HS Code in International Shipping: Meaning, Importance & More

Businesses across the globe are expanding their reach by moving beyond their domestic market. As a result, cross-border trading is witnessing a rise. India’s exports have increased from USD 466.22 billion in 2013-14 to USD 778.21 billion in 2023-24. Electronics, pharmaceutical products, textiles, and iron ore are among the items that are being exported mainly from India to various foreign countries. Different categories of items are assigned different Harmonized System (HS) Codes. This unique code helps distinguish the products from each other based on their type. What exactly does this code consist of? Why is it important in cross-border trade? What are its uses and types? Let us find out all this and more about the HS code. 

What Are the Basics of HS Code in International Shipping?

The concept of HS codes has been introduced to understand the exact type of goods during international shipping. These unique identifiers indicate the precise category a good belongs to. Here is a closer look at the uses of these codes:

• To segregate physical goods and assign correct categories to them to ship them safely and smoothly. For instance, an LED TV has a different HS code than a cotton shirt.
• To complete the documentation process.
• To determine the amount of tax to be levied on each category.
• To carry out market research and generate reports about the trade statistics.

The codes created by the World Customs Organisation are recognised globally. Almost every country uses these codes to ensure a smoother customs procedure. With the introduction of these codes, the customs staff and the government bodies have become better equipped to follow a standard approach to manage each HS category.

Why Does HS Code Matter in International eCommerce Fulfillment?

HS Code is of great significance in international trade because of the following reasons:

• Since this code is accepted globally, it helps classify the goods uniformly across countries. 
• Determining the correct tariffs and taxes becomes easier when the categories are well defined.
• It makes the customs clearance process less complicated. It also speeds up the customs procedures.
• The international agreements and trade policies have determined the codes and support the same.

What Are the Key Characteristics of an HS Code You Should Know?

Let us look at the key characteristics of an HS code:

• The HS code system applies to almost all the goods traded across borders to facilitate a uniform classification.
• Being used by more than 220+ countries and territories, it is a global standard for international shipping.
• The 6-digit code comprises a hierarchical structure that enables the correct categorisation of physical goods.
• The system is clearly defined to ensure everyone involved in the international shipping process understands it well.
• The HS code system is reviewed and updated periodically to ensure the correct classification of goods. The countries following the system must stay abreast of the revised rules and comply with them.

How are HS Codes Classified: Sections, Chapters, and More?

The HS code has been clearly defined into different sections, chapters, and headings. Let us take a closer look at these classifications:

• Sections

Physical goods have broadly been classified into 21 categories. Thus, an HS code system comprises 21 sections.

• Chapters

The sections have been divided further for more clarity and better classification. It helps in identifying the products across categories with greater ease. There are a total of 99 chapters.

• Headings

Every chapter in the HS code contains different headings to provide precise classification of the goods.

• Subheadings

The headings are divided into subheadings. The subheadings mostly comprise six digits and are meant to provide a clearly defined core classification of goods. 

• The six-digit HS code is recognised by all the countries that use the system.
• Some countries use an eight-digit code domestically to distinguish their goods better and determine the tariffs accordingly. India is one such country that uses eight-digit codes. It adds two digits to the international 6-digit HS code. This is known as the Indian Trade Classification (ITC-HS). It is published in two distinct schedules. One is for import and the other is for export. Here’s the distinction:

1. Schedule 1 provides the classification of goods imported to India.
2. Schedule 2 provides the classification of goods exported from India.

• The US and certain other countries use a 10-digit HS code. This enables a deeper understanding of the type of product being shipped in the international market. It helps compute the tariffs and duties with greater ease.

What Are Documents Against Acceptance in International Trade?

Documents against acceptance (D/A) is an exclusive method of payment where the exporter shares the shipping documents with their bank. Thereafter, the documents are sent to the importer’s bank. The importer has to accept a time draft upon receiving notification about the documents. The time draft, which is a promise to pay the amount later, must be accepted before receiving the documents required to claim the goods. So, D/C enables the importer to get access to the goods before making the payment. Document against acceptance builds trust by reducing the chances of non-payment. It also simplifies the documentation as the banks serve as intermediaries. 

How to Choose the Right HS Code for International Fulfilment?

Here is the stepwise procedure to choose the correct HS Code for international trade:

1. Click open the GST portal.
2. Enter your user ID and password.
3. Go to Services and select User Services.
4. Search HSN code.
5. Key in a short product description to determine its type.
6. Identify the appropriate heading and subheading your item falls under. Check the same as well as the tariff.
7. Get the correct HS code for your product.

How Does ShiprocketX Simplify HS Code Mapping for eCommerce Fulfilment?

ShiprocketX is here to help grow your business in the overseas market. We offer seamless integration to make the eCommerce export process simpler for you. With the use of our smart platform and support from our experienced personnel, you can map HS codes for your eCommerce fulfillment with efficiency and ease.

Our wide network of shipping operators enables shipping to more than 220+ countries and territories. We offer complete transparency as the shipment moves from your warehouse to its overseas destination. You get a chance to customise your tracking page to reflect your brand’s essence. You can add your logo, colours, and brand’s message to offer a consistent experience to your consumers.

Our efficient services are available at an affordable rate. You may send us your requirements to get our quotation. Our team shares the quotation quickly so that you can make a quick decision and start shipping at the earliest. Pickups are done within 24 hours of receiving the request, and your packages are shipped safely. 

Conclusion

Obtaining an HS code is necessary to export goods from India to other parts of the world. The six-digit code classifies goods based on their categories. Businesses must understand its structure and assign the correct codes to their products. HS code is needed to determine the duties and taxes associated with different export items. Thus, it simplifies the customs process. Most countries recognise this code to maintain uniformity in international trade. It helps prevent shipment delays and ensures regulatory compliance.

ShiprocketX helps with HS code mapping and smooth shipping across the globe.