Product NCM: what is it, and what do I need to know?
If you are a master data analyst, buyer, importer, or otherwise involved in the world of trade, you have probably come across the term…
If you are a master data analyst, buyer, importer, or otherwise involved in the world of trade, you have probably come across the term NCM. But, after all, what is NCM and why is it so important for your business?
In this article, we will demystify this code and provide valuable insights so that you can navigate the complex world of commercial transactions with confidence and with the certainty of correct tax classification.
What is NCM?
NCM, or Mercosur Common Nomenclature, is a goods classification system adopted by several countries, including Brazil. These numeric codes are assigned to different products, making it easier to identify and categorize goods during the import and export process.
The Mercosur Common Nomenclature (NCM) is a goods classification convention adopted since 1995 by Uruguay, Paraguay, Brazil, and Argentina, based on the Harmonized System (HS)
HOW IS THE NCM STRUCTURED?
The NCM consists of 8 digits.
The first 6 positions of the NCM come from the HS system.
The last 2 positions of the NCM were created under Mercosur's requirements.
- First 2 positions – Chapter;
- First 4 positions – Heading;
- First 6 positions – Subheading;
- 7th position of the NCM – Item;
- 8th position of the NCM – Subitem NCM 3003.10.12 has the following structure:
- Chapter 30: Pharmaceutical products;
- Heading 3003: Medicaments (excluding goods of heading 30.02, 30.05 or 30.06) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale;
- Subheading 3003.10: Containing penicillins or derivatives thereof, with a penicillanic acid structure, or streptomycins or their derivatives;
- Item 3003.10.1: Containing penicillins or derivatives thereof, with a penicillanic acid structure;
- Subitem 3003.10.12: Amoxicillin or its salts.
NCM 3003.10.12 has the following structure:
- Chapter 30: Pharmaceutical products;
- Heading 3003: Medicaments (excluding goods of heading 30.02, 30.05 or 30.06) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale;
- Subheading 3003.10: Containing penicillins or derivatives thereof, with a penicillanic acid structure, or streptomycins or their derivatives;
- Item 3003.10.1: Containing penicillins or derivatives thereof, with a penicillanic acid structure;
- Subitem 3003.10.12: Amoxicillin or its salts.
NCM 3003.10.12 has the following structure:
- Chapter 30: Pharmaceutical products;
- Heading 3003: Medicaments (excluding goods of heading 30.02, 30.05 or 30.06) consisting of two or more constituents which have been mixed together for therapeutic or prophylactic uses, not put up in measured doses or in forms or packings for retail sale;
- Subheading 3003.10: Containing penicillins or derivatives thereof, with a penicillanic acid structure, or streptomycins or their derivatives;
- Item 3003.10.1: Containing penicillins or derivatives thereof, with a penicillanic acid structure;
- Subitem 3003.10.12: Amoxicillin or its salts.
HOW DO I DETERMINE WHICH NCM I SHOULD USE?
You need to review the list and, when associating a code with a product, be certain that you made the right choice. There is no simple way to identify this. It is crucial to thoroughly analyze the TIPI table and find the most suitable reference matching all of the product's characteristics.
WHERE CAN I FIND THE STANDARD NCM LIST?
Use the following links:
How can descriptive standardization of materials facilitate the NCM determination process?
Descriptive standardization of materials (PDM) plays a crucial role in the NCM (Mercosur Common Nomenclature) determination process and can bring several benefits to companies involved in trade.
Here is how descriptive standardization can facilitate and support this process:
**1. Accurate Identification:
By standardizing material descriptions, companies ensure that products are clearly identified. Detailed and uniform descriptions help with the correct classification of products, making it easier to determine the appropriate NCM.
**2. Avoids Ambiguities:
Standardization eliminates ambiguities in material descriptions. Vague or ambiguous terms can lead to misinterpretations and incorrect product classification. A standardized description reduces the margin for error.
**3. Compliance with Regulations:
Some products have detailed specifications for NCM determination. By standardizing material descriptions according to these specifications, companies ensure compliance with customs and tax regulations.
**4. Facilitates Internal Communication:
Clear standardization facilitates communication within the company. All departments understand material terms and descriptions in the same way, avoiding confusion and ensuring that the NCM classification is consistent.
**5. Increases Efficiency:
With standardized descriptions, NCM determination processes become more efficient. Employees do not have to spend time deciphering inconsistent descriptions, speeding up the classification process.
**6. Reduces Costs and Risks:
Incorrect product classification can result in extra tax and tariff costs, in addition to possible penalties. Descriptive standardization reduces the likelihood of misclassification, minimizing risks and saving the company money.
**7. Facilitates Data Analysis:
Standardized descriptions simplify the analysis of data related to sales, imports, and exports. This allows companies to identify patterns and optimize strategies based on the information collected.
How do I use PDM in my company?
To learn about descriptive standardization, watch the following video:
How can I expand my knowledge about PRODUCT master data and tax classification?
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HOW DO I SOLVE MY PRODUCT MASTER DATA PROBLEMS AS QUICKLY AS POSSIBLE?
Standardizing customer, supplier, and material master data provides better inventory control, reduced use of physical space and, consequently, lower inventory costs, in addition to contributing to more appropriate and higher-performing logistics.
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