What is a Commodity Code & How do you find it?

Commodity codes are globally recognized reference numbers that describe specific products during the import or export of goods. They play a crucial role in ensuring the safe movement of goods in compliance with tax, customs, and duty regulations. Commodity codes, also known as trade tariff commodity codes help determine customs duties, applicable preferential treatments, and any prohibitions or restrictions on imports, exports, and transit of goods.

Commodity codes are indispensable for fostering the seamless and streamlined operation of global trade. They serve as a cornerstone, establishing a universal language that facilitates communication and management among businesses, customs authorities, and regulatory bodies. These codes play a pivotal role in ensuring the coherence and efficiency of diverse facets within cross-border transactions.

By using commodity codes, businesses can calculate the correct rate of customs duty and import VAT, assess applicable taxes, and explore preferential rates that may apply. These codes also indicate whether specific goods require an import or export license and if excise or anti-dumping duties are applicable.

Correctly classifying goods is a legal responsibility that ensures adherence to trade regulations. Failure to comply may result in delayed cycles, shipment confiscation, heavy fines, and damage to the trust established with stakeholders. Additionally, accurate classification contributes to cost reduction, a valuable reward in the business realm.

To find a product's commodity code, businesses can follow steps such as searching the tariff, scanning it alphabetically, and thoroughly exploring sections. Trademo Compliance offers advanced classification modules, including HS Code Classification and ECCN Classification, allowing businesses to classify imports and exports efficiently.

These are crucial insights into international trade without which it will be only too difficult to carry on with the business. With Trademo HS Classifier, we are consistently making efforts to help you leverage data and information for empowered business decisions.

How does commodity code work?

Product classification codes play a crucial role in presenting products in a standardized format. The length and structure of commodity codes exhibit variations based on the nature of goods, their origin, and the intended destination. Here’s an example to make it more understandable.

Goods arriving in the United Kingdom from non-EU countries typically bear a 10-digit commodity code, extending to 14 digits for specific product categories. Conversely, goods exported from the UK are usually identified by an 8-digit code. What adds intrigue is that each code is composed of numerous different elements which describe details such as the broad product category, the material used to make it, and even the method employed in production.

Isn’t it simply amazing how much information can be conveyed only with a few digits?

Why are commodity codes essential?

By now, you've gained a fair understanding of what commodity codes are and their significance. Let's delve deeper into why these codes are essential:

• Ensure Accurate Duty and VAT Payments: Verify that the amount you pay for duty and VAT aligns with the correct commodity code.
• Assess Duty Suspensions: Understand whether any duty suspensions are applicable to your goods.
• Explore Preferential Duty Rates: Determine if preferential duty rates can be applied to optimize costs.
• Navigate Licensing Requirements: Identify whether specific goods require import or export licenses.
• Address Excise or Anti-Dumping Duties: Be aware of the potential application of excise or anti-dumping duties.
• Prevent Incorrect Interest Payments: Avoid making wrong interest payments on backdated charges.
• Mitigate Risks of Seizure or Delay: Minimize the risk of goods being seized or delayed by adhering to correct commodity codes.

Launching a new imports or exports business brings excitement, but surprises in the form of legal restrictions or heavy taxes can be daunting. Using the correct commodity code not only ensures compliance but also affirms adherence to safety and legal regulations.

Here’s how the University of Washington use commodity codes.

The University of Washington (UW) relies on UNSPSC (United Nations Standard Products and Services Code) Commodity Codes. Through informed comparative analysis, commodity codes empower UW to:

• Understand departmental spending and benchmark against peer institutions.
• Evaluate pricing disparities and identify opportunities for cost optimization.
• Design better contracts, leading to improved pricing from suppliers.

UNSPSC provides a unified global classification system, offering:

• Company-wide visibility for spend analysis.
• Cost-effective procurement optimization.
• Full exploitation of e-commerce capabilities.

How can you find your product’s commodity code?

When embarking on the quest to find your commodity code, ensure you've prepared the following information in advance:

Understand Your Product:

• Define your product and its key characteristics.
• Identify the components that make up your product.
• Comprehend the functionality and operation of your product.
• Know the packaging specifications for your product.

Once you've gathered this information, follow these steps:

Search the Tariff:

• Simplify the process by entering your product type, hoping for a straightforward category and code – the "Golden Bullets" in classification.

Search the Tariff Alphabetically:

• If options seem limited, try an alphabetical search in the tariff. It allows for quick and easy scanning of items.

Thoroughly Scan the Sections:

• Navigate through the tariff sections systematically:
• Click on the title of the main section.
• Explore relevant sub-sections by clicking on the most applicable ones.
• Continue this process until you reach specific headings.

Carefully Choose Options:

• Examine descriptions in bold to narrow down choices.
• Under bold descriptions, find the final option that precisely defines your product.

While commodity classification may seem extensive, it doesn't have to be cumbersome. Trademo’s 8-in-1 Compliance Suite provides a solution – the HS Code Classification and ECCN Classification modules. These advanced tools enable you to classify your imports and exports effortlessly with just one click. No need to navigate complexity of codes – simplify the process and save valuable time.

Why Correct Classification of Commodity Codes is Important?

Accurate classification of goods is not just a legal obligation; it serves as a pivotal responsibility in international trade. These codes play a crucial role in communicating the nature of imports, outlining associated restrictions, and specifying applicable taxes. Adherence to regulatory standards and trade rules is not to be underestimated. Neglecting this duty can result in prolonged shipment cycles, confiscation of goods, substantial fines, and the erosion of trust—whether in the process of establishment or after years of building credibility. Moreover, it's not just about compliance; it's about financial prudence. Precision in classification not only safeguards against legal ramifications but also translates into tangible cost savings, a strategic advantage every business aims to achieve. After all, in the realm of business, efficient cost reduction is synonymous with enhanced success.