New Brazilian antidumping Rules

Newsflash for foreign exporters to Brazil.

On the last 26^th July, Ms. Dilma Roussef (president of Brazil) has promulgated the Decree nº 8.058/13 that details the Brazilian anti-dumping rules.

Among all the new measures brought by the Decree, some should be highlighted, as follows:

• The Department of Foreign Trade of the Ministry of Development, Industry and Foreign Trade (SECEX) and the Council of Ministers of the Foreign Trade Chamber (CAMEX) concentrates a lot of power when concerning dumping investigation. The first one is responsible for starting and ending investigation and the second one decides when to impose the anti-dumping measures and when to suspend such application. (art. 2º and 5º);
• Clear (albeit very broad) concept of dumping under the Brazilian understanding, which is the exportation of products with costs lower than its regular value in comparison with similar products (arts. 7º, 8º and 9º);
• Establishes the deadline for examining an application for anti-dumping investigation shall not exceed 60 days (art. 150);
• Determines the provisional application of anti-dumping measures during the investigation process (until 120 days counting from the start of the investigation process). (art. 65);
• The reduction of the maximum investigation term from 15 to 10 months (art. 72);
• The investigation starts with a petition from the domestic industry that feels jeopardized. The petition must include evidence of dumping, injury to the domestic industry and causation (Art. 38);
•   Sets up a deadline of 15 days for the review of the claim (art. 41);
•   The investigation may be closed if the exporters involved in the dumping commit to adjust the pricing (art. 67);
•   The penalties applied under the anti-dumping duty shall be proportional to the damage caused by the dumping activity (art. 78).

But you will have time to get used to these new rules. They will only be in force from October the 1^st onward. 

 Meanwhile I suggest the exporters who are into dumping to try and adjust their business. The Brazilian government seems to be quite serious about those rules.

You may find the full text of the rules in this link, in Portuguese.

See also:

Selling Chinese shoe products and insoles in Brazil. Anti-dumping measures, brand registration and other considerations

Import taxes in Brazil: make it double

I have already written a long post about import taxes in Brazil: How to calculate Brazilian import costs

But the comic strip below says it all:




By the way, you should read Pigs in Maputo. It is hilarious, and very informative too!

Selling Chinese shoe products and insoles in Brazil. Anti-dumping measures, brand registration and other considerations.

Dear Adler,

I hope my message finds you well.

I came across your blog while looking for information on subsidiaries in Brazil and hope it's ok. I reach out with a few questions. I am based in Shangri-La with a small company which produces cosmetic insoles - a product I believe would be a great fit for the Latin American market. I have a potential business partner in Brazil who is foreign as well (no permanent visa) so it would make sense to start there. His name is James Hilton. 

I am wondering however if you could recommend establishing my company as a subsidiary - I've heard that importing products to Brazil can be rather expensive if being done by a company from abroad so local presence might make sense? And though I have known my business partner for a handful of years, I'd still like to make sure that I have more or less full control of the company.

I hope that you can spare a moment to guide me in this matter.

Barbara Kopetski

-----------------------

Dear Barbara,

Thank you for you message. People from Shangri-La are indeed very polite. 

If the products are going to be imported into Brazil, the taxation will not be different, regardless of it being imported by an independent agent or by a subsidiary/controlled company. The only difference might be the total price, which is supposedly lower in an inter-company transaction (although transaction between companies belonging to the same group can't be too distorted, or Brazilian transfer pricing rules will apply).

If the products are going to be at least partially produced in Brazil, then you might have a tax advantage. 

I'd love to help you out more, but you must share more about your plans. 

Regards, 

-----------------------

Hi Adler,

Wow – thanks for the speedy response, I’m sure you are very busy!

I am currently exploring my options regarding production in Brazil, so far it seems that its best for me to stick to China where my production takes place at the moment. Also, I’d like to avoid complicating things too much in the beginning so my main concern now is how to establish myself in Brazil (if at all necessary to get my product into the country) and ensure that my partner who is very well connected in Latin America doesn’t run off with my product.

So I understand from your email that the import taxes, levies, duties etc are the same regardless of who imports my product (my own subsidiary, my partner as a local representative, a local company). I’ve learned that a subsidiary might be complicated and perhaps taking it too far considering the stage I’m at – would “exporting” or simply “appointing a representative” be good options to start? 

Perhaps the most simple option would be for my partner to open her own company in Brazil and register for import without my involvement? And a standard contract between my company in Shangri-La and her company in Brazil including a clause preventing her from launching a similar product in Latin America if we decide to go separate ways would be the link between us?

Thanks so much and I totally understand if you don’t have time to go through all this.

Kind regards,

--------------------------------

Dear Barbara, 

Don't worry. You got me in a good mood. 

Your conclusion is very reasonable, and in fact a good one. I see you never lost horizon in your plannings. 

I would only add that you must register your design and brand before the Brazilian Intellectual Property Institute (INPI). 

Also, your partner does not have to start a company. You may make use of many trading companies already operatingin Brazil, which are able to import the product and resell it. Your partner might act as a salesman for the trading companies. Your agreement can provide for the incorporation of a company in the future. 

Since you are a blog reader, I may draft the agreement for you and manage the registration of the brand and design before the INPI.

Good luck!

Regards, 

----------------------- 

Hi Adler,

Always a pleasure to bring out the good mood. Have you ever been in Shangri-La?

I’ve found a list of trading companies who specialize in importing the type of goods I am dealing with so I’ll start by approaching them and see which type of compensation they expect for their services. I imagine its rather costly so might not work! So you wouldn’t  recommend my partner to establish a firm to begin with?

Regarding brand registration, I’m not sure what the rules are in brazil, but cant imagine they are much different from the ones in Europe. I just realized that there is a footwear company in Brazil with the same name of my company. Would it be a problem?

-----------------------

Dear Barbara, 

I have never been to Shangri-La, but I have friends that tell wonders about the place. 

Your friend may start his own company, and I can help him with it. It will take about 3 months to have everything ready. I just mentioned the trading companies because they would allow you to start right away. Also, depending on the amount of imports you plan to do, minimum capital requirements are applicable (for example, for more than 150 thousand US dollars per semester)

The brand may be registered if the Brazilian company has not registered the brand in all applicable categories. We must check it.

I look forward to hearing from you. 

Regards

-----------------------

Dear Adler,

Yes its great here – you should visit!

My partner is off for the weekend (some far flung place) so don’t expect to hear from her until this upcoming week. Meanwhile, I read your post on Brazilian import costs to get a better sense of the costs associated to my product specifically but it proved more or less impossible. 

Who should we approach in order to get an idea of the full cost – do you think my shipping agent or a potential trading company would be able to help?

Kind regards,

-----------------------

Dear Barbara, 

Please note that this is an informal conversation, with no legal value. 

Under normal conditions, the importation of your product would have a total taxation of about 60% (not including port and insurance expenses). 

Again: you must hire professional advice before making plans. 

However, you mentioned that the product is made in China. In this case, a series of anti-dumping measure may apply. These measure vary from the application of a flat penalty (usually about USD 14.00) over each unit/pair, to the application of an additional tax of 182% of the product's value.

Many Chinese exporters will take their products to be finalized in Vietnam or other nearby countries in order to avoid these penalties. This practice, however, may be considered illegal by the Brazilian government, specially where there is no real manufacturing in Vietnam.

Regards, 

See also: 

Importing to Brazil, Setting up a Subsidiary/Sending a representative to Brazil

Can the matrix company pay for the goods purchased by the Brazilian subsidiary/affiliated company?

Gerdau case: exemption of taxation over foreign subsidiaries

Automatic taxation of subsidiaries ruled unconstitutional 

Importing to Brazil: Import by Order and Import on Behalf of Third Party

Many of our clients that seek advice regarding international contracts in Brazil are usually completely lost about import procedures in Brazil. 

I have been noticing that the lack of understanding about Brazilian import modalities can drive foreigners towards bad or inneficient deals. 


Thus,  we bring  a little explanation about import modalities. We will focus on indirect imports. That is, import procedures in which the importing company does not perform all import procedures, but outsources them to specialized companies. 

Please not that, for the procedures below to work, a Brazilian importer must hire a Trading Company. So, either the investor must have a subsidiary/controlled company in Brazil, or the final client must hire a Trading Company in order to import the goods from the foreign seller.  

There are two forms of indirect importation: import by order and import on the behalf of third party. 

The major problem surrounding the choice of them is the lack of accurate information regarding the tax burden and the peculiarities of each procedure, which we will try to clarify below.

Import by order

In this modality, a Trading Company will buy and import the goods with its own financial resources and commits to resell them to the buyer (the real importer), due to a contract previously concluded.

The taxes incident on the import operation, which will be fully funded by the Trading are Importation tax (II), ICMS, PIS / COFINS, IPI and IOF, just like the ones in a direct import.

For such services, the Trading can embed its fees in the sales invoice or opt for the commission system, always defining such option previously on the contract.

The catch is: the Trading Company must resell the goods to the final importer. When this sale is made, VAT taxes will apply, just like in any internal sale in Brazil. The operation becomes more expensive, as a result.

It is important to highlight that even if the buyer delegates all customs clearance work to the Trading Company, the buyer is still required to obtain Brazilian Import Licenses (SISCOMEXand RADAR).

Import on behalf of third parties

In this mode of importation, the buyer is the real owner and importer of the goods  and the Trading is a mere intermediary that assists in the bureaucratic process. There must be a formal agreement between Trading Company and Importer.  

The buyer shall pay the  supplier and the import taxes directly.

Import taxes apply as usual. 

After import taxes are paid and customs are cleared, the Trading company must issue a "nota fiscal de transferência" (a transportation document, required by the Brazilian Revenue Service) and ship the goods to the final importer.

It is precisely no this that the Import on behalf of third party differs from Import by order. Since it is a mere remittance, this operation does not constitute a taxable event for PIS/COFINS (one of the Brazilian VAT).  Thus, the taxation levied on the transference of the  goods from the Trading to the importer is lower in this modality than in the import by order.

Moreover, in this kind of import, the Trading’s services are paid by the buyer through  a service invoice (in the previous modality, the Trading would add an "overhead" to the merchandise cost).

With respect to registration formalities, the buyer is also obliged to obtain the RADAR/SISCOMEX.

COMPARISON

In conclusion, each of the methods has its pros and cons. If the buyer does not want to bear the risk of import and do not want to spend its capital since the beginning of the importation process, he should opt for import by order, since such burden falls on the Trading.

 In contrast, in a different analysis, it is more profitable to use the import on behalf of third party, since the VAT charged in the  transfer of the goods from the Trading Company to the final buyer is considerably lower.

See also:

Step by step for the Brazilian Import License (RADAR/SISCOMEX)

Exemption of import tax for machinery - Import permits for electronics and drugs 

Taxation of software importation by end users in Brazil 

Business Basics in Brazil

How to calculate Brazilian import costs

How can foreign companies fight unfair public biddings in Brazil

Here follows an email forwarded to a client that was having problems with competitiveness in Brazilian public biddings, in which we suggested some measures to resolve it.

Dear Patrick "Eel" O'Brian,

We have evaluated several document, emails and news reports regarding the current and planned public biddings to be performed in Minas Gerais state, regarding the purchase of software.

The most important issues have proved to be the unfair competition in the public bidding, due to a pre determined technology being explicitly or implicitly favored in the public call for offers;

We have been asked about legal alternatives for forcing Minas Gerais government and public companies to provide a more competitive selection of suppliers.

In response to that, we shall make a number of considerations.

a)   Brazilian constitution and federal laws explicitly reject unfair public biddings.

b)   The existence of pre determined bids (licitações dirigidas) is well known in Brazil. There is massive jurisprudence that condemns such practice.

c)   The most usual legal action against unfair bidding procedures is the “mandado de segurança”, an emergency injunction that can be filed whenever a public officer or public agent is engaged in illegal activities, provided that the illegality is clear to see and not dependent on the production of evidence. For example: formal or procedural mistakes, lack of publicity, lack of competence, clear violation of the due process of law.  A mandado de segurança can be used before, during or immediately after a public bidding takes place. It usually cannot be used after the conclusion of the agreement between the public agent and the winning company. In this last case, an ordinary procedure shall be filed.

d)   In this specific case, we believe that the use of Mandado de Segurança is justified. We must survey the current status of the contract before advising if it is still possible to file it against all the public biddings relevant to the case, or only against the ones not yet completed.

e)    The Mandado de Segurança may be filed by any person. This includes ordinary citizens, associations, companies and, of course, public agents (attorneys at law, etc.). It is not common for foreign companies to file a Mandado de Segurança. But there is no prohibition to that.

We hope these considerations help you in advancing your resolutions.

Start-up Brazil Program

With the global technological innovation trend, the Brazilian government saw the need to help the competitiveness of Brazilian technology companies’ products, both domestically and internationally. To do so, it created several investment programs for such business segment, imposing few restrictions and considerable benefits.

The Brazilian government has created the Start-up Brazil, a program that aims to accelerate the development of technology-based companies, specifically software and services, by investing in new products.

It reveals a Brazilian trend in offering to the local and international market new innovative products and services, connecting our technological businesses with global ones, as well as seeks to build a partnership between the government and the private sector to foster the technology-based entrepreneurship.

The forecast of funds for investment is 40 million dollars and the companies that may apply are the ones with up to 3 years old. It shall be highlighted that 25% of the start-ups to be benefited by the program are international companies located in Brazil.

This initiative is part of the TI Maior, a Brazilian government program started in 2012 that sets several benefits for companies engaged in the technology industry.

The Paulista Innovation Fund (Fundo de Inovação Paulista), created in partnership with the Agency Develops SP and FINEP, follows the same line. This fund has from 60 million to 100 million and aims to invest in innovative companies that have authorization from the Securities Commission (Comissão de Valores Mobiliários - "CVM").

As well as the Government, the private sector also sought to create strategies to foment the development of technological creative industry. As an example of such initiative is the Criatec Fund, which seeks to invest in emerging and innovative companies and to obtain capital gain by investing long-term in early-stage companies (including zero stage), with innovative profile and a high return .

This fund still seeks to promote an integration of efforts among governments, universities and institutions of science and technology and the local business community, in order to maximize the technological development.

Furthermore, it is becoming more often in this business segment the intervention of Business Angels who are willing to inject capital in IT companies in embryonic stage. These are usually executives or successful companies that have accumulated sufficient resources to allocate part of them in investments.

As it turns out, there are a good number of initiatives both private and public to assist the development of start-ups in the IT sector, which is why investing in such companies in Brazil right now should be an option for those looking for building new business.

Sources:

http://timaior.mcti.gov.br/interna4.php

http://desenvolvesp.com.br/a2sitebox/uploads/files/chamadafundoinovacaok.pdf

http://www.fundocriatec.com.br/interna.php?p=oQue

International Bank Account Number (IBAN) - Sending money to Brazil

See also:

-Financial investments by non-resident in the Brazilian financial and capital markets

- Getting money into your Brazilian company - a few common problems

- How to get cash back from Brazil to Europe

List of documents for setting up a company in Brazil

Power of Attorney for setting up a company in Brazil

Brazilian banks always give foreigners a hard time when it comes to international transfers.


I mean, a really hard time. It is not unusual to wait up to two weeks before a wire transfer from the UK is available to a Brazilian account holder. And, when it is finally available, the bank will usually require a long list  of documents before clearing the funds.

Until last week, Brazilian banks did not use IBAN (short for International Bank Account Number). Only swift codes.

This was awkward, of course, because European banks adopt IBAN. The mismatch was inevitable.

Starting this month, Brazilian banks are forced to accept and provide IBAN identification to their clients. I hope this makes things easier for everybody.

The rule is here, in Portuguese.


You might also want to read:

Getting money into your Brazilian company - a few common problems

Opening a Brazilian Bank account for non-residents

A cool Brazilian blog: Brazilphenomenon (brings details about swift and IBAN)

A cool Brazilian blog: Brazilphenomenon

I'm always looking for new points of view about Brazil (managing my google alerts is not easy, and reading my RSS reader is a challenge even for me).

This blog has called my attention: http://brazilphenomenon.wordpress.com/. It is written by an Argentinian who has been educated in the UK, and has been living in Brazil for 20+ years.

Her takes on Bureaucracy and "jeitinho brasileiro" are very interesting. She is also very acid sometimes, bordering cinical. Here and there, she make some comments that would make a Brazilian shudder (such as saying that Brazilian police is among the best in the world). But a nice read.

I have selected a few posts that are more connected to business and Brazilian law. And another one that reflects her personal views.  It is worth a reading.

Sending and receiving money in Brazil (swift, iban and other horrors) – Update 23/07/2012

Living in Brazil: Bureaucracy

Why average people don´t help the poor in Brazil

Brazil's ports are now working 24 Hours

Since May 03 the major Brazilian ports started working 24 hours a day. This is one of the several measures implemented by the Provisional Measure (a law binding presidential decree) No. 595,  which seeks to modernize the Brazilian ports. 

The ports that will work 24 hours are the ports of Santos (São Paulo), Rio de Janeiro, Vitória, Paranaguá (PR), Suape (PE), Rio Grande (RS), Itajaí (SC) and Pecém (CE). This is great news for all businessmen who work with import and export in Brazil. Much remains to be done in Brazil with respect to logistics and port infrastructure, but this is will much contribute to end the delays and long bureaucratic problems of the ports in Brazil.

See also:

 Brazilian ports infrastructure and logistics – The “Zarpa Brazil” Campaign

Which are the best brazilian ports? 

Annual Census of Foreign Capitals in Brazil 2013

The brazilian Central Bank starts today the new edition of the Annual Census of Foreign Capitals in Brazil. For the ones that participated of the 2011 edition, things will be mostly the same. It is mandatory, however, only for those legal entities resident in Brazil who had:

1) on December 31 last year, stockholders' equity exceeding $ 100 million and simultaneously non-residents direct participation in any amount in their share capital;

2) foreign debt, in the form of short-term trade credits (up to 360 days), equal to or exceeding $ 10 million.

The statements shall be delivered until August 15, 2013.  Click  here for more details and to access the Circular Letter fixing the dates of the Annual Census.

How much land may a foreigner purchase from the Amazon forest?

See also:

São Paulo Court allows purchase of rural land by foreigners

No to purchase of land by foreigners. Uruguay joins Brazilian sad club

Brazil and Argentina have restricted land acquisition by foreigners

Draft bill allows the purchase of land by foreigners

A smart and intrepid young man plans to purchase a large estate in Brazil, in order to pursue his objectives. Please read my comments on his plans, and on the limitations Brazil might impose on it. 

_______________

Dear Adler,

I read you previous post on the restriction imposed on foreigners regarding rural land acquisition in Brazil

However, foreigners (like me) have long bought rural land in Brazil! 

The primary restriction is on the purchase of extremely large (multi square miles, ) properties. 

Look it up!

Regards, 

Charles Francis Xavier

----------------------------

Hello Charles,  

I most certainly know that foreigners can purchase small properties. But the properties that are interesting for business, usually the very large ones, can't be purchased by foreigners directly, only through the incorporation of a Brazilian company.

Recently, the government has tried to prohibit companies owned by foreigner to purchase 

land. The decision I have shared has ruled such prohibition as unconstitutional.

Regards,

 Adler

------------------------

Adler,

Few companies or individuals- other than huge agrobiz and/or land speculators (sometimes the same thing)- would be interested in the many hundred thousand hectare properties (10000 m2/hectare) foreign purchase of which the law is designed to regulate and (possibly, but not necessarily) restrict.

 Surely 99% of all foreign rural land purchases never had nor now have the slightest restriction. Except, perhaps, those promoted by somewhat over  eager lawyers. 

Regards,

Charles

------------------------

Dear Charles,

Being very clear: the law allows for the purchase of up to 3 "modules of land" by a foreigner. 

Such modules vary in size from city to city. In some cities in the São Paulo State, 3 modules would be about 15 hectares. Not too small, but no so big.  

In other cities in the extreme North of Brazil, 3 modules would be as much as 210 hectares. 

Undoubtedly big, but still a much smaller than the large properties used for soy or sugar cane, which can easily reach 10 thousand hectares.

The biggest farms in Brazil have more than 200 thousand hectares.  

There is no comprehensive and reliable data comparing the purchase of land by foreign individuals x the purchase of land by Brazilian companies with foreign capital. However, since  the size of the properties that may be freely purchased is not so big, I would not bet on the 99% figure you have presented.   

15 hectares might be sufficient for an individual looking for retirement, or planning to grow a  small crop. But is not a suitable size for many kinds of large scale plantations: eucalyptus, for  instance.  

Regards, 

 Adler