Customs Tariff Number (HS code): complete information for E-commerce

If you have an e-commerce business and are entering or planning to enter international markets, you will inevitably encounter the customs clearance process for your shipments. This process involves completing customs declarations and invoices. These documents must include a unique identifier for the goods being moved through customs, known as the HS Code.

In this article, we will thoroughly explain what the Harmonized System (HS) Code is, how it affects your e-commerce business, and how customs clearance of shipments depends on its correct application.

Customs Tariff Number: what is it?

So, what is a customs tariff number (HS Code)? This is a numerical code (Harmonized System code – HS), which is part of an international system for standardizing the names and characteristics of goods. It is necessary for customs authorities in different countries to understand what commercial goods are being declared in a shipment. The list of HS codes is created and maintained by the World Customs Organization, which updates them every five years.

The goods coding system for customs clearance allows countries from all continents to uniformly classify export-import operations. Depending on the destination country and which party is handling the «customs clearance» (exporter, importer, or both), the customs tariff numbers may have different names. These can be referred to as a tariff number, product code, or abbreviated as HTS, HC, or B.

For example, if your company’s electronic order (product) is exported from Germany outside the EU to Bolivia, you as the exporter select the appropriate tariff number for your product from the HS code classification, include it in the accompanying documents and invoices, and both customs authorities in Germany and Bolivia immediately understand what is being cleared and what duties are to be applied.

In the world of export-import operations, it is crucial to correctly determine the HS code for a product. This information not only helps identify the nature of the cargo being cleared, but is also essential for taxation and delivery control mechanisms.

Customs tariff number, commodity code and HS Code: difference

Is there a difference between the terms «Customs Tariff Number», «HS Code», and «Product Code»? In practice, these terms are synonymous and have identical meanings. When dealing with customs clearance, you may encounter various terms describing the same operation – assigning a unique identifier number to a product for customs clearance.

However, there are certain legal differences between these terms. The HS Code is an international system for classifying goods. The Customs Tariff Number is a more detailed national code used for calculating customs duties and includes the HS Code. The Product Code is a general term and can refer to different coding systems depending on the context.

E-commerce companies should know that several other terms can be used interchangeably with the Customs Tariff Number:

• Customs number.
• KN code.
• Inch code number.
• Goods tariff number.
• Common Customs Tariff (TARIC) code.
• Product number.

EAN Code vs. HS Code

Quite often, newcomers in the export-import field ask whether EAN and HS codes are the same. Let's look at the differences between these two product identifiers.

The EAN Code (European Article Number) is used for identifying products in retail. It is a 13-digit code (sometimes 8, 14, or 18 digits) that allows for tracking goods, managing inventory, and automating sales. The EAN Code is a barcode read by scanners in stores, warehouses, etc., and is part of the global GS1 system.

The HS Code is used for classifying goods in international trade. It is a 6-digit code (which can be extended by national systems) that determines customs duties and taxes and helps in collecting trade statistics. The HS Code is part of an international agreement regulated by the World Customs Organization and is mandatory for importing and exporting goods.

Thus, the EAN Code and HS Code serve different purposes and are used in different areas of trade and logistics.

Customs Tariff Number: who defines them?

Customs regulations are overseen by the World Customs Organization (WCO). The WCO developed the «Harmonized System (HS) Code Agreement», which was adopted in 1983 and implemented in 1988. This agreement replaced all previous international agreements on cross-border goods supply. The goal of the agreement is to standardize international customs procedures and simplify the movement of goods across borders.

Currently, the agreement has been signed by 157 parties (156 countries and the European Union), covering most countries worldwide, including all major international markets. The agreement defines customs tariff numbers that cover the vast majority of goods produced globally. The WCO controls the agreement and updates the customs tariff number system every five years, adding new items and sub-items for new types of products in the market.

The WCO also publishes guidelines for interpreting customs tariff numbers. This helps e-commerce companies find the correct codes for their products. Customs authorities use these guidelines to verify the proper use of tariff numbers. E-commerce companies involved in international trade should review coding information in advance and apply the correct product codes for exported goods. This ensures that the shipment will be quickly processed by customs officials and subject to the appropriate taxation.

Structure of Customs Tariff Number

In practice, assigning customs tariff numbers to goods follows a clear algorithm. It is based on a 6-digit code from the Harmonized System (HS), which remains the same for any country that is a signatory to the HS Agreement. The subsequent digits are regional identifiers, reflecting the country or customs union (e.g., the EU), the characteristics of the goods, and national requirements for them (tax rates, bans, or restrictions on movement through the customs area, etc.).

Customs tariff numbers can consist of varying numbers of digits. In the EU, depending on the application, customs tariff numbers have the following characteristics:

• For import operations in the EU, an 11-digit HS code is used.
• For export operations from the EU, an 8-digit product code is used.
• For recording international trade statistics (Intrastat), an 8-digit customs tariff number is also used.

If your e-commerce company finds it difficult to determine the exact HS code, it is advisable to request an official expert assessment for a specific product from the customs authorities of your country. You can also obtain information on customs duties in case of uncertainty with a specific group or individual product.

The EU Commission’s EVZTA database for binding classification can be helpful. You can check the information published by the customs authorities. This database helps you find goods that are identical to those exported or imported by your e-commerce company.

The structure of the 6-digit HS code includes:

• Chapter number – the first two digits.
• Heading number – the third and fourth digits.
• Subheading numbers – the fifth and sixth digits.
• The subsequent digits in the product code describe the goods according to national customs rules.

Section number

The Harmonized System (HS) includes 21 sections of product groups. Each section contains chapters, headings, and subheadings. To determine the HS code, you first need to select the appropriate section and then proceed with your search within it.

Chapter number

The first two digits of the HS tariff code represent a specific category of goods within the chosen section. These categories are called «chapters». When classifying products, your e-commerce company needs to choose from 99 different chapters that belong to the 21 sections of the HS.

Position number

Within the selected chapter, you need to identify the next two digits that describe the «position» under which the product falls. A chapter can contain anywhere from a few dozen to nearly two hundred positions. Overall, the Harmonized System includes 1,244 positions.

Subheading numbers

The last two digits provide a detailed description of the product. They correspond to the subheading that the product belongs to and accurately describe its characteristics. The Harmonized System includes 5,224 subheadings. These last two digits will precisely describe your product for customs purposes.

Additional numbers

For a more detailed description of the product in export-import operations, two or more additional digits are added. These additional product identifiers may be required by the customs legislation of both the exporting and importing countries. These numbers can affect the import status, tax status, or be used for analyzing international trade statistical data. In the EU commodity codes, two more digits are added – the Common Customs Tariff (TARIC), and one digit is a code that reflects the electronic customs tariff.

Example of assigning an HS Code for a specific product exported from the EU

Let's consider an example of selecting a customs tariff number for a specific product exported from the EU.

Product: Chocolate (contains cocoa, not in blocks or slabs, net weight of each piece not more than 2 kg).

1. Determining the section.

Chocolate falls under food products, so it will be in section IV «Prepared foodstuffs; beverages, spirits, and vinegar; tobacco and manufactured tobacco substitutes».

2. Determining the chapter.

Food products, including chocolate, are found in chapter 18 «Cocoa and cocoa preparations».

3. Determining the heading.

For chocolate that contains cocoa, the appropriate heading is 1806 «Chocolate and other food preparations containing cocoa».

4. Determining the subheading.

In this case, we need a subheading that corresponds to chocolate, not in blocks or slabs, with a net weight of each piece not more than 2 kg. The appropriate subheading is 1806 90 «Other, containing cocoa».

5. Adding additional digits.

For imports to countries outside the EU, additional digits may be required for a more detailed description of the product. However, for our example, we will consider the code without additional national codes.

Thus, the customs tariff number for chocolate containing cocoa, not in blocks or slabs, with a net weight of each piece not more than 2 kg, will be:

1806 90 19 00

Description of the HS code:

• 18: Section IV «Prepared foodstuffs; beverages, spirits, and vinegar; tobacco and manufactured tobacco substitutes».
• 06: Chapter 18 «Cocoa and cocoa preparations».
• 90: Heading «Other food preparations containing cocoa».
• 19 00: Subheading for specific types of chocolate.

Application

The exporter (an EU-based company that manufactures or sells chocolate) selects the appropriate customs tariff number for their product, which is 1806 90 19 00. Customs authorities in the EU and the importing country use this code to identify the product. The exporter includes this code in all accompanying documents, such as invoices, customs declarations, packing lists and shipping manifests. Based on this code, customs authorities in both countries determine the applicable customs duties and taxes.

Legal and financial aspects of the correct use of Customs Tariff numbers

Legal Aspect

In export-import operations, the customs clearance procedure, including the correct assignment of the commodity code, is the responsibility of the importer. The importer is also responsible for paying customs duties and taxes.

However, in the e-commerce sector, the legislative norms differ, and the responsibility for assigning the correct customs tariff number falls on the exporter. This is due to the fact that the importer is usually an individual purchasing goods for personal use. Most ordinary buyers are often unaware of how to apply the customs tariff number and generally do not deal with customs. Therefore, it is logical for legislation to place the responsibility for preparing customs documentation, paying duties, taxes, and other fees on exporters. In the case of e-commerce businesses, this responsibility is assigned to the companies operating online stores or marketplaces where the transaction takes place.

In such cases, the responsibility for correctly using the HS code (and additional coding systems) is fully on the seller. Incorrect classification of the HS code can lead to legal consequences, such as fines, seizure of goods by customs authorities, or import denial.

To avoid such issues, it is essential to provide accurate customs information. In case of any disputes or uncertainties, it is advisable to seek professional consultation from state customs authorities or experienced customs brokers.

Financial Aspect

As an online seller, you understand the importance of correct pricing. Customs clearance often creates financial problems for international shipments, so it's important to calculate the cost of customs duties on e-commerce goods accurately. Customers should not have to pay any additional fees or taxes for the goods unless it is specified in the delivery agreement. In general, additional costs are perceived extremely negatively by end consumers. This can lead to the rejection of the goods upon receipt and damage the seller's reputation.

You need to accurately determine the customs tariff number of the goods, carefully calculate customs payments, and only then issue invoices to your customers. It should be borne in mind that during the customs clearance process, additional issues may arise related to the storage of goods in a customs warehouse beyond the norms established by customs legislation. This will also affect the final cost of the goods. To avoid such delays and costs, you should carefully prepare a package of customs documents with the correct HS code.

Thus, correct application of customs tariff numbers allows you to:

• Accurately calculate additional costs for customs clearance.
• Provide customers with the correct final price for goods.
• Avoid unnecessary fees and taxes, and potentially receive tax and customs exemptions.
• Protect yourself from the risk of fines and penalties.

How to find and use a Customs Tariff Number

To find the customs tariff number, the internet can be consulted. By using customs tariff number search tools, e-businesses can quickly find the correct classification for their products.

However, the best option is the official website of the World Customs Organization, which presents the latest version of the HS nomenclature with all the changes for the current year. Here, you will find all the up-to-date information on product codes and descriptions. Additionally, the official portal of this regulatory body provides supplementary information, explanations, and the latest updates. This will help you stay informed and avoid mistakes when selecting customs tariff numbers, especially if you have an e-commerce project with a wide product range.

A customs tariff number should be included in the company’s customs documentation package. It is noted on commercial invoices, customs declarations, and other documents. To expedite the customs clearance process, it is recommended to place the packing list with the list of HS codes on the goods in a visible spot on the packaging or container. Customs officials will use the product code to quickly calculate the amount of customs duties and fees, and if applicable, apply any customs or tax discounts.

Customs Tariff Number: problems and solution

Accuracy in determining tariffs for goods is crucial for customs clearance. The list of customs tariff numbers may seem confusing at first glance. However, over time, your e-commerce business will easily manage to determine HS codes not only for the existing product range but also for new product categories.

If your e-commerce company specializes in a specific group of goods, you will likely use only a few customs numbers from the Harmonized System. However, always pay attention to the correctness of the codes, even if it is not always easy.

The Harmonized System includes over 5,000 subheadings with subtle differences between customs numbers. Pay close attention to the subheading description and choose the code that most accurately describes your product.

Regularly check the list and relevance of customs numbers. Different product ingredients or packaging may change your product’s subheading. Make sure you are using the latest customs tariff code list, as it is updated annually. Below are the most recent changes to the nomenclature of goods, which came into force on January 1, 2024.

Using the wrong customs number can lead to fines, penalties, and additional costs for customers, harming your relationships with them and reducing competitiveness. To avoid this, always verify the correctness of customs numbers and seek assistance from customs authorities in case of doubts.

Customs Tariff Number: changes for 2024

Selecting correct customs tariff numbers is an ongoing task. The Combined Nomenclature (CN) is updated annually, while changes to the Harmonized System (HS) occur every five years. At the end of each calendar year, the EU regulatory authorities and statistical agencies provide information on changes to customs tariff numbers and statistical data for the upcoming year.

For 2024, several important changes have been made to the Combined Nomenclature. Implementing Regulation (EU) 2023/2364, published by the European Commission on October 31, 2023, introduced modifications to the Combined Nomenclature, specifically affecting the 7th and 8th digits within the EU. Updated product numbers must be submitted by companies involved in export or internal operations within the community starting January 1, 2024. The changes affect sections 8, 20, 39, 50, 56, 70, 90, and 94. Detailed information about the changes can be found in the Implementing Regulation.

The Federal Statistical Office DESTATIS has also introduced its changes for 2024. It has updated the list of goods for collecting external trade statistics. The changes are uniquely marked. For instance, HS codes with revised text are marked with the letter «T», new numbers with the letter «N», reused with modified content with the letter «W», and deleted with the letter «X».

Some HS codes may not be clearly defined. Therefore, a customs tariff number changed in 2023 may correspond to several numbers in 2024.

Changes in the 8-digit codes for quick comparison are available in the tables.

Remember: only current customs tariff numbers are valid. Therefore, it is essential to verify and update them in your databases and customs document templates. This process is automated depending on your software and data transfer services. However, you can make manual updates using the revised list of goods.

Conclusion

Customs tariff numbers are essential elements in international trade, including for e-commerce companies. Their correct application ensures swift and accurate customs clearance, precise calculation of duties and taxes, and helps avoid legal issues and financial risks.

For successful entry into foreign markets, it is crucial to thoroughly study and utilize the Harmonized System (HS) nomenclature, adhere to the recommendations of the World Customs Organization, and consult professionals for complex cases. This approach will contribute to effective management of export-import operations and a positive perception of your business by clients.

FAQ

When do I need a Customs Tariff Number?

You need a Customs Tariff Number when exporting or importing goods to classify them and determine the applicable duties and taxes. This number is also required for completing customs declarations, commercial invoices, packing lists, and bills of lading to comply with customs regulations.

Which country's Customs Tariff Number should be used?

In international trade, it is standard practice to use the Customs Tariff Number of the destination country where the goods are being exported.

What happens if the Customs Tariff Number is incorrect?

If the Customs Tariff Number is incorrect, it can lead to delays in customs clearance, as authorities may require additional information or clarification. Incorrect tariff numbers may also result in improper calculation of duties and taxes, which could lead to overpayment or underpayment. Persistent errors can result in fines and penalties, and might even cause legal and compliance issues, including the seizure of goods. Accuracy in Customs Tariff Numbers is essential to avoid these potential problems and ensure smooth international delivery.

Is the HS code a Customs Tariff Number?

Yes, the HS code is a type of Customs Tariff Number. The HS code, or Harmonized System code, is an internationally standardized system of names and numbers used to classify traded products. It is used by customs authorities worldwide to determine tariffs, taxes, and regulations applicable to imports and exports. The HS code forms part of the Customs Tariff Number, which can include additional digits for more specific classification within a particular country's tariff system.