The development of the HS and HTS codes
New importers almost always have the same question: what is an HTS number? This is because all products that are imported into other countries are required to have an HTS code that identifies what those products are without the customs agency needing to open shipments. But how did these HTS codes come into being? Who decided which codes go with which products? The answer lies in the desire to have a common international trade language that makes imports easier for everyone.
Simplifying the international trade process
Going back in history, the first time that a governmental agency attempted to create a common language for trade purposes was during the Roman Empire. Roman senators created a system of customs tariffication that listed merchandise commonly traded among countries along with their corresponding rates of duty. This list was known as the Customs Tariff of Palmyra. This was the first known time that different products were taxed at different rates instead of a single flat rate.
The Customs Tariff of Palmyra laid the foundation for other classification systems that at first were developed on a country-by-country basis. Importers had to know how to code their items for every country they imported into. This wasn’t too challenging when it began because there weren’t many products that could be traded. Of course, this changed as more countries began to trade together and technology made international trade easier.
After World War II, the need for standardization of customs tariffs became apparent, as new products were hitting the market constantly, making it nearly impossible for customs agencies to properly tax goods coming into their countries and to track what was being imported. This led to the Convention on Nomenclature for the Classification of Goods in Customs Tariffs in 1950 that developed the Brussels Tariff Nomenclature (BTN), which was later renamed the Customs Co-operation Council Nomenclature (CCCN).
Initially, the BTN and CCCN only had four digits, but it soon became clear that additional digits were necessary to classify products on a more granular level. In 1989, the Harmonized System as we know it today was established that developed a six-digit code for all products traded among international countries.
In 1989, the United States adopted the HS, but tweaked it to meet its international trade needs. It added two digits as a “rate line” to more precisely tax items according to their descriptions and an additional two digits to use for statistical purposes. This was the birth of the Harmonized Tariff Schedule of the United States, or HTSUS or simply HTS.
The HS can be expanded to 10 digits, with the last four digits left up to individual countries for their specific purposes. As such, your products might have a 10-digit HTS code for the United States, but a different 10-digit code for China, for example. The first six digits will be the same, but those extra four can vary. This is why it is imperative that importers pay attention to where they’re importing goods and what they’re importing so their products are always properly coded.
It’s always interesting to learn how systems were developed and why. The HS and HTS codes are no different and are actually extremely useful in the world of international trade.