“So Chris, as I told you the last time we spoke, I am ready to learn how to get ready to go international. But where should I start?” asks Charles Verseau, owner of a Los Angeles-based company that manufactures high-quality saxophones.
“Charles, since you are not currently exporting, we will need to start from scratch to build your international program,” I reply. “This is not a negative; it means we can set things up correctly from the beginning rather than have to go back and fix any problems that may exist.”
“The first thing we need to do is classify your product for export. Are you familiar with the Harmonized System?” I ask him.
“Well, I am in the music business so I know the difference between harmony and melody. But I am guessing you are referring to something different,” comments Charles.
“Yes, indeed,” I confirm.
“The Harmonized System, or HS, is used to classify products in international trade. Developed and maintained by the World Customs Organization, it serves to reduce confusion and disagreement regarding what exactly is being imported and exported by trading partners. This is particularly important as it relates to any duties being charged by the importing country,” I explain.
“Sounds pretty straight-forward,” remarks Charles. “How does the HS apply to my saxophones?”
“Since you want to export your products, we will want to determine the Schedule B number, which is based on the HS and used to classify exports from the U.S.,” I answer. “It is administered by the Foreign Trade Division of the U.S. Census Bureau.”
“Is the Schedule B number easy to determine?” asks Charles.
“Depending on the product, it can take a bit of work to make sure the correct Schedule B is chosen for a given product. For your saxophones, it should be pretty easy to identify, but you need to pay attention,” I explain. “For example, if the saxes you are exporting are made of plastic and are considered more as toys than as professional instruments, they would be classified differently and, importantly, may have different import duties applied to them by the importing country.”
Charles’s demeanor turns a bit more somber. “Sounds like it’s not so straight-forward.”
“Let’s take a closer look and it will be clearer,” I offer.
“First, a Schedule B number is a 10-digit number that is based on the commodity classifications of the HS,” I explain. “The first two digits of the number indicate the Section in which a commodity is classified. The second two digits detail the Chapter heading under which the commodity is listed, with the next two digits providing further detail at a Subheading level. The final four digits provide for further commodity detail and statistical reporting.”
“So what is the Schedule B for my product?” asks Charles.
“Let’s take a look,” I answer as I pull up the bookmarks on my laptop’s search engine. “Here is a useful website from the U.S. Census Bureau that will help you determine the Schedule B number for your product: https://uscensus.prod.3ceonline.com.”
I pass the laptop over to Charles so he can try it out.
“Great! I see that if I enter ‘saxophone’ in the search engine, the number 92.05 for ‘wind musical instruments’ comes up, with a further detailed number of 9205.90.1000 for ‘woodwind instruments’. It appears to be the closest match to my product and is 10-digits,” Charles correctly realizes.
“Right!” I confirm.
“Chris, this is really helpful,” says Charles as he continues to explore the site. “While I think I need to study this a bit more, use of the HS and Schedule B numbers are much clearer to me now.”
“Now that’s music to my ears!” I remark with a smile, both of us understanding that this is only the second of many discussions we will have about Charles’s evolving global business plans.