Looking to import products into the US for your online ecommerce business? The process can be daunting, with complex regulations and customs procedures to navigate. To ensure a seamless import process and avoid any penalties or delays, understanding the significance of HTS codes is essential.
US Customs requires businesses to declare their imported goods using these codes, and improper usage can result in fees, inspections, and seizures. Don’t let this happen to you! Learn how to determine the correct HTS codes for your products and make your way through the customs process with ease.
In this post, we’ll discuss how HTS codes work and how to use them, as well as the consequences of improper usage—including penalties and fees levied by Customs.
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What is an HTS code?
HTS stands for Harmonized Traffic Schedule. An HTS code is a unique 10-digit number used to determine the duty or traffic tax applicable on goods imported in the US from other countries.
Although the United States International Trade Commission maintains HTS codes, they are enforced by the Department of Homeland Security’s Customs and Border Protection (CBP) unit.
HTS codes: key terminology
International ecommerce can become complex due to the numerous terms and acronyms used to describe different processes. To help you navigate this world, we’ve listed the meanings of the main governing bodies and terms associated with international imports:
Harmonized System (HS)
The Harmonized System (HS) is a universal language for coding and identifying goods being traded internationally. It’s also defined as a nomenclature for transportable items that almost all countries use for their customs tariffs and for trade statistics. The latest version of the HS system was introduced in 2022.
A six-digit code that classifies each imported item, where the first two digits represent the chapter, the middle two represent the chapter’s heading, and the last two highlight the sub-heading within the heading.
A 10-digit code that classifies each imported item, where the first six digits represent an HS code, the subsequent two highlight the US subheading of the HS code, and the last two make a statistical suffix.
World Customs Organization (WCO)
An independent intergovernmental body representing 183 customs administrators of different countries. The WCO formed and maintains the HS system to create harmony in customs regulations across countries.
US Customs and Border Protection (CBP)
A government body that issues legally binding rulings with regard to the importation of goods into the United States.
Schedule B code
Maintained by the US Census Bureau and based on the HS, Schedule B codes are 10-digit international codes that categorize goods exported from the United States.
A brief history of the HTS
Most countries use the HS code to classify imported items and establish the tariff. However, the United States uses the HTS, which was brought into effect on January 1, 1989. Unlike the former tariff schedules, the HTS is based on the HS.
How the HTS works
The HTS classifies imported goods based on characteristics like product name, function, and composition. You can find the most recent version of the HTS on the USITC government website, divided into 22 sections and 99 chapters that identify a range of different items. Each section and chapter contains notes at the beginning, providing important information.
There are three chapters of the HTS that serve different purposes than the others. For instance, chapters 98 and 99 are reserved for national use whereas chapter 77 is reserved for future use.
The HTS is categorized into chapters and headings that make up the HTS code for each good. It contains more than 10,000 individual codes associated with specific items. For instance, Section II, Chapter 10 classifies “Cereals,” which is relevant if you’re importing cereal products into the US. In this chapter, you’ll come across duty rates, descriptions, and HTS codes for goods such as barley, oats, rice, and others.
Structure of HTS codes
HTS codes are made up of 10 digits and can be divided into five different sections. As previously mentioned, the first six digits are the international HS number. Let’s take a closer look at the breakdown of an HTS code:
- Chapter: The first two digits indicate the chapter in the HTS, and these numbers are consistent across countries.
- Heading: The subsequent two digits highlight the heading within that chapter in the HTS, and these numbers are also consistent across countries.
- Subheading: The following two digits classify the subheading within that chapter, and these numbers are likewise consistent across countries.
- Subheading (tariff rate lines): The subsequent two digits determine duty rates and are specific to the United States.
- Statistical suffix: The final two digits are basically statistical suffixes. These are specific to the United States and used to gather trade data.
Example of HTS
Now that you understand the structure of HTS codes, let’s try and classify the HTS of “certified organic durum wheat (seed)”:
Here’s a breakdown of the HTS code: 1001.19.00.25
How HTS codes work
HTS codes can be found in the specific HTS PDFs of each chapter, which are downloadable from the HTS website. Alternatively, you can search the HTS database, but make sure to turn off any ad blockers to get full functionality.
For instance, let’s assume we want to import cinnamon. The HTS code for cinnamon can be located in Chapter 9, which is given a two-digit number.
All products classified in Chapter 9 begin with the same two digits (e.g., 09). Further classifications of the product include varying 10-digit HTS codes that syndicate the statistical suffix with heading/subheading.
Understanding the HTS code of an item is important because it tells you the duty or tariff on an imported good. The duty rates are categorized into three different sub-columns, namely Column 1 (General), Column 1 (Special), and Column 2. There are three types of duty rates in the HTS, namely ad valorem, specific, and compound.
To illustrate, let’s take a look at the HTS number (0906.20.00.00) of crushed or ground cinnamon. Based on Column 1 (General), importing this item from most countries is free and does not have a duty tax attached. However, if the item is imported from China, it is subject to an additional 7.5% ad valorem rate of duty, as stated in heading 9903.88.15 of Chapter 99 on Temporary Legislation in the HTS. Based on Column 2, the specific rate of duty applied to this item from Cuba and North Korea is 11¢ per kilogram.
Understanding the HTS codes of your products is essential to increase the upside of your business by sourcing products in the most cost-effective manner.
Ramifications of improper HTS code use
Using HS codes incorrectly can have consequences that impact your business, including penalties, delays, heightened inspections, and seizures. The US Customs and Border Protection released an informed compliance publication that mentions some of these consequences. Fortunately, you can avoid issues with HTS codes by doing the following:
- Verify the accuracy of HTS codes provided by suppliers and freight forwarders to ensure proper classification.
- Use the correct code rather than the most beneficial one (i.e., the code with the lowest tariff rate). Refer to the General Rules of Interpretation and seek help from the USITC if unsure.
- Understand the trade agreements and programs in place that may affect tariff rates for specific goods. Consult the General Note section of the HTS for details.
Adding HS codes to your Shopify products
HS codes are crucial for merchants when importing goods and also relevant for goods shipped to international customers. While Shopify does not support adding 10-digit HTS codes to products, it allows you to input the first six digits of an HTS code as an HS code:
Here are the steps to add an HS code to your Shopify goods:
- Log into the Shopify admin, then choose Products from the left hand menu bar.
- Click on Add Product on the top right side.
- Navigate down to the Shipping section and keep scrolling until you reach the Customs Information section.
- List the region/country of origin for your item. This is typically where the goods are manufactured.
- Complete the HS (Harmonized System) code field.
- Look for your product and choose the six-digit code that appears on the screen.
- Enter the code manually if it’s longer than 10 digits.
- Click Save.
Note: You can also add HS code by importing it via a CSV file or through the bulk editor inside Shopify admin.
Stay compliant when importing into the US
Understanding HTS and HS codes and how to use them can help you avoid headaches when importing foreign goods into the US.
Besides avoiding penalties for non-compliance, having knowledge of these codes can drive decision-making by informing where you import from and where you avoid.
Start classifying your items with HTS codes and you’ll be able to seamlessly bring your goods across the border.
HTS codes FAQ
Do I need to comply with the HTS?
To remain compliant with the law when importing goods into the US, you must comply with the HTS. Refer to the USITC website to learn more about this classification system, including an About page and contact information.
Does Shopify allow merchants to use HTS codes?
Shopify doesn’t accept a 10-digit HTS code. However, you can enter the first six digits of HTS code (the six-digit HS) on the platform.
Where can I find the HTS number for my goods?
1) Use the official HTS search tool (make sure to read the disclaimer first).
2) Search within a specific chapter of the current HTS online.
3) Use Google, but always cross-check with the official HTS.
HS and HTS codes: what’s the difference?
HTS codes (Harmonized Tariff Schedule codes) enable US customs authorities to determine the applicable tariffs and duties on imports. HS codes (Harmonized System Codes) are used to identify goods traded globally.
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