Module 3:

Harmonized System (HS) data Classification and Market

Identification and Competitiveness Analysis using Trade Map Data
LEARNING OBJECTIVES:

• Introduction to Harmonised System (HS) Trade data classification

• From where to access trade-related data?
• Data Comparability Issues
• How to use Trade Map database?
LEARNING MATERIAL:

3.1 International Trade Classification and Harmonized System (HS)

While conducting international trade, the firms from various countries trade by using a
common trade classification for the tradable products. This is important both from the
industry perspective (e.g., checking the tariff rates applied by importer on the product from
various partner countries) as well as for several key government functions (e.g., anti-
dumping investigations, rules of origin compliance verification).

The most commonly used code of product classification is known as Harmonized system
(HS). The HS classification is used by firms for international business and World Custom
Organisation (WCO), World Trade Organisation (WTO) and other multilateral and regional
bodies in their negotiations and discussions as well. The advantage of using this
classification system is that the traders from across the countries can assure themselves
during the pre-business stage that the same product is being discussed.

The HS classifications are arranged in 2-digit (Chapters), 4-digit (Heading), 6-digit (Sub-
Heading) and 8-digit or 10-digit (actual product at tariff line). The classifications are
harmonized across all the countries in the world upto 6-digit level. Below that level the tariff
lines are presented at 8-digit (e.g., in India) in some countries and at 10-digit (e.g., in USA) in
some other countries. From Table 3.1 the idea about HS code classification difference across
countries can be explained, with the example of watermelons.It is seen that the HS code
descriptions are same both in India and USAupto HS 6-digit level of classifications. Below
that level while in India, there is only one HS 8-digit code, there are more than one 10-digit
classifications is USA. Similar difference can be there for other product-country
combinations as well and the corresponding Indian classifications.

Table 3.1: HS Classification for Watermelons in India and USA

Category Code Description
Chapters (2 digit) 08 Edible fruit and nuts; peel of citrus fruit or
melons
Headings (4 digit) 0807 Melons, incl. watermelons, and papaws
(papayas), fresh
Sub-Headings (6 digit) 080711 Fresh watermelons
Basic Product (8-digit or 10- 08071100 Fresh watermelons
digit) - India
Basic Product (8-digit or 10- 0807114010 Seedless Watermelons, Fresh, entered
digit) - US during the period from April 1 to
November 30, in any ...
Basic Product (8-digit or 10- 0807113010 Seedless Watermelons, Fresh, if entered
digit) - US during the period from December 1, in
any year, to …
Basic Product (8-digit or 10- 0807114090 Watermelons, Fresh, entered during the
digit) –US period from April 1 to November 30, in
any year, inclusive, ...
Source: Compiled from Trade Map (ITC, undated a)
The basic principle for identifying the HS code for one’s product, if not exactly known, is the
following. The early HS chapters relate to primary products, while the later ones relate to
manufacturing or value-added sectors. For instance, HS 3 relates to fishery products, while
HS 87 covers the vehicles and auto-components. Similarly, within HS chapters, the similar
principles are followed for headings. For instance, HS 79 includes all the products made of
zinc. HS 7901 includes Unwrought zinc, while Zinc tubes, pipes and tube or pipe fittings
come under 7906.

To sum up, one can find the HS code of the products of interest by first identifying the
corresponding chapter, and then going further down by identifying the heading, sub-
heading and finally the appropriate tariff line. The appropriate chapters can be identified by
either the material content, usage or function or by stage of processing. An example is
provided in Table 3.2. In the first column, we see that the similar products in terms of
material content are placed under HS 40 (rubber), 44 (wood) or 69 (ceramic materials). The
second vertical shows some chemical products which have medical or agro-chemical usage
are accordingly placed under HS 30 (pharmaceuticals) or 31 (fertilizers). Vehicles and Auto-
components on the other hand come under HS 87. Finally, depending on the stage of
processing of the product, e.g., cotton in primary forms, fibre or fabric in semi-processed
stage or final garments, the product will be placed under HS 52, 55, 60 or 61.

Table 3.2: Identification of Products within HS Chapter

HS Code by Material HS Code by Usage or HS Code by Stage of Processing
Content Function
Rubber – HS 40 Pharmaceuticals – HS 30 Cotton – HS 52
Wood – HS 44 Fertilizers – HS 31 Man-made staple fibres – HS 55
Ceramic Products – HS 69 Vehicles and Auto- Knitted or crocheted fabrics –
components – HS 87 HS 60
Articles of apparel and clothing
accessories, knitted or
crocheted – HS 61
Source: Compiled from Trade Map (ITC, undated a) descriptions

Alternatively, the intermediate products used in production of a final consumer good, say an
automobile (HS 87) products might be spread across a wide range of HS chapters. For
instance, if a producer of vehicles(say, with 1000 cc engine) requires to import parts and
components, Table 3.3 gives an example of its inputs being scattered under different
chapters, not necessarily under automobile products. While tyres are coming under HS 40
(rubber products), the ignitions are appearing under HS 85 (electrical machinery and
equipment)while safety airbags used in vehicles come under auto-components (HS 87).
Similar examples can go on.
 Table 3.3: Auto-Components under Different Chapters
HS Code Description
401310 Inner tubes, of rubber, of a kind used on motor cars, incl. station wagons
and racing cars
851110 Sparking plugs of a kind used for spark-ignition or compression-ignition
internal combustion
870895 Safety airbags with inflator system and parts thereof, for tractors, motor
vehicles
Source: Compiled from Trade Map (ITC, undated a)

7.2 Source of trade-related data

The trade data involving any partner can be accessed from individual country government
databases, maintained by respective Ministry of Trade / Commerce. For instance, the year-
wise Indian trade data (both export and import) with Australia or Brazil can be obtained
from the Export Import Data Bank (GoI, undated). The database provides one a good
perspective on India’s past trade values in a particular product in a partner country.
However, an exporter may often need to consider a wider perspective. For instance, an
exporter is planning to export Turbopropellers of a power > 1.100 kW (HS 841122) to USA.
He may need to consider not only India’s export of the product in question to USA over last
few years, but also USA’s import of the same from competitor countries like China and the
tariff applied by USA on its regional trade partner countries like Mexico. Those data points
will not be available in the Indian trade database. To obtain the comparable data for more
than one countries from one single database, one needs to consider the international
databases. Examples for some common databases and their applications are noted in Table
3.4.

Table 3.4: Auto-Components under Different Chapters

Database Application Source
Export Import Data India’s trade data with partners GoI (undated)
Bank
Trade Map All countries trade data with partners ITC (undated a)
WITS All countries trade data with partners World Bank
(undated)
COMTRADE All countries trade data with partners UN (undated)
Market Access Map Tariff data applied by all countries ITC (undated b)
TAO Tariff data applied by all countries WTO (undated)

Usually all these databases maintained by multilateral bodies obtain the data from the
national government designated agencies in individual countries (e.g., DGCIS in case of
India), so the data is authentic. However, despite that small differences may be noted for
the same data series (India’s export of HS 847950, i.e., Industrial robots, n.e.s. to Japan)
obtained from Trade Map and WITS. It is therefore advisable to stick to one database (say,
Trade Map) while conducting an analysis with multiple data series, e.g., for computing an
index like Revealed Comparative Advantage (RCA) and market potential.
7.3 Data Comparability Issues

In the current discussion one particular database, namely Trade Map, has been used for
accessing India’s trade data to analyse potential and competitiveness. However, one needs
to be cautious while using the database. Suppose an exporterintends to understand India’s
potential in USA market for T-shirts, singlets and other vests of textile materials, knitted or
crocheted (excluding cotton) (HS 610990) by accessing Trade Map data.One may observe
the required information by looking either at Indian export of the product to USA or US
import of the product from India, as both relate to the same series. The first series might be
in terms of FOB (free-on-board), while the second series might be in CIF terms (cost-
insurance-freight). Because of inclusion of freight and insurance cost, the import value of
USA from India might be greater than the corresponding figure for exports by India to USA.
The data search results from Trade Map database for this query are summarized in Table.
3.5.

Table 3.5: Indo-US Trade in HS 610990 (T-shirts, singlets and other vests of textile
materials, knitted or crocheted, excluding cotton)
Year India’s Export to USA (USD 000) USA Import from India (USD 000)
2008 20157 9092
2009 23725 6484
2010 45112 10648
2011 62465 10915
2012 102549 12384
2013 190295 13697
2014 186283 19860
2015 203349 20548
2016 195140 17411
2017 117018 17922
Source: Constructed from Trade Map data (ITC, undated a)

The table clearly shows that for several years, the export values are found to be far larger
than the corresponding import values. The question for an exporter then is - which series to
trust more? For instance, in 2017 USA can be considered as a major market for Indian
exports if one looks at the export data. However, if the import data is to be trusted, then
USA is only a modest market. This type of counter-intuitive observation might result owing
to multiple reasons, including measurement problems, trade deflection to other directions,
rejection of consignments in targeted importer, errors in entry of data, documentation
errors, under-invoicing and so on (Bacchettaet al., 2012).

Suppose, India exports a marine product consignment to USA. Then in the Indian export
data reporting system, the trade direction will be shown as USA. If for some quality reason,
the consignment is rejected by USA Food and Drug Administration (USFDA) during entry
point quality inspection, the exporter may not pay freight charges once again to recall the
products back to India. They rather may try to sell the same in Mexico and the data will be
reflected in Mexico’s imports accordingly. Thus a data mismatch for HS 610990 in Indo-USA
bilateral trade would arise in this hypothetical example. Hence in many trade analytic
exercises, reliance will be more on the import data, as that series provides a better
confirmation of entry of cargo in the destination country.

Another possible reason behind the difference in export and import data is the divergence
in classification at Harmonized System (HS) 8 and 10 digit level across countries. HS data is
harmonized at HS 6-digit level for all countries, but below that there is no harmonization.
For instance India and USA follow HS 8-digit and 10-digit level of classification respectively.
The mismatch between India’s export and USA’s import data at a HS 6-digit level product
cannot be compared to the minute details because of this HS code asymmetry.

7.4 How to use Trade Map database?

Trade Map database is freely accessible from home, office or other locations, once an
exporter registers there to create unique user id and password. Once an exporter enter the
database, various data extraction options (e.g., product code at HS 2, 4, 6, 8 or 10 digit level;
reporter and partner countries; export or import; yearly / quarterly / monthly time series or
trade indicators; number of years) can be set from the drop down menus. For
understanding greater details of the Trade Map database operation, the Trade Map User
Manual (ITC, undated c) can be accessed.

Suppose one exporter is interested to understand which of the countries where India is
presently exporting T-shirts, singlets and other vests of cotton, knitted or crocheted(HS
610910) can be considered as a good export market. Then the HS 6-digit product can be
selected be setting India as the exporting country and world as the trade partner. The yearly
time series data (say, 5 years) to major destinations can be obtained from Trade Map and
placed under Table comes in the following form.

Table 3.6: India’s Export of HS 610910 (T-shirts, singlets and other vests of cotton,
knitted or crocheted) in USD 000
Indian Export
2013 2014 2015 2016 [2017
Destination
World 1873572 1827709 1779061 1732492 1712366
USA 480237 407628 412693 392061 403654
UAE 146290 133692 213424 226044 169306
Germany 214630 199780 170260 168937 162539
UK 150069 164367 159698 137772 146914
France 129967 153459 148629 123262 115015
Spain 56357 65202 55149 59961 70209
Source: Obtained from Trade Map (ITC, undated a)

As the exporteris interested to learn which existing market is good for Indian exports, he
might then opt for Trade Indicators. The output for major partners can be observed from
Table 3.7. The table shows India’s export growth rate to the market, the country’s import
growth rate from the world, average tariff imposed by the country on India and several
other information (not shown in Table 3.7).
 Table 3.7: India’s Trade Indicators for HS 610910 (T-shirts, singlets and other vests of
cotton, knitted or crocheted) in USD 000
Indian Share Growth Tariff
Share of Total imports
Export in in Ranking of (estimat
partner growth in value
Destination India’s exported partner ed)
countries of partner
Exports value countries faced by
in world countries
(%) between in world India (%)
imports between 2013-
2013-17 imports
(%) 17 (%)
(%)
World -2 100 0
USA 23.6 -4 1 15.8 -1 16
UAE 9.9 9 11 2 -3 5
Germany 9.5 -7 2 10.7 -4 9.6
UK 8.6 -2 3 6.8 -2 9.6
France 6.7 -5 4 5.5 -2 9.6
Spain 4.1 4 5 5 3 9.6
Source: Obtained from Trade Map (ITC, undated a)

In order to confirm which markets to export the product to after observing the output in
Table 3.7, the graph tool under Trade Indicators can be accessed. Figure 3.1 shows the
analysis for select countries to which India can export. The horizontal axis shows share of
partner countries in Indian exports and import growth by the partners are shown in vertical
axis. The countries where India’s export growth is greater than their import growth are
coloured in blue and in the reverse case, the country bubbles are visible in yellow. It can be
noted that USA can be a future market as there is possibility of increasing Indian exports
there (yellow bubble), while Spain can be considered as a market to be focussed in short run
(blue bubble). There are other also Trade Map graphical tool views available, which can be
used for understanding market potential as per Trade Map User Manual (ITC, undated c)
guidance.

The data obtained from Trade Map can provide an existing / potential exporter an idea
whether India is enjoying any export advantage in the category. Computation of such trade
indices can be noted from Mikic and Gilbert (2009), which gives detailed account these. For
instance, the Revealed Comparative Advantage (RCA) of India can be compared with China
for HS 610910 to know whether the two countries enjoy any advantage in their exports to
the world. The computation is summarized in Table 3.8. It can be concluded from the table
that as relative share of the product is increasing in the export basket of both China and
India vis-à-vis the world (i.e., RCA index greater than 1), both the countries are efficient
exporters of the commodity in question in global market.
 Figure 3.1: Understanding Possible Export Markets for India

Source: Obtained from Trade Map (ITC, undated a)

Table 3.8: Comparison of India and China’s RCA for HS 610910 (T-shirts, singlets and
other vests of cotton, knitted or crocheted) in USD Billion
Data Series 2013 2014 2015 2016 2017
India's Export of 610910 to World 1.87 1.83 1.78 1.73 1.71
India's Total Export to World 336.61 317.54 264.38 260.33 295.85
World's Export of 610910 to World 27.79 28.99 28.34 27.29 27.96
World's Total Export to World 18878.63 18874.64 16413.29 15885.52 17585.23
India's RCA 3.78 3.75 3.90 3.87 3.64
China's Export of 610910 to World 4.37 4.85 4.56 4.28 3.98
China's Total Export to World 2209.01 2342.29 2273.47 2097.64 2263.37
World's Export of 610910 to World 27.79 28.99 28.34 27.29 27.96
World's Total Export to World 18878.63 18874.64 16413.29 15885.52 17585.23
China's RCA 1.34 1.35 1.16 1.19 1.11
Source: Constructed from Trade Map (ITC, undated a) data

Finally, suppose an exporter intends to export HS 610910 to USA market and attempts to
understand the competitiveness of Indian products therein. This can be computed by
following various competitiveness-related methodologies specified in Reis and Farole
(2012). Suppose one compares the average unit pricesof major exporting countries in
USA(reflected form USA import data) with their corresponding market shares. For evening
out any annual fluctuations, averages over two five-year periods can be compared. The
results of this exercise are summarized in Table 3.9. It can be observed that for India rise in
average unit price during 2013-17 over 2008-12 period is leading to a decline in its average
market share in USA imports. Hence there is need to be cautious on price competitiveness
of the exports for expanding the reach to the USA market.

Table 3.9: Analysis of India’sCompetitiveness of HS 610910 (T-shirts, singlets and other

vests of cotton, knitted or crocheted) in USMarket
Average Unit Price (USD /
Ton) Average Market Share (%)
Change Change in
2013- in Unit Market
Exports to USA 2008-12 17 Price 2008-12 2013-17 Share
Honduras 8263.2 8484.8 221.6 14.84 13.44 -1.4
Nicaragua 9959.6 9754.8 -204.8 4.56 7.54 2.98
El Salvador 8840.4 9139.4 299 10.7 9.88 -0.82
China 13352.6 14094.8 742.2 10.12 9.86 -0.26
Dominican Republic 10023.4 9650.8 -372.6 3.02 6.54 3.52
Mexico 8830 9326.8 496.8 10.48 8.2 -2.28
Haiti 7420 8875 1455 5.56 8.04 2.48
Viet Nam 15074.6 17111.4 2036.8 5.54 5.56 0.02
India 12878.6 14332 1453.4 5.18 5.14 -0.04
Source: Constructed from Trade Map (ITC, undated a) data

Suggested Reading:

Bacchetta, M., Beverelli,C., Cadot, O., Fugazza,M., Grether, J., Helble,M., Nicita, A. and Piermartini,
R. (2012). A Practical Guide to Trade Policy Analysis. Geneva: World Trade Organization and
United Nations Conference on Trade and Development.
Government of India (undated). Export Import Data Bank. Available at: http://commerce-
app.gov.in/eidb/.
International Trade Centre. (undated a). Trade Map database. Available at:
http://www.trademap.org/Index.aspx.
International Trade Centre. (undated b). Market Access Map database. Available at:
http://www.macmap.org/.
International Trade Centre. (undated c). Trade Map User Guide. Available at:
https://www.trademap.org/Docs/TradeMap-Userguide-EN.pdf.
Mikic, M. and Gilbert, J. (2009). Trade Statistics in Policymaking - A Handbook of Commonly used
Trade Indices and Indicators. Bangkok: United Nations Economic and Social Commission for Asia
and the Pacific (UNESCAP).
Reis, J. G. and Farole, T. (2012). ‘Trade Competitiveness Diagnostic Toolkit’. Washington DC: World
Bank.
United Nations(undated). UN COMTRADE database. Available at: https://comtrade.un.org/
World Bank. (undated b). World Integrated Trade Solution (WITS). Available
at:http://wits.worldbank.org/.
World Trade Organization (undated). Tariff Analysis Online (TAO) database. Available at:
https://tao.wto.org/welcome.aspx?ReturnUrl=%2f.
Learning Outcomes: Application of Knowledge

Case-Let 1:Mr. Khurana is a major trader of Single cotton yarn, of combed fibres, containing
>= 85% cotton by weight (HS 520524). He decides to export the product to appropriate
markets. To be on the safe side, he decides to export the product to markets where other
Indian firms are exporting the product at present. How can he identify the markets for this
purpose? Explain the reason behind selecting these markets for this purpose.

Case-Let 2: Mr. Kulkarni is a major producer of Flat-rolled products of iron or non-alloy steel,
of a width of >= 600 mm, hot-rolled or cold-rolled (HS 721049). He decides to export the
product to appropriate markets in the globe. How can he identify the markets for this
purpose? Explain the reason behind selecting these markets for this purpose.

Case-Let 3: Mr. Thapar has decided to export Mens / Boys shirts of man-made fibre, knitted
(HS 610520) to the USA market. Before entering the market, he wants to understand how
on the average the Indian players are performing there vis-a-vis other competitors. How can
such an analysis be conducted? Explain the reason behind the conclusions drawn after
conducting the analysis.
Review of Learning Outcomes:

1. One knows the principle following which the product codes are assigned to various
commodities, and how to search for the HS code for own product.

2. One knows the caution that needs to be followed while using the data from international
databases, namely - Trade Map, WITS, UNComtrade etc.

3. One knows how the Trade Map database can be used for identifying the possible markets
and understanding competitiveness of the same in a target market.