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

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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, 

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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,

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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, 

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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?

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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

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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,

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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