Products Classification For International Trade

Classification of the products is one of the important steps in the whole import and export process. It is a basic task to export, import or even for domestic trading.

Standard International Trade Classification (SITC) is a classification of goods used to classify the exports and imports of a country to enable comparing different countries and years. The classification system is maintained by the United Nations.

The SITC is recommended only for analytical purposes – trade statistics are recommended to be collected and compiled in the Harmonized System instead.

Harmonized Commodity Description and Coding System or simply Harmonized System (HS) is effective since 1988 and is maintained by the World Customs Organization (WCO) and currently, over 200 countries and economies make use of it.

HS Code is widely used in every international trade process. As an importer or exporter, it’s necessary to fully understand and make proper use of it.

Harmonized System proposes a logical organization of products classification, going from products economically less elaborated to ones with most added value. Therefore live animals are found at the beginning while machinery and precision instruments are listed in subsequent chapters.  The composition, form, and function of the product are part of the classification model. The HS is structured in 21 sections and 97 chapters and those subdivided into approximately 5.000 headings and subheadings.

All references of HS to a given product are expressed by six digits. The first two digits indicate the HS chapter; the second two digits designate the headings and the next pair of digits the subheadings. Under the Harmonized System, all goods are subject to unique and unambiguous classification. It allows the classification even for merchandises yet to be produced.

Most of the countries that adopted the HS added two or four more digits to the initial six to accommodate specific needs of customs tariffs or for statistical purposes as well as to add their own Explanatory Notes.

Regional agreements or specific international commerce treaties may use other forms of product classification. That is the case of Mercosul the Southern Common Market, sub-regional bloc formed by Argentina, Brasil, Uruguay, Paraguay, and Venezuela. Mercosul uses the Mercosul Common Nomenclature (MCN), with eight digits, where the first six come from the Harmonized System and the two last digits are specific attributions within the Mercosul countries.