What is the Harmonized Classification System (HS)?
The Harmonized Classification System is a globally recognized way to
identify goods being imported and exported by assigning a standardized
classification. The HS classification is used for declaring goods at
the time of export in export declarations and for the purpose of
filing customs entries at the time of import in the country of
destination. The HS classification is used to determine duty rates and
collect duties, taxes, and fees for imported products.
The Harmonized System (HS) is something every importing and export
company will need to understand so proper HS classifications can be
assigned to their products. Companies need to take great care in
assigning HS classification and understand the compliance risks
associated with their HS classification decisions. Exporters and
importers alike have a legal responsibility to properly claim and
classify goods/products.
The Harmonized Classification System Breakdown
The Harmonized System (HS) is a very structured classification system
made up of sections, chapters, notes, headings, and subheadings.
The United States has two published versions of the Harmonized System
(HS). For imports, the U.S. publishes the Harmonized Tariff Schedule
(HTS) of the U.S. for the HS classification of imported products and
the assignment of duty rates. For exports, the U.S. publishes
Schedule B for export HS classifications and the collection of
statistical data.
The Harmonized System (HS) is broken down into 22 sections which act
as groupings of similar chapters.
There are 97 chapters of products that are organized from least
manufactured to more manufactured and logically group classifications
by make or by use. The first two digits of each HS classification are
the chapter number. Within each chapter, the Harmonized System (HS)
provides a four-digit heading with the primary legal definition of
what is to be included in that heading. Those headings are further
broken down into six-digit subheadings. The heading and subheading
legal definitions are universal and all countries agree to use the
same legal definitions.
While the globally recognized headings and subheadings remain
constant, each country can further break down the subheadings with
country-specific suffixes. In the U.S. two digits (digit 7 and 8) are
added as the duty rate suffix and two digits (digits 9 and 10) are
added as a statistical suffix – making the U.S. classification a
10-digit number.
See the photo above for an example using Coffee.
Why is HS Classification Important for Your Business?
First of all, for importers, the HTS classification determines the
duty rates and the duties paid at the time of import so it has
immediate revenue implications. Non-compliance can result in fines,
penalties, and the back payment of additional duties owed.
Paying duties is a non-negotiable, so proper classification can
reduce your compliance risk in the short and long run. The result will
never be good when using the wrong classification. If your
misclassification caused you to overpay in duties, you won’t receive a
refund. If you are underpaid in duties, you are required to pay the
difference, and customs will decide if you will need to pay interest,
and whether or not fines and penalties will be imposed.
For exporting, HS classification is used in:
- Export documentation (ex. Commercial Invoice)
- Export Declaration
- Import customs entry in a country of destination
For importing, HS classification is used in:
- Customs and Border Protection (CBP) for customs clearance and entry
All in all, use the HS classification to your advantage. Generate
proper classifications and importing and exporting will be smooth sailing.
Are You Interested in Learning More?
GVSU's Van Andel Global Trade Center offers a yearly Fundamentals of
Harmonized System (HS) Classification Training. Check out our Events page to register for this
upcoming event!
---
About the Contributor
Jenna Hoover worked as a student assistant for GVSU’s Van Andel
Global Trade Center. At GVSU she studied Finance and Supply Chain
Management within the Seidman College of Business. You can find her
visiting local coffee shops or checking in on her Roth IRA. In her
free time, she enjoys walking her dog, Gertrude, and hanging out with
friends along the beautiful beaches of West Michigan.
Originally published 4/8/2022 - Updated 4/9/2024
April 9, 2024
FOR IMMEDIATE RELEASE
February 26, 2024
Contact: GVSU University Communications
[email protected]
(616) 331-2221
GRAND RAPIDS, Mich. — Navigating industry difficulties and challenges
will be the main topic of the 25th Michigan Automotive Suppliers
Symposium, hosted by Grand Valley State University’s Van Andel Global
Trade Center.
The symposium, with the theme of
“Momentum Matters,” will be held at the DeVos Center, Loosemore
Auditorium, on the Pew Grand Rapids Campus on Thursday, March 7, from
8:00 a.m.-noon.
"The annual symposium offers the chance to hear crucial insights
as businesses realign with the constantly changing fast-paced
automotive sector,” said Sonja Johnson, executive director, of the Van
Andel Global Trade Center. “Listen to industry experts and how they
are maintaining momentum as they navigate challenges in the
requirements to meet government standards, and customer needs while
juggling a complex supply chain and how recent issues such as labor
strikes have impacted the auto industry.”
Speakers include two GVSU alumni. Alejandra Lorenzo, who works for
Stellantis North America as a supplier diversity program manager,
graduated in 2014. Lorenzo is an expert in supplier diversity, risk
management, project management, pre-production and international
launches. Lorenzo will give the keynote presentation, “Supplier
Diversity: Direct and Tangible Benefits to Create a Stronger, More
Resilient Supply Chain.”
GVSU graduate Mike Wall will present “The Road Ahead: Navigating the
Winding Roads of the Auto Industry,” as an industry outlook. Wall
earned a bachelor’s degree in finance and now has over 20 years of
expertise. As executive director of automotive analysis at S&P
Global Mobility, Wall will provide an in-depth analysis of vehicle
markets and technology trends.
Other sessions include a fireside chat with Munro & Associates;
and a Tier 1 Supplier Panel with representatives from Pridgeon and
Clay, Inc.; ADAC Automotive; Lacks Enterprises; and Warner Norcross +
Judd LLP.
Each year since 1999 the Van Andel Global Trade Center has hosted
more than 25 international business events in Michigan and worked with
a broad variety of community partners & corporate sponsors to
provide the international business community with the business
training and international resources it needs to succeed on the global stage.
For more information on this event, visit the Van Andel Global Trade
Center website.
####
February 26, 2024
It seems like all over the internet there are guides giving advice on
specific locations or countries. Some of their advice can range from
very specific to extremely broad, making it all the more confusing as
to what advice might carry over into a different country. But what
advice do all these guides have in common?
Here are some general rules to apply when expanding your business to
any country:
1. Understand the Market
Market research is absolutely vital when trying to reach a certain
segment. When expanding internationally, this step is crucial. Markets
vary widely by country and region, market research for a specific
area/region is highly recommended.
Some things to consider while putting together market research:
- Local currencies
- Potential client base in your market segment
- Number of local competitors currently in your target segment
- Foreign competitors in the desired market segment
If performing business from your home country and shipping to a
foreign country, ask yourself: Do they take my currency? Could I take
their local currency? What kind of people am I trying to sell my
product to? What type of people need my product? Which companies in
that market are already selling a product similar to what I am trying
to sell? Is that market oversaturated?
Asking and answering these types of questions can help verify that
your business can become successful in your next venture.
2. Know the Regional Politics
On the outside, a venture might seem extremely viable, but if the
political climate is not advantageous then everything can stop in its
tracks. If governmental entities are unwelcoming to foreigners or
certain types of businesses, then adjustments should be made accordingly.
Things to look out for regarding regional politics include:
- Recently passed legislation regarding the business sector your
company is attempting to enter
- Any tariffs or exceptional high duties
- Past and present tensions between the country of origin and the
country your business is attempting to expand to
Has the country you’re operating from been at odds with the country
you are trying to perform business with recently? Have the respective
governments responded by putting tariffs and other restrictions on
each other? Such actions would make trying to get your product within
that country extremely expensive and could potentially ruin the
competitive advantage you once held over your foreign competitors.
Additionally, if the country residents are highly involved in these
politics, they might boycott your product anyway. It is important to
consider this a highly relevant factor when attempting to expand internationally.
3. Study the Culture
The culture difference can be a make-or-break point when introducing
a new business within a foreign culture. Certain topics might be
considered more taboo, other countries may hold more conservative
values, and different countries might have almost no boundaries at all.
Here are some techniques to get an accurate grasp of a country’s culture:
-
Analyze Their Media - If a country’s media
broadcasts highly controversial or offensive content, business in
this country may not be good for business. Media analysis can also
often give you an idea of what’s popular with your demographic and
help you advertise abroad.
-
Look at Their Laws - Some countries might ban
certain demographics from certain activities by the letter of their
law. In that case, it would not be wise to release a product that
would make those demographics legally vulnerable or unsafe.
-
Know Their History - Countries historically go
through phases, yet many aspects of their culture remain constant
over time. It’s important to understand major historical movements
that have happened within your target country, how they affected or
changed the culture, and whether are not some of those impacts are
still lasting today. Additionally, it is vital to identify ongoing
movements and build that into your brand identity for marketing
within that country.
Also, understand that cultures within countries can also vary by
region as well, so the more specific an analysis is to the target area
the better. It is vital to know if your product or service would
transition well within a country’s culture to gauge how successful it
has the potential to be. For example, avoid selling products that go
against a religious belief held by the majority or confront a cultural
taboo in the country you are looking to do business in. It is vital to
identify whether your product has a “fit” within the culture you are
trying to sell to.
With all three of these major factors in mind, you are now ready to
successfully expand your business abroad and find yourself a market
with the perfect fit for your product or service and the Van Andel
Global Trade Center (VAGTC) can help! Whether you are a company just
starting to consider global expansion or have been at it for a few
years, VAGTC can help you go global or expand into new markets. With
funding opportunities available for small and medium-sized businesses
from the Michigan Economic Development Corporation (MEDC)
through the Michigan State Trade Expansion Program (STEP),
there is no better time than now to start or expand your export operations!
For more specialized information on expanding your business
internationally and getting connected to the MEDC and STEP, schedule a
consultation with the Van Andel
Global Trade Center to answer any questions and get connected.
--------------------------------
ABOUT THE CONTRIBUTOR
Natalie Bremmer
is a Student Assistant at
GVSU’s Van Andel Global Trade Center
. She is a Senior currently pursuing an undergraduate degree
in Finance, Human Resource Management, and General Management at
Grand Valley State University. She enjoys lifting weights, getting
lost in a good video game, spending time with friends, and going on
long hikes.
Edited by Parker Mackey, a student assistant at
the Van Andel Global Trade Center.
Original publish date 5/18/2023 - Updated 2/8/2024
February 8, 2024
How can small businesses grow their customer base and increase
profitability? Export!
When local markets are facing tough times or simply not bringing in
enough revenue, the next step in expanding a small business and
increasing revenue is to start exporting goods to access new global markets.
Common Concerns about Exporting
Exporting, however, may seem quite daunting and expensive to the
inexperienced individual. Fortunately, there are several financial
resources, mentors, and consultants available for small businesses to
utilize to create an export strategy and set up export operations
unique to their business needs.
Setting up and maintaining export operations does require an
investment of both time and money, but with 95% of the world’s
consumers outside of the U.S., it has the potential to turn into a
profitable investment. If traditional bank financing doesn’t fit your
business needs, there are different types of loan programs that help
in setting up and/or maintaining export plans and provide alternatives
to traditional loan options to fund export endeavors.
Export Programs
Programs funded through the U.S. Small Business Association (SBA)
that small businesses should be aware of include:
SBA loans are provided through banks, but SBA guarantees a
substantial portion of the loan – up to 90% – making it more likely to
get accepted than a traditional, non-SBA-backed loan.
State Trade Expansion Program (STEP)
One of the most easily accessible financial assistance options
available for exporting is the STEP program.
The State Trade Expansion Program (STEP)
is a completely different category than the other loan program since
technically it’s not a loan at all. Though the money given to the
state government is awarded by SBA, it is ultimately the individual
state’s economic development department that distributes these funds–
no repayment is required.
State-level STEP assistance helps small businesses:
- Learn how to export
- Participate in foreign trade missions and trade shows
- Obtain services to support foreign market entry
- Develop websites to attract foreign buyers
- Design international marketing products or campaigns
Roughly 46 of the 50 states were awarded STEP funds, including
Alabama, Arizona, Arkansas, California, Colorado, Connecticut,
Delaware, Georgie, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas,
Kentucky, Louisiana, Maine, Michigan, Maryland, Massachusetts,
Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North Carolina, North
Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode
Island, South Carolina, Texas, Utah, Vermont, Virginia, Washington,
West Virginia, Wisconsin, and Wyoming.
Michigan’s STEP program, MI-STEP,
administered by the Michigan Economic Development Corporation, offers
export assistance that covers up to 50% of export-eligible expenses.
For more information on MI-STEP, check out our blog article Michigan
Small Businesses Are Missing Out on Free Money: Why You Should
Take Advantage of MI-STEP
.
Coverage rates and total assistance varies by state, check your
state’s STEP
policy for exact export assistance information.
International Trade Loan Program
The most expansive of these would be the International
Trade Loan Program. Companies can be approved to borrow a
maximum of $5 million through this program with a processing time of
roughly 5 - 10 business days.
These loans are available to help small businesses enter
international markets and compete with businesses already present in
the market. It works by combining fixed assets, working capital
financing, and debt refinancing for the maximum amount of assistance.
Export Working Capital Program
The
Export
Working Capital Program is similar to the International Trade
Loan Program in that there is a $5 million maximum borrowing limit and
5 - 10 day processing time, but the purpose is slightly different.
People applying for this loan already have a finalized sale or export
contract in hand and just need the extra funds to seal the deal. This
venture is ultimately a bit less risky than going into a market blind
– like the prior program – which makes the approval process easier.
Export Express Loan Program
The Export Express
Loan Program allows small businesses to get loans accepted within
36 hours with the trade-off of only being able to borrow $500,000 or less.
The reason turnaround time is so quick is that Export Express lenders
can directly underwrite a loan without SBA prior approval.
Meet Your Export Mentors
For businesses interested in learning how to export their goods and
explore funding opportunities and resources available for this
endeavor, GVSU’s Van Andel Global Trade Center along with state and
federal partners from the Michigan Economic Development Corporation
(MEDC), Michigan West Coast Chamber of Commerce, U.S. Department of Commerce - Grand Rapids, Michigan Small
Business Development Center, Export-Import Bank of the United States, Networks
Northwest, U.S.
Small Business Association (SBA), and more, are offering four
opportunities to join us for our New to Export Workshops
throughout the state of Michigan in 2024, visit our event page for
dates and details!
—------------------
Natalie Bremmer
is a Student Assistant at
GVSU’s Van Andel Global Trade Center
.
She is a Junior currently pursuing a Bachelor in Business
Administration degree in Finance, Human Resource Management, and
General Management at Grand Valley State University. She enjoys
lifting weights, getting lost in a good video game, spending time
with friends, and going on long hikes.
Originally published 12/14/2022 - Updated 2/8/2024
February 8, 2024