“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?
In casual conversation, exporters tend to use Schedule B code, HS code, and HTS code interchangeably. That’s because they understand that these codes are used to classify their products for customs. However, it’s important to understand the differences. Here’s how you can distinguish between them 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 (also known as HS codes) are used by customs authorities around the world to identify products for duties and taxes.
For exporters, standardized HS numbers make trade easier. Instead of learning hundreds of types of customs nomenclature for exporting, most exporters need to understand only the HS system, upon which HTS codes and Schedule B codes are built.
Because HS numbers are the same in every country, you should include the six-digit HS code on any export documents that are used by both the exporter and the importer. That typically includes the proforma and commercial invoices and certificates of origin.
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 and serve as the foundation for the import and export classification systems used in the United States.
What Are Schedule B Codes?
The Schedule B code is a U.S.-specific coding system administered by the International Trade Management Division of the U.S. Census Bureau to monitor U.S. exports. These codes take the same form as HS codes for the first six digits, 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. If you are an exporter, you should be more concerned with Schedule B than HTS codes. 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.
You should include the 10-digit Schedule B code on your documents or filings that are used exclusively for the export process. The Schedule B number should be part of your Electronic Export Information (EEI) that you submit to AESDirect when the value of your goods per Schedule B number exceeds $2,500, if your product requires an export license, if you are exporting a used vehicle, or, beginning September 27, 2020, when exporting anything to China, Russia or Venezuela regardless of the value.
If you pay your freight forwarder or some other third party to file on your behalf, you should include the Schedule B code on your Shipper’s Letter of Instruction (SLI) that you give them.
Here’s a summary of Schedule B codes:
- There are 10 digits in a Schedule B code.
- Schedule B codes are used exclusively in the United States and exclusively for exports.
- The Schedule B code for a particular product may differ from the HTS codes used for imports.
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.
Finding the Correct Schedule B: An Example
The Schedule B has three pieces of information that you need: the number, the description, and the unit of quantity (or unit of measure).
Below is a page from Chapter 9 of the Schedule B. When you look at the column called Schedule B No. and Headings, you’ll see examples of two-, four-, six- and 10-digit numbers. The two-, four- and six-digit numbers are headings and are not actual Schedule B codes.
So using the sample below, the first Schedule B number that is listed is 0901.11.0000. The 09 and 09.01 preceding it are only headings.
Once you have found the correct Schedule B number, you must decide what to use for your Commodity Description. You must provide a detailed-enough description of the item being exported so that the Schedule B number can be verified. Sometimes that means you can use the description listed right next to the number.
For example, the description, “Coffee husks and skins,” is sufficient for Schedule B number 0901.90.1000. However, the description next to Schedule B number 0901.11.0000, which is “Not decaffeinated,” is not a clear-enough description. So instead, you could build a description using the heading description plus the number description such as, “Coffee, not roasted, not decaffeinated.”
The next column is Unit of Quantity, which also means unit of measure. When you submit your EEI filing through AESDirect or complete an SLI for your freight forwarder so they can file on your behalf, you must report the quantity for this product using this unit of measure. This may be a different unit of measure than how you sell the product and how you include it on your commercial invoice.
For example, you might sell your coffee by the can. Or, because you are a successful wholesaler, by the gross (144 cans). You can, and should, list your product this way on your commercial invoice. If I buy 10 gross of coffee from you, the invoice quantity is 10 and the unit of measure is gross.
However, the Census Bureau doesn’t care about the number of cans you are exporting. Based on your Schedule B number—0901.11.0000—your EEI filing needs to report the quantity in kilograms. If each of your cans contains one pound of coffee, the quantity to report is 65.3 kilograms.
But you may not be done yet. The final column in the Schedule B chart shown above is called Second Quantity.
Under the Schedule B, the Census Bureau sometime requires that you report two quantities and two units of measure for your product. The example above does not show any of those items, but if you look in Chapter 32, you will see that certain kinds of paint need to be reported in liters and kgs (see Schedule B number 3208.10.0000).
Whether there are one or two quantities of measure listed, this AES reporting requirement trips up way too many exporters who default to using the same unit of measure as they use on their invoice whether or not it’s appropriate for their Schedule B code. This can cause an immediate problem by delaying their current shipment or more serious concerns in the future if an audit reveals a pattern of incorrect filings.
Changes to Classification Codes
It’s important to understand that the Schedule B (and HTS) are often updated at the beginning of every year and, to a lesser extent, at some point in the middle of the year. These changes may not be large, but exporters should watch for these updates and determine if any of their products are affected by the change.
The World Customs Organization publishes a much more extensive list of changes to the Harmonized System every five to six years. Since the HTS and Schedule B codes are based on the HS codes, importers and exporters can expect much more substantial updates to their product classifications during those years.
Properly Preparing Your Export Paperwork
As described above, there’s a lot to know and a lot of variables to account for when preparing your export paperwork:
- First, of course, you must properly classify your products for their 10-digit Schedule B code and understand the proper unit of measure to use.
- You must then remember that you need to display the six-digit HS code on your documents that will be used by both the exporter and the importer (because the HS code will be the same for both).
- You also need to remember that you should include the full Schedule B code for your EEI filing through AESDirect or on your SLI if your forwarder is going to file on your behalf.
- You must almost make sure that while your proforma and commercial invoices may use one set of quantities and units of measure, your EEI and SLI may need a different set.
Whew. That’s a lot to keep track of!
An export documentation software program like Shipping Solutions can help manage all of that.
Shipping Solutions export software includes a product database where you can store all the information related to your products including the proper Schedule B code, the correct price and unit of measure for your invoices and, if necessary, a separate price and unit of measure or measures for AESDirect filing purposes.
When it comes time to create a set of export documents, you can select all the products in your shipment from a drop-down list and enter the correct quantity for all your products. Shipping Solutions will automatically generate standard export forms that are properly formatted to meet all the export and import requirements. That includes the commercial invoice with an 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.
This article was first published in January 2015 and has been updated to include current information, links and formatting.