Commodity Code: A basic introduction
Andrew Thurston · August 16th 2023 · read
If you import or export goods you should have an understanding of what a commodity code/harmonisation code represents and its importance in both the Customs and VAT world. Here we will provide some background and useful tips to ensure that you understand their importance within your operations.
1) Why do I need a commodity code?
Any ‘good’ that is moved across customs borders will require a harmonisation code, known in the UK as the ‘commodity code’. The basis for the code is established by the World Customs Organisation (WCO) who meet regularly to discuss the coding of goods, both new and old, to determine if the coding is correct.
The code is required for establishing the following:
- Origin of the goods
- Customs Duty rate
- VAT rate
- Anti-dumping duty rate
- Trade remedies, restrictions and prohibitions.
2) Who determines the codes?
The WCO determines
the first six digits of the UK commodity code. Basically, a product should, if imported to countries around the world, be classified under the same six digits.
Since Brexit, the last four digits of the commodity code are determined by the UK, but still maintain close links to the codes transferred over from when the UK was part of the EU.
It is important to remember that each customs territory will establish its own codes, many of which will not match those provided by the UK. For example:
Racing bike manufactured in Germany with wheels having a diameter of 54cm and having disk brakes:
|Bicycles with ball bearings > Other
|Bicycles having both wheels not exceeding 63.5 cm in Diameter > Having both wheels exceeding 50 cm but not exceeding 55 cm in diameter
|Bicycles and other cycles (including delivery tricycles), not motorized > Other (without cantilever brakes) > Of a nominal wheel diameter not exceeding 24 (60.96cm)
As you can see from the above, each country has its own code and is dependent on the requirements set out within the country’s Tariff.
In the UK, the last four digits provide the export code (8 digits) and the import code (10 digits). For imports, it is the last two digits which are important for determining the customs duty and VAT rates.
3) Where can I find the UK commodity code?
All commodity codes are available on the UK Online Customs Tariff which can be found here. You can search by keyword (e.g. Bicycle), or Tariff Chapter (e.g. 87), etc.
At MHA our Customs experts are available to assist your company in reviewing and confirming the commodity codes applicable to the goods it buys and sells.
They can also assist in obtaining Advance Tariff Rulings which are legally binding for three years and take away any uncertainty, so your company can plan costings with confidence that there will be no additional duty liabilities.