BRAZIL TRADE DIRECTORY ON DISK BRAZIL - OVERSEAS BUSINESS REPORT -SUMMARY Introduction Trends in Industrial Development Role of Government Recent Government Actions Marketing Considerations Basic Import Regulations and Fees Documentation Imports Subject to Special Control Labeling and Marking Requirements Samples, Promotional Material, and Technical Literature Special Customs Provisions Import Channels Transportation Marketing Aids Government Procurement Credit Investing in Brazil Intellectual Property Protection Guidance for the Business Traveler Abroad Bibliography OVERSEAS BUSINESS REPORT -- MARKETING IN BRAZIL MAY 1992 CONTENTS Introduction Country Overview -- Brazil's Economic Importance; Trade Policy Trends in Industrial Development Role of Government Recent Government Actions Privatization; 1988 Constitution Marketing Considerations Basic Import Regulations and Fees Registration and License Requirements; Services; Typical Import Steps; Basis of Duty Assessment; Advance Rulings on Classification; Customs Surcharges; Internal Taxes; Warehousing Charges; Hypothetical Cost Buildup for an Imported Product; Reductions and Exemptions from Import Regulations and Fees; Insurance; Export Credits; Preferential Import Duty Rates Documentation Import Permit; Pro Forma Invoice; Required Shipping Documents; Fines and Penalties Imports Subject to Special Control Import of Used Material; Sector Specific Controls Labeling and Marking Requirements Labeling; Marking Samples, Promotional Material, and Technical Literature Samples; Advertising Matter and Technical Literature; International Expositions and Fairs Special Customs Provisions Entry, Transit, and Reexport; Parcel Post Shipments and Passenger Baggage; Transit Zones; Free Ports and Free Zones; Abandoned and Reexported Goods Import Channels General; Agents and Distributors; Trading Companies Transportation Marketing Aids Market Research Studies Industry Sector Analyses; Other Services Government Procurement Services Credit Export-Import Bank of the United States; U.S. Banks in Brazil Investing in Brazil Investment Climate; Registration of Foreign Capital; Restrictions on Foreign Investment; Repatriation of Capital and Earnings Intellectual Property Protection Guidance for the Business Traveler Abroad Entrance Requirements; Business Etiquette; Travel and Transportation; Time; Entertainment; Holidays; General Information Bibliography Business Guides; Business Guides; Business Newsletters and Magazines; Business Newsletters and Magazines; Brazilian Statistical Sources; Other Information Sources; Other organizations with Current Information on Brazil Overseas Business Report is available from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402. Introduction This report is designed to acquaint the U.S. business community with Brazil's economic and commercial environment and provide guidance on exporting to Brazil. Brazil's rules and regulations affecting trade and investment are in a state of rapid change as the Brazilian government implements various programs intended to stimulate economic competitiveness through opening its traditionally restricted and protected markets to greater foreign and domestic competition. Considerable attention has been given to the details of Brazil's import system because it is important to understand how the system operates. Exporters must be familiar with Brazil's import procedures and documentation requirements, which are stringently applied. Non-compliance inevitably results in delays and financial penalties. Information is also provided on Brazilian regulations affecting foreign investment. Country Overview -- Brazil's Economic Importance Brazil is the largest and most industrialized country in Latin America. It is the fifth largest nation in the world, about the same size as the continental United States, and occupies 48 percent of the land mass of Latin America (3,287,000 square miles). Brazil is a democratic, intermediate-income developing nation with the ninth largest economy in the world. It has a diversified industrial, agricultural, and services base; a gross domestic product (GDP) of approximately $358 billion (1991) and a wealth of resources, both human and material. Brazil's current economic structure breaks down into roughly 54 percent of GDP from services, 35 percent from industry, and about 11 percent from agriculture. Principal industries are agriculture (coffee, soybeans, and orange juice), minerals, steel, automobiles, footwear, textiles, capital goods, electronics, and petrochemicals. Brazil has a population of 146 million (1991 census), with a growth rate of 2.5 percent per year. Brazil has become increasingly urbanized, with 72 percent of the population now living in cities; S o Paulo, Brazil's industrial center, has 17 million inhabitants. U.S. direct investment in Brazil at year-end 1990 was estimated at about $15 billion, accounting for approximately 32 percent of total foreign direct investment in Brazil. For 1991, Brazil's global trade reached almost $53 billion; $31.6 billion in exports, and $21.0 billion in imports. The United States is Brazil's major trading partner, absorbing approximately 21 percent of Brazil's exports during 1991. The United States imported $6.7 billion from Brazil in 1991, down about 18 percent from $7.9 billion in 1990. U.S. producers supplied $6.2 billion in exports to Brazil in 1991, accounting for about 30 percent of Brazil's total imports. Principal U.S. exports to Brazil are aircraft, chemicals, computers, electronic components, office equipment/parts, coal, telecommunications equipment, and fertilizers. Leading U.S. imports from Brazil are footwear, automotive parts, petroleum products, orange juice concentrate, iron and steel, and coffee. Trade Policy After nearly four decades of following an inward looking economic development model emphasizing import substitution policies to foster growth of the domestic industry, Brazil has changed its economic development approach to favor policies focusing on attaining greater economic competitiveness through better incorporating Brazil into the world economy. To accomplish this, the Brazilian government is implementing an ambitious program of economic and trade liberalization. Over the last three years, most of Brazil's non-tariff barriers to trade, such as import quotas, import prohibitions, restrictive import licensing, and local content requirements, which for many years were the hallmarks of Brazil's restrictive trade regime, were eliminated or drastically reduced. Import duties were reduced from an average of about 50 percent in the late-1980s to about 25 percent now, and will be reduced to a average of 14.2 percent and a maximum of 35 percent by mid-year 1993. While the overall level and pervasiveness of barriers to imports have been drastically reduced, import duties remain high in comparison with most other countries, and Brazil imposes several other taxes and fees on imports that add significantly to the product's landed cost. Trends in Industrial Development Since World War II, the Brazilian Government has stressed the importance of industrial growth as the key to general economic development. Initially, growth was generated almost exclusively by tariff-protected consumer goods industries such as food processing and textile manufacturing. Gradually, high growth rates were maintained by shifting emphasis to more sophisticated industries, including light capital and consumer durable goods manufacturing. In recent years, a relatively sophisticated capital goods industry emerged and greater emphasis was placed on indigenous technological development. The evolution of Brazil's industrial sector was orchestrated by the government through a system of incentives for production and export. Industry represents a growing percentage of Brazil's GDP. Economic difficulties, prompted by the oil shock of the early 1970s and Brazil's debt crisis, led the Brazilian Government to pursue a policy of import substitution and export promotion. To foster domestic production, the Brazilian government established incentive programs to stimulate exports and to assist import substitution. However, most of these incentive programs were abandoned as costly and inefficient in recent years. Geographically, industrial growth in Brazil has been very uneven. It is heavily concentrated in the southeast region, principally the states of S o Paulo, Rio de Janeiro, and Minas Gerais. Though primarily agricultural, the southern states of Paran , Santa Catarina, and Rio Grande do Sul, are considered a part of the more developed, technologically advanced, dynamic, and productive states in Brazil. North and central Brazil have great potential for agro-industrial development, but large capital investment will be required. The Government of Brazil has encouraged heavy agro-industry investment in this area. It also has toughened zoning restrictions in the state of S o Paulo in an attempt to force industry to locate in the north. However, U.S. firms should also be aware that there are restrictions concerning the amount of rural land that foreigners and foreign companies can own. Exceptions to this may be made on a case-by-case basis. Economic activity in the northeast is primarily agricultural, notwithstanding periodic droughts in the semiarid back lands. The northeast has received considerable aid from the Brazilian Government, including special fiscal incentives designed to promote development of new industries. While establishment of an industrial center and a petrochemical area near Salvador has enhanced economic growth in the state of Bahia, income in the region as a whole still remains well below the national average. The vast center-west and northern regions account for only 10 percent of Brazil's total population. The most important economic activity in the center-west is open range cattle grazing. Subsistence farming and rubber gathering are predominant in the northern region. Brazil's development plans aim to stimulate activity in agriculture and mining in certain selected areas of the north. Role of Government Under the development policies of previous Brazilian administrations, the government established a tradition of being the dominant force in shaping economic growth by means of planning and management. Its influence was felt not only directly through the day-to-day activities of government entities, but also through governmental wage, price, and credit policies, and subsidy and fiscal incentive programs. While the central government still retains an important economic role, the policies of the current administration focus on reducing the role of the government in economic activities and concentrating government activities on more traditional roles, such as improving public health, safety, and education. As a result, the government is emphasizing creating greater economic opportunities for the private sector through privatization, deregulation, and removal of impediments to competition. Recent Government Actions Privatization Since entering office in March 1990, the Collor Administration has undertaken an effort to implement a sweeping program to privatize state owned companies. The program has broad public support, but got off to a slow start because of opposition from labor and certain vested interests. However, in 1991 with the sale of a major steel mill, the program began to gain momentum. Firms in the steel, transportation equipment, fertilizers, and petrochemicals sectors have been successfully auctioned. There are now more than 20 companies on the list for privatization in sectors including iron and steel, fertilizers, shipping, chemicals, petrochemicals, copper mining, railways and aircraft manufacture. The scope of the privatization program is limited by provisions of Brazil's 1988 Constitution which establish government monopolies for basic telephone and telegraph services, electric energy production, and petroleum extraction and refining. These constitutional provisions effectively bar privatization of Telebras (telephone company), Electrobras (electric Utility holding company), Petrobras (petroleum company). Constitutional amendments have been introduced to allow privatization in these sectors. Responsibility for implementation of the privatization program is delegated to the National Bank for Economic and Social Development (BNDES), which contracts for evaluation and sale of state-owned companies via auction. Payment for company shares may be made in seven different currencies: cash (cruzeiros or cruzados novos), agrarian debt bonds, national development fund bonds (OFND), Siderbras debentures, Certificates of Privatization (CP), matured securitized debts, and certain external debt credits and securities. In an effort to attract more foreign investment, the government has amended the rules for foreign participation. The rules governing privatization limit foreign ownership to 40 percent in the first sale of the state enterprise, but foreign companies can buy up to 49% of the privatized firm during a subsequent resale. Foreign capital invested in a privatization must stay in the Brazil for six years before it can be repatriated. 1988 Constitution Brazil's current constitution, promulgated on October 5, 1988, enshrines many of the nationalistic features of Brazil's economic and trade policies common during the past several decades. The 1988 constitution includes provisions for government monopolies in key sectors of the economy, such as petroleum extraction and refining, public telecommunications services, and electrical energy generation. The constitution allows for reserved markets and other special treatment for Brazilian firms, and permits limitations on foreign investment and trade in certain goods and services. As part of its efforts to remove impediments to private sector initiative and foreign investment in the Brazilian economy, the government of President Collor introduced a package of constitutional amendments collectively called the emend o, or "big amendment" to remove government monopolies and correct other provisions causing economic distortions. These amendments were subsequently grouped together into five separate pieces of legislation which are awaiting action by Brazil's congress. Marketing Considerations Potential exporters to Brazil should take into consideration the vast geographic size of the country as well as the demographics and diversified industrial base of the country. In Brazil, these market factors have traditionally been overshadowed by political-economic uncertainties. However, with the advent of the Collor presidency in 1990, a policy is in effect to stabilize the domestic economy and resolve the external debt issue, as well as to liberalize the market to allow for greater imports. These changes have had a positive effect on market opportunities for American exporters in selected sectors. With a marketing campaign focused on medium- to long-term growth, experienced exporters and investors will benefit not only from Brazil's sheer size but, as the market evolves, from the country's increased need for capital equipment and foreign technology. To enter this changing market, it is essential that firms establish a relationship with a well-qualified Brazilian partner. The Brazilian representative should have proven knowledge not only of the sector marketplace but of current government policy. Both U.S. and Brazilian participants must consider competitive financing, distribution support and follow-on service and training, as well as potential market growth. Basic Import Regulations and Fees Import duties in Brazil are levied according to a policy that weighs a variety of factors bearing on the economic well-being of the country. As part of the government's trade liberalization and industrialization policies, a schedule for the gradual reduction of tariff levels was provided. In general, the Brazilian government will reduce tariffs to an average of 14.2 percent by year-end 1993. However, U.S. exporters should keep in mind that additional taxes and fees bring the landed cost of many imports to double FOB prices. Registration and License Requirements Firms importing into Brazil must be registered with the Foreign Trade Department (DECEX) of the Ministry of Economy and Planning. DECEX plays a central role through its implementation of directives issued by the National Council of Foreign Trade (CONCEX), one of the national trade policy making bodies. Through the registration process, the government is able to monitor companies that import. The registration requirement does not apply to government agencies and mixed (public and private) capital companies with government-controlled import budgets. Following registration with DECEX, companies must apply for an import license, which allows them to proceed with a planned shipment. Services Since at least 1975, the Brazilian National Industrial Property Institute (INPI) has regulated contracting for foreign specialized technical services by Brazilian companies. INPI regulations apply the "Law of Similars" concept to technical services. That is, INPI does not authorize contracts for foreign services when INPI believes there is a Brazilian firm capable to provide the same services. Approval to contract foreign technical services is allowed in the absence of Brazilian domestic technical capabilities. INPI's definition of "specialized technical services" is broad. It includes management studies, engineering services, technical training, industrial research, and the development and use of computer systems or programs. The importation of design technology must be controlled by a Brazilian engineering firm. Typical Import Steps There are numerous procedural requirements associated with importing into Brazil. They warrant careful consideration, as failure to comply with regulations may result in fines and delays. Typically a Brazilian importer will follow the steps outlined below. 1. The importer files an application for an import permit (pedido de guia de importacao) for a specific transaction, accompanied by a foreign supplier's pro forma invoice for the product(s) to be imported. If the imported product(s) contains a computer or other digital technology, the importer must also seek the approval of the Department of Informatics and Automation Policy (DEPIN) concurrent with step (2), stating why the imported product(s) is needed. This step will not be necessary after October 29, 1992. 2. Once the application is approved by DECEX, the importer notifies the supplier to ship the products(s) and to send all shipping documents and commercial invoices along with the exporter's statement, certified by any chamber of commerce or Brazilian consulate, that the prices quoted are those prevailing for goods for export. (Goods should not be shipped until DECEX has granted an import permit.) 3. The importer arranges for a Brazilian government licensed customs broker to clear the goods and pay customs duties and other taxes (typically, Industrial Products Tax (IPI) and Merchandise Circulation Tax (ICM)). 4. A copy of the import license (pedido de guia de importacao) and the paid customs declaration are sent to the importer's exchange broker, typically a bank, for closing the foreign exchange transaction. The average processing of these steps is one to four weeks, although processing of digital products subject to DEPIN approval typically takes longer. An importer may deal with DECEX directly or through an expediter (despachante). It is generally advisable for an importer to retain an expediter to assist in moving the import request through the bureaucratic approval process with DECEX and the customs authority. Many government companies, agencies, and the military import directly, without DECEX or DEPIN authorization, and are exempt from all taxes and duties. Basis of Duty Assessment On January 1, 1989, Brazil implemented the Brazilian Tariff Nomenclature, known as the NBM (Nomenclatura Brasilera de Mercadorias), consistent with the Harmonized System (HS) for tariff classification, as authorized by the Brazilian Nomenclature Committee (CBN), Resolution Number 76, of August 31, 1988. Since January 1, 1989, the HS has been the basis for tariff schedule classification and the compilation of statistical data in Brazil. Duties are levied ad valorem on the c.i.f. value of the import. The rates of duty range from zero to 40 percent, with the majority in the 20 to 30 percent bracket. Brazil has implemented the Customs Valuation Agreement of the General Agreement on Tariffs and Trade (GATT), but with certain reservations. The agreement distinguishes five methods for determining customs valuation -- a primary basis and four additional methods that must be applied in hierarchical order. The primary basis is based on "transaction value," the price that is actually paid or payable for goods by importers, plus certain costs and expenses. Advance Rulings on Classification Based on a complete product description, a logical HS tariff classification can often be determined by the company agent in Brazil or the U.S. exporter's nearest U.S. Department of Commerce district office, located in most major cities throughout the United States. Brazilian customs brokers are another valuable source for classification information. However, the ultimate authority is Brazilian customs. If there is doubt about the classification, a request for advance ruling may be presented to the Internal Revenue Department (CST) of the Ministry of Economy and Planning, preferably through a Brazilian representative. Samples and specifications should be included with the application. A ruling in response to such requests may take months. An inquiry presented to DECEX is probably preferable, but this does not ensure that CST, through customs, will necessarily accept the DECEX classification. Customs Surcharges The Merchant Marine Renewal Tax is assessed at 25 percent of ocean freight charges on import by sea, payable by the importer. In addition to these taxes, the Brazilian government assesses the following fees: Syndicate Fee -- 2.2 percent of c.i.f. value Brokerage Fee -- 1 percent of c.i.f. value Warehouse Tax -- 1 percent of the import duty Fee for Handling Charges -- varies according to value of produce from $20 to $100 Administration Commission -- currently fixed at $50 Import License Fee -- 180 UFIRS (approximately $100) Additional Port Tax -- two fees totalling 3 percent of c.i.f. value Internal Taxes The internal Brazilian taxes of consequence to U.S. exporters are the Industrial Products Tax (Imposto Sobre Produtos Industrializados, or IPI) and the Merchandise Circulation Tax (Imposto Sobre Circulacao de Mercador as, or ICM). The Industrial Products Tax (IPI) is a federal tax levied on most domestic and imported manufactured products. It is assessed at the point of sale by the manufacturer or processor in the case of domestically produced goods, and at the point of customs clearance in the case of imports. The tax rate varies by product and is based on the product's c.i.f. value plus duties; it normally ranges from 0 to 15 percent. In general, a relatively low tariff rate carries a lower IPI tax rate and a relatively high tariff rate carries a correspondingly higher IPI rate. As with value-added taxes in Europe, IPI taxes on products embodying several stages of processing can be adjusted to compensate for IPI taxes paid at each stage. IPI taxes have been temporarily waived for a wide range of capital goods and industrial inputs. Exports from Brazil are exempt from the IPI tax. The regulations dealing with the IPI tax are detailed in Decree Number 87.981, of December 23, 1982. The Merchandise Circulation Tax (ICM) is a state government value-added tax applicable to both imports and domestic products. The ICM tax on imports is assessed ad valorem on the c.i.f. value, plus duties, plus IPI. Effectively, the tax is paid only on the value-added as the cost of the tax is generally passed on to the buyer in the price charged for the merchandise. The ICM tax due to the state government is based on taxes collected on sales, minus those paid in purchasing raw materials and intermediate goods. The ICM tax is levied on both intrastate and interstate transactions and is assessed on every transfer or movement of merchandise. The rate varies among states, with the predominant rate currently at 17 percent. On interstate movements, the tax will be assessed at the rate applicable in the state of destination. Some sectors of the economy, such as construction services, mining, electrical energy, liquid and gaseous fuels, and locally produced machinery and equipment, are exempt from the ICM tax. For the most part, Brazilian exports are exempt. Warehousing Charges The former Ministry of Infrastructure (replaced in March 1992 by the Ministry of Transportation) has established the following rates for maritime shipping warehousing: first 15 days after cargo unloading, 1 percent of import duties; second 15-day period, 2 percent of import duties; third 15-day period, 3 percent of import duties; fourth 15-day period; 15 percent of import duties; and thereafter, the rate increases by 4 percent per 15-day period. Air-shipped goods pay rates based on the calculated c.i.f. value for 15-day periods: first period, 2 percent of c.i.f. value; second period, an additional 2 percent; and thereafter, the charge is increased by 4 percent per subsequent 15-day period. Warehousing of corrosive products, explosives, flammables and oxidizers is charged at double the normal rate. The following is a hypothetical cost buildup for imported industrial process control equipment. Due to all taxes/fees, an imported product at an f.o.b. price of $10,000 and 45 percent duty will cost about 2.3 times its initial f.o.b. price. Hypothetical Cost Buildup for an Imported Product* Cost Buildup in $U.S. FOB Price of Product $10,000.00 Freight and Insurance $1,000.00 (9% and 1%, respectively) Total c.i.f. of Product $11,000.00 Bank Charges (90 days at $1,320.00 4% per month) c.i.f. Plus Bank Charge $12,320.00 Landing Charges AMMF (Merchant Marine Tax: 25% of Ocean Freight) $225.00 Import Duty (20% of c.i.f.) $2,200.00 Port Costs (2.5% of import duty, including warehousing & expediters) $33.00 IPI (Manufactured Products Tax -- 12% on c.i.f. plus import duty) $1,584.00 ICM ** (Value-added Tax -- 17% on c.i.f. plus duty plus IPI) $2,513.28 Syndicate Fee (2.2% of c.i.f.) $242.00 TOTAL FINAL COST $19,117.28 * FOB value, insurance, freight, bank charges, IPI and duties are all assumed numbers. ** ICM usually is 17 percent, but might be 10 percent or 12 percent in some states. If the product enters a state with 17 percent ICM, the difference must be paid. Reductions and Exemptions from Import Regulations and Fees GOB's incentive for imports stresses locational rather than sectoral criteria. Import duty and federal IPI tax reductions and exemptions are granted on products destined for the Manaus Free Trade Zone and export processing zones (ZPEs). Also eligible are imports for manufacture of exports under the drawback system and certain production machinery. Fiscal and credit incentives established to promote exports include exemption from federal IPI (manufactured products) tax, state ICM (value-added/merchandise circulation) tax, federal income tax, the "Sole Tax" on lubricants and fuels, and other federal and local taxes. Technical catalogs, pamphlets, and publications without intrinsic commercial value and dealing with the operation, maintenance, repair or use of machines, apparatuses, vehicles, and the like, may be imported duty free. This exemption also applies to educational and scientific films; newspapers and books; brochures; and similar printed matter for cultural, religious or educational use. Insurance Brazil requires that import shipments be insured by companies (foreign or domestic) established in Brazil and that policies be denominated in local currency, which implies risk of exchange losses. The import permit, therefore, may not include margins for foreign insurance payments. All reinsurance in Brazil must be purchased from the government reinsurance monopoly -- the Brazilian Reinsurance Institute (IRB). In special cases, the IRB may grant exceptions to these terms and allow insurance to be placed abroad. Export Credits Although until recent years a major factor in Brazil's trade regime, export incentives and subsidies have been largely eliminated as a result of the economic reform measures of the current Brazilian administration. In response to complaints from Brazilian exporters that their international competitiveness is affected by the lack of Brazilian export credit programs, the government announced in February 1992 the expansion of the Proex program designed to offset the difference between interest rates for export credit available in Brazil and the rates prevailing in developed countries. Preferential Import Duty Rates In June 1989, Brazil, Argentina, Uruguay and Paraguay signed the treaty of Asunci n to establish the parameters and schedule for formation of the Southern Common Market, known by its Spanish acronym, Mercosul. The Treaty of Asunci n calls for the formation of a customs union with free internal trade and a common external tariff. Argentina and Brazil are to reduce import duties for trade between themselves to zero by year-end 1994; Paraguay and Uruguay are given an extra year to reduce import duties to zero. To arrive at the eventual elimination on inter-Mercosul import duties by 1995, the member countries are reducing import duty rates in progressive steps. Under a special regional trade initiative, Brazil extends preferential import duty rates and other benefits to certain imports from members of the Latin American Integration Association (ALADI), formerly the Latin American Free Trade Association (LAFTA). Under ALADI, Brazil has bilateral trade agreements with each of the other 10 members (Mexico and the nine South American republics) and participates in many of ALADI's multilateral industry agreements. U.S. Export Administration In addition to Brazilian import regulations, U.S. exporters must comply with U.S. Government export controls. Export Administration regulations are issued by the U.S. Department of Commerce to implement the Export administration Act of 1979. A validated export license is required for U.S. exports that fall into the following categories: 1. "Strategic" commodities to any destination -- Generally speaking, a "strategic" commodity is one that the U.S. Government believes can contribute significantly to the design, manufacture, or utilization of military hardware. 2. "Short supply" commodities to any destination. A "short supply" commodity is one which unrestricted exportation would excessively drain U.S. supplies and have a serious inflationary impact on the U.S. economy. 3. Any other commodity to a destination in which there are foreign policy or national security concerns. 4. "Unpublished" technical data to certain destinations. The term "unpublished technical data" applies to technical information, generally related to the design, production, or use of a product that is not available to the public. It is not described in detail in books, magazines, or pamphlets, nor is it taught in colleges or universities. It is know-how that cannot be released without a fee. To determine whether an export product is subject to U.S. controls, exporters should refer to the Commodity Control List (CCL) of the Export Administration Regulations. The official source of information on the details of U.S. export administration is the Exporter's Service Staff, Bureau of Export Administration, U.S. Department of Commerce: Eastern Division, (202) 377-4811; Western Division, (714) 660-0144. Another convenient source is a local Department of Commerce district office. Documentation Import Permit The import permit (guia de importacao) is the single most important document required for exporting goods to Brazil. An import permit must be obtained from DECEX by the importer for all but a very limited list of products. Most of the information required for the permit must be provided by the foreign supplier. DECEX Portaria Decree No. 8 of May 1991 established the degree of import regulation applied to specific products by categorizing them: 1. Imports exempted from the import permit requirement are listed in Annex A of the appropriate DECEX Portaria No. 8; 2. Imports under legislative or regulatory prohibition; 3. Imports under special control. Import permit requests must be accompanied by the foreign manufacturer's catalogs or price lists covering the goods to be imported, unless such material has already been filed with DECEX. A local agent of a foreign firm should update the information on file with DECEX regardless of whether a shipment is pending. If there are no published catalogs or price lists, DECEX will accept a notarized statement by the exporter on the pro forma invoice of the wholesale price. An import permit specifies the period during which it is valid. It establishes the maximum time for embarkation of merchandise, or in certain cases, for registering the Import Declaration. Although the validity period of an import permit generally ranges from 60 to 180 days, DECEX will examine petitions for extensions required by special operations or pre-defined exceptions. Goods usually facing limits of 60 days include those subject to special price controls imposed by DECEX, particularly on food and agricultural products, metal, and other products with periodic and/or seasonal price fluctuations, and display items imported under special restrictions for exhibition. Limits of 90 days are imposed on raw materials and food items not under DECEX special price controls, and 180 days are provided for other imports. Under no circumstances should an exporter ship goods to Brazil without an import permit. The shipment could be impounded by Brazilian customs authorities and may not be returned to the United States without payment of fines equaling 20 to 100 percent of the c.i.f. value of the goods. In addition, to avoid clearance problems, any discrepancy between the actual composition of a shipment and the terms of the corresponding import permit should be immediately transmitted to the importer so that the importer can request amendment of the permit prior to arrival of the goods in Brazil. Pro Forma Invoice In order to apply for an import permit, the Brazilian importer will require a pro forma invoice (fatura proforma) and a published list of prices or sales catalog from the supplier (if such exist). The original copy should be notarized, but need not be accompanied by a chamber of commerce certification or consular visa. The document must contain the following: 1. The name and address of the manufacturer or exporter; 2. A signed statement by the exporter or manufacturer verifying that the prices stated are current export market prices for destination to any country; 3. If applicable, the name and address of the agent distributor, representative, or concessionaire in Brazil, and a statement of commission due. This is not necessary when the agent has filed a general statement with DECEX of fees collected from a particular foreign firm. If no representative exists, this must be so stated; 4. Total f.o.b. price, unit price, gross and net weight, itemized freight and all other expenses, and total c.i.f. or c.i.f. value; 5. If applicable, a statement declaring that published catalogs or price lists do not exist for the invoiced products. Pro forma invoices issued by commercial enterprises, such as an export trading company, can be used in lieu of a manufacturer's invoice for the importation of parts, accessories, and other small articles. Required Shipping Documents Documents required by Brazilian laws and regulations for cargo shipments to Brazil are the commercial invoice and bill of lading (or air waybill). Inspection or sanitary certificates are also required for shipments of certain goods. These documents must carry the number of the DECEX-issued import permit. Generally, the document itself does not accompany the shipment. Commercial Invoice -- This document should give full details about the merchandise shipment. It should be prepared by the manufacturer or the seller in the country of origin, not by a seller who is not established in the country of shipment, or a buying agent of the Brazilian importer. Good business practice dictates that a commercial invoice include the full address of the shipper, seller, and consignee, if other than seller; the import permit number; other reference numbers; date of the order; shipping date; delivery and payment terms; a complete description of the merchandise; and export markings. A declaration of origin that is combined with a declaration of correct prices should be made on the commercial invoice, which in turn should be certified by the foreign exporter or local chamber of commerce. For a letter of credit or other contractual agreement, chamber of commerce certification is not required, but may be requested. When in doubt, exporters should contact their Brazilian importers. A notarized declaration, as follows, should be made on the extra copy of the commercial invoice, which the exporter or the chamber of commerce retains. I (name, title, name of company), hereby swear that the prices stated in this invoice are the correct market prices for any country for the merchandise described herein, and the origin of these goods is the United States of America, and I accept full responsibility for any inaccuracies or errors herein. Legalized commercial invoices are not required. To correct errors in commercial invoices, the exporter should make out new invoices. A detailed letter of explanation stating corrections should be attached to the new invoices, which should be sent at once to the exporter's principal in Brazil. Commercial invoice forms are available from commercial stationers. Bill of Lading -- Attached to each copy of the commercial invoice is a nonnegotiable copy of a numbered and dated bill of lading. This may be an ocean bill of lading or air waybill, depending on the mode of transportation and/or terms of sale. There are two basic types of bills of lading: nonnegotiable and negotiable, or "shipper's order" bills of lading. The latter is used for sight draft or letter of credit shipments. When shipments originate abroad and are cleared through the United States in transit to Brazil, either an authentic copy of the "through" bill of lading issued by the foreign carrier for the voyage from port of origin to the United States must be attached to one copy of the invoice prior to shipment from the United States. Bills of lading and air waybills no longer require the carrier's signature. Consular registration and chamber of commerce certification are not required. The import license number and its expiration date must be shown on the bill of lading or air waybill. In rare cases, when no import permit is required, the exemption should be clearly stated. Freight charges must also be clearly indicated in words and numbers. Noncompliance with this regulation will prevent the importer from closing or liquidating foreign exchange contracts, and failure to detail information on import licensing will result in considerable delays. According to International Chamber of Commerce rules governing foreign trade terms and documents, the only bill of lading that is acceptable on draft or letter of credit shipments is one marked "Clean on Board." This means that the carrier has not taken any exception to the condition of the cargo or packing and that the merchandise has actually been loaded aboard the carrying vessel. Special Documentation -- Various special documents are required on shipments of certain commodities. These special documents include sanitary certificates from the Ministry of Agriculture for shipments of live plants or parts thereof; health certificates for shipments of live animals and animal products capable of transmitting disease; inspection certificates for shipment of used merchandise, machinery, and equipment; and Ministry of the Army authorization for armament shipments. Industry-specific import and documentation requirements are detailed in a separate section of this report entitled "Imports Subject to Special Control." Fines and Penalties Brazil imposes fines and penalties for violation of customs, exchange, and consular regulations. These fines and penalties are severe, especially in cases of fraud, and where the complicity of the exporting firm is proven. Fines may be incurred for violations or errors in preparation of document preparation. When goods that require import permits are imported without this documentation, there is a fine of up to 100 percent of the c.i.f. value of the merchandise. When a commercial invoice is absent, the fine is equal to the customs duty. If the original commercial invoice is not available for presentation at customs, the importer can sign a guaranty of responsibility that it will be presented within 120 days. Failure to present the invoice before expiration of the guaranty of responsibility could result in a fine equal to the customs duty. For under-invoicing, over-invoicing, or otherwise misrepresenting the value of an import, there is a fine of up to 100 percent off the excess or deficiency. If the value declared by the importer is judged to be false, there will be a fine of at least 50 percent of the difference between the duty declared by the importer and that verified. If the appraised value exceeds the invoice value by more than 10 percent, there is a fine of 100 percent of the value of misrepresentation; the fine is 50 percent if the value of misrepresentation is between 5 and 10 percent. There is no fine in cases of error in weight or quantity, but rules are strict. Currency indexation of the amount of fines levied and not paid effectively preclude the payer of a fine from taking advantage of high inflation in order to profit from currency devaluations. In addition, the Central Bank does not allow remittance of foreign exchange to cover the excess except in special cases. It is essential that shippers prepare documents completely and carefully. For instance, failure to make a separate declaration on the invoice of the net weight and value of drums or other containers that have been used in shipping the merchandise may subject Brazilian importers to heavy fines. When customs officials challenge the declared value of imported goods, they have eight days to establish a new valuation. The importer then has 30 days during which to protest the new value, and a decision must be rendered within another 30 days. While the value is in dispute, the importer's declared value is provisionally accepted for the purpose of clearing the goods, but the importer must post bond or make a deposit covering the claimed differences, pending a final determination of the dutiable value. Appeals concerning the valuation of imported merchandise are heard by DECEX. If the final decision is against the importer, a fine amounting to between 50 and 100 percent of the difference between the declared value and the verified value must be paid by the importer. Imports Subject to Special Control Import of Used Material In accordance with provisions of DECEX (National Foreign Trade Department), Portaria 8, of May 14, 1991, DECEX will accept for consideration requests covering the importation of used machinery equipment or instruments providing the following requirements are met in full: 1. The equipment is intended for the importer's own use and will play a direct role in the production process; 2. The goods are not of a type that can be produced within Brazil and cannot be substituted by other machines or equipment of Brazilian manufacture; 3. The goods are considered by the Brazilian government to be of interest to the Brazilian economy and can be applied in hastening the expansion of internal production programs or the rapid increase of exports. 4. The equipment is not intended for quality control; 5. The equipment has less than 10 years of use at the date of the request for importation in the following cases: precision instruments intended for mass production or tooling, and equipment in which normal operation is performed under unfavorable conditions that accelerate its physical deterioration by corrosion, shock or vibration; 6. The equipment has less than 20 years of use at the time of presentation of the request for importation, in the following cases: heavy equipment not used in tooling, and exceptionally large equipment used in tooling, but not for items which are mass produced. In all such requests, DECEX will require the presentation of an inspection and appraisal certificate signed by an international, specialized, and qualified firm acceptable to local Brazilian consular authorities. Brazilian consular authorities may in some cases accept a notarized statement by the manufacturer. The certificate should state the following regarding the used equipment: 1. Year of manufacture, reconditioning or overhaul, with indication of substituted parts and accessories and the total value; 2. That the used equipment's operational condition and tolerances that are required by technical norms in effect in the country or origin are identical to those of equipment units when new; 3. The technical differences between new units and those inspected; 4. The life expectancy of the used machinery; 5. The market value of a reproduction of the equipment and that of a similar unit technically updated; 6. Net weight. In the case of imports of reconditioned parts and accessories for airplanes originating in and proceeding from the United States, the inspection and appraisal certificate should be issued by a company authorized by the U.S. Federal Aviation Administration. "Yellow tags" issued by authorized institutions in other countries will be accepted in lieu of a certificate. The requirement for certification may be waived in the following cases: a) imports under the BEFIEX program (a Brazilian export-incentive program); b) imports under temporary admissions; c) imports under leasing, according to Brazilian legislation; d) airplane imports approved by COTAC, Brazilian Air Ministry; e) imports of ships and boats, approved by the National Department of Water Transportation of the Ministry of Infrastructure and by the Council of the Merchant Marine. Inspection and approval of used machines, equipment, and instruments will be carried out by DECEX. Importation of used consumer goods will not be authorized. Sector Specific Controls Informatics - In October 1991, Brazil's Congress passed a law (Law Number 8248) to drastically modify Brazil's 1984 Informatics Law (Decree Law Number 7232). The new 1991 Informatics Law provides that the broad powers given to the government under the old 1984 informatics law to regulate trade, investment, research, manufacturing, technology transfer, and marketing in Brazil of "informatics" products or services will largely expire at the end of October 1992. (Informatics products are defined as goods or services based on digital data processing technology.) Under the old 1984 law, the Ministry of the Economy's Department of Informatics and Industrial Automation (DEPIN), formerly the Special Secretariat of Informatics (SEI), protected Brazilian informatics firms by prohibiting imports and severely restricting foreign investment in sectors of the market in which Brazilian firms were technologically capable. In practice, these policies were used to "reserve" the lower end of the market -- small computers and many types of components and peripheral equipment -- for Brazilian firms. Under the new 1991 Informatics Law, beginning in November 1992, there will be no more prohibitions or requirements for government prior review for imports, investment, or manufacturing by foreign firms in Brazil. However, import duties will remain high (about 40 percent) on informatics products, and Brazilian firms will receive preferential treatment in government procurement and will have access to certain fiscal benefits, including tax reductions. Rules governing computer software are contained in Law 7646 (the "software law") of December 1987 which provides copyright protection and establishes rules for marketing computer software in Brazil. Law 7646 extends existing copyright legislation to cover software. Copyright protection is granted for 25 years from the date a program is first released in any country. Copyright registration in Brazil is administered by the National Industrial Property Institute (INPI). The software law requires that all software be "cataloged" by DEPIN prior to its commercialization in Brazil, and that software for use on Brazilian- made equipment (i.e., small and medium-sized computers) must be distributed through a Brazilian firm. In the case of foreign software, cataloging can be denied if DEPIN determines there is a similar program of Brazilian origin. DEPIN has 120 days to issue its decision regarding whether a program will be granted or denied cataloging. Once cataloged, a program can be freely marketed in Brazil for a period of three years, at the end of which cataloging must be renewed. During the cataloging renewal process, a test of similarity may be required. A draft law has been introduced into Brazil's Congress to eliminate the requirement for cataloging, the test of similarities, and the requirement that software to run on Brazilian-origin hardware must be distributed by a Brazilian firm. This draft bill likely will be voted on by mid-1992. Additional information on Brazil's computer and software restrictions and regulations can be obtained from the U.S. Commerce Department Brazil Desk at (202) 377-3871. Petroleum Products - Bulk shipments of petroleum products to Brazil are controlled by the DNC -- Departamento Nacional de Combustiveis (the National Fuel Department), an agency of the Ministry of Mines and Energy. Authorizations are determined in accordance with national needs assessments conducted biannually by Petrobr s, the country's oil and gas monopoly. Packaged Lubricating Oil and Petroleum - A request to import packaged lubricating oil and petroleum must be submitted by the importer to the DNC (National Fuel Department). In turn, the DNC routes the request to Petrobr s for confirmation that locally produced alternatives at competitive prices are not available before the request is approved. Arms and Ammunition - All imports of firearms, ammunition, and implements of war, whether for personal, commercial, or government use, require a permit issued by the Ministry of the Army. Wheat - Purchases and imports of wheat are controlled by the government Department of Wheat (CRTM), of the Banco do Brasil. Other Products Requiring Special Approval/ Documentation - Imports of soft drinks, flammables, airplanes, dangerous substances, chlorinated pesticides, insecticides, other agricultural chemicals, and animal foodstuffs are also controlled. Additional current and detailed information may be obtained from A Basic Guide to Exporting from the U.S. Department of Commerce and Dun and Bradstreet International's Exporters Encyclopedia. Labeling and Marking Requirements Labeling The Brazilian Consumer Protection Code, in effect since September 12, 1990, requires that product labeling provide the consumer with correct, clear, precise, and easily readable information about the product's quality, quantity, composition, price, guarantee, shelf life, origin, and risks to the consumer's health and safety. Imported products should bear a Portuguese translation of this information. Since metric units are the official measuring system, products should be labeled in metric units or show a metric equivalent. The United States Senate Concurrent Resolution No. 40, adopted July 30, 1953, invited U.S. exporters to inscribe, on external shipping containers in indelible print of a suitable size: "United States of America." Although such marking is not compulsory under law, U.S. shippers are urged to follow this procedure in publicizing American-made goods. Marking The essential identifying marks -- shipping marks, port of destination, and package number (when required) -- must be prominently shown on the shipping case and situated so that they will not be covered by any later strapping. Any other markings should be placed in a less prominent place and should be limited as much as possible to essential data. Identifying marks used in the bill of lading should also be shown on the shipping case. A number may be used as an identifying mark, provided that it is placed within a geometric figure, i.e., a triangle, square, etc. Samples, Promotional Material, and Technical Literature Samples An import permit is not required for samples up to a value of $1,000 which have no commercial value. The invoice must be marked "Samples, not for Sale." Samples of pharmaceutical products require the same documentation as commercial shipments. Commercial travelers may bring collections of samples into Brazil on a temporary duty-exempt basis. Brazilian customs authorities do not require presentation of an import permit for merchandise entered duty-free in such a fashion. However, to guarantee withdrawal of the samples when the commercial traveler leaves the country, a bond or cash deposit must be posted in an amount equivalent to all duties, taxes, and fines that would apply in case of failure to reexport the merchandise. Use of international "carnets" (a "passport" for merchandise accepted in countries in lieu of posting a bond) has not been accepted as yet by Brazilian customs authorities. Samples and small parcels of minor commercial value, except those dutiable in the country of destination, may be mailed from the United States without U.S. shipping permits. Advertising Matter and Technical Literature Ordinary advertising matter, trade catalogs, prospectuses, and other printed promotional materials, including posters of any kind and calendars) are dutiable. An import license must be obtained if the value exceeds $1000. However, foreign catalogs, pamphlets, and similar publications of a technical nature that are without commercial value and concern the operation, maintenance, repair or use of machinery, vehicles, etc., may be imported free of duty. Newspapers, educational and scientific films, books, brochures, and similar printed matter for cultural, religious or educational use may also be imported free of duty. Import licenses are not required in the case of such technical and educational material. International Expositions and Fairs The importation of merchandise intended to represent foreign government entities or private firms at international expositions and fairs must be approved by the Ministry of Finance, and is administered by DECEX. Materials that enter Brazil for use at the exhibition site (advertising materials, food and beverages, standing frames, pamphlets, etc.) are duty free. However, this exemption cannot be applied to materials that can be reused after the event. An import license is not required for such materials but the quantity and value are determined by the Finance Ministry. Imports of sample cases and merchandise typically identified as advertising material (banners, catalogs, magazines, photographs, match boxes, pencils, etc.) which exceed the quantity and value approved by the Finance Ministry may be authorized by inserting a clause classifying the nature of the event in the respective import permit. The importation of merchandise to be exhibited is restricted to one unit of each kind or a set of each type or mark. Goods not sold must be returned to the country of origin within the period determined by the customs officials (usually 30 to 45 days from the date of customs clearance). If sold, the merchandise can be transferred from the exhibition site or bonded warehouse to the purchaser only after the nationalization process (for formal transfer of ownership) has been completed. The importation of used merchandise and products not originating from a country represented directly or indirectly in the exposition is forbidden. All material that is sold during the fair is subject to import duties and taxes. For material that is sold, tax charges are automatically transferred to the Brazilian buyer. Materials distributed free of charge are subject to import taxes. A special agreement between the United States and Brazilian governments permits firms to exhibit under the auspices of the US&FCS in Brazil, as a customs-free area. U.S.&FCS Brazil should be contacted for shipment details. The US&FCS conducts trade shows in Brazil; for these events U.S. exhibitors enjoy waivers to some of the above requirements, facilitating the demonstration of their wares. Special Customs Provisions Entry, Transit, and Reexport In order to clear goods through customs without difficulty, Brazilian importers must have all necessary documents with them. Documents are often delivered to importers against their acceptance of the exporters' bank collection draft, as in open account shipments, unless otherwise contracted. When documents are sent by means other than the carrier on which goods are shipped, they should be forwarded soon enough thereafter to ensure timely arrival. To clear merchandise through customs, importers or their agents must present copies of the commercial invoice (fatura comercial), which includes a declaration or origin of the merchandise (a separate certificate of origin is acceptable but not required), the bill of lading, and the import permit (guia de importacao). It cannot be overemphasized that the documentation must be complete and correct in all requirements in order to avoid heavy fines and penalties. Exact weight and quantity of goods, including parts and accessories for machines and apparatus in general, must be accurately and completely supplied by the exporter to the importer on either the pro forma invoice, the commercial invoice, or the price list. The import license must contain the accurate weight and quantity specifications. While the importer may clear merchandise through Brazilian customs following the steps outlined above, this job is often turned over to a "despachante," or freight forwarder. Despachantes are often quite large organizations that provide a wide range of services to anyone wanting to expedite their dealings with the government. The customs clearance fees charged by such an organization are controlled by the Union of Despachantes. Despachantes are employed not only because they can clear goods through customs faster than an importer, but also because they eliminate the need for permanent staff in the importing firm to handle such matters. Parcel Post Shipments and Passenger Baggage A March 13, 1992 regulation (Normative Instruction 32) allows imports of merchandise by mail, including mail order catalog shipments, up to a value of $500 ($1000 for computer software) without the requirement of an import license, provided the item is not for resale. Items valued no more than $50 are duty free and are deliverable to the addressee; parcels above this value can be picked up at the post office upon payment of import duties. Imports that are prohibited or subject to special regulations must comply with applicable Brazilian government provisions. Identical shipments from the same source to the same person or address in Brazil within a 90 day period are considered part of the same shipment and may be subject to confiscation (medication is exempted from this restriction). Payments can be made using international credit cards, an international money order, or bank transfer. Other merchandise that usually enters duty free includes items such as newspapers, maps, books, and magazines. Passenger baggage, such as personal clothing and linen, jewelry, consumption goods and other objects for the passenger's professional or domestic use, is exempt from import tax. Souvenirs with a value not exceeding $500 or its equivalent in other currencies are also duty free. Personal effects of individuals transferring residence to Brazil are duty free if accompanied by an authorization issued by the Brazilian Embassy or Consulate at the country of origin. Transit Zones The tariff law provides that goods in transit through Brazilian national territory, enroute to another country via customary channels of international trade, are exempt from the payment of import duties. Goods in transit are granted maximum storage periods of three months in the case of perishables and one year for other merchandise, extendable for an additional six months. The following Brazilian ports have been designated as transit zones for the specified neighboring country. Bel}m, for Peru and Bolivia; Corumb , for Bolivia; Manaus, for Equador; Paranaga, for Paraguay; Porto Velho, for Bolivia; and Santos for Bolivia and Pauaguay. Other seaports or airports where federal customs officials are stationed may also be used as transit zones for countries contiguous to Brazil even though no special facilities have been created for transit shipments. Free Ports and Free Zones In 1967 the Brazilian government created the Free Trade Zone of Manaus in a 10,000 square kilometer area surrounding the city of Manaus, in the state of Amazonas, in the north of Brazil. However, it was in fact inaugurated by decree ten years later, in 1967. This decree established special incentives for a period of 30 years for the creation of an industrial, commercial and agricultural center in the heart of Brazilian Amazonia. Later, these incentives were extended to all western Amazonia, comprising the states of Amazonas, Rondonia, Acre and Roraima, an area of 2.9 million square kilometers, equivalent to 26 percent of the entire territory of Brazil. The Brazilian Constitution of 1988 endorsed the fiscal benefits of the Manaus Free Trade Zone and extended their applicability to the year 2013. Free Trade Zone status implies that goods of foreign origin may enter into the Manaus free port without payment of customs duties or other federal, state or local import taxes. In addition, the Industrial Product Tax on certain commodities and the ICMS sales tax on most items are not applied. Imported products used for processing, reexport or transshipment and which are subsequently shipped to other parts of Brazil also qualify for these tax exemptions (unless they are among a small group of exceptions). The ICMS sales tax is imposed on items produced in the free port when shipped out of the free zone into Brazil. Law No 8.387 of December 30, 1991, modified the regulations for the Manaus Free Trade Zone by eliminating the previously existing import quota. Now, importers may bring in whatever they need, provided prior notification is made to the Superintendent of the Manaus Free Zone (SUFRAMA). The law also allows free zone importers to supply foreign goods from their stock in Manaus to other parts of the country regardless of quantity. These goods, however, are subject to all duties assessed under normal importation. DECEX import licenses must be issued prior to shipment of goods destined for the Brazilian marketplace. These licenses are additionally subject to authorization by the Superintendent of the Manaus Free Trade Zone (SUFRAMA), the Manaus free zone authority. Commercial invoices and bills of lading must have "Free Zone of Manaus" typed on them, and one of the following statements, as applicable: "Zona Franca de Manaus para Consumo" (Manaus Free Zone for Consumption) or "Zona Franca de Manaus para Reexportacao" (Manaus Free Zone for Reexport). Brazilian restrictions on the informatics sector no longer apply to the Manaus Free Trade Zone. License and authorization requirements for health/sanitary controls, national security interests, and environmental protection remain in effect. Each passenger leaving Manaus is allowed a quota of $2,000 (FOB value) of goods of foreign origin. Products manufactured in Manaus are not subject to the quota. In July 1988, the Brazilian government approved legislation to establish export processing zones (ZPEs) -- free trade areas -- to encourage production of goods for export in the northeast and other priority development areas. Law 8037 of December 30, 1991, created a ZPE in the new state of Amap . The free trade area will be set up in the city of Macap , capital of the state, and will be considered a comparable area of free trade for imports and exports. It will operates under the control of the Superintendent of the Manaus Free Trade Zone. Legislation regarding ZPEs establishes requirements that firms operating in the zone export at least 90 percent of production. Up to 10 percent of production can be sold in the domestic market, and is subject to a duty of 75 percent ad valorem on the final price, minus the cost of imported inputs. Normal corporate income taxes apply to profits generated in the zones. Firms operating in the zones will be exempt from foreign exchange regulations and will maintain dollar and local currency accounts; the official Brazilian exchange rate must be used to convert dollar accounts for local purchases. Foreign firms established in the zones may use their own hard-currency resources for tax-free imports of machinery and raw materials from abroad. Firms in the ZPE may not produce goods subject to export quotas. License and authorization requirements remain in effect in ZPEs for health/sanitary controls, national security interests, and environmental protection. Abandoned and Reexported Goods Goods imported into Brazil may be expressly or tacitly abandoned. They may be expressly abandoned in writing at any time prior to customs clearance. Tacit abandonment occurs when the merchandise is not withdrawn within the permissible warehousing period. Although customs laws permit the reexportation of merchandise that has entered the country legally, foreign trade controls make reexport difficult. Imported goods not cleared through customs require authorization for reexport. On goods already cleared through customs, for which foreign currency payments were made, reexportation will not be authorized without reimbursement of the foreign currency paid. Once goods have been cleared through customs, they are considered nationalized, and import duties are not refunded if goods are reexported. Goods shall be considered to be abandoned if they remain on customs premises 90 days after discharge; 60 days after the date on which clearance procedures were halted because of an action or failure to act on the part of the importer; and 45 days after the date of notification from customs. Import Channels General All the customary import channels exist in Brazil: agents, distributors, import houses, trading companies, subsidiaries of foreign firms, etc. The typical import transaction is the importation of capital goods or raw materials by an individual firm for its own use. Brazilian import firms do not generally maintain stocks of capital equipment or raw materials. This is partly due to a shortage of working capital. Additionally, should a buyer qualify for a duty reduction or exemption, an agent or distributor cannot obtain a rebate for import duty already paid on an item in stock. Some flexibility in the maintenance of stocks in the country has been opened up by legislation enlarging the operations of bonded warehouses. Implementing regulations are contained in Decree Law Number 71,866, dated February 26, 1973.) Agents and Distributors As in other countries, the selection of an agent in Brazil requires careful consideration. A unique factor in the Brazilian situation is that a prospective agent may not be able to cover the entire country adequately. A regional orientation still prevails in Brazil, despite improved internal transportation and communications. A Sao Paulo-based agent, for example, may want to split the commission with a subagent in Porto Alegre who would cover southern Brazil. This kind of arrangement is not always attractive to an agent in Porto Alegre, who is accustomed to operating independently. The ability of an agent to cover the country depends in large part on the item being sold; certain types of sophisticated machinery may have only a dozen or so potential buyers in Brazil, making marketing relatively simple. On the other hand, less expensive equipment with a wide potential market and the need for countrywide service facilities puts much greater organizational demands on an agent. Brazilian income tax may be levied on a foreign exporter if there is evidence that the exporter is "present" in Brazil (Article 76 of Law Number 3470/58). This presence is determined basically by two interrelated factors -- the closing of sales contracts in Brazil and the existence of either an express or tacit power of attorney granted to an agent or representative in Brazil. In such cases, the taxable income is estimated at 20 percent of the total price of the product imported into Brazil. The precise applicability of this law to any particular transaction or agent-principal relationship is best determined by a Brazilian tax lawyer. Once the agent-principal contract is signed, a Brazilian agent is protected by law from unilateral termination of the contract by the foreign principal without "just cause." The definition of just cause is limited to the following: the agent's negligence; the agent's breach of contract; acts by the agent damaging to the principal; and conviction of the agent for a serious criminal offense. The legislation governing contract stipulations and conditions for termination of agency agreements in Brazil is contained in Articles 27-39 of Law Number 4886, of December 10, 1965. Trading Companies The trading company is another type of import marketing organization in Brazil. Although principally designed as an export promotion tool, trading companies may play a role in importing through direct purchase or countertrade activities. The operation of Brazilian trading companies is open to foreign as well as national interests. Basic legislation defining the operations of trading companies is contained in Decree Law Number 1248 of November 29, 1972. Brazilian trading companies were modeled to some extent after foreign trading companies, principally German and Japanese. In Brazil trading companies are called empressas comerciais exportadoras, companhias comerciais, or companhias de comercio exterior. They are set up to give small and medium-sized manufacturers the same operational flexibility as large manufacturers in promoting Brazilian exports, especially of nontraditional exports. Trading companies may act as principals, acquiring goods from Brazilian producers for the specific purpose of exporting, assuming all commercial risks and exporting under their own names. Alternatively, trading companies may act as intermediaries. In this role, they operate as commercial agents, utilizing their functional structure to provide complementary services. Transportation Of all the means available for transporting goods within Brazil, the highway system is the most dependable. The Brazilian government has channeled considerable financial resources into improving and extending the road network. Some shipping is done by rail, but the railway system is limited, and much slower than highway transport. The government is trying to remedy deficiencies in the railway system. Coastal shipping is also deficient. Goods shipped between the ports of Santos and Porto Alegre, for example, have traditionally traveled by highway. Air cargo service, domestic and international is excellent; however, congestion does occur in ground handling facilities in S o Paulo and other large cities. The two most important seaports are Santos and Rio de Janeiro. Both have extensive facilities, including bonded and refrigerated warehouses, and several grain installations. They are undergoing improvements and expansion. Unfortunately, Brazilian ports are currently among the most expensive in the world due to the near-monopolistic labor and managerial situation prevailing there. The Brazilian federal government has introduced legislation to change this, but there is no timetable for passage, nor certainty that the bill will pass unaltered by Congress. Marketing Aids Industry associations (sindicato or associacao) in Brazil can be of assistance to U.S. exporters in identifying potential Brazilian importers, especially if the products being sold are used by member firms. An association membership list can be a valuable marketing tool, since all Brazilian firms are required by law to belong to a sindicato for their respective industry. Related industry sindicatos of a particular state in Brazil are grouped together in a federation; state federations are in turn represented by their national confederation. The two independent American Chambers of Commerce in Brazil are located in Rio de Janeiro and Sao Paulo. The Rio Chamber has approximately 800 members, with a branch in the northern city of Salvador. American Chamber of Commerce Praca Pio X, 15/5th floor C.P. 916 20040 Rio de Janeiro, RJ, Brazil Tel: 55 (21) 203-2477 The Sao Paulo organization has approximately 2,000 members with membership divided more or less along geographic lines. American Chamber of Commerce Rua Alexandre Dumas, 1976 04717 Sao Paulo, SP, Brazil Tel: 55 (11) 246-9199 Each chamber publishes a membership directory, which is a good source of useful information on Brazil and the activities of U.S. firms in Brazil. Market research, advertising and public relations activities have not reached the same degree of sophistication in Brazil as in the United States. Numerous local and multinational advertising or marketing firms, however, are available to advise U.S. suppliers on public relations and marketing techniques which are compatible with the Brazilian marketplace. These agencies have access to research institutes, film companies, printing houses, sound recording companies, and direct-mail firms, all catering to advertising firms. Market Research Studies Valuable market research is provided by the U.S. Department of Commerce, International Trade Administration (ITA). ITA's US&FCS staff at the U.S. Embassy in Brazil prepares brief industry sector analyses (ISAs). In addition, ITA contracts full-scale international market research (IMR) for certain target industries. These studies on key sectors in Brazil are available for the following subjects and may be requested through the local Commerce/ITA district office, listed in the U.S. Government pages of your local telephone directory. Industry Sector Analyses (ISAs) Textile Machinery (Jan 1990) Computer Software CAD/CAM/CAE (Feb 1990) Consumer Goods (March 1990) Educational Training in U.S. (April 1990) Telecommunications (April 1990) Food Processing Equip. (May 1990) Avionics and Air Traffic Control (June 1990) Medical Equipment (June 1990) Metalworking Machinery (July 1990) Free Trade Zone - Manaus (July 1990) Industrial Organic Chemicals (Sep 1990) Printing and Graphic Arts (Sep 1990) Computers and Peripherals (Oct 1990) Elect. Production/Test Equip. (Oct 1990) Oil and Gasfield Machinery (Nov 1990) Analytical/Scientific Instruments (Sep 1990) Avionics and Ground Support Equip. (Oct 1990) Textile Industry (Jan 1991) Security and Safety Equip. (Feb 1991) Broad Woven Textile Fabrics (March 1991) English Language Training (March 1991) Mining Machinery Parts and Equip. (April 1991) Distributed Control Digital Sys. (April 1991) Franchising Services (April 1991) Integrated Circuits (April 1991) Discretionary Pleasure Travel to USA (May 1991) Local Area Networks (May 1991) Consumer Electronics (June 1991) Computerized Systems for Apparel (June 1991) Potentiometers (June 1991) Data Communication Equipment (July 1991) Material Testing and Quality Control Instruments (July 1991) CASE Software (July 1991) CAE Software (Aug 1991) Aircraft and Parts (Aug 1991) Offset Printing Machinery (Aug 1991) Foundry & Rolling Mill Machinery (Aug 1991) Broadcasting Equipment (Sep 1991) Parts & Components For Air Conditioning and Refrigeration Equip. (Sep 1991) Industrial Waste Treatment Equip. (Sep 1991) Circuit Component Assembly Machines (Oct 1991) Drill Bits (Nov 1991) Turbines For Thermal Power Plants (Dec 1991) Computers and Peripherals (Jan 1992) Software and Services (Feb 1992) Industrial Air Pollution Control Equip. (March 1992) Desktop Publishing Software (March 1992) Hybrid Integrated Circuits (April 1992) Metal Cutting Machine Tools (April 1992) Underground Mining Equipment (April 1992) Other Services The U.S. department of Commerce is an additional source of marketing information and potential Brazilian business contacts. The Comparison Shopping Service (CSS) and Agent Distributor Service (ADS), available through U.S. Department of Commerce District Offices, are important market assessment and contact services designed to assist U.S. firms in identifying potential agents, representatives, distributors and licensing or joint venture contacts in foreign markets. Government Procurement Brazilian Government imports (direct and indirect) account for around 20 percent of Brazil's capital goods imports. In part, this is due to the considerable financial backing (domestic and international) given to infrastructure projects such as highway construction, hydroelectric plants, port improvement, subway construction, etc. It is worth noting that the Brazilian Government buys a preponderant share of total imports in at least two product categories -- electric power generation and distribution and telecommunications -- while other imports, such as petroleum are controlled by government monopolies. In cases of indirect importation, such as purchasing foreign goods through local intermediaries, the government prefers to work through Brazilian firms. This policy is primarily to ensure the government's ease in taking legal action against a supplier if necessary. A Brazilian contractor with a government agency may import duty free in the name of the agency. In this case, the equipment must remain in the country. If the contractor later uses the equipment in Brazil for private purposes, a prorated duty must be paid. Services The Brazilian National Industrial Property Institute (INPI) regulates the contracting of foreign specialized technical services through application of the Law of Similars concept. INPI's definition of "specialized technical services" is broad, encompassing management studies, engineering services, industrial research and development, and use of computer systems in programs. In practice, it is almost impossible for foreign service firms to operate in the public sector in Brazil unless work is performed in association with a local firm. To be considered Brazilian, a firm must have majority Brazilian capital participation and decision making authority -- "operational control." As of mid-1989, it is unclear how the new constitution's requirements for "Operational Control" will be applied. A Brazilian state enterprise is permitted to subcontract services to a foreign firm if domestic expertise is not available for the specific task. A foreign firm may only bid for government contracts to provide technical services when no qualified Brazilian firm exists. Regulations governing this are contained in Decree Law Number 64.345 of April 10, 1969. In case of international bidding to supply goods and services for specific government projects, successful bidders are required to have local representation -- i.e., "legal presence" in Brazil. Since the open period for bidding is often as short as one month, it is highly advisable to have a permanent resident in Brazil able to act on tenders as soon as they are announced. A U.S. supplier may find that including local purchases of Brazilian goods and services within its bid, or significant subcontract association with a Brazilian firm, will improve the chance for success. Similarly, a financing proposal that includes credit for purchase of local goods and services for the same project will be more attractive than one that ignores local business. The US&FCS staff in Brazil advises U.S. exporters interested in supplying goods and services for Brazilian Government projects that advance descriptions of U.S. suppliers' capabilities can often be influential in gaining a sale. These early proposals can be effective even before the exact terms of an investment plan are defined or the design of a project's specifications is completed. Such a proposal should include financing, engineering, and equipment presentations. Credit Export-Import Bank of the United States The Export-Import Bank of the United States (Eximbank) offers a range of loan and loan guarantee programs to facilitate exports of U.S. goods and services. Eximbank's programs include Eximbank direct loans, commercial lender working capital loan guarantees, commercial lender loan guarantees, and intermediary loans. Eximbank works in conjunction with the Foreign Credit Insurance Association (FICA) to offer various export insurance programs, including short- and medium-term export credit insurance, multi-buyer insurance, letter-of-credit insurance, and lease insurance policies. Other Eximbank guaranteed export credits are available from the Private Export Funding Corporation (PEFCO), which borrows in the commercial market and re-lends for exports. Additional information on Eximbank, FICA, and PEFCO programs can be obtained from: Export-Import Bank of the United States 811 Vermont Avenue, N.W. Washington, DC 20571 (202) 566-8990 Eximbank Small Business Hotline: (800) 424-5201 U.S. Banks in Brazil Brazil has one of the most sophisticated financial systems in Latin America. U.S. commercial banks have been in Brazil since 1915, and numerous American banks have a presence in Brazil today: The First National Bank of Chicago Sao Paulo First Interstate Bank of California Rio de Janeiro Banco de Boston The First National Bank of Boston Sao Paulo (branch in Brasilia) Citicorp Investment Bank Citibank N.A. Sao Paulo (branch in Brasilia) Manufacturers Hanover Trust Company Sao Paulo American Express do Brasil American Express Sao Paulo (branch in Rio de Janeiro) BankCal The Bank of California Banco Chase Manhattan S.A. Sao Paulo NorChem Banco Noroeste Chemical de Investimento S.A. Sao Paulo Bank of American International Sao Paulo Bankers Trust Company Rio de Janeiro (branch in Sao Paulo) Chemical Bank Noroeste-Chemical S.A. Leasing (Norchem) Sao Paulo Continental Bank International Continental Illinois National Bank & Trust Co. of Chicago Sao Paulo Crocker National Bank Sao Paulo Morgan Guaranty Trust Company of New York Sao Paulo Pittsburgh National Corporation Sao Paulo T. Henry Schroder Bank & Trust Company Rio de Janeiro (branch in Sao Paulo) Security Pacific International Bank Sao Paulo Texas Commerce Bank N.A. Sao Paulo The Citizens & Southern National Bank Rio de Janeiro The Philadelphia National Bank Ltda. Sao Paulo Salomon Brothers, Inc. Sao Paulo Standard Chartered Bank Rio de Janeiro Investing in Brazil Investment Climate Brazil's basic legislation governing foreign investment has been in place for about 30 years. Under this basic legislation, foreign capital is granted the same treatment as national capital, and foreign investment is encouraged. However, laws, regulations, and policies governing investment were instituted during the past two decades that combined to create a very complex, and in some sectors, restrictive investment climate. To conform with its overall economic objectives of promoting growth and development by fostering economic modernization and greater international competitiveness, the current Brazilian government is implementing reforms aimed at improving the investment climate to attract greater foreign investment and inflows of foreign technology. Though prior Central Bank approval is required, foreign investors are generally free to invest directly in legitimate ventures in sectors not reserved for Brazilian companies. Government policy discourages or prohibits foreign investment in certain sectors of the economy, such as petroleum production and refining, basic telecommunication services, and most public utilities. Government policy seeks to boost nationally owned development of sectors such as informatics and telecommunications that are perceived to be of "strategic importance" for long-term technological development in Brazil. Brazil's 1988 constitution contains certain provisions which pose, or threaten to pose, restrictions on foreign investment. The constitution differentiates between majority Brazilian owned companies -- Brazilian national capital companies (BNCC) -- and Brazilian companies with majority foreign capital, such as subsidiaries of multinational firms. A BNCC must be permanently controlled by individuals domiciled in Brazil (or the Brazilian Government) who retain majority ownership of the firm's voting capital and decision making authority (Article 171.II). Fiscal benefits and preferential treatment in government procurement are granted to BNCCs. The 1988 constitution provides for government monopolies in petroleum extraction and refining and basic telecommunications services, and restricts foreign participation in health services and mining. The current administration has proposed constitutional amendments to remove these and other restrictions on foreign investment. These proposed amendments will be considered in 1993 as part of a scheduled constitutional plebescite. Investors seeking to obtain information on sources of supply in Brazil should contact the Brazilian Government Trade Bureau (551 Fifth Avenue, Suite 201, New York, N.Y. 10176. Tel: 212/916-3200). Registration of Foreign Capital Capital, loans, and technology agreements must be registered to ensure remittance rights. Law Number 4131 of September 1962 regulates the registration and repatriation of foreign capital and resultant profits. The provisions of this law and subsequent modifications were consolidated in Decree Law Number 55.762 of February 1965. In order to qualify for the remittance of profits, foreign capital must be documented and registered with the Central Bank either by the foreign owner or the local entity. Investments can be made in the form of currency, tangible goods, or intellectual property, provided it is registered with the National Institute of Industrial Property (INPI). In general, currency investments can enter Brazil freely, but investments in the form of goods require prior authorization by the Central Bank. Any new investment or increases must be reported within 30 days. Distinctions should be made for: 1. foreign capital invested through the remittance of cash or in the form of equipment; 2. reinvested profits; and 3. other increases in foreign capital (including approved credits for technology). Reinvested profits in this context are defined as those profits earned in Brazil on registered foreign capital which have been retained and capitalized. Registration of such capital must be made both in local currency and in the currency of the country to which the profits could have been remitted. For remittance purposes, technology and related agreements must be registered with INPI and with the Central Bank. INPI registration of a technology agreement involves an appraisal of the need for the services to be rendered and the local availability of alternative technology. In the case of royalties, registration of the contract depends on proof that the related patent or trademark is duly registered in Brazil and is still valid. Brazilian regulations require that company balance sheets be adjusted for inflation through the application of an official adjustment index (currently the "TR") to net worth and permanent assets. Increases in capital from inflation adjustments are translated into the currency of registration. Restrictions on Foreign Investment Investment in certain sectors of the Brazilian economy is subject to restriction and requires Central Bank approval. This procedure allows the government to control market access through investment restrictions and prohibitions. In addition to actively restricting foreign investment in certain sectors for nationalistic or security reasons, foreign participation is limited by extensive state ownership characteristic of Brazil. Industries in which investment opportunities are reserved for Brazilian nationals include: petroleum and mineral exploration and refining, fishing, domestic airlines, the merchant marine, information media, and most utilities. Foreign firms also have been barred from participation in the country's program for producing alcohol as a gasoline substitute except on an export-only basis. Foreign investors are subject to restrictions, but are not barred from participating, in other sectors such as petrochemicals, agriculture, telecommunications, aircraft, and informatics. In the petrochemical sector, for example, the prevailing form of ownership is the tripartite model in which the government-owned Petrobras, private Brazilian investors, and foreign investors each take a one-third share in the venture. In the telecommunications industry, the government maintains a monopoly on provision of basic telephone and telex services. Under the 1988 constitution, all mineral resources are property of the state. Exploration of mineral resources can be undertaken only by Brazilians and only with national capital. In general, firms operating in communications, information media, and certain capital goods sectors can expect to be pressured to take on minority shareholders. For most projects in basic sectors such as insurance, the government seeks majority Brazilian ownership. Foreign ownership in financial institutions is restricted to minority control, and foreign banks intending to open branch offices require Central Bank approval. Direct or indirect foreign ownership of real estate is strictly regulated and subject to limitations as to the amount of real estate owned. Foreign investors may not own property within 150 kilometers of Brazil's land borders or coastlines. In the Amazon Basin, considered a national security area, foreigners may not own more than 3,500 hectares of land for any purpose. In addition, National Security Council permission is required for a new foreign investment in approximately 75 other national security zones. Purchases of large rural tracts are subject to the approval of the Ministry of Agriculture or the Ministry of Industrial Development, depending on the intended use. Additionally, in 10 Sao Paulo municipalities, foreign companies are allowed to purchase a maximum of 750 hectares. This requirement was imposed because of the heavy concentration of foreign firms in the area. Under the U.S.-Brazil Investment Guaranty Agreement, the U.S. Overseas Private Investment Corporation (OPIC) insures U.S. investments in Brazil for certain risks. Repatriation of Capital and Earnings Foreign capital (currency, capital goods, machinery, and intangible goods such as patents and trademarks) must be registered with the Central Bank to ensure the right to remit profits and repatriate the principal. Registration of investment inflows must be applied for within 30 days of the inflow and such funds should be directed to a local company established to do business in Brazil. Likewise, reinvestment should be registered with the Central Bank to increase the effective "base" from which total investments and profits may be repatriated. Profits may only be remitted on capital brought into Brazil or on reinvestment of profits derived from such capital. As previously mentioned, Law Number 4131 of September 3, 1962 established the basic criteria for repatriation of foreign capital and profits arising from foreign investments. This was later modified by Law Number 4390 of August 29, 1964 and Decree Law Number 55.762 of February 17, 1965. Capital (including reinvestment), up to the amount registered with the Central Bank, may be repatriated without payment of tax nor limitation as to period or amount. Quantities in excess of the registered foreign currency (i.e., capital gains) require special permission before being repatriated and are subject to withholding tax. Repatriation of quantities exceeding registered capital is subject to a 25 percent income tax. Dividends and branch profits on registered foreign investments are freely remittable. While there is no limit on the amount of profits remitted, an income tax of 25 percent is with held. Law number 8383 of December 30, 1991 reduces this income tax to 15 percent as of January 1, 1993 and, effective January 1, 1992, eliminated supplemental taxes on remittance of "excess profits." Investment capital resulting from debt conversion must remain in Brazil for a 12-year period before remittance is permitted. Resultant dividends may be freely remitted (according to basic profit remittance regulations). Remittances of royalties or technical service fees by a subsidiary established in Brazil to its head office abroad are permitted under Law 8383 (not permitted for branch offices in Brazil) provided that the technology agreement has been registered with INPI. Payments of royalties or technology fees abroad are deductible for income tax purposes by the Brazilian subsidiary. The minimum repayment period for foreign loans is eight to 10 years (when qualifying for tax incentives), with a grace period of 30 months before the first repayment of principal. The loan may be repaid in equal installments throughout the remainder of the period of the loan (5 1/2 or 7 1/2 years, respectively). Subject to these limitations, no restrictions are imposed on the payment of loan principal, provided that the financial contract is registered with the Central Bank. Interest is freely remittable within the terms of the registered loan contract. Supporting documentation must be presented for approval of any remittance abroad of any funds. When profits or other forms of taxable income are involved, proof must also be furnished that the appropriate withholding tax has been paid. Foreign businesspeople should not, in general, try to solve their problems directly with the Brazilian Government, but rather work through their attorneys or freight forwarders. Legislation and regulations affecting business in Brazil tend to be short-lived; the system is complex; and a little knowledge may be worse than none. The general rule is to comply strictly with the terms of import permits; do not take advantage of technical errors or bona fide mistakes, since this can create further complications. Intellectual Property Protection A major concern of foreign companies trading with Brazil is that protection of intellectual property rights is often inadequate and uncertain. Brazil is a signatory to the Paris, Berne, and Universal Copyright conventions on intellectual property rights (IPR) protection. Most of the country's statutes on IPR are consistent with Western standards. However, serious gaps exist regarding patent protection for pharmaceuticals (current laws do not provide for pharmaceutical patent protection), trademarks (protection for well known marks is not universally granted), and trade secrets (weak enforcement provisions). Legislation is before Brazil's congress to address most of these issues. Brazil's technology-transfer regulations affect most IPR protection -- from trade secrets to computer software. By law, the Brazilian National Industrial Property Institute (INPI) is required to approve all transfer-of-technology agreements and all patent and trademark licenses. Brazil does not have a statue that specifically provides protection to trade secrets or know-how. There is only an indirect form of protection, normally of five-years' duration, derived from the unfair competition section of Brazil's Industrial Property Code, Article 178, Item XII. Brazil's Copyright Law of 1973 is generally consistent with accepted Western standards. Issues of concern to foreign patent holders are INPI's slow processing of patent applications; the federal judiciary's uncertain application of patent law; the potential for arbitrary interpretation of compulsory licensing requirements; and Brazil's statutory prohibition against either process or product protection for pharmaceutical patents. A bill is pending before Brazil's congress which would address many of these concerns. The bill's projected date of passage is uncertain. Guidance for the Business Traveler Abroad Entrance Requirements While foreign business visitors may enter Brazil with only a tourist visa, Brazilian law requires that they must have a temporary (business) visa if they plan to transact business. "Business" would include signing legal documents, engaging in financial or commercial transactions, and working or engaging in research. Visa status may be changed while in Brazil. If the change is from a temporary to a permanent visa, duty-free entry of personal effects is not permitted. Tourist visas are valid for 90 days. A temporary business visa is valid for 90 days. Transit visas are valid for 10 days and require travelers to enter and exit through the same port. Details regarding Brazilian visa procedures and requirements are provided in literature available on request from the Consular Section, Embassy of Brazil, 3006 Massachusetts Avenue, N.W., Washington, DC 20008. Tel: (202) 745-2828. Business Etiquette U.S. business visitors must become accustomed to several business conditions that are specific to Brazil. Compared to the United States, the pace of negotiation is slower and is based much more on personal contact. It is rare for important business deals to be concluded by telephone or letter. Many Brazilian executives do not react favorably to quick and infrequent visits by foreign sales representatives. They prefer a more continuous working relationship. The Brazilian buyer is also concerned with after-sales service provided by the exporter. The slower pace of business negotiation does not mean that Brazilians are less knowledgeable in terms of industrial technology or modern business practices. In fact, one should be as prepared technically when making a call on a Sao Paulo firm as on a Chicago firm. In addition, a U.S. business person is encouraged to learn as much about the Brazilian economic and commercial environment as possible before doing business in that country. While office hours in Brazil are generally 8:30 a.m. to 5:30 p.m., decision makers begin work later in the morning and stay later in the evening. The best times for calls on a Brazilian executive are between 10 a.m. and noon, and 3 to 5 p.m., although this is less the case for Sao Paulo where appointments are common throughout most of the day. Lunch is usually two hours. It is customary in Brazil to drink coffee during a business appointment. While many Brazilians may speak English, they may wish to conduct business in Portuguese. The non-Portuguese speaking U.S. executive may need an interpreter on more than 50 percent of business calls. Correspondence and product literature should be in Portuguese, and English is preferred as a substitute over Spanish. Specifications and other technical data should be in the metric system. Travel and Transportation Air Travel - Brazil has three major airlines, Varig/Cruzeiro, Vasp, and Transbrasil. These companies provide efficient service throughout the country. Brazilian regional airlines provide service to their respective parts of the country. Air taxi services are available at most airports. Scheduled airline fares are comparable to those in Western Europe. Business people, travelers, and residents spend a good deal of time among the four most important cities -- Sao Paulo, Rio de Janeiro, and Brasilia and Belo Horizonte. Sao Paulo is Brazil's center for commerce and manufacturing; Rio de Janeiro is important for its service industries and several state companies; Brasilia is the seat of government and location of foreign embassies. An excellent air bridge (or "ponte aerea") service facilitates travel among these three cities. During rush hours, flights between Rio de Janeiro and Sao Paulo leave every 15 minutes from conveniently located downtown airports. For weekend travel, return reservations must be confirmed for Rio on Friday evening and for return to Sao Paulo or Brasilia on Monday morning. Local Transportation - Meter taxis, identified by roof lights, are plentiful in urban areas. However, getting about in Sao Paulo and other large cities can still be a problem. It is not always possible to rely on taxis when making calls. They are extremely difficult to find at certain hours of the day and in certain sections of the city. Fares are inexpensive, but frequently readjusted to compensate for the high inflation rate. A table used to adjust fares is posted on the inside of the taxi's rear window. It is not necessary to tip. Radio taxis are more expensive but convenient and reliable. In Rio call: 270-1442, in Sao Paulo call: 251-1733, in Brasilia call: 224-3330 or 224-7474, and in Belo Horizonte call: 464-3999. Rental cars are common, especially at airports. They can be costly compared with other forms of transportation. Sao Paulo is very confusing for a newcomer; driving is not recommended. Time Local time in Brazil is two hours ahead of Eastern Standard Time. The country observes daylight savings from December to February. When daylight savings is in effect in the United States, Brazilian time is one hour ahead. When daylight savings is in effect in Brazil, Brazilian time is three hours ahead. Entertainment Cinemas in Rio and Sao Paulo show a wide variety of up-to-date foreign films in the original language with Portuguese subtitles. For those who understand Portuguese, theater is lively, especially in Sao Paulo. Music and dance performances are also common is these two cities. Nightclubs for all tastes are plentiful in Rio and Sao Paulo. Discos are found in many of the better hotels. Brasilia, by contrast, is less culturally sophisticated than Rio and Sao Paulo. In Rio, much of the entertainment is on the beaches. Copacabana covers a 6 kilometer crescent and is the largest and most famous. The beaches of Ipanema and Leblon are more chic. Further along the coast, beaches at Sao Conrado and Barra tend to be less crowded. Residents escape the pollution of Sao Paulo for a day at the beach with an hour-long drive to Santos or Guaruja on the coast. Holidays The following holidays are designated by the Brazilian Government: New Year's Day - January 1 Carnival* - Four nights and three days preceding Ash Wednesday Good Friday Easter Sunday Tiradentes Day - April 21 Labor Day - May 1 Corpus Christi - May 25 Independence Day - September 7 "Nossa Senhora Aparecida" (Our Lady Appeared) - October 12 All Souls Day - November 2 Proclamation of the Republic - November 15 Immaculate Conception - December 8 Christmas Day - December 25 In addition, various state holidays and other religious and federal holidays are proclaimed throughout the year. Some of these include: San Sebastian Day - January 20 (Rio de Janeiro only) Anniversary of the Founding of the City of Sao Paulo - January 25 (Sao Paulo only) "Nossa Senhora Dos Navegantes" - February 2 (Porto Alegre) * Avoid arriving during Carnival unless reservations have been confirmed in advance. General Information Foreign Exchange -- Banks are open from 10 a.m. until 4:30 p.m., Monday through Friday, for purchases of local currency. The Brazilian Government has recently followed a policy of daily mini-devaluations of the currency. When leaving Brazil, take only a minimum of local currency to cover taxi fare to the airport, the exit tax (approximately $6) and any last-minute purchases. Remaining cruzados may be converted back into hard currency at the official rate, provided official exchange receipts are shown. As of January 1989, there is a tourist exchange rate in Brazil that may differ from the official rate. The Brazilian Government has authorized the purchase and sale of foreign exchange at free market rates for purposes linked to tourism. These transactions may be undertaken by banks, travel agencies, exchange brokers, and hotels. Souvenirs -- The best buys for souvenirs and gifts are probably lace from the northeast, Amerindian arts, and loose precious stones bought from a reputable dealer. Manaus is an inland duty-free port where electronic consumer goods can be purchased at excellent prices. Street Crime -- In Rio de Janeiro, (particularly along Copacabana and Ipanema beaches) and also in parts of Sao Paulo, muggings are common despite police patrols. Visitors should be as "street wise" as they would be in any large metropolitan area and use common sense and take precautions. These include the following: travel in groups as much as possible; walk only in well-lighted areas; dress casually; do not carry more cash than you need for the occasion; leave valuables -- including all rings, bracelets, watches, etc. in the hotel safe; seek advice from your hotel porter on the local areas to avoid; and videos and cameras brand you as a tourist -- take them out only when necessary. * * * * * * * * * * * * * * * * The information supplied in this report is not intended to serve in lieu of legal counsel. Such advice may be obtained from attorneys in the United States who specialize in foreign law. A list of attorneys in Brazil may be obtained from the U.S. Embassy in Brasilia or Counsulate General offices in Sao Paulo or Rio de Janiero. U.S. Diplomatic and Consular Posts in Brazil American Embassy Avenida das Nacaes, Lote No. 3 70403 - Brasilia, DF, Brazil Tel.: (55 61) 321-7272 Telex: (55 61) 1091 FCS Fax: (55 61) 225-3981 American Consulate General Rio de Janeiro: Avenida Presidente Wilson, 147 20030 Rio de Janeiro, RJ, Brazil Tel.: (55 21) 292-7117 Telex: (55 21) 21466 Sao Paulo: Rua Padre Joao Manuel, 933 01411 Sao Paulo, SP, Brazil Tel.: (55 11) 881-6511 Telex: (55 11) 31574 Commercial and Agricultural offices at: Avenida Paulista, 2439 - lo. andar 01311 Sao Paulo, SP, Brazil Tel.: (55 11) 853-2011 Telex: (55 11) 25274 FCS Fax: (55 11) 853-2744 American Consulate Porto Alegre: Rua Cel. Genuino, 421 90010 Porto Alegre, RS, Brazil Tel.: (0512) 26-4288/26-4697 Telex: (0512) 2292 Recife: Rua Goncalves Maoa, 163 50070 Recife, PE, Brazil Tel.: (081) 221-1412 Telex: (081) 1190 American Consular Agent Bel}m: Avenida Oswaldo Rua Maceio, 62 69057 Manaus, Amazonas, Brazil Tel.: (092) 243-4546 Note: The Commerce Department's International Trade Administration has U.S. and Foreign Commercial Service offices in Brasilia, Sao Paulo, Rio de Janeiro, Bel}Belo Horizonte. Bibliography Business Guides (in English) 1. American Firms Operating in Brazil. A list of firms compiled by World Trade Academy Press, Inc., 50 East 42nd Street, New York, NY 10017; (212) 697-4999. 2. Brazilian-American Who's Who. Includes companies in the United States and their subsidiaries and affiliates in Brazil. Available from the Brazilian-American Chamber of Commerce, Inc., 22 West 48th Street, New York, NY 10036-1886; tel: (212) 575-9030. 3. Brazil Company Handbook. Contains data and information on major listed companies in Brazil. Also, Brazilian Privatization Program. Provides the international financial and investment community with information and data on privatization in Brazil. Order from the International Company Handbook, Gateway Lake Headquarters, 1280 S.W. 36th Ave. Suite 210, Pompano Beach, FL 33069-9826; tel: (305) 978-0553. 4. Foreign Business in Brazil -- A Practical Law Guide. (2nd edition), Thomas Benes Felsberg, 336 pp. Order from IBDT: Livereiros e Editores Ltda., Avenida Paulista, 1471, conj. 919, 01311 Sao Paulo, SP, Brazil. 5. Doing Business in Brazil. Pinheiro Neto & Co. Binder of monthly updates. Available for a yearly subscription from Matthew Bender Company, Customer Service Department, 1275 Broadway, Albany, NY 12201; (800) 833-3630. 6. Information Guide: Doing Business in Brazil (January 1991), Price Waterhouse & Company, International. Order from Distribution Center, Price Waterhouse & Company, P.O. Box 30004, Tampa, FL 33630; (813) 287-9000, or order from local branches. Free of charge. 7. Investment in Brazil (1992). Limited copies available from KPMG-Peat Marwick, Distribution Center, 3 Chestnut Ridge Rd., Montville, NJ, 07645, tel: (201) 307-7931. 8. Investing, Licensing and Trade Conditions Abroad: Brazil. Available in major libraries or from Business International, Subscriptions Department, One Dag Hammerskjold Plaza, 7th floor, New York, NY 10017; tel: (212) 460-0600. 9. Summary of Investment Legislation in Brazil. Banco do Brasil, 118 pp. Order from Banco do Brasil, 550 Fifth Avenue, New York, NY 10036; tel: (212) 730-6700. Free of charge. Business Guides (in Portuguese) 1. Anuario das Industrias. Comprehensive list of Brazilian manufacturers by product area. Order from Editora Pesquisa e Industrias Ltda., Rua da Consolacao 2043; 01031, Sao Paulo, S.P., Brazil; tel: (011) 259-1344. 2. Sao Paulo Yearbook. Annual directory of members of Sao Paulo branch of the American Chamber of Commerce. Order from the American Chamber of Commerce for Brazil; C.P. 12518; 04798, Sao Paulo, S.P., Brazil; tel: (011) 246-9199. Business Newsletters and Magazines (in English) 1. Brazilian News Briefs. Summary of important items from the Brazilian press and other sources. American Chamber of Commerce for Brazil; Avenida Rio Branco, 123, 21 andar; C.P. 916; 20000, Rio de Janeiro, R.J. Brazil. 2. Brazilian Business Trends. A weekly report to management on the Brazilian economy. Order from Analise Editora Ltda., Avenida Pedroso de Morais, 433; 05419 Sao Paulo, S.P. Brazil; tel: (011) 815-0879. 3. Brazilian-American Business Review/Directory (1991). Brazilian-American Chamber of Commerce, Inc., 22 West 48th Street, New York, NY 10036-1886; tel: (212) 575-9030. 4. Business Latin America. Weekly newsletter containing business articles on Brazil and other Latin American countries. Published by Business International, Subscriptions Department, 215 Park Avenue South, 18th floor,New York, NY 10003; tel: (212) 460-0600. 5. Gazeta Mercantil (New York Weekly Edition). English excerpt from the Brazilian daily business newspaper, Gazeta Mercantil. Order from Flavio Ebert, 220 East 42nd Street, room 930, New York, NY 10017; tel: (914) 665-9867. 6. News Bulletin. A monthly review of Brazilian business and financial news. Brazilian-American Chamber of Commerce, Inc., 22 West 48th Street, New York, NY 10036-1886; tel: (212) 575-9030. Free of charge to Chamber members. 7. Update. A bilingual newsletter on the investment climate and economic conditions in Brazil. Order from the American Chamber of Commerce for Brazil, C.P. 12518, CEP 04798, Sao Paulo, S.P., Brazil; tel: (011) 246-9199. Business Newsletters and Magazines (in Portuguese) 1. Banco Central do Brasil. Informativo Mensal. Available on request from Economics Department, Banco Central do Brasil, Setor de Autarquisas Sul, 70070 Bras lia, D.F., Brazil; tel: (061) 224-7115. 2. Banco do Brasil/Monthly letter. Order from International Division (ASPLA), Banco do Brasil, C.P. 1150, 20000 Rio de Janeiro, R.J., Brazil. 3. Brazilian Business Trends. Order from Rua Jos} de Freitas Guimaraes, 65, 01237 - Sao Paulo - SP, Brazil; tel: (011) 263-1295. 4. Carta Semprel de Brasilia. Order from Setor Commercial Sul, quadra 06, Bloco A, No. 157 Edificio Bandeirantes, Salas 301/304, 70300, Brasilia, DF, Brasil; tel: (061) 321-1324. 5. Conjuntura Economica. A monthly magazine with in-depth articles on Brazil's economic, commercial, industrial and financial situation, and many statistical tables. Order from: Fundacao Getulio Vargas, Praia de Botafogo 190, C.P. 9052, 22253, Rio de Janeiro, R.J., Brazil; tel: (021) 551-1542. 6. Gazeta Mercantil. A Brazilian daily business newspaper. Also, Balan o Anual. A yearly business guide magazine with articles and statistical tables on Brazilian companies and industries. Order both publications from: Gazeta Mercantil S.A., Rua Major Quedinho 90, C.P. 6503, 01050 Sao Paulo, Brasil; tel: (011) 256-3133. 7. Exame. A monthly general business magazine. Veja. A weekly general interest news magazine. Order both from Editora Abril, Avenida Otaviano Alves de Lima, 800 Sao Paulo, S.P., Brazil. 8. Manchete. A weekly general interest magazine. Tendencia. A monthly business magazine. order both from Bloch Editores, Rua do Russel, 766, 22210 Rio de Janeiro, R.J., Brazil. 9. Visio. A weekly, general news magazine. Quem e Quem na Economia Brasileira. An annual who's who of the Brazilian economy with sector analyses and financial data on the more important firms within each sector. Subscriptions for both publications available from: Visao Magazine, National Press Building, Room 735, 529 14th Street, N.W., Washington, DC 20045, (202) 347-3810. 10. Electricidade Moderno (Electrical industry). Quimica e Derivados (Chemical industry); Transporte Moderno (Transportation) DeFilippes Company. 420 Lexington Avenue, Room 1760, New York, NY 10170, tel: (212) 697-8185. 11. Data News (A major computer industry publication in Brazil). Anuario de Informatica CWB (Yearbook). Order from: C.W.B. Servicos e Pulicacaes, Rua Alcindo Guanabara 25, 10 andar; 20031 Rio de Janeiro, R.J., Brazil; tel: (021) 240-8225. 12. Panarama do Setor de Informatica (Special yearly). Secretaria Especial de Informatica, SAS Lote 6, C.P. 040390, 70070 Brasilia, DF, Brazil, tel. (061) 225-7475. 13. Letter. Setor Comercial Sul, quadra 08, Bloco B-50, Sala 443, 70333 - Brasilia - DF, tel: (061) 225-0811. Brazilian Statistical Sources (in Portuguese) 1. Anuario Estatistico do Brasil. Available from Fundacao IBGE (Instituto Brasileiro de Estat stica), Avenida Franklin Roosevelt, 166, 20000 Rio de Janeiro, R.J., Brazil. 2. Comercio Exterior do Brasil (import/export statistics). Centro de Informac es Economico-Fiscais (CIEF), Secretaria de Receita Federal, Ministerio da Fazenda, 70000 Brasilia, D.F., Brazil. 3. Boletem do Banco Central do Brasil (banking and finance). Banco Central do Brasil, Departamento Economico, C.P. 04-0170, 70000 Brasilia, D.F., Brazil. Other Information Sources 1. Annual Report on Exchange Restrictions. International Monetary Fund. Approximately 500 pp. Worldwide survey of exchange regulations with section on Brazil. Available from Publications Office, International Monetary Fund, Washington, DC 20431; (202) 623-7430. 2. Douanes, International Customs Journal: Brazil, 1986. Available from the International Customs Tariff Bureau, Rue de l'Association 38 - B, 1,000 Brussels, Belgium. 3. Manual de Atualizac o da Tarifa Aduaneira do Brasil, (Brazilian tariff book). Editora Agenco, Ltda.; Rua Senador Dantas, 75, 4 andar; 20037 Rio de Janeiro, R.J., Brazil. 4. Translations. List of translations of official Brazilian Government measures, with prices, available from American Chamber of Commerce for Brazil; Avenida Rio Branco, 123, 21 andar; C.P. 916; 20000 Rio de Janeiro, R.J., Brazil. 5. Country Labor Profile: Brazil, Bureau of International Labor Affairs S-5015, U.S. Department of Labor, Washington, DC 20210; (202) 523-7631. 6. Background Notes: Brazil, Office of Brazilian Affairs, Room 4262, U.S. Department of State, Washington, DC 20520; (202) 647-6541. Other organizations with Current Information on Brazil l. U.S. Chamber of Commerce, Room 619, International Division, 1615 H Street, Washington, DC 20062. Director of Latin American Affairs; (202) 463-5485. 2. Brazilian American Chamber of Commerce 22 W. 48th Street, New York, NY 10036; (212) 575-9030. 3. Council of the Americas 1625 K Street, N.W., Suite 1200 Washington, DC 20006; (202) 659-1547 4. Brazilian Government Trade Bureau (Commercial Information) 551 Fifth Ave., Suite 201 New York, NY 10176; (212) 916-3200 5. Brazil-Southern California Trade Association World Trade Center, #226 350 South Aqueroa Los Angeles, CA 90071; (213) 627-0634 6. Export-Import Bank of the United States, Annual Report 811 Vermont Avenue, N.W. Washington, DC 20571; (202) 566-2117