Posts tagged HS Codes

Harmonized System Codes (or HS Codes)

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What are Harmonized System Codes?

Harmonized System codes or HS Codes facilitate customs clearance. It is an internationally standardized system of names and numbers for classifying traded products.

More meaning from Wikipedia:

The Harmonized Commodity Description and Coding System (HS) of tariff nomenclature is an internationally standardized system of names and numbers for classifying traded products developed and maintained by the World Customs Organization (WCO) (formerly the Customs Co-operation Council), an independent intergovernmental organization with over 170 member countries based in Brussels, Belgium.

More than 200 countries, customs and economic unions, representing more than 98% of world trade, use the HS as a basis for:

-Customs tariffs
-Collection of international trade statistics
-Rules of origin
-Collection of internal taxes
-Trade negotiations (e.g., the World Trade Organization schedules of tariff concessions)
-Transport tariffs and statistics
-Monitoring of controlled goods (e.g., wastes, narcotics, chemical weapons, ozone layer depleting substances, endangered species)
-Areas of Customs controls and procedures, including risk assessment, information technology and compliance.
Codes have been revised through the years. If it is necessary to reference a code related to a trade issue from the past, one must make sure the definition set being used matches the code.

As a forwarder or broker, you sometimes encounter terms such as HS codes… hope this article helps!

BTW, Here’s a good source.

HS Codes V2 (Also known as Tariff Codes)

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Part 2 of Harmonized System Codes.

Over here in Malaysia, there is a single document that declares the varied items in your shipment a HS code or tariff code for that matter. In this document, you will see details about your forwarding agent’s name, your own company’s name and address, and 1 big bar code in the middle. Right below the bar code, there’s a line titled: No. Kod Tarif Pertama. The numbers below are the tariff code that represent your shipment.

The numbers are split into 3 sections, the first section containing 4 digits, the second containing 2 digits, and the final section containing 4 more digits.

It looks something like this: 4602.90.9000 (this tariff code applies for rattan products).

Further below there will be a line stating the description of the items.

It should look something like this:

HS Code Form

HS Code Form

Sometimes, you will be asked for the customs code. What’s a custom code? Actually a custom code is similar to the tariff code, the only difference is that it is applied to each individual item being shipped. That way each item is being taxed differently. (Due to some items having more duty than others).

In a Malaysian customs import declaration form such as below, the circled part will be the customs code.

Customs Import Declaration Form

Custom Form 1

Custom Form 1

Why are these codes so important? Simple, its simply because of the import duty and sales tax. Importers especially, wish to avoid huge duties imposed by the customs department so that it is cheaper to buy from abroad. Items are being taxed at an average of 20%, so if your goods is worth $10000 USD, that’s an extra $2000 USD you need to fork out. Don’t ever forget there’s a thing called Sales Tax or in some countries, VAT. This is a compulsory percentage tax charged. If you add the import duty and sales tax (usually at 10%) together, that raise the price by 30%.

If you buy from certain countries however, you don’t have to pay any single cent. Countries that have relations in duty-free groups such as ASEAN, or MALAYSIA-CHINA bilateral ties allows for 0% import duty. Though for the sales tax you probably still need to pay. How to proceed with such stuff? You need to utilize a special document called Form D or it’s general name: Certificate of Origin – with duty exemption feature. (But that’s for another post)

To check what’s the tariff code for your goods, check out this link.

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