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A central part of international trade is accurate identification of the goods being traded. Goods must be accurately classified for a number of reasons:
To facilitate this, every product has a code. This code is often known by terms such as tariff number, commodity code, or HS (harmonised system) code, but the proper term is harmonised code. In the EU it is most commonly known as the Combined Nomenclature (CN).
Each code is made up of a series of numbers. The first 6 digits are standard for all countries around the world. Further digits then provide a more detailed classification, but these can vary between customs areas. For example, after the first 6 digits, the EU nomenclature is different to the US system. There are approximately 5000 codes and between 97-99 chapters that refer to the HS codes which seems a lot but it keeps the world of trade running smoothly, allowing trade to flow securely, with the correct paperwork and highlights any anomalies that could be fraudulent or dangerous.
EU codes are usually 8 digits for export declarations and 10 for imports. The US uses a 10 digit code.
There are two main reasons why it’s so important for exporters to make sure they are using the right codes for their goods. Firstly, it means your products are subject to the correct tariffs and duties. Secondly, if you use the wrong code your shipments could be delayed, you may be subject to additional inspections, and you could face significant fines and penalties. Deliberately using the wrong code to avoid or reduce tariff implications is illegal and even if a discrepancy is accidental, the responsibility lies with the exporter. This applies even if you are advised by a third party, such as a freight forwarder.
The HMRC online tool can be found on the OBD platform and is very useful for helping you determine the right code. There is also a tariff classification service helpline (01702 366077) which can help.
