Introduction to HS Codes and Why They Are Needed
If you have ever ordered something from another country or sent a package to a friend on the other side of the world, your package has been given a Harmonized System (HS) code. The HS codes are a standardized numerical method of classifying traded products.
It is used by customs authorities around the world to identify products when assessing duties and taxes. And for gathering statistics.
The HS system is managed by the World Customs Organization (WCO). They update it regularly every five years. The system assigns specific six-digit codes for each product being exported or imported.
The HS Nomenclature comprises about 5,000 commodity groups. These groups are identified by the 6-digit code and arranged according to a structure based on fixed rules.
Over 98 percent of goods are covered by the HS system. Countries can assign a longer code themselves to have a more specific classification. For instance, the US uses 10-digit codes and China’s codes are 13 digits. Still for all countries, the first 6 numbers of a code are the internationally agreed HS-6 code
Based on those codes, customs offices determine the rate of duty and taxes for goods that enter a country. And as the 6-digit code is the same everywhere, there is no confusion. And nothing is “lost in transition”.
One might ask, why does it matter for a marketplace or a consumer?
Eurora’s HS codes classification
Currently, HS codes are often added to parcels manually. That means that for every package sent, somewhere a person assigns the code.
This is terribly time-consuming but the system has been working. Up until now.
At the moment, most parcels that enter the EU are not declared in customs. As currently only packages worth more than 22 EUR need to be declared. ON July 1st, 2021, however, this will change. And the new regulations say that all parcels must now be declared. This means a lot more declarations to fill.
While the exact numbers are hard to predict, we can assume that the number of electronic declarations will rise from 2 billion to 8 billion. It is pretty safe to say that without going from manual to automated labor, the speed of customs processes will come to a grinding halt.
Luckily, we have been working on a solution. Eurora’s Artificial Intelligence (AI) automatically chooses the correct HS code for a product based on the product description and fill in the electronic declaration customs need.
This is an automated classification service. Eurora built the service on top of an extensive science-backed AI engine which automatically matches product descriptions with HS-6 codes in under 100 milliseconds. Eurora ‘s AI engine currently processes over 350 million product descriptions. And we are continuously expanding our database of different product descriptions.
This is all possible due to years of research and machine learning. As our team has been working with scientists and universities for a long time in order to build the most precise AI for the trade industry.
Marketplaces can enable this service via a simple API integration which can assign HS codes in real-time in buyer’s shopping carts.
How Eurora helps everyone affected
For marketplaces, the benefits are clear. If people buy goods from your online store, and there are issues with delivery, it is likely, the customer will blame you.
And avoid buying things from your website in the future. So for online shops, it is a matter of trust and reputation to have a system in place that makes shipping goods across borders as smooth and fast as possible.
For postal companies and logistics firms, the need for an efficient HS allocation system is vital as well. As a huge number of parcels would slow down operations completely. And in turn, make it much harder to grow or even keep a business running.
In order for trade to run smoothly, companies need to make sure all their papers are in order. That declarations are done correctly, and no detail is missed. Eurora can help you with all of that.