Brazil: Selling

Customs Procedures

Import Procedures

Foreign exporters and Brazilian importers must register with the Foreign Trade Secretariat (SECEX), a branch of the Ministry of Industrial Development and Commerce (MDIC). Companies seeking to import goods into Brazil must obtain a RADAR licence. The RADAR licence grants a password to access the Brazilian Integrated Foreign Trade System (SISCOMEX). The SISCOMEX is an electronic integrated trade documentation system designed by the Brazilian Government to control and monitor the Brazilian Foreign Trade. The RADAR licence can be limited, unlimited or express depdening on the amount of imported goods. Licence applications must be submitted to tax autorities and the type of licence is determined after a review of the financial capacities of the company. Other documents are necessary for custom clearance: the commercial invoice, incoterms, bill of lading and cargo manifest ,certificate of origin, import declaration and proof of import. Depending on the product, Brazilian authorities may require more documentation.

Import costs include the Import Duty (II), the Merchandise and Service Circulation tax (ICMS) and the Brazilian Federal Value-Added Tax on Manufactured Products (IPI). Import duty is a federal product-specific tax levied on a CIF (Cost, Insurance, and Freight) basis. Rates usually vary between 10% and 35%. The IPI is a tax levied on finished products (whether foreign or domestic), resulting from some sort of industrial process. The IPI is not considered a cost for the importer, since the value is credited back to the importer. IPI rates range between 0% and 15%. The ICMS is the VAT levied by states and applies to the legal, physical, or economic circulation of goods, whether imported or not, the services of transportation and telecommunications. Although importers have to pay the ICMS to clear the imported product through Customs, it is not necessarily a cost item for the importer because the paid value represents a credit to the importer. ICMS rates vary from one state to another: in the State of São Paulo, the rate varies from 7-18 percent. Certain industries may qualify for a ICMS tax exemption.
Other minor taxes that apply to imports:

• PIS-Import and COFINS-Import are both federal contributions levied on the entrance of foreign goods into Brazilian territory.
• Freight Surcharge for Renewal of the Brazilian Merchant Marine (Adicional ao Frete para Renovação da Marinha Mercante – AFRMM) is a fee charged to support the development of merchant marine and shipping construction.

In order to attract investments, some Brazilian states grant tax incentives, consisting of total or partial reductions of ICMS on imports, which minimize tax costs of foreign trade operations.
For more information, please visit the website of Brazilian Tax Authority.

Specific Import Procedures

It is necessary to obtain a specific agreement from the ministry concerned for the following products: beverages, pharmaceutical or veterinary products, arms and munitions, as well as many cosmetics, rare metals, radioactive products or those which can damage the environment, and petroleum and all its derivatives. The Ministry of Health regulates all products that may affect the human body, including pharmaceuticals, vitamins, cosmetics and medical equipment/devices. Such product can only be imported and sold in Brazil if the foreign company establishes a local Brazilian manufacturing unit or local office, or if the foreign company appoints a Brazilian distributor who is authorised by the Brazilian authorities to import and distribute medical products.
The import of several types of meat is prohibited. The Brazilian requirements for the importation of animal products are defined by article 486 of Decree no. 9,013, dated March 29, 2017.

Importing Samples

For the import, export and re-export of commercial samples the ATA (Temporary Admission) carnet can be used. It must be written on the product that it is a free sample and that it may not be sold.

Customs Duties and Taxes on Imports

Customs threshold (from which tariffs are required)

No duty and ICMS are levied on imports where the CIF value is below USD 50.

Average Customs Duty (Excluding Agricultural Products)

13.46 %, which is within the average for emerging countries. You can find more information here.

Products Having a Higher Customs Tariff

Agricultural products, fermented liqueurs, IT and telecommunications equipment.

Preferential Rates

Member of MERCOSUR (Mercado Comun del Sur : Argentina, Brazil, Paraguay, Uruguay). Customs duties between member countries were theoretically abolished in 1994, but with many exceptions, according to the "adaptation regime" (Regime de adecuaçao): capital goods, information technologies, telecommunications sector, automobiles, sugar sector.
The Mercosur Common External Tariff (CET) does not concern all products: only 75% of the tariff lines benefit from a single tariff. Moreover, there are a certain number of sensitive products according to the country (about 300 for Brazil) which are also exempted from this single tariff.
The CET was completely in place in 2006, with the following structure:
- 0% to 14% for capital goods;
- 16% to 20% for textiles, articles of clothing, consumer goods;
- 10% to 15% for metallurgy;
- 12% to 16% for agricultural products and the information processing and telecommunications sectors.

The countries apply the recommendations of the central institution more or less, according to their economic situation. It should also be noted that re-exporting within Mercosur does not entitle you to an exemption from duties: so if you export a product to Brazil, to sell it on to Argentina, you will pay Brazilian duty and then Argentine duty.
There are various Customs agreements, either between Mercosur and other countries (EU, Chile and Bolivia), or bilaterally between Brazil and other countries (Chile, Andean Pact). Brazil launched in May 2013 a system of consultation of the agreements on tariff preferences signed by the country named CAPTA.

Customs Classification

Brazil applies the Mercosur Common Nomenclature (NCM) is used to comply with the Harmonised Customs system.

Method of Calculation of Duties

Ad valorem on the CIF value of the goods. Be careful, there are a certain number of minimum prices applied by Brazilian Customs for the calculation of duties.
Most of the taxes are calculated on a cumulative basis.

Method of Payment of Customs Duties

Import payments can be made in various ways, with a contingent financed by the Exporter (Supplier Credit) or by the importer, by means of financial institutions in Brazil or abroad (Buyer Credit).
The simplest and most common used methods are: advance payment, documentary collection, documentary credit, and open account.

Import Taxes (Excluding Consumer Taxes)

There are three taxes that account for the bulk of import costs:

• the Import Duty (abbreviated in Portuguese as II),
• the Industrialized Product tax (IPI)
• the Merchandise and Service Circulation tax (ICMS).

In addition to these taxes, several smaller taxes and fees apply to imports. PIS-Import and COFINS-Import are both federal contributions levied on the entrance of foreign goods into Brazilian territory. Freight Surcharge for Renewal of the Brazilian Merchant Marine (AFRMM) is a fee charged to support the development of merchant marine and shipping construction.

Labeling and Packaging Rules

Packaging

Must respect the Brazilian Consumer Code adopted in 1990. This requires the packaging of a product to give the consumer correct information, which is legible, clear and precise, about the quality, quantity, composition, price, guarantee, origin, expiry date and risks for health and safety.

Languages Permitted on Packaging and Labeling

Translation into Portuguese is mandatory for imported products.

Unit of Measurement

Metric system.

Mark of Origin "Made In"

Yes

Labeling Requirements

Quality, quantity, composition, price, guarantee, origin, expiry date and risks for health and safety.

Specific Regulations

Any product containing GMOs must show this very clearly.

Distribution Network

E-commerce

Internet access

With a population of over 200 million people, Brazil is the 5th most populous country in the world and the largest internet market in Latin America. As of 2017, Brazil is the fourth largest  internet market worldwide, with a user base of 139.111.185 people, placing penetration around 66%. The number of smartphone users in Brazil is estimated to reach 84.24 million by the end of 2018. Monthly internet usage in Brazil amounted to 25.7 hours per user in 2016. In comparison, the Latin American average is 18.6 hours. The most popular search engines in the country are Google, Bing, Yahoo!, DuckDuckGo and Baidu. Google is by far the most popular and accounted for 96.98% market share, followed by Bing with 1.61%. Google is  the most dominant search engine in the Latin American online search market, with a desktop search market share of over 92% in several leading markets in the region.

E-commerce market

Brazilian e-Commerce ended 2017 with US$18 billion in earnings, a number that has been increasing over the past few years and is expected to reach US$ 23 billion by 2021. With a predicted online retail growth of 12% in 2018, Brazil continues to be an outstanding opportunity for online retailers in Latin America and the world. Mobile commerce continues to be one of the strongest trends for the coming years. Consumers are learning to compare prices and product information via the internet and often prefer the convenience of purchasing items via e-Commerce. The rise in sales of mobile devices (2%), compared to the decrease in sales of notebooks (30%) and desktops (37%) demonstrates a change in people’s lifestyle and buying habits. Mobile devices were used for 27.3% of e-commerce purchases according to Ebit and up to 31% according to Atlas and ABComm, a significant growth in comparison to 2016, when its share was 22%. However, when it comes to completing an online purchase desktop is still the most popular device. According to the e-Commerce Foundation, 25% of people use their smartphones to look for information on a particular product every week, while 12% do that on their computers. Additionally, 6% of people use their smartphone to purchase goods on a weekly basis and 3% of them use their computers to make the purchases.

Social media

In 2013, the Wall Street Journal bestowed Brazil with the title of “Social Media Capital of the Universe”. Brazilian users are among the world's most engaged, spending an increasing amount of time on social media (in 2017, the daily average spent on social media was 3 hours 43 minutes). Facebook and WhatsApp are the leading social networks in the country, followed by Facebook Messenger, Instagram and Twitter. According to a report by We Are Social, as of 2017 122 million people in Brazil are active on social media, which accounts for 87.7% of all internet users in the country. Of them, over 100 million are active on a daily basis. The number of social media users is up 18% since January of 2016, so it is clear that social media is a rapidly-growing sector in Brazil. Brazil has the third largest Facebook user base in the world, after India and the US, and they have the third highest number of Google+ users worldwide. Almost 18 million people use Twitter, making it their sixth highest user base. 
Around 63% of online shoppers receive and search recommendation through social media before making any purchase, according to the Brazilian Ecommerce Association. More than 60% of companies in Brazil invest in a paid advertising strategy, with the intent of raising brand visibility and increasing sales. Of this percentage, 98.5 % of businesses invest their money in Facebook Ads, which, being less expensive than Google AdWords, is a great option for small to medium sized brands who want short-term results with a low budget.

Direct Selling

Evolution of the Sector

According to the World Federation of Direct Selling Associations (WFDSA), 2016 retail direct sales in Brazil decreased slightly to USD 8,689 million (a 0.1% decreased compared to 2015). Despite this, independent representatives in the industry reached 4,335,834 people. According to Euromonitor International, direct selling remained relevant in 2017 due to increased unemployment in other sectors generating an influx of new direct sales representatives. Fabio Piastrelli, founder of Gera (IT solutions for direct sellers), claims Brazil has nearly 200 direct selling companies that will maintain direct selling's relevance in the country.

Brazilians value a well-groomed appearance which, combined with person-to-person experience, makes personal care products the leading direct selling sector. Major players include Natura, Avon, and Luxor Cosmetics, although they face increased competition from cosmetics company Hinode. In fact, Hinode has revolutionized the industry by offering strong direct selling training, jumping from 35,000 to 600,000 representatives and 600% revenue growth from 2012 to late 2016. As a response, many direct selling companies are diversifying their sales efforts into the Internet to make up for decreasing demand.

Commercial Intermediaries

Trading Companies

 

• Type of Organization

- Trading companies, public limited companies, listed on the Stock Exchange and registered with the Secretariat for Foreign Trade (SECEX), they manipulate large volumes of imports thanks to substantial financial capacities;
- empresas comerciais, limited liability companies, less expensive and more flexible, better adapted to lower volumes of imports or on the regional scale. In addition, it is essential to go through these importers-exporters to penetrate the retail sales market, and they take charge of distribution.

• Main Actors

List of import-export companies.

Wholesalers

 

• Type of Organization

Importers are also wholesalers in accordance with Brazilian legislation.

• Main Actors

Atacadão, a wholesaler bought by Carrefour in 2007.
Makro Atacadista S.A.
Association of wholesalers and distributors (ABAD)

Useful Resources

Association of wholesalers and distributors

Using a Commercial Agent

The Advantages

It is advisable to begin commercial operations through an agent or a distributor. Agency and representation agreements are governed by the law of 10 December 1965. An agent knows his area of activity, his potential customers, his town and/or his region well. Less expensive than going through a trading company.

Where to Be Vigilant

A single agent cannot cover the whole country. In spite of considerable progress made at the level of domestic transport and communications, the regional orientation of the economy remains important. A company desiring more complete coverage across the country is advised to place at least one agent in each of the two main centres of activity: Rio and Sao Paulo. Moreover, regional economic disparities and varying states of infrastructure often make it necessary to use several agents to access the Brazilian market. Agents are not always specialised in one type of product. Companies are advised to seek prior information about their contacts.

Elements of Motivation

The agent has exclusivity for the distribution of the product once he has proved his sales capacities in the area concerned.

The Average Amount of Commission

Commission on the volume of sales is negotiated between the two parties. It is better to go through a bank which pays the income from sales to the exporter and commission to the agent.

Breach of Contract

The content and the extension of the agent's work must be specified in the contract. This cannot be broken unless there is a professional fault or the two parties request it.

Finding a Commercial Agent

French Chamber of Commerce in Brazil
Association of distributors and wholesalers, State of São Paulo
Alibaba

Setting Up a Commercial Unit

The Advantages

The company's physical presence in Brazil is an essential element given that business relations are based on personal contact and mutual confidence.

Where to Be Vigilant

Be careful of fiscal declarations and the legal constitution of your company; the initial formalities can be long and complex. The advice of a local lawyer is not superfluous.

Different Possible Forms of Settlement

 

• A Representative Office

It is relatively easy to set up a representative office to make the first contacts on the ground. If the office is to be responsible for importing, it must be formed into an "empresa comercial" (commercial company).

• A Branch Office

There are no major legal obstacles to setting up a branch office in Brazil. It will be considered as a local company in the eyes of the fiscal authorities.

• A Company

The forming of a company in Brazil, as a corporation (anonimas) or limited liability company (limitada) is relatively easy but all participating foreign capital must be registered with the Central Bank. Failure to comply may cause serious foreign exchange losses, as well as problems with capital repatriation or profit remittance.

Franchising

Evolution of the Sector

The Brazilian franchise sector shows consistency and stability even in the face of moderate economic growth. According to the latest report provide by the Brazilian franchising association, in 2019, the Brazilian franchise sector grew by 6.8%, and total sector revenue was about  R$ 186,755 billion. The number of networks has grown thanks to the number of new brands in the Service and Other Business and Food segments, reaching 2,918 franchising chains. New brands acting in the market have brought the number of franchising units to 160,958. The average of units per network has increased steadily, with over 55 units per franchise chain in 2019 (+3.4%). The opening of new networks and expansion in the number of units have helped direct job creation, the franchising sector employed 1,358,139 people (+4.6%). In 2019, the franchising sectors with the highest turnover in Brazil were Food; Health, Beauty and Wellness; Services and other business; Fashion.

It is important to adapt a foreign name to the Brazilian context. At the legal level, a specific form is required for any official franchise offer, called "Circular de Oferta de Franquia," which must contain a certain amount of information concerning the company's financial health and the settlement of legal disputes. It is increasingly common for a Brazilian investor to negotiate risk-sharing agreements with the foreign franchisor when introducing a new brand to the market.

Some Big Franchises

Habib's, Fast-food
O Boticario, body care and products
Kumon, language and mathematics courses
Wizard, English courses

For Further Information

Setting Up Your Company and Office in Brazil
Brazilian franchise association (in Portuguese)

Finding Assistance

Export Trading Companies

Association of foreign trade companies

Recommended Resource

Trade and Investment Guide – Invest & Export Brazil (Brazilian government information service)