In the course of export consulting, we often find exporters who have some idea of the significance of the Harmonized System (HS) Code since it is tied directly to customs duties. However, when pushed further, exporters based in the U.S. are often unaware of another code called the Schedule B, which is critical to filing accurate export documentation. When exploring an exporter’s knowledge of the HS Code, including the Harmonized Tariff Schedule of the United State (HTSUS) and the Schedule B, exporters often do not understand the importance or difference between these various classifications.
Defining these terms helps exporters understand the importance of each element:
Harmonized System (HS) Code: The HS is a standardized six-digit international product classification number, also known as an HS code. More than 200 countries have adopted the same initial six-digit codes as identified by the World Customs Organization (WCO) to classify products entering their borders1. A product is classified with a specific country’s HS Code. While the first 6 digits remain consistent among all countries, the importing country can extend the code to a country-unique 8- or 10-digit code. A correct HS Code classification helps in the assessment of duties owed on imported goods by the importing country’s customs authorities.
The Harmonized Tariff Schedule of the United States (HTSUS) is used by U.S. Customs and Border Protection (CBP). The HTSUS is comprised of 8- and 10-digit codes used to assess duties for all merchandise imported into the U.S. CBP administers the HTSUS at U.S. ports of entry and provides advice and rulings on matters relating to the classification of imports.2
The Schedule B is a 10-digit code for the export of goods leaving the U.S. The Schedule B is administered by the U.S. Census Bureau and is used to track the amount of trade goods that are being exported from the U.S.3
Explaining the Differences
Exporters need to understand the importance and the differences of these various codes and how to apply them in order to successfully export. When exporting goods, U.S. exporters must have the country-specific HS code readily available for every country they export to in order to present the code to the importing country’s customs authority. While the HS code is used by foreign countries’ customs authorities, the Schedule B number is an exclusively U.S.-based number for U.S. exports. The exporter must classify their product against the Schedule B once the product’s initial 6-digit HS Code has been identified. In the case of U.S. customs, often the HTSUS and the Schedule B are the same or similar as they both share the international six-digit HS code. However, U.S. exporters should not assume that the HTSUS and the Schedule B are always the same and should take the time and effort to classify their products to each schedule. A fun fact: The U.S. Census Bureau reports there are approximately 19,000 codes in the HTSUS, but only 9,000 codes in the Schedule B codes – food for thought as exporters classify their products against these two resources.4
As with anything related to government filings, accuracy matters in the use of HS Codes and Schedule B numbers. Customs authorities look to the HS Code to guide duty assignments, possible taxation requirements, as well as certain compliance issues they may have to apply as goods enter a country.
- Incorrect HS classifications can negatively impact the goods clearing customs in an efficient and cost-effective manner, customs duty assignments, and Free Trade Agreement eligibility or other processing issues. An incorrect HS code can result in an incorrect duty leading to a host of regulatory violations, creating long-term challenges for the exporter.
- As for the Schedule B classification, the U.S. government places significant emphasis on accuracy in terms of the product controls and data collection obligation. If an Electronic Export Information (EEI)/Automated Export System (AES) filling is incorrect, it can lead exporters to face long-term challenges getting their goods out of the U.S. and may include fines and penalties.
Exporters must have a firm grip on all classifications for each of their products for the smooth transfer of goods. Becoming fluent in the utilization of these important codes will assist companies in successfully conducting international trade.
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3 Schedule B number / Export number (cbp.gov)
4 Exporting With Import Classification Numbers (census.gov)