HS Code: All You Need To Know

With so many countries selling so many types of products – right from tea, coffee to aircraft, from leather to spices and from apparel to engineering products – it was necessary to devise a system in which it was easier to identify products. This led to the introduction of the HS code. In this system, each product is labelled with a unique code that any exporter in any country may use to ship the product from one destination to another.

 Here is all you need to know about HS Codes.

What is HS Code?

HS Code is an international system developed by the World Customs Organization (WCO) used for over 5000 commodity groups worldwide to regulate trade with uniformity. HS Code or HSN Code is a coding system used as part of the state, central, excise and customs tax laws. HS Code systems allocate a six-digit unique number to each product which helps identify the product for all stakeholders involved.

 The HS Code system is being used in over 200 countries across the world for trade and collating statistics. Over 98% of global goods are classified under this coding system.

 It simplifies the identification of goods for both exporters and importers and avoids any confusion in the process. These codes are also used effectively to collect internal and external taxes properly at customs.

 Not using or using an incorrect HS Code can lead to charging wrong duty rates for the goods, and the exporter may be found not following the trade norms. At the same time, the absence of an HS Code can also lead to the inability to identify the shipment correctly.

 What are the salient features of the HS Code?

Here are some salient features of the HS Code system:

  • The codes are made as per the rules that classify the codes in the first place
  • It is a worldwide uniform standard for the classification of goods
  • Close to 5000 commodities across the world are covered with HS Codes

What is the structure and classification of HS Codes in India?

 The WCO has developed a system with six-digit HS Codes. However, it also allows the country to customize the HS Codes in a way that it can add additional digits after the first six digits. For instance, the US has a system of 10 unique digits.

India follows a system of 8-digit HSN Codes. The first 6 digits are mentioned by WCO, while the last two digits are additional. It is also called the Indian Trade Classification, ITC (HS) Code or Indian Tariff Code. 

What is the use of an HS Code?

 HS Codes are important mainly because they help in customs clearance. At the same time, there is no catalog confusion in the minds of exporters and importers. It also helps to keep track of tariffs and taxes on various products. They are also helpful in collating export data and in the calculation of internal taxes and liabilities during a given period.

 How to find the correct HS Code for a product?

 It is easy to find the right HS Code for any product. Follow these steps:

  • Go to the DGFT Website
  • Search list provided by the Ministry of Commerce
  • Search for the relevant chapter
  • Check for the correct heading, subheading and tariff item
  • Get the proper HS Code

What are the consequences of using an incorrect HS Code?

 Incorrect use of HS codes on products can lead to delays in shipments and customs clearance and can even attract penalties and charges to the parties involved.

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