Is your Factory Wasting Your Money with the Wrong Harmonization Code?

Something you learn when you're in my end of the business--which is in the middle, to be exact--is all the things that the factory "handles" and the customer is completely ignorant of. Industry pros know better than to let the factory handle everything without any checks in place, but newbies or even those who have been manufacturing in China for 5+ years might not know... and could be wasting a load of money on taxes.

You may recognize the term "harmonization code" if you've ever shipped your products outside of your country. A harmonization code is the internationally agreed-upon codes used to define what the product is, so that customs doesn't have to rip open every package to find out. It also helps customs officials know how much import duty to charge. So for example, on the outside of an eyeshadow primer the code would be "3304", which stands for "eye makeup preparations". Ta da! Easy peezy. Right?

But are you checking which harmonization code your factory uses? Probably not.

Reasons for the Wrong Harmonization Code

1. Sometimes factories are inexperienced in your particular export area (unfortunate if true, but it sometimes is). 

2. Sometimes factories know which code to use, but want to use a different one to save you money (much like them changing the real price on the receipt to a cheaper one... which they do a LOT). This could get you fined.

3. Sometimes factories don't know or understand the end use of your product. Maybe they think your bottles are for teeth whitening, because that's what their other customers use them for, but in fact you're going to fill them with lipgloss! Those are two totally different uses, making it essentially a different product, with a different harmonization code.

4. Sometimes your factory is using out-dated codes.

There could be a hundred other things going on, but that pretty much covers it.  Now, onto the consequences:

 

Issues with Using the Wrong Harmonization Code

1. Fines for mislabeling the code (or trying to evade taxes)

2. Unreasonably high taxes, for misclassification

3. Delays or holds at the border - this could also result in rejection of the goods or dumping of your goods.

And a slew of other, less likely consequences.

 

Conclusion: Your Harmonization Code

Like we always tell you: don't be lazy. It's not that hard.

Just do a little extra work and ask your factory what harmonization code they're using on the shipping paperwork, before your goods ship.  Look up your harmonization code online beforehand, so you can double check with theirs, and have a gentle discussion if the codes are't matching up.

Last but not least: Cosmetics are FREE to import to the US, so DON'T be silly and get that code wrong! You shouldn't be paying tax, so don't!