Mastering HTS Codes: Structure, Challenges, and Smart Solution
- Freya Jane
- Director of Customer's Success
Master the numbers that move your products across borders.
HTS codes are the quiet driving force behind every successful import into the United States. It determines the amount of duty you must pay, whether your products pass customs quickly, and whether you will face unforeseen penalties. However, a lot of importers fail to understand the importance of these ten numbers and use incorrect code, ending up with a lot of challenges.
This blog takes you through every aspect of the HTS code that each US importer must know.
What are HS codes?
Harmonised Tariff Schedule codes, or HTS codes, are numbers used to identify goods entering the United States. They assist customs officers in determining what you are carrying into the country and the appropriate amount of duty (import tax).
The US Customs and Border Protection (CBP) uses these codes every time an item is imported. They also assist in ensuring that your goods fulfil all applicable legal and regulatory standards.
The Harmonised system (HS), a global standard, serves as the foundation for HTS codes, which are overseen by the U.S. International Trade Commission (ITC). Each HTS code has ten digits:
- First 6 digits: Shared worldwide as part of the international HS system.
- Last 4 digits: US-specific details that further define the product.
One crucial thing to remember: HTS codes are only for imports entering the United States. If you’re delivering to another country, their system may appear identical but utilise different codes after the sixth digit.
The structure of HTS codes
Although HTS codes appear to be nothing more than a series of numbers, there is a certain pattern.
The HTS code typically consists of ten digits. The first 6 numbers are from the global Harmonised System (HS) that is utilised worldwide, and the last 4 digits are specific numbers for the United States to provide more information and establish particular duty rates.
Let’s examine a football example and break down HTS code 9506.62.4040 in detail:
1. Chapter: The first 2 digits (95)
This is the broadest category. There are 99 chapters in the HS system, each covering a general type of product.
In this case, 95 refers to “Toys, games, and sports equipment.”
2. Heading: The first 4 digits (9506)
Chapters are divided into more specific groups called headings.
9506 zeroes in on “Articles and equipment for general physical exercise, sports, or outdoor games.”
3. Subheading: The first 6 digits (9506.62)
This level gets more specific.
62 refers to “Inflatable balls,” so now we’re clearly talking about things like footballs and soccer balls. These six digits make up the international HS code, which other countries also use.
4. U.S. Subheading or rate line: 8 digits (9506.62.40)
The US adds more digits to better define what kind of inflatable ball it is.
40 here means “Footballs and soccer balls.” This part helps determine the exact duties owed when importing.
5. Statistical suffix: 10 digits (9506.62.4040)
The last two digits don’t affect duties but are used for data collection. They help the government track import trends and volumes.
For example, footballs and soccer balls might have the same duty rate but are still separated for reporting purposes.
How do HTS codes and Schedule B codes differ from each other?
You may have heard of HTS codes and Schedule B codes and wondered if they were interchangeable. Although they are comparable, they are not the same.
The Schedule B codes are ten-digit numbers used only to track exports from the United States. These are managed by the US Census Bureau, not the US International Trade Commission, which is in charge of HTS codes. The government uses these codes to gather trade statistics about items that are leaving the nation.
On the other hand, HTS codes are used for imports into the United States and are likewise ten digits long. Compared to Schedule B codes, they frequently cover a wider range of products and are more comprehensive.
One important thing to know is that the international HS code system serves as the basis for the first six digits of both Schedule B and HTS codes.
The differences between the two can be found in the last four numbers. This is because the United States may keep somewhat different records of imports and exports.
Common challenges with HTS codes
There can be severe repercussions if you enter your HTS code incorrectly. If customs perceives it as deliberate misclassification, it may be interpreted as fraud, resulting in fines, penalties, or delays at the border. Understanding some of the most common errors importers make when working with HTS codes will help prevent these problems:
It is not simple to classify complex products
There are some things that aren’t simple. A product may not readily fall into one category if it is composed of various materials or components. To make sure you’re choosing the correct code, you might need to do more research or consult an expert.
HTS codes vary over time
HTS codes change over time. They are updated frequently to take into account modifications to international agreements, new technologies, and trade regulations.
You can be inviting challenges if you’re utilising an old code. Verify the most recent version and make the necessary updates to your data.
Not every country use the same codes
Importers and exporters commonly make the mistake of using the same codes for shipments moving to different countries. These codes are not accepted universally. Using the incorrect version for a shipment could result in it being refused or delayed at customs because different countries have their own versions.
Minor product variations can change the code
The right HTS code might be impacted by even minor modifications to your goods, such as its size, quantity, or packaging.
For example, one code may apply to a single unit, while another code may apply to a version that is packaged in bulk. You might be surprised to learn how important these nuances are.
Why is selecting the correct HTS code important?
Harmonised Tariff Schedule (HTS) codes are more than just numerical values. They serve as the foundation for product identification in global trade. Correctly entering the code can help you avoid delays, save money, and maintain compliance with customs laws.
Here’s why it’s so important:
1. It has a direct impact on the duty you pay
The fact that HTS codes affect how much import tax, or duty, you pay is one of the main reasons they are important. Every product category has a different duty or tax, and many things are even duty-free.
Selecting the incorrect code could result in you paying more than you should or underpaying, which could cause financial strains.
For example, importing footballs into the United States with HTS code 9506.62.40 (for footballs and soccer balls) entails no duty at all, but using 9506.62.80 (for other inflatable balls) entails a 4.8% tax. Depending on the size of your shipment, this minor mistake could cost you hundreds or thousands of dollars.
2. There isn't a single HTS code that works for all countries
Assuming that HTS codes are similar is a common mistake. Although the first six numbers are the same everywhere, each country has its own extended codes. This implies that a code that is accepted in the United States might not be in another country or might signify something entirely different.
Let’s imagine you’re shipping the same footballs to China. If you use the US code 9506.62.4040, China might refuse your shipment because their system classifies footballs under 9506.62.1000. Using the incorrect code may result in additional fees, delays, or customs denials.
3. Correct classification is your legal responsibility
The US Customs Modernisation Act states that the importer is legally obligated to make sure that the items are accurately classified and declared. This implies that you are ultimately responsible for any mistakes, not your freight forwarder or customs broker.
If customs discovers that your items were incorrectly classified, even by mistake, you may be subject to:
- Financial penalties
- Delays
- More checks
- Product seizure
- Bad reputation with customs officials
Additionally, constant errors can lead to long term damage to your business.
4. Accurate HTS codes maintain the smooth movement of your shipments
Using the correct code expedites the process of getting your items through customs. In case of miscalssification, you may come across longer delivery times due to further checking of the shipment.
In supply chain, even a slight delay might have significant repercussions. You can avoid future headaches, save money, and save time by getting the HTS code right from the start.
Finding the right HTS code with iCustoms
Manually finding the HTS code can leave one on the edge of misclassification, particularly when dealing with the constant updates to the trade laws. However, iCustoms doesn’t let you do it alone.
Our intelligent tool, iTariff, is designed specially for US traders to accurately and quickly find out HTS codes with minimal effort.
iTariff does the labour-intensive work for you, whether you’re shipping a complex product with several components or bulk goods.
Try iTariff and see the difference for yourself:
- Get HTS codes quickly with lightning-fast classification
- Get accurate, up-to-date codes that meet all regulations
- Say goodbye to spreadsheets and time-consuming manual searches
- Perfect for everyone: from small businesses to large global enterprises
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About iCustoms
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