The export and import of goods is a lengthy process, mostly because goods need to cross borders to reach their destination. As part of the import-export activity, customer declarations must be completed. Requirements may differ from country to country, however, goods codes, usually known as commodity codes, need to be included on the form. For exports outside of the European Union (EU) or goods moving within the EU, the commodity code is an eight-digit number. For imports from outside the EU, the code is a ten-digit number.
Member states of the EU hold commodity codes in a database called the Integrated Tariff of the European Union (TARIC). This database is updated regularly, which means that importers and exporters can rely on the same standards and treatment throughout the EU. UK traders can also find commodity codes in the UK Trade Tariff database. This is published once a year and updated every ten months, which makes it less reliable than TARIC. However, the UK Trade Tariff contains UK-specific data on VAT, licensing, restrictions and excise duties. You can look for the applicable codes in Trade Tariff documents. It’s important to bear in mind, however, that if the UK leaves the EU with no deal, you may need to pay different rates of customs duty.
Why do we need commodity codes?
Commodity codes are used when completing paperwork for customs declarations. They help customs to determine how goods should be handled. Every item can be categorised with a commodity code and relates to their duty rating, as well as generating alerts for any import or export restrictions. The commodity code tells you:
- The duty and VAT ratings you’ll be charged for your goods
- If you can apply for a preferential duty rating – ‘preferential treatment’ means that your goods may benefit from tax exemptions or Free Trade Agreement reductions
- Whether your product requires an import licence – without a licence, the goods could be delayed at customs, or worse, they could be confiscated
- Whether anti-dumping duties apply – these are charged in addition to normal customs duty; they are designed to allow the EU to act against goods that are sold at less than their normal value
Commodity codes are important because they classify goods for import and export. If you classify your goods incorrectly, you could be asked to pay any outstanding duty or VAT on customs entry, and your goods might be delayed and/or seized.
If Indiana Jones wanted to import his whip, he could search for the commodity code on the Trade Tariff database and find the appropriate details under ‘Section XII: Footwear, headgear, umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-crops and parts thereof; prepared feathers and articles made therewith; artificial flowers; articles of human hair’. The commodity code for importing a ‘hand-made whip’ is 6602000010. Indiana Jones would also be able to see that his item is subject to the VAT standard rate of 20%, which he can probably afford.