Entrepreneurship

Comprehensive Guide To Commodity Codes

Cameron Fleming | 19 May 2022 | 2 years ago

commodity codes

Commodity codes are numbers that are used to classify goods when they are traded internationally. The code determines what the product is, how much it costs, and any special rules that apply to it. You need a commodity code on your goods so that customs can process them correctly and charge the right amount of duty. The code also helps businesses to comply with the law and to avoid paying too much or too little duty.

In this article, we will explain what commodity codes are, how they work, and what you need to know about them. We will also look at how the UK’s departure from the European Union (EU) might affect commodity codes for imports and exports.

What are Commodity Codes?

Simply put, a commodity code is a number that is used to identify a particular product so that it can be taxed correctly. The code is made up of six, eight, or ten digits depending on the level of detail required.

The code determines how much duty you will need to pay on your goods when they are imported into or exported out of the UK. It also provides other important information such as whether your goods are subject to any special rules, such as quotas, or if they are eligible for preferential treatment under a trade agreement.

The code is used by businesses to comply with customs regulations and to avoid paying too much or too little duty. It is also used by government departments to collect statistics on trade.

Commodity codes are classified according to the Harmonized System (HS). The HS is a global system that is used by almost all countries. It is maintained by the World Customs Organization (WCO) and it is updated every five years.

In the UK, commodity codes are also known as Tariff Codes, HS Codes, or simply HS Numbers.

How do Commodity Codes Work?

Commodity codes are necessary because they help authorities correctly identify imports and exports for the purposes of security, tax and statistics.

Each product is assigned a unique code which is used to track it through the supply chain from manufacture to sale. The code also provides information on how the product should be taxed.

In the UK, commodity codes are administered by HM Revenue & Customs (HMRC). They are used to collect statistics on trade, monitor compliance with customs regulations, and charge the correct amount of duty on imported goods.

The code is made up of six, eight, or ten digits. Six-digit codes are used when exporting goods out of the UK to most countries. Eight-digit codes are used when exporting goods to the EU or importing goods from the EU.

Ten-digit codes are used for exporting goods to all other countries and for importing goods from all other countries.

What do the Numbers Mean?

The first two digits of the code identify the chapter in which the product is classified. The next four digits identify the heading under which the product is classified. The last two digits identify the subheading under which the product is classified.

For example, a car with a commodity code of 8701.90.00 would be classified under chapter 87 (vehicles), heading 01 (cars), and subheading 90 (other cars).

The first six digits of the code are known as the HS Code or Tariff Code. The first four digits are known as the HS Chapter Number and the last two digits are known as the HS Subheading Number.

The eight-digit code is made up of the six-digit HS Code plus two additional digits. These additional digits are known as the Commodity Code Supplement (CCS) and they identify the country of origin of the goods.

The ten-digit code is made up of the six-digit HS Code plus four additional digits. These additional digits are known as the Commodity Code Supplement (CCS) and they identify the country of origin of the goods and whether they have been processed or not.

importing and exporting goods

Customs Duties

Customs duties are taxes that are levied on imported goods. The amount of duty that is payable depends on the value of the goods, the country of origin, and the commodity code. Duties are not payable on all goods. For example, there is no duty on most food products, books, and medicines. Furthermore, some goods are subject to special rules, such as quotas or preferential treatment under a trade agreement. It is important that imports and exports have the right commodity codes so that the correct amount of duty is charged.

UK Agricultural Policy

The UK agricultural policy is a system of subsidies and tariffs that are used to support farmers and protect the agricultural industry.

The policy is made up of three parts: the Common Agricultural Policy (CAP), the Rural Development Programme for England (RDPE), and the National Reserve.

The CAP provides financial support to farmers in the form of subsidies. It also sets minimum prices for certain agricultural products and imposes tariffs on imported goods.

The RDPE provides funding for rural development projects, such as environmental protection, infrastructure, and business growth.

The National Reserve is a pool of money that is used to fund emergency measures, such as flood relief or disease control.

Commodity codes play a huge part in ensuring the UK agricultural policy is adhered to because all imports of agricultural products must have the correct commodity code so that they can be correctly taxed. This ensures that foreign products are not unfairly competing with UK products.

UK Anti-Dumping Duties

UK anti-dumping duties are tariffs that are imposed on imported goods that are sold at below market value. The purpose of the tariff is to level the playing field for domestic producers by making imported goods more expensive. The UK has no ability to dictate international business rules but anti-dumping duties mean the UK can take action when another country unfairly sells products in the UK below market value.

Dumping occurs when a company exports a product to another country at a price that is lower than the price of the same product in the company’s home market. This is usually done to gain market share or to get rid of surplus stock. It can be harmful to domestic producers because it can drive down prices and cause job losses.

Commodity codes play an important part in anti-dumping investigations because the code is used to identify all products that are being imported into the country. This means that the authorities can then make sure they are not being sold below market value.

customs checks

What are the Most Effective Anti-Dumping Measures?

The UK has a number of anti-dumping measures that can be used to protect domestic industry. These include tariff quotas and safeguard measures.

Tariff Quotas

Tariff quotas are a type of trade restriction that limits the quantity of a good that can be imported into the country. The purpose of a tariff quota is to protect domestic producers by making it more expensive to import goods that are in high demand.

Commodity codes are important for tariff quotas because they are used to identify the products that are subject to the quota. This ensures that only the correct amount of goods are imported into the country.

Safeguard Measures

Safeguard measures are temporary tariffs that are imposed on imported goods in order to protect domestic industry from a sudden influx of cheap imports. The purpose of the tariff is to give domestic producers time to adjust to the new market conditions.

Safeguard measures are usually imposed for a period of 200 days and can be extended for a further 200 days if necessary. Commodity codes are used to identify the products that are subject to the safeguard measure.

Important Product Information for Commodity Codes

There are various things to consider when working out whether your products need commodity codes for UK import or export. These include:

What Type of Product is it?

This includes details such as whether your product is a manufactured item or whether it is some kind of raw material. It also includes its key features or characteristics and whether it will be used in future production or manufacturing. For example, a commodity code for a car would be different to a commodity code for a tyre.

What is the Purpose of the Product?

This includes information such as what the product will be used for and how it will be used. It may be that you intend to sell the product directly at retail or, alternatively, you may be exporting the product for use in another country. All of this will decide which commodity code is most appropriate.

What are its Materials?

This includes a list of all the materials that are used to make the product, including any packaging materials. It is important to be as specific as possible when listing the materials. For example, if your product is made from steel, you should specify the type of steel that is used. This information is important because the UK has restrictions on the import of certain types of materials or quotas on how much can be imported.

How is the Product Produced?

This includes information on how the product is made, including any special processes that are used. It is important to be as specific as possible when describing the production process. This information can help to identify any potential safety or environmental concerns that need to be considered as well as ensure the products meet UK standards.

What is the Packaging Like?

This includes a description of the packaging, including any special features or requirements such as temperature needs or careful handling. It is important to include this information as it can help to identify any potential problems with the product during transport or storage.

Brexit and UK imports and exports

How is Brexit Impacting UK Exports and Imports?

The UK’s decision to leave the European Union has had a significant impact on exports and imports. If you are planning to export or import goods after Brexit, it is important that you familiarise yourself with the new procedures. Failure to do so could result in delays or your goods being held up at customs costing you a lot of time and money.

The main change that has been introduced is the requirement for businesses to have an EORI number in order to export or import goods. This number is a unique identifier that is assigned by HMRC and is used to track goods that are traded between the UK and the EU.

The process for exporting and importing goods has also changed. The main change is that businesses now need to declare their goods to HMRC before they can be exported or imported.

It is important to note that these changes only apply to businesses that trade with the EU. If you trade with countries outside of the EU, the process for exporting and importing goods remains the same. The UK has signed some trade deals with other countries including Australia and New Zealand so make sure you are well-versed in the terms of those deals when trading with those countries.

Whether these issues can be ironed out in the coming years has yet to be established with the two sides of the table in constant disagreement. Proponents of Brexit argue that the UK will be better off without the EU and that the extra import/export complications are a temporary but necessary inconvenience. Critics of Brexit argue that the UK will be worse off outside of the EU and that the extra import/export complications are a sign of things to come. Only time will tell which side is correct.

Final Thoughts

As you can see, there is a lot to consider when it comes to commodity codes for UK imports and exports. It is important that you have a clear understanding of the commodity code system and the changes that have been introduced as a result of Brexit. If you are planning to export or import goods, make sure you are familiar with the new procedures and requirements. Failure to do so could result in delays or your goods being held up at customs.

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