Classification of goods
The World Customs Organisation (WCO) has developed the Harmonised Commodity Description and Coding System (HS), generally referred to as “Harmonised System” or simply “HS” – a multipurpose international product nomenclature . An overview of the Harmonised System can be found at WCO: Conventions and Agreements: the Harmonised System
This is a global trade nomenclature which comprises of more than 5000 commodity groups: each identified by a six digit code, arranged in a legal and logical structure supported by uniform rules. The system is used by more than 200 countries and economies as a base for their customs tariffs – over 98% of merchandise in international trade is classified in terms of the HS.
Article 6 of the Harmonised System Convention provides for the establishment of a committee and sub-committees to administer the HS. The HS is used by governments, international organisations, and the private sector for purposes of internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, compilation of national accounts and economic research and analysis. Therefore, it is a universal economic language and code for goods, and an indispensable tool for trade.
Classification of goods within the United Kingdom and the European Union
The United Kingdom was part of the single market of the European Union until the close of 31st December 2020, and has retained its classification system.
The EU Customs Territory includes the territories of the 27 current member nations, and also states that are not covered by the treaties, these include:
Monaco
Cyprus (certain territories)
Channel Islands
Isle of Man
Andorra, San Marino and Turkey are also within the customs union of the European Union, which is governed by the Union Customs Code.
The UK and EU’s system of classifying goods comprises of a 10-digit coding system. The first 6 digits are determined by the HS developed by the World Customs Organisation, which is hierarchical, organised by sections, chapters (2 digits), headings (4 digits) and sub-headings (6 digits).
The following 4 digits are unique to the European Union and the UK.
A commodity code classification will consist of:
First two digits: Chapter
There are 21 sections in the Harmonised Schedule, which separate products into shared characteristics. 97 chapters provide a more detailed division of goods.
Second two digits: Heading
The headings are found within each chapter, and further categorise product types.
Third two digits: Sub-heading
The sub-heading will further classify products, and may contain description of processing or manufacturing related to the product, to further distinguish it from other types of goods. Not all goods will be classified to subheading level, and where further classification is not required, the description will consist of zeros.
United Kingdom and European Union specific
Fourth two digits: CN code (used for exports) The Combined Nomenclature
The Combined Nomenclature (CN) is the 8-digit classification, used for declaring exported goods, and the basis upon which tariffs and customs-related rules are established within legislation.
The combined nomenclature includes:
preliminary provisions (general rules for classification, rules related to duties or to nomenclatures, etc.)
descriptions of the goods
additional section/chapter notes and footnotes relating to CN subdivisions
conventional duty rates – the EU tariff commitments in the WTO, and some EU autonomous duties
supplementary units
a set of tariff-related annexes (agriculture, chemistry, etc.) and a special coding system (Chapters 98 and 99).
Each subdivision of the nomenclature is known as a ‘CN code’. It has an 8-digit code number followed by a description and a duty rate, and as the case may be, a supplementary unit.
Fifth two digits: TARIC code (used for imports) The Integrated Tariff (TARIC)
The Integrated Tariff (TARIC) is a 10-digit code, is used for classifying imported goods. The TARIC identifies all trade policies, preferential tariffs, restrictions, certificates, licenses, tariff suspension and trade policy measures, relating to the import, and is added to further classify the 8 digit CN code.
Each classification is accompanied by legal notes, known as the General Rules for the Interpretation of the Harmonised System, which must be considered when interpreting the application of the code. As the system is hierarchical, it must be examined as such.
Best practice
When exporting to the EU, or any other region it is best practice to include the 10-digit TARIC code for your client on the packing list, alongside the 8-digit CN code to be submitted via the exporter’s customs agent.
This will ensure that your importer has the correct code upon import and does not have to provide the final classification of the goods internally or hire the third-party services of a customs agent to do so.
Online resources
A few useful online resources concerning trade classification, and how to import or export in compliance with customs and border related measures are available from:
This is the UK’s online classification tool to identify commodity codes classify goods for import and export so you can:
fill in declarations and other paperwork
check if there’s duty or VAT to pay
find out about duty reliefs
UK Trade Tariff may be used to search the the product description may be used to search for the correct classification and where in conjunction with the country of economic origin of the goods all of the customs and border related measures pertaining to prohibitions and restrictions, quotas, tariff preferences, duty, excise duty and VAT may be identified. Obtaining the correct classification is a crucial element of the trade process.
Check how to import and export goods (CHIEG)
Use this UK government international trade tool to assist with preparing correct documentation to comply with customs and border-related measures for both imports and exports, and identify any trade restrictions and appropriate compliance measures related to the nation that you are importing from or exporting to.
It may be usful to confirm the classification of your product using the UK Trade Tariff prior to using this tool, then select it by using the drop down commodity code catalogue, as the commodity code won’t be immediately recognised if you place it in the search bar.
[1] World Customs Organisation, WCO: Conventions and Agreements: the Harmonised System, available from: http://www.wcoomd.org/-/media/wco/public/global/pdf/about-us/legal-instruments/conventions-and-agreements/hs/hsconve21pdf1.pdf?la=en