About HS code
Q: What is a HS Code?
HS Code is short for Harmonized System Code. The Harmonized System is a multipurpose international product nomenclature developed and maintained by the World Customs Organization (WCO). It is periodically updated to secure uniform interpretation or to reflect changes in trade patterns, manufacturing processes or technological advancements. It comprises more than 5,000 commodity groups; each identified by a six-digit code, arranged in a legal and logical structure, and supported by well-defined rules to achieve uniform classification. In short, it is a universal way to assign codes to products.
Q: Why are HS Codes important?
HS Codes are used by customs authorities around the world to identify products when assessing duties & taxes, as well as for gathering statistics. It is also extensively used by governments, international organizations and the private sector for many other purposes such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, a compilation of national accounts, and economic research and analysis. The HS is thus a universal economic language and code for goods, and an indispensable tool for international trade.
Q: Are HS codes the same for all countries?
Generally, yes! The 6-digit Harmonized System is used by more than 200 countries and economies as a basis for their Customs tariffs and the collection of international trade statistics. According to the WCO, over 98 % of the merchandise in international trade is classified in terms of the HS. However, to be compliant with all the import and export rules, most countries require longer than 6-digit country-specific tariff codes. Starting from the 7th digit, every country is permitted to have their own classification system.
Q: What happens if I use an incorrect HS code?
Incorrectly classifying a product can lead to overpayment/underpayment of duties, non-compliance penalties, shipment delays, failure to utilize free trade agreements, seizure of products, or even a denial of import/export privileges. As the declarant, you are responsible for correctly classifying the products, and therefore you are liable.
HS Code Allocation by Eurora
Eurora uses customized collections of machine-learning models. Product descriptions given by the customer are pre-processed and given to the ‘machine’ which does its magic and allocates the HS-code. For allocating an adequate HS code the quality and relevance of the input data, like product descriptions, are important.
Eurora AI-based HS Code Allocation service enables the allocating of 6-digit HS codes for most countries as well as 8 and 10-digit codes for the EU (Combined Nomenclature for 27 countries), UK and US, and 8 - digit codes for UAE.
Q: How does HS Code Allocation AI work?
The algorithms are based on the following methods:
- FastText ensembles using customer-specific input representations.
- Transformer-based deep neural network models.
The choice of model depends primarily on the:
- volume and the variety of customer data
- customer's field of activity.
Eurora constantly has about 10 models, approaches, and ways of combining models in the applied research phase. The Eurora platform allows a fuzzy search. "Inaccurate product description" can mean that due to customer constraints, the description has extra noise in it, the description has typos, or the description is written using synonyms. Eurora solution performs preprocessing which removes any irrelevant information from the description so that the decision can be made only from the informative parts. In addition, instead of correcting the input, the underlying model making the decision is taught to be robust concerning the typos, word cases, and the use of language and words by using context and synonym approximation. Context allows to still derive the correct estimation if some parts of the description are inaccurate. However, if the product description is inaccurate to the level where the description no longer describes the product or service itself (or where it is no longer differentiable from some other product/service category), all bets are off, unless the customer has passed information to Eurora explaining the reasoning further. For existing customers, it's the domain experts and data scientists that work relentlessly to make the HS code allocation as universal as possible. At the same time, we put daily effort into monitoring the quality of the estimations we give to them and improving the AI continuously.
Q: Why is the Eurora AI-based approach better than manual coding? (Why should I use Eurora service?)
Managing a lot of shipments means a lot of HS codes need to be allocated. It takes a huge amount of time to handle this manually, is not cost-effective, and is prone to inconsistencies and errors. Using an AI however provides the answer to these queries in 0.39 ms while also providing a consistent quality of output.
Common questions when using the service
Q: How to write a "good description”?
The general rule is that if people do not understand what the product is by simply looking at the given description, then the AI will not recognize it either. Always remember - AI does not have your feelings (yet). Some things that are obvious to the human eye are not the same for the machine.
A good description contains
- approximately 4-6 meaningful words.
- the name of the actual product as specifically as possible. The name of the product is the most accurate word for a product, not a generalization - blouse, not apparel; computer, not electronics.
The brand name only is not enough to get the correct code.
- detailed information on the characteristics of the product like gender (crucial for clothing and footwear), material, method (e.g. women’s knitted sweater of cotton), working principle (hand tool vs. electric appliance) etc.
Please check out some examples from here.
Q: Why can’t I get the HS Code for my product description?
It is most likely because our AI did not recognize the product from the given description. Follow the tips in this section to find out how to write a perfect product description.