Update: US Customs and Border Protection (CBP) has delayed kicking off the US HTS code updates and revisions for 2022 until January 27, 2022 to give importers more time to prepare for the changes.
And that’s for good reason. When you’re tasked with classifying your goods from a list of over 21,000 items, it makes sense that many importers may find this system confusing.
But the good news is - the Harmonized Tariff Schedule (HTS) doesn't have to be nearly as complex as it sounds. The concept of HTS codes itself is relatively simple to explain. And there are a few quick tips that you can use to help determine how to apply HTS codes to your US import business.
1. What an HTS code is and what they are used for
2. The difference between HTS codes and HS codes
3. Why it’s important to select the correct HTS code for your items
4. How to determine your HTS codes
5. Changes coming to the HTS code system in 2022
So just what are HTS codes, anyway? To put it simply, an HTS code is a number given to a specific imported item that helps identify and classify it. HTS codes also are used by governments to determine the amount of duty or taxes that must be paid to bring that item into the country. HTS stands for “Harmonized Tariff Schedule”, which is the list of all code classifications for traded goods.
Are HTS codes international or unique to the United States?
While the term “HTS” itself can be used to refer to tariff schedules in a variety of countries, the United States HTS code (abbreviated HTSUS) is the set of codes unique to the US. We will be using the HTSUS code list as the basis for our examples in this article.
A classification system
By identifying imports with standardized codes, governments (in the US, specifically the US International Trade Commission (ITC)) can make sure that the correct amount of duty is paid on those items and that there is relative fairness in trade across the board – product codes and duty amounts remain the same, regardless of the company or entity importing the items.
Classifying imports using the HTS does more than determine duty, though. HTSUS codes are also used to track products coming into the country to help keep illegal or dangerous items from crossing US borders. For example, if an import alert is issued on raw 33-count cold-water shrimp that may be contaminated with salmonella, CBP agents can use their HTS classification – 0306.16.0006 – to track down the items that may be affected and detain them for further examination to make sure they’re safe.
You may be thinking, so that’s an HTS code – but then what is an HS code? You can think of HTS codes as localized versions of HS codes. “HS” stands for “Harmonized System”, and refers to the single, universal and global classification system for most traded goods and products.
What is an HS code?
HS codes are used in most shipping processes internationally. They are six digits long and consist of a chapter and heading.
How is an HTS code different from an HS code?
HTS codes, on the other hand, are ten digits, and are made up of a chapter, heading, and up to three subheadings. The first six numbers are the item’s HS code, but the additional numbers are unique to the country of import and serve to further divide and classify the goods.
Take a look at the graphic below, using footballs as our example, for a visual breakdown of the elements that make up an item’s HS and HTSUS codes.
Chapters are the first classification layer in the HS code and HTS code systems. There are currently 99 chapters in the international HS code list, grouped into 29 general sections like “Section 20: Miscellaneous Manufactured Articles”, where you will find Chapter 95 for “toys, games, and sports equipment”. An item’s classification chapter is indicated in the first two digits of its HS/HTS code.
Chapters are further divided into headings, which help narrow down the items in the category. For example, “toys, games, and sports equipment” can be subdivided into “Articles and equipment for general physical exercise.”
3) HTS Code/Subheading
You can see that row three, where you find the six-digit “subheading” for classifying footballs, is the item’s global HS code. These six numbers can be pretty much universally used around the globe on a higher level to classify footballs almost anywhere you ship them.
4) First US Subheading: Rate Line
Moving further down, the eight-digit subheading, sometimes called a “rate line”, is unique to the US and helps CBP determine the duty you will pay on the items.
5) Second US Subheading: Statistical Suffix/Category
The final ten-digit “statistical suffix” or “category” is a more detailed description of the item and is used for trade data collection.
In this example, the eight- and ten-digit codes are what make this a US HTS code – these additional numbers on the code are only valid in the US. Other countries may use the same first six digits (9506.62) to classify footballs, but if those countries have their own tariff code systems, any additional numbers may be different from those we see in the US HTS code.
Remember: HTS codes determine the duty you pay
Using our example of footballs and the current list of US HTS Codes, there would be a big difference between reporting your pallet of footballs as 9506.62.40 (Inflatable balls – footballs and soccer balls), which can be imported duty free, and reporting it as 9506.62.80 (Inflatable balls – other), for which you would pay a 4.8% import tax.
Other countries won’t recognize HTSUS codes
In addition, you have to be careful not to use US-only HTS codes for items you are shipping to other countries. Other countries have their own variations of HTS codes, and though they may look similar to US HTS codes, they will be different, and the number used to describe an import in the US may mean something very different in another country. For example, if you tried to ship a pallet of footballs to China, and reported them as 9506.62.4040, your shipment would be rejected because in China, the code to classify footballs is 9506.62.1000.
It’s the importer’s duty (pun intended)
The US Customs Modernization Act states that an importer is responsible for filing customs entries with accurate values and estimated duties, and it is therefore technically illegal to misclassify your goods. If you are found to be doing so you may face serious fines and penalties as a result.
So that covers HTS and HS codes. But then what about those “Schedule B” codes?
Simply put, while HTS codes are used to classify imports, Schedule B codes are used to classify exports.
Schedule B and HTS codes: What’s the difference?
Schedule B codes are ten-digit numbers used by the US Census Bureau (rather than the ITC) to monitor US exports. An item’s Schedule B is similar to its HTS code, where the first six digits are identical to the international HS code. However, its last four digits may be different. The code lists are not identical, and HTS codes tend to be more detailed, so the HTS code list is a bit lengthier than the list of Schedule B codes.
Are Schedule B codes and HTS codes interchangeable?
Schedule B codes are used by exporters in their paperwork and on forms. You can sometimes use HTS codes when exporting (rather than classifying items twice – once for HTS and once for Schedule B), but Schedule B codes cannot be used in place of HTS codes for items imported into the US. For more details about the differences between HTS codes and Schedule B codes, as well as explanations of when it may be appropriate to use one or the other, visit the US Census Bureau’s Foreign Trade site.
HTS codes narrow descriptions of goods and items down to a very nuclear level. That is generally the point of using them. But that same quality that makes the HTS code greatly efficient at helping CBP classify imports can also make it very difficult and confusing for shippers to categorize their items.
Here are a few tips to get you on the right track:
1) Know your product. To even begin to assign HS or HTS codes to a shipment, you have to know everything about it. And we mean everything – what it’s made of, how big it is, what it does and doesn’t do, and any other specifications unique to it.
2) Start at the top and work your way down. The classification system can seem less daunting if you think of it in segments. So start with determining the right chapter for your goods – this is usually the easiest part. Then move down the list section by section.
3) Read the notes. Once you determine which chapter your goods will most likely be assigned to, it’s important to read the notes at the beginning that provide specific guidance on line items within the section.
4) Use Ctrl + F. Thanks to the US International Trade Commission, the entire HTS Code list is available (and searchable) online here. You can use the website’s search function to dynamically sort through the codes, or if you can identify what chapter your goods belong in, you will be able to download a complete PDF version of that section. Once you’ve done that, you can easily use the keyboard shortcut “Ctrl + F” to generate a search bar, and just type in a word or words that would help narrow down the search. For example, using Ctrl + F in Chapter 95 (Toys, Games and Sports Equipment) to search for “football” quickly brings us to Heading/subheading 9506.62.40 (“Footballs and soccer balls”).
5) Compare and contrast. Even if you think you have found the correct heading, it’s a good idea to read through all related headings in a chapter to make sure there isn’t one that better fits your product. The same applies to subheadings – compare all that are there and select the one most relevant to your items.
6) Know your GRIs. There are six GRIs, or General Rules of Interpretation, that exist to provide guidance on classifying your goods. These rules cover some “basics”, like that classifications apply to items whether they are finished or unfinished, that cases shaped to fit specific items like musical instruments should be classified with the items they are meant to store, and that items should be classified into the category “to which they are most akin”, or similar.1
7) Ask an expert. You can consult with the US Commercial Service, which is a part of the US Department of Commerce’s International Trade Administration (ITA) for help classifying your items. In addition, if you outsource your shipping to a knowledgeable freight forwarder, that company will likely have access to customs and brokerage experts who can help you with the policies and procedures associated with that process.
8) When all else fails, request a ruling. If you are still stumped, you can submit a request to CBP to have them consider your items and issue a Ruling Letter telling you how your goods should be classified. Make note, however, that once you receive an official ruling from CBP, you must classify your items in the manner/classification they have selected. You can learn more about requesting a CBP ruling here.
On January 1, 2022, new changes to the World Customs Organization’s Harmonized System will take effect, adding over 70 headings and subheadings, including new classifications for items like smart phones and 3D printers.2 These changes will of course inevitably trickle down to the US HTS, which will welcome over 1,500 codes to its list.3
The HS code system is reviewed at least every five years, and the World Customs Organization explained that upcoming changes were made to address new technology and world factors, including provisions for new health and safety equipment, drones, and more. It’s important to review the changes before the deadline to make sure that your goods are still being properly classified.
Thomson Reuters put together a nice summary of the changes coming to the HS next year, which you can view here. And to see how the codes have changed and determine whether a new code is needed to classify your products, check out the World Customs Organization’s 2017-2022 Correlation Tables.