What is a commodity code and why is it important to use the right ones when importing or exporting goods for your business? Here’s what small businesses need to know.
What is a commodity code?
You need to use commodity codes to classify your goods when you’re importing and exporting them.
You use a commodity code to look up the item and make your import or export declaration. It helps you work out:
what rate of duty and import VAT you should pay
whether the duty is suspended
whether you need a licence to move your goods
if your goods are covered by Agricultural Policy, anti-dumping duties, or tariff quotas
Commodity codes are also known as trade tariff codes or HS codes (harmonisation tariff codes).
Tariff codes mean your product can be recognised worldwide using a specific code, so there’s no hold-up due to language barriers.
What are commodity codes used for?
As mentioned, commodity codes are used for the customs declarations you need to make when importing and exporting goods to and from the UK. You declare the value and content of the goods that you’re importing or exporting.
The declaration is a legal document that lets customs authorities know you’re paying the right amount in tax and duties. The declaration also lets you and the authorities know whether the items are subject to licences or permits.
It’s important that the declaration is accurate, which is where commodity codes come in – problems with the declaration can hold up your items at the border.
Following Brexit, you now need to make customs declarations when importing and exporting goods from the EU. You might hear the term ‘TARIC codes’, which relate to the EU customs tariff system and are often also referred to as commodity codes.
Commodity codes: what do they look like?
Commodity codes vary in length depending on the type of item, whether they’re being imported or exported, and even how they’re made.
That’s because commodity codes get specific, which lets the authorities know exactly what they’re dealing with.
Gov.uk gives the example of a pair of men’s trousers. You need to know how they’re made and what they’re made of before using the HMRC trade tariff tool (described below).
For example, if you run a clothing business, men’s trousers made from a knitted material that’s made primarily of cotton will have an export commodity code of 61 03 4200 and an import commodity code of 61 03 420000.