Commodity Code: Essential Guide
What is the Commodity code? Who issues it? What is it used for? What is it made of? Is it mandatory? What if I get it wrong? Here are some of the questions I will go through in this article.
It has become the new game amounts manufacturers and traders, playing with number trying to come up with that magical combination that will determine the amount of duty and VAT payable on your products or what you buy… Actually, finding the right commodity is pretty easy, let’s take a look.
The commodity code is found in the UK trade tariff, it classify goods for export and import and is based on an international recognised system that is used in the vast majority of world trade.
It is vital to get it right and it is your responsibility as importer or exporter to classify your products correctly along with the right commodity codes. Even if you are using a customs agent to do your declarations.
The Manufacturer/trader is responsible for classifying their products correctly and providing the right commodity codes, even when using customs authorised agents
What is the Commodity code used for:
So, since being so important, what is it actually used for?
- To fill in declarations and other paperwork
- To check if there are duty or VAT to pay
- To find out about duty reliefs and rules of origin
- To check that goods have the correct permissions to enter the country
- To produce trade statistics
- To find out about specific certification needed by importer/exporter for certain products (animal/foods & drinks, chemicals, pharmaceuticals etc…)
What is a commodity code made of:
The World Customs Organisation keep updated the
international classification commodity codes. It help countries to classify
traded goods on a common basis.
From an international perspective, the Coding Systems for
classifying goods is a six digit code, also known as Harmonized System (HS
code).
Individual countries add additional digits to classify goods
with more details. As an example, In the UK, in most cases the commodity code
for export is made of 8 digits and a minimum of 10 digits for import.
The Harmonised System nomenclature is a hierarchical
structure organised by section and then:
- Chapter (first 2 digits)
- Heading (4 digits)
- Sub-heading (6 digits)
A closer look
there are about 5000 commodity group, each identified by a six digit code, arranged in a legal and logistics structured and is supported by well-defined rules to achieve uniform classification
The WCO updates the code every 5 years, for example, to reflect new technology
Example of the EU Classfication System
What if you get your classification wrong
Failure to provide the right commodity code can have a damaging impact to your business, here are some of the consequences:
- Potential delays in transit
- Potential Penalties
- Potential seizure of goods
- Potential over or underpayment of VAT or Duty with its repercussion
- Cancellation of licencing for specific products
- Wrong trade data being passed on
How to find a commodity code
Commodity codes can be found in Volume 2 of the Integrated Tariff of the UK.
LINK: https://www.gov.uk/trade-tariff
You can enter the name of the goods and follow the options presented to refine your search or use an A to Z index of classified goods.
** In most circumstances, the higher the code, the more manufactured or processed it is**
Always read the notes as they often gives crucial bit of information. The notes can say for example what is not included within a section or chapter.
If you are still unsure, you have other options to go to:
- HMRC has produced some good content to help you find the right classification including guidance for specific products/parts (https://www.gov.uk/guidance/finding-commodity-codes-for-imports-or-exports)
- Emailing HMRC for advice ([email protected])
Your will need to include information such as product description, the materials it made from, what it is used for and how it presented or package. You can usually expect a response within 3 days. Take note to send out one email per product you wish to get help for.
- Getting a BTI ruling
This step is usually involves new product that do not sit in any existing classification code. It provide a legal document which confirms the commodity code agreed for your product. Here is the link for how to apply: https://www.gov.uk/guidance/apply-for-a-binding-tariff-information-decision-notice-600
