Coagro Corp: How are Products Classified for International Trade?

This knowledge will help you create a stronger business.

For commercialization, all companies must create their products to fit certain criteria. The defining factors will be set by standards of quality, security, hygiene measures, production, and origin, to name a few, considering the particular trade market of choice. But when the identification of all of these characteristics is required for commercialization purposes, it’s necessary to create a nomenclature to ensure that all parties understand what’s being commercialized. This is especially important when products are going to be sold or traded abroad. International trade requires strict classification to ensure customer satisfaction, and today you’ll learn all about it!

How are products classified for international trade?

To deal with language barriers and other technical difficulties that can arise when trading on international markets, the creation of a standard code is required. These systems assign numbers that indicate the characteristics of a product by hierarchy and offer a detailed guide that can be assessed by anyone that knows the nomenclature.

However, these international rulings vary depending on the market and the particular requirements of the field so that products can be labeled according to one or more of the following identification methods:

Harmonized System (HS):

It’s set by the World Customs Organization (WCO) and is among the most frequently used classification systems. It’s a series of 6 digits. Each pair of them designates particular characteristics. The first two are the chapter indicator; the following pair is the heading; the next pair is the subheading. These codes are used for international trade and are compiled and updated every five years.

Harmonized Tariff System (HTS):

Countries of origin and destination often require additional information to introduce the traded goods into national classifications, hence the creation of the HTS classification. In the case of the US market, this is a code limited to the requirements of their own field of work. It's composed of the HS code, with 4 additional numbers, creating a 10-code number unique to the country. In the case of the US, these are updated annually, with midyear modifications when necessary, and are determined by the US International Trade Commission.

Schedule B codes

This system is used for the exportation of products out of the US markets. These are a form of HS code and comply with the same normative, as far as nomenclature (as they will be in international markets, where this is required). It’s composed of 6 digits, and its classification and register are done through the Automated Export System, with the US Census Bureau to publish the numerical determinants per market and amount.

Why are products classified for international trade?

While commercialization might be the obvious answer, nomenclature does more than just to define and indicate the origin of products and help its commercialization. These classifications are important for all parties involved in the trading process, and they can help speed up the process of transportation. International trade codes also make the whole process more efficient and likely to comply the requirements of the buyer and seller.

It's no wonder why most countries value what the code systems do for their business and stick to them. Why? Because they can help achieve the following goals:

Ensure correct custom tariff payments.
Allow the collection of internal taxes.
Create international trade statistics.
Determine origin.
Allow concessions for market negotiations.
Improve the effectivity of risk assessment, compliance and information collection.
Help to monitor transported goods (to ensure they are legal and controlled).
Reduce the risk of legal transportation of illegal products.

All commodity and trading companies know that following the correct nomenclature systems speeds up the process, and ensures the safe traveling and arrival of the products they send to their customers. Coagro Corp knows this and makes sure that every single element they offer to their consumer is properly identified to ensure satisfaction. Contact them and do business with professionals of the commodity world!