Commodity codes: The essential guide

In this guide we’ll look at when and why commodity codes are used, what they look like, and how to find the right one for your needs.

If you’re considering starting a business involved in importing or exporting products, you’ll need to know about commodity codes. These are used to classify goods for import and export, to make sure they’re moved safely and in compliance with customs, tax and duty regulations.

In this guide we’ll look at when and why commodity codes are used, what they look like, and how to find the right one for your needs.

Here’s all you need to know about commodity codes.

What are commodity codes?

Commodity codes – sometimes referred to as trade tariff commodity codes – are used to classify any goods being imported or exported. Getting the right code is important to ensure compliance with customs declarations, and pay the right taxes and duties.

Why you need to know about commodity codes

Commodity codes have a number of uses in import and export businesses. They’re used when completing paperwork for customs declarations, and can influence the amount of tax and duty you pay to import or export a product. Using the correct commodity code is also important to make sure you’re following any relevant legal or safety regulations when importing products which might be dangerous or restricted.

Tip: There’s a lot to learn when launching a new import or export business. One nasty – but avoidable – surprise for many new international businesses is the high cost of bank fees when dealing with customers and suppliers overseas.

To make sure you’re not overpaying for your international transfers, you’ll definitely want to research the costs charged and exchange rates used by your bank. Traditional banks aren’t always upfront about their costs, and can hide fees in an inflated exchange rate.

Many entrepreneurs find that they’re better off using a service that specialises in international transfers like TransferWise. With TransferWise, you can be sure there are no hidden costs, and the exchange rate used will be the best available. All transfers are made online or through their app for convenience. They’re also FCA regulated, just like a regular bank.

Structure of the code

The commodity or tariff codes used can vary in length and structure depending on the type of goods, and where they’re moving to and from.

For example, goods coming into the UK from outside of the EU will usually have a 10 digit commodity code, which can go up to 14 digits for some products. However, goods for export from the UK may only have an 8 digit code.

Each code is made up of a number of different elements which describe details such as the broad type of product, the material used to make it, and even the type of method used for production. It includes:

  • Details required for the Harmonised system – the global customs naming system known as the HS
  • EU wide information which is captured as a CN Code (which stands for the catchy Combined Nomenclature), and simply records trade levels between EU states
  • TARIC integrated tariff information which covers EU trade policy information needed for national customs authorities.

It’s pretty amazing how much meaning can be conveyed by just a few digits. For example, the EU trade helpdesk website features an example of shoe parts made for import. The code for these is 6406 10 10 10 90 – made up in the following way:

Code Meaning Classification type
64 Footwear HS Chapter
64 06 Parts of footwear HS Heading
6406 10 Shoe uppers HS Subheading
6406 10 10 Leather CN Code
6406 10 10 10 Hand-made Taric Code
6406 10 10 10 90 Other Taric Code

 

So with just a few numbers, the importers and exporters – and every other authority and organisation which handles the products on the way – know exactly what they’re dealing with.

What happens if you don’t have a commodity code or use an incorrect one?

If you use an incorrect commodity code, you might find that your goods are seized or delayed by customs. You might pay incorrect VAT or duty, and – if you pay too little – could be liable for extra fees and charges.

Some items can only be imported or exported with a license, such as plants, animals, or anything potentially hazardous. If you try to move these products using an incorrect commodity code, you’ll be breaking the law, and will find yourself in serious legal trouble.

How to find your commodity code

Finding the correct commodity code for your needs can be daunting, as there are so many to choose from. However, help is at hand. To make the process a little simpler you might consider:

The trade tariff lookup tool available from the UK government allows you to find the right code by narrowing your search using information such as what your product is, what it’s made from, how it works, and how it’s packaged.

Find your commodity code with the Trade tariff look up

If you’re not sure of the correct commodity code, one good place to start is by looking it up using the trade tariff tool.

  • Go to the UK government trade tariff look up page
  • Hit Start Now
  • Enter the search term you want to use – the dialogue box will automatically populate with common searches to help you
  • Suggested commodity codes will appear, starting with the HS chapter and headings to help you narrow it down to the correct category of products
  • You can continue to search the suggestions using other information, such as what the item is made of or how it is packaged
  • Once you find the correct item type you’ll be shown the import and export codes, and any important information connected to this code – such as whether or not you need a license to import or export items under this code.

Emailing HMRC

Another option, if you can’t find the commodity code you’re looking for, is to ask HMRC for advice on the best fit code for your product. You can contact HMRC using the following email address:

classification.enquiries@hmrc.gsi.gov.uk

You’ll need to include information about the product you’re planning to import or export, to get advice on the commodity code. Your message should include:

  • A description of the product
  • The materials it’s made from
  • What it’s used for
  • How it’s presented or packaged

HMRC ask that you send a separate email for every item you want to ask about.

Getting a BTI ruling

In some cases it might be helpful to apply for a BTI – a binding tariff information ruling, to confirm your commodity code. It’s a legal document which confirms the commodity code agreed for your product, so there’s no guesswork involved.

Getting a BTI can be helpful because you’ll have certainty about the commodity code needed for your imports or exports. It doesn’t cost anything to get a BTI ruling, but you may need to pay if there are tests needed, for example, to determine the materials used in your product.

This ruling usually lasts for three years, and is legally binding throughout the EU. It can be revoked, however, if you’re found to have provided incorrect or incomplete information about the product. It might also be reviewed early if there are changes to the law or how it’s interpreted, or if you change the nature of your product during the BTI period.

To get a BTI ruling, you’ll need to:

  • Make sure you have an EORI number already
  • Register for the eBTI tool on the UK government gateway website
  • Log into the eBTI tool using your EORI number, password or PIN, and business address
  • Describe the goods you’re planning to export or import, including the materials used and what they’re for
  • Send images of the goods to: tariff.classification@hmrc.gsi.gov.uk
  • Send samples of the goods if required, to: 10th Floor SE, Alexander House, 21 Victoria Avenue, Southend-on-Sea, Essex, SS99 1A
  • You’ll also have to confirm the commodity code you believe to be most appropriate for your goods.

Samples must always be provided for textiles, ceramics and shoes, but you might also find it helpful to provide samples for other types of items, to get the most accurate code.

Once a decision has been made, you’ll get a legal ruling which confirms the commodity code you should use on your customs declarations. If you disagree with the ruling, there is an appeal process you can follow.

Finding the right commodity code is one of the first things you’ll need to do before you can import or export goods. It can be a little complex, but there is help at hand to make sure you get the right code for your business needs. With the resources outlined here, you should be able to find all you need to start getting your import/export business off the ground.

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