How to Classify Your Products in the Harmonized System (HS) Nomenclature
Various range of products.
Classifying your product and having your accurate Harmonized System (HS) Code is critical for international trade compliance.
A single product should only have one classification and a single HS Code. For countries who are members of World Trade Organization (WTO), they must have no difference in classification of a product on 6-digit level HS Code. But, variation of a product classification may exist between them on the 8 or 10-digit level HS code which is depend on their respective national policies on tariff and statistics. For this reason, knowing your products HS code in your trade partner’s country is also important so that you can find out the applicable tariffs and, if any, special import requirements or licenses for the product. Exporters may have to arrange and provide some of those requirements, before shipping the products, to the buyer for import clearance process.
The question now is, how should we classify a product properly and get its correct HS code? Most of us normally do this by picking up an HS code where its description shows most close relationship to the product information. With today’s technology and internet, you can do this technique could even more easily and quickly. It could work fine for a simple product. But for more complex products, with characteristic of having potential multi interpretation, most likely you would get inaccurate classification. This mistake will in turn lead to wrong identification of tariffs or any requirements for the product.
Phase in Classifying a Product
These are two phases in classifying a product and find the accurate HS code:
Phase 1 – Product Identification
It is about how well you know a product you want to classify. The more information of the product you have, the easier will be your classification process. You need to have at least 4 of these types of information for product identification:
- General Product Knowledge
Physical appearance of a product is the first and most important. You can see if the product is solid, liquid or gas. You need to know if it is raw material, semi-finished goods or finished goods, is it animal product, agriculture, spare part, machinery or may be chemical and so on. The product name, description and specifications can provide you with information about its characteristics and technical aspects. - Product material composition
What materials used to produce or manufacture the product. Is it made of plastic, metal, wood or combination of them? Which material is the most dominant? - Product functions
This is what the product is used for. How is it functioned? Is it part or component to install on other product? Does it have multiple uses? - Product delivery
In what condition the product is shiped or imported, whether as a unit, incomplete or partial (knock down)? How is it packed and in how many Unit of Measurement per pack?
Phase 2 – Find the Classification in the HS Book
Based on those information you get from Phase 1, you can start the classification process and find the correct product HS code. To do this, you have to understand and follow the General Rules for the Classification of HS and the Legal Notes (Section, Chapter and Subheading). These are the steps you can follow through:
- Identify possible chapter(s) based on material composition, product function or other characteristics.
- Find relevant Heading and Subheading on those chapter(s) covering your product information.
- Determine the classifiable HS codes for the product
- Follow the General Rules for the Classification of HS in hierarchical order.
- Read carefully the related Section Notes, Chapter Notes and Subheading Notes.
- Refine your classification by excluding irrelevant Chapter(s), Heading and Subheading based on your product information, the General Rules and corresponding Legal Notes.
- Determine your accurate product HS Code
- Based on HS Code, you can find information of applicable tariff and any requirements.
Indonesia has just implemented its Customs Tariff Book 2017 version, known as BTKI 2017. This new version uses only 8 digit HS codes for tariff heading, instead of 10 digit code used in previous version. So, BTKI 2017 is now the same as the ASEAN Harmonized System Nomenclature (AHTN).
In addition to HS, there are also complementary publications, published officially by the World Customs Organization (WCO); the Explanatory Notes to the Harmonized System (EN) and The Alphabetical Index. These publications are also useful to help you classifying goods.
Related regulations
Here are recent regulations of Indonesia Customs Tariff Book (BTKI) 2017 version that you can download:
- Minister of Finance Regulation No. 6/PMK.010/2017 regarding determination of classification of goods and imposition of import duty tariffs on imported goods
- Minister of Finance Regulation No. 213/PMK.010/2017 regarding amendment of Minister of Finance Regulation No. 6/PMK.010/2017
- Minister of Finance Regulation No. 17/PMK.010/2017 regarding 2nd amendment of Minister of Finance Regulation No. 6/PMK.010/2017
I hope this short article could give you some knowledge and general understanding on product classification. If you need more information or advices on customs or international trade compliance, especially in relation to Indonesia, please send your query through our E-Consulting link or simply email us at [email protected]
You may also request us to arrange a training on a particular topic of customs and international trade through this Request link or email us at [email protected]
