The Improvement and Facilitation of Foreign Trade from Brazil.
Brazil’s foreign trade and business environment was known for its huge bureaucracy. As an example, Brazilian exports, despite the computerization of part of the processes, are subject to 46 different procedures, administered by 12 agencies. In imports, there are 72 obligations, controlled by 16 government agencies. Thus, complaints were recurrent about paperwork, delay, excess and unclear requirements to start a business or to export or import into Brazil.
Further, a complex framework of rules and regulations that were often not well organized and easily accessible, made the consolidated understanding of these procedures, especially those behind the import and export licensing regime, an extremely difficult task, even for operators specialized in foreign trade. The lack of standardization of procedures, the uncertainty about requirements and the increased costs due to the paperwork required somehow created a barrier for foreign investors.
The main concerns raised by companies and foreign investors in the import area referred to the import licensing process, especially with regard to the lack of clarity and standardization of procedures for issuing the Import License, the difficulty of communication with the consenting bodies and the length of procedures in general. Additionally, the costs and time required to complete foreign trade procedures were a constant and widespread concern of the private sector. The many documents that needed to be filed in different systems increased the costs and time of the trade procedure.
As a consequence, in order to modernize the business environment in Brazil and make it more transparent and simpler, recently, the Federal Government issued a new regulation to solve the above issues. The government’s intention behind this new regulation is to reduce bureaucracies and make requirements more transparent, as well as to create a safer environment for national and foreign investors by facilitating foreign trade in goods and services and incorporating into the law some corporate governance practices adopted internationally.
The text of the new regulation is divided into eight areas and, among the themes approached, facilitating foreign trade is one of the modifications presented. The purpose within this area is to reduce bureaucracy and attract investment by simplifying its requirements.
With the intent to remedy the above issues, the new regulation determines that the government and its bodies no longer can impose requirements based on the characteristics of the merchandise to be imported and the requirements for issuing the Import License can only be imposed if they are provided for by a normative act. Further, the text prohibits both the stipulation of a limit for customs values of import and export and the non-authorization or non-granting of licenses due to such values. An exception to this rule is the tax and customs regulations under the jurisdiction of Receita Federal Brasileira (equivalent to IRS), which will continue with its competence to identify tax fraud in foreign trade operations.
This is likely to create certainty when applying for an Import License, considering that all the requirements should be provided by the law, no longer subject to the sole discretion of the government employee analyzing the case and no longer subject to a limitation for values of import and export.
Additionally, another innovation by this regulation is that it institutionalizes the Portal Único de Comércio Exterior, forcing it to be used by all consenting bodies, also stipulating that all forms must be electronic and filled out through the Portal. The Portal consists of an IT system through which foreign trade operators are able to forward documents or data required by the Public Administration for the import, export or transit of goods to a single entry point accessible through the Internet.
It is likely that institutionalizing the system and forcing all government bodies to use it will eliminate duplicate paper records, reduce costs for importers and exporters and also simplify the procedures and communication with consenting bodies, which, as mentioned, were a concern for the private sector.
Also, this is a type of system adopted in different jurisdictions. Examples of this type of system can be seen in the United States (Automated Customs Environment), United Kingdom (UK International Trade Single Window), European Union (Eletronic Customs Initiative), Chile (SICEX) and Mexico (Ventanilla Única). Consequently, this is an illustration that Brazil is moving towards a standard applied internationally, which shall create more certainty.
Another modification is regarding Siscoserv. Siscoserv was a foreign trade obligation instituted in 2012 with the purpose of collecting data on imports and exports of services, intangibles and other operations that produce variations in equity between Brazilians and foreigners. All service exports above US$ 30,000 per month had to be registered with Siscoserv. This obligation was constantly criticized by service importing companies, for its complexity and bureaucratic burden. In fact, Siscoserv had been discontinued since October, 2020, and now, the regulation substitutes Siscoserv with a system supplied by data shared by federal public administration bodies and entities. Thus, the burden of sharing such information now relies with the government and no longer with the parties involved in the imports and exports of services, intangibles and other operations that produce variations in equity. This shall facilitate the procedures and reduce costs for foreign investor and parties involved in such operations.
In general, the changes proposed seek to align Brazil with the standards practiced internationally. With the implementation of the regulation, the Ministry of Economy believes that “Brazil can be included for the first time, in the short term, among the 100 best economies to do business in the country, and the objective is to reach the Top 50 of the ranking”. Today, the country ranks 124th out of 191 countries analyzed by the World Bank’s Doing Business report, which assesses the ease of doing business in different jurisdictions.
Finally, as we can infer from the comparison between the requirements before the new regulation and after the new regulation, it is very likely that these measures will have a positive effect on the daily lives of companies that operate in foreign trade. The effective implementation of these proposed measures can stimulate investment in Brazil, reduce legal uncertainty and the bureaucratic cost that hinders business in the country.
The RMSA team is prepared and have the essential experience to formulate the international planning necessary for foreign investors. Our team is experienced in this area and advises clients in all five continents, assuring compliance with the legislation and helping the expansion of their businesses within Brazil, simplifying the legal aspects of their operations and maximizing their results.
 The regulation (MP1.040/2021) was proclaimed by the President and is already in full force and effect, but to become a definitive law it depends on the final ratification of the Brazilian legislative. Nevertheless, due to the improvement and benefits it brings to the Brazilian business environment, it is practically certain that it will become definitive.