2. HS CodeseCommerce Harmonized System Codes
Every imported or exported item is assigned a classification code that corresponds to its product type. These numerical codes are used by countries worldwide for statistic- gathering purposes. They also determine which tariffs, if any, will be applied to the product. Additionally, foreign trade regulations require exporters to include the correct classification code on export documentation.
- All import and export codes used by the United States are based on the Harmonized System (HS) of the Harmonized Tariff Schedule (HTS). Virtually all countries base their tariff schedules on this system, making it easier to conduct international trade.
- The HS assigns specific six-digit codes for varying classifications of products and commodities. Countries that use the HS are allowed to add longer codes to the first six digits so they can classify their products even further.
For example, the United States uses 10-digit codes to classify products. The first six digits are the HS number (sometimes also called the HTS number). The HS number is the first six digits of a product’s classification code, regardless of which country is classifying it or how many digits that country adds when creating its own product classification codes.
The last four digits are unique to the United States and classify the product more specifically. The entire 10-digit code is known as a Schedule B code. Schedule B codes are administered by the U.S. Census Bureau, and they are important to know when exporting.
Let’s look at how the United States and Japan classify a men’s wool overcoat with a fur- lined hood. In the United States, the Schedule B number is 6201.11.0000; in Japan, where overcoats with fur are distinguished from those without, the number is 6201.11.100. Both numbers start with the same six “harmonized” digits, but Japan adds only three, not the additional four seen in the United States’ Schedule B number. These variations in classification can make a big difference: overcoats with fur are taxed at 12.8 percent, whereas overcoats without are taxed at 9.1 percent. If the Japanese buyer purchases an overcoat without fur but gets charged the duty rate for a coat with fur, the buyer unknowingly pays almost 4 percent more than he or she should have. The more you know about the codes and the duty rates for your products in specific markets, the lower the landed cost price will be, and the more you can save your customer.
Why You need to Know Your Product's Schedule B and HS Codes
Exporters need to know their product’s Schedule B and HS codes so they can:
- Determine applicable import tariff rates and determine whether a product qualifies for a preferential (lower) tariff under a free trade agreement.
- Complete the many required shipping documents, including commercial invoices, certificates of origin, and other documents.
- Comply with U.S. law, where applicable.
How to Identify Your Product’s Schedule B Code
You need to determine the Schedule B code for each item you plan to export. Modifying your inventory system—adding a field for each product’s Schedule B code— will simplify your export process because you’ll have ready access to the relevant Schedule B codes when completing requisite export documentation. The Census Bureau offers a free, widely used online Schedule B search tool (1.usa.gov/1QTJoF5) that can help you classify your products. The Schedule B search tool is the most commonly used method for classifying products. Simply follow the easy on-screen instructions to find the appropriate code for your product. To learn more about the Schedule B search engine, visit the Census Bureau’s Frequently Asked Questions page (census.gov/foreign-trade/faq).
If after searching online you still can’t find the Schedule B code you need, consult a commodity specialist at the U.S. Census Bureau Foreign Trade Division. For durable goods (metals, machinery, computers, electronics, and other miscellaneous goods), call (301) 763-3259. For non-durable goods (food, animal, wood, paper, mineral, chemical, and textile goods), call (301) 763-3484.
Your local U.S. Commercial Service International Trade Specialist can help you identify the appropriate HS and Schedule B codes, as well as duties and taxes for specific countries.
If your product is difficult to classify, the Customs Rulings Online Search System (CROSS) database (available at rulings.cbp.gov)can help you find its Schedule B code. CROSS contains official, legally binding rulings from other exporters’ and importers’ requests for Schedule B codes. Use this database to determine whether other exporters or importers requested a ruling on the same or a similar product and, if so, what that ruling was.
Multiple Items Shipped as a Set
For the most part, determining a product’s Schedule B code is straightforward. For example, let’s consider an unassembled bicycle that is sold in a box containing the bicycle frame, handlebars, pedals, and seat. On official documentation, this product would be classified as a bicycle (because the item is sold as one unit) and not as several different components. Some sets, however, are harder to classify. Rule 3 of the General Rules of Interpretation (GRI) of the Harmonized Tariff Schedule addresses composite goods, mixtures, and items that are sold in a set. The GRI has established a three-step process for determining the Schedule B code in such situations; the introduction to the official Schedule B publication contains the relevant passage:
- 3(a) The heading that provides the most specific description shall be preferred to headings providing a more general description. However, when two or more headings each refer to parts only of the materials or substances, contained in mixed or composite goods, or to parts only of the items in a set put up for retail sale, those headings are to be regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise description of the goods.
- 3(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of the material, or component, that gives them their essential character, insofar as this criterion is applicable.
- 3(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading that occurs last in numerical order among those that equally merit consideration.
Source: Introduction, Schedule B: Statistical Classification of Domestic and Foreign Commodities Exported from the United States
Special Circumstances: Textiles/Apparel Shipped as a Set
The rules that govern Schedule B codes for textiles and apparel sets are unique. Let’s say that Company X sells a set consisting of a hat, a shirt, and a pair of pants. According to the GRI passage excerpted above, a set should be classified under one Schedule B code. However, textiles are treated differently, as seen in Chapter 50, Note 14:
- Unless the context otherwise requires, textile garments of different headings are to be classified in their own headings even if put up in sets for retail sale. For the purposes of this note, the expression “textile garments” means garments of headings 6101 to 6114 and headings 6201 to 6211. (Note: These heading numbers include most articles of clothing.)
- If the shirt and pants are composed primarily of textiles with different headings (i.e., the first four digits of the Schedule B number), then each item in the set must be listed separately under its own product classification. In our example above, export documentation must list the shirt, pants, and hat under separate product codes.
- Many countries and regions, including Canada and the European Union, apply these atypical rules to textiles.
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