Restrictions & Regulations
Importers need to be aware of relevant product safety regulations and make sure imported goods are safe.
Some goods are covered by bans or mandatory product standards.
If you don’t comply, they will be stopped from coming into the country by Customs. You are responsible for the safety of your products. To clear Customs you may have to show proof that the goods meet the required standards by proving certification.
Merchant shipping is one of the most heavily regulated industries. Regulations concerning shipping are developed at the global level. Because shipping is inherently international, it is vital that shipping is subject to uniform regulations on matters such as construction standards, navigational rules and standards of crew competence.
If improper product classifications for international shipping are applied, you could open yourself up to legal penalties which can have a massively negative impact on your business. It can also result in your goods being seized.
Here we are going to help you understand some of the important terms includes Harmonized System (HS) and Harmonized Tariff Schedule (HTS), and HS Codes, Schedule B and some other classification terms.
What Is the International Harmonized System (HS)?
The HS is an internationally accepted system of names and numbers used to classify traded products. It was developed in 1988 and continues to be maintained by the World Customs Organization.
The World Customs Administration administers a commodity-classification system known as the International Harmonized System (HS): the code is used by all countries globally to classify all imported and exported goods.
When you are looking to ship a product overseas, it is a legal requirement that you have a six-digit HS code. This doesn’t change whether you are shipping t-shirts or cars, every product must be assigned the HS code.
The code is split into three groups of two, in what some refer to as the HS Code List:
The first two categorize the product, the second two define this classification further and the final set is to specify the product in more detail.
HS code 1006.30, for example indicates Chapter 10 (Cereals), Heading 06 (Rice), and Subheading 30 (Semi-milled or wholly milled rice, whether or not polished or glazed).
Information on Harmonized Commodity Description and Coding Systems (HS) can be found at the World Customs Organization website at: http://www.wcoomd.org/home_wco_topics_hsoverviewboxes.htm
HS codes and descriptions (and other classifications such as SITC and BEC) can be downloaded from UN Comtrade Commodity Classifications.
By entering key words or HS code, you can search list of products and commodities with their 6 digit, 4 digit, or 2 digit – HS codes at the online database below:
Adding Further Description: Schedule B and GHS
This system can be further enhanced depending on the country that is importing or exporting the good.
In the US, products are assigned an additional four-digit code, known as the Schedule B number, to classify them further. This four-digit code is added to the end of the HS code to make a 10-digit code.
Schedule B numbers are used and administered by the US Commerce Department, Census Bureau, Foreign Trade Division. The data they collect is then used to publish US export statistics.
To check what your Schedule B number is, you can use an HS Code Finder. Alternatively, you can speak to a fulfilment provider who should be able to provide you with the relevant information.
In addition, in the US, when you are shipping consignments that are valued over $2,500 or the item is required to have a license, then you need to report the schedule B number to the Automated Export System.
Furthermore, there is an additional requirement for the shipment of chemical that runs in parallel to the GS system. It’s called the Globally Harmonized System of Classification and Labelling of Chemicals (GHS).
How These Affect Customs Duty
A classification code are generally used to clarify tariffs and duties. To enable your imported product to a country to get a duty rate, it needs to have a classification number assigned to the consignment that is used by the receiving country.
The absence of correct Schedule B and HS numbers could mean that you miss out on preferential tariff rates under a free trade agreement.
It is also important to have the schedule B and HS numbers to ensure that your business’ fulfilment team are completing their export documents.
Ensuring that you have the right HS and Schedule B code might add more time to shipping internationally, but it can also help save time and ensure customers are happy in the other end.
The absence of the code may also lead to exports being delayed at the exporting or importing country.
In addition it could also lead to a fine or further higher tariffs leading to unprofitable shipping arrangements as well as unhappy customers experiencing delays and perhaps incurring charges also.
Currently, 180 countries or territories use the Harmonized System for purposes of:
- Collecting international trade statistics
- Internal Taxes
- Monitoring Controlled Goods
The Importance of Using the Right HS Code
In many jurisdictions, the correctly classifying goods is the responsibility of the trader.
Failure to classify correctly can lead to:
- Non-compliance penalties
- Border delays
- Seizure of goods
- Denial of import privileges
- And more…
Unless you want to have your goods seized, lose your import privileges, or have things held up at the border, do the research to find the proper HS code.