Trade knowledge / Getting Friendly with the Harmonized Code Number
Date: 2017-12-02
Getting Friendly with the Harmonized Code Number
The Harmonized Code number is your friend. There’s a different one assigned to different products. If you’re shipping the product to a buyer in another country, you need to know what the number is.
What is it? Simply stated, it’s a number that’s recognized by Customs officials in every country in the world. The first six digits are the same everywhere. The last four are specific to the country of origin, and provide additional information. The number helps countries and international agencies keep track of the volume of trade in goods between countries.
More importantly for the importing country, the number tells Customs officials what import duty to charge on the item. The amount of duties charged vary according to the product. Even though the percentage of duties varies within a small range, the amount can be significant, especially with large volumes,
Also, for security purposes, if the item is restricted by the exporting or importing country, the number alerts Customs officials to make sure the proper licenses have been granted by government authorities. If they haven’t, or there is something suspicious about the shipment, the items will be held for further investigation.
The Harmonized Code number is entered on the shipping documents, especially the commercial invoice, but also the bill of lading, certificate of origin, way bill or air bill export license and letter of credit, depending on which documents are needed. For most B2C ecommerce transactions, the commercial invoice and way bill or air bill are the only documents involved, which must carry the Harmonized Code number.
Pick a number
One thing to be mindful of is that more than one Harmonized Code number can fit the same product. This is not deliberate, but an understandable result of having 18,000 so called tariff lines, or different kinds of products. The interesting thing is that similar products with different Harmonized Code numbers may have different tariff rates, depending on the country that set the rates.
Sometimes, the buyer in a specific country will suggest to you a number to use. That buyer knows that one number has a lower tariff and that he can save money by having the product sent under the lower number. Before agreeing, you should check his number to make sure the description is generally the same as the one you are accustomed to using. If it’s significantly different, refuse to use it, even if it costs you the sale. He is trying to rip off the system, and it’s likely the goods will be confiscated, which will be a loss to you.
A variation on this is when the importing Customs officials insist that an alternative Harmonized Code number be used. This happens when two numbers refer to similar descriptions, but one has a higher tariff rate. The officials want to maximize the collection of duties and will thus insist on the Harmonized Code number with the maximum yield. The difference may only be a percent or two—and the importer pay it, not you.
If you don’t want to worry about any of this, your freight forwarded can do it for you. They know the lingo, the (legal) tricks of the trade, how to complete the required documents and much more. We at Webport Global strongly recommend using them, especially for larger shipments.
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