Trade Talk Blog F
or any importer, preparation is the key to ensuring that goods get where they’re supposed to go efficiently and without any complications—and one crucial part of that preparation process involves being well-versed in Harmonized Tariff Schedule (HTS) codes. That’s why understanding what HTS codes are, how they work, their customs implications, and more is a critically important but often overlooked element when it comes to global trade.
The Harmonized Tariff Schedule, or HTS, is a numerical coding system that is used by U.S. Customs and Border Protection (CBP) to classify imported merchandise. This coding system was implemented as part of the International Convention on the Harmonized Commodity Description and Coding System in 1988 and has since become one of the most important tools available for international trade. HTS codes are essential for importers in the United States, as they are required for all entries made with CBP, including entry summaries, duty payments, and post-entry activities like drawback claims or protests.
As an importer, a lack of knowledge or familiarity with HTS codes can have very real consequences for you. We understand just how critical this subject matter can be for keeping your international business operations running smoothly. That’s why in this guide to HTS codes we will discuss all things related to HTS code — from definition and history, usage today, and valuable tips for compliant application — to arm you with the information necessary for successful importing!
What are HTS codes?
An HTS code, which stands for Harmonized Tariff Schedule code, is a 10-digit number used to identify and classify imported items. HTS codes are used as a means to determine how much duty or taxes are to be paid when importing goods into a country. Every product has a unique HTS code assigned to it, meaning that tariffs can be accurately determined when something is imported. In the United States, HTS codes are maintained by the International Trade Commission but enforced by Customs and Border Protection (CBP).
The HTS code classifies imported goods based on characteristics like the item’s composition, name, and function. The United States International Trade Commission website provides the most current version of the HTS that classifies all types of imported goods. To help importers better understand goods classification and tariff rates, the website also offers General Notes, General Rules of Interpretation (GRIs), General Statistical Notes, and descriptive guidelines.
How the HTS and HTS codes work
The HTS, which is made up of more than 10,000 codes for goods, is further divided into chapters, headings, and subheadings. HTS and HTS codes are used to not only classify imported goods but also to determine duties paid at customs. Standardized codes allow government entities, such as the International Trade Commission, to determine the correct amount of duty to be paid on identical items. This way, duty amounts are consistent for all importers.
HTS codes can be found in individual HTS PDFs of each chapter, which can be downloaded on the HTS website. They can also be found using a quick search on the HTS database. An HTS chapter is assigned a two-digit number so that every item classified within the chapter starts with the same two numbers. The system then further breaks down classification into headings and subheadings, eventually resulting in a 10-digit code.
The Harmonized Tariff Schedule contains a Rates of Duty column that will tell you exactly how much duty or tariff you are expected to pay based on the quantity listed in the Unit of Quantity column. The Rates of Duty includes three sub-columns:
Column 1 (General)
This column is used for goods imported from countries that maintain normal trade relations with the United States.
Column 1 (Special)
Items listed here are granted special tariffs like free trade agreements or the generalized system of preferences.
Column 2 is dedicated to imports from countries that do not have normal trade relations with the United States (Cuba and North Korea).
HTS Codes and duty rates
Harmonized Tariff Schedule (HTS) codes are assigned to every product imported into the United States. The 10-digit HTS code allows U.S. Customs and Border Protection agents to classify and assess duties on goods entering the country. Duty rates vary depending on the product’s origin, purpose, and value; higher-valued goods often require a higher duty rate than lower-valued goods. For example, agricultural products typically have a lower duty rate than electronics or luxury items. Furthermore, some imported products may qualify for free trade status or preferential treatment that would reduce the amount of duty charged on the item. It is important to research any applicable duties associated with an import before purchasing it to avoid unexpected fees or customs penalties.
Under the Rates of Duty column, you will be able to pinpoint the exact amount of duty to be paid for your imported goods. If the goods are not imported duty-free, there are three types of duty rates you can expect to pay, either a fixed percentage, a fixed price per quantity, or a combination of both fixed percentage and fixed price.
The three types listed in the Harmonized Tariff Schedule are:
Ad valorem duty rates are taxes that are levied on imported goods and services based on the value of the item being assessed. The rate of these duties will vary depending on the type of product, its country of origin, and the intended purpose for which it is being imported. For example, a product from China may have an ad valorem duty rate of 25%, while imports from Canada may be taxed at 8%.
Specific duty rates are calculated as a price set per quantity of the imported good. Specific duty rates are determined based on the type of goods imported and the country it was imported from. The higher duty is meant to limit imports and protect local businesses from foreign competition.
A compound duty rate uses an ad valorem and a specific price per quantity of the item. Importers will be expected to pay a compound duty as outlined in the Rates of Duty depending on the specific goods being imported.
Why do we need HTS codes?
As an importer, HTS codes can provide you with a clear understanding of the duties to be paid before you begin the import process. This will enable you to build realistic budgets and effectively predict any potential customs rate changes that could affect your business moving forward. Moreover, these codes may streamline various operations by integrating seamlessly into present internal systems for swift management and tracking of all imports.
The 10-digit HTS codes are used to categorize goods imported into the United States. They are used to determine the duty rate the item is subjected to upon entry into the U.S. and for trade data collection.
HTS codes are also used to track all products being imported into the country, eliminating or reducing the entry of illegal and dangerous items. CBP agents can use their HTS classification to track down specific shipments if an alert is issued.
Are HTS codes unique to the U.S.?
The Harmonized Tariff Schedule (HTS) came into effect as a system to classify goods based on duty, quota, and statistical purposes. The HTS is based on the HS, however, it is specific to the United States and can be referred to as the Harmonized Tariff Schedule of the United States (HTSUS).
HTS codes vs HS codes
HTS codes and HS codes share the first six digits, which are based on an internationally recognized classification system. HTS codes, however, are unique to each country and cannot be used globally.
What are HS codes?
HS codes are six-digit codes, made up of a chapter and heading, used for most international shipping. HS stands for Harmonized System which is a universal classification system used for most internationally traded goods.
The World Customs Organization, established in 1952, is an independent intergovernmental body that represents 183 customs administrators and is responsible for about 98% of international trade. The World Customs Organization is the establishing entity behind the Harmonized Commodity Description and Coding System, also referred to as the Harmonized System or the HS. The goal of the World Customs Organization is to facilitate customs regulations by relying on uniformity across countries with systems such as the HS.
How an HTS code differs from an HS code
HTS codes, which are ten digits long, include a chapter, a heading, and up to three subheadings. The first six digits of an item are its HS code, while the additional four digits are unique to each country’s import classification system.
What makes up an HTSUS code
An HTSUS code is broken up into 5 parts, each of which represents a specific aspect of the imported item.
The first classification, the first two digits of the code, are internationally consistent. Currently, there are 99 chapters listed in the international HS code, grouped into 22 general systems such as “Section 1: Live Animals; Animal Products” and “Section 17: Vehicles, Aircraft, Vessels and Associated Transport Equipment”
Chapters are divided into internationally consistent headings, to further classify imported goods. The two digits used to refer to headings can be used, for example, to separate between cruise ships (heading 01) and yachts (heading 03).
The HTS code or subheading
Next in the code are the two digits that make up the subheading of the item. Combined with the previous four digits, they make up a universal HTS code that can be used globally.
First U.S. subheading
The rate line, which is made up of eight digits, is made up of the previous six digits, as well as two digits unique to the U.S. These digits are used to determine how much duty is paid on items.
Second U.S. subheading
Finally, the Statistical Suffix, which is also unique to the U.S., is a detailed description of the item that is used to collect trade data.
Why choosing the right HTS code matters
Understanding how HTS codes work and choosing the right code will help you avoid any problems with customs. Ultimately, choosing the right code is important for you as an importer as it not only clarifies the exact duties paid at customs, it also safeguards your rights and prevents potential fines and penalties.
HTS codes determine the duties you pay
A simple mix-up in the HTS code could easily change your import tax from duty-free entry for a canoe (8903.93.05) to 2.7% if listed as 8903.93.15 under other pleasure or sports vessels. Pay attention to the exact code of your imported items to avoid this costly mistake.
Choosing the right code can also mean reduced tariffs for your imported goods. The United States has trade agreements that allow certain goods reduced tariffs or no tariffs at all. Trade agreements can be found under Column 1 (Special) on the HTS, but remember that trade agreements can change and may include additional rules and conditions. This information can be found under the General Notes section.
HTSUS codes are only recognized in the U.S.
If you are shipping items to countries other than the United States, be careful not to use HTSUS codes, which won’t be recognized outside the U.S. Countries have different classifications beyond the first six digits of a code, and while they may seem similar, an HTSUS code can refer to something completely different in China.
You will be held accountable
As an importer, it is your responsibility to submit accurate values and duties when filing for customs. When dealing with a supplier or freight forwarder, double-check the HTS code they have declared since you will be held accountable for misclassifications and could be subject to fines and penalties.
8 Tips to determine your HTS code
HTS codes are as detailed as possible, classifying goods and items based on very specific descriptions. Although this is an efficient method to determine duties and understand import trends, it can be confusing for importers to choose the correct HTS code. Here are eight simple tips to help you determine the exact HTS code for your imported goods:
Tip 1: Know your product
Before diving into the complex world of HTS codes, you need to know everything about the imported item. From its size and composition to its unique characteristics; this information will save you a lot of time in the future.
Tip 2: Slowly narrow down your search
Classification systems usually begin with the general and gradually narrow down. Do the same for your items, starting with the right chapter and then moving on to the heading and subheadings.
Tip 3: Read all the notes
Every chapter contains notes that act as a guide to the items listed within the chapter. Read these notes well to eventually find the correct HTS code.
Tip 4: Search for your product
The International Trade Commission’s website allows you to search for specific codes and download a PDF version of the chapter you are seeking. Type in words that will help you find the exact terms related to the goods you wish to import.
Tip 5: Go through related headings
You may think you have finally found the right heading for a specific item; however, it never hurts to read other related headings to make sure you have found the best one. Go through subheadings as well and compare descriptions to find the best choice.
Tip 6: Read the General Rules of Interpretation
There are six General Rules of Interpretation that include further information on classifications and how they apply to items. Read these rules thoroughly to be able to find the right HTS code.
Tip 7: Consult an expert
The US Commercial Service can provide you with additional information on item classification. You can also consult with a customs broker who can guide you through policies and procedures.
Tip 8: Seek help from CBP
Customs and Border Protection (CBP) can help if you submit a request and will respond with a Ruling Letter stating how your items should be classified. However, once you receive the ruling, you are required to use the classification selected by the CBP.
HTS vs Schedule B
HTS and Schedule B are two important coding systems used by the U.S. trade industry to classify imported and exported products. The HTS is a comprehensive system of code numbers developed in partnership with the World Customs Organization, while Schedule B is administered solely by the U.S. Government. The HTS codes are used to classify all types of goods, including food, minerals, machinery, textiles, and agricultural and industrial products. On the other hand, Schedule B codes are specifically used for tracking exports.
Schedule B is a statistical classification used for goods being exported from the U.S. Schedule B is maintained by the United States Census Bureau, and while it is based on the HS, it is used for exports rather than imports. HTS codes and Schedule B codes may be the same, however, each code serves a different purpose and should only be used accordingly.
The differences between HTS and Schedule B go beyond their respective areas of application. For example, the HTS also allows for subheadings that can be used to further break down goods into their components. In comparison, Schedule B does not include these extra levels of classification granularity and instead assigns a single 10-digit number for each item regardless of its makeup or composition.
In addition to different number lengths for classifying goods under each system, there is also variation in how tariffs get applied depending on which one you use. Since both systems incorporate different levels of detail when describing a product category and assigning it an associated tariff rate, when faced with multiple codes from either the HTS or Scheduled B list that could apply to your particular item, it’s important to thoroughly determine which one is most applicable as this can make a difference in how much you ultimately pay in taxes or duties upon importation or exportation.
Similarities between HTS and Schedule B codes
- Both HTS and Schedule B codes are 10 digits long
- The first six digits of both codes are the same as the HS code
Differences between HTS and Schedule B codes
- HTS codes are used for imports and Schedule B codes are used for exports
- HTS codes are maintained by the International Trade Commission while Schedule B codes are maintained by the United States Census Bureau
The consequences of using an improper HTS code
Using the wrong HTS code can easily lead to delays, fees, penalties, and even the seizure of your imported goods. Customs and Border Protection’s Penalties Program clearly outlines the consequences for misclassifying and misvaluing imported goods, which can include increased duties and civil or criminal penalties. As the importer of record, it is your responsibility to verify HS codes to prevent any unwanted fees or sanctions.
HTS codes are essential for any business that plans on importing goods in the United States. By understanding what HTS codes are, how they work, and why we need them, you can avoid costly mistakes when shipping your products. Choosing the right HTS code is crucial to ensuring that you pay the correct duties on your imports, so be sure to take the time to research the appropriate code for your products.
Streamline your imports with
At GHY, we are committed to helping you throughout every step of your import process. Our experienced Trade Experts will guide you as you determine the correct HTS codes for your imported goods. With our services, you can avoid unnecessary fees and sanctions that could otherwise be applied to your goods, saving you time and money during importation.
We also provide full-service solutions for managing, tracking, and filing all required paperwork associated with international trade. This ensures that all processes are handled efficiently and accurately so that your shipments arrive on time and comply with applicable regulations. With Breeze Customs at your side, you can rest assured that you’ll receive the best service possible at a competitive rate. Book a meeting with one of our Trade Experts today and we’ll help you streamline your imports!