HS codes in Russia and EAEU

Classification of goods crossing the border of any country is based on customs codes directories which provides all the goods with special codes in order to identify them, calculate customs duties, consider applying licenses, and perform other important actions. In the Eurasian Economic Union (hereinafer "the EAEU") since January 1, 2017 the EAEU HS is used instead of the outdated HS of the Customs Union.

The EAEU HS is a classifier of goods created for the customs services and importers' use to identify the products, charge duties and facilitate automated processing of customs declarations.

The EAEU HS is formed on using two classifiers:

• The Commonwealth of Independent States Harmonized System (hereinafter — "the CIS HS") — the directory of goods transferred between states of the commonwealth.
• The Harmonized Commodity Description and Coding System (hereinafter — "the Harmonized System", "the HS") — a coding system developed by World Customs Organization (WCO) in order to classify goods worldwide.

The Harmonized System

Due to rapid development of international trade, the need of the classifier allowing the identification of all sorts of exported and imported goods became evident. On January 26, 1953, the World Customs Organization was established as an international organization that united customs services of various countries. Its main purposes included: classifying goods, assessment of customs value, verification of the origin of goods, stipulation of customs duties, simplification of international trade procedures, reinforcement of corruption intolerance, etc.

As a result of WCO's work, the International Convention on the Harmonised Commodity Description and Coding System was developed. It was signed by 17 European countries in 1983 in Brussels and came into effect on 1 January 1988 within the territory of these countries. The convention stipulated the HS purposes, application scope, and plans for the further development. In order to form the HS, various classifiers such as SITC, CCCN and others were used. Moreover, it had come to involve new rules.

The Harmonized System complies with three conditions:

• Goods are divided into 3 big groups, so they have a common feature in each one. All chain links of classification are independent and could be further divided;
• Goods are subject to be classified only by the one main feature;
• Classification of goods is carried out according to main feature first, then to specific ones.

Since the HS was adopted, a number of major changes have taken place. As of today, five revisions of the HS have been approved: in 1996, 2002, 2007, 2012 and 2017. The most current revision of the HS is available on the WCO website.

The HS has a hierarchical structure and comprises about 5,300 article/product descriptions arranged in 99 chapters grouped in 21 big sections. Each chapter starts with the textual introduction, clarifying which goods should (or should not) be classified within the chapter. The introduction is followed by a table providing the 6-digits codes and article descriptions for goods. The codes are shown as blocks of numbers separated by dots, for example: '8482.10 — ball bearings' .

Nowadays, more than 200 countries apply the HS to classify goods and use it as a base to calculate customs duties. Thus, approximately 98% of goods of international trade are coded with the HS. While more than 150 countries have adopted the convention, the other 50 use it only to develop their own coding systems.

What does convention adoption mean? It allows countries to work together on the HS as it is constantly evolving due to changes in international trade. Therefore, a new revision of the HS is published every 5 – 6 years. During these years, representatives of the countries work on modifications to be adopted in the next revision.

Foreign coding systems

As previously stated, most countries use the HS for their customs services with or without changes.

• Countries of the European Union use the HS-based Combined Nomenclature (the CN) as well as an expanded coding system – the Integrated Tariff of the European Union (TARIC)
• The USA uses the Harmonized Tariff Schedule (the HTS) and the Schedule B systems in order to classify goods.
• In India the Indian Trade Classification (Harmonised System) — the ITC (HS) is applied.
• China has also joined the convention and uses the HS to develop its own coding system — Import and Export Schedule (进出口税则商品及品目注释查询).

The EAEU HS structure and its features

The EAEU HS code is 10-digits long and consists of the group code (first 2 digits), the heading (4 digits), the subheading (6 digits) and specific subheading (8 digits), so it is written as XXXX XX XXX X, where:

• XX — the EAEU HS chapter;
• XXXX — the EAEU HS heading;
• XXXX XX — the EAEU HS subheading;
• XXXX XX XX — the EAEU HS specific subheading;
• XXXX XX XXX X — the full EAEU HS code.

Therefore, the EAEU HS code of a digital camera, for example, is as follows: “8525 80 300 0”.

The first 6 digits of the EAEU HS match the HS, 7th and 8th – to the CN, 9th – to the CIS HS. The 10th digit is only used to specify the code within the EAEU territory.

Traditionally, unlike both the CN and HTS, the EAEU codes are written in the form of blocks of digits separated by spaces, not dots. At the same time, the first 6 digits always coincide with foreign coding systems based on the HS (only if the code has been determined correctly).

Another feature of the EAEU HS is the existence of preliminary decisions on goods classification which are given out by the Federal customs service in Russia or a customs state authority of another EAEU member-country.

There are also certain clarifications on the classification of goods with the EAEU HS intended to aid determining the code of complicated and multifunctional goods as well as for goods that cross the EAEU border for the first time. The clarifications are presented in Order of the Federal Customs Service of Russia dated January 14, 2019 No. 28 and are subject to be executed by any customs of Russia. There is also a constantly updated list of decisions on classification according to the EAEU HS adopted by EAEU commission which defines the codes for certain goods to be used throughout the whole EAEU territory.

Classification of goods according to the EAEU HS

The EAEU HS comprises certain interpretation rules to be used for the classification of goods. It also provides descriptions for goods that could and could not fall into each heading. At the same time, the use of all the above criteria is mandatory to classify the goods correctly.

It also should be noted that foreign exported HS codes cannot always be applicable for EAEU customs services, even the first digits, because exporters often classify the goods using a convenient HS code which allows them to simplify exportation or decrease duties paid. Therefore, an EAEU importer should check the HS codes for goods in advance of importing them into the EAEU territory.

Why you should pay attention to the classification

• In accordance to article 20 of the EAEU code (in Russian) all the goods crossing the EAEU border should be provided with the EAEU HS code.
• Classifying is a key process during customs clearance because the HS code affects customs duties which greatly vary in different headings. Due to this fact, Russian customs services keep track of proper classification to ensure appropriate duties collection. Therefore, if you classify goods incorrectly, you run the risk of paying excessive duties.
• The HS code also affects restrictions and prohibitions applicable for the goods and stipulates obtaining licenses, certificates.
• Another important function of the EAEU HS code is that considering it, customs services track customs value of the goods.

Liability

According to Russian legislation, there is administrative liability for incorrect classification as well as providing customs services with false information for the goods declared, especially if it caused noncompliance with restrictions or a decrease of the customs value is caused. This means the importer should pay a fine, and this may also cause confiscation of the goods.

Links

EAEU HS