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Commodity Codes

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.

Dun & Bradstreet (D&B) assigns a unique nine digit number to each physical location of a business to identify unique information about that business in that particular location.  This 9 digit number is a Data Universal Numbering System or DUNS Number. If your business maintains multiple locations, then you will be assigned multiply DUNS Numbers.  This registration is FREE, but required by all businesses seeking to register with the Federal government for contracts or grants.  Usually the number can be assigned within 1 business day.

There are two ways in which to register with D&B for your DUNS Number.  You can register online by clicking HERE, or you can call the following phone numbers:

1-866-705-5711 – U.S. and U.S. Virgin Islands

1-800-234-3867 – Alaska or Puerto Rico (select option 2, then option 1)

Required Information:

Legal Name

Trade-style, Doing Business As (DBA), or other business name

Physical Address, City, State, and Zip Code

Mailing Address

Telephone Number

Contact Name

SIC Code (Line of Business)

Number of Employees at location

Headquarters name and address

Is this a home-based business?

For more information please visit D&B.com.

A Federal Tax ID, also known as a Federal Employer Identification Number (FEIN or EIN), is a nine digit number.  It is a permanent number for your business which acts like an individual person’s social security number.  It is used for banking, tax filing, business identification, applying for business licenses, credit reporting, and other business purposes.  A business will be assigned one EIN which is valid in all states.  It can be used immediately, however, it may take up to two weeks before this number becomes part of the IRS’ permanent records.  You should apply early enough to have your EIN before you need to file a tax return or make a bank deposit.

You can apply online IRS EIN, or call the IRS Business & Specialty Tax Line at 800-829-4933.  To apply by fax or for other information please visit the website “How to Apply for an EIN” at http://www.irs.gov/businesses/small/article/0,,id=97860,00.html.

The FEIN or EIN is issued for the following entities:

Sole Proprietorships

Individuals / Small businesses

Limited Liability Companies (LLC)

Partnerships

Corporations

S-Corporations

Non-Profits

Estates

Trusts

And some other entities

Do you need a Commercial and Government Entity (CAGE) Code?  Most states may ask for, but do not require a CAGE Code during Vendor Registration.  It is utilized by the U.S. Federal Government procurement agencies but seldom needed by the individual state or local purchasing offices.  You can register your firm with The Central Contractor Register (CCR) if you intend to bid on contracts for the federal government.  This is a FREE registration.

The Central Contractor Register (CCR) is the primary registration database for the U.S. Federal Government.  It maintains data in support of all federal procurement agencies so that vendors only need to register in one place.  Registering with CCR is a prerequisite before bidding on a federal contract.  It does not guarantee winning any contracts.   The registration process takes about 1 hour to complete and must be finished all at one time.  It is the responsibility of the registrants to maintain accurate and current information.

Registering with CCR is FREE.

How to register in CCR –

1.  CCR online Registration –Users will be unable to submit their registration online unless ALL mandatory information is provided

2.  Click “Start New Registration” – Data Universal Numbering System (DUNS) number required to begin registration

3.  Complete and Submit online registration – takes about 1 hour

The CAGE Code will be assigned upon activation of your registration

Categories of required and requested information include – ALL CATEGORIES INCLUDE, BUT NOT LIMITED TO THE FOLLOWING INFORMATION:

*General Information – DUNS number, CAGE Code, company name, Federal Tax ID Number (FEIN or EIN or TIN), location, number of employees, web site address, annual revenues and possible other depending on business (see our other articles about these subjects);

*Corporate Information – Type of business or organization and SBA-defined socioeconomic characteristics;

*Goods and Services – NAICS code (see our articles about commodity codes), Product Service (PSC) code, and Federal Supply Classification (FSC) code;

*Financial Information – financial institution, American Banking Association (ABA) routing number, account number, remittance address, lock box number, automated clearing house (ACH) information, and credit card information;

*Point of Contact (POC) Information – Primary and alternate points of contact and the electronic business, past performance, and government points of contact;

*Electronic Data Interchange (EDI) Information – The EDI point of contact and telephone, email, and physical address (EDI information is optional and my be provided only for businesses interested in conducting transactions through EDI).

For more information, please visit FAQ – CCR.