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Commodity codes – they may be more important than you think, says AEB

[ May 24, 2013   //   ]

A new white paper by supply chain solutions company AEB International aims to explode some of the most commonly help misconceptions about commodity codes and product classification.

Commodity codes are the key classifier in international trade, and carry more weight than many realise, says AEB. For example, they determine not only import duties but also import and export restrictions, as well as licensing and documentation requirements, and they also play a key role in the authorisation of simplified customs procedures.

However, they are frequently disregarded or under-appreciated in day-to-day business. Individual numbers and combinations of numbers in the commodity code have specific meanings: In general, exports require an eight-digit commodity code or CN code throughout the EU. Imports are subject to additional regulations based on national law, such as those governing the value-added tax on imports, so imports require a ten-digit (or, in some countries, 11-digit) commodity code known as a customs tariff code.

Misclassification can mean that companies pay too much import duty – if they’re lucky – or, worse, they may be found guilty of tax evasion. Misclassification can also result in unauthorised exports with corresponding penalties – ignorance of the law is no excuse.

However, some companies still believe, wrongly, that the commodity code is not all that important because they only export, not import. Others believe that the responsibility for classifying new goods lies with someone else, or suggest that, because there is no commodity code that matches their products, there’s no point in looking.

Product classification is often a tedious and time-consuming task. Manually classifying products requires sifting through a nomenclature of 21 sections, 96 chapters, and over 5,000 subheadings to find the right code and requires a high level of expertise. AEB offers its ASSIST4 Classification software to largely automate the process.

The white paper can be downloaded free of charge at www.aeb-international.co.uk/classification.

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