Using Commodity Codes to Accelerate Imports & Exports

June 27, 2023
Using Commodity Codes to Accelerate Imports & Exports

Commodity codes are an essential part of international trade, and their correct use is crucial for businesses involved in importing and exporting goods. A commodity code is a number used to classify products and goods for trade purposes. It is a system of classification used worldwide by customs authorities to ensure that goods are accurately classified, and the correct duties and taxes are applied.

Administered by the WCO (World Customs Organization), the Harmonized System (HS) is an international system of commodity codes, and each code is made up of eight to ten digits; the more digits a code has, the more specific the classification becomes. For businesses involved in cross-border trade, the correct use of commodity codes is vital to ensure that goods are not held up at customs and that they meet the necessary regulations.

For bespoke guidance on commodity codes, tailored to your organisation and your operations, consider clearBorder’s specialised consultancy services. We offer a free initial consultation to discuss ways you can look to optimise efficiency and ROI; alternatively, read on as we explore commodity codes in more depth.

What Exactly Are Commodity Codes?

Commodity codes are a system of classification used to identify and categorise products and goods for trade purposes; in effect, they are a shorthand to indicate what types of items or materials products represent.

They are a crucial part of international trade and are used worldwide by customs authorities to ensure that goods are accurately classified, and the correct duties and taxes are applied. Commodity codes are sometimes also known as HS codes or tariff codes, and their use is overseen by the World Customs Organization (WTO).

A commodity code is made up of eight to ten digits; the more digits a code has, the more specific its classification becomes.

The first eight digits of a code are known as the Harmonized System (HS) code, which is used to classify products at an international level. The remaining digits are used to provide more granular information about the product characteristics, such as its material, function, or intended use.

By using the correct commodity code for a product, businesses can ensure that they comply with local regulations and avoid unnecessary delays and additional costs.

Why Are Commodity Codes Used?

Essentially, commodity codes are used to accurately classify goods and products for trade purposes.

This system is essential for ensuring that the correct duties and taxes are applied, and that goods meet the necessary regulatory requirements. The correct use of commodity codes is vital for businesses involved in international trade to avoid delays at customs, penalties, and additional costs.

How Commodity Codes Are Used in Cross-Border Trading

Commodity codes help relevant authorities around the world to identify and classify goods accurately. When a business imports or exports goods, they must provide the correct commodity code for each item, which is used by local customs to determine the appropriate duty or tax.

Customs authorities may also conduct additional checks on goods based on their commodity code, to ensure that they comply with local regulations.

While the Harmonized System (HS) is used as a global standard for commodity codes, there may be variations in how it is implemented by different countries. For instance, some countries may have additional codes or requirements for specific goods, which can make the process more complex. It’s essential for businesses involved in cross-border trading to stay up to date with the relevant commodity codes and regulations to avoid any delays or complications in the import or export process.

The best way of doing so is to partner with expert and objective specialists in trade legislation. With bespoke, accurate and up-to-date trade consultancy, your business will be well-positioned to facilitate an accelerated customs process. Contact us now to learn more.

7 Streamlining Benefits

The benefits of using commodity codes correctly are numerous, and can significantly accelerate operations. By streamlining the import and export process, a company makes significant cost savings and increases efficiency. Here are some of the key benefits:

  1. Easier identification of tariff rates: Commodity codes allow businesses to quickly identify the correct tariff rate for a product or substance obtained for trade purposes, avoiding overpayment of duties and taxes.
  2. Reduced risk of delays or penalties: Properly classified products are less likely to be held at customs or incur penalties for non-compliance, ensuring smooth and efficient cross-border trading.
  3. Compliance with international regulations and local laws: Commodity codes help businesses ensure compliance with legally-binding requirements regarding import and export.
  4. Supply chain accuracy and efficiency: By using commodity codes, businesses can streamline the supply chain and increase visibility, thereby reducing errors and delays.
  5. Enhanced visibility of goods in transit: Commodity codes help businesses track goods, improving transparency in operations and reducing the risk of lost or damaged shipments.
  6. Management of inventory and procurement: Commodity codes help businesses better manage inventory and procurement, ensuring that they have the right products on hand at the right time.
  7. Greater shipping and logistics control: Businesses can gain greater control over shipping and logistics operations, ensuring that goods are delivered on time and on budget.

Finding & Using the Right Commodity Codes

Regardless of the product quantity obtained, finding the right commodity code can be a complex process – but it’s essential to get it right in order to profitably move or sell products.

The first step is to determine the HS code for the product using the World Customs Organization’s Harmonized System. Businesses can also use tools such as the UK government’s Trade Tariff lookup or the European Union’s TARIC database, to search for commodity codes based on the product’s description or keywords.

It’s also essential to keep up to date with any changes to commodity codes, as they are updated periodically. Businesses can subscribe to notifications for changes to commodity codes on the UK government’s Trade Tariff website to ensure that they are aware of any updates.

Additionally, it can be useful to consult with a specialist trade consultancy service, which can provide tailored advice on commodity codes and other aspects of international trade. Such services provide valuable resources and insider tips to help UK businesses navigate the complexities of international trade.

Moving Consumer Products With Ease

As we’ve seen, commodity codes are an essential tool for businesses involved in cross-border trade. They provide a standardised system for classifying and identifying goods, which is vital for complying with import and export regulations.

With commodity codes, businesses can avoid customs delays and errors, reducing the risk of additional costs and potential damage to their reputation.

Using the right commodity codes also helps businesses take advantage of preferential trade agreements and tariff reductions, maximising profits and yielding a crucial competitive edge. As such, it’s important for businesses to invest in specialised training and consultancy to gain a deeper understanding of commodity codes and how to use them effectively.

At clearBorder, we offer expert advice and guidance on commodity codes, helping businesses accelerate imports and exports for truly future-proof their operations. Contact us today to find out how we can help your business succeed.