by Damon Baca
To facilitate global trade, the World Customs Organization administers the Harmonized System (HS), which provides common nomenclature to describe traded products using names and numbers. The number of digits in a fully qualified HS code varies, but the first six are harmonized, meaning they should be the same in every country. The next digits are unique to the country to which the goods are being exported.
The United States uses the 10-digit Harmonized Tariff Schedule (HTS-US) for goods imported and the 10-digit Schedule B codes for exported goods. U.S. companies, seeking to comply with a U.S. Census Bureau mandate, often just use the Schedule B codes when exporting rather than the code of the country to which the goods are being shipped. Most feel that as long as the first six digits are correct, what’s the difference?
Not using a country’s fully qualified HS code makes a big difference.
First, it could set your firm up for compliance violations. Even if the product enters the country successfully once or twice with just the Schedule B code, continued use of an improper code could result in a fine or a ban from future exporting to that country. Moreover, a quota might apply to the commodity in question. You could be creating serious future problems by not properly classifying products covered by a quota.
Consider, too, a second possibility: failure to use the correct code could result in the shipment being stopped completely or delayed until properly classified. The repercussions don’t stop there and can extend to your customer. Delays can transform a happy customer into a dissatisfied one, especially if there is an urgent requirement for the product now being held up by customs. Worse, the customer could be handed an unexpected duty/tax bill for payment because you improperly classified the shipment (more on that below).
Last, but certainly not least, when you fail to use the appropriate fully qualified HS code, customs will likely classify the product in its “Other” category for purposes of computing duties and tariffs. The “Other” category typically imposes the highest possible rates. So, you – or your customer – will be paying unexpected and excessive duties and taxes.
Using a fully qualified HS code avoids all of these issues and gives you the power to predict precise costs in advance.
Some companies mistakenly believe that the broker on the other end will take care of the coding. But unless specifically contracted to do so, brokers will not modify codes because there is liability attached to doing so. Others rely on their foreign partners or importers to address the issue. Yet, unless you have worked out a specific system, the code you assign will prevail.
So what is an exporter to do?
It is challenging to properly assign fully qualified HS codes. First, access to all the codes in every country is not as easy as going on export.gov and conducting a search. Codes can be very difficult to obtain. Then, there are the language issues. Some appear only in the native language, and many are formatted differently than U.S. codes. Variations in language use can create problems as well. But perhaps the biggest hurdle of all is that tariffs, taxes and duties are subject to change. So, even if you could obtain and understand the country’s schema for classification, there is no guarantee that the information you have is current.
QuestaWeb can help!
As detailed earlier, not knowing the correct tariff code and associated duties can hurt your company – and your customers – in a variety of ways. QuestaWeb offers its customers the ultimate in content. Our database goes beyond the HTS-US and Schedule B codes to include the fully qualified HS codes for over 175 customs areas worldwide, all the latest duty and tax data, and information on more than 300 Free Trade Agreements. Our content is verified and updated regularly to assure your company always operates with the latest information possible.
Further, QuestaWeb now offers TradeGearQW , a product line with software solutions powered by this expansive database. With TradeGearQW , companies can acquire the precise solutions and content they require, rather than being forced to purchase functionality or content they do not need. Firms can opt to purchase the HS codes for a single country, a standalone decision engine for landed cost calculations, a decision engine to identify and qualify products under Free Trade Agreements and much, much more. Via product unbundling, QuestaWeb allows you to acquire just the products and content you need to trade compliantly at an affordable price.
We’re breaking new territory every day to bring our customers the very best in global trade management solutions.