Importing goods into the United States, and subsequently working with US Customs, comes with extra process and paperwork. US Customs requires businesses to declare the items they’re importing into the country using an important identifier, known as an HTS code.
Understanding how to import your goods through customs, including the proper use of HTS codes, will help you avoid headaches at the border and ensure there are no hold ups or delays when it comes to shipments and eventually getting products into the hands of your customers. Here, we’ll outline how HTS codes work, how to determine the HTS codes for your goods, and the ramifications of improper usage—including fees, unexpected inspections, seizures, and penalties levied by US Customs.
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HTS code definition
An HTS code is a unique 10-digit number that determines the tariff tax or duty incurred on items imported into the United States from other countries. HTS codes are maintained by the United States International Trade Commission, but enforced by Customs and Border Protection (CBP) of the Department of Homeland Security.
HTS codes: understanding the terminology
The world of international ecommerce and imports can feel complicated, in no small part due to a slew of terms and acronyms that make understanding processes even harder. Before we dive into how HTS codes work, let’s define some of the governing bodies and terms you’ll encounter as you navigate the world of imports:
World Customs Organization
Established in 1952 as the Customs Co-op Council, the World Customs Organization (WCO) is an independent intergovernmental body representing 183 customs administrators around the world, responsible for approximately 98% of international trade. They work to create uniformity, harmony, and efficiency in customs regulations across countries. The WCO established and maintains the Harmonized Commodity Description and Coding System, typically referred to as the Harmonized System or the HS.
Harmonized System (HS)
Formally known as the Harmonized Commodity Description and Coding System, the HS is a universal language for identifying and coding goods being traded internationally. In other words, it’s a nomenclature for transportable goods. Almost all countries use this system for their customs tariffs and for trade statistics. The last version of the HS was put in place in 2017, while a new version will be introduced and take effect on January, 1, 2022.
A six-digit code that categorizes each imported good. The first two digits represent the chapter, the middle two digits represent the heading within the chapter, and last two digits represent the sub-heading within the heading.
Harmonized Tariff Schedule (HTS)
Brought into effect in 1989, the HTS is a hierarchical numerical structure for describing goods for duty, quota, and statistical purposes in the United States. The system is based upon the HS. Be aware that the HTS is sometimes referred to as the Harmonized Tariff Schedule of the United States (HTSUS).
A 10-digit code that categorizes each imported good. The first six digits are an HS code. The subsequent two digits identify the US subheading of the HS code to determine the duty rate, while the final two digits are a statistical suffix.
United States International Trade Commission (USITC)
Established in 1916, the United States federal agency in charge of trade-related mandates. It maintains the Harmonized Tariff Schedule (HTS).
Customs and Border Protection of the Department of Homeland Security (CBP)
Established in July 1789 and consolidated into its current form in March 2003, US Customs and Border Protection is charged with maintaining the integrity of the country’s borders and ports of entry. It enforces the HTS.
Statistical Classification of Domestic and Foreign Commodities Exported from the United States (Schedule B)
Schedule B is the statistical classification for goods exported from the United States. It is maintained and published by the United States Census Bureau and is based on the HS.
Schedule B code
A 10-digit international code that categorizes each exported good.
A brief history of the HTS
While almost all countries use the HS to determine tariffs and classify imported goods, the United States uses the HTS. The HTS was enacted by Congress and brought into effect on January 1, 1989. The system is based on the HS, unlike the previous Tariff Schedules of the United States it replaced.
While the USITC maintains and publishes the HTS, CBP is responsible for interpreting and enforcing the HTS.
How the HTS works
The HTS is used to classify imported goods based on a range of characteristics like composition, product name, and function. The most up-to-date version of the HTS can be found on the USITC government website, spanning 22 sections and 99 chapters classifying a range of different goods. Each section has section notes at the beginning of the section and each chapter has chapter notes. Three chapters of the HTS serve different purposes than the rest: Chapter 77 is reserved for future use, while chapters 98 and 99 are reserved for national use and should also be consulted when classifying goods.
The HTS includes General Notes, General Rules of Interpretation (GRIs), General Statistical Notes, and more guidelines with additional descriptions and clarifications you should refer to when classifying goods and understanding tariff rates.
The HTS is divided into chapters, headings, and subheadings that determine the HTS code for each good. The HTS is composed of over 10,000 individual codes belonging to specific items.
For example, Section II, Chapter 9 classifies “Coffee, tea, maté and spices” and will be relevant if you’re importing cinnamon into the US. Within this chapter, you’ll find HTS codes, descriptions, and duty rates for goods like the aforementioned cinnamon, as well as green tea, saffron, and more.
Structure of HTS codes
All HTS codes are 10 digits long and broken down into five different sections. Additionally, as covered earlier, the first six digits are the HS number under the international HS.
Here’s the breakdown of an HTS code:
- Chapter: These first two digits identify the chapter in the HTS. The numbers are consistent internationally.
- Heading: These next two digits identify the heading within that chapter in the HTS. The numbers are consistent internationally.
- Subheading: These next two digits identify the subheading within that chapter. The numbers are consistent internationally.
- Subheading (Tariff rate lines): These next two digits establish duty rates. These numbers are specific to the United States.
- Statistical suffix: These last two digits are statistical suffixes that collect trade data. These numbers are specific to the United States.
Let’s take a look at an example of an HTS in action and see how we would classify the HTS of certified organic green tea (flavored):
Here’s a breakdown of the HTS code: 0902.10.90.15.
Additionally, the HS number of certified organic green tea (flavored) is 09.02.10.
How HTS codes work
HTS codes can be located in individual HTS PDFs of each chapter, downloadable on the HTS website, or they can be looked up in the HTS search database.
For instance, in the same example for importing cinnamon, the HTS code can be located within Chapter 9:
Each HTS chapter is given a two-digit number. In the case of Chapter 9, all goods classified in this chapter start with the same two digits (e.g., 09). Within this chapter are four-digit headings, listed in the Heading/Subheading column. In the example of “Cinnamon and cinnamon-tree flowers,” the appropriate heading is 0906. Further descriptions appear in the Article Description column.
As you go further down, more specific classifications of cinnamon have different 10-digit HTS codes that combine the heading/subheading and stastifical suffix:
- Cinnamon-tree flower, neither crushed nor ground, has an HTS code of 0906.11.00.00
- Cinnamon (other) has an HTS code of 0906.19.00.00
- Cinnamon (crushed or ground) has an HTS code of 0906.20.00.00.
The HTS code of an item tells you the duty (or tariff) on an imported good in the Rates of Duty column, based on the quantity in the Unit of Quantity column. The rates of duty is divided into three different sub-columns:
- Column 1 (General): The rate of duty applied to imports from countries with which the United States maintains “normal trade relations.”
- Column 1 (Special): The rate of duty applied to special tariff treatment programs such as free trade agreements or the generalized system of preferences.
- Column 2: The rate of duty applied to imports from countries the United States does not maintain normal trade relations with, namely Cuba and North Korea.
There are three types of duty rates you will see in the HTS:
- Ad valorem: A percentage applied to the good’s customs value (e.g., 2.5%).
- Specific: A price per quantity of the good (e.g,. $0.05 per kilogram).
- Compound: An ad valorem and a specific price per quantity of the good (e.g., 2.5% + $0.05 per kilogram).
Now, back to our cinnamon example. Here’s what we can determine from the HTS number (0906.20.00.00) of crushed or ground cinnamon:
- Importing from most countries is free and does not have a duty tax attached.
- If you hover over the attached note, you’re referred to 9903.88.15 in Chapter 99 on Temporary Legislation in the HTS. When you navigate to this section, you will find the following stated: “For the purposes of heading 9903.88.15, products of China, as provided for in this note, shall be subject to an additional 7.5 percent ad valorem rate of duty.”
- Based on Column 2, the specific rate of duty applied to this item from Cuba and North Korea is $0.11 per kilogram.
As an entrepreneur, knowing the HTS code of a product doesn’t only provide a tax rate on importing it into the US, it also can provide insight on the best place to source your products in the most cost-effective manner to increase the upside of your business.
HTS vs. Schedule B
Schedule B is the statistical classification for goods exported from the United States. It is maintained and published by the United States Census Bureau and based on the HS. Schedule B codes are used by the US government to monitor US exports
While a good’s Schedule B code and HTS code can be the same, Schedule B and the HTS are different systems that serve different purposes. As a business owner, you should use HTS codes when importing and Schedule B codes with exporting.
Here are the similarities between HTS codes and Schedule B codes:
- HTS codes and Schedule B codes are 10 digits long.
- The first six digits of HTS codes and Schedule B codes are the same as the HS code.
Here are the differences between HTS and Schedule B:
- HTS codes are used for imports; Schedule B codes are used for exports.
- HTS codes are governed by the USITC and enforced by US Customs; Schedule B codes are governed by the United States Census Bureau.
Avoiding issues with HTS codes
Knowing how to read the HTS and understanding what each HTS code means will help you avoid issues that can arise with customs. Here are a few things to keep in mind as a business owner importing goods into the United States:
- You are responsible for the proper HTS code. Along the export journey, you are likely to come in contact with a supplier and a freight forwarder. Both entities are required to declare the HTS codes of the items they are supplying and forwarding, respectively. However, as the “importer of record,” you are ultimately responsible for using the proper HTS code. Do your own research to verify any code you are provided in the HS to ensure it is correct.
- Use the correct code, not the advantageous code. On the HTS, it’s not uncommon to have an item that could plausibly fit under several different codes. It’s important to choose the code that is most correct, rather than the code that has the lowest tariff rate. As a rule of thumb, use the code that describes your goods in its condition as imported, as a Customs agent would view it at the port of entry. Additionally, you can refer to the General Rules of Interpretations, six principles shared in the HTS, for more guidance on classifying goods. If you are unsure, reach out to the USITC directly for help.
- Be aware of trade agreements and programs. The United States has trade agreements that result in reduced tariffs or no tariffs on specific goods. These trade agreements can also change. They can be found right on the HTS under Column 1 (Special). Refer to the General Note section of the HTS for more details on rules and conditions for obtaining particular tariff treatment and understanding various trade agreements, like NAFTA.
Consequences of improper HTS code use
Unfortunately, incorrect use of HS codes on your products can have consequences—such as delays, heightened inspections, fees, penalties, and seizures—that impact your business and prevent your goods from coming into the United States and getting to your customers.
An informed compliance publication, published by US Customs and Border Protection in 2004 and updated in 2020, outlines the consequences for not exercising reasonable care in the final classification and value of merchandise:
“The classification and valuation of goods is an important part of the importation and entry process. At a minimum, incorrect classification or valuation may lead to delays and increased duties (plus interest). The failure to use reasonable care in either situation may also lead to detention or seizure of the merchandise, and the imposition of civil or criminal penalties.”
As a merchant, you are considered the importer of record and are ultimately responsible for the proper classification of your goods. Getting HS codes right will prevent these consequences from being levied by US Customs.
Adding HS codes to your Shopify goods
While Shopify does not currently support adding HTS codes to products, the first six digits of an HTS code are the equivalent of an HS code, and can be inputted. Though HS codes are important as a merchant when importing goods, they’re also relevant for the goods you ship to international customers.
If you’re a merchant using Shopify to sell your goods online, the platform supports adding HS codes to the goods you plan to ship around the world, in order to show international customers an estimate of duties at checkout. Duties are calculated based on a few factors, including a product’s declared value and shipping costs, the product category as determined by the HS code, the country or region of origin, the destination country’s tariff rates, and applicable trade treaties.
Here’s how to add an HS code to your goods in the Shopify admin:
- On the left hand menu bar, select Products and then click on Add Product on the top right hand side.
- Scroll down to the Shipping section.
- Navigate down further to the Customs Information portion of the Shipping section.
- Add the country/region of origin for your product. In most cases, this is where the product is manufactured. You may also need to add the province of origin, depending on the country.
- Fill in the “HS (Harmonized System) code” field.
- Search for your item (e.g., “candle”) and select the six-digit code that comes up (e.g., “3406.00”).
- If you have a code longer than ten-digits, enter it manually.
- Click save.
Note: you can also add HS code information through the bulk editor or import it with a CSV file.
Certain stores on the Advanced Shopify or Shopify Plus plans may have access to a beta feature that allows them to Certain stores on the Advanced Shopify or Shopify Plus plans may have access to a beta feature that allows them to collect duty and import taxes at checkout.