Thomson Reuters ONESOURCE Global Trade is currently promoting the “Exports More+” campaign in Brazil. This campaign aims to highlight the importance of exports as a strategic direction for companies by expanding their market segment and not relying solely on the local markets.
Companies gain benefits such as: new international business opportunities, increased company revenues and lower tax costs through the use of Special Customs Regimes through exports. Ultimately being an exporter can strategically place a company ahead of its competitors. The opening of new businesses in foreign markets requires companies to improve their process controls, mainly targeting the service time, quality and price.
Brazilian companies have in recent times, recognized the importance of being open and remain active in the international market not relying solely on the domestic market, minimizing the risks of facing localized crises and allowing international recognition of its products. The Brazilian government has been carrying out legal changes to allow companies to invest in foreign markets and ensure greater tranquility in their operations. These changes have maintained a positive trade balance in the last months of 2015.
Below are the top five tips being promoted in The “Exports More+” campaign:
- Prepare your company for new customers. For a company that decides to open up to new markets, it is important to organize the activities to meet the requirements of different international markets. The exports will require a different structure in the organization, both from an operational and managerial perspective. Each market will require special attention, so it becomes important to structure the entire company to meet the expectations of this market, as in offering quality, competitive prices, and respect to the delivery schedules for each market. And of course having an understanding of the agencies with which it has business relationship will ensure that there is an understanding of any restrictions, supporting the effort to not tarnish the company’s image.
- Use the Special Regimes. The Special Regimes provide benefits of suspension /exemption of taxes for imported goods and purchases in the domestic market for export; making it essential for the exported goods to compete on price in the international market position. One of the strengths Brazil has in its customs legislation is the diversity of special customs regimes, which are applicable in virtually all market segments (such as: automotive, textile, pharmaceutical, technology, oil, etc.). In Brazil, if a company does not take advantage of the use of different Special Regimes, then they are not competitive.
- Free Trade Agreements (FTA) FTA’s are a great opportunity to take advantage of cost savings through duty reductions and avoidance when exporting products. Since the goal of the FTA is to open new business in the international market and keep up with the competition, it is beneficial for exporters to engage in the markets with which Brazil has international agreements. Ultimately, participating in the benefits provided under the FTAs may bring significant financial gains for exporters and importers. Here are examples of the advantages:
- Benefits for the Importer: The Trade Agreements allow the buyer to acquire goods with reduction/exemption of import taxes, thus getting access to cheaper products.
- Benefits for the Exporter and the entire production chain: encourages domestic production, direct and indirect sales, expansion to foreign markets and consequently increase in profit margins.
- Economic: the Trade Agreements aim to coordinate foreign trade policies in the areas of customs and tax for the countries that are part of the agreement, encouraging these countries to trade their products to each other, with clear and precise rules. Thus, the economy of these countries grows, creates jobs, brings technological improvements and increases the ability to purchase and sale agreements of the countries members.
- Tariff barriers: decremented reduction in tariff rates on many commodities identified to encourage trading between countries.
- Removal of Tariff protectionist measures: elimination of any mechanisms and economic policy instruments that influence international trade, such as import quotas, anti-dumping, services, etc.
The 2015 Annual Global Survey by Thomson Reuters and KPMG noted that companies in Brazil may improve their knowledge of rules of origin as well as the applicability for the products they export to countries that maintain agreements with Brazil, including the MERCOSUR economic block. Almost 40% of the companies surveyed could not determine if their products are eligible for a Free Trade Agreement. This demonstrates the difficulty that most Brazilian companies have to comply with the rules to benefit their export operations with the participating countries.
- A control and management system within any organization is a large and expensive investment so it must be very well controlled and managed. The following are some of the reasons for the need of effective controls of information within companies:
- A management system is best suited to quickly update legal changes.
- Regulatory agencies are looking for improvements in technology and information capabilities in order to monitor the company’s operations enabling the agencies to require that companies have good controls.
- A management system supports the battle from increased competition by providing greater accuracy in planning operations and cost controls.
- A computer based solution with legal content of foreign trade information provides the users with updated changes and requirements by the regulatory agencies.
The consequences of demonstrated deficient controls:
- Rework due to unfamiliarity with the law.
- Not adequately control the process creates uncertainty for all the teams involved, as in any official audits there is a risk of penalty due to missing or inconsistent information.
- Resources and time spent on legal and operational research.
- Penalties, fines, administrative and financial losses.
- Risks to the company’s image with increased scrutiny by regulatory agencies.
In summary, companies are immersed in a dynamic and ever-changing world. A systematic solution to control operations and foreign trade management enables a company to:
- Know the weak points and support a solution for process improvements.
- Achieve greater competitiveness and efficiency in their operations by ensuring compliance with regulatory instructions.
- Identify the elements that enable them to anticipate issues and implement effective strategies in its international operations.
- Identify their operating costs and seek opportunities to control or reduce.
- Centralization of information for decision making and data.
- Establish links with business entities aimed at promoting exports. It is essential that companies are connected with the business and government sectors so that they can see and validate market opportunities to grow their business and not be held hostage to restricted markets.
It is highly recommended that companies validate and ensure that their export operations comply not only with legislation but also with their own business objectives. As an added measure, ensure that all employees directly or indirectly involved in the international negotiating process, know clearly the organization’s purposes. This can be accomplished through training and education, or through company-wide communications. These steps will protect the company’s image from risk and negative exposure from regulatory agencies, overpayments to the government and in the form of mitigating actions, and deviations in processes, etc. Thus allowing companies to become less dependent on the local market through new markets and ensuring success in your business.
To learn more about import or export, visit our ONESOURCE Global Trade page