidence. Alternatively, you can opt to identify HS codes based on the annually updated tariffs according to searching rules in Circular 31/2022/TT-BTC of the Vietnamese Ministry of Finance.
Similarly, to move goods in and out of the United States (US), you can use the US Census Bureau’s Schedule B search tool or the US International Trade Commission’s HTS search tool to find your Harmonised Tariff Schedule (HTS) code.
For the United Kingdom (UK), you can use the Trade Tariff tool, provided you know the type of your product, the material used to make it, and its production method.
Who is responsible for classifying goods?
The duty of classifying goods falls squarely on the shoulders of importers and exporters. Their responsibility in accurately categorising their products cannot be overstated, as errors in coding can trigger a cascade of detrimental outcomes. In severe cases, it might even lead to the revocation of the company’s Accredited Client Programme and Importer Exporter Code. Given that importers and exporters possess an in-depth understanding of their products, they are not only in the best position but are also duty-bound to meticulously select the most precise HS code classification.
How HS codes affect shipping
Understanding HS codes isn't just about mastering a complex system of numbers; it's about ensuring a seamless and secure international shipping experience. HS codes are indispensable for various aspects of international trade, such as tariff classification, customs duties determination, and statistical tracking. When you ship goods internationally, customs authorities check and refer to the HS code to identify and categorise your products correctly. These codes are essentially the silent architects of your logistical success. Let's dive into how they exert their influence on the shipping process, affecting key aspects in profound ways:
Cost
The financial underpinning of international trade, customs duties, and taxes are inextricably linked to HS codes. Accurate classification of your goods ensures you pay the right amount, avoiding costly overpayments or the spectre of penalties due to underpayment. In the world of global commerce, precision translates to savings.
Time
Time, as they say, is money. In the realm of shipping, time can also mean the difference between a satisfied customer and a delayed delivery. HS codes play a pivotal role in expediting customs clearance. When your products are correctly classified, customs authorities can swiftly process them, reducing transit times and ensuring timely deliveries. An incorrect code, on the other hand, can trigger inspections and additional paperwork, causing frustrating custom delays.
Success
Success in overseas shipping hinges on a multitude of factors, and HS codes rank high among them. Properly classified goods glide through customs with ease, while inaccuracies can lead to bottlenecks and delays, potentially jeopardising the successful completion of your shipments. This not only spells financial losses but also tarnishes your business's image.
