For those of us planning to trade with the UK after Brexit, HS codes will soon become a fact of life.
Find out what HS codes are, how they work and how to use them on this week’s article.
What is an HS Code?
An HS code is a 6 digit number used to categorise any goods being imported or exported internationally. The HS code is a vital piece of information on third-country customs declarations — authorities all over the world depend on HS codes to accurately track and tax goods coming in and out of their country.
HS is shorthand for “Harmonized Commodity Description and Coding System” — it’s a globally recognised system that covers 98% of all goods traded on planet Earth. With 5,000 commodity groups in the nomenclature, there’s an HS code for everything, from pearls to parasols. It’s surprisingly comprehensive; there’s even an HS code for “synthetic textiles made from human hair” (6703.00, just so you know).
Is HS code the same for all countries?
The full list of countries, territories and economic unions that apply the HS coding system can be found on the World Customs Organisation website — almost every country on earth, including Ireland, uses HS codes. If you’re wondering why you’ve never needed HS codes in the past, it’s possibly because HS codes aren’t required for trade inside the EU. When the UK leaves the EU, HS codes will become more important.
How are HS codes determined?
The first batch of HS codes were agreed in 1988. Since then, the WCO have updated the list five times, with each new edition of the HS nomenclature changing to accommodate new technologies, goods and materials. We’re currently on the sixth edition (HS 2017). The seventh edition of the HS nomenclature (HS 2022), will come into force on 1 January 2022. It creates clear codes for e-cigarettes, smartphones and UAVs (drones), which were not sufficiently covered in previous editions.
If there is any confusion or ambiguity over which HS code to use (if your goods can be classed as both raw materials and finished products, for instance), the authorities can issue a BTI (Binding Tariff Information) notice. A BTI is basically a written statement confirming which HS code you should use if your goods don’t neatly fit into one HS category.
What is the HS Code of my product?
When determining which HS code might be appropriate, the first step is to look at the WCO’s HS nomenclature, available on the WCO website. HS 2017 has almost 100 chapters, arranged in 21 different sections. If you’re looking for the HS code for ‘live goats’, for instance, you would first look in Section I (Animals & Animal Products), then go to Chapter 1 (Live Animals), and find the HS code on that list. If you need more help (keyword search, for instance), we recommend you give us a call or visit our Tariff Codes page.
What happens if I get my HS code wrong?
As a rule, HS codes need to be shown on commercial invoices for any imports/exports outside of the EU. If goods are categorised incorrectly, you could face added administrative costs, penalty fees, goods seizures and — in severe cases — the revocation of important trading licences & import privileges (e.g. AEO status). Poor HS categorisation could cost you regardless of whether you import or export, so it pays to triple-check the HS code and get advice if you are in any doubt.
Trading with the USA: Schedule B and HTS codes
The USA append most HS codes with an additional four digit code of their own design, called the Schedule B number (US exports), or the HTS code (US imports). Schedule B and HTS aren’t meant to replace the HS coding system – they build on it in a way that enables US authorities to get a richer picture of the country’s import & export volumes. When looking at a 10-digit US commodity code, the first 6 digits are always the globally-recognised HS code, then the next 4 digits show the HTS / Schedule B information.
HS Codes after Brexit
As a result of the UK leaving the EU, authorities will need to implement customs controls on either side of the UK border. The default system is the HS code system, so if a deal can’t be done before the Brexit transition period comes to an end in 11 months’ time, then we’ll need to quote HS codes on every UK import and export.
Customs will be a high priority on the list of EU/UK negotiation topics this year, so it’s possible that, by the start of 2021, we’ll only need to use HS codes in special cases. As Brexit develops, we recommend you regularly check the UK Government’s guidance on import/export commodity codes — if there are any HS code announcements as Brexit develops, we expect to find them here.