Importance of HS Code in Trade Business

HS Code or Harmonized Code is an international product nomenclature used to classify the commodities being transported. The harmonized classification code has been developed and maintained by the World Customs Organization (WCO). The WCO meets periodically to add new products and delete obsolete products. Customs officials give their clearance of goods based on the HS Codes as the product enters or leaves the country. The code is legally binding and is arranged logically. 

The HS Code is a sequence of six digits given for a product. The Harmonized code is followed by 200 countries. 98% of the merchandise traded globally is listed on the HS Code. The HS Code has over 5,000 commodity groups. Each group is classified into 99 chapters. There are 21 sections in each chapter. 

These logical rules have allowed for universal acceptance of the HS Code. Countries have the flexibility of adding additional numbers to classify HS codes for their internal revenue or legal purposes. The first six digits of the HS Code remain unchanged are universal.

It is important to include the correct HS code in all your shipping documentation to prevent delays, fines, or pay the wrong tax. The code is utilized by government agencies, private-sector firms, and international organizations.

 The HS Code list helps to monitor, update, and optimize controlled goods. The list has emerged as a vital tool for international trade and economic language. The HSN Code list is used for:-

•  Custom duties and internal taxes are levied on the goods.
• The rules of origin can be determined. Custom duties can vary depending on the rule of origin.
• Logistical experts and providers monitor transport and traffic statistics and determine the freight charges. 
• The HS Code list is the basis for compiling national accounts, quota controls, monitor prices, and economic research.
• The product can be safely stored when the product is in the customs yard.

Indian HS code is called the ITC HS Code (Indian Trade Classification) is based on the HS Code. The list is maintained and updated by the DGTF (Director General of Foreign Trade). The DGTF is responsible for the execution of the country’s foreign trade policy and promoting exports. The ITC code is an 8 digit code. The Indian HS Code is classified into:-

ITC HS Import Schedule I describes the regulations and policy regarding imports. The schedule has 21 sections. The sections are further subdivided into chapters. There are 98 chapters in schedule I. Schedule II describes the regulations and policies regarding exports. The code contains 97 chapters.

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