How to Avoid HS Code Misclassification
Quick Take
HS code accuracy is the foundation of Customs and SST compliance. A single misclassification can trigger penalties, shipment delays, and even rejection of exemption claims. Yet, most errors happen because companies rely on outdated product descriptions or assumptions rather than verified legal references.
Why It Matters
An incorrect HS code does more than increase costs—it can affect duty rates, SST liability, and eligibility for Free Trade Agreement (FTA) benefits. Misclassification is a top risk flagged in Customs audits and often leads to backdated tax assessments.
3 Ways to Get HS Classification Right
A) Use the General Interpretative Rules (GIRs)
The 6 GIRs under the Harmonized System provide the legal basis for classification. Never classify based only on product names—always follow the hierarchy of GIR rules.
B) Analyze Technical Specifications
Customs classifies goods based on their essential character. For machinery, details like function, component materials, and capacity matter more than trade names.
C) Cross-Check Against RMCD Rulings and Explanatory Notes
Use the Customs Duties Order 2022, World Customs Organization (WCO) Explanatory Notes, and any existing Advance Rulings to confirm accuracy.
Case in Point
One of our clients had classified an imported component under a general category (duty 20%). After a review using GIR and Explanatory Notes, it was reclassified under a specialized part category (duty 0%). The correction saved over RM250,000 annually.
Related Regulation
Customs Duties Order 2022
Harmonized Commodity Description and Coding System (HS) Rules
RMCD Advance Ruling Framework
