HS Codes 2022: Updates, Challenges & Solutions For eCommerce Businesses
Harmonised system (HS Codes) is an essential part of well-organized, smooth, and cost-efficient international commerce. Managing more than $19 trillion of goods sold worldwide every year, this classification is a fundamental basis for every business that wants to keep their trade internationally competitive.
The latest revision of the system comes into operation on 1 January, 2022. Let’s sort out the details: what are HS codes, what is their purpose, what the new system edition brings and what it means for eCommerce.
What Is HS Code?
Harmonised System (HS) is a numerical classification system for traded goods, utilised by custom authorities worldwide for products identification, duties & taxes assessment and other international sales operations.
The HS codes, introduced by WCO (the World Customs Organization), are used globally to calculate trade tariffs and systemize international commerce statistics. Harmonised System codes help the custom authorities to recognize the goods and apply the right tariffs, to bring down shipping costs and ease the international trade movement. Nowadays, more than 98% of goods sold internationally are classified by the Harmonised System.
What Is The Structure Of A Harmonised System?
The classification network has the following structure:
- The code consists of six digits for product identification;
- Harmonised system has 5000 commodity groups with 99 chapters, each of which has 21 sections;
- All the codes are organized in a logical structure;
- There are clear-cut rules that are the base for the system;
- Different countries may adopt their own specific code breakouts (e.g. HS tariff codes in the US allocate duty rates at the 8-digit level, and utilize the 10-digit level to do statistical reports or collect trade info).
Nowadays, the HS codes of products are widespread in electronic messages like the EDIFACT. This facilitated the procedure of HS system structure turning into an international standard of describing the products across numerous eCommerce platforms.
HS Codes 2022 Edition: What’s Inside?
The Harmonised System 2022 review ensures that the classification remains up-to-date in accordance with modern technologies, new products movement and the biggest critical global issues. Here are the crucial factors driving HS code database revision:
The ever-changing world of technology alters the methods of classifying goods. The Harmonised System database for many of the newly evolved technological products is simply outdated and does not allow to categorize them properly.
For example, the subheadings of metal former machinery products or glass fibers no longer speak for technological processes in this industry. The changes will also concern electric heavy-duty vehicles, hybrid electric vehicles, and 3D printers.
Evolving Of New Trade Models & Product Streams
One of the amendments of HS 2022 edition is about recognizing the recently developed sales models. It is going to relate to high-profile products and make the stream of these goods more visible (e.g. smartphones, drones, flat panel displays, nicotine products, novel tobacco, etc).
The newly introduced edition brings specific terms for categorization of electronic and electrical waste of goods (lighting products, consumer electronics, etc). The amendments are made to support the sustainability of trade and endorse the manufacturers from countries who are Basel Convention participants.
Health & Safety Issues
The attention to health has increased, primarily because of Covid-19 pandemics, which showed such problems as very expensive deployment of instruments for diagnosis of infection diseases. That’s why one of the modifications will be in simplifying the grouping of such products, to facilitate the faster delivery of these goods, increase the quality of medicine and care more about safety issues. There will also be new conditions for the HS shipping codes of placebo, cell therapy products, and clinical trial equipment, which aims to clear the way for transborder medical studies.
Anti-Terrorism Fight & Borders Security
The modifications in this sector refer mostly to the HS tariff codes of multifunctional products that could be sidetracked and used without an authorization: radioactive substances, components of improvised explosive products (e.g. detonators), biosafety cabinets, and some other types of similar potentially dangerous products. The main purpose is to give a guarantee that international trade goes along with safe borders and anti-terrorism fight around the globe.
Promoting The Execution Of Different International Conventions
Another 2022 update is associated with products that are controlled by different global conventions. Some of the revisions include the modified categorization of the dangerous chemicals, POPs (persistent organic pollutants), and various hazardous gases.
While it might seem that these factors are not related, on the contrary, they’re interconnected: modern technologies bring to life the new trade patterns and product streams, meanwhile health, safety and environment affairs involve products regulated by global conventions.
Harmonized System 2022: Challenges For eCommerce
The new edition of 2022 not only alters the important global social and environmental issues, but also brings challenges to the eCommerce businesses. Since it’s difficult now to find an international brick-and-mortar shop that does not operate online, the changes for the eCommerce industry are inevitable.
Adjusting To The New Classification Updates
Modifying product information according to the new changes is a must do for manufacturers, in order to continue international sales. For those who sell through multiple channels it means synchronizing their product information related to HS classification with various marketplaces. Retailers will also need to collect the updated HS shipping codes information from manufacturers in order to avoid business downturns.
Managing Large Amounts Of Information
Organizing the HS code database can be very time consuming, and prone to data errors. What’s more, it can drain the energy of your team: managing data sheets instead of focusing on creative tasks is not the best way to use your human resources. This is exactly the case when a product information management solution can come to the rescue by automating these data-related tasks.
Facing Slowdowns In Transborder eCommerce
Not adjusting to the approaching changes brings the risks of a decrease in your international sales. If the hs code of a product is not updated, there are high chances of delays in shipping, which is going to result in poor customer experience and even customer churn. Also, it puts you at risk of paying penalties and fines for not updating your product data on time.
How To Get Ready For Changes
While it’s impossible to describe all the Harmonised System’s revisions in one article, you can do the HS codes lookup on the website of the World Customs Organization.
Note that for the moment, only global 6-digit codes were issued, while the additional 2-4 numbers for each individual country have not been announced yet. It means there’s going to be extra work on your product information later, but you still can work with the published data.
1. Create your current HS codes list.
Assemble the current codes of products you sell and create an HS code database.
2. Check your current codes against updates.
Use the World Customs Organization instruments, look through their full announcement of HS codes updates to check your currently used codes and see if they are going to be updated.
3. Incorporate changes.
Check if your code still exists: if it has been withdrawn, choose another one that will be the best fit for your product. In case the interpretation of your code has been modified, do the audit to see if it still covers your products, and change it, if it’s required.
4. Wait till your import country shares the additional updated HS code list.
Follow the published amendments for the additional country code and then add it to your code, once it is issued.
5. Collect the new product information and share.
Apply the new codes to your products for a flawless sales process, update it in your webshop. Make sure to do it on time, especially if you do not want it to slow down your sales.
One of the main challenges might be synchronizing this information with the international marketplaces and retailers that sell your products. Doing it manually might take a lot of time and lead to numerous data errors. In this case, it is wise to rely on automation and entrust this to a third-party solution. It will automatically update all the required product information, distribute product data to multiple sales channels, and reduce time-to-market.
Harmonised System FAQ
To sum up the highlights of the article, we gathered a handy list of the most commonly asked questions about Harmonised System code.
Why Is HS Code Classification Important?
For 30 years, the HS classification has been bringing clarity to international trade. Harmonised system is the basis for identifying goods, estimating taxes and duties, and assembling commerce statistics.
How Often Are HS Codes Updated?
Harmonised System rules are updated every 5 years. The next update is coming in power in January 2022.
What Is HS 2022 Edition?
On 1 January 2022, the new edition of Harmonised System Codes will be introduced, which is going to be the seventh edition. It’s going to bring significant changes into the HS database by launching 351 sets of amendments that apply to a wide range of internationally traded products.
Where Do I Find HS Code?
There are different sources where you can look up HS code of your products, mainly HS code finder on your country’s government website, World Custom Organization tool, shipping services such as FedEx, platforms such as European Custom Portal, Foreign Trade and similar. It will be also included in the invoice once the buyer receives an order.
HS Code VS HTS Code: What’s The Difference?
HTS code basically stands for HS tariff code and is a version adopted by the USA (as each country can add their own modifications). In this case, the first 8 digits refer to the duty code of the product, while the 10 digits refer to product data collection and statistical reports.
What Are The Main Challenges Of Harmonised System Code Changes?
For many sellers, shipping companies, and retailers there will be new data requirements regarding HS shipping codes, VAT rates, and duties. The main challenges for international eCommerce businesses will be in handling massive amounts of product information, related to the upcoming amendments, timely modifications to avoid any data errors and sales drops and possible delays in product delivery that can be a result of not updating the HS shipping codes. Managing all the information manually is another challenge that might slow down operations for eCommerce businesses.
Will My Business Be Affected By The HS Classification 2022?
The changes in the system are not going to affect all kinds of businesses, however, if your products are being sold internationally, you have to review the changes and evaluate your product data accordingly.
What Will Happen If I Do Not Update The Products Affected By HS 2022 Updated?
It’s essential for your products to be correctly classified for international commerce, otherwise you might face fines and penalties because of not providing accurate information, as well as your product flow will be affected. That’s why the correct classification of the product is the responsibility of manufacturers.
Gepard: Always Updated Product Data In Ever-Changing eCommerce World
The amendments to the Harmonised System Code Classification shows how the global issues and challenges alter the state of eCommerce. It proves that in order to stay competitive on the global sales arena, you have to keep up with the new trends.
How to stay up to the minute in a volatile world of trade? The key is accurate, well-organized product information that can be automatically updated and standardized according to the requirements of international trade organizations, as well as adjusted to the demands of multiple sales channels.
This is where the Gepard eCommerce platform comes in. With its data syndication and validation modules, you can rest assured that your product data is in compliance with all the conditions of the marketplaces and sales channels you choose to distribute your products to.
No more worries about tedious adoption of your product content to shifting requirements – book your personalized demo to see how your business can benefit with Gepard.
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