When shipping goods in or out of Canada, there’s a specific code you need to follow.
It’s called the Harmonized System (HS), a standardized numerical method developed by the World Customs Organization (WCO) to identify and categorize a wide range of internationally traded products—from metals, machinery and medical supplies to toys, tobacco and farm tractors. Used by more than 200 countries around the world, all goods, including food and raw materials, are given a six-digit HS code to calculate customs tariffs and duties and collect trade statistics. Compliance is mandatory and as an exporter, it’s your responsibility to use the correct HS code when declaring your goods.
But with the ever-changing trends in global trade and rapid advancements in technology, the HS system needs to be updated every five to six years. On Jan. 1, more than 350 changes, revisions and amendments were announced to the classification system. To help you avoid penalties and disruptions in your shipments, here’s what you need to know:
What’s an HS code?
The HS code is a six-digit number used to classify globally traded products. Also called HS numbers, they’re used to identify the duty and tax rates for specific types of products. The first two digits of the code indicate the main product category. The next four digits indicate the subcategories the product fits into.
What’s the difference between a duty and tariff?
Duties are indirect taxes that are imposed on the consumer of imported goods. Tariffs are a direct tax applied to goods imported from a different country. Tariffs and duties help protect domestic industries by making imports more expensive.
How do I determine the right HS code for my product?
For goods you’re purchasing from outside Canada, you can look up the Canadian customs tariff on the Canada Border Services Agency website. For goods you’re shipping abroad, you’ll find the HS codes here. Having trouble finding the code you need? Use the keyword search as a starting point. But it’s always best to contact a customs broker because selecting the correct code can be complicated in some cases.
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Why were changes made to the HS codes?
Changes, revisions and amendments to the codes were made this year to ensure that the classification of goods stays up-to-date. With increasing innovation and so many new products coming to markets, it’s imperative that sections of the customs tariffs are updated.
What are some timely examples?
Specific amendments were made to reflect the current global pandemic and growth in innovation. Here are just three examples:
- Health and safety: In response to the dangers of delays in the deployment of tools for the rapid diagnosis of infectious diseases in outbreaks, changes were made to the provisions for the diagnostic kits to simplify classification.
- Unmanned aerial vehicles (UAVs): Commonly referred to as drones, they were given their own specific provisions to simplify the classification of these aircraft.
- Smartphones: A subheading was imposed to clarify the classification of these multifunctional devices.
Which Canadian sectors will be affected by the new HS code changes?
If your products fall under the following customs chapters, it’s a good idea to double-check their classifications:
- Chapter 29: Organic chemicals
- Chapter 30: Pharmaceutical products
- Chapter 44: Wood, articles of wood, charcoal
- Chapter 70: Glass and glassware
- Chapter 73: Articles of iron or steel
- Chapter 84: Nuclear reactors, boilers, machinery
- Chapter 85: Electrical machinery and equipment
- Chapter 87: Vehicles (non-railway, non-rolling stock)
- Chapter 88: Aircraft and spacecraft
- Chapter 90: Medical or surgical instruments and apparatus
- Chapter 95: Toys, games and sports accessories
- Chapter 97: Works of art, collectors’ pieces and antiques
Any advice for exporters?
It’s very important to discuss these changes with a customs broker because they’re the experts when it comes to trade compliance. Many Canadian brokerage companies offer services overseas, which helps streamline the process of verifying HS codes. The key for exporters (and importers) is to stay up-to-date and ensure they verify how their goods are classified, especially if they’re affected by the HS code revisions.
How can Export Development Canada help?
Our trade advisors recommend that exporters review The Forum for International Trade Training (FITT) free guides from its FITTskills Lite learning series. For new entrepreneurs, Documents and the International Trade Transaction and Crossing Borders and Managing Customs guides are especially helpful. They outline how to properly complete, submit and manage all documents to meet legal and trade regulatory requirements and avoid financial penalties and customs issues.