NEWSLETTER - SMALL BUSINESS

Harmonized System and Classification

by Anthony Cambas, NAFTA Trade Specialist
NAFTA Opportunity Center
Winter 2008

Harmonized System (HS) Classification:
The Harmonized Commodity Description and Coding System, also known as the Harmonized System (HS), allows trading partners to "speak the same language" by identifying products in a standardized fashion. (In general, there is uniformity on the first six digits of an HS classification number). The World Customs Organization (WCO) oversees the Harmonized System which today is used to identify about 98% of global trade.

In the United States, the Harmonized Tariff Schedule is used for imports and the Schedule B for exports. The Schedule B is also used on Shippers Export Declaration (SED) filings. There are compliance and monetary considerations that must be taken into account when determining HS codes. For example, HS codes allow government officials to know whether or not merchandise is subject to antidumping/countervailing duties, licensing, or other government agency requirements. In addition, HS codes determine duty rates and are used for gathering trade statistics.

Compliance Assessments and Audits:
International trade compliance and supply chain security have become important topics in recent years. Export and import regulations have become more complex with increasingly severe penalties being issued for non-compliance by regulatory agencies including US Customs and Border Protection (CBP) and the Bureau of Industry and Security (BIS). Compliance regulations make the companies themselves, not freight forwarders and customs brokers, primarily responsible for compliance. The use of risk management principles and internal controls and procedures are emphasized and are major focuses of compliance audits.

Assistance Is Available:
The Illinois SBDC NAFTA Opportunity Center (NOC) and Illinois SBDC International Trade Center (ITC) at Bradley University offer Illinois companies assistance with Schedule B classification and trade compliance issues. The NOC and ITC have helped companies with key compliance areas and have developed and delivered compliance training. The centers have also assisted Illinois exporters with determining Schedule B numbers for their parts and are currently working on a coding project for a client with more than 4,000 inventory parts. For further information on how the NOC/ITC can provide your company with assistance in these areas, please contact NAFTA Trade Specialist Anthony Cambas at (309) 677-3075 or via email.