Guide to HS and HTS Codes

When shipping internationally it’s important to get all documentation and product identification correct. If you don’t, you’ll likely get slammed with extra fees and shipping delays from products being held at customs.  

One of the most important aspects of proper customs clearance is classifying your products correctly. The Customs and Border Protection uses an internationally recognized system of codes to identify and process your shipments accurately and on time. These are called HS codes and HTS codes, and they identify product classification and tariff and tax dues, respectively.  

Here is more about both HS Codes and HTS Codes and how to ensure you’re properly classifying your products.  

What are HS Codes? 

HS stands for Harmonized System, which is an internationally recognized standard administered by The World Customs Organization (WCO). The HS system of codes is used to identify and classify commodities (any goods or raw materials) that are moved across international borders.  

The Harmonized System codes are comprised of six digits. Each unique code identifies a specific commodity or raw product. All imports and exports are required to be identified by their HS code at customs to be cleared to move in or out of the country.  

What are HTS codes? 

Often confused with HS codes, the Harmonized Tariff Schedule, or HTS codes, are country-specific codes that help identify which duties and taxes are applied to products being imported.  

HTS codes are 8-to-10-digits long and are used to streamline the process of applying any customs fees like tariffs, duties, and taxes.  

The Structure of HTS Codes 

HTS codes can differ from country to country, making decoding them complex. Let’s take the US system, or Harmonized Tariff Schedule of the US (HTSUS), as an example.  

The U.S. International Trade Commission administers the HTS code for product classification purposes based on a product’s composition, form and function. For example, if a shipment of coffee beans is to be imported, the HTS code would differ depending on whether the beans in question were coming into the U.S. raw or if they had already been roasted. 

The US uses a 10-digit code system where the first six digits are the HS code (also called Schedule B number), and the last digits denote the HTS code.  

Here are the different sections of HTS codes, and their meanings: 

• The first two numbers denote the chapter that the product belongs to. This might be live animals, or cosmetics.  
• The second two numbers are the heading and further clarify the chapter designation. Taking the same two examples, this might be Horses and Mules, or Perfumes and Toilet Waters.  
• The third two numbers are the subheading and drill down further into the classification specificity. Using the same example, this may be Purebred Horses, or Alcohol-Free Product.  

The remaining digits are additional classifications used to establish the appropriate country-specific customs fees (duties, tariffs, or taxes). The HTS code will indicate the exact tax, duty or tariff rate meant to be collected since it would be different based on the specific product identifiers (perfumes containing alcohol versus ones that are alcohol-free).  

Common Issues When Determining HTS Codes  

It’s crucial to make sure you classify all products correctly. Some shippers fall into the trap of thinking their product marketing is the same as their documentation identification. If you’re selling t-shirts that are called “sea-turtle green” don’t add sea turtles to your HTS codes. CBP may think you’re trying to import live animals, instead of cute clothing.  

Here are some of the issues that may come up if your products aren’t coded correctly

• Held at customs, which means grumpy customers.  
• Penalties, no one wants surprise costs coming their way.  
• Incorrect fee payment, either overpaying or underpaying, either will be headache to resolve.  
• Customs and Border Protection (CBP) might put a flag on your shipments and audit your goods more closely.  

How to Ensure You Have the Correct HTS Code 

There are many places to get tripped up, but here are a few ways to ensure you’re properly classifying your products.  

• Get clear on who’s responsible. The importer of record is responsible for supplying the HTS code. Most often that’s the ecommerce company, but not always.  
• Don’t try and game the system. Some shippers will choose HTS codes that have lower tariff rates. This creates way more headaches in the long run if CBP finds out.  
• Use the right code. It sounds silly, but there are many examples of products that may be difficult to code. It’s important to do your due diligence to use the correct code, rather than guessing and getting it wrong. For products that are difficult to classify, you can look up the code in the Customs Rulings Online Search System (CROSS) database. 
• Work with an expert. If in doubt, hire an international shipping expert to help you get to the right code. There are brokers, internationally shipping consultants, and also agencies that can help you find your HTS code and optimize your international shipping strategy.  

To find the correct codes for your products there are many resources online you can turn to. Most countries have updated pages within their government website. If you search for Canadian HTS Codes, look for the official Canada Border Service Agency website.  

If you’re seeking international shipping support, reach out to DCL Logistics for a quote. We have amazing international shipping partners like Passport Shipping who can integrate seamlessly with our services to give you great international support.   

Tags: International