NCM and HS Code: know what they are and why they matters to your business

If your business trades internationally, you have to make sure your products are classified correctly for customs in order to pay the correct taxes and avoid shipment delays.

Most goods that are imported around the world must be declared to customs authorities. The correct classification of these products is essential, as it establishes how much tax is to be paid. It also determines if a permit or license is required for the product.

Most of the world uses the Harmonized System (HS) Codes to classify goods. However if you are importing to Brazil, it is important to know that a different classification system is used, the Nomenclatura Comum do Mercosul (NCM) codes.

Businesses can face many costly and time-consuming hurdles if they do not comply with customs rules and regularly check for updates to the classification codes. Let’s have a look at the difference between the HS and NCM codes.

HS codes

Harmonized System (HS) Codes are used by more than 200 countries during the import/export process for goods.

Administered by the World Customs Organization (WCO), HS codes are identification codes given to goods for use in international trade and cover over 5,000 commodity groups. The HS is used by customs authorities to identify products when calculating duties and taxes and to gather statistics on foreign trade.

The HS code is also needed for legal and commercial documents such as sales contracts, letters of credit, and certificates of origin.

The HS code consists of six digits, although countries are allowed to add more digits to the code for further classification.

NCM codes

The Brazilian customs system differs from the international Harmonized System.

In 1995, Brazil implemented the Mercosul Common Nomenclature, or in Portuguese the Nomenclatura Comum do Mercosul (NCM).

Based on the HS, the NCM Code is an eight-digit code to identify the nature of goods for import/export.

In order to import products into Brazil, businesses must comply with the customs system and have an NCM code on their legal documentation. This makes the NCM an essential part of doing business in Brazil.

Remember that your business can face non-compliance penalties, shipment delays, and seizure of products by authorities if your products are classified incorrectly. Make sure you check for updates to the codes to avoid these risks!

And if you need help with the international sales process, get in touch with our team.