The global economy offers plenty of opportunities for companies to ship products and services overseas. Indeed, that is the entire business of companies involved in imports and exports. With so many products and services crossing so many borders, it is only natural that the regulations controlling imports and exports would be complicated. If you are new to the industry, here is the #1 rule: there is a code for everything.
Wherever you find government regulations, you find codes. That is certainly the case when you are talking about global trade. At Vigilant Global Trade Services in Shaker Heights, Ohio, expert consultants are concerned about three primary types of codes:
- Harmonized System (HS)
- Harmonized Tariff Schedule of the United States (HTSUS)
- Schedule B.
Vigilant says that there is some overlap with all three types of codes. That is good in the sense that knowing one code can give you a clue as to the other two. It is bad in the sense that overlap causes confusion.
Harmonized System (HS) Codes
The World Customs Organization is an intergovernmental organization tasked with overseeing customs-related matters on a global scale. They are the organization responsible for developing and maintaining HS codes. The codes represent a standardized method for classifying goods shipped around the world. Classification is based on a numerical system that makes it easier to track statistical data, identify goods, and assess duties.
Note that the HS system is the standard system used around the world. Here in the U.S., we operate a system that is distinct but still based on HS codes. Six-digit HS codes are recognized by global trade partners the world over.
Harmonized Tariff Schedule of the United States (HTSUS) Codes
HTSUS codes are unique to goods and services being imported into the United States. Also known more simply as HTS codes, they are the purview of the United States International Trade Commission (USITC). U.S. Customs and Border Protection (CBP) require that importers use HTS codes rather than standard HS codes.
Fortunately, HTS codes are just HS codes with four digits added. The first six digits pertain to the standard HS code while the remaining four are only for U.S. classification. They mean nothing else to trading partners importing goods elsewhere.
It cannot be stressed enough that U.S. importers utilize the correct HTS codes on all goods coming into the country. Commodity duties are based on these codes, so getting it wrong could mean paying too much or too little. Subsequently, that could lead to financial penalties.
Schedule B Codes
Last are Schedule B codes maintained by the U.S. Census Bureau. These codes serve but one purpose: to provide the Census Bureau with statistical information used to monitor U.S. exports. Schedule B codes are not necessary on goods imported into the US. They are only required on exports.
Again, these numbers utilize the HS code of a particular product for the first six digits of the 10-digit number. The remaining four digits are unique identifying digits for that particular product.
U.S. exporters are required to use the correct Schedule B codes on export documents. According to Vigilant, there are numerous ways for an exporter to obtain the correct number if it is not already known. For example, exporters dealing in goods manufactured by another entity can usually ask the manufacturer for the appropriate code.
If you are new to imports and exports, know that the #1 rule in your industry relates to codes. In short, there is a code for every product you import or export. It is important that you know and use the codes correctly.