What is a Commodity Code?
A commodity code is a standardized numerical code used to classify goods in international trade. It is essential for accurately identifying products in customs declarations, determining applicable duties and taxes, and ensuring compliance with import and export regulations.
Why Do You Need a Commodity Code?
Commodity codes are crucial for several reasons:
Customs Declarations: When importing or exporting goods, you must declare them to customs using the correct commodity code.
Duty and Tax Calculation: The code determines the applicable customs duties, VAT, and any other taxes or fees on the goods.
Trade Compliance: It ensures that your goods meet all legal requirements, including any necessary licenses, permits, or restrictions.
Who Uses Commodity Codes?
Businesses: Any company involved in the international trade of goods must use commodity codes in their customs declarations.
Customs Authorities: Customs officials use these codes to process and monitor goods entering or leaving a country.
Logistics Providers: Shipping companies and freight forwarders use commodity codes to ensure the correct handling and processing of shipments.
Which Paperwork Must Include the Commodity Code?
Including the correct commodity code on all relevant trade documentation is essential for ensuring compliance with international trade regulations, avoiding delays, and accurately calculating duties and taxes. It is important to consistently use the correct commodity code across all these documents to facilitate smooth customs processing and minimize the risk of errors or disputes.
Customs Declarations
Import and Export Declarations: The commodity code must be included in the customs declaration forms when goods are imported into or exported out of a country. This is essential for the correct calculation of duties, taxes, and compliance with regulations.
Commercial Invoice
Description of Goods: The commodity code should be listed alongside the description of the goods on the commercial invoice. This document is used by customs to assess the value of the goods and determine the applicable duties and taxes.
Typical Commodity Codes
Metals
Material | Duty | Commodity Code |
Aluminium | 6% | 7616999099 |
Iron and steel | 0% | 7206900000 |
Nickel | 0% | 7508900000 |
Copper | 0% | 7419999099 |
Titanium | 6% | 8108909099 |
Zinc | 0% | 7907000000 |
Magnesium | 0% | 8104190090 |
Plastics
Material | Duty | Commodity Code |
Plastics (General) | 0% - 6%max | 3926909790 |
ABS | 6% | 3903300000 |
POM | 6% | 3907100020 |
PC | 6% | 3907400090 |
Nylon | 6% | 3908100000 |
PE | 6% | 3907400090 |
PEI | 6% | 3907209990 |
PP | 0% - 6%max | 3907209990 |
PVC | 6% | 3904100090 |
What Happens If an Incorrect Commodity Code is Used
Using the wrong commodity code for a shipment can lead to several serious consequences.
Delays in Customs Clearance
Extended Inspections: Customs authorities may flag your shipment for further inspection if they suspect the commodity code is incorrect. This can lead to significant delays, especially if the goods need to be reclassified.
Holding of Goods: Until the issue is resolved, your goods may be held at the port or customs warehouse, causing delays in delivery to your customer.
Financial Penalties
Underpayment or Overpayment of Duties: If the wrong code leads to an incorrect duty rate being applied, you could either overpay or underpay customs duties and taxes. Underpayment may result in penalties, fines, or additional duty assessments.
Fines for Non-Compliance: Incorrect classification can lead to fines or penalties imposed by customs authorities for non-compliance with customs regulations.
Seizure of Goods
Seizure: If the wrong commodity code is used and the goods are either severely misclassified or are restricted/prohibited, customs might take the shipment. This means you could lose the goods and face a financial loss.