Semiconductors are the tiny chips that fuel all modern technologies and represent $1.56 trillion worth of annual global trade. Such complex supply chains make this industry, typically, a semiconductor crossing international borders four or more times from start to finish. Harmonization rules of trade and their uniform enforcement are critical, considering the complex and global nature of our industry, for ensuring semiconductors cross borders free, fair, and efficiently. Here we decide what Semiconductor HS Codes are.
Definition
In simple terms, the H.S. Code system refers to the Harmonized System Code. Some nations label it as HTS (Harmonized Tariff System). The World Customs Organization developed the HS system, and over 140 countries uniformly apply it worldwide. HS codes for goods classified in four-digit headings and six-digit sub-headings (four digits of heading followed by two). Customs department of more than 140 major countries have been functioning on the basis of the said 6-digit tariff code.
Work
Really much significant material has been covered by the harmonized system (HS) in this context. Having said so, HS is a complicated piece of instrument but has proved to be a useful and everlasting device in global use for identification and classification of traded goods. The industry has greatly benefited from the HS definitions, even though progress in semiconductor technology has significantly outstripped these definitions. While updates can and should occur to enable quicker and more effective adaptation to changes in semiconductor technology, the U.S. semiconductor industry does not support revising the current HS structure and supporting nomenclature related to semiconductors at this time.
Importance
Here are some of the problems that arise due to poor assignment or a lack of HS codes.
Effect upon Duty Rates: Duty rates are very much associate HS codes. Not assigning HS code or giving incorrect HS code may be very much commercially risky. One of the significant steps that the complete shipping process has is getting the understanding of duty tariffs. Not just the normal duty rate, but also anti-dumping and countervailing duties are very much associated with HS codes.
Importer Security Filing (“10+2”): The most effective way of complying with Importer Security Filing (“10+2”) requirements is to include the HS code within the purchase order to the importer.
Delay Risk: A shipper runs into delays and incurs storage charges when a customs broker cannot classify the shipment in the requisite HS codes until the arrival of the vessel and expiration of free time at the terminal, which is usually very limited.
Regulatory Risk: Shippers would still risk falling into regulatory intervention as the practice of on-the-fly assigning. HS codes is a very risky undertaking that leads to low accuracy. Inaccurate HS codes would lead to either overpayment of duty by the importer or fines for inaccuracy.
Most importantly, the semiconductor HS codes need to be correct and forms part of the legal obligations of the exporter or importer. Both should take the time and effort to source all classification resources and get it right, whether for their import products, export products, or for that matter, any assortment of products being imported or exported.
