HS code
Also known as: Harmonized System, tariff heading
The HS code is the international six-digit goods code from the Harmonized System of the World Customs Organization. Well over two hundred countries use the same first six digits, which makes the HS code the worldwide base under every goods code.
How is an HS code built up?
The first two digits form the chapter, for example 09 for coffee and tea. The next two form the heading and the last two the subheading. That brings you to six digits, which mean the same worldwide. Everything after that is regional or national: the CN adds two EU digits, TARIC two more. A cotton coat can thus be HS 6101.20, CN 6101.20.10, TARIC 6101.20.10.00. The six digits are the same in China, the US and the EU. The eight and ten digits are not. Anyone putting a US ten-digit code on an EU declaration puts a code that does not exist here. For B2C e-commerce via DECO the six digits suffice, because the H7 data set does not set a tariff up to one hundred and fifty euro. For an IMA in DMS six digits are too few: DMS wants ten. For export and Intrastat the EU wants eight.
How do you classify a product?
Classification goes according to the six general rules, in order. Rule 1 says that the text of the headings and the notes to the sections and chapters are decisive. The titles of sections and chapters are only a guide. A product that according to the title seems to belong in chapter 84 can fall in 85 through a note. Only if that gives no answer do you come to the next rules: the essential character for composite goods, and otherwise the last in numerical order of the headings that come into consideration. In practice most discussions do not get further than rule 1 and rule 3. A search term in a database is not a classification rule. On doubt and a large financial interest you apply for a BTI, a binding tariff information. That is a written decision of Customs on the classification of a specific product, valid three years in the whole EU. Without a BTI the classification is your responsibility, even if the supplier put another code on the invoice.
How often does the HS change?
The World Customs Organization revises the Harmonized System every five years. The last revision was HS 2022, the next is HS 2028. At a revision codes lapse and new ones are added, often for products that did not exist before. Article master data that are not updated lead after such a change to refused declarations. Between the revisions the EU changes the CN yearly, and TARIC changes daily. A six-digit HS code is therefore the most stable layer, but not eternal. A code that applied in 2017 can have been split in 2022. Anyone who only reviews the article file at the turn of the year misses the five-yearly HS move. Keep per article on which HS version the classification rests, and run the file along the correlation tables when there is a new version. That is the same ritual as with the annual CN, only less often and with larger shifts.
What are the general rules of interpretation?
There are six general rules and they apply in order. Rule 1 decides that the text of the headings and the notes to the sections and chapters are decisive; the titles of sections and chapters are only a guide. Rule 2 extends headings to incomplete and unassembled goods. Rule 3 gives the order for goods that can fall under several headings: first the most specific description, then the essential character, then the last heading in numerical order. Rule 4 works with the most akin goods if nothing fits, rule 5 deals with packings and cases, and rule 6 declares the rules applicable to the subheadings. In practice most discussions do not get further than rule 1 and rule 3. A set of an appliance plus accessories, a textile product with two materials, a machine with a software component: those are rule 3 matters. Document why you choose a heading, not only which heading it became.
Why is the right HS code worth so much?
The code decides the import duty, and the difference between two plausible codes can be ten percentage points or more. On an annual volume of a few million euro that is an amount a discussion with Customs goes over. The code also decides whether anti-dumping duty applies, whether a permit is needed and whether the shipment must be inspected. A wrong code that happens to have the same tariff can thus still bypass a prohibition, and that weighs heavier at an audit than the money. Finally the code is the key to the rest of the process. The DTV links the document codes, the authorisations and the measures to it. If the code is right, the rest follows; if it is not, every control after that is based on the wrong rules. On doubt: apply for a BTI, or have the classification checked before the volume runs. A BTI takes time, an assessment over two years of volume costs more. The code on the supplier's invoice is a hint, not a decision.
Where do you look up an HS code and what is a BTI?
In the Dutch customs Gebruikstarief or in the combined nomenclature of the EU. Both are searchable on description, but the text of the heading and the notes ultimately decide the classification. A search result on coat is not a classification of that coat. Read the notes to the chapter before you fix the six digits. A BTI is a binding tariff information: a written decision of Customs on the classification of a specific product, valid three years in the whole EU. You apply for it at the customs of the member state where you are established, with samples, specifications and photos. Other member states are bound by it. A BTI is not a free pass for a slightly different product. If the composition changes, it no longer applies. If the nomenclature changes, it can lapse. Keep the number with the article, and stop the code if the product or the nomenclature has changed.
What happens if the HS code is wrong?
A wrong code produces a wrong tariff, missed measures, or a prohibition you should have seen. On import DMS notices a code that does not exist, but not a code that exists and describes the wrong product. That second error gets through and falls at an audit. The assessment is the tariff difference over the period, plus interest, plus possibly a penalty. A code that dodges an inspection or a permit is heavier than a tariff difference. Customs sees that as circumvention, even if the intent was a sloppy master datum. On export a wrong code can miss a permit requirement. In both directions the declarant is responsible, not the supplier who put the code on the invoice. Correct the article file, not only today's declaration. A wrong HS code in the master data produces the same error tomorrow. Put the support with the article: heading text, note, BTI number. At the next audit the question is why, not which code you now use.