brazilian exports

Brazilian exports in 2016

Although Brazilian exports in the last five years have slowed down, the main indexes indicate that one of the worst crises has already left its apex. According to the Ministry for Industry and Foreign Trade, Brazilian exports reached US$ 132,391 billion up to September 2016, which, along with USD 97,654 in imports, summed up to a positive figure of USD 34,737.
The Asian market is still the main destination of Brazilian products, growing 13% when compared to 2015, representing almost one fourth (23%) of all our exports. On the other hand, there’s been a decline in Brazilian exports towards North America, Europe and the Mercosur. Currently the country’s biggest importers are China, the US and Argentina.

Main products exported by Brazil

Let’s see which products have contributed to Brazilian exports in 2016. Soybeans represent the largest share of exports, reaching 11% of global sales, where China remains as main buyer.

The sale of basic products leverages the figures, thanks to the trade of oil and ores and their concentrates, representing 8.7% of exports. Poultry is also among the main exported products, representing 7% of sales. Beef is also represented, with nearly 5% of sales.

Manufactured products (machinery and motors), while being among the most trade products, represent 5.9% of exports, and vehicles score a 5% share. Semi-manufactured products like sugar and cellulose reach only 4% of exports in spite of the importance of these sectors. Coffee, tea and spices represent 3.2% of Brazilian
exports.

Main exporter companies

From this scenario we can analyze the main exported companies in the country. Among them we have Petrobrás, Vale and JBS. Although Vale posted a 45% decrease in exports, and Petrobrás also dipped by 35%, both still occupy the post of greatest Brazilian exporters.

Companys in the mineral and food processing sectors harbor the biggest exporters, such as Brasil Foods, Metalúrgica Gerdau, CSN and Cosan. Embraer is also among the highest foreign sellers, and one of the exceptions in showing growing sales. Itaúsa, Braskem and WEG complete the list.

What to expect of Brazilian exports?

Exports through 2016 have shown significant increase in daily sales, posting a 4.5% growth in the first half of the year. Even though still declining, when compared to previous years, there is an optimist expectation that the figures may recover, focusing in products with aggregated value for the international buyer.
The country is well regarded thanks to the commercial agreements that may favor international transactions. Exchange rates may also help in the financial strengthening of the country as it brings new exporters into play. Finally, agricultural products should be highlighted as they may leverage the country, mainly due to soybeans that have remained as a top-ranking exported product.

What is your perspective for the incoming months? Take part in the discussion leaving your comment. Sign up for our newsletter in order to receive exclusive content on Brazilian exports.

The influence of the Vienna Convention over Brazil’s contracts for the international sale of goods

In Brazil, contracts for the international sale of goods are not usually established by a physical document signed for that purpose. We are used to considering the Commercial Invoice as a contract, where every information is mentioned, such as the information about the seller and the buyer, as well as the method of payment and details about the operation.

However, the parties’ obligations and the risk transferences and costs are not always described in detail, and this may make posterior litigation difficult, particularly in cases when the goods are damaged during the transport, or payment delinquency. With Brazil’s accession the convention, this lack of detail in commercial invoices can be remedied by the Convention’s dispositions.

In case there’s contractual resolution or violation of their duties and rights, the parties will be able to pursue losses and damages. It is important to highlight that, in case of resolution for contract violation foreseen in the Convention, it is possible to extend the deadline for payment, and also to take extrajudicial alternative measures. Furthermore, there’s a maximum deadline of two years in which the buyer may claim problems with the quality or the quantity of delivered goods, with a few exceptions; and the criteria for the calculation of the amount to be paid as indemnity are well defined (according to Articles 74 to 77 of the Convention), unlike the Brazil legislation.

Another interesting point that reinforces the buyer’s and seller’s legal freedom in the Convention is the permission given to the parties to opt out of the Convention’s application and regulate the deal according to their own will (according to Article 6).

One controversial point pertains to the sales in which the Convention cannot be applied. These situations. provided by Article 2, are: goods acquired for personal, family or household use, goods acquired in public auction or sold as result of lawsuits; securities, credit titles, currency, ships, vessels, hovercraft, aircraft and electricity.

Brazil is known for having legislation that is widely favorable to protecting consumers rights and, therefore, many times doubt can arise: where does the buyer protection stand as provided by the Consumer Defense Code (CDC, Law 8.078/1990)?

On this subject it is important to highlight was Moser and Pignatta (2015) clarify: item ‘a’ of article 2 provides for the exclusion of contracts established with a buyer. Different from the consumer qualification given by article 2 of the Consumer Defense Code, the Convention mentions “personal, family or household use”, restricting the buyer only to individuals, since companies cannot acquire goods for “personal, family or household use”. The expression was carefully chosen so that there would be no doubt as to the buyer characterization. Therefore, the Convention will not be applied in case where the goods have been acquired for “personal, family or household use”. The deal closed by an individual with corporate or commercial objective is subject to the Convention. Another possibility for the application of the Convention occurs when the seller is an individual who is not a merchant. Different from the Brazilian CDC, the Convention does not define the character of a supplier and therefore there’s no need for the seller be a trader so that the Convention is applied. All that is needed is that the buyer does not use the goods for “personal, family or household” purposes for the Convention to apply.

Conclusion

The Vienna Convention was conceived with the aim of standardizing the rules applicable to the contracts of international sale of goods and creating the mechanisms to ensure legal security and the predictability of trading relations between Brazilian and foreign companies, determining the seller and buyer obligations, as well as establishing measures in case of losses and damages and contract violation and other form of breaches.

Analysing the text of the Convention, it is possible to notice an attempt to give greater autonomy to the involved parties, with solid support on transparency and uniformity, neutrality and good faith (objective), avoiding at most legal disputes and foreseeing alternative ways to prevent and solve conflict between the parties.

For Brazilian companies the application of the Convention may contribute to overcoming difficulties that arise from cultural barriers between the countries of sellers and buyers, as well as reduce legal costs in light of the certainty regarding the rules applied to the contracts and the ease with which conflicts can be solved. In this way, when a businessman decides to sell his product in a country that is party to the Convention he will be able to consult the local regulations in his own language, without the worry of knowing foreign legislation, given that the Convention is translated and available in the six official languages of the UN and many other unofficial translations, including Portuguese. This will allow the fluence of deals of internationally-trading Brazilian companies to grow in a secure, foreseeable and transparent way. This international uniformity in legislation tends to reducing harmful discrepancies in arbitral reports our nacional court decisions based on subjective norms or distinct domestic legislation.

Lastly, the tips

It is necessary to observe the finality of the acquisition of goods for, as we have seen, depending on the situation they may not be subject to the Convention. It is also important to remember to negotiate every detail of the operation, as well as costs and risks that are to be accepted for the choosing of the best incoterm, and, lastly but not less important: it is important to study the legislation of the dealing country, as in Brazil, for example, the commercial invoice must contain a series of information required by law (Article 557 of Customs Rules – Decree 6759/2009), or the importer may be liable to fines for disagreeing invoices.

Did you like knowing all the details about the Vienna Convention? To know about this and other issues, subscribe to our newsletter!

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 impacts of the exchange rates on international businesses

Following the US dollar fluctuations has become a routine in the life of any professional that acts in the foreign trade area, particularly if this specialist’s international transactions involve the Brazilian territory.

Speculations destabilize the market, slow the flow of buying and selling down and make buyers lost, without knowing in which direction to go. How importing from markets where the currency is so devalued? How to make a sale to the foreign market in this current economic environment? These are questions that dominate the current scenario.

 

How does the US dollar affect economy?

Understanding how the US dollar affects the economy is a crucial point because this is the currency that will be taken as a reference in commercial transactions.

It is assumed that the US dollar will affect all the other currencies and, thus, that its drop or its increase shall set the shape of the rest of the market. When the US currency is valued against the Brazilian Real it is the time to invest in sales to the international market and when the US dollar devalues, it means the moment is favorable for buying from foreign markets.

 

We can deduce from this that, to the exporter, it is beneficial that the Brazilian Real is devalued. With the current volatile market, with the Brazilian currency devalued, exporters can negotiate and put a better price on their products, to the extent that, in Brazil, the foreign currency will be worth more on par with the Brazilian currency. In plain language, the US dollars will render greater purchasing power to exporters that will receive payments in US dollars and reverse their profit in Brazilian Reais. The importer, in turn, will be able to acquire a product with a value below his/ her local currency.

Currency exchanges as Brazilian’s main ally

Currency exchange rates variations can be attractive to buyers who want to invest in Brazil, especially for importers who want to invest in cellulose, on the footwear and on the textile sectors. The input becomes so competitive to the point that it can be considered equivalent to the Asian market. Although the workforce can be more expensive compared to other foreign markets such as China and India, for example, thanks to the strength of the United States dollar and the devaluation of the Brazilian Real, the price of the final product is an advantage in foreign markets.

In June 2016 Brazil reached a deficit of 2.479 million dollars. The Central Bank predicts that, by the end of the year, this deficit will be of about 15 billion dollars in transactions. However, with a trade balance governed only by exports, we may have an economic imbalance, as foreign capital enters, but few inputs are purchased by imports.

Both exporters and importers expect a balance, but very pessimistic hopes are being observed throughout the months of 2016. We must be attentive to the movement of foreign exchanges and set a pugnacious behavior in order to make it possible to design the monetary scenario, based mainly on the US dollar, the currency that governs all the monetary policy, and hope that, this way, it will be possible to expand business and have purchasing power abroad.

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.

To keep updated on all the news related to International Trade subscribe to our newsletter!

Most common taxes to import products from Brazil

What ‘export rates’ are?

When we think of taxes on exports, we think about expenses. One should be aware of the entire process to know about the documents to be issued, legislation, transportation, internal taxes, service providers’ fees, import taxes that are collected at the time that the goods are withdrawn, tax exemptions and obligations, financial and banking costs, among others.

We have listed below some of the most common taxes charged by the Brazilian Federal Revenue regarding exports:

EXPORT TAX (IE)

According to the Brazilian Federal Constitution, the export tax is generated when a national or nationalized product leaves the country.

One of its features is the collection with taxation and regulatory functions:

➤ FACTOR THAT GENERATES THE EXPORT TAX: The event that generates the Export Tax is characterized at the moment of the registration issued by SISCOMEX (A Federal Revenue System) for the exit of national or nationalized materials from Brazilian territory to be sent to other countries, whatever the purpose of those leads is. With the exception of personal cases, such as luggage, it doesn’t matter if the export is classified as donation or if the owner and the final importer are the same person or organization: the exit of goods out of Brazil is subject to taxation.

➤ CALCULATION BASIS: The basis for calculating the tax is the price that a specific product (or comparable item) will reach at the export time.

➤ TAX RATES: The tax rate of the IE is 30%, which can be reduced or increased by the Brazilian Executive Power to meet the exchange rate and foreign trade policy goals.

➤ CONTRIBUTOR: The taxpayer is the exporter or its legal representative.

ICMS

The export of manufactured goods is immune to ICMS . Although not immune, the export of primary products and semi-finished products may also have ICMS exemption in many cases.

IPI

Industrialized products intended for export, from national or foreign origin, are, with no-exception, immune from the IPI tax.

PIS

In Brazil, exports are exempted from PIS, being the exported goods either finished products or service provisions.

COFINS

In 1991, a complementary Brazilian law granted exemption of COFINS on revenues derived from the export of goods, even when conducted through cooperatives, consortia or similar entities, including trading companies.

ISS

The ISS is not levied on the exports of services. Nevertheless, services developed in Brazil, for which the final result is verified inside national territory are taxable.

EXPORT EARNINGS

Gross sales revenue in exports of domestic manufactured products should be determined by the conversion, into R$, of its value expressed in foreign currency according to the rate fixed at the shipment date of the products to foreign countries.

SOCIAL SECURITY CONTRIBUTION (INSS) – INTERNATIONAL SALES OF RURAL PRODUCTS

There is no INSS on the revenue from the export of rural products.

Even though a meticulous analysis of each individual and specific case must be thoroughly done in order  to determine which taxation the Brazilian product or service you are planning to import is subject to, another important strategy, not always remembered, is to evaluate the tax incentives, because due to the lack of knowledge, they  are being commonly underutilized in companies.

We are looking forward to hearing from you and clear up any doubts on TAXES or any other issues regarding the import of Brazilian goods. Do not hesitate on talking to us.