If you’ve already been importing and exporting goods to non-EU countries pre-Brexit, then you’ll be familiar with customs duty and commodity codes as part of day-to-day business procedure. However, from 1 January 2021 when Brexit came into effect, products coming into the UK from the EU and being sent from the UK to the EU are now considered imports and exports (respectively) and will now be applicable for VAT; a commodity code; and import duty rules. Our blog below has been put together to assist businesses who will have to implement new processes for EU sales and purchases.
Definition of a commodity code
Commodity codes (also known as trade tariff commodity codes) outline the type of products as well as confirming the import duty payable on those goods. It is, therefore, important that you apply the correct commodity code not only to ensure compliance with HMRC, but to ensure your sales and profits are calculated accurately.
Commodity codes can also determine if a product requires a license, permit or other important documentation prior to importing or exporting.
As detailed below, a commodity code consists of ten digits based on the type of product, the material used to make it and the production method:
- The first six are based on the 'harmonised system' which outline the product and are split between chapter, heading, and sub-heading.
- The next two digits relate to the 'combined nomenclature' which further define the product and are reliant on the product.
- The last two digits correlate with additional circumstances.
- There can also be a further two digits added, giving a total of twelve digits in some cases.
| Digit | Meaning |
|---|---|
| 1 & 2 | Harmonised System Chapter |
| 3 & 4 | Harmonised System Heading |
| 5 & 6 | Harmonised System Subheading |
| 7 & 8 | Combined Nomenclature Heading |
| 9 & 10 | TARIC Subheading |
How do I know what commodity code applies to my product?
You can work out your commodity code by using the tools provided by HMRC. Click the links below to help you:
https://www.gov.uk/guidance/using-the-trade-tariff-tool-to-find-a-commodity-code
https://www.gov.uk/guidance/finding-commodity-codes-for-imports-or-exports
https://www.gov.uk/trade-tariff
Here is an example of how a commodity code works:
| Code | Meaning | Classification type |
|---|---|---|
| 64 | Footwear | HS Chapter |
| 64 06 | Parts of footwear | HS Heading |
| 6406 10 | Shoe uppers | HS Subheading |
| 640610 10 | Leather | CN Code |
| 6406 10 10 10 | Hand-made | Taric Code |
| 6406 10 10 10 90 | Other | Taric Code |
VAT and Import Duty
Following the Brexit deal and subsequent staggered communications from the Government, many businesses are struggling with the changes they need to make to comply with the new legislation for trading with EU countries. We have published a detailed blog with information from 2020 Innovation, providing practical answers to the main questions businesses are asking right now around VAT, Import Duty and other areas of Brexit.
Take a look at our dedicated Brexit section on our website for all the answers you need.
We are updating clients via our blog, social media and newsletter as soon as possible after information is released from the Government on Brexit, so do follow us on LinkedIn, Twitter, Facebook and Instagram. If you need any assistance from our friendly and experienced team in the meantime, please do not hesitate to contact us via mail@lwaltd.com or call 0161 905 1801 in Manchester and 01925 830 830 in Warrington.