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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.
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:
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.
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 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.
You can use the HMRC trade tariff tool to find the right commodity codes for your business.
As discussed above, commodity codes are made up of different elements based on:
So you need to have all of this information available when using the commodity code checker.
HMRC lists four steps when using this tool:
You’ll see a search bar when you access the tool – put the type of goods that you’re importing or exporting here and see what it comes up.
If the goods don’t come up by name, you can try searching for what they’re used for or made from.
In this example, we’re searching video game consoles – for example, Sony PlayStation and Nintendo machines.
After searching the item, different sections will show. You should check to see whether your goods are accurately described under these sections.
In this example, the ‘toys, games and sports requisites’ section, with a commodity code starting 95, most accurately describes what we mean by video game consoles.
After clicking through on a section, you’ll see more subheadings. If your goods are specifically described under a subheading, choose that.
But in this example, our type of video game consoles are listed as more general ‘video game consoles and machines’, to separate them from coin-operated consoles you might see in seaside arcades.
After clicking through, the tool should show you the commodity codes, as well as any duties, licences and permits needed.
You can also check the footnotes to make sure you’ve got the right codes. The footnotes for this example tell us that the subheading 9504 50 is the right commodity code for Sony PlayStation and Nintendo consoles.
If you make mistakes with the trade tariff tool and commodity codes, not only could it hold up your items, you might have to pay extra fees and charges.
In the worst cases, if you use the wrong commodity code and you don’t end up getting the right licences and permits, you’ll be breaking the law.
So, it’s important to be accurate. That said, commodity codes are complex, so you might want to get professional help if you import or export goods as a core part of your business.
Here’s what else you can do if you’re having trouble finding the right commodity codes:
What’s your experience of finding the right commodity codes for your business? Let us know in the comments below.
Sam has more than 10 years of experience in writing for financial services. He specialises in illuminating complicated topics, from IR35 to ISAs, and identifying emerging trends that audiences want to know about. Sam spent five years at Simply Business, where he was Senior Copywriter.
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