HSN codes were implemented in 1988 by the World Customs Organisation (WCO) as a multipurpose international product nomenclature to facilitate the classification of goods all over the World in a systematic manner. Today, the HSN code list is used across over 200 countries worldwide to classify as many as 5,000 products.

Here are the five basics of HSN code you need to know for international shipping.  

1. What is HSN? 

The HSN stands for Harmonised System Nomenclature. It is a set of six-digit codes used to standardise the classification and coding of goods to facilitate customs clearance and tariffs calculations in international trade. Primarily, the HSN code is used in India for importers and exporters to have a logical structure to classify their goods. Such structure helps the local custom to accurately impose taxes and duties without biases or discrepancies. Additionally, product names may differ between countries. Using HSN codes can eliminate confusion caused by communication barriers.  

2. What is the difference between HSN and HS code? 

HSN Code is the same as the Harmonised System Code (HS Code) in shipping. However, it is more commonly known as the HSN in India. Like the HS Code list, each of the HSN codes for import and export of goods comprises six digits. In India, however, the code has been extended to eight digits to ensure a higher level of accuracy during custom checks. With the HSN code list, goods in India can be classified accurately for the easy tabulation of Goods and Service Tax (GST) and Value Added Tax (VAT). 

3. What is the structure of HSN? 

The HSN Code structure is divided into 21 sections representing a broader class of goods. Each section is subdivided into 99 chapters that refer to a particular class of goods. The chapters are then further segregated into 1,244 headings and subsequently divided into 5,224 subheadings to narrow down to a specific type of goods. For example, the HSN code for “Roasted Chana” is 19.04.10.90.  The first two digits, ‘19’ is the Chapter, ‘04’ is the Section, ‘10’ is the subheading, and ‘90’ refers to the tariff item.

4. How is HSN used in India? 

In India, most goods are classified by the HSN Code list to help businesses identify the correct GST rates. On top of that, companies are required to input the HSN Codes for GST registration, insert codes in invoices for goods and services and provide HSN Summary when filing for GST Return.

5. What should Malaysian exporters be mindful about when using the HSN code? 

When using the HS code or HSN code for the export of goods, it is common for exporters in Malaysia to commit mistakes that can snowball into unexpected consequences. For starters, exporters often use wrong product classification and do not make an effort to verify information that is provided to and received from custom brokers. Many also don’t keep abreast with tariff law changes and end up failing to utilise free trade privileges.

These mistakes can also quickly spiral into custom delays, denial of export privileges and overpaying or underpaying custom duties. Sometimes, exporters may even be slapped with fines or have their goods seized. 

To prevent these problems, exporters must implement systematic processes to classify their goods based on accurate cargo descriptions and have the HS Codes printed on the Bill of Lading (B/L). By providing error-free information, both exporters and custom offices can process trades with more efficiency. 

Apart from understanding the HSN code, it is essential for importers and exporters in Malaysia to get acquainted with the international shipping documents required to ensure the smooth import and export of goods.