One might say that the risk of fraud is an inevitable concern for anyone entering the world of import and export. We believe it can also be prevented as the best way to protect your business from international supply chain fraud is to apply efficient strategies, such as: identifying trusted vendors and partners, developing contractual safeguards and using fraud detectors.
But what about the risk of fraud within your own business? How can you prevent unintentional violations or fraudulent activities in your import operations, which, in most cases, stem from negligence? One of the first and most crucial steps is ensuring accurate HS classification.
However, we completely understand that at first, grasping this can be complex and overwhelming. At the end of the day, it is not an easy task—especially if you are on your own. So to prevent any issues caused by misclassification, we recommended to #1 seek the expertise of a mexican custom broker and #2 keep reading to discover why correct HS classification is crucial for importers.
Why do we need a HS classification?
Every single day, millions of products are imported worldwide. In customs, keeping track of every item can become an impossible task, as not every product arrives individually labeled or in plain sight.
So, what would be the best solution? For many countries, developing an alphanumeric system was the most effective approach at the time. However, despite having a similar concept, these codes were not unified. For example, the United States adopted the Harmonized Tariff Schedule of the U.S. (HTSUS), while most of Europe relied on the Brussels Tariff Nomenclature.
This lack of standardization created challenges in international trade, leading to the need for a global system. Therefore, in 1983 the World Customs Organization (WCO) introduced the Harmonized System (HS) code to the 170+ country members.
To understand it, let’s look at HS classifications as a kind of universal import language, that allows customs authorities all around the world to identify two things: the type of products being imported and their applicable duties and taxes, by looking at just six digits—though some countries choose to add extra digits for more specific categorization.
Key reasons to use a correct HS classification code
In short, we need an HS code because using it clarifies the product type and applicable taxes using just six to ten standardized digits. It may sound simple, but in reality, even experienced importers can mistakenly use an incorrect HS code.
To prevent this, we strongly encourage you not to use an HS code without the support of one of the top customs brokers in Manzanillo. These professionals are highly trained in accurately classifying products and ensuring the correct combination of numbers to comply with regulations and guarantee the following:
1.- Avoided of fines
When dealing with customs procedures, it’s crucial to be very careful at each step, as omissions of information, wrong documentation or in this case incomplete or lack of a HS code could at first be mistaken for fraud and result in significant fines.
Keep in mind that providing this code is not only a legal responsibility but also a sign of trust, as it ensures transparency, so when there is an omission, a custom authority might assume misclassification or an attempt to evade duties.
So to ensure that the only payment you need to make is your designated taxes, as specified in the HS code, we recommend maintaining close collaboration with your team and custom brokers in Nuevo Laredo.
2.- Smooth clearance
Another important reason for using the correct HS code is proper categorization. It might not seem like it, but these digits are one of the most influential factors for smooth customs clearance.
This is because the HS code determines the duties, taxes, and trade regulations that apply to your goods. Customs authorities rely on this classification to assess import tariffs, identify restricted or regulated items, and verify compliance with trade agreements.
In contrast, using an incorrect HS code can result in miscalculated duties, shipment delays, and additional inspections, which could negatively impact your supply chain and increase operational costs.
How can you be sure you are coming up with the correct classification?
As we mentioned before, determining the correct HS code for your goods is not a task you can do alone—it requires the expertise of your mexican customs broker. However, this does not mean you are excluded from the process.
You still play a crucial role, as your custom brokers in Manzanillo will rely on you to answer various questions about the nature of your goods to ensure accurate classification. They may ask about:
- Material composition – What materials are used to make the product?
- Intended use – How and where will the product be used?
- Manufacturing process – How is the product made, and does it undergo any specific treatments?
- Country of origin – Where was the product manufactured or assembled?
- Special characteristics – Does the product have any unique features that could affect its classification?
- Packaging and labeling – How is the product packed, and does it include any specific markings or certifications?
Each question will help them narrow the selection using the 97 chapters and 21 sections provided by the World Customs Organization (WCO).
Explanatory Notes (EN) to the Harmonized System (HS)
Additionally, for more precise results and to prevent any misinterpretation, your mexican custom broker may consult the Explanatory Notes (EN) to the Harmonized System (HS).
These notes, published by the World Customs Organization (WCO), provide detailed guidance on the classification of goods by clarifying the scope of each heading and subheading. They include descriptions, examples, exclusions, and technical specifications to help interpret the HS and provide a standardized framework.
For example, if you want to import a selection of men’s Cotton T-Shirts, your custom broker may suggest you the HS code: 6109.10.00, that means:
61 – Articles of apparel and clothing accessories, knitted or crocheted (Section XI)
09 – T-shirts, singlets, and other vests
10 – Made of cotton
00 – Additional national or regional classification (varies by country)
In the grand scheme of things, having this code is only a fraction of the requirements needed for a successful import. But as you see in this article it plays a crucial role. Without the correct HS code, even if all other requirements are met, shipments may face delays, fines, or even rejection at customs.
But with the proper support of a custom broker you can ensure that none of these issues ever arise, allowing for a smooth and hassle-free import process.
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