global entrepreneur chapter 3

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SECTION ONEBEFORE YOU GO GLOBAL

Chapter Three

Harmonized Codes- ClassifyingYour export products


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Chapter Objectives

To understand what is Harmonized codeand the important role of Harmonized

Code

To understand how to locate the correctHarmonized Code

To comprehend HC versus SIC, NAICS,AND SITC


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Harmonized Code

Is an important tool for internationalplanning

Is used to identify potential foreignmarkets

Is used to identify the activities of

competitors Is used to identify foreign import tariffs


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WHY HARMONIZED CODES ARE NEEDED?

The potential problems of shippinggoods internationally if the exporter

considers its product one thing, butthe foreign customs authorityconsiders it an other.

The disagreements about the importduty rate still occurs between twocountries


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WHY HARMONIZED CODES ARE NEEDED?

Implementing the Harmonized commodityDescription and Coding System (harmonizedsystem) will reduce much dispute

It is known as the International System ofnumbering or International Harmonized Codes

By agreeing the format of the numbers, and

how to classify products, disagreements shouldno longer occur


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HOW THE HARMONIZED SYSTEM WORKS?

The harmonized system consists of22 sections divided into 97 chapters

that correspond to the InternationalSystem of numbering

Each section and chapter is a very

general grouping of commonproducts


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All products are described by a ten digitnumber

It is broken down by chapter, heading,subheading, and commodity code.

Chapter represents first two digit, heading

for first 4 digits, subheading for first sixdigits and full ten digit is called commoditycode


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It is very important to read chapternotes

The notes will give the indication of wto classify these exceptions

The chapter notes are importantparts of the harmonized code system


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INTERNATIONAL HARMONIZATION CODE

The fairly specific nature of thesubheading is not a coincidence. It is

all the level of subheading that thecodes have been harmonized globally

The first six digits of the ten digit

code are the same for all products inall countries that have adopted theinternational harmonized code system


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THE COMMODITY CODE

The final four digits that make up the tendigit commodity code is dependable on

where the classifications for each country Each country may choose four digits to

round out the commodity code

If the country doesnt care for additionalclassification to detail products beyond thesubheading, they will simply add fourzeros


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THE COMMODITY CODE- IMPORTING

VERSUS EXPORTING

The subheading in the HS are the same betweencountries but the commodity codes will vary

Not only different between countries thecommodity code may also vary between codesused for exporting products and those forimporting products

For import purposes, the commodity code isused to determine what import duty is applied tothe product as well as tracking import statistics


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VERSUS EXPORTING

In USA no duty is applied for exported productsso the primary use of the commodity code is forstatistical reporting

The US has established two sets of commoditycodes to distinguish between commodity codefor exporting and importing

Both base on the harmonized system but thedifferences are in the full ten digit commoditycode


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VERSUS EXPORTING

When exporting from United States, the system ofclassification is called Schedule B. The system ismanaged by the US Census Bureau

When importing to US, the system of classification iscalled Harmonized Tariff Schedule (HTS). HTS ismanaged by the Office of Tariff Affairs and TradeAgreements within the US International TradeCommission

The primary purpose of HTS is to assist I the applicationof import duties and track import statistics


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LOCATING THE CORRECT HARMONIZED

CODE

Obtaining copies of the Schedule B or HTS. Both areavailable on the internet and can access immediatelywithout cost

Schedule B: http://www.cencus.gov/foreign-trade/schedules/b/. HTS:http://www.usitc.gov/taffairs.htm

First step- Check the index

Schedule B versus HTS Subheadings Resolve difficult classification

Seek assistance in classifying your goods

Binding Rulings
http://www.cencus.gov/foreign-trade/schedules/b/http://www.cencus.gov/foreign-trade/schedules/b/http://www.usitc.gov/taffairs.htmhttp://www.usitc.gov/taffairs.htmhttp://www.cencus.gov/foreign-trade/schedules/b/http://www.cencus.gov/foreign-trade/schedules/b/http://www.cencus.gov/foreign-trade/schedules/b/


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SIX GUIDING RULES FOR CLASSIFYING PRODUCTS

UNDER HARMONIZED CODE SYSTEM

The titles of sections and chapters are only a guide.Classification should first be based on the wording of theheading (four digit number)

Incomplete or unfinished articles are to be classified as ifthey are completed or finished, as long as the item hasthe essential character of the complete or finishedarticle.

When the goods is classifiable under two or moreheadings, classification is as follows:

a. The heading that provides the most specific descriptionshall be preferred to a heading providing a more generaldescription


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b. If both headings are equally descriptive, the heading ofthe material component that gives the essentialcharacter should be used

c. Goods that cannot be classified by rule 3a or 3b shouldbe classified under the heading occurs last in numericalorder among those that equally merit consideration

Goods that cannot be classified through rules 1-3 should

be classified as you would a good that is the most similarthat does have a clear schedule B number

Packing and containers:


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a. Specifically shaped and/or fitted, suitable for repetitiveuse, and presented with the goods, classified with thegood. Otherwise on their own merit

b. Normal packing classified with the goods

Rules 1-4 are to be used to determine the heading.You would then repeat the process to get the

subheading


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HARMONIZED CODE VERSUS SIC, NAICS AND SITC

There are some other important product and industry

classifications that we may encounter in our international

documentation or research requirements.

STANDARD INDUSTRIAL CLASSIFICATION (SIC)

THE NORTH AMERICAN INDUSTRY CLASSIFICATIONSYSTEM (NAIC)

THE STANDARD INTERNATIONAL TRADE

CLASSIFICATION (SITC)

THE EXPORT CONTROL CLASSIFICATION NUMBER(ECCN)


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HARMONIZED CODE VERSUS SIC, NAICS AND SITC

STANDARD INDUSTRIAL CLASSIFICATION (SIC)

www.osha.gov/oshstats/sicser.html

THE NORTH AMERICAN INDUSTRY CLASSIFICATIONSYSTEM (NAIC)

www.cencus.gov/naics orwww.ntis.gov/business/sic.htm

THE STANDARD INTERNATIONAL TRADECLASSIFICATION (SITC)

THE EXPORT CONTROL CLASSIFICATION NUMBER(ECCN) http://www.bis.doc.gov/licensing/do_i_needaneccn.html
http://www.cencus.gov/naicshttp://www.cencus.gov/naics

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