HS Codes - The devil is in the data

Getting HS Codes Right.

It is crucial for business involved in international trade to have a solid understanding of customs classification, ensuring compliance and reducing duty costs.

Customs authority must be notified of the import and export of most commodities and the classification of products is a requirement before goods can leave the country of export or be accepted at their destination. Getting this part of the process wrong can have significant consequences.

All materials, components and finished products must be classified using HS (Harmonised System) codes which at a basic level consists of six digits. This is a standardised matrix of names and numbers which identify details about items being traded. These are also known as ‘commodity codes’.

The code defines what level of duty will need to be paid in the country of import and it gives information on the country of origin of the item as well as determining whether an import licence is required.

To conform to local Customs rules and to avoid costly delays or penalties in Customs, importers and exporters need a good knowledge of the tariff and HS classification protocol or access to a reliable system that will classify goods for them.

It is possible that your goods are zero-rated for Customs purposes but this doesn’t mean you don’t need the correct codes. It is also possible that rules other than duty are applicable to the goods such as:

·      Requirement for a certificate of origin

·      Eligibility for export refund or requirement to pay excise duty

·      Application needed for an import or export licence

·      Whether any import or export restrictions are in force

There are also a host of other HS code hazards to navigate. There is a lifecycle to the system and the authorities regularly impose updates to numbers, new rulings on particular products which could mean restriction of entry or different levels of duty or tariff.

The whole system is administered by WCO (The World Customs Organisation) and has been formally adopted by 155 countries. However, over 200 administrations around the World use the system. Each code consists of up to 10 digits but an 11th digit is possible in some EU countries such as Germany and some countries have even longer variations.

The variations that could apply to your goods are truly mind-boggling and it is essential that there are no mistakes. In particular, mistakes that mean you pay less tax or duty than the relevant authority deems to be payable would make you very unpopular!

One answer to this puzzle is to employ an A.I. (Artificial Intelligence) solution, such as ColossNet from CustomsPlus, which assesses the codes on your shipping documents, searches to see if it is correct and provides an alert if there are any mismatches. A blend of AI machine learning and human intelligence maximises the opportunity for efficient, correct classification