What is the Harmonized System? 

The Harmonized System (HS) is a system that was developed by the World Customs Organization (WCO) in 1988 to classify goods in shipments entering WCO member countries. Products are classified with HS codes. This means products are given a specific numerical code to allow customs officials the ability to keep track of what items are entering their country.

The main purpose of HS code classification is to assign accurate duty rates to imports and to allow countries the ability to track the type and quantity of goods entering their country. The standard HS code is a universal, six-digit code, and countries add their own digits to the end of the six-digit base to form a country-specific code. The Harmonized System has a schedule to update every five years, and countries can schedule their own code updates as well. That five-year mark has now arrived. Changes begin rolling out in January 2022, and as a seller, you must be aware of the changes you need to make regarding international sales.

You may be asking yourself a lot of questions at this point, but don't worry. Here’s what this post will cover:

• What are the updates?
• Why is it being updated?
• Who is affected by the 2022 HS updates?
• What happens if I don’t stay up to date with the latest version of the Harmonized System?
• How can I stay compliant?
• Is there a way to automatically stay up to date with the changes?

What are the updates to the Harmonized System? 

To better understand terms such as “chapter,” “heading,” subheading,” etc., here is an example of a United States HS code for a platinum ring. The image below shows the parts of an HS code and what those parts can represent.

The main changes apply to HS codes in the following chapters:

• Live Animals and Animal Products (Chapters 02, 03, 04)
• Vegetable Products (Chapters 07, 08, 12)
• Animal and Vegetable Fat (Chapter 15)
• Beverages, Spirits, and Vinegar; Tobacco Tobacco Substitutes (Chapters 16, 17, 18, 19, 21, 22, 24)
• Chemicals (Chapters 28, 29, 30, 32, 34, 36, 38)
• Plastics* (Chapters 39, 40)
• Articles of wood* (Chapter 44)
• Textiles* (Chapters 55, 57, 61, 62)
• Articles of Stone, Plaster, Cement, Asbestos, Mica or Similar Materials; Ceramic Products; Glass and Glassware* (Chapters 68, 70)
• Articles of Metal* (Chapters 73, 74, 81)
• Machinery* (Chapters 84, 85)
• Automotive (Chapter 87)
• Aircraft (Chapter 88)
• Ships (Chapter 89)
• Furniture (Chapter 94)

*common ecommerce goods most likely to affect online retailers

Within these [and other] chapters, there will be new headings and subheadings, updated descriptions, and updated and new legal notes. Essentially, there will be either totally new or partially updated codes for certain goods.

Why is the WCO updating the Harmonized System? 

As previously stated, the Harmonized System updates every five years in order to keep up with changes in different industries, goods produced within those industries, and the need for new chapters, headings, and subheadings. The 2022 HS code changes are influenced by multiple driving factors, including the following:

• Environmental impact
  • Example: Electronic goods that are approaching the end of their useful life are considered potentially harmful to the environment and are considered electronic waste, or e-waste. Altering or adding HS codes to correctly identify these goods help officials to keep track of the amount of e-waste entering and leaving their country.
• Technological advances and product innovations
  • Example: Electric vehicles are now being separated, by HS codes, into groups such as hybrid electric vehicles, plug-in hybrid vehicles, and all-electric motor vehicles.
• Health and medical research
  • Example: New provisions for rapid diagnostic testing kits, clinical trial kits, and cell cultures and therapy have been added.
• Ever-changing trade patterns
  • Example: New provisions have been added for goods like smartphones, tobacco and nicotine devices, and drones to address environmental and social issues of global concern caused by these new product streams.
• Food & Agricultural Organization (FAO) proposal
  • Example: A new subheading for edible insects and food products such as different mushroom types and pine nuts has been added.
• The fight against terrorism
  • Example: New subheadings have been added for goods that could potentially be used for unlawful purposes, e.g. dual-use items that can be used to construct explosive devices.
• Implementing various international conventions
  • Example: Some international organizations are rolling out new initiatives which require HS codes to implement specific conventions, e.g. The International Narcotics Control Board controls certain substances and needs to track how much of a certain narcotic is being traded internationally, and where they are being exported from and imported to.

Who is affected by the 2022 Harmonized System update? 

If you have a business that sells products internationally, assume you are affected, especially if your products fall under one or more of the updated chapters, e.g. textiles, furniture, plastics, etc. This post only covers the high-level changes, but there are many individual changes not mentioned here within each of the chapters listed above. It is best practice to stay up to date with the latest version of the Harmonized System, (including the full HS codes for the countries you sell to). This will help you stay compliant and have a smooth international selling experience.

What happens if I don’t stay up to date with the latest version of the Harmonized System? 

This is a layered question because different countries have their specific codes they use to build on the universal HS code, and these tariff codes are typically updated throughout the year following the Harmonized System updates. Some countries don’t even stay up to date with the Harmonized System changes. The United States, Canada, and the European Union are typically some of the first to update their codes. Essentially, most countries stay relatively up to date and some don’t; either way, there are country-specific codes to take into consideration. A new version of the Harmonized System adds a whole new layer of complexity to the already nuanced subject of HS code classification, but the simple answer is this: Using an outdated HS code or country-specific code is considered an incorrect code. Classifying your products incorrectly can result in the following consequences:

• Your shipment may be held at the border by customs.
• Customs will assign an HS code to the goods themselves, which may result in a higher-than-accurate duty rate.
• Your shipment may be rejected.
• You may incur penalties and fines.

With all of the complicated layers involved with getting HS codes correct for your imports, it can seem impossible to accurately classify all of your products. With the right help, up-to-date product harmonization is both possible and fast.

How can I stay compliant? 

You can stay compliant by doing the following:

1. Review the WCO changes.
2. Identify which of your products may be affected.
3. Compare the WCO impacted HS codes to your product classifications.
4. Map your products to the new or updated chapters and subheadings in the Harmonized System. This will make reclassifying your products much easier when the countries release their HS codes.
5. Identify which countries schedule/publish their changes ahead of time. Many countries will schedule a release date letting the public know when theirs will be updated.
6. Understand that changes are not final until they are officially made effective.
7. Reclassify your affected goods for each country as they become available.

Is there a way to automatically stay up to date with the changes? 

Zonos Classify has changed the industry with automated HS code classification. Classify stays up to date with the changes in the Harmonized System and country-specific classification codes in order to quickly and easily assign accurate HS codes to your products. Zonos Classify generates HS codes upon demand using as little as an item description or image. Classify is available via API or as a web-based tool and allows you to harmonize your entire product catalog. You can also look up the HS codes for your products individually to use for your landed cost quote calculation or if you need a classification in real time within Zonos Dashboard.