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What are Brazil's import duties or tariffs for my products?

CanadExport is launching a new column called Ask the Trade Commissioner Service, where entrepreneurs ask a business-related question and we answer.

Peter Muller of Mississauga-based Dimension Displays asks:

We design and market award winning portable display stands, and have been approached by an organiser of a trade show in São Paulo to exhibit at an event later this year. We are considering attending with a view to meeting a possible master distributor for Brazil.

We already export to the USA and are NAFTA registered, with our products falling into two harmonised code tariffs.

I understand that Brazil has very high import duties on goods, which would make the cost of our products so high that they would become unattractive for potential distributors to take on.

I would appreciate any information that you might be able to pass on regarding duties or tariffs relating to our goods.

Yours sincerely,

Peter Muller
Dimensions Displays Ltd.

David Verbiwski, Trade Commissioner, Canadian Consulate General in Sao Paulo answers:

Mr. Muller,

Brazil, with half the population and half of the GDP of Latin America (not including Mexico) is a rich market for a very wide range of products and services. It is encouraging that you are being approached by a Brazilian organizer as this could indicate a market for your products.

Pricing

Brazilian import taxes are in fact complicated and can be high depending on the product. The upshot is that in learning how the import regime works gives you access to half of Latin America's market. Although taxes may seem high, you are on a level playing field with other international competitors. Where it could lead you to a disadvantage is if you have a Brazilian competitor who would not face some of the import tax burdens.

Thank you for providing the harmonized codes for your products. We have researched the applicable taxes and duties and the graphs below give you a comparison of the taxes your products would face versus a Brazilian-made product that uses the same HS codes. We use a sample price of $100 as an illustration (freight and insurance are very general estimates). I would also caution that this is meant to illustrate the taxes that would be applied to your products. It could differ from taxes actually applied upon landing due to changes in the tax structure, warehousing and broker fees. Taxes in Brazil are levied on the cost of the product plus freight and insurance and are compounded.

As you can see from the graphs below, there can be a big difference between a similarly priced product manufactured in Brazil and one manufactured in Canada. Fortunately, production costs in Brazil are not all that much lower than they are in Canada so you will be competing from a similar base level if a similar product does exist in Brazil.

Licensing

One additional option that you may wish to consider is licensing your design to a company in Brazil who manufactures similar products who could then market and produce on your behalf, paying royalties back to Dimension Displays in Canada.

Other companies have taken this route, not to greatly reduce overall manufacturing costs but to reduce the import taxes. It has a double benefit as Brazil does enjoy preferential tariff rates for exports to other Mercosur countries.

I hope this helps as a first response and please do not hesitate if we can be of any additional assistance.

David Verbiwski
Consul and Trade Commissioner
Consulate General of Canada in São Paulo
Tel.: (011-55-11) 5509-4354

Estimated final cost breakdown using HS Code #1
DescriptionTax rateProduct CanadaProduct Brazil
F.O.B. 100.00100.00
Freight 1.00 
Insurance 0.55 
Customs Value 101.55100.00
Import Tax (18%)18.0018.28 
IPI (10%)10.0011.9810.00
PIS (Federal Tax)1.652.17 
COFINS (Federal Tax)7.6010.18 
ICMS (for São Paulo state)18.0025.9519.80
Total (not including handling fees) 170.12129.80
Estimated final cost breakdown using HS Code #2
DescriptionTax rateProduct CanadaProduct Brazil
F.O.B. 100.00100.00
Freight 1.00 
Insurance 0.55 
Customs Value 101.55100.00
Import Tax (35%)35.0035.54 
IPI (0%)0.000.0080.00
PIS (Federal Tax)1.652.26 
COFINS (Federal Tax)7.6010.59 
ICMS (for São Paulo state)18.0026.9918.00
Total (not including handling fees) 176.94118.00

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