“All squares are rectangles, but not all rectangles are squares.”
That idea really confounded me as a child learning geometry. How could one belong to another, yet the inverse not be true? As my teacher explained, the difference lies in specificity.
A similar concept applies in exporting: If you’re new to exporting, the difference between Harmonized System (HS) numbers and Schedule B codes may be vexing. You may be wondering, are they the same? Can they be used interchangeably? What’s the difference?
Here’s how you can distinguish between the two to make sure you’re using the right code at the right time.
What Are HS Numbers?
The Harmonized System classification is a six-digit standard, called a subheading, for classifying traded products. HS numbers are used by customs authorities around the world to identify products for duties and taxes.
Here’s a summary of HS numbers:
- There are six digits in an HS number;
- HS numbers are uniform across the globe;
- HS numbers are administered by the World Customs Organization.
- HS numbers are used in most international export documentation and commercial invoices (although there are some exceptions).
What Are Schedule B Codes?
The Schedule B code is a U.S.-specific coding system administered by the Foreign Trade Division of the U.S. Census Bureau to monitor U.S. exports. These codes include the first six digits that make up the HS codes, but include four additional digits for a total of 10 numbers. These additional numbers help further identify and classify products.
The Schedule B codes for goods are unique to the United States. They may be similar to, but can be different than, the 10-digit Harmonized Tariff Schedule codes that are required to be used for imports into the United States. (Read also: HS Codes, HTS Codes, and Schedule B Codes: What's the Difference?)
Exporters must include the Schedule B codes of their export goods when they file their electronic export information (EEI) through the Automated Export System (AES). According to the export.gov website, “There is a Schedule B number for every physical product, from paperclips to airplanes.”
Here’s a summary of Schedule B codes:
- There are 10 digits in each Schedule B code;
- Schedule B codes are used exclusively in the United States;
- They are administered by the Census Bureau’s Foreign Trade Division for export statistics.
- Schedule B numbers are required to be reported in the Automated Export System (AES) for shipments valued at more than $2,500 or when your export requires a license.
Understanding the Difference
Because the 10-digit Schedule B code is unique to the United States, you should include that code when reporting your export information to the U.S. Census Bureau. As mentioned above, that is typically done by the EEI filing through AESDirect on the Automated Commercial Environment (ACE) portal.
If your company does not do its own EEI filings and instead pays a freight forwarder or other third party to file on your behalf, you should include the Schedule B code on the Shipper's Letter of Instruction (SLI) that you would typically provide to the forwarder. They'll use that information to do the AES filing.
When you are preparing the other export documents for your shipment including the commercial invoice, you should include the HS number instead of the Schedule B code. (If you've been paying attention, you know that the HS number will be the same as the first six digits of the Schedule B code.) That's because the invoice will be used by the importer to clear the goods through the customs authority in the country of import.
As part of the import process, the importer may be required to append two, four or six more digits to the HS code to properly classify the goods for their country. Almost certainly, that eight-, 10- or 12-digit import code will be different than the Schedule B code.
Consider this example:
Imagine you’re exporting parts for umbrellas. In the United States, they are identified by the Schedule B Code 6603.20.3000. If you’re exporting these to Germany, and you complete the commercial invoice using all 10 digits of that code, the German importer’s paperwork will be rejected—in Germany, the correct number is 6603.20.0000.
As you can see, the first six digits (the HS numbers) are identical. The difference comes in the last four digits. Though the HS code subheading is the same, the U.S. Schedule B code for exporting the umbrellas is one digit different than the German code, making it incorrect.
Properly Preparing Your Export Paperwork
As detailed above, it's important to know when to use the 10-digit Schedule B code and when to use the six-digit HS code on your export paperwork. If you don't have a good system in place for creating your export documents, it's easy to misuse the two classification codes. However, an export documentation software program like Shipping Solutions makes that process easy.
With Shipping Solutions software, you can enter your export shipping information into the software, and it automatically generates standard export forms that are properly formatted to meet export and import requirements. That includes the commercial invoice with a HS number and the SLI or the EEI filing with the Schedule B code.
Not only does Shipping Solutions eliminate redundant data entry, allowing you to prepare accurate export documents faster than ever before, it also lets you simply click a button to submit your export information directly to AESDirect on the ACE platform. Doing your own EEI filings eliminates the need to pay your freight forwarder or other third party to file on your behalf.
Properly Classifying Your Products
Not only is it important to understand when to use the six- or 10-digit classification on your export paperwork, it's important to identify the correct classification of your goods. Since the HS number is the same first six digits of the Schedule B code, you don't have to do a separate search for both.
The Census Bureau includes a very good (and free!) Schedule B Search Engine on its website. By entering a description of your product, the search engine will help you identify the proper code. Because some of the differences between classifications can be quite technical, it's important that someone who understands the technical specifications of your products conducts the search.
For help finding the proper classification of the goods, you may call the U.S. Trade Assistance Center at 1-800-872-8723 option 2 or contact your local Export Assistance Center. These Export Assistance Centers are part of the U.S. Commercial Service, and it's their mission to help U.S. companies grow their exports. They are an invaluable resource.
This article was first published in January 2015 and has been updated to include current information, links and formatting.