Apply HS Codes in 2022

What is the Harmonized System?

The International Convention on the Harmonized Commodity Description and HS Codes Coding System entered into force on 1 January 1988 with three objectives:

1. to facilitate international cross-border trade and the collection, comparison, and analysis of statistics by harmonising the description, classification, and coding of goods in international trade.
2. to reduce the expenses related to international trade; and
3. to facilitate the standardise

Every five years, the World Customs Organization, the governing body of customs administrations representing more than 180 countries, reviews the Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS). HS codes are the foundation of tariffs for more than 200 economies and countries worldwide.

The WCO reviews HS numbers to ensure they reflect changes and updates in technology and that they provide visibility into new product streams and emerging global issues. The seventh edition of the HS, called HS 2022, entered into force on Jan. 1, 2022. HS 2022 is the result of a review cycle that began in 2017 and concluded on June 28, 2019. During the cycle, the WCO adopted 351 sets of amendments relating to a wide variety of products and product groups.

Who uses the Harmonized System?

More than 200 countries currently use the Harmonized System as a basis for their national customs tariffs. The HS is also used as a basis for the collection of international trade statistics, trade negotiations and rules of origin, and the monitoring of controlled goods.

HS Code Changes in 2022

The European Commission has published the latest version of the Combined Nomenclature (CN) applicable as from 1 January 2022. HS 2022 makes major changes to the Harmonized System, with the 351 sets of amendments covering a wide range of goods moving across borders. The primary focus of the HS 2022 amendments is to adapt to current trade by recognizing new product streams and addressing environmental and social issues of global concern.

Highlights of the changes include the following:

• New product streams (drones, tobacco products)
• Technological advances (glass fiber, metal forming machines)
• Health and safety (diagnostic kits, placebos, clinical trials)
• Human security (toxins, lab equipment)
• Protection of society (radioactive materials, detonators)
• Station of trade documentation and the transmission of data.

What does an HS code look like?

In practice, an HS code is a 6-digit code that represents a Chapter, Heading and Sub-heading that together defines the good being imported/exported.

Let’s look at an example of a company shipping rear-view mirrors for vehicles:

• The first two digits in the HS code are the Chapter– this is the broad categorisation of your good. In our case, this would be Glass and glassware (Chapter 70)
• The second two digits are the Heading, which offers another layer of separation. In this case, we would need the Glass mirrors sub-heading (09).
• The final two digits are the Sub-heading – which offer a final layer of clarification. In the case of our glass example, there is a sub-heading specific to rear-view mirrors for vehicles, which adds a final two digits (10).

Bringing all these components together gives you the HS code: 7009.10. Sometimes, a sub-heading isn’t needed, in these cases, the final two digits are 00.

Why is having a HS code important? 

When trading internationally, applying a HS classification code to your goods is mandatory. If applied incorrectly, you could be paying higher duty payments and damaging overall margins. Businesses using the IOSS (Import One Stop Shop) Scheme to report the VAT due on distance sales of imported goods will need to apply their IOSS number as well as the correct HS code on customs declarations attached to consignments.

For all importing/exporting business, applying the right HS code for the goods you’re sending can speed up the customs process and make sure that your shipments pass through without incurring extra fees or delays. Ensuring you are using the correct HS code means you can also:

• Know the exact amount of duty or import VAT you or your recipient should pay
• See if the duty for your goods is suspended
• Check if you need a license for your item(s)
• See if your goods are covered by:

Anti-dumping duties – this is an added tax duty placed on imported goods that are sold at a significantly lower price than their normal value. This protects domestic markets from damage in trying to compete with these below-average prices of imported goods.

Tariff quotas – Tariff quotas refers to a limit placed upon the number of goods that can be imported/exported at reduced or no duty rates. This is also expressed via a ceiling system where quantitative limits are applied to certain goods from countries.