HS Code and Incoterms Guide: Why Are They Important in B2B Trade?

For companies that want to trade internationally, producing a quality product is not enough. The product must be classified correctly, the right delivery term must be selected, customs processes must be understood, and the responsibilities of the buyer and seller must be clearly defined. At this point, two important concepts come forward: HS Code and Incoterms.

HS Code is a standard product coding system that shows which category a product belongs to in international trade. Incoterms are international delivery rules that define who is responsible for transportation, costs, insurance, customs procedures, and risk between the buyer and the seller. When these two systems are used together, companies present their products more accurately and reduce mistakes in commercial agreements.

What Is an HS Code ?

HS Code means “Harmonized System Code”. This system, developed by the World Customs Organization, is used to classify traded products at the international level. The HS system defines thousands of product groups with codes and is used by many countries as the basis for customs tariffs, taxation, and trade statistics.

Simply put, the HS Code is like an international identification number for a product. It often determines which customs duty applies to a product, which documents or permits may be required, and how the product appears in import and export statistics.

Why Is HS Code Important for Companies?

HS Code is not only a technical code used at customs. It is also important for direct sales, marketing, export operations, and trust in B2B trade.

First, using the correct HS Code makes customs procedures easier. If the wrong code is used, the product may be subject to the wrong tax rate, may wait at customs, or may require additional documents.

Second, HS Code affects import and export costs. Customs duties, additional financial obligations, quotas, permits, and inspection requirements may change depending on the product’s tariff classification.

Third, HS Code helps international buyers understand the product more accurately. On B2B platforms, companies may sometimes search not only by product name but also directly by HS Code or product classification.

Fourth, HS Code is valuable for SEO and digital visibility. When the correct product name, description, category, and HS Code are used together on a product page, both search engines and buyers can understand the product more clearly.

Fifth, HS Code creates a professional company image. A company that presents its product together with international trade information appears more reliable to buyers.

What Should Be Considered When Choosing an HS Code?

When choosing an HS Code, it is not correct to rely only on the commercial name of the product. Products known by the same name may be made of different materials or may have different purposes of use. This can change the code.

Main points to consider:

1. Product material

Plastic, metal, textile, wood, glass, or chemical content can lead to different classifications.

2. Purpose of use

Two products made from the same material may fall under different codes depending on their purpose.

3. Processing status

Raw materials, semi-finished goods, and finished products may be classified under different headings.

4. Technical characteristics

Technical details can affect classification, especially for machinery, electronics, textiles, and chemical products.

5. Country-specific detailed codes

The first 6 digits are internationally standard, but countries may add extra digits after the first 6 according to their own needs.

Therefore, companies that import or export should verify GTIP/HS Code information through a customs broker, official tariff system, or authorized institutional sources.

What Are Incoterms?

Incoterms means “International Commercial Terms”. These rules define which costs, risks, and operational responsibilities are carried by the buyer and seller during the delivery of goods. Incoterms rules are published by the International Chamber of Commerce, and the current widely used version is Incoterms 2020.

Incoterms are very important for understanding what is included in a sales price. For example, two prices given for the same product may look different, but one may be EXW while the other may be CIF or DDP. In this case, comparing only the price can be misleading. When the delivery term changes, responsibilities for transportation, insurance, customs clearance, and taxes also change.

What Do Incoterms Do?

Incoterms rules clarify the answers to these questions:

- Who will transport the product?

- Who will pay the freight cost?

- Who will arrange insurance?

- Who is responsible for export customs procedures?

- Who is responsible for import customs procedures?

- At which point does the risk transfer from seller to buyer?

- Where is the product considered delivered?

Incoterms define the duties of the buyer and seller in transportation, insurance, document preparation, customs clearance, and logistics activities. Therefore, choosing an incorrect or incomplete delivery term may cause commercial disputes, unexpected costs, and delivery delays.

Incoterms 2020 Delivery Rules

Incoterms 2020 consists of 11 delivery rules. Seven of these rules can be used for all modes of transport; four are suitable only for sea and inland waterway transport.

Incoterms suitable for all modes of transport:

- EXW - Ex Works: The seller makes the goods available at its own premises; the buyer undertakes most of the process.

- FCA - Free Carrier: The seller delivers the goods to the agreed carrier and handles export customs clearance.

- CPT - Carriage Paid To: The seller pays transport costs to the named destination; risk transfers when the goods are handed to the first carrier.

- CIP - Carriage and Insurance Paid To: Similar to CPT; the seller also arranges insurance.

- DAP - Delivered at Place: The seller brings the goods to the named destination; unloading is generally the buyer’s responsibility.

- DPU - Delivered at Place Unloaded: The seller delivers the goods unloaded at the named place.

- DDP - Delivered Duty Paid: The seller takes the broadest responsibility, including import duties.

Incoterms suitable for sea and inland waterway transport:

- FAS - Free Alongside Ship: The seller delivers the goods alongside the ship.

- FOB - Free On Board: The seller delivers the goods loaded on board the vessel.

- CFR - Cost and Freight: The seller pays the freight; risk transfers to the buyer after loading on board the vessel.

- CIF - Cost, Insurance and Freight: Similar to CFR; the seller also arranges insurance.

Most Commonly Confused Incoterms Issues

One of the most common mistakes companies make when using Incoterms is assuming that transfer of cost and transfer of risk are the same thing. For example, under CPT, CIP, CFR, and CIF, the seller may pay certain transport costs, but the risk may transfer to the buyer at an earlier point. Therefore, saying “the seller pays the freight” does not always mean “the risk stays with the seller”.

Another mistake is not writing the delivery place clearly. General expressions such as “CIF Turkmenistan” or “DAP Turkey” are not sufficient. The delivery point should be stated as a city, port, warehouse, or full address whenever possible.

Correct usage example:

DAP Ashgabat, Turkmenistan - Incoterms 2020

More precise usage example:

DAP Buyer’s Warehouse, Ashgabat, Turkmenistan - Incoterms 2020

It is also recommended to write “Incoterms 2020” in the contract. This prevents confusion with older versions.

Why Are HS Code and Incoterms Important Together?

HS Code and Incoterms regulate different issues, but they complement each other in B2B trade.

HS Code shows what the product is and which customs classification it belongs to.

Incoterms show how the product will be delivered and under which responsibilities.

For example, a buyer may want to see the following information:

- Product name

- Product description

- HS Code / GTIP

- Country of origin

- Packaging information

- Minimum order quantity

- Delivery term

- Payment term

- Shipping option

- Required certificates or documents

When this information is provided together, the product listing looks more professional. The buyer can also understand the commercial conditions of the product more quickly.

Benefits of Using HS Code on B2B Platforms

Thousands of products and services are listed on B2B platforms. Therefore, products must be added with the correct category, description, and technical information. HS Code can be an important structuring tool here.

Main benefits of using HS Code on a B2B platform:

1. It makes product search easier.

Buyers can find products faster by category, name, or HS Code.

2. It gives an advantage to export-oriented companies.

A company that adds its product with an HS Code appears more prepared for foreign trade.

3. It reduces misunderstandings.

Product names may vary in different languages, but HS Code creates a common classification language.

4. It supports SEO performance.

When HS Code, product name, and category are used together on product pages, more descriptive content is created for search engines.

5. It increases buyer trust.

Companies that provide complete commercial details are perceived as more professional.

Benefits of Using Incoterms on B2B Platforms

Companies offering products or services on a B2B platform can reach an agreement with buyers more quickly when they clearly state delivery terms. Incoterms information is especially valuable for companies involved in import and export.

Including Incoterms information on the platform provides these benefits:

- The seller clearly shows up to which point it is responsible.

- The buyer calculates the total cost more accurately.

- Transportation and insurance responsibilities are clarified from the beginning.

- The quotation and comparison process becomes easier.

- Trust is created in international trade.

For example, writing only “price: 1,000 USD” in a product listing is not enough. If it is not stated whether the price is EXW, FOB, CIF, or DAP, the buyer cannot understand the real cost.

Better usage:

Price: 1,000 USD / ton - FOB Turkmenbashi Port - Incoterms 2020

or

Price: Upon request - DAP Ashgabat option available

Which Incoterms Can Be Preferred and When?

There is no single correct delivery term for every company. The choice depends on the product type, mode of transport, experience of the buyer and seller, logistics capability, and target market.

The general logic can be considered as follows:

- EXW: The least responsibility for the seller, but the buyer carries a high operational burden.

- FCA: More practical than EXW in many cases because the seller handles export customs clearance.

- FOB: Commonly used in sea transport, especially when the buyer wants to control the shipping process.

- CIF: In sea transport, the seller organizes freight and insurance; it may seem easier for the buyer at the beginning.

- DAP: The seller brings the goods to the specified point in the buyer’s country; import procedures are generally the buyer’s responsibility.

- DDP: The easiest for the buyer and the highest responsibility for the seller.

Especially for companies that are new to international trade, it is important to get support from a logistics company, customs broker, or foreign trade specialist when choosing Incoterms.

How Should HS Code and Incoterms Be Written in a Product Listing?

Companies adding products to a B2B platform can use the following structure:

Product Name: Polypropylene Big Bag Sack

Category: Packaging Products

HS Code / GTIP: Must be verified according to the product type

Origin: Turkmenistan

Minimum Order: 1,000 pieces

Delivery Terms: EXW / FCA / FOB / DAP options

Packaging: Palletized or baled shipment

Usage Area: Agriculture, chemicals, construction, non-food bulk product transportation

Description: Durable, high carrying capacity, producible in different sizes and lifting loop options.

A listing prepared in this way gives clearer information to the buyer and helps the company look more professional.

Practical Checklist for Companies

Before adding a product to a B2B platform, the company should check these questions:

1. Has the correct product category been selected?

2. Is the product name clear and understandable?

3. Does the product description include technical information?

4. Has the HS Code or GTIP been verified?

5. Has the delivery term been specified?

6. Has the Incoterms version been written?

7. Are packaging, minimum order, and origin details included?

8. Are the product photos high quality?

9. Can a quotation be prepared quickly when a buyer contacts the company?

10. Has the product information been translated correctly into different languages?