Remember that scene from the Wizard of Oz, when Dorothy, the Tin Man, Lion, and Scarecrow cautiously wander through the haunted forest, terrified of what could jump from behind the next tree and devour them? “Lions and tigers and bears, oh my!” was the chorus that distracted them from the fear that gripped their journey.
For exporters, there’s also a trio of threats that strike fear into the hearts of those responsible for completing export documentation. “Export codes, classifications and numbers, oh my!” is its refrain.
New exporters are especially fearful of the codes, classifications and numbers that lurk behind every shipping document. The web of numbers and codes is indeed bewildering. Don’t fear, however; this article will take much of the mystery out of the common codes, numbering systems, and classifications you’ll run up against in everyday exporting.
What You Need to Know About Export Codes, Classifications and Numbers
There are numerous government agencies and offices that write the rules all exporters must follow. These agencies oversee most of the codes and classifications you apply to each shipment that leaves your loading dock.
Moreover, we’ve written extensively on this topic here, in our International Trade blog. For a more in-depth discussion of each of these topics, check out the links we provide throughout the article. To make the most sense of this cavalcade of digits affecting your exports, I split them up into two groups:
- Group 1: Codes and classifications used for customs purposes.
- Group 2: Codes and classifications used for export compliance purposes.
Group 1: Codes and Classifications for Customs PurposesWithin this group of codes and classifications, we have HS codes, HTS codes, and Schedule B codes.
- The Harmonized System or HS code is a six-digit global standard used to classify globally traded products. This standard, also called a subheading, is used by customs authorities around the world to identify the duty and tax rates for specific product types. HS codes are used in most international export documentation and commercial invoices.
- The Harmonized Tariff Schedule of the United States or HTSUS code is a classification system used in the U.S. The International Trade Commission (ITC) administers HTSUS codes.
- The Schedule B code is a 10-digit subset of HTS codes. The Census Bureau’s Foreign Trade Division uses the Schedule B code to keep stats on U.S. exports, thus the code is used only in the U.S. and is only used for exports, never imports. Note the U.S. Census Bureau and not the ITC administers Schedule B codes.
Group 2: Codes and Classifications for Export Compliance Purposes
Within this group of codes and classifications, exporters deal with issues of export compliance—especially items controlled by the U.S. Department of Commerce or the State Department. These items may require a license from the appropriate department before they can be exported. Therefore, the first step in export compliance is determining which department has jurisdiction over your products.
Most goods designed and sold for commercial purposes are controlled by the Commerce Department and don’t require an export license. However, some goods that are considered dual-use items—items that have both commercial and military application—may require a license from the Bureau of Industry and Security (BIS) before they can be shipped to certain countries. The first step to make this determination is to identify an item’s Export Control Classification Number (ECCN).
ECCNs are five-character number-letter sequences found on the Commerce Control List (CCL). The CCL contains 10 categories of controlled products, ranging from nuclear materials to electronics, computers, sensors and lasers.
Not all items are found on the CCL, in which case they are designated as EAR99. EAR stands for Export Administration Regulations. Keep in mind that even items that are classified as EAR99 may require an export license depending on the destination, end user, and end use of the product.
Products with a military application typically fall under the jurisdiction of International Traffic in Arms Regulations (ITAR) and are found on the the United States Munitions List (USML). Items found on the USML require an export license from the State Department’s Directorate of Defense Trade Controls (DDTC).
You’ll find more information on this topic in the blog post, Understanding ITAR—the International Traffic In Arms Regulations. Over time, the more you work with export codes, classifications and numbers, the more familiar you’ll become with them all.
At first exposure, the thought of deciphering all of these can indeed be scary. But just like Dorothy, you’ll eventually emerge from the haunted forest unscathed, knowing what to expect next time.