A commodity code, or a tariff code, is a standardized code used to identify goods and products for including international trade and customs declarations. It is very important for e-commerce businesses to understand what a commodity code is, when to use it, and their purpose.
Commodity codes are numeric or alphanumeric and are used to specify the nature and characteristics of a product. They often include information about the product’s origin, composition, and purpose. Importers and exporters use these codes to determine the applicable customs duties, taxes, and regulations for their goods, as well as to facilitate international trade documentation and reporting. When using fulfilment companies like SJ Henderson Fulfilment, they ensure all of this paperwork is completed when importing and exporting products on your behalf so you can focus on growing your business!
Commodity codes are essential for e-commerce for several reasons:
1: Customs Compliance: E-commerce businesses that engage in international trade must accurately classify their products for customs purposes. Commodity codes help ensure that the correct customs duties, taxes, and import/export regulations are applied to products. Having commodity codes in place for each product is crucial to avoid legal issues, delays in shipping, and unexpected costs.
2: International Shipping: When selling products to customers in different countries, e-commerce businesses must provide accurate product descriptions and classifications on customs documentation. Commodity codes help facilitate customs clearance, making international shipping smoother and more efficient.
3: Pricing and Cost Estimation: Commodity codes allow e-commerce businesses to calculate and include the correct import/export duties and taxes in the pricing of their products. This transparency is essential also for international customers, as it helps them understand the total cost of their purchases, including any applicable fees.
4: Regulatory Compliance: Different countries and regions may have specific regulations and restrictions on the import or export of certain products. Commodity codes help e-commerce businesses identify and adhere to these regulations, ensuring they comply with the law.
In summary, commodity codes play a vital role in e-commerce by facilitating international trade, customs compliance, cost estimation, regulatory adherence, and overall product management. They are essential for e-commerce businesses that engage in cross-border trade and want to provide a seamless shopping experience for customers worldwide.
If you are sourcing, designing or creating new products and want to find out what commodity code applies to your product, you can use helpful tools such as the commodity code checker found on gov.uk, linked below.
Once found, you can create a simple spreadsheet for your records detailing every commodity code applicable across your SKUs for future reference, so when asked by your freight forwarder or fulfilment company – you need not look further.