The Harmonized System is a system that allows different countries to express the same product with the same code. The Harmonized System went into effect on 1 January 1988 . It is administered and updated every five years by the World Customs Organization (WCO) in Belgium. It is used by more than 200 countries and economies in the harmonized system and covers more than 98% of goods in international trade.
It is used to categorize exported goods, it is a classification method accepted by the whole world. Its main function is used by customs brokers to identify products, to determine the correct taxes on the products. In the Harmonized System, each product is assigned a unique numeric code called the HS code. This code has at least six digits. While exporting or importing, it is obligatory to include the HS Code of your product in your shipping documents such as your commercial invoice, packing list and shipping invoice. And as an exporter or importer, it is your legal responsibility to accurately determine the HS Code of your product. Misclassification can leave you in legal trouble.
The primary function of the Harmonized System is to provide a basis for tariffs worldwide. However, it also has other uses such as:
● Collection of international trade statistics
● Collection of internal taxes such as SCT and value added tax (VAT)
● As the basis of freight and shipping tariffs
● As the basis for rules of origin (which are criteria for determining the national source of a product)
● As a basis for setting preferential tariffs and MFN (most preferred country) tariffs under free trade agreements
● As a basis for governments to decide on trade policies
● For monitoring of controlled goods (drugs, chemical weapons, endangered species, waste, etc.)
● As a facilitator of customs controls and procedures such as risk assessment and compliance
The Harmonized Goods Identification and Coding System, or simply HS, is an international nomenclature developed by the World Customs Organization (WCO) for the classification of goods. It is a system developed to identify products traded between countries.