HSN Code vs HTS Code: Key Differences Explained

In the ever-evolving world of international trade, the classification of different goods and products is necessary to streamline taxation while getting familiar with customs regulations. To process global trade efficiently, the two most important systems, the HSN code (Harmonized System of Nomenclature) and the HTS code (Harmonized Tariff Schedule), play a major role in signifying the whole procedure of taxation. Both are distinctive and serve as an effective system to address every category of item with a unique application.

However, business enthusiasts may get confused by the terminology even after they check HSN codes on different platforms to perform business trade. Today, through this blog, you will come to know about both the important terminologies and their key differences to apply them properly while trading.

What Is the HSN Code And How Does It Work?

As the name suggests, Harmonized System Nomenclature (HSN code) was first developed in 1988 by the WCO to standardize global trade while classifying the different items and products. It is followed by more than 200 countries and implies the system to regulate international trade, while becoming a backbone for every trade that occurs.

The primary objective of the HSN code is to:

• Ensuring the appropriate classification of every type of product for international trade.

• Elevating the authenticity of statistical data for global trade.

• Access to reliable taxes and duties on different types of goods.

As per the data, more than 98% of global trade is classified using HSN codes, making it easy for businessmen to process their trade while fetching GST HSN codes to improve their global trade significance.
 
While coming to the HSN coding system, it is a complete and arranged six-digit code curated in a logical structure. However, there is a possibility of finding 8 and 10-digit HSN codes, depending on the bulk and deep information for a particular product. Before you search the HSN code list, address a few things about the code, such as:

Simply taking an example of the Cashew HSN code: 0801.32

• Here, the first two digits “08” of the code represent a broad category of products such as fruit and nuts.

• The next two digits of code “01” define the specific category (Cashew nut).

• The last two digits “32” help in identifying finer information and classification (Shelled cashew nut)

Sometimes, you may find HSN codes with 8 digits, as countries are allowed to specify their products more precisely, like in India, 8-digit HSN codes are used for identifying GST HSN codes and grabbing deeper information for international trade.

What is the HTS code, and How Does it work (USA’s approach)?

Coming to the HTS code, which stands for “Harmonized Tariff Schedule,” specifically adapted by the United States. The code is generally based on HS but known as HSTUS after adaptation by the US for import classification.

US HTS codes are formed with a 10-digit code, which was first developed by the United States International Trade Commission, helping US businesses to determine the import duties and tariffs. Before you search for the US HTS code list, you need to know the crucial things about them, such as:

Simply taking an example of Smartphone HTS code: 8517.13.0000

• Here, the first 6 digits (8517.13) provide classification based on the HS system, such as (Chapter, heading, and subheading, which are Electrical machinery, Telephone sets, Smartphones, respectively). It matches the internationally used HSN/HS code structure.

• Whereas the next 4 (0000) digits of the HTS code provide deeper information and classification of the product specific to the US, like duty rates and statistical classification.

Why is the Accurate HTS and HSN code list crucial for businesses?

To lead the right business trade with different countries, HSN codes and HTS codes play a pivotal role in identifying the trade process without any discrepancies. It helps businesses in several ways, such as:

• Ensures smooth customs clearance and eliminates penalty risk

Whether you are exporting any product to a different country, using the right code protects you from overpaying and underpaying duties. Even, it reduces the heavy penalties and fines while your goods will easily clear customs formalities and conditions.

• Assist in availing of the Preferential tariff benefits

Due to the trade collaboration of many countries and trade agreements between different groups like ASEAN-FTA, EU, and USMCA, they provide special discounts on duties for different goods. Therefore, using the right type of HSN and HTS codes helps in identifying these benefits and claiming them to augment your product share.

• Enables accurate pricing and costing

Using the appropriate HTS and HSN code search features, importers and exporters can identify their genuine and effective duties before setting prices. The miscalculation may lead to the risk of loss due to sudden increases and decreases in final cost.

Wrapping up!

The development of HSN and HTS codes is not just a common number; it’s a boon for businesses to identify the right taxation and customs duties for different countries, helping them to practice import and export of goods without any interruption. Finding an accurate HTS code list and HSN code list helps identify the correct duty rates, which in turn lowers the final cost, facilitates easy and quick clearance at ports, eliminates the risk of compliance issues and penalties, and streamlines global market trade. So, whether you are an Indian exporter, a US importer, or a global trader from any other country, HSN and HTS codes are invaluable numbers that can streamline your global business flawlessly.