Commodity Codes
Intro
A commodity code is a standardised numerical code used to classify goods for international trade. Also known as a HS Code (Harmonised System Code), tariff code, customs code or TARIC code.
Commodity codes helps customs authorities identify products, determine applicable taxes and duties, and ensure compliance with trade regulations by setting import restrictions and additional importation or documentary requirements.
Why Commodity Codes are Important
Determining Import Duties and VAT: The code determines the import duty rate and VAT that will be applied to goods. Using the correct code helps to ensure you pay the right amount of tax and avoid underpayments, overpayments and are compliantly declaring your goods to customs.
Trade Statistics: Governments use these codes to track trade data, monitor imports and exports, and maintain economic statistics.
Compliance with Trade Regulations: Correct classification helps businesses comply with import/export regulations, including licensing requirements, product standards, and safety checks.
Facilitates Customs Clearance: Proper use of commodity codes simplifies customs procedures, minimising delays at the border.
Structure of a Commodity Code
Commodity codes vary in length depending on the level of detail needed. A full commodity code is 10 digits long and can generally be broken down into subsections of 2 digits with each successive 2 digits more specifically detailing what the goods are.
The first 2 digits are known as the ‘Chapter’ and is used to split out commodities according to a very general section of goods, for example, chapters 50 to 63 refer to ‘textiles and textile articles’.
The first 6 digits are standardised internationally under the Harmonised System (HS) by the World Customs Organisation (WCO).
The next 4 digits (digits 7-10) can vary slightly from one customs territory to another. This means that while commodity code could be accurate for your goods in one country it potentially may not be for another, and may need adjusting slightly.
Example of a Commodity Code Breakdown (UK Database)
First 2 digits: 50 to 63 = (textile and textile articles)
First 4 digits: 6205 (men’s or boy’s cotton shirts)
First 8 digits: 6205.20.00 (of man-made fibres)
Full 10 digits: 6205.20.00.00 (of man-made fibres – this particular code does not have further specifications for the last 2 digits)
An export customs entry requires first 8 digits relevant to export customs territory
An import customs entry requires full 10 digit code relevant to import customs territory
Different Commodity Code Databases
UK Trade Tariff Database can be found here
EU Trade Tariff Database can be found here
US Trade Tariff Database can be found here
Common Challenges with Commodity Codes
Misclassification: Using the wrong code can lead to incorrect duty payments, delays, and even penalties. It’s crucial to classify goods accurately to avoid issues with customs.
Product Complexity: Some products, like multi-component items or high-tech goods, may be difficult to classify correctly. In such cases, it may require professional advice or a Binding Tariff Information (BTI) ruling.
In the UK you can also ask HMRC for help classifying your goods – the advice is non-legally binding and they aim to reply within 5 working days.
Changes in Codes: Commodity codes are updated periodically, so it’s important to stay current to ensure compliance.
Diclaimer: The information provided on this website is for general informational purposes only and should not be considered professional advice. While we strive to ensure the accuracy and relevance of the information, Unity Logistics does not guarantee its completeness, reliability, or suitability for any specific purpose. Users should consult with qualified professionals before making decisions based on the content found on this website. Unity Logistics disclaims any liability for actions taken based on the information presented here.