quinta-feira, 22 de setembro de 2016

Exporting old electronics to Brazil

Exchange of messages with a reader, published with his approval. 


Dear Adler,

I came across your blog and it is so informative but I still have something to ask you as I cannot find the info.

I want to find out what is involved with shipping broken and/or used electronics from the US (old iPhones, android phones, electronic musical instruments, etc.). 

Our plan is having them fixed/refurbished in Brazil and then wholesaling those to retailers and/or selling them directly via the retail market. 

I am also interested in finding out what the tax rates are for this and also how long it takes things to go through customs.

Best regards,

Reader

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Dear Reader,
Thanks for reading the blog.

Your plan is very hard to do, because importation of used good and/or trash is mostly prohibited in Brazil. You might try to import the equipment as parts, but they would have to be disassembled. 

Paraguay has less strict regulations. You might try to executed the plan there and sell to Brazil.

Please let me know if you would like further information about it.

May I post your questions in the blog, without mentioning your name?

Regards,
Adler 
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Dear Adler,

Thanks for quick response.  You may publish the questions in your blog.

I have few more questions and hope you can help me out:

If we need to establish this business in Paraguay, will you be helping us or do you have some one that can help us establishing the company, and other things?

Do you have any idea on total taxing rates? US to Paraguay and then to Brazil particularly for refurbished consumer electronic goods?

And also I am interested on knowing what will be the process involved in importing new consumer electronics into Brazil from US like restrictions, reporting requirements, licenses, taxes, tariffs, etc and how long it takes things to go through customs


Reader

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Dear Reader, 

I know some excellent law firms in Paraguay. They will be able to help you with taxes there.

Import taxes in Brazil are calculated based on the HS codes for the goods. They are usually very high, about 80% of the CIF value.  

Please see the specific post about it in this blog: http://brazilianlawblog.blogspot.com.br/2012/11/brazilian-import-costs.html


I will also introduce you to some good customs brokers.

Let`s keep in touch.

Adler


quarta-feira, 14 de setembro de 2016

Federal Program of Partnership in Investments

The new president has sponsored a Law that creates the Program of Partnership in Investments.



From what I see, it is no more than a reorganization of the process for granting subsidized loans and organizing public bidding for infrastructure.



However simple it may seem under a legal perspective, it is undoubtedly a clear sign for investors. The new government what things to move on, and the GDP to turn upwards.



The link for the text is here:    L13334:



'via Blog this'

terça-feira, 13 de setembro de 2016

8 biggest mistakes that Chinese companies make when doing business in Brazil

BildergebnisI just came across this presentation. I`m probably helping my competition by sharing it, but I must say it is very informative.



I haven`t checked the details and I`m not endorsing the tax calculation. But the overall content is very true.



8 biggest mistakes that Chinese companies commit doing business with …:



'via Blog this'

No more stamps - Consulates in the US already using the Apostille convention

Bildergebnis für convenção apostilaAn interesting exchange with a client:

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Hello Adler:

I am in the process of gathering the documents for CNPJ for my company.  I pretty much have them all in my hands now.  Question for you - I just went to the website of Brazilian Consultate in Washington DChttp://cgwashington.itamaraty.gov.br/en-us/general_information_from_august_14th_2016.xml and it states that it will NO LONGER legalize ANY DOCUMENTS issued in the US.  Instead, US documents must be accompanied by Apostille.  Please advise on what to do as I can no longer "legalize" the documents in the US.  Here is an abstract from the Brazilian Consultate website:




LEGALIZATION OF AMERICAN DOCUMENTS - FROM AUGUST 14TH 2016

American documents of all types (e.g. school, public and private) will NO LONGER need consular legalization. Documents will simply need to be accompanied by an “apostille” issued by the Secretary of State of the state where the document was issued.

From August 14th 2016 the Consulate General of Brazil will no longer legalize any documents issued in the United States, as the Convention Abolishing the requirement of Legalization for Foreign Public Documents (“Apostille Convention”) will be valid in Brazil from that date.

Consular legalization will no longer be required, since it will be replaced by the ‘Hague Apostille’. Such Apostille may be found in all US states at the Secretary of State’s office, or at any US Authority’s office listed on the Hague Conference on Private International Law webpage .

In reciprocity, Brazilian documents will no longer be required to be legalized at the Ministry of Foreign Affairs (Ministério das Relações Exteriores) in order to be valid in the United States. Some Notary Offices (Cartórios) in Brazil will be allowed to issue Hague Apostilles on behalf of the Brazilian State, in order to verify document authenticity. Further details on the regulation of the employment of the Apostille Convention in Brazil can be found in Decision 228/2016 of the National Justice Council (Conselho Nacional de Justiça – CNJ).

NOTE:  In accordance with CNJ Decision, foreign documents legalized before August 14th 2016 by Embassies and Consular Offices in Hague Party Countries will only be accepted in Brazil until February 14th 2017.

For information on the validity of the Apostille Convention by Brazil, please contact the CNJ Ombudsman Office (Ouvidoria):
Phone : +55 (61) 2326-4607 / 2326-4608

======================
MY ANSWER

Dear Client, 

Thanks for sending this. 

Their information is right. Brazil did ratify the convention. But adoption by local public agencies in Brazil and even by some embassies abroad is being slow and irregular. 

If the US embassies are already fully able to adopt the Apostille, we have no choice but to use it and to explain to the Brazilian agencies in Brazil that this is how documents from the US must be accepted, from now on. 

May I post your message to my blog, without mentioning your name? It would make a perfect example for future readers. 

Thanks, 

Adler




quarta-feira, 17 de agosto de 2016

Crowdfunding in Brazil - Past and future

I have been following the development of Crowdfunding regulation in Brazil in recent years.

My view about it has been mostly pessimistic, as you can see at  Crowdfunding in Brazil - Someone thinks it is possible and also in the article below, which has been originally published at Alternative Emerging Investor magazine.

However, Brazilian Secuirities & Exchange Comission (CVM) has finally called for a public round of debates, in order to discuss a draft regulation for equity crowdfunding in Brazil.

The call for contributions stresses the importance or equity crowdfunding for the development of tech companies and also highlights its use as an alternative source of financing, that is welcome at a moment when Brazilian basic interest rate is at 14,15% per year.

The regulation is a bit harsh, in my opinion.

On the bright side, it has dismissed the need for previous registration of each crowdfunding opportunity with CVM. However, it will demand previous registration of the investment platforms with CVM (as if the websites and platforms were financial companies or small banks).

Other than this initial setback, the regulation seems pro-business. It will apply to crowdfunding rules similar to the simplified rules applicable to public offers by small companies.

The main points of the proposal are:

a) the company receiving the investment must be a limited liability company (Ltda);
b) the maximum gross revenue of the company will be 10 million reais (~3 million USD);
c) maximum value to be obtained through a crowdfunding campaing is 5 million reais (~1,5 million USD);
d) each individual can invest a maximum of 10 thousand reais (or 3 thousand USD)  per year, but exceptions are made to qualified investors;
e) a full business plan, including details such as the fee that is being paid to the investment platform;
f) there are provisions allowing for syndicated investment by professional groups.

I will follow this topic and post further developments here.

Meanwhile, if you can read Portuguese, please check the proposed regulation here.

For an overview of what the market is at the moment (that is, before the new rules come to force), please read the article below.


Crowd funding still not a replacement for private equity in Brazil
 By Adler Martins - Originally published at Alternative Emerging Investor magazine. 

Brazil has a modest crowd funding scene, with less than a dozen famous websites in the area. The amounts those websites are capable to process is estimated in less than a couple million dollars per year.

Like anywhere else in the world, Brazilian crowd funding operations are focused in a few basic areas: artistic events, including movies; innovative business ventures (often related to technology and internet) and nonprofit initiatives, usually humanitarian in nature.

In a sense, a crowd funding website works as a mini stock exchange: entrepreneurs will present their projects, and the website will act as a broker between the new venture and many possible investors or supporters.

The operation is not identical to an IPO, however. It is common for companies looking for crowd funding to offer benefits that are not related to equity or profits. For example: absolutely nothing (in case of humanitarian initiatives); the chance to obtain a small part in a future movie; one or two units of the product that the company plans to develop.

Problem is: according to Brazilian law, the similarity with a regular public offer is too stark to disregard, which may trigger the application of several rules governing capital and financial markets.

This article will make a brief overview of the risks crowd funding websites face in Brazil, especially those dealing on the funding of new business ventures (as opposed to cultural and humanitarian projects).

Background: Brazil is scarred when it comes to public saving and capital markets

Brazil has suffered heavily from lack of capital pools, extremely high inflation and currency devaluation during the nineteen hundreds.

A series of misfortunes has left a mark on Brazilian capital market rules and regulations, many of them drafted during the dictatorship era, notably 1960-1970.

In spite of moderate advancements in the last 20 years, Brazilian financial system is clearly out of sync with recent developments such as crowd funding.

Public offers and the Brazilian Stock Exchange Commission (CVM)

Brazilian law n. 6.385, from 1976, regulates the stock markets. It defines public offers in a rather broad way, describing all usual financial instruments (bonds, equity, and preferential shares) and including a general description of “any other bonds, or collective investment arrangements, when offered to the public”.

It is widely recognized that any public offer that is related to any kind of return on invested capital is potentially regulated by Law. N. 6.385.

The same rules also describes that the Brazilian securities market shall be operated by a limited number of participants. Among them stock exchanges (such as Bovespa) and financial institutions, including banks and stock brokers. 

Basically, all financial institutions are regulated by Law n. 4.595 from 1964 (as well as by many other legal rules), which requires them to obtain previous approval by the Brazilian Central Bank, before starting operations.

In consequence, there is no way an independent entity, such as a small website, would be able to publicly trade or offer securities without being previously registered with the Brazilian Central Bank.

Finally, normative instruction n. 400, from 2003, issued by the Brazilian Comissão de Valores Mobiliários - CVM (our Stock Exchange Commission) demands that any public offer be previously registered with CVM.

Therefore, it is clear that only a financial institution, formally approved by the Brazilian Central Bank, may request CVM’s approval in order to, finally, be able to make public offers.

The protection of public savings by the prohibition of raffles similar practices

The route described above may seem a little disheartening.

However, let’s not forget that one of the crow funding modalities does not deal specifically with equity in the new ventures, but with the purchase of products that will be developed in the future.

Unfortunately, this path also does not offer any shelter to crowd funding websites. Brazilian law n. 5.768, from 1971, regulates the public placement of raffles or similar gambling competitions that are offered to the public.

The law says that any raffle or similar scheme that is publicly offered and that involves previous collection of payment by a large pool of consumers must be previously approved by the government.

Penal sanctions

The practice of business or operations that are restricted to financial institutions is a crime in Brazil, as per law n. 7.492 from 1986.

Also, the company’s directors may be held responsible for such behaviors.

Options for crowd funding web sites.

Since it seems that usual crowd funding web sites are not allowed to operate in Brazil, at least not in the traditional way, one must inquiry if there are any legal options for such ventures in Brazil.

One option that comes to mind is to establish them as not for profit organizations that organize raffles. This is because law n. 5.768 does not prohibit the organization of raffles and similar competitions by churches, humanitarian organizations and other institutions that serve the public. Such institutions must obtain a previous declaration of public utility before being able to enjoy this benefit.

A second option would be to organized crowd funding websites merely as intermediaries of donations made from the public to a specific business venture. This arrangement is not ideal, though, because it would eliminate the possibility of equity ownership in the company. The donors would, at maximum, be entitled to a small gift from the company, in exchange for their donation.

A third option is for Brazilian crowd funding sites to be located abroad, in countries where the regulation of such small scale investments is less restricted. After the funds are acquired, the total amount could be invested in Brazil as foreign direct investment. This option, as all others, is also not perfect. The remittance of money abroad is difficult for the average Brazilian citizen, for example. Also, this kind of operation would allow only the ownership of equity in the future company, not the purchase of future products.


We hope Brazilian regulation evolves to catch up with modern ways of funding new ventures. Before that, crowd funding in Brazil remains a gray area, with a lot of risks associated to it. 
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NOTE: This article was published before August 2016, when Brazilian Stock & Exchange commission started regulation of equity crowdfunding. Please see the beggining of the post for updated information.