All about the Brazilian accession to the Vienna Convention

First, it is important to highlight that, when you talk about “Vienna Convention” you need to clarify specifying the topic, for there are many editions to this Convention and each one deals with a different subject. There are, for example: the Vienna Convention on Diplomatic Relations, the Vienna Convention on Consular Relations; the Vienna Convention on the Law of Treaties;; the Vienna Convention for the Protection of the Ozone Layer; the Vienna Convention on Civil Liability for Nuclear Damage; the Vienna Convention on Road Traffic, etc. Among these there is the Convention to which this article refers, the Vienna Convention on Contracts for the International Sale of Goods (CISG), and is in fact called “United Nations Convention on Contracts for the International Sale of Goods”.

This convention was drawn up in April 11th 1980 during the United Nations Convention on Contracts for the International Sale of Goods, with the support of the United Nations Commission on International Trade Law (UNCITRAL), and came into force in January 1st 1988, aiming at adopting uniform rules regarding contracts for the international sale of goods which would take into account the different social, economical and juridical systems, contributing to the elimination of juridical obstacles to international exchanges and promoting the development of international trade.

Today, around 75% of countries have adhered to the Convention. In whole it is 85 signing countries, among them Brazil’s chief trading partners like China, the United States, Mercosur members, Chile, Canada and many European nations. Brazil was the 79th country to sign the convention in march 2013, but the document only came into force in April 1st 2014, and was promulgated by Dilma Rousseff by Decree number 8.327 in October 16th 2014.

The Convention contains 101 articles divided in four parts: Part I refers to the application of the Convention and general dispositions. Part II pertains to the rules on the formation of contracts for international sale of goods, while Part III establishes the basic rights and obligations for the buyer (importer) and seller (exporter). At last, Part IV contains the final dispositions of the Convention, which relate subjects as: when and how it will come into force, accepted reservations and declarations, and the application of the Convention to international sale contracts in which both States have the same or similar laws on the same subject.

What about the Incoterms?

At this point the following question may come up: “if this convention refers to the duties of seller and buyer, how do the use of Incoterms fall in place?”

As it is known, the incoterms are sale contract articles that deal with the moment where damage risk is transferred from the seller to the buyer (this moment and place is called the “delivery” of the goods), and also which costs and from what moment on each party takes it over from the beginning to the end of the process. Today there are eleven terms, created by the International Chamber of Commerce (ICC) in Paris, which are dealt by the importing and exporting agents according to their abilities to take on responsibilities for cost and risk. These terms are periodically updated (generally, every ten years) as new socioeconomic, political and logistic situations come up, among others.

What happens is that the Vienna Convention, due to its intention of being comprehensive and juridically fair, has posted a very straightforward text and, since incoterms are subject to periodical alterations, the Convention text would risk becoming outdated and the ICC would be the most adequate forum to deal with the details of incoterms definitions in an accurate and up-to-date way. The Convention authors thus decided to adopt clearer rules on risk transfer, adapting them to the needs of each deal. Another factor that may have influenced this is the fact that the use of incoterms is defined as non-compulsory and therefore would make it difficult for this to be subject of a convention that aims at standardizing international sale contracts law. We may conclude, therefore, that the incoterms may be considered as viable and useful instruments to the regulamentation of risc transfer in international sale contracts in a more detailed and specific way than the convention, and the relation between this convention and the incoterms themselves is complementary.

Did you know all these details about the Vienna Convention? Leave your comment. In the next article we will talk about its influence in Brazilian international sale contracts.

The advantages of working with Trading Companies (TC)

Trading Companies are enterprises specialized in export and import operations. These types of firms have the infrastructure to facilitate businesses between the selling and the buying companies.

Playing the role of intermediators, the trading companies are seen as an opportunity, mainly, by small and medium domestic producers, which, in most cases, do not have bureaucratic knowledge, time nor structure to carry out foreign trade operations.

There are many advantages on using the foreign trade services that the trading companies offer, such as:

  • the relationship between the manufacturer and the purchaser;
  • insurance of the goods and the services provided;
  • contracts;
  • financial assistance;
  • supply chain;
  • businesses, tax and customs managements.

For been specialized on the foreign trade sector, the Trading Companies have more expertise on these type of transactions than the manufacturer or the purchaser themselves, once They do not only focus on the buying and the selling of goods. International businesses involve much more than that, for example: tax benefits (exempting, reducing or taking credit for some taxes using logistics strategies).

There are several logistical strategies that can be planned by the trading companies, among them are: analyzing through where the goods will transit to get to its final destination and identifying which country is more profitable to negotiate with, considering that there are many global treaties, such as the Southern Common Market (Mercosul) and the European Union (EU), to facilitate the free trading among member countries.

For both the buyer or for the foreign manufacturer, the advantages of working with the Trading Companies are seen as real business opportunities when you do not know directly buyers, domestic producers or manufacturers.

Many brands from the automotive import into the national local market through Trading Companies. The most common services for this segment are: importation on behalf of third parties and importation under order.

 

Importation on behalf of third parties

The client hires a trader or a company specialized on importing transactions to perform, along with the customs authorities, all service related to the importing of their goods. Inside this category, other services can be included, such as: financial transactions and commercial management (article 1 of the IN SRF No. 225/02 and article 12, § 1, I, of the IN SRF No. 247/02).

 

Importation under order

The trader or the company specialized on importing transactions plays the role of a buyer in this service segment. These types of companies’ functions are purchasing goods abroad and carrying out all the bureaucratic issues required by the customs authorities to, later, resell them to the final client. (Art. 2, § 1, I, of the IN SRF No 634/06)

The advantages of using the Trading Companies services are numerous. It is up to the client to analyze and decide which method of export or import is more appropriate to his/ her business.

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Major Brazilian ports

There are more than 2000 ports in the world, each with its size and its purpose. In Brazil, according to the Secretaria de Portos (SEP), there are 235 port facilities – taking into account public and private infrastructures. Among these 235 port facilities 37 are considered Public Ports (administered by the federal government – either through the dock companies or through municipal, state or public consortiums), and 161 are river ports.

10 Brazilian Main Ports

The main ports in Brazil are determined according to their efficiency. To this end, it is taken into consideration:

– Cargo volume handled,
– Amount of US$ it generates,
– Size of the port, and
– Influence area.

According to IPEA (Institute of Applied Economic Research), the sum of the factors mentioned above led to the following ranking:

 

NUMBER 1: SANTOS PORT (SP)

Location: Santos/SP
Size: National
Area of influence: SP, GO, MT, MS, MG, RJ, PR, ES, BA, RS, TO, RO and DF.
Participation in the foreign trade of the state of São Paulo: 84, 5%
Amount of US$ it generates: US$ 29,400 million.
How many states use this port: 27
Added value of the exported goods: Medium
Main sectors: mechanical industry, chemical industry, food and beverages, transportation equipment, agribusiness and wood.
Highlights: It is the main Brazilian port in all aspects and the only one that seeps products from 24 Brazilian states.

 

NUMBER 2: PORT OF PARANAGUÁ (PR)

Location: Paranaguá/PR
Size: Large
Area of influence: PR, MT, SC, SP, RJ, RS, RN, AC, TO and GO.
Participation in the foreign trade of the state of Paraná: 27, 1%
Amount of US$ it generates: US$ 7,600 million.
How many states use this port: 4
Added value of the exported goods: Low
Main sectors: agribusiness, wood, food and beverage.
Highlights: The total value of exported goods has greater significance than the imported amount. The 20 most exported products exceeded US$ 30 million.

 

NUMBER 3: RIO DE JANEIRO PORT (RJ)

Location: Rio de Janeiro/RJ
Size: Large
Area of influence: RJ, MG, SP and ES.
Participation in the foreign trade of the state of Rio de Janeiro: 37, 6%
Amount of US$ it generates: US $ 5 200 million.
How many states use this port: 23
Added value of the exported goods: Medium
Main sectors: metallurgy, transportation equipment, chemical industry, mechanical industry and mineral products.
Highlights: The type of cargo handled at this port is quite diversified and concentrated in the manufacturing industry, which means higher added value per unit of each of the exported products.

 

NUMBER 4: PORT OF ITAJAÍ (SC)

Location: Itajaí/SC
Size: Medium
Area of influence: SC, PR, RS, SP and AC.
Participation in Santa Catarina’s foreign trade: 44, 2%
Amount of US$ it generates: US $ 2 900 million.
How many states use this port: 19
Added value of the exported goods: High
Main sectors: agribusiness, wood, footwear, leather, chemical industry, mechanical industry, food and beverage.
Highlights: It is the second port with higher added value products being handled in Brazil, registering about 1.000 US dollars per ton.

 

NUMBER 5: PORT OF VITÓRIA (ES)

Location: Vitória/ES
Size: Large
Area of influence: ES, MG, GO, BA and SP.
Participation in the foreign trade of Espirito Santo state: 53, 9%
Amount of US$ it generates: US $ 8,200 million
How many states use this port: 19
Added value of the exported goods: Low
Main sectors: metallurgy, mineral products, cellulose and paper, agribusiness and wood.
Highlights: The main specialization of the port is the marketing of iron and iron ore.

 

NUMBER 6: PORT OF RIO GRANDE (RS)

Location: Rio Grande/RS
Size: Large
Area of influence: RS and SP.
Participation in the foreign trade of Rio Grande do Sul: 57, 9%
Amount of US$ it generates: $ 6.200 million.
How many states use this port: 21
Added value of the exported goods: Medium
Main sectors: agribusiness and wood, footwear and leather, chemical industry, mechanical industry, food and beverage.
Highlights: Forty-four products recorded export values higher than US$ 10 million and all of the 20 most imported products exceeded US$ 40 million.

 

NUMBER 7: PORT OF SÃO FRANCISCO DO SUL (SC)

Location: San Francisco do Sul/SC
Size: Medium
Area of influence: SC and PR.
Participation in the Santa Catarina’s foreign trade: 36, 0%
Amount of US$ it generates: US$ 2,500 million
How many states use this port: 19
Added value of the exported goods: Medium
Main sectors: agribusiness ,wood, mechanical industry and mineral products.
Highlights: Soya beans exports through this port totalize over 430 million dollars.

 

NUMBER 8: PORT OF SALVADOR (BA)

Location: Salvador/BA
Size: Medium
Area of influence: BA and SE.
Participation in Bahia’s foreign trade: 46, 4%
Amount of US$ it generates: US$ 2,300 million.
How many states use this port: 22
Added value of the exported goods: High
Main sectors: transportation equipment, chemical industry, metallurgy, mineral products, agribusiness and wood.
Highlights: The most exported products through this port are vehicles and the second one is crude oil.

 

NUMBER 9: PORT OF MANAUS (AM)

Location: Manaus/AM
Size: Medium
Area of influence: AM and MT.
Participation in the foreign trade of the state of Manaus: 42, 8%
Amount of US$ it generates: US$ 2,300 million.
How many states use this port: 13
Added value of the exported goods: High
Main sectors: electrical and electronics, mechanical industry.
Highlights: It is the port with higher added value products handled.

NUMBER 10 – PORT OF ARATU (BA)

Location: Aratu/BA
Size: Medium
Area of influence: BA.
Participation in Bahia’s foreign trade: 33, 8%
Amount of US$ it generates: US$ 1,800 million
How many states use this port: 8
Added value of the exported goods: Low
Main sectors: mineral products and chemical industry.
Highlights: This port exports an average amount of US$ 443 million in petroleum oils. In general, the port of Aratu handles products originated from the Camaçari Petrochemical Complex.

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6 Risk factors that should be taken into consideration before importing

Every importer should be aware of the risks that bringing a new product into a new market may face. It doesn’t really matter if it is a demand from the public or this is a new product being presented to the market: it is always good to keep in mind the attributes below.

1 – Cultural characteristics of a country

Not every country present traders with an easy approach to business. Due to a number of reasons (economical, political), some countries may impose to traders a large number of taxes, regulations, paperwork, inefficiency procedures and traditional way of conducting business. Some countries and companies are still ruled by old-fashioned traditions and this may be something that the importer should look into before deciding to go ahead with the business.

2 – Knowing the best way to communicate with the country you are importing from

It is extremely important that a trader finds the best way of communicating within the country he wishes to import from. Learning the language can be not only helpful in terms of understanding who you are doing business with, but it will also show your potential business partner that you are truly keen. You can also look for support in domestic agencies that will help you conducting processes in a country you don’t know much about.

3 – Economic and political scenario

Even though some countries offer quite stable economics for foreign trade, some of the countries that export the most are the ones who could present the biggest economical problems and politics matters. For this reason, it is crucial that economic factors are taken into consideration, and that the importer will keep in mind that these issues may pose as a risk factor, due to the instability of certain countries. Information is crucial: reading the news on what is going on in the country is key.

4 – Will the product be well accepted?

It doesn’t matter if the product is a demand from the public or it is the importer’s idea: it is fundamental that the importer conducts studies of well acceptance prior to initiating the business. Some entrepreneurs will invest in research before bringing a new product into the market, which will help measure the acceptance of a new product.

5 – Competition
Even if the importer is sure that the product that he aims to bring into the market is top quality and will be well accepted by the customers, another factor to consider is the internal competition. They should be aware and study the market, their competitors and mainly, the competitor’s product. Only this way he will be able to compare his product with others and decide to go ahead with the business or not.

6 – Familiarizing with rules and regulations

Studying all the processes and, if possible, having the assistance of a company that specializes in offering support to traders have proved to be a step forward taken by successful importers. Sometimes the cost of this professional support is not that high if compared to the losses an importer could face if they had not done such research in advance.

What is a FMCG Fast-moving consumer goods?

For definition FMCG is: frequently purchased essential or non-essential goods such as food, toiletries, soft drinks, disposable diapers. ‘Fast moving’ implies that the items are quick to leave the shelves and also tend to be high in volume but low in cost items. These are products that you can use day by day. This sector holds some of the most famous brand names that we come across every day.

Why work in FMCG?

1- The FMCG creates in demand consumer products at a low cost that are always available. It means that the types of products in this sector are surrounding consumers every day. Everyone is a consumer, so it easy to sell;

2 – The companies involved in the FMCG are the biggest in the world usually. Working with these companies can be a great opportunity for your target market;

3 – Innovation is a consistent process in the FMCG industry. The FMCG Industry is always thinking to improve their good such as, marketing, advertising. This makes it the perfect market for someone looking to work in a fast paced profitable environment;

4 – Even during the recession, the FMCG industry still carried on profiting good. Because when you are selling so primary products, people alway need it and are always buying it;

5 – The FMCG industry is very dynamic, if you are interesting in be part of this, there are so many different opportunities available in the industry.

Some of the degrees that may prove useful for a career in FMCG include:

Retail Buyers

Are responsible for stock selection. They must understand their customers’ tastes, and the types of products that sell well in their store. They must keep abreast of current trends and fashion, and be aware of the nature of the competition.

Retail Managers

They plan and coordinate the operations of retail outlets. They assume responsibility for ensuring the quality of customer service, the appropriateness of choices of inventory, and managing the finances. In a small organisation, they may take direct responsibility for all aspects of supply chain management, for example.

Supply and Distribution Chain Managers

Are responsible for planning and organising all tasks of supplying the right products to the right store in time. They are required to manage the storage of goods, and the delivery of goods to the retail outlet.

Marketing Managers

Research, plan and implement all aspects of an organisation’s marketing. Improve the image and profile of the organization, and to increase its sales and market share. They need to understand consumer trends and demographics, to plan and develop advertising and publicity campaigns.

Finance Managers

They need graduation in accounting preferably for this work. Many graduates in this function take an MBA to accelerate their career progression and differentiate themselves. The work involves producing management accounts in time for reporting cycles. They work to improve overall profitability of the organisation.