HS codes and everything you need to know about the details they hold

Summary:

• HS codes provide a system to classify globally traded goods.
• They are usually 6-12 digits long.
• They help calculate customs duties.
• This blog talks about what constitutes HS codes and what happens if they are not correctly assigned.

For everyone who is trading across international borders, HS code is a commonly heard term. It is frequently associated with the fear of the complexity that comes along with it. Especially if there are a large variety of products that you are selling, you should mind the HS codes and understand how they function. HS codes stand for harmonised system codes- a system that helps classify all globally traded products to calculate customs duty for each. These codes are a combination of digits that help identify and make tax classification for all sorts of globally sold products. Be it a pair of shoes or a nice top, everything is classified to determine the accurate rates and then levy the correct charge of tax. It won't take a genius to say what might happen if HS codes go wrong.

• Shipments stuck in customs.
• Fines and charges.
• An extra payment of charges has to be made.
• Product rejections.
• Lower margins are in case of excess payment of taxes.

People in business who want to focus on growing their businesses often see these as hindrances, making engaging in cross border commerce difficult. This blog is about HS codes and what information they store.

Unlike how small their acronyms are, HS codes are pretty long. They are almost 6- 12 digits, depending on the product details. In addition, they store information related to the product like the type of product, sub-classification, country of origin, and sale.

The first six digits of the HS codes are universal and come from a globally accepted codification for categories of products. They are the same for all the countries and identify the type of product and describe it further. Say, for instance- a kind of apparel made of cotton or footwear further classified as sandals.

The following two to six digits are different for every country. They depend on the land of sale, the destination of the deal, and they also define subdivisions for national purposes. Here comes the tricky part. In the case of manual entry of HS codes, the complexity leaves room for human errors. HS codes directly tie up to the calculation of customs duty.

Tax automation systems like Avalara use artificial intelligence to classify significant volumes of data within no time, and that too error-free. As a result, sellers can input data and rest free as the system does everything from them.

Many sellers venture into international markets without hesitation every time they find an opportunity. And that is great because International markets are promising for businesses. But the real deal begins when they encounter tax compliance that they had not foreseen. A lack of strategy can be a solid initial blow for small and large-scale businesses alike. In addition, hiring a different department with the skill set of understanding the complexities of taxes is an expensive affair. In situations like these, sellers should choose to pick a good and reasonably priced software that can help tackle these complexities within no time. Find out how software like Avalara can help you with international compliance.

Avalara helps businesses of all sizes automate their tax processes. We have software for all companies, and we recommend automation to everyone only because it is cheaper and more accurate than having a different department for that.

To know what will work for your business, check out our website.