Land Border Duty Free stores now regulated in Brazil

As you can see in this link, Brazil has just published regulations allowing for the operation of Duty Free stores in the twin cities located in its dry borders. 

I have prepared this post to give you the inital pointers on the matter. 

DUTY FREE STORES AS IMPORT/EXPORT COMPANIES

In Brazil, duty free shops are set up as usual import/export companies. The  status of a "duty free shop' is attained after the company wins a call for bids organized by a port/airport. 

There is also a second kind of duty free shops, which has just been regulated, that can be located only at dry borders in cities bordering other countries. They are commonly located in the South of Brazil, near the Argentinian border, since there is a greater number of cities  and inhabitants there (the map shows it very clearly) . This kind of duty free shop depends on city regulations to be installed. 

In order to become an import/export company, the business must first incorporate in Brazil as a regular company. 

After incorporation, the company will obtain an import/export license (known as "Radar"). Any company can obtain an import license for small amounts of operation. i.e. 150,000.00 USD per year. 

For larger businesses, the company must upgrade to an unlimited import license. This depends on the company financial capability but usually demands a minimum equity of 400,000.00 USD. 

DUTY FREE SHOPS IN DRY BORDERS

The new rule (INSTRUÇÃO NORMATIVA RFB Nº 1799, DE 16 DE MARÇO DE 2018) requires that border shops, among other things: 

a) should be installed in a municipality that already has city regulations allowing border stores;

a.1) should be installed in a municipality that has a unit of the Federal Revenue Service (this may exclude very small towns, specially in the North);

b) must have a minimum net worth of 2 million BRL (about 650K USD);

c) must have an electronic system controlling sales, and the system must be synchronized with the Federal Revenue Service;

d) must have camera surveillance in the store;

The company must incorporate in Brazil and fulfill the requirements first. Only after all requirements are fulfilled will the company be able to request the special regime of "duty free shop". 

I would suggest the following steps:

a) perform an initial survey of municipalities that have, or are about to issue, regulations allowing for border stores;

b) incorporate a company in Brazil with minimum equity of 2,5 millions BRL (800K USD);

c) remit the equity to Brazil;

d) obtain an import export license;

e) set up the systems required by the IRS (surveillance, electronic stock control, etc.)

f) finally, obtain the special tax regime for duty free stores and start operating. 

It all starts with an initial survey of cities, as  you can see. 

Companies must act fast in surveying the potential locations. The quickest ones will certainly have an advantage. 

Homologation and importation of medical products in Brazil

Please check this presentation covering the basics on importation and sale of medical products in Brazil. You will have a best grasp of the theme if you also read:

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  Creating a Brazilian import company


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Homologation and importation of medical products in Brazil - ANVISA from Adler Martins

Choice of venue and applicable law in Brazil

From time to time, I will post some interesting conversations I have had with readers. Content is true, names, maybe.

Mr. Martins,

I am a law student at the University of Gotham in the United States.

I'm doing class research on accepting Brazilian law as the governing law for a contract between an American software company and a Brazilian telecommunications company, and was wondering if you had any insight. 

I am also researching how to establish Brazil as the jurisdiction or venue for any disputes that may arise during the course of this contract.

I read your article on electronic contracts posted on February 11th, and it was helpful (though I can't read the Portuguese article you linked to).

However, I was wondering if it would apply to a paper contract that would be mailed back and forth between the two companies.

Thank you in advance for any help you can provide.

Sincerely,

Bruce Attman Wayne

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Dear B. Attman,

Thank you for your message. It is always a pleasure to help readers of my blog.  

What is the contract about? Brazil has a regulatory agency for Telecommunication issues, called Anatel, which issues a considerable number of regulations: http://www.anatel.gov.br/Portal/exibirPortalInternet.do .

However, if the subject is related only to software, the American company may be able to skip these regulations. 

Brazil accepts choice of venue clauses, generally speaking (not to be confuse with choice of Law clauses. Those are only applicable in case of arbitration).

So, you won't have a problem with that, unless the agreement deals with real estate or inheritance. In these cases, the Brazilian venue shall generally apply. 

The same rules regarding electronic contracts apply to paper ones mailed back and forth (the law applicable to the agreement is the law of the country where the final proposal has been made).

The regulations are contained in articles 427 to 435 of the Brazilian Civil Code.  However, since the acceptance is not instantaneous, the contract will be reputed as celebrated once the acceptance is received by the offeror, or declined if an acceptance fails to reach the offeror within reasonable time. 

Adler

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Mr. Martins,

Thank you for your quick response.

The contract covers the sale of software services to the telecommunications company.  Would the American software company still need to comply with the Anatel regulations?

Glad to hear about the choice of venue clause and the contract does not cover real estate or heritages.  What about the governing law of the contract (and any disputes that may arise)?  Are there any issues with creating a contract that is governed by Brazilian law?

I will look at those sections of the civil code and thanks again for your help!

B. Wayne

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Master Wayne, 

Sorry for the late response this time. 

It looks like only the Telecommunication company should worry about Anatel's regulations. But I'd have to take a closer look to be sure. 

About the governing law: Brazilian courts will always use Brazilian conflict of law rules to determine the applicable law, regardless of the choice of the parties, unless the parties choose arbitration. 

Regarding the Brazilian law, if the contract is to be executed directly in Brazil, it might be the safest bet.

__________

Mr. Martins,

Thanks again for your response and your willingness to talk to a student about an obscure (dark) Brazilian contract law problem.

You've been a great help and if I have any further questions, I will definitely email you back.

By the way, the company is called Wayne Enterprises.

Brazil's economy: A breakdown of trust (from The Economist)

I'd recommend you to read this article from The Economist. I agree with it completely, specially when it mentions the government inclination to interfere in business through authoritarian legislation.

You may check it here or here.