Export-industry jargon includes references to acronyms such as HS and NAICS codes. Companies new to export will be wondering what these mean, and whether or not they’re the same thing. We hope that this post will help clear things up.
The harmonized system (HS) code is a six-digit code that acts as a uniform goods classification standard worldwide. As per the Trade Finance Global website:
HS codes, accepted by the majority of nations around the world, are identification codes given to goods for use in international trade. The HS codes are administered by the World Customs Organization (WCO) and are internationally accepted for use by customs authorities and companies to identify goods.Trade Finance Global
HS codes cover 98% of good and over 5,000 commodities in international trade. They are required in legal and commercial documentation such as sales contracts, bills of lading, letters of credit, and certificates of origin. The first two digits refer to the HS code chapter, the second two refer to headings, and final two digits refer to sub-headings; HS codes have 21 sections, 99 chapters, 1,244 headings, and well over 5,000 sub-headings, with each step increasing the specificity of the goods in question.
Trade Finance Global offers the example below; it determines that the HS code for roasted caffeinated coffee would be 0901.21.
The World Customs Organization (WCO) updates its HS code system every five years, to adapt to the evolving nature of global trade. The seventh and most recent edition was published in January 2022 and featured slight amendments to the HS code rules. You can learn more about HS codes by visiting the WCO’s website and referring to its HS tool page to determine what code would apply to your particular product.
While HS codes cover global goods trade, NAICS are classifiers for the North American market. The North American Industry Classification System (NAICS) was developed via collaboration between Canada, the U.S., and Mexico for the collection, analysis, and publication of economic data. Although developed for statistical analysis, some government agencies, trade associations, and regulatory boards now use NAICS for their own internal classification needs (which may include contract bid postings or business tax incentives), or to classify customers by industry.
Like HS codes, NAICS is a dix-digit number with the first five describing the levels used in all three countries, and the sixth to designate nation-specific industries. Specifics for NAICS numbers are as follows:
- The first two digits indicate the sector,
- The third digit indicates subsector,
- The fourth number indicates industry group,
- The fifth number designates the industry, and
- As mentioned, the sixth indicates a nation-specific industry (with ‘0’ indicating no further detail).
NAICS codes with country-specific detail may be presented as either NAICS Canada, NAICS United States, or Sistema de Clasificación Industrial de América del Norte (SCIAN) México, where required.
NAICS is a self-assigned system, meaning that a company selects the code that best depicts their primary business activity and uses that code when required. Companies with more than one business activity may use more than one NAICS code, and the NAICS Association has an identification tool that can help you find the correct code (or codes).
NAICS 2022 Version 1.0 was the largest revision since 2002, and includes updates related to the digital economy. It includes 20 sectors, 99 subsectors, 323 industry groups, 695 industries, and 922 Canadian industries. (Note too that Canada’s NAICS version includes several cannabis categories that are unique to that country.) More information about the NAICS Canadian version can be found here; information pertaining to the U.S. can be found here.