Legal documentation, bookkeeping and maintaining records is a vast part of the international shipping process. Some of these formalities and practices include traders from across the world following the same specifications. The Harmonized System code, commonly abbreviated as the HS code, is a part of that globally accepted system. It is the list of numerical figures that represent and classify all the trading goods. In some countries, the terminology of this system is also named as Harmonised System of Nomenclature (HSN). What does this system do in the logistics world? How does it benefit traders, shippers and other parties involved in the shipping industry?
The purpose of bringing in a specific code system to classify all the kinds of goods that are a part of the trade industry was to bring simplicity to the process. Earlier, the customs department faced a lot of complications to verify the traceability of goods, their origin, classification and so on. With the help of the HS code, over 200 countries across the world have been able to classify 98% of their trading goods systematically. Let us learn about the benefits of this code system in the trading world.
Following the Harmonized System is crucial in the international trade business.
Harmonized Code System For World Logistics: Top 8 Benefits
World logistics has enjoyed simplification and a smooth workflow even since the establishment of the HS code system. With traders adapting to the process and accepting the defined numerical figures, it has become easier to classify goods and prepare the required documentation. Considering the changes harmonised codes have brought to the trade industry, we can describe its benefits in eight categories.
#1 Simplifies Goods Classification
In the absence of the Harmonized Codes, it was possible to classify one good in more than 17 categories. Yes, this neutrality was becoming a problem, especially when the growth of the international trade business was at its peak. The Harmonized Codes have helped classify each good specifically with a defined code. Each numerical figure contains a chapter, heading and subheading to signify the identity of a good.
#2 Helps Identify Trading Country
Every country has its set of HS code systems that they use while processing their freight shipments. For instance, China has a 13-digit code system (an exception from all other countries), while Thailand follows an 11-digit code system under the AHTN abbreviation. Similarly, all the trading countries have adopted their code system to help in the classification process.
#3 Allows Efficient Allocation
Allocating a category to trading goods to calculate their duties and taxes is a complicated task. With the Harmonized Codes, the process has become more efficient as one just has to look at the code and use it in the shipping documents. The customs department can then verify the validity of the code and approve shipment.
#4 Makes Documentation Easier
Documentation has never been easier for traders with the HS code system. They do not have to waste time in deciding which of the 17 categories is right for their trading item. It is possible to pick a code specifically and use it in the documentation.
#5 Globally Managed System
The World Customs Organisation (WCO) manages and serves as the basis of this system by classifying the customs tariff. They are in charge of these Harmonized Codes as well. So, traders from across the world can rely upon the information and numbers to process their freight shipments without any hassle.
#6 Helps In VAT & Tax Duties Collection
The VAT and tax duties applicable on one trading goods may be different from the other. In this case, classification is vital to calculate the taxes. The numerical figures in this code system make it possible to calculate duties easily without hours of classification. Traders can also save some valuable time in shipping their freight on short notice.
#7 Categorises The Nationality of Goods
As per the rules and regulations of the customs department, every trader must mention the nationality of the goods he is trading under his ownership. The HS code system helps clear out this confusion as every country has its predefined set of figures to represent the nationality of the products.
#8 Facilitates Customs Procedure
Lastly, following these Harmonized Codes makes it simple to facilitate the customs procedure and clearance in the exporting as well as the importing country. Traders can just simply look at the numbers and give detailed documentation for a smooth clearance.
All these advantages of the HS code system have made it an integral part of the international trade market. The Customs department of all the trading countries has also benefited from this customization. There is no doubt that the shipping process involves a lot of complications. It is rules and systematic procedures like this that make the difference! Traders must find the best source of information to get these codes for all the goods they trade.