Brazil is a very specific country when it comes to customs level which requires some adaptation for international companies that wants to establish a stock in the country.
So, if you have a company and is thinking of investing in the Brazilian market, we have listed some important points to help you understanding the process.
- Make sure there is a Brazilian company certified with an import RADAR to deal with your customs clearance.
Contrary to what is done in many countries, Brazil applies different rules for international companies that want to set up a local stock in the country.
First of all, international companies are not able to deliver from abroad their goods to a Brazilian fulfillment center or a warehouse because they cannot release the goods from Brazilian by themselves. The incoterm DDP is prohibited.
Only a Brazilian with an import permit called RADAR can do the customs clearance.
A non-Brazilian company is not authorized to obtain this RADAR permit and only a Brazilian company will be able to process the customs clearance of the products as Importer of Record. On the other hand, being the Importer of Record of the products mean to take responsibility on their acquisition. Fulfillment centers don’t want this responsibility.
If you try to send your products without having a Brazilian Importer of Record (IOR) to process the customs clearance, the products will remain blocked and will be difficult to recover. Thus, to establish a stock of product in Brazil, it is necessary first of all to ensure that you have your own entity or a local partner IOR.
2. Choose the business model you want to apply to be able to release your goods from customs.
As we saw, being able to clear the goods in Brazil before to set-up a local stock means having a local entity with RADAR.
Therefore, an international company will face two options:
- Open a subsidiary to obtain its proper import license RADAR
- Deal with an importer of record (IOR) who will be your intermediate clearing the goods and setting them up in a warehouse.
Be aware that opening a subsidiary in Brazil is a long and costly process. It would take about 6 months to get an operational subsidiary. Indeed, beside the administrative set-up of the company, it will take time to get the necessary import permit RADAR to be able making the first import.
On the other hand, it is necessary to understand that the concept of Importer of Record (IOR) in Brazil necessarily means the purchase and transfer of ownership when the goods are cleared.
In other words, a foreign company will not be able to sell directly to its final consumers from abroad. The local IOR partner who will be the intermediary between you and your customers in a B2B2C / B2B2B model, who will purchase your goods and resell them to the final consumers.
It is then up to the international company what level of responsibility it wishes to delegate to the IOR. It may want a traditional distribution model where the IOR takes a commercial risk to invest in the products and their distribution or find a partner positioning itself more as a service provider where the risks and investments are shared.
3. Identify the right Brazilian fulfillment center for your operation
When you look for a local operation, you should consider 3 important points:
a. Analyze their scope of actions
A complete fulfillment center should be able to:
Receipt and storage of products
Upon arrival the merchandise must go through verification and counting to then be positioned in the physical stock and registered in the WMS (Warehouse Management System), software used to manage the entire fulfillment operation.
With the support of the Warehouse Management System, all the stock must be kept up to date in the sales channels. In practice, if a brand sells on Amazon, for example, and also has its own e-commerce, the available stock is automatically updated on both channels as soon as a purchase is made.
As soon as the order is placed, the WMS should be able to receive this information and automatically places the order in the processing queue, so that it is prepared for dispatch.
At this stage, the following steps are carried out: collection of products (picking), packaging (packing) and creation of labels (labeling) for the carriers. Then, the WMS updates your sales channel with the order’s tracking number.
In Brazil, it is also important that the fulfillment center may be able to print, and in the case even issue, the Nota Fiscal, which is the mandatory legal invoice that must goes along every package.
Still with the support of WSM, the merchant may choose in some case the type of shipment of the purchased product. This is possible because the software is connected to the carriers and the entrepreneur is able to select the type of shipment according to the goods or delivery location.
It is important that the fulfillment center is able to receive, and process return or exchange orders, making sure of the good state of return of the products and warning the seller in case of damage.
b. Make sure they are well located
Brazil is huge, so make sure that you are in the right region to do not turned you uncompetitive due to the last miles delivery costs.
Companies that wish to get a national coverage will look for a fulfillment center in São Paulo. Indeed, the region is the economic hub of the country and count with many deliveries route making the average last miles delivery costs lower than on other region.
c. Check their certification
Companies who deal with health, cosmetics or food & beverage products should verify the certification of the fulfillment center.
They should be certified by:
- ANVISA to deal with health and cosmetics products
- MAPA to deal with food & beverageproducts
Did you like this article? Novatrade is a solutions hub that can help foreign companies to establish its business in Brazil. If you have interest in investing in the country, talk to one of our specialists.
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