What Exactly the Harmonized System of Nomenclature is?

HS Code

19-Nov-2020

Harmonized System of Nomenclature

Harmonized Classification or HS Nomenclature or HS Code is a multipurpose international product classification of goods. World Customs Organization developed and maintains the code. The WCO an intergovernmental organization, located in Brussels. The WCO adopted the HS Code in 1983. Presently the code is used by 200 countries as a basis of their customs tariff. Today the code covers 98% of commodities traded internationally. 

The Harmonized System Committee takes policy decisions and makes amendments when required. The WCO amends the code periodically, new products are added, and obsolete items are deleted. They usually update the code in 5 years. They last updated the code in 2017.

The HSN Code is considered a trading language for product code and international trade.

  • The products are arranged in a logical and systematic framework. The code is organized by economic activity or component material. 
  • The code is divided into 21 sections. 
  • It is further subdivided into 99 chapters. 
  • The HSN Chapters are classified further into 1244 headings and 5224 subheadings. The section and chapter classification denotes the

Uses of HS Classification are:-

  • Customs authorities to identify the product and apply the applicable import duty and taxes.  
  • It allows for commodities to be cleared from customs smoothly and timely manner. It reduces the need for documentation. Storing the product safely in the customs yard becomes easy. 
  • It helps custom authorities monitor the import and export of controlled goods.
  • It helps determine the rules of origin. Preferential tariffs such as MFN tariffs (most favored nation) are based on HS Classification. Free trade agreements are based on the HS Code.
  • It is used to collect trade and transportation statistics. 
  • Logistic service provides charge transport tariff.

Every product is assigned a six-digit unique code. The features of the code are:-

  • The first two digits of the code correspond to the HSN Chapter.
  • The third and fourth digits of the code correspond to the HSN heading
  • The last two digits of the code denote the HSN subheading.

Countries have the flexibility of adding additional digits to the HS Code for a more detailed classification of the product. E.g. US, EU, Canada have a 10 digit HSN Code and India has 8 digit HS Code. The Indian HSN Code list called the ITC Code or Indian Trade Classification is based on HSN Classification

The ITC-HS codes have two sections – ITC Import Schedule I describes the import policies, rules, and regulation. Schedule 1 has 21 sections, the sections are divided into chapters. ITC Export Schedule II describes the export policies, rules, and regulations. Schedule II has 98 chapters. 

The importers and exporter are responsible for the correct HS Code in their documentation. Traders can find the appropriate HSN Code using the HS Code List. Incorrect code can lead to fines or delays.

For more details about the Harmonized System of Nomenclature/HSN code for your business products or commodities, get a live demo of import export data search using HS codes.

 

Related Blog: Indian HS Code List

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