What is the Harmonized System code and why it is important in trade business?

HS code (Harmonized system code) is a method to categorised commodities while importing and exporting them from one part of a globe to another. It is a six digit code and used as a key tool for trading products at an international level. It assists in handling the entire process of trade and monitoring each and every shipment. It is very important for every trader to Find HS code in order to keep a track record on every shipment.

In this system of product nomenclature, around 5000 commodities are divided into 92 chapters and 21 sections. Each and every product in these 92 chapters are identified by this six digit code, arranged in such a way that even a lay person can easily understand what is in the shipping containers.

The first two digits of any HS code of a product are called chapters, next two digits are known as heading and next two digits are sub-heading. An example is shown below which help in completely understand the structure of HS codes. Let’s suppose the HS code of Mobile is 08:04:30. The first two digits i.e. “08” are called “chapters’- (Edible fruit & nuts, peel of citrus/melons). The next two digits i.e. “04” are called 'heading'- (Dates, Figs, pineapples, avocados, etc. fresh or dried) and last two digits i.e. 080430 are known as 'sub heading'- (Pineapples).

In the international trade business, ones should know how to find HS code correctly because with the support of this global products classification technique, it becomes quite easy to identify collection of international trade statistics,monitoring of controlled goods,including risk assessment customs tariffs,collection of internal taxes,trade negotiations,rules of origin,information technology and compliance and areas of Customs controls and procedures.