Across the world, millions of products are exported every day from one port to the other across a range of categories like leather
, jewellery, spices
and more. With so many exporters involved in the trade, a coding system was introduced to ensure smooth import-export between countries. Irrespective of the origin or destination country and the product being sold, the code helps standardize and identify products in an easy manner. This is the Harmonized Commodity Description and Coding System or commonly called the HS Code.
Developed and managed by the World Customs Organization (WCO), HS code is known as HSN code (Harmonized System of Nomenclature) in India. HSN coding is currently used under Excise, Customs, and state Value Added Tax (VAT) laws. Comprising more than 5,000 commodity groups, the internationally recognized nomenclature identifies each product with a unique 6-digit code, defined by laws, to regulate uniformity across the world. The system is used by more than 200 countries to decide the customs tariffs and create trade statistics. More than 98% of the trading merchandise is classified under the Harmonized System1.
The HS code interprets product information and allows both exporter and importer to avoid any interruption during goods exchange. It also helps in categorizing goods to collect proper internal as well as external taxes at the customs clearance.
Not applying an HS code or assigning an improper HS code to your products might affect calculating standard duty rates and fines for not following trade norms. The absence of an HS code might also lead to inability to identify the shipment correctly.
According to WCO, the length of an HS code should be six digits. However, additional digits can be added as per further classification codes of a particular country. For instance, USA uses 10-digit HS code, where the first six digits are given by the WCO and additional numbers are allotted by the US customs authority, called Harmonised Tariff Schedule (HTS) numbers2.
In India, an 8-digit HSN code is used, in which the first six digits are given by WCO and two other digits are additional. The HSN codes are further classified into 21 sections, 99 chapters and each chapter defines a specific product category – heading, subheading and tariff item3.
So, in the 8-digit ITC (HS) code, the first two digits indicate the chapter, the next two represent the heading, the next two represent subheadings and the last two are the tariff item numbers.
Let’s consider this example (only for reference):
The HSN code is 090111112.
09- Tea, Coffee and spices ()
0901- Tea, green tea or blue tea
090111- Green Tea that is not caffeinated
09011112- Green Tea that is not caffeinated grade B
So, 090111 is an international part of the HS code and “12” is added in India. This 8-digit code is known as ITC (HS) code/Indian Trade Classification/ Indian Tariff Code. These ITC (HS) codes are developed and maintained by the Directorate General Of Foreign Trade in India.
How to find the right HS code for your product?
You can easily find the ITC (HS) code for your product, so you can export easily.
a) Open the DGFT website
b) Search the list provided by the Ministry of Commerce
c) Once the latest list opens, search for the relevant chapter
d) Check for correct heading, subheading and tariff item
e) Get the right HS code for your product.