What an HS code is and why an importer needs it

How the ten digits are built

The code reads from left to right, from the general to the specific. Let us take black tea in packages of up to 3 kg — code 0902 30 00 00.

The key thing to remember: the first six digits are the same worldwide. That is the Harmonized System level of the World Customs Organization. So subheading 0902 30 means the same tea in China, in the EU and in Ukraine. Beyond that each country adds its own detail, and the Chinese code in the shipping documents will not match the Ukrainian one in length or in its final digits. That is normal, and it also gives you your first check: if the first six digits of your code and of the code on the Chinese export declaration diverge, there is an error somewhere.

Chapters are grouped into sections designated by Roman numerals. In total the nomenclature has 21 sections and 97 chapters, of which chapter 77 is reserved.

What exactly depends on the code

Import duty. The customs tariff has several columns of rates. Goods from China are subject to the preferential-tariff column that applies to countries with which Ukraine mutually grants most-favoured-nation treatment within the WTO. The free-trade preferential rate does not apply to Chinese goods, because there is no free trade agreement between Ukraine and China.

VAT. The base rate is 20%, with reduced rates for certain product groups. It is charged on the customs value together with duty and excise.

Excise. Applies to a narrow list — vehicles, fuel, alcohol, tobacco. It does not affect most imports from China.

Non-tariff measures. The part with the most expensive consequences. It is the code that determines whether you need a certificate or declaration of conformity to a technical regulation, a conclusion from the State Consumer Service, a phytosanitary certificate, a radio frequency authorisation, or a licence or permit from the State Export Control Service. The list for a specific code is best established before purchasing rather than after the cargo reaches the port. This is covered in detail in the article "Which documents you need for import".

Three things are visible in this table.

First: duty is calculated on the customs value, not on the price of the goods. Logistics to the border is part of the base, so cheaper freight reduces not only the forwarder's invoice but the payments at customs as well.

Second: VAT is charged on an amount that already includes duty. That is not a calculation error but the normal sequence.

Third: for a VAT payer, the tax paid at customs goes into the VAT credit. So the genuinely non-recoverable cost of importing is duty and logistics, while VAT is a working capital question. This is exactly why official import with VAT for a company on the general tax system is usually cheaper than it first appears.

How the code is determined and what to do with borderline goods

The code is determined not by similarity of names but by the General Rules for the Interpretation of the nomenclature. There are six rules and they apply in strict sequence: first the texts of the headings and the notes to sections and chapters, then the rules for mixtures, sets and unfinished articles, and only at the end — analogy.

In practice classification requires a technical description of the goods, their composition or material, purpose and operating principle, and often photographs, a catalogue and the manufacturer's specification as well. Two items that look identical can carry different codes depending on material or function.

If the goods are complex or expensive and the cost of an error is high, there is a lawful way to remove the uncertainty — an advance ruling on the classification of goods. It is issued by the customs authority on application, is valid for three years and is binding on customs. For regular imports of a complex product range this is the simplest way to insure yourself against a dispute at the border.

What happens if the code is wrong

Customs has the right to disagree with the declared code and issue its own classification decision. The consequences depend on which way the error went.

• The code understated the payments. Duty and VAT are assessed additionally, plus a penalty which under the Customs Code can be a multiple of the underpayment itself.
• The code overstated the payments. The overpayment is refunded, but only after the declaration is amended, and that takes time.
• The code brought other permits with it. The most unpleasant scenario: the cargo is already at the port and needs a certificate that takes weeks to obtain. Storage runs for the whole of that time.

So the code is not something to be settled on the day the declaration is filed. It is worth checking while you are still discussing the specification with the factory.

We select the code together with you before the purchase, not at the port: we look at the specification, establish which permits the code requires, and obtain them ourselves — including certification for product ranges that cannot clear without it. Customs clearance is handled by our own and partner brokers, or we deliver the cargo to the terminal for your own broker if you already have one.