HS refers to the internationally agreed upon naming and coding system that helps to classify traded products. Currently, HS codes are employed in the classification of imported and exported products by over 200 countries. The use of HS codes serves numerous significant advantages for organizations that engage in cross-border commerce. The following is the list of ten benefits of using HS codes:
1. Simplified Customs Clearance
HS codes help to shorten the customs clearance period. HS code makes it easier for customs official to know what a shipment contains without have to open the shipment. This allows them to know whether there are restrictions, duties and taxes in the products without having to go through long inspections. Businesses such as importers, exporters lose less time being restrained in customs every time they classify their goods with HS codes.
2. VAT/Sales Tax/Customs Duty rates to be calculated correctly
Various duties and taxes that are relevant to a certain product can be determined on the basis of its HS code fast and easily. According to the HS codes, most of the countries provide for specific duty rates and tariffs. It means that right classification makes sure importers and exporters pay appropriate import duties and taxes. This helps to avoid situations when after some changes in the company’s activity, it is necessary to reassess the coefficients and pay large penalties to customs authorities.
3. Improved Trade Data Quality
They thereby contribute towards improved quality of International trade data. It is easier for statistics bureaus and customs agencies to accurately gauge the quantity and value of imported and exported products through the use of HS codes in classifying products. This is important for governments and businesses, to anticipate the outcomes of trade policies, specific target markets and certain products.
4. Compliance with Trade Regulations
Some products are labeled, protected or have other requirements depending on the HS code. Classification also makes it possible to meet any product categorization standards when exists. This could lead to a situation where products are rejected in the customs in case they do not conform to the trade requirements of a specific country. HS codes also assist in determining banned/trusted imports and exports.
5. Identifying Duty Relief Programs
Some countries have other trade incentives such as providing more favourabletariffs or no tariffs at all to certain exporters under trade agreements and duty remission schemes. Purchases under these programs must classify goods in the right manner with a view of demonstrating eligibility to import the goods. Applying HS codes helps to meet origin and product rules that dictate whether imports can qualify for lower duties.
6. Consistent Terminology Globally
HS codes also help to avoid confusion, which originates from the various language descriptions of goods in international trade. Export documents match import documents regardless of language such as ‘Chinese to Spanish. ’ HS codes help link import/export data in order to increase supply chain transparency.
7. Increased Possibility of Establishing Easy Communication with Partners and Vendors
HS codes also save on communication misunderstandings with the partners and vendors in the international market. This is true because the use of an HS code does not involve language since it is recognized globally by different countries. Compared to other system, partners can more easily categorize, record and reward commodities without the problems of translation.
8. A system that enhances the tracking and planning of inventories
HS codes are useful in internal systems as they ensure proper classification of inventories. Supply and demand departments can directly forward data to logistical, warehousing, and accounting departments. This efficiency aids in demand forecasting, determination of inventory requirements as well as transportation capabilities.
9. E-Commerce Exports and Imports Facilitation
HS codes make cross border sales easier for eCommerce exporters and importers. Sellers operating online can sort consumer products’ data to determine the duties/taxes for customers. Markets employ HS codes to interface with customs and maintain efficient delivery. This also helps in having track and traceable duties/taxes for a good buyer experience.
10. Preferential Market Access is defined as the right to enter a market before others and with special conditions different from those for others.
The EU for instance has developed a preferential access offered to developing countries like the GSP. Those coming under GSP have to be correctly classified by harmonized system code. This helps exporters to have advantage of being charged zero tariff or a lower tariff than they would have been charged if they exported the goods on their own.
The practice of trading goods based on accurate classification using HS codes is immensely beneficial. Although it is not an easy task to allocate HS codes the value that it provides in the long run is in the form of ease in trading processes and compliance with the regulatory frameworks. Appropriate allocation of funds towards HS classification ensure that the customs procedures are effective and cuts costs hence enhancing cross board competiveness.
