Basically, a commodity code assigns a numeric value to a good or service for the industry to which that good or service belongs. For example, the NIGP commodity code for an electric water fountain is 225-30. Commodity Code lists are a collection of industry or class-item numbers and descriptions used to specifically code products and services to their corresponding industries. These lists are used by state agency buyers and private vendors as a baseline for descriptions, definitions, and standards for goods and services in the procurement process. This develops a general identification for purchasing agents to code their requisitions so that formal and informal bids are addressed to vendors that are capable of furnishing the required materials, equipment, supplies, or services. It is important to identify the proper commodity codes as specifically as possible when you register as a vendor to insure that you receive notification of bid opportunities. Many states require between 1 and 3 commodity codes at registration, however, you will be able to modify these codes at a later time.
The commodity code lists will be organized by their numeric index, however, an alphabetical list may also exist. The lists are generally organized in a systematic fashion based on the industry to which it applies. State agencies purchase everything from hospital equipment to fertilizer, so you can imagine the size and scope of the commodity code lists used.
You can find the codes that apply to your business in several ways. You can search through the commodity code list to find the class and category which best fits your business. Or, you can search through the registered vendor’s list to find either the manufacturer of your products or competing businesses that sell similar products. I have found valuable information and ideas by using the registered vendor’s list as my resource to code my products. It is less time consuming and less frustrating, as well. If you cannot find the codes that you need, then please remember that most states offer a 1-800 help line to assist you with commodity code and other registration questions.
Some states or state institutions create their own commodity lists based on a data base of previously purchased products and services. Other states cross reference their QPL or Standards and Specifications lists to create the state commodity code list. There are a number of government coding systems that serve a variety of purposes. We have provided additional information about some of the most referenced commodity code list.
The following is a basic overview of some of the more commonly used commodity coding systems.
NIGP – National Institute of Governmental Purchasing
The NIGP (National Institute of Governmental Purchasing) commodity code is a five-digit class item number. It is one of the most commonly used commodity code lists because it is thorough and fairly straight forward. The first 3 numbers designate the class and the final 2 numbers identify the item number. Combining the class and item number determines the commodity code. Please click on the NIGP link as I will refer to the Texas State Procurement website NIGP list for the following example. To determine the commodity code for sandpaper, combine the class number 005 – abrasives (click on 005 to go to sub categories) with the item number 14 – Abrasives, Coated: cloth, fiber, sandpaper, etc. to find that the NIGP commodity code for sandpaper is 005 14. As you review the NIGP list remember to click on the 3 digit class number to access an item list of all products that are categorized in that class. For a $25 fee, you can find the NIGP code that best describes your product or service by visiting NIGP.com.
NAICS – North American Industry Classifications System
NAICS (North American Industry Classification System) was adopted in 1997 to replace the SIC Code. It was developed jointly by the U.S. Economic Classification Policy Committee, Statistics Canada, and Mexico’s Instituto Nacional de Estadistica y Geografia. The purpose was to gather and compare business statistics among the North American countries. NAICS (pronounced Nakes) is the Federal standard for classifying business establishments (single location) for the collection, tabulation, presentation, and analysis of statistical data describing the U.S. economy. It groups establishments into industries according to similarity in the processes used to produce goods or services. The U.S. Census Bureau assigns one NAICS code to each establishment (business location) based on its primary activity and various other government agencies adopt the NAICS classification system for their own purposes.
NAICS is a 2 – 6 digit hierarchical classification system, offering 5 levels of detail. Each digit in the code is part of a series of progressively narrower categories, more digits = greater classification detail. To re-visit our sandpaper example, the NAICS classification for sandpaper is 327910 – abrasive product manufacturing. The first part – 32 indicates “Manufacturing” sector; -79 is “other nonmetallic mineral product manufacturing” and -10 represents “abrasive product manufacturing.” Please click NAICS to view the 2007 NAICS Sector codes and titles. To determine the NAICS codes for your business, then search at www.census.gov/naics using the “2007 NAICS Search” box at left. Enter a keyword that describes your kind of business. A list of primary business activities with that keyword and corresponding NAICS code will appear. A second way to determine your NAICS code is to view the complete 2007 NAICS structure with codes and titles, then choose the 2-digit sector code for a list of all 6-digit codes and definitions in that category. If you know your SIC Code, then you can cross reference it with the 2002 NAICS code.
SIC CODE – Standard Industrial Classification
The SIC CODE (Standard Industrial Classification) codes are used by the U.S. Government to classify business types. A company is typed based on its main industry, line of business, or function. The SIC code for our example sandpaper is D3291. Division D – Manufacturing; 32 – stone, clay, glass and concrete products; 91 abrasive products. Please click on the highlight name, SIC Code to view the SIC Code list. The NAICS replaced the SIC in 1997. There will be no further revisions of the SIC Code, however, many state and local agencies continue using the SIC Codes for their own purposes.
HS Number – Harmonized System Number
The HS (Harmonized System) number is a 6 digit code for general commodity categories. The HS codes are used by importers and exporters to classify products for custom purposes. Import codes are administered by the U.S. International Trade Commission (USITC), and export codes (or Schedule B numbers) are administered by the U.S. Census Bureau. Knowing the product’s HS number is important for determining the appropriate tariff rates and preparing shipping documents such as the Shipper’s Export Declaration and Certificate of Origin. The HS code for our example, sandpaper, is 680520. The category for stone/glass is 68; -05 is for abrasive powder etc on a base of text material etc; -20 is natural or artificial abrasive powder or grain, on a base of paper or paperboard only.
I have listed the HS numbers below:
Harmonized System Numbers
- 01-05 Animal and Animal Products
- 06-15 Vegetable Products
- 16-24 Foodstuffs
- 25-27 Mineral Products
- 28-38 Chemicals and Allied Industries
- 39-40 Plastics / Rubbers
- 41-43 Raw Hides, Skins, Leather, and Furs
- 44-49 Wood and Wood Products
- 50-63 Textiles
- 64-67 Footwear / Headgear
- 68-71 Stone / Glass
- 72-83 Metals
- 84-85 Machinery / Electrical
- 86-89 Transportation
- 90-97 Miscellaneous
- 98-99 Service
As we have discussed, there are many commodity coding systems for a variety of industry purposes. Government procurement agencies may use one or several of these lists to code their bid requests. It is to your advantage to identify the commodity codes that best represent your products or services because invitations to bid are matched to businesses by the industry commodity codes.