BRAZIL – The Importance of Product Classification and Associated Challenges in Customs
Recently, U.S. companies exporting to Brazil have reported increased scrutiny in the screening of NCM product codes for items entering the country. The NCM (Mercosur Common Nomenclature) is an 8-digit code used to classify goods within the Mercosur countries, including Brazil. There have also been reports of import clearance delays and significant financial penalties resulting from alleged misclassification.
Product classification is a crucial aspect of importing U.S. products into Brazil, where customs regulations can be quite strict and complex. While the Brazilian importer of record has the responsibility to assign the correct product classification codes, it is vital for U.S. exporters to familiarize themselves with local procedures and collaborate with their clients and partners to avoid mistakes in product classification that could lead to significant issues.
In Brazil, the classification of goods must adhere to the Harmonized System established by the World Customs Organization (6-digit code). However, Brazilian product classification also follows the common external tariffs of Mercosur (country-specific classification), which is usually where most issues arise.
What to do in case of border issues?
The US Commercial Service recommends pre-shipment work to clarify any potential doubts regarding the customs classification of your product, always in collaboration with local partners and their customs brokers and/or consultants. There are also risk mitigating measures such as a preliminary consultation with the Customs Authority that can provide assurances for a successful future transaction.
Nevertheless, if a problem with clearance procedures occurs and the importer is penalized by the Customs Authority due to a classification error, the impacts can be substantial and heavily affect the profitability of a transaction.
It is important to understand the range of tools available to the US exporter and their partners and clients in Brazil to attempt a reversal of a classification decision or penalty. One aspect that not many people are aware of is that before resorting to litigations in court, there is a whole structure of administrative tribunals which are much more technical and can evaluate such cases with greater authority.
For more details or counsel on a pending transaction, please reach out to CS Brazil at moacir.rodovalho@trade.gov.