In the field of import and export, HS code is a very commonly used term. Documents related to customs procedures and transportation of goods such as customs declarations, bills of lading, certificates of origin and invoices all contain this HS code. However, not everyone understands it clearly. The following article by Van Hai will provide detailed information to help readers better understand the HS code.
1. What is HS code?
HS code or HS code, is a code used to classify import and export goods according to the Classification System released by the World Customs Organization. This system is called "Harmonized Commodity Description and Coding System" (HS - Harmonized Commodity Description and Coding System).
Simply put, HS code is the code that classifies goods according to the Import-Export List. Based on this code, you can know the import or export tax, and other policies related to goods (such as product policies, risk management...). So, when you know the product's HS code, you can calculate the tax rate to pay for your goods along with related procedures.
In fact, if you have ever gone through customs clearance procedures, you will know that if you use the wrong HS code, it will lead to many consequences such as: editing the declaration, making additional payments or having to apply for a tax refund or customs clearance. Delayed than expected,…
hs code is used to classify import and export goods
2. The importance of HS code
HS codes are an important tool for the Government in identifying types of imported and exported goods to fulfill tax collection and other obligations, as well as enforce domestic laws and international treaties. In addition, the HS Code also supports the analysis of micro and macro strategies and international trade negotiations.
For businesses, the correct use of HS Code ensures compliance with domestic and international laws. If classified incorrectly, businesses will encounter many difficulties in delivery and inspection, as well as risk being fined and incurring costs. On the contrary, if goods are classified correctly with HS Code, businesses will enjoy many benefits from free trade agreements.
3. The role of HS code in import and export
Using HS codes with 8 or 10 numbers to represent goods helps all countries in the world classify goods systematically and uniformly. The customs terminology and language system also helps related parties understand each other, avoiding trade disputes due to misclassification of goods due to local language differences.
For example, Southerners call sunshades "Hats," while Northerners call them "Hats." However, in the UK and US, it is called “Hat.” If commercial contracts are disputed due to language differences, it is difficult to establish laws to resolve them.
In addition, identifying goods according to HS codes also helps simplify the work of relevant organizations and individuals. Agreement and implementation of trade agreements become more favorable.
HS codes are also the basis for customs authorities, tax authorities and chambers of commerce to license whether goods can be imported or exported. HS codes identify types of imported and exported goods to facilitate tax collection and imposition, and at the same time make statistics on domestic trade and import and export possible.
4. Structure of HS code
The list of Vietnam's import and export goods is specified in Circular No. 65/2017/TT-BTC dated June 27, 2017 of the Ministry of Finance determining Vietnam's HS code includes 8 numbers:
HS code is used internationally, consisting of 8-10 characters. The HS code is divided into the following parts:
Part: The HS code consists of 21 or 22 parts, each part has its own legend.
Chapter: HS code includes 97 chapters. Of these, chapters 98 and 99 are specific to each country. Each chapter has its own annotation. The first two characters provide a general description of the goods.
Group: divide products into general groups, including 2 characters.
Subgroup: divided from a more general group, consisting of 2 letters.
Subgroup: includes 2 characters. Sub-headings are specified by each country to determine export duties.
cau-truc-hs-code
Note: The first Section, Chapter, Group, and Subheading includes 6 numbers and is national, but the subheadings depend on each country.
To know the HS code of each country, pay special attention to the Grouping and Subgrouping sections. Currently, Vietnam is applying an 8-digit HS code, while some other countries in the world may use a 10 or 12-digit HS code.
For example: HS code of instant coffee is 2101.20.90, including 6 digits divided into 3 groups. Analyze the structure of this code as follows:
21: Is the code of the group of goods in the HS list, called "Chapter". 21 is the chapter on the commodity group "Products of the food industry; beverages, liquids and powders containing alcohol”.
01.20: Is the code of “Item” in the HS list, describing in more detail the type of goods. 01.20 is the entry for “Coffee, including instant coffee and coffee extract”.
90: This is the "Sub-code" code in the HS category, providing additional information about the commodity group. 90 is often used to designate similar products that do not clearly fall within the HS category.
5. Rules for applying HS code
Rule 1: Chapter notes and product identification.
The names of sections, chapters and subchapters only assist us in determining which part and chapter the product belongs to and have no legal value in classifying goods. However, this name cannot describe all the products included in that chapter. Therefore, to classify products, we need to rely on annotations and product grouping.
The caption of each chapter is the most important determining factor in classifying the goods in that chapter. This is very important and will be applied in all subsequent rules. We must check section and chapter legends to ensure products are classified correctly.
For example: Find the HS code of Sony 55 inch TV
Step 1: Area shaping: Can be applied to chapter 85: Machinery, electronic equipment and their parts
Step 2: Read the legend of that area: The legend of chapter 85.g allows determining the HS code of a 55-inch Sony TV
Step 3: Look up the code according to the identifier or the clearest specific explanation in the subgroup. The TV belongs to group 8528, so the HS code of Sony 55 inch TV will be: 85287219.
Rule 2: Unfinished products and compounds are in the same group
Rule 2a: The product is not complete
If a product is unfinished, lacking some parts but has the same features and functions as the finished product, it will be classified in the same product code as the finished product.
Example 1: A bicycle missing wheels would still be subject to the bicycle product code if the wheels were disassembled and would be reassembled later.
Thus, a product that has detachable parts and those parts can be assembled to form a complete product, the product code of the complete product will still be applied.
Example 2: Even if each part of a vehicle is removed to facilitate transportation, the vehicle's HS code is still determined.
A blank is a product that is not yet ready for use and is usually similar in appearance to the finished product. They are used solely for finishing the finished product.
Rule 2b: Mixtures, compounds of raw materials or substances
A product is classified according to this rule only if it is a mixture of raw materials and substances.
If a mixture or compound of materials or substances is in the same group, it is classified in that group.
If a mixture or compound of materials or substances is in different groups, it will be coded based on the most basic substance of the mixture.
For example: A packet of instant coffee is a mixture of substances such as coffee, sugar and milk. Therefore, to classify this mixture, we will apply the most basic substance code, coffee.
Rule 3: Goods at first glance belong to many groups
Rule 3a
Goods groups with the most detailed descriptions will be given priority over groups with general descriptions when classifying products.
Example 1: Brewing mixture includes 60% wheat (HS code 1001), 30% barley (HS code 1003), and 10% additives. This beer product will be classified with HS code 1001.
Example 2: A belt is made from leather on the top, plastic on the bottom, and has an aluminum clasp. Because leather makes belts softer and more elastic, and has a higher value than plastic, this product can be classified with HS code 4203 (leather garments and clothing accessories).
Rule 3b
In cases where it is not possible to classify mixed goods according to rule 3a, we can classify them according to raw materials or constituent parts.
For example: The set of hair care products includes: Electric curling irons, combs, hair pins. We realize that the Electric Hair Curling Clip has the most special features, so we will apply the HS code of this product to the entire product set.
Rule 3c
If Rule 3(a) or 3(b) is not applicable, Rule 3(c) shall be used to classify the goods. According to this Rule, goods will be classified in the last group in the list of groups considered for classification.
For example: Suppose we have a repair product set including Screwdriver, Pliers and Wrench.
After looking up the customs codes (HS) for each product, we notice that Co Le's HS code is in the last order in the list of HS codes considered. Therefore, to classify the repair product set, we will apply the HS code of the Wrench product to the entire repair product set.
Rule 4: Classify according to the most similar goods
Goods that cannot be classified according to the rules set out above shall be classified in the group of goods most similar to them.
This rule requires comparing goods intended to be classified with similar goods that have already been classified to determine the most similar group of goods. Factors determining similar goods include the description, characteristics, nature and intended use of the goods. After that, the goods intended to be classified will be classified into the group most similar to the same goods to apply the appropriate HS code.
Rule 5: Containers and packaging
Rule 5a: Boxes, bags, bags and similar containers
Similar bags, bags, boxes, suitable or specially shaped to contain a specified product or set of products, can be used for a long time and accompany the product when sold, are classified along with the product inside.
For example: A bag used to carry a guitar will have the HS code applied along with the guitar.
Rule 5b: Packaging
This rule only applies to the classification of types of packaging commonly used to package and contain goods, including products imported with goods such as plastic bags, carton boxes, etc. However, the rule This does not apply to reusable metal packaging.
For example: Gas HS codes cannot be applied to steel gas containers (cans that can be reused many times) but must be classified according to separate codes.
Rule 6: Explain how to classify and compare correctly.
Classification of goods into subheadings of a group must ensure compliance with the content of each subheading, conformity with subheading notes and conformity with relevant chapter notes.
To compare a product across different groups or subgroups, make sure you are comparing at the same level.
So Van Hai has clarified what the HS code is? Rules for applying hs code and other related information. Hope the article is useful for your work and study.
