Square Insights Hs Code, the Starting Point of
Global Trade Data

Key Summary at a Glance

The HS Code (Harmonized System Code) is a product classification system used universally in global trade.
It serves as the standard language of global trade, covering customs duty and tax calculation, customs clearance inspections, and trade statistics. An HS code consists of a 6‑digit international base code and country‑specific extension codes. Incorrect use of HS codes can lead to clearance delays, additional levies, audits, and fines. Recently, AI‑based HS code classification has been spreading, making accuracy and efficiency a crucial competitive advantage.

1. What Is an HS Code?

The HS Code (Harmonized System Code) is an international product classification system established by the World Customs Organization (WCO) to standardize the categorization of trade goods worldwide. More than 90 % of global trade volume is currently managed by using the HS Code system.

Why the HS Code Is Needed

• Unifies product names, languages, and classification criteria varied by countries into a single code system

• Provides an objective basis for applying customs duties, import regulations, and accumulation of statistical data

• Serves to clearly describe goods when declaring imports and exports

2. When and Where Do You Encounter HS Codes?

HS codes are rarely visible in everyday life, but they appear the moment a product crosses a border.
In most cases, an HS code is recognized first in situations as below:

“When preparing export import documents or entering data into a system”

The HS code is not just a simple input value; it represents how a product is officially defined.
It is required in the following processes:

• Import and exports declaration documents

• Commercial Invoice (C/I)

• Packing List (P/L)

• Customs clearance system entry stage

“When receiving a notice that customs clearance is delayed”

After submitting an import and export declaration, customs will first check the HS code if any of the following occurs:

• When clearance is put on hold,

• When customs request additional documents,

• When being asked to verify grounds for the classification

Customs determine the HS code based on these criteria:

• Characteristics of the product,

• Which regulations and duties apply,

• Whether the declared information is valid

“When customs duties are higher than expected”

When the same products are applied by higher tariffs or different duties by country, this discrepancy usually stems from differences in HS‑code classification. The HS code determines the tariff rate, value‑added tax or consumption tax applicability, and any conditions for reduction or exemption.

“When each country’s required code is different and confusing”

Even for identical products, the number of digits can vary among Korea, the United States, the EU, etc. This is because the HS code is standardized internationally up to six digits; any additional digits are extensions codes defined by individual countries.

In international trade, the HS code serves as a common language, but at the actual customs clearance phase you must also consider each nation’s extended codes. It is at this point the HS code becomes a tangible “practical issue.”

Once entered, an HS code can affect customs clearance, taxation, statistics, and audits. Therefore, the HS code is not “information that gets handled automatically” but a baseline data that must be understood and managed.

3. How is an HS code structured?

The standard HS code is expressed as a 6‑digit number. The first six are international common standard; any digits beyond that are extended numbers defined by each country.

EX) South Korea: 10‑digit, United States: 10‑digit (HTS Code), EU: 8‑digit (CN Code) EX) Mobile phone: 8517.12‑0000
Coffee beans: 0901.11‑0000

• First 2 digits: Chapter – the broad category of the product

• Middle 2 digits: Heading – the product group within the chapter

• Last 2 digits: Subheading – the specific item within the heading

4. Impact of HS Codes on Customs, Customs Clearance, and Trade Statistics

An HS code is not merely a numeric system; it plays a role of foundational reference for deciding taxes, regulations, and risk assessments.

Why can a single HS code lead to such different outcomes?

Customs authorities and governments evaluate goods based on the HS code rather than product descriptions. In other words, an HS code conveys the following information:

• What is the product?

• Which tariff rate should be applied?

• Is the product subject to import restrictions or certification requirements?

Key Areas On Which HS Codes Have an Impact

• ① Application of Tariff Rates
  HS codes are the direct basis for determining tariff rates. Even for the same product, tariffs can differ depending on its HS code classification. Customs calculates duties using the tariff table set for each HS code, and a change in code can affect the rate, eligibility for reductions, and any additional taxes.
• ② Calculation of VAT·Consumption Tax
  In many countries, value‑added tax (VAT), consumption taxes, and special duties are also levied based on HS‑code classification. An error in HS‑code classification, therefore, influences not only customs duties but the entire tax structure.
• ③ Application of Import Restrictions & Certification Requirements
  HS codes are used to determine whether a product is prohibited or restricted, and whether safety, environmental, or health certifications are required. The same product may be subject to certification or be exempt depending on its HS code.
• ④ Trade Statistics & Government Policy Data
  HS codes work as the basic unit for national import and export statistics, industrial policy formulation, and trade‑negotiation data. Code classification affects statistical accuracy of not only corporates but also countries.

Therefore, if an HS code is mis‑classified, it can lead to outcomes such as customs hold or delay, additional customs and tax, fines and administrative penalties, and, in case of repeated errors, being subject to a customs audit. Customs authorities may also request an explanation and supporting evidence for “why this HS code was chosen.”

5. Should HS codes be continuously checked?

Is an HS code set once and done?

An HS code is not a “set‑and‑forget” code. The World Customs Organization (WCO) revises the HS codes every 5 years to reflect global industrial structures and technological changes. These revisions are not merely number changes; they alter the very criteria by which products are classified.

• Most recent update: HS 2022 (January 1, 2022)

• Next full revision: HS 2027 (planned)

Frequently Encountered “Invisible Risks” in Practice

• Code remains in the system but has changed in the standard
  Many ERP or customs‑declaration systems still hold previous HS codes. Data entry may proceed without error, yet problems surface during post‑assessment, customs inspections, or audit phases. In other words, the risk remains hidden until an issue arises.

• International standard matches, but national standards differ
  The first six digits of an HS code are internationally uniform, but country‑specific extensions, which are used for actual customs clearance, are frequently altered according to each nation’s policies. If you only align with the international standard and neglect checking the national extensions, errors can occur at the clearance stage.

Why AI is gaining attention at this point

Recently, AI‑based classification and verification technology are rapidly utilized in the HS code management area. AI can help in “automatic recommendation of HS code candidates based on product description and specification information, consistency checking of HS codes for large numbers of items, detection of misclassification possibilities through learning of past classification history, and identifying the impact scope when HS codes are revised.”

Through this, HS code management is moving from simple manual entry to a data‑based management area.

However, AI cannot “take responsibility” of HS code classification. The WCO also makes clear that automated tools are means to support decision‑making, and the legal responsibility for HS code classification lies with the reporting entity. The important thing is the combination of “AI + verification system + management process.”

6. How to Search For HS Code

• ①How to search for Customs Administration HS Code
  Access the Customs Administration HS Code search page (https://unipass.customs.go.kr/clip/index.do)
  → Enter product name (Korean or English) → Check item description and tariff rate → Select the most similar item code
• ②WCO HS Code Site
  Enter the WCO HS Code website (https://www.wcotradetools.org/en/harmonized-system)
  → Able to check international standard HS code (6-digit) and description of classification in search tools (*mostly in English)
• ③Overseas HS Code sites :Customs or government agencies of each country also provide HS code and extended‑code searches
  ✔ United States HTS (Harmonized Tariff Schedule) – provides U.S. import tariff codes and descriptions
  EU TARIC – European Union integrated tariff codes and regulatory/tariff rates
  China, Japan, Singapore, etc. customs search systems – allow verification of country‑specific HS code applications
  → First verify the 6-digit international HS code on the WCO site, then search for detailed extended codes and tariff rates on the relevant country’s customs website to obtain more accurate information.

[Closing Insight]
✅ HS codes are not just numbers. They are the basis for customs duties, clearance, and risk assessment.
✅ Managing HS codes is not a “one‑time classification” but a matter of “continuous management.”
✅ When managed with data and platforms, HS codes become a strategy that prevents costs and delays.