What is an HSN Code?

October 19, 2022

HSN (Harmonised System of Nomenclature) codes are six-digit identification codes used to categorise goods in international trade. 

HSN codes (sometimes referred to as HS codes) were introduced by the World Customs Organisation (WCO) in 1988 and are now used to classify over 98% of goods shipped worldwide. Over 200 countries currently utilise the HSN code classification system.


What are HSN Codes Used for?

HSN codes provide goods and commodities with a unique classification ID to show customs authorities exactly what is being shipped. This globally-recognised coding system makes it easier to identify goods and apply the appropriate fees and taxes in the importing country.

Universal HSN codes are designed to improve speed and efficiency when it comes to exporting and importing goods worldwide.


The Importance of HSN Codes in International Trade 

The correct HSN code is necessary for legal and commercial documents issued by Exporters and Importers. Almost every nation requires HSN codes on trade documents such as bills of lading and letters of credit

The unique six-digit code classifies an item by its category and product type


HSN Code Structure and Examples


Understanding HSN trading codes can seem complex at first. But to make it easier you can break the six digits into three sets of two-digit combinations.

Firstly, it's important to understand some WCO terms related how god are categorised:

  1. Sections - these are product groups, and the WCO lists 21 on its website. The Section does not form part of the HSN code.
  2. Chapters - these are categories of products that sit under the sections. There are 99 of these in total.
  3. Headings - these are sub-categories of products that fall under chapters. There are 1,244 headings in total.
  4. Subheadings - these refer to the products themselves. The WCO lists 5,244 of these.

Any six-digit HSN code combination tells the customs authority the chapter, heading and subheading of any WCO-listed product. 

  1. The first two digits represent the chapter.
  2. The middle two digits represent the heading.
  3. The final two digits represent the subheading.

Here is an example of the HS code for brown rice.

Section II - Vegetable Products

Chapter 10 - Cereals
Code: 10XXXX

Heading 06 - Rice
Code: 1006XX

Sub-heading 20 - Husked (brown) rice
Code: 100620

Therefore, the HSN code for brown rice would be (100620).


Are HSN Codes the Same in Every Country?

There are a few minor exceptions to the standard six-digit HS code rule. 

For example, India - the first nation to adopt the classification system - uses an eight-digit model, with an additional two digits added for greater accuracy during customs checks. 

The USA adopts a 10-digit HS code model for even more specific product classifications.

However, the first six digits will still consist of the universally-accepted HS code


Key Considerations with HSN Codes

HSN codes are designed to classify goods for customs tariffs and taxation purposes. Therefore, Exporters must apply the correct code for each product to avoid complications such as:

  • Shipping delays
  • Overpaying or underpaying on customs fees
  • Fines 
  • Having goods seized

Therefore, companies should ensure that they avoid any errors by placing the correct, up-to-date HSN code on all shipping documents. If you're an Exporter regularly shipping specific goods, keeping a record of the code(s) you need lowers the risk of errors when producing new shipping documents. 

It's also recommended to stay up-to-date with news from the WCO because they review the classification system every few years. This could include changes to the HS code system and structure.


How Do I Find the Right HSN Code for My Product?

The global HSN code for any product can be found online. The Indian government's GST website offers a search function into which users can enter a description of their items to find the correct code. 

The WCO HS webpage also lists all HS code sections, chapters, headings and sub-headings. 


What About SAC HSN Codes?

Similar to HSN codes, Services Accounting Codes (SAC) provide a classification function but for services instead of goods. SAC codes also consist of six digits which classify specific services and categories. 

Below is an example of the SAC code for web development services:

Chapter 99 - Business services
Code: 99XXXX

Heading 83 - Other professional, technical and business services
Code: 9983XX

Sub-heading 14 - Information technology (IT) design and development services
Code: 998314


2022 Updates to HS Code

The WCO updates the HSN code system every few years to adapt to the evolving needs of global supply chains. 

In January 2022, the WCO posted its 7th edition of the Harmonised System.


Hopefully the above information has answered your questions about HSN codes and their uses. It's clear to see how important they are in international trade.

Stenn recommends that you check whether the code you use on your shipping documentation is correct and up-to-date. 


About the Authors

This article is authored by the Stenn research team and is part of our educational series.

Stenn is the largest and fastest-growing online platform for financing small and medium-sized businesses engaged in international trade. It is based in London, provides financing services in 74 countries and is backed by financial giants like HSBC, Barclays, Natixis and many others.

Stenn provides liquid cash to SMEs within the global financial system. On stenn.com you can apply online for financing and trade credit protection from $10 000 to $10 million (USD). Only two documents are required. No collateral is needed and funds are transferred within 48 hours of approval.

Check the financing limit available on your deal or go straight to Stenn's easy online application form.


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