HS Code vs Tariff Code: Key Differences Explained

When shipping goods internationally, you need to classify products correctly to avoid delays, fines, or legal issues. Two key systems are used: HS Codes and Tariff Codes.

• HS Codes: A 6-digit global standard managed by the World Customs Organization. Used by over 200 countries, they categorize goods and streamline international trade.
• Tariff Codes: Country-specific extensions of HS Codes (up to 8–12 digits). In the U.S., these are called HTS Codes and determine duties, taxes, and regulations for imports.

Quick Overview:

• HS Codes: Global, 6 digits, universal classification.
• Tariff Codes (e.g., HTS in the U.S.): Country-specific, 8–12 digits, affects duties and regulations.

Using the correct code ensures compliance, avoids penalties, and keeps shipments moving smoothly. Misclassification can lead to fines up to 800% of the duty loss, delays, or even seizure of goods. Tools like GetTariffs can help businesses classify products accurately and estimate costs.

HS Codes, HTS Codes and Schedule B Codes: What's the Difference?

HS Code: Global Product Classification System

HS Codes serve as a universal system for categorizing products, used by over 200 countries and economies. This standardized approach eliminates the confusion that would arise if each country had its own classification system, streamlining global trade.

What is an HS Code?

An HS Code is a six-digit numerical identifier established by the World Customs Organization (WCO) to classify goods in international trade. These codes provide a universal framework that customs authorities, businesses, and trade officials rely on to identify products consistently.

Over 98% of goods traded globally are classified using the HS system, making it a cornerstone of international commerce.

These codes are critical for determining customs duties and taxes, smoothing the customs clearance process, enforcing trade regulations, and compiling trade statistics that shed light on global trade trends and emerging markets.

How HS Codes are Structured

HS Codes are organized in a logical hierarchy, moving from broad categories to more specific classifications. Each six-digit code is divided into three parts, with each pair of digits serving a distinct purpose.

• The first two digits represent the chapter, which covers a broad product category.
• The next two digits define the heading, narrowing the product type within that chapter.
• The final two digits specify the subheading, offering the most detailed product description.

For instance, HS Code 1006.30 can be broken down as follows: Chapter 10 (Cereals), heading 10.06 (Rice), and subheading 1006.30 (Semi-milled or wholly milled rice, whether or not polished or glazed). The 2022 edition of the Harmonized System includes 1,228 headings and 5,612 subheadings, ensuring comprehensive coverage of the vast array of goods traded internationally.

Worldwide Use of HS Codes

The global adoption of HS Codes has revolutionized international trade by creating a shared language for product classification. This consistency minimizes communication errors between customs authorities and reduces inefficiencies in cross-border trade.

The Harmonized System, implemented on January 1, 1988, organizes over 5,000 groups of goods into 97 chapters and 21 sections. It’s worth noting that HS Codes apply exclusively to goods, not services.

For businesses involved in international trade, understanding HS Codes is essential. These codes help calculate accurate landed costs, which directly influence pricing and sales strategies. They also ensure compliance with trade regulations and allow companies to take advantage of preferential trade agreements and reduced duties.

Since the system is updated periodically, staying informed about changes to HS Codes is crucial. Businesses are encouraged to familiarize themselves with the HS nomenclature and consult local customs experts to ensure they are using the correct codes.

Mastering this universal system is a key first step before tackling the more specific tariff codes used by individual countries, which detail duties and regulations further.

Tariff Code: Country-Specific Product Classification

While HS Codes serve as the universal foundation for global trade classification, tariff codes take things further by adding extra digits tailored to local duties and regulations. These extensions allow countries to apply specific duty rates and enforce regulations that go beyond the basic six-digit international system. In the United States, this system is known as the Harmonized Tariff Schedule (HTS), which we'll explore in more detail below.

What is a Tariff Code?

A tariff code builds on the six-digit HS Code by adding extra digits to account for country-specific duties and regulations. Each country customizes these codes to meet its unique trade and regulatory requirements.

"An HS Code is a standardized number associated with a given commodity that identifies that product worldwide. It is a 6-digit number universal to all countries under the International Harmonized System. An HTS code ranges from 7 to 10 digits and provides country-specific product and tariff classification." - USA Customs Clearance

The number of additional digits varies by country. Some nations use 8-digit codes, while others expand to 12 digits, depending on their administrative needs.

US Harmonized Tariff Schedule (HTS) System

In the United States, the Harmonized Tariff Schedule (HTS) assigns 10-digit codes to all imported goods. The first six digits align with the international HS Code, ensuring consistency across global trade. The remaining four digits provide details specific to the U.S., such as exact duty rates and statistical tracking requirements.

The HTS includes over 11,000 8-digit subheadings, with optional 10-digit extensions for even more precise classification. This detailed system helps customs officials determine the correct duties and taxes for each shipment, while also flagging any restrictions or regulations tied to specific products.

The additional digits in a U.S. HTS code refine product descriptions to reflect differences in material, manufacturing, or other characteristics that influence the duty rate. This level of detail ensures that products with subtle variations are classified and taxed appropriately under U.S. trade laws.

US Agencies That Manage Tariff Codes

Two key federal agencies oversee the U.S. tariff code system:

• United States International Trade Commission (USITC): The USITC maintains and updates the HTS, ensuring classifications stay up-to-date with changes in trade patterns and product developments.
• U.S. Customs and Border Protection (CBP): CBP enforces these codes at ports of entry, using them to classify imports and collect the appropriate duties.

Misclassifying products can lead to serious consequences. CBP refers suspected violations to the Department of Justice (DOJ) for investigation and enforcement. The DOJ has taken aggressive action in recent years, including high-profile cases that resulted in multi-million-dollar settlements. For instance, companies importing vitamins and plywood faced severe penalties for misclassification.

The DOJ can also pursue civil penalties under the False Claims Act for knowingly underpaying customs duties. In such cases, whistleblowers may receive a portion of recovered funds through qui tam actions. These examples highlight the importance of accurate tariff code classification to avoid costly legal and financial repercussions.

sbb-itb-148ee33

HS Code vs Tariff Code: Main Differences

Using HS Codes and Tariff Codes correctly is crucial to avoid compliance issues and shipping delays. While both codes work hand-in-hand, they serve distinct purposes: HS Codes provide a standardized global classification for products, and Tariff Codes determine country-specific duties and regulations.

Direct Comparison of HS Codes and Tariff Codes

Here’s a side-by-side breakdown of their key differences:

Feature	HS Code	US HTS Code
Length	6 digits	10 digits
Scope	Global	United States
Authority	World Customs Organization (WCO)	United States International Trade Commission (USITC)
Purpose	Global product classification	US-specific tariff rates, exemptions, and quotas
Updates	Every 5 years by WCO	Annually by USITC
Customs Duties	No direct impact on duties	Directly determines US customs duties and fees
Trade Agreements	Reference for international agreements	Dictates specific treatment under US trade agreements

The World Customs Organization (WCO) oversees the global HS system, ensuring uniformity across more than 200 participating countries. On the other hand, individual countries, such as the United States, extend these codes into their own tariff systems to address domestic regulatory needs.

These differences define their unique roles in international trade processes.

When to Use HS Codes vs Tariff Codes

The choice between HS Codes and Tariff Codes largely depends on whether you're exporting or importing goods. Since over 98% of globally traded goods are classified using HS Codes, they are indispensable for international shipments.

• Use HS Codes for exports. These six-digit codes are internationally recognized and must appear on shipping documents, commercial invoices, and export declarations. They ensure smooth processing through customs in foreign countries.
• Use HTS Codes for imports into the US. The 10-digit HTS Code is mandatory for US customs declarations. It determines duty rates, applicable taxes, and any benefits under trade agreements. Importers are responsible for accurate classification, making proper HTS Code selection critical for compliance.

Incorrect Tariff Codes can result in fines, shipment delays, or even the seizure of goods. If you're uncertain about the correct classification, you can consult the Customs Rulings Online Search System (CROSS) database or request an official ruling from U.S. Customs and Border Protection (CBP).

For products with complex specifications, the additional digits in HTS Codes are especially important. While an HS Code provides a general classification, the extra digits in the HTS Code capture finer details - such as materials or manufacturing processes - that directly influence duty rates under US trade laws.

Impact on US Import Compliance and Business Operations

Getting your product codes wrong can have serious consequences for your business. These mistakes can affect everything from your finances to your relationship with customs authorities.

Consequences of Wrong Code Classification

Misclassifying your products can lead to hefty penalties. These fines can range from 5% to 80% of your merchandise's domestic value if no duty is lost, and up to eight times the duty loss when duty is involved. Beyond monetary penalties, you could face shipment delays, rejected entries, or prolonged customs holds. In the worst cases, goods might be seized, or you could lose your import privileges altogether. Customs may also increase scrutiny on your future shipments after a misclassification audit.

It’s worth noting that you are legally responsible for the accuracy of your HTS codes - even if the mistake originated with a supplier or freight forwarder. This highlights the importance of adopting reliable classification practices.

Methods for Accurate Code Classification

To minimize risks, businesses employ several strategies for accurate product classification. Government tools like CROSS and the Census Bureau's Schedule B tool are valuable resources for identifying the correct codes. Seeking guidance from customs brokers or trade consultants can also help you navigate complex classifications and stay updated on regulations. Keeping detailed records of your classification decisions is essential, especially during audits. For intricate or assembled products, gathering thorough product details ensures the correct code is applied.

Periodic audits of your commodity codes are another critical step. These reviews can catch errors early, avoiding costly penalties. Since the Harmonized System is updated every five years, setting a regular review schedule ensures your codes stay up to date. Additionally, technology solutions like automated classification tools can simplify the process. These tools analyze product details and assign accurate codes, using the latest customs data to keep you compliant.

How GetTariffs Helps with Code Classification

GetTariffs makes code classification and cost analysis straightforward. This platform combines an AI-powered tariff calculator with user-friendly tools to help you make smarter import decisions.

The AI calculator provides instant, precise tariff calculations based on daily updates to official rates. Detailed reports break down your import costs, including basic duties and additional fees, giving you a clear picture of your total landed costs. With its product-specific tariff lookup feature, you can quickly identify the correct classification for your goods and understand the applicable duties - removing much of the guesswork.

For newcomers, GetTariffs offers 5 free calculations per day, allowing you to test classifications and estimate costs without any upfront commitment. For businesses with higher demands, premium plans offer unlimited calculations and in-depth reporting. With daily updates to tariff rates, GetTariffs ensures you’re always working with the most current information, helping you stay compliant and streamline your import processes.

Summary: HS Codes vs Tariff Codes

Grasping the difference between HS Codes and Tariff Codes is a must for anyone navigating international trade. HS Codes act as the global standard for classifying goods, using a 6-digit system created by the World Customs Organization. They’re the backbone of global commerce, relied upon by over 98% of internationally traded goods to ensure consistent classification across borders and support seamless shipping operations.

Tariff Codes take this a step further. They expand HS Codes to 8–12 digits, incorporating country-specific details that determine duty rates and import regulations. In the U.S., for example, the Harmonized Tariff Schedule (HTS) applies these extended codes to calculate duties and taxes on imported goods accurately.

"Tariff codes are a fundamental tool for the classification of goods. These codes allow standardized identification of products crossing borders, facilitating the calculation of duties, taxes and compliance with customs regulations in each country."

• Across Logistics

The stakes for getting these classifications right are high. With customs duties averaging 5.7% of an imported good’s value, misclassifying a product can lead to incorrect charges and shipment delays. According to U.S. Customs and Border Protection, errors in classification can even result in merchandise being detained or seized, and may carry civil or criminal penalties.

To avoid these pitfalls, smart businesses rely on advanced tools for classification. GetTariffs, for instance, simplifies the process with an AI-powered calculator that provides instant, accurate tariff calculations updated daily. Its product-specific lookup feature helps businesses identify the correct codes and estimate total landed costs, taking the guesswork out of import planning.

FAQs

How can businesses ensure they’re using the correct HS and Tariff Codes to avoid penalties or shipping delays?

To steer clear of penalties or unnecessary delays, businesses need to thoroughly understand their products and their unique attributes. This knowledge is key to correctly classifying items under the appropriate HS or Tariff Code.

It’s also crucial to stay informed about updates to classification rules, as these codes are revised periodically. Using trusted tools or software can make the classification process easier, but for more complex products, seeking advice from a trade compliance expert is a smart move.

Lastly, always keep a record of your classification decisions. Proper documentation not only ensures compliance but also simplifies customs declarations and makes future import or export operations much smoother.

What happens if products are assigned incorrect Tariff Codes in the U.S.?

Using the wrong Tariff Codes in the U.S. can lead to major problems for your business. You could face customs delays, hefty fines, or even have your goods seized. In some situations, legal action might follow, piling on more financial stress and harming your company’s reputation.

Getting the classification wrong doesn’t just hurt your wallet - it can throw your entire supply chain off track, drive up costs, and cause compliance headaches. Assigning the correct Tariff Codes is key to steering clear of these issues and keeping your import/export processes running smoothly.

What’s the difference between HS Codes and Tariff Codes, and how do they affect shipment costs and compliance?

HS Codes are a universal system used to classify products in international trade, ensuring a standardized way to identify goods across different countries. These codes are crucial for determining tariffs and duties on imports and exports. Tariff Codes, however, are specific to individual countries. They build upon HS Codes to define the precise duties, taxes, and regulations that apply to goods entering a particular country, such as the United States.

Getting these codes right is critical. Using the wrong code can lead to shipment delays, unexpected fees, or even penalties. Proper classification not only ensures smooth customs clearance but also keeps businesses compliant with regulations and guarantees accurate duty calculations. In short, it’s a key step in making international trade efficient and hassle-free.