A harmonized system tariff is a tariff that is categorized by the Harmonized System, also known as the Harmonized Commodity Description and Coding Systems. The Harmonized system (HS) is utilized in around 200 countries in their harmonized tariff schedules and has categories for more than 5,000 commodities. The HS is upheld and revised by the World’s Customs Organization in Belgium.
Each time a good or other commodity crosses an international border, HS works by classifying it. Every good or commodity that is classified is assigned a unique 6-digit classification number. The number each commodity is assigned is based on its utility or substance. The leading four digits are known as the ‘heading’, while the subsequent 2 numbers are called the ‘subheading’. For example, all things related to toy dolls are given the heading 9502, so a part or accessory for a doll is assigned the number 9502.91.
This system was set up in part so that all of the countries participating in HS have the ability to share a unified system of naming for global trade. All of these countries do not have the ability to alter the first six digits, although they may attach anywhere between two and four more digits. Some countries do this for research objectives or to use in their own tariff rate system.
The HS has been in operation since the 1970s, when worldwide communications and global trade started to increase almost exponentially. With this sharp rise in the volume of international transactions, there was need for a common and uniform type of classification. Every five years, the HS gets updated with additions, alterations and deletions. There was an update in 2012, so the next scheduled update is in 2017.
For more on the HS or for help with international trade, please contact us.