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What Are You Trading?

Traded goods have to be classified for the purposes of taxes and trade statistics. The Harmonized Commodity and Description System (sometimes referred to as "HS code or tariff"") was created by the Customs Co-operation Council, the predecessor to the World Customs Organization (WCO). It is a multi-level system that provides uniformity in classification for almost all countries and 98% of the world's trade. If you intend to import/export goods, it is important you are familiar with the system.

The Harmonized System is a hierarchical system organized into 21 sections, 99 chapters, and 35 sub-chapters. The goods listed are organized in ascending order of technical complexity with animals and vegetables listed first and complex manufactured goods and art listed last.

In Canada, a tariff classification is a ten-digit number. Every two-digits represents a level that gets successively more specific within a category of goods. The first 6 digits are the same for all countries using the HS. In Canada the 7th and 8th digits are for Canadian trade purposes and the 9th and 10th digits are for more detailed Canadian statistical purposes. As an example, here is the first 10-digit tariff in the Customs Tariff Schedule: 0101.21.00.00 - Live horses, asses, mules and hinnies. - Horses: - Pure-bred breeding animals. Each level is named as follows:

  • (01) is the Chapter

  • (0101) is the Heading

  • (0101.21) is the Sub-heading

  • (0101.21.00) is the Tariff Item

  • (0101.21.00.00) is the Classification number

In your process of identifying the classification number, ensure that you review the Chapter Notes at the beginning of the Chapter in the Customs Tariff Schedule as they are legally binding in Canada. Correctly identifying the classification number ensures that the right duties and taxes are applied and avoids any penalties being issued by the Canadian Border Services Agency (CBSA) or the applicable governing body in your country.

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