What are HTS Codes?
Thinking of starting your own import and export business? It’s a plan with a lot of advantages, your business might just start on the right foot; take note of relevant weaknesses in the market you belong to and price differences with other countries. Aspiring importers and exporters out there need to fully understanding the Harmonized Tariff Schedule (HTS) as well as the Harmonized System (HS). Improper comprehension and lack of understanding with HTS and HS can lead to legal penalties; legal penalties can be considerable enough to sink businesses. Depending on the case, goods may be seized for extended periods of time, which basically defeats the purpose of the business.
Keeping that in mind, here is a simple guide for the basic understanding of HS and HTS code beginners; it’s highly likely that all these are confusing at first, but you’ll get it eventually.
Introducing the Harmonized System
So basically, the HS is an accepted system of numbers and names which are used internationally to better classify imported and exported products. Created back in 1988, HS codes are constantly being maintained and updated by its independent intergovernmental body. As we speak, about 180 countries and territories have already implemented the Harmonized System for various purposes; some use it to monitor tariffs, controlled goods and internal taxes while others collect international trade statistics.
To give you an idea of how meticulous it is, the HS is categorized into 21 sections and those sections are divided further into 96 chapters each, the chapters are then classified under 5,000 headings and subheadings. Sections and chapters are basically huge categories dedicated to goods and products that require specific details with every heading and subheading involved; it’s safe to say that with all these classifications involved, the HS is astonishingly detailed.
The Classification of Goods in the Harmonized System
Keeping in mind the sheer number of products required to be classified with HS, there are bound to be confusion every now and then. A handful of factors determine a product’s classification like the form, composition and use.
For example, potatoes. Potatoes may seemingly be as straightforward as you can get but that’s not the entire story. Fresh potatoes are given the code 0701.90 and are given the header ‘potatoes, fresh or chilled.’ On the other hand, frozen potatoes are coded 0710.10 instead and display the header ‘vegetables (uncooked or cooked by steaming or boiling in water) frozen’ alongside the subheader ‘potatoes.’
As you can see, HS is comprehensive but they’re not as straightforward as you expected.
What Exactly is the Harmonized Tariff Schedule (HTS)?
HTS codes basically take the initial six digits of the international HS codes and add four more digits for a better definition. People that want to be involved with the import and export industry have to learn all about the HS and HTS codes; the aforementioned codes are international language of the trade.