Harmonized System Codes (HS Code)

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Introduction:

The HS is intended to serve as a universally accepted classification system for goods so countries can administer customs programs and collect trade data on exports and imports. It was designed to replace the local systems used by countries allowing them to have a common classification system by which to track trade and apply tariffs.

The basic system uses a 6-digit number to identify basic commodities. Each country is allowed to add additional digits for statistical purposes. It was developed under the auspices of the Customs Cooperation Council (CCC) now known as the World Customs Organization (WCO). The WCO, located in Brussels is an international organization consisting of representatives of about 139 countries or territories.

How the HS works

The Harmonized System is a commodity classification system in which articles are grouped largely according to the nature of the materials of which they are made, as has been traditional in customs nomenclatures. The HS contains approximately 5000 headings and subheadings covering all articles in trade. These provisions are organized in 96 chapters arranged in 21 sections which, along with the interpretive rules and legal notes to the chapters and sections, form the legal text of the Harmonized System.

The basic six digit code that makes up the HS is made of three parts. The first two digits identify the chapter the goods are classified in. For example:

The next two digits identify groupings within that chapter:

The next two digits are even more specific:

This is the last point at which different countries classification codes are identical. After this point countries can add more digits to make the HS classification numbers even more specific. Canada uses another two for exports and another four for imports. The United States uses four additional numbers for both imports and exports. In Canada for exports the next step in the above progression is:

Most countries of the world track imports far more thoroughly than they do exports. Canada uses five different 10 digit HS codes for the import of fresh or chilled carrots:

While the United States does use 10 digit codes for both exports and imports this doesn't necessarily mean that they track exports in any more detail than does Canada.

This is what their HS code for fresh or chilled carrots looks like:

Here's their import HS codes:

See how different the codes can be even though they use the same first six digits? And this is for a relatively simple good like fresh or chilled carrots. It gets much worse with more complicated goods like apparel and machinery. This makes comparison of different countries trade problematic but still better than it used to be with the plethora of commodity codes that existed before 1988 when the HS system came into widespread use.

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