In addition to Incoterms, Combined Nomenclature (CN) codes are also used in international trade.
In practice, these codes, which are based on the Harmonised Commodity Description and Coding System (HS), allow goods to be classified under a particular code number and the application of restrictions, exemptions, rights and other impositions through their tariff measures.
For those who deal with the flow of goods in the international space on a daily basis – both in terms of imports and exports – it is one of the pillars of customs that must be taken into account.
How does the tariff classification of goods work? Read this publication to find out.
“Tell me your code and I’ll tell you how you’ll be taxed!”
All products exported from or imported into the EU are classified under a tariff code. This classification helps to understand what conditions and tariffs should be applied to a particular product.
In this case, the tariff code provides the following information:
- Duty fees and other fees applicable to the product.
- Applicable protective measures (e.g., anti-dumping).
- Import and export formalities and other non-tariff requirements (health certificates, quality controls, CE marking, etc.)
The absence or misuse of commodity codes presents a risk of:
- Violation of standards and safety.
- Sanctions Risk.
- Financial and criminal liability.
- Tax revenue lost.
How can these risks be avoided in the relationship between taxpayers and tax and customs authorities?
- Implement internal verification systems for NC codes.
- Introduction of pre-import and post-export control mechanisms.
- Introducing contractual and penal clauses
What about the Global Classification System? What is it used for?
It contributes to the harmonisation of customs and trade procedures and the exchange of trade data, thereby reducing the costs associated with international trade.
- It consists of around 5,000 categories of goods.
- Each group is identified by a six-digit code. It is organised in a legal and logical structure.
- A system used by more than 200 countries and economies. It is the basis for customs duties and the collection of international trade statistics.
- More than 98 per cent of goods in international trade are classified in terms of the HS.
But after all… how do you classify goods?
To find the appropriate tariff code, it is necessary to classify them in the nomenclature.
Sometimes it gets complicated when the classification is not explicitly stated in the nomenclature. In this case you need to have a detailed knowledge of the goods (including their composition).
Sources:
Access2Markets. (s.d). Classificação dos produtos. Consultado a 08 de agosto de 2023, em: https://trade.ec.europa.eu/access-to-markets/pt/content/classificacao-dos-produtos
APOTEC. (2020). IEC e Direito Aduaneiro. A importância da classificação pautal. Consultado a 08 de agosto de 2023, em: https://www.apotec.pt/fotos/editor2/IEC%20e%20Direito%20Aduaneiro%20vrs2.pdf
Balona, C. (2022). Diz-me o teu código e dir-te-ei como serás tributado. Consultado a 08 de agosto de 2023, em: https://www.ey.com/pt_pt/tax/diz-me-o-teu-codigo-e-dir-te-ei-como-seras-tributado
Martins, H. (2018). A Classificação Pautal de Mercadorias – Enquadramento. Consultado a 08 de agosto de 2023, em: https://www.linkedin.com/pulse/classifica%C3%A7%C3%A3o-pautal-de-mercadorias-enquadramento-heitor-martins/?originalSubdomain=pt
