How to Save Money on Custom Duty for HSN Code: A Complete Guide

Are you an importer or exporter who wants to save money on custom duty for HSN code? If so, you need to know how to classify your products correctly and take advantage of the various duty exemptions and concessions available. In this article, we will explain what HSN code is, how to find it, and how to use it to reduce your custom duty liability. We will also share some tips and resources to help you with the process.

What is HSN Code?

HSN code stands for Harmonized System of Nomenclature code. It is a six-digit code that is used to identify and classify products in international trade. It is based on the Harmonized System (HS), a global product classification system developed by the World Customs Organization (WCO). The HS is used by more than 200 countries and covers over 98% of the world’s trade.

The HS code consists of 21 sections, 96 chapters, and thousands of headings and subheadings. Each section and chapter has a title that describes the broad category of products it contains. Each heading and subheading has a four-digit or six-digit code that specifies the product type more precisely. For example, the HS code for coffee is 0901, where 09 is the chapter for coffee, tea, mate and spices, and 01 is the heading for coffee.

The HS code is also known as the tariff code or the commodity code. It is used by customs authorities around the world to determine the import duty rates, collect trade statistics, enforce trade rules, and implement trade agreements. The HS code is also used by other government agencies, such as health, agriculture, and environment, to regulate the import and export of certain products.

How to Find HSN Code for Your Product?

To find the HSN code for your product, you can use one of the following methods:

Use the online Schedule B search tool provided by the U.S. Census Bureau

This tool allows you to search for your product by keyword or description and get the corresponding Schedule B number, which is the U.S. version of the HS code. You can also browse through the sections and chapters of the HS to find your product category.

Use the Customs Rulings Online Search System (CROSS) database provided by the U.S. Customs and Border Protection (CBP)

This database contains official, legally binding rulings from other exporters’ and importers’ requests for Schedule B codes. You can search for rulings on similar products or request your own ruling if your product is difficult to classify.

Use the online Tariff Database provided by the U.S. International Trade Commission (ITC)

This database allows you to search for your product by keyword or HS code and get the import duty rate for various countries. You can also access other information, such as trade agreements, quotas, antidumping duties, and countervailing duties.

Use other online sources

Use other online sources, such as Zauba, Wise, or Trade.gov, that provide information on HS codes and import duty rates for different countries. However, these sources may not be updated or accurate, so you should always verify them with official sources before using them.

How to Use HSN Code to Reduce Custom Duty?

Once you have found the HSN code for your product, you can use it to reduce your custom duty liability in various ways:

Check if your product qualifies for a preferential tariff under a free trade agreement (FTA) between your country and the destination country. For example, if you are exporting coffee from India to Japan, you can benefit from the lower duty rates under the Comprehensive Economic Partnership Agreement (CEPA) between the two countries. To claim this benefit, you need to provide a certificate of origin along with your shipment documents.
Check if your product qualifies for a duty exemption or concession under a special scheme or program offered by the destination country. For example, if you are importing coffee from Colombia to the U.S., you can enjoy duty-free access under the Generalized System of Preferences (GSP) program that grants preferential treatment to developing countries. To claim this benefit, you need to provide a Form A along with your shipment documents.
Check if your product qualifies for a duty drawback or refund under a scheme that allows you to recover some or all of the duty paid on imported inputs used in exported products. For example, if you are importing coffee beans from Brazil to India, processing them into instant coffee, and exporting them to China, you can claim a duty drawback on the imported beans under the Duty Drawback Scheme of India. To claim this benefit, you need to provide proof of export along with your shipment documents.

Tips and Resources to Help You with HSN Code

Here are some tips and resources to help you with finding and using HSN code for your products:

Keep yourself updated on the changes and amendments to the HS code and the import duty rates of your target markets. The WCO updates the HS code every five years, and the latest version is HS 2022, which will come into effect on January 1, 2022. The import duty rates may also change due to trade disputes, policy changes, or currency fluctuations.
Consult a customs broker or a trade specialist if you are unsure about the classification or valuation of your product. They can help you with the documentation, compliance, and clearance of your shipment and save you time and money.
Use online tools and platforms that can help you with the entire export or import process, from finding buyers or suppliers, to getting quotes, to arranging logistics, to making payments. For example, Alibaba.com is a leading global marketplace that connects buyers and sellers of various products and services. You can use Alibaba.com to find HSN codes, import duty rates, shipping costs, and other information for your products.

HSN code is a key element in international trade that can affect your custom duty liability and profitability. By finding and using the correct HSN code for your product, you can take advantage of the various duty exemptions and concessions available and save money on your import or export transactions. You can also use online tools and resources to help you with the process and make it easier and faster.

How Custom Duty for HSN Code Affects the Global Demand in the Industry

The Harmonized System (HS) is a global product classification system that assigns a six-digit code to every type of product traded internationally. The HS code, also known as HSN code in India, is used by customs authorities to identify products, assess duties and taxes, and gather statistics. The HS code is also the basis for determining the import tariff rates for different products in different countries.

One of the factors that affects the global demand for a product is the custom duty or import duty that is levied on it by the importing country. Custom duty is a tax that is imposed on the value of the imported goods to protect the domestic industry from foreign competition and to generate revenue for the government. Custom duty can vary depending on the product type, origin, destination, trade agreement, and other criteria.

In this article, we will look at how custom duty for HSN code affects the global demand in three industries: electronics, rubber, and textiles.

Electronics Industry

The electronics industry is one of the largest and fastest-growing sectors in the world, with a global market value of $2.5 trillion in 2019. The industry produces a wide range of products, such as computers, smartphones, TVs, cameras, appliances, and components. The HS codes for electronics products fall under chapter 84 and 85 of the HS system.

According to the World Trade Organization (WTO), the average applied tariff rate for electronics products was 4.6% in 2018, with some countries imposing higher or lower rates depending on their trade policies. For example, India has a high tariff rate of 18% for most electronics products under HS code 8504 (electrical transformers, converters, etc.), while the United States has a low tariff rate of 0% for the same products under the Generalized System of Preferences (GSP) program.

The custom duty for HSN code can affect the global demand for electronics products in several ways. First, it can influence the price competitiveness of the products in the importing market. A higher custom duty can make the imported products more expensive than the domestic or other foreign products, reducing their demand. A lower custom duty can make the imported products cheaper than the domestic or other foreign products, increasing their demand.

Second, it can affect the production and trade patterns of the electronics industry. A higher custom duty can discourage imports and encourage domestic production or sourcing from countries with lower or preferential tariff rates. A lower custom duty can encourage imports and discourage domestic production or sourcing from countries with higher or non-preferential tariff rates.

Third, it can affect the innovation and quality of the electronics products. A higher custom duty can create a barrier to entry for new or advanced products from foreign markets, limiting their diffusion and adoption. A lower custom duty can create an incentive to introduce new or advanced products from foreign markets, enhancing their diffusion and adoption.

Rubber Industry

The rubber industry is one of the oldest and most versatile sectors in the world, with a global market value of $40 billion in 2019. The industry produces a wide range of products, such as tires, hoses, belts, gloves, and latex. The HS codes for rubber products fall under chapter 40 of the HS system.

According to the WTO, the average applied tariff rate for rubber products was 6.5% in 2018, with some countries imposing higher or lower rates depending on their trade policies. For example, India has a high tariff rate of 10% for most rubber products under HS code 4010 (conveyor or transmission belts), while China has a low tariff rate of 0% for some rubber products under HS code 4001 (natural rubber).

The custom duty for HSN code can affect the global demand for rubber products in similar ways as for electronics products. It can influence the price competitiveness, production and trade patterns, and innovation and quality of rubber products in different markets.

Textiles Industry

The textiles industry is one of the oldest and most diverse sectors in the world, with a global market value of $961 billion in 2019. The industry produces a wide range of products, such as fabrics, garments, carpets, and curtains. The HS codes for textiles products fall under chapter 50 to 63 of the HS system.

According to the WTO, the average applied tariff rate for textiles products was 8.6% in 2018, with some countries imposing higher or lower rates depending on their trade policies. For example, India has a high tariff rate of 20% for most textiles products under HS code 5208 (woven fabrics of cotton), while the European Union has a low tariff rate of 0% for some textiles products under HS code 6302 (bed linen).

The custom duty for HSN code can affect the global demand for textiles products in similar ways as for electronics and rubber products. It can influence the price competitiveness, production and trade patterns, and innovation and quality of textiles products in different markets.

References:

http://www.wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonized-system.aspx

http://www.wcoomd.org/en/about-us/wco-members/membership.aspx

https://www.science.org/doi/10.1126/science.aaa3141

https://wise.com/in/import-duty/
http://www.cbic.gov.in/resources//htdocs-cbec/customs/cs-tariff2017-18/cst1718-idx.pdf
https://ec.europa.eu/taxation_customs/business/calculation-customs-duties/what-is-common-customs-tariff/taric_en

https://www.cbp.gov/trade/programs-administration/determining-duty-rates

https://www.trade.gov/harmonized-system-hs-codes

https://wise.com/in/import-duty/

https://alibaba.com