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Commodity Codes: Unlocking the Benefits of International Trade

In this podcast, you will learn more about the importance of commodity codes for businesses that trade goods internationally

In this podcast, the conversation between Yaz and Ben is about the importance of commodity codes for businesses that trade goods internationally.

Ben explains that a commodity code is like a passport number for a product and is used by customs to identify what is in the box, container or drum. He emphasises that understanding the use of commodity codes and making sure to use the right one is essential for anyone looking to trade goods. He then goes on to explain the different types of commodity codes, such as the Harmonized System (HS) code and the Standard International Trade Classification (SITC) code, and how they are used in different countries. Finally, Ben provides some helpful tips for businesses on how to make sure they are using the right commodity code.

Customs officers use commodity codes to identify and classify goods crossing borders. These codes help inform customs about the raw materials, the size, the purpose and use of the product and the duty rate, VAT rate, licenses and export controls that apply. It is vitally important to get the commodity code right as mistakes can lead to businesses paying the wrong amount of duty or VAT and potentially facing fines and a bad compliance record with HMRC which can hurt their chances of being approved for customs specialised procedures.

The conversation focused on how business owners should be careful when using commodity codes to ensure that they are correct, as HMRC can increase the chances of auditing a business if it is found to have provided the wrong codes. It can also result in delays and extra costs for the business if the wrong code is used. The conversation then moved on to the Harmonized System, which is a recognised universal language for international trade and is used to ensure that the first six digits of any commodity code are the same regardless of the import or export nation.

The Harmonized System (HS) is used by more than 200 countries to classify and identify goods when they move internationally. This system helps businesses avoid confusion and delays when trading overseas by using the same six-digit code to identify a product. This code consists of a chapter, heading and subheading which are used to determine the commodity code. The UK trade tariff is a useful tool which can be used to search for a product using a keyword or by entering some or all of the known commodity code. It is also important to read the chapter notes as they will help determine what items do not fit within the specified chapter. The ‘Check How to Export’ service is also useful for businesses who are looking to export goods from the UK as it provides information about the process.

Commodity Codes Podcast Timestamps:

0:00:00   Exploring the Importance of Commodity Codes for International Trade

0:01:58   The Importance of Accurate Commodity Codes for Businesses and Customs

0:03:46   Understanding the Harmonized System and its Impact on Commodity Codes

0:05:43   Exploring the Benefits of the Harmonized System for International Trade

0:12:20   Exploring the Benefits of Utilizing Commodity Codes for International Trade

0:14:44   Understanding the Six General Rules of Interpretation and Additional Services to Find the Right Commodity Code

0:17:02   Exploring the Importance of Commodity Codes for International Trade

Commodity Codes Podcast Highlights:

These are the rules which a business should follow to decipher the right commodity code for their product and the way they are set out.  A business should first consult rule one, if that's not appropriate to their product, to move on to rule two again, if that's not appropriate, rule three and so forth, so forth.

The country will identify the commodity Code for the importing nation and like I mentioned, the different duty VAT and taxes which may be applicable and on top of this identify whether any export licenses or controls apply to that product as well.

It's very useful for businesses who trade under the incoterm DDP or for businesses who are trying to conduct research to maybe aid their customer who's going to complete the import for Maltese in the destination country or it can make up part of wider market research.

Provide business with the correct commodity code for UK customs purposes and it will go right through to the 1012 14 digits that requires. Again, that depends on what your product is, whether you're importing or exporting, but it will give you the full commodity code that you need in your situation to use this service.

To give that a bit of context, the Harmonized System, was introduced in the 70s by the World Customs Organisation, the WCO, with the aim of creating a recognised universal language, for the purposes of international trade.

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