What Is an HTS Code in Shipping?

A Harmonized Tariff Schedule (HTS) code is used to categorize goods imported into the US. HTS is maintained and updated by the US International Trade Commission (USITC) to reflect changes in trade practices, products, and tariffs. It is based on the Harmonized System (HS) developed by the World Customs Organization (WCO). HTS serves as the foundation for establishing tariff classifications for goods imported into the US.

Uses for an HTS code

• Department of Homeland Security (DHS): To monitor trade flows, identify illicit activities such as smuggling and trafficking, and detect potential security threats at ports of entry.

• Customs and Border Protection (CBP): To classify imported goods and determine appropriate tariff rates and duties that apply for customs clearance.

• The Office of the US Trade Representative (USTR): To analyze trade data, identify tariff barriers, and formulate trade policy objectives.

• Department of Commerce (DOC): For economic analysis, trade promotion initiatives, and enforcement of trade laws.

Purpose of an HTS code

Classification

The primary purpose of an HTS code is to classify goods for customs and statistical purposes. Each product’s characteristics, composition, and intended use are outlined in the code, helping authorities accurately identify imported goods.

Customs and tariffs

HTS codes help determine applicable customs duties, tariffs, and other trade measures. Different HTS codes are associated with different duty rates and trade policies, enabling customs authorities to assess and collect appropriate taxes and fees.

Trade compliance

Importers must accurately classify their goods using the appropriate codes to comply with customs regulations and facilitate smooth import processes.

Structure of an HTS code

An HTS code can be 8 to 10 digits long. 

For example, the code might look like this: “0102.21.0010”.

The first six digits “0102.21” represent the HS code. Out of these, the first two digits represent one of the 99 HS chapters, the next two highlight the specific heading, and the last two represent the subheading. In this case:

01 = Live animals

02 = Live bovine animals

21 = Pure-bred breeding animals

The next two digits “00” identify the US subheading of the HS code, establishing duty rates. In this case, they represent free duty. The final two digits are a statistical suffix used for trade data; “10” is for males.

Importance of accurate HTS coding

Easier importation to the US

Accurate HTS coding streamlines the customs clearance processes. By quickly verifying the accuracy of the codes, customs authorities can release shipments faster and reduce the burden on importers.

Avoid negative consequences

Proper HTS coding ensures that involved parties avoid these hurdles:

• Penalty and fines: Paying higher duty rates or unexpected fees for additional verification steps. Authorities can also impose penalties for non-compliance with import regulations.

• Delays: Additional documentation and inspections might be necessary to rectify the incorrect classification of goods.

• Seizures: Improper classification can lead to the shipment being seized as it might point toward fraud, smuggling, or other illicit activities.

• Reputational damage: The business’s reputation and credibility with authorities, suppliers, and clients can be damaged.

Difference between an HTS code and a Schedule B code

Schedule B codes are subsets of HTS codes and follow the same structure. While HTS codes are for imports, Schedule B codes are used by exporters to track and report goods shipped from the US. These codes are maintained and updated by the US Census Bureau.