What is the Harmonized Tariff Schedule?

HTS Codes, also known as the Harmonized Commodity Description and Coding System, or HS Codes, or simply the Harmonized System, is a system for classifying products that are shipped or traded internationally. The system is largely standardized across all developed trading countries. Countries employing this code classify their import tariffs in accordance with these classification codes. 

The system was promulgated by the World Customs Organization in 1988. The Harmonized Tariff Schedule of the United States (HTSUS), also known as the Harmonized Tariff Schedule of the United States Annotated (HTSA), is the principal schedule that not only classifies customs duties payable on various goods imported into the United States, but also categorizes US-made goods that are exported to other countries. 

The classification is based on parameters such as its designation, intended use, and components used during the manufacturing process. The HTSUS then allocates unique ten-digit classification code numbers to all permitted goods. The United States Customs and Border Protection is the sole authority entrusted with dispensing verdicts on cataloguing of imports.

How is the Harmonized Tariff Schedule Used?

The function of the HTS code system is to make international trading of goods (import-export) process easier. The codes system identifies and classifies more than 5,000 groups of commodities. The HTS code consists of 6 digits representing a particular class of commodity. The categorization breakdown proceeds as follows:

• System Sections (21)
• System Chapters (99) - Only 96 chapters are in use internationally. Chapter 77 is reserved. Chapters 98 and 99 are dedicated for special provisions for individual nations. Chapter 99 also includes specific limitations for code use.
• Headings (5,000+) - There are thousands of headings. Within these, there are many sub-headings. These serve to indicate a more specific category within any system chapter. The last 2 digits of the code are the most specific, indicating the sub-categories for the product.

Some countries will add an additional 2 to 4 digits to create a specific categorization for the good within that country. These are known as Harmonized Tariff Schedules. The US uses a 10-digit code system, known as schedule B numbers. The HTS codes are used for imports coming into the US. The Schedule B codes are used when preparing paperwork for export from the US.

Harmonized Tariff Schedule Codes in the United States

The HTSUS draws heavily from the international Harmonized System, which is an international system of nomenclature mandated by the World Customs Organization (WCO). WCO's Harmonized System essentially defines a majority of the global goods trade and is a reliable mechanism used by nearly all countries worldwide as a standard for deriving their tariff schedules.

History of the Harmonized Tariff Schedule

The HTS was intended to replace the erstwhile Tariff Schedules of the United States (TSUS) and was incorporated into subtitle B of title I of the Omnibus Trade and Competitiveness Act of 1988. The schedule came into effect on January 1, 1989. As a rule, the United States refrained from implementing the earlier international nomenclatures. However, it still enlisted as an affiliate of the World Customs Organization - the body that had hitherto established the Customs Cooperation Council (CCC) as also the U.S. Customs Service. These organizations had played a vital role in developing the HTS throughout the third quarter of the 20th century. At the behest of President Ronald Reagan in the early 1980s, the United States International Trade Commission formulated a draft of the U.S. tariff schedules employing HTS terminology. The Omnibus Trade and Competitiveness Act was enacted to replace the Tariff Schedules of the United States on August 23, 1988.

Chapters in the Harmonized Tariff Schedule

The HTSUS consists of 99 chapters categorized under 22 sections. It also comprises of separate appendices for chemicals, drugs, and components of acid dyes. The first few chapters are dedicated to raw materials such as unprocessed goods of plant and animal origins, whereas later chapters deal with processed goods and ready to use equipment such as machinery and electronic appliances, musical instruments, automobiles, fashion accessories and such like. There is however a bit of ambiguity in classification. For example, toys and fine art are classified separately in separate chapters. Also, there is an unclassified chapter 77 that is set aside for future usage.