Bonded warehouses, also known as bonds, is an aera where shippers can store imported goods before customs have processed them.
The payment of the import duties for the good stored is suspended until the customs clearance of the product. Therefore, working with a bonded warehouse can make supply chain management and cash flow more straightforward and efficient as you can deliver your goods closer to their final destination and that duty payments can be postponed until the product has been moved.
Generally, there are two kinds of bonded warehouses: wet and dry. Wet bonded warehouses allow for the storage of alcohol and tobacco. Dry bonded warehouses can store most other imported goods.
Let’s see how bonded warehouses work in Brazil.
What is a bonded warehouse regime in Brazil?
Bonded Warehouse is a Special Regime through which the Federal Revenue of Brazil (RFB- Receita Federal do Brasil = Brazilian tax and customs authority body) allows importers and exporters to store their cargo in a customs or authorized place, so that they can carry out the customs clearance of their products with a longer period than usual, or do it partially. Likewise, it makes it possible to suspend taxes, both federal taxes and ICMS, until the process is fully completed.
The goods may be stored for a maximum of 24 months (2 years), taxes will only be collected at the time of customs’ clearance (sale).
Because this regime deals with goods that have not yet been nationalized, it allows the storage of these loads to occur only in a bonded or authorized location, for example:
- port facilities;
- bonded warehouse;
- the ports and airports.
Although these three possibilities exist, it will often be much more viable to store the products in a bonded warehouse whose costs are much more competitive than port or airport terminals. The Bonded warehouse may be also referred to as a « Dry port » or “Free trade zone”.
Requirements to benefit from the bonded warehouse regime
It is important to note that only a Brazilian company with a RADAR import permit can make the necessary records to establish a stock of product under the bonded warehouse regime.
And it will be the same for customs clearance.
A foreign company is not allowed to have a RADAR import permit and will be unable to do these procedures.
In the case a foreign exporter wishes to set-up a stock in bonded warehouse regime in Brazil, he will need a local importer of record partner to make such register. On the other hand, it worth mentioning that such register does not transfer the ownership of the goods to the local import of record.
The foreign exporter remains owner of the goods up to their clearance.
Process to set-up a stock of goods in a Brazilian bonded warehouse and customs clear it.
In order to benefit from the advantages that this type of procedure makes possible, this decision needs to be taken before shipment, in cases of importation. This is necessary so that the Brazilian certified importer can guide the foreign exporter regarding the correct completion of the required documents, both for importing and for proceeding with the cargo registration (called DTA or DTC) in this special regime, to enable transport on the territory of customs uncleared goods.
Thus, when the merchandise arrives in Brazil, the customer broker (“Despachante” in Brazil) must register the Declaration of Admission (Declaração Aduaneira) (DA).
At this point, the products have been registered under the bonded warehouse regime thanks the import permit RADAR of the Brazilian importer, but as mentioned previously, the property remains that of the foreign exporter who retains the right to be able to reroute the goods to another destination at any time, without having to pay any taxes for this.
After the process has been approved by the RFB, the goods are ready to be sold and cleared through customs.
Sales can be made partially and for different Brazilian customers, as long as they have a RADAR.
For this, the foreign exporter issues a commercial invoice to the Brazilian customer which will serve as the legal basis to allow the latter to clear the goods indicated on this invoice and register the import declaration (DI).
This invoice is therefore CIF, as the foreign exporter can only be held responsible for the costs of the goods up to the bonded warehouse. Payment of import taxes will be the obligation of the Brazilian importer.
The CIF value invoiced may vary from one customer to another depending on the commercial negotiations between the parties, insofar as it respects the transfer price rules and does not under-invoice the products.
It is interesting to know that each shipment of goods will be subject to a different DA which cannot be merged.
So, for example, if a foreign exporter sends a stock A the first month and a second stock B the second month; two DAs will be registered separately and cannot be merged.
Consequently, if a Brazilian importer subsequently wishes to buy part of the products in stock A and another part in stock B, he will have to do two separate customs clearances, which can multiply the fixed costs of the customs broker (~ BRL 1,000 per customs clearance) .
So, pay attention to the product mix and the turnover of its products so as not to multiply the customs clearance processes.
Advantages of a bonded warehouse in Brazil?
1. International logistic consolidation
Before international logistic consolidation, we must understand the context of importing into Brazil to understand its relevance, greater in this country than in the rest of the world.
Importing into Brazil is complex and can scare off many local businesses that might consider sourcing from abroad.
Beyond the complexity, a Brazilian buyer will have to plan his shipments in order to dilute the costs of international logistics, and the fix costs associated, but also the tax burden, since import taxes are calculated on the CIF value, i.e. on the value of products more freight international.
Therefore, it is crucial in Brazil to consolidate these shipments and dilute the cost of transport as much as possible.
To illustrate this, let’s take two examples considering the same cost of transporting a container of USD 3,000 and the same import tax (II) of 14%.
If the importer consolidates a shipment of USD 25,000 for this container, he will pair the import tax on the CIF value of USD 25,000 +USD 3,000, i.e. USD 28,000 x 14% (II) = USD 3,920
Compared to the initial value of the product, this corresponds to 15.7% tax at the end of the accounts.
If the importer consolidates a shipment of USD 100,000 for this container, he will pair the import tax on the CIF value of USD 100,000 +USD 3,000, i.e. USD 103,000 x 14% (II) = USD 14.420
Compared to the initial value of the product, this corresponds to 14,4% tax at the end of the accounts.
14,4% < 15,7% the product cost is therefore less impacted and the profitability better. And this proportion can quickly worsen when the cost of transport begins to represent more than 20% / 25% of the product value, especially when it comes to air freight.
Consolidation is therefore crucial, but not all Brazilian importers have the need or the financial capacity to invest in a container filled to the maximum.
They are therefore unable to optimize costs and the import of foreign products may therefore become unviable.
There is a solution to this problem, and it lies in the use of bonded warehouse regime.
Through this, an international exporter can send a consolidated volume to Brazil and make it available for partial customs clearance for these Brazilian customers offering commercial flexibility and cost reduction for its customers.
In addition to the optimization of logistics costs, the fixed costs of customs registrations upon arrival in Brazil will be diluted in a greater volume.
Customers therefore benefit from the consolidation of international shipments and can buy quantities adapted to their needs.
2. Easier customs clearance and fast delivery
The stock being already on the spot, the delivery is also much faster, especially because a first customs registration (DA) is made during the arrival facilitating the procedures of release (DI) thereafter.
Unlike port or airport terminals, customs agents in bonded warehouses are fixed and therefore more accessible. It is possible to present the project to them in advance and receive their indication on the best possible procedure to be fully in accordance with Brazilian legislation, which due to its bureaucracy can bring some surprises at the time of operations.
This is totally impossible in port and airport terminals where customs officers are randomly assigned, very inaccessible and can make customs clearance take weeks or even months for a procedural detail.
3. Port and airport terminals costs saving
As mentioned above, customs procedures at port and airport terminals can take time, and this is even more impacting as the storage costs applied by these terminals are high.
Thus, we can face a situation where the customs agent makes the customs clearance last for several weeks and therefore blocks the collection of the goods which remain at the port and airport terminals whose charges, invoiced in % of the CIF value, will quickly become exorbitant.
In order to avoid this, a security measure is to transfer the goods to a bonded warehouse before initiating the customs clearance procedure. Storage costs are much more reasonable and will not destroy the profitability of the project even if the goods remain for several weeks.
It is therefore a recommended maneuver for complicated imports, involving for example the ANVISA (national health vigilance agency), or high-value goods.
In this way, it is possible to have a control and a projection of the logistics costs and to do your customs clearance without experiencing the stress (and the costs involved) of depending on a customs agent at the port and airport terminals.
4. Sales flexibility
Once the stock has been registered in the bonded warehouse, the goods can be cleared through customs in smaller batches, by any Brazilian customer with a RADAR import permit.
In this way, it is possible to reach several customers (importer-distributors, and end customers) and having different comercial negotiation with them as you may change the CIF value of your Commercial Invoice depending on the quantities and established relationships.
On the customer side, having a stock available in a bonded warehouse is a real guarantee of confidence.
The products are already in the national territory, which removes a great Brazilian psychological barrier that sees the import route as risky and complicated.
Then, as seen before, they will benefit from more competitive prices due to the consolidation of international shipping and will therefore pay proportionally less tax on the value of the products.
Finally, being able to do several clearances of smaller sizes, it will be easier to integrate the purchases into their cash flow and make several orders with frequency.
5. Low costs and low risk market expansion
For the international exporter, the use of the bonded warehouse is a good expansion strategy at lower risk and cost.
Indeed, Brazil is a huge market but it requires a local presence to penetrate it.
This local presence often requires heavy investments to open and maintain a subsidiary, when you are not even sure of your market yet.
Establishing yourself initially with a stock of product in a bonded warehouse means setting foot in the Brazilian market with little investment and little risk.
The initial investment corresponds to the international logistics and the storage cost of the bonded warehouse.
The risk corresponds to these logistics costs and the mobilization of a stock.
In cases where sales are not made, it suffices to re-export the goods without paying any import duties and just afford the only loss being reverse logistics.
Bonded warehouse localization and fees
The main bonded warehouse locations in Brazil are in the South and Southeast regions. The main concentration is naturally around the main economic hub of São Paulo, and then in the more southern ports of Santa Catarina (port of Itajaí and Navegantes) known for its import tax benefit, and Parana near Curitiba ; two very industrial regions.
The remuneration of bonded warehouses is generally made via a % on the CIF value of the stored goods with a minimum per period.
This % is around 0.15% / 0.20% per 10-day period with minimums of around USD 75-100 for the same period.
Limitation of Brazilian bonded warehouse: e-commerce cross-border sellers
Around the world, many e-commerce cross-border sellers use bonded warehouses to establish product stock in the destination country and manage their dropshipping sales from there.
That is to say, make online sales directly with the end consumer and prepare and invoice the order and then send the unit directly from the bonded warehouse.
Unfortunately, this is still impossible in Brazil for different reasons:
First because in Brazil, the foreign seller cannot clear customs because he has no RADAR.
Customs clearance must be done directly by the end customer, which is not easy.
Second, because there is a fixed cost per customs broker clearance and bonded warehouse administration which can be valued on average at USD 300 – 450.
It is therefore not viable to individually clear consumer products at low prices and pay this price for each sale.
Customs clearance must be done in batches.
A foreign e-commerce seller will therefore have to find a Brazilian importer of record capable of clearing the products in batches and ensuring the fulfillment of the products then locally.
If you are interested, discover our BtC fulfillment service here.
How international companies may plan an expansion in Brazil with a bonded warehouse?
You are an international industry wishing to develop in Brazil?
See how you can grow through a bonded warehouse.
First, find a reliable and neutral importer of record capable of importing and registering your products under the bonded warehouse regime as well as monitoring transactions on your behalf.
Second, set up a sales team in charge of prospecting your local customers.
Third, put together a commercial offer considering two scenarios:
– USD/EUR CIF sale to your customers with RADAR who wish to clear the products directly from the bonded warehouse
– BRL DDP sale via an importer-distributor capable of clearing customs and reselling the goods locally on your behalf.
And that’s all you need to get a foothold in the Brazilian market.
Novatrade is an Importer as a Service, enabling international companies to expand in Brazil using our import and distribution capacities.
We are able to import your products and register them under the bonded warehouse regime.
We work in synergies with your local sales team
We support your customers to clear the goods directly from the bonded warehouse or may clear and resell the goods on your behalf.
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