What exactly does Harmonized System Code mean?

Harmonized System Code or Coding system is an international standardised system of numbers or names that are used to easily classify trade products. Developed and maintained by World Customs Organisation (WCO), and independent governmental organisation that had 200 member countries, was brought into effect since the 1980’s. Basically, the harmonized system code is organised by component material and economic activity, for example, all the products pertaining to animals and animal products are found in one section whereas machinery, mechanical appliances, and other products come under the other section.

The HS code is a numeric 6 digit code and the first two digits are designated to the harmonized system chapter. Mainly, the products are divided into sections and chapters, where titles are the broader category that is the chapters, and subheadings in the chapter known as sections are used to describe the product more in detail. In the 6 digit HS code – first two digits are designated to the chapter (as mentioned above), second two digits are the headings and the third two digits are the subheadings. To ensure that harmonisation is done, the parties that are contracting to the Convention on the Harmonized Commodity Description and Coding System have agreed to put the tariff on legal notes.

The whole process of assigning the harmonized system code is known as HS classification. The codes are also determined on various factors including the product’s composition, the function it performs and its form. Every product and every part of the product can be classified as per the system. Any product that does not have any explicit description can either be classified under a basket or residual heading or the subheading or there is another option called ‘Other Goods’. The residual or basket codes normally are in the numerical order that is related to headings and subheadings.