Understanding Codes For International Trade
Many trade compliance departments are faced with the decision to assign both a Schedule B Number and a Harmonized Tariff Schedule (HTS) code to their products, or just to assign the HTS code only.
The Harmonized System of classification is a six-digit standard for classifying globally traded products. The first six digits are standard worldwide, with the remaining 2-4 digits varying from country to country. HTS codes are used by customs authorities around the world to identify duty and tax rates on specific types of goods with these numbers being assigned based on various criteria.
Why These Shipping Documents Matter To Your Business
Since many companies are importing and exporting today, they need to know what classification to assign to specific items to ensure they remain in compliance with international trade regulations.
As commodity classification continues to become more complex, international corporations must fulfill the requirements for both import and export clearances within the classification system.
What’s The Difference Between HTS Codes & Schedule B?
Many shippers can become confused about what information they need to provide to ensure they are compliant with international trade regulations. While both Schedule B codes and HTS codes are used in shipping, each one is used in different circumstances and for different purposes by the U.S. government. These differences are important to remember to ensure your company remains compliant in all aspects of your international trade operations.
U.S. Customs requires a U.S. HTS code to be assigned to each product on the import entry paperwork. Meanwhile, the Census Bureau allows the Schedule B or HTS code to be used on the export declarations.
Should Your Company Use HTS Codes Or Schedule B Codes?
Like everything else with trade regulations, there are some exceptions to using the HTS code on export declarations. In most cases, the reason is due to HTS codes used for duty reduction which are located in Chapters 98 and 99 of the U.S. HTS (e.g. U.S. Goods Returned, U.S. Armed Forces goods, etc.).
Others are more of a surprise. (For example, frozen chicken legs, fruits, and vegetables.) HTS Codes that cannot be used for export declarations are identified in the U.S. Customs regulations under the “Notice to Exporters” section of the U.S. HTS.
If your commodity’s HTS code can be used for exports, then why not use the HTS code? It can be a time-consuming task to assign an additional code to each product, especially since HTS and Schedule B are not always the same number.
Customs and Census use the numbers to track the imports and exports of certain goods to and from the U.S. While they may care about cherry tomatoes shipped to the U.S. from Chile during a certain time of year to protect U.S. Farmers, they only track that tomatoes (all varieties) sent from the U.S. under one code.
Furthermore, any updates to the regulations will require the company to update their databases with the changed numbers. It’s obviously easier to update one code versus two.
What Should Your Company Pay Attention To?
So, you may be asking: What should I do? It’s important to consider your company’s line of business. A defense contractor manufacturing products in the U.S. may only use the 98 chapter to return goods for repair, and they may be required to assign a Schedule B for exports.
The bottom line is that each company needs to look at their products, customers, operations, and business plan to see what works best for the company.
Export Solutions’ trade compliance training services can help you with this evaluation and the correct assignment of codes. Schedule a free consultation today, and let us work with you to create the best approach.
Tom Reynolds is the Vice President of Operations for Export Solutions, a consultancy firm which specializes in helping companies with import/export compliance.