This is marketing research on the Textile machinery - Brazil industry and can include information on the background, market structure, definitions, competitors, trends and developments of textile machinery in Brazil. and is related to other topics such as cloth, wool and cotton.
Textile Machinery - Brazil 2009
Table of Contents
1 Consumption of textile machinery in units 2 Tariffs, non-tariff barriers, and import taxes 3 Taxes and fees on import of textile machine and parts 4 Customs regulations – still burdensome 5 Brazilian imports of textile machines 6 Investments in textile machinery (in milion US$) 7 Sources
Investments in machinery by the Brazilian textile and clothing industries totaled an estimated US$10 billion from 1990 to 2005. Of this total, US$2.9 billion were invested in the spinning segment; US$1.6 billion in the weaving segment; US$1.6 billion in the knitting segment; US$1.7 billion in finishing and US$1.9 billion in made up articles. The remaining US$300 million wereinvested in other segments, such as felt manufacturing and non-woven fabrics.
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Consumption of textile machinery in units
1990 1995 2000 2001 2002 2003 2004 2005 Brazilan Machinery 307 316 185 200 214 208 266 330 Imported Machinery 377 737 453 410 297 211 293 320 Total 684 1,053 638 610 511 419 559 650The United States is Brazil’s largest trading partner, with bilateral trade totally US$40 billion. Over the last decade, Brazil has taken substantial steps to reduce trade barriers such as tariffs, import licensing and other regulatory requirements. Tariff rates in Brazil, though, do remain high; favoring locally produced products, with average tariff rates averaging 15%. In 1991, the United States signed a trade and investment framework agreement with Mercosul, a customs union organization that includes Brazil, Argentina, Paraguay and Uruguay. Under this framework, the United States and Mercosul agreed to encourage reducing barriers to trade and investment. Movement on further reductions has been slow as Mercosul continues to face internal debates between members. The United States government does continue to work to facilitate business in Brazil on a bilateral basis, though moving on the most contentious issues has proven difficult. In this report, we will explain the trade regulations and barriers that may affect US companies seeking to export to Brazil.
Tariffs, Non-Tariff Barriers, and Import Taxes
Tariffs, in general, are the primary instrument in Brazil for regulating imports. All tariffs are ad valorem, with rates between 0-35%, levied on the Cost Insurance Freight (CIF) value of the import, with the exception of some telecommunication goods. razil’s average applied tariff was 17% in 2002. The average tariff in 1990, by contrast, was 32%. Brazil also maintains a higher average tariff on processed items than on semi-processed goods and raw materials.
Brazil and its Mercosul partners implemented the Common External Tariff (CET) on January 1, 1995. In November 1997, after consulting with its Mercosul partners, Brazil implemented an across-the-board three-percentage point increase on all tariffs (inside and outside the CET), raising the ceiling from 20 to 23%. The surcharge is being gradually phased out, but given uncertainties over Argentina’s economic recovery, its elimination may be delayed. Other Mercosul members have also unilaterally adjusted their tariffs in response to economic crises, and given these developments, the CET is currently full of exceptions.
As a means of providing incentives for the renewal of Brazilian industrial parks, the GOB launched a program to reduce taxes on machinery/equipment that has no similar/alternative national product—the so-called “ex-tarifario” program. Import Taxes on these capital goods can be reduced from an average of 14% to 4% pending appropriate request and procedures submitted to the proper authority, which is CAMEX (International Trade Chamber), a government board.
The tariff benefit will only be granted if there is no similar machinery produced in country. The influence of national associations is strong and can hinder the process. Associations such as ABIMAQ (Machinery producers) and ABINEE (Electronic and Electrical producers) are openly against a policy of tariff adjustment and can obstruct such requests by naming supposed ational producers of machinery/equipment similar to that intended for import.
Taxes and Fees on Import of textile machine and parts
Imports are subject to a number of taxes and fees in Brazil, which are usually paid during the customs clearance process. There are three taxes that account for the bulk of importing costs: the Import Duty (II), the Industrialized Product tax (IPI), and the Merchandise and Service Circulation tax (ICMS). In addition to these taxes, several smaller taxes and fees apply to imports. Note that most taxes are calculated on a cumulative basis.
Year I.I. (1) I.P.I. (2) I.C.M.S. (3) PIS/COFINS (4) 2004 0% 3.50% 18% 9.25% 2005 0% 2.00% 18% 9.25% 2006 0% 0% 18% 9.25%Source: SECEX
(1) Import Duty (II) In most cases, Brazilian import duty rates range from 10 - 20 %. which substantially reduces costs and means foreign producers have a better chance to compete with locally produced machinery.
(2) Industrialized Product Tax (IPI) The 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 IPI tax is not considered a cost for the importer, since the value is credited to the importer. Specifically, when the product is sold to the end user, the importer debits the IPI cost.
The Government of Brazil levies the IPI rate by determining how essential the product may be for the Brazilian end-user. Generally, the IPI tax rate ranges from 0 to 15 %. In the case of imports, the tax is charged on the product's CIF value plus import duty. Often one can note that usually a relatively low import tariff rate carries a lower IPI rate. Conversely, a relatively high import tariff rate carries a correspondingly higher IPI rate. As with value-added taxes in Europe, IPI taxes on products that pass through several stages of processing can be adjusted to compensate for IPI taxes paid at each stage. Brazilian exports are exempt from the IPI tax.
(3) Merchandise and Service Circulation Tax (ICMS) The ICMS is a state government value-added tax applicable to both imports and domestic products. The ICMS tax on imports is assessed ad valorem on the CIF value, plus import duty, plus IPI. Although importers have to pay the ICMS to clear the imported product through Customs, it is not necessarily a cost item for the importer, because the paid value represents a credit to the importer. When the product is sold to the end-user, the importer debits the ICMS, which is included in the final price of the product and is paid by the end-user.
Effectively, the tax is paid only on the value-added, since the cost of the tax is generally passed on to the buyer in the price charged for the merchandise. The ICMS tax due to the state government is based on taxes collected on sales by a company, minus the taxes paid in purchasing raw materials and intermediate goods. The ICMS tax is levied on both intrastate and interstate transactions and is assessed on every transfer or movement of merchandise. The rate varies among states: in the State of São Paulo, the rate is 18 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 are exempt from the ICMS tax. Most Brazilian exports are exempt. The ICMS on most textile machinery has been temporarily reduced to 8.8%.
(4) Social Program Tax (COFINS) These contributions can also be credited by the machine buyer, and compensated with the debit of the same duty applied in internal sales of products manufactured by the buyer.
NOTE: The ICMS reduction, as well as the import tariff reduction to 0%, is part of the Brazilian government’s efforts to help local companies improve the quality of their products by importing better technology. Such improvements are essential as the Brazilian textile industry, similar to the shoe industry, is facing very heavy pressure from Asian, particularly Chinese, competitors.
Customs Regulations – Still Burdensome
In 1997, the Brazilian Government established a computerized information system to monitor imports and facilitate customs clearance. This system, the Foreign Trade Integrated System (SISCOMEX), has facilitated and reduced the amount of paperwork previously required for importing into Brazil. Yet, importing into Brazil can still be burdensome and confusing. All Brazilian importers must be registered in the Foreign Trade Secretariat’s (SECEX’s) Export and Import Registry and receive a password given by Customs to operate the SISCOMEX. SISCOMEX has a graphic interface for the composition of electronic import documents and transmits information to a central computer. Customs Clearance in Brazil can be a time consuming and frustrating process, even compared with other countries in Latin America. In a report issued by ICEX (the Institute for Studying Foreign Trade), the average customs clearance time in Brazil was the slowest in the Hemisphere (150 hours). Products can be stopped at the port of entry for various reasons for minor errors or emissions in paperwork.
From April – June 2005, the union for Brazilian Customs conducted a work slowdown in an attempt to gain a dramatic increase in salary, which has risen only 9% in the last 10 years. For importers, the slowdown caused considerable delays. The Union notes that low salaries give rise to greater possibility for corruption. Anecdotes among importers abound to confirm the widespread nature of this problem. However, the Government of Brazil notes that customs inspectors’ jobs are hotly sought after and that the budget would not withstand such a dramatic salary increases. Work slowdowns, limited resources and strikes continue to hit Brazil’s Customs regime, hurting the country’s competitiveness.
Automatic Licenses
As a general rule, Brazilian imports are subject to the automatic import license process. This procedure requires the Brazilian importer to submit information concerning each import, including description of the product as well as the harmonized tariff classification number, quantity, value of the shipment, shipping costs, etc. This information will be used for purposes of preparing the Import Declaration (locally known as the DI). Subsequently, all information is fed into the SISCOMEX. Certain products and import operations are subject to special requirements, which should also be completed prior to the customs clearance process. For example, food products require additional approval by the Agricultural Ministry. Selected natural and synthetic rubbers require approval by the Environmental Agency (IBAMA). And a variety of product registrations may be required for asbestos, chemicals, pharmaceuticals, perfumes, cosmetics, and medical equipment.
Non-Automatic License (LI)
Whenever imports are subject to the Non-Automatic License (LI) regime, the importer must provide information concerning each shipment to Brazilian customs authority either prior to shipment or prior to customs clearance. The required information includes a description of the product as well as the harmonized tariff classification number, quantity, value of the shipment, shipping costs, etc. Importers must seek clearance prior to shipment if they want to bring in products subject to special controls from SECEX or approvals from other Brazilian government agencies. Such products may include used products in general; products that enjoy import tariff reductions, and imports that do not involve payment from importer to the exporter. Importers must seek clearance prior to customs clearance if they want to bring in products imported under the drawback regime or items destined for the free trade zones or the National Council for Scientific and Technological Development. Examples of those goods subject to such non-automatic licenses are: samples, donations, temporary admission, psychotherapeutic drugs, products for human or veterinary research, weapons and related products, radioactive products and rare earth metal compounds, crude oil, oil derivatives or other petroleum derivatives, anti-hemophilic serum, medications with plasma and human blood, and products that may be harmful to the environment such as CFC and airplanes.
Brazilian imports of textile machines
COUNTRIES 2003 2004 2005 US$M US$M US$M 1. GERMANY 75,325 83,933 88,753 2. ITALY 35,088 56,516 46,493 3. JAPAN 17,435 32,194 42,811 4. CHINA 8,115 17,516 30,348 5. SWITZELAND 21,013 19,107 24,199 6. TAIWAN 6,696 11,706 14,538 7. BELGIUM 12,069 21,980 13,479 8. SOUTH KOREA 3,885 5,689 12,490 9. UNITED STATES 6,489 10,216 11,728 10. FRANCE 3,951 8,238 8,338 11. CZECH REP 2,812 3,126 4,935 12. SPAIN 6,737 4,061 4,931 TOTAL 199,615 274,282 303,043Source: IEMI
The data show that, on a per unit cost, machinery exported from the US to Brazil is cheaper than all the top ten, except for Sweden and Taiwan. They are competitively priced, but are often not as high in technology. This does not mean, though, that the United States industry is behind technology wise. Rather, it is a statement on the standards associated with this industry. Brazilian textile machinery follow standards and rules issued by the ABNT (Brazilian Association of Technical Norms). Presently, most US machinery does not comply with such standards, meaning that much of more sophisticated machinery is not exported to Brazil.
European and Asian machinery competitors, though, follow similar guidelines as Brazilian machinery. The ABNT website, http://www.abnt.org.br, is an important tool for . If the textile machinery companies need assistance in navigating this sight and verifying standards for specific equipment, please let the U.S. Commercial Service know so that we may assist.
Imports of textile machinery by segment ( in US$ thousands)
SEGMENT 2003 2004 2005 1. SPINNING 56,756 73,659 98,119 For the treatment of fibres 14,514 17,483 20,840 Spindles 18,943 31,134 46,226 Treatment of yarns and twisting 3,631 4,706 6,255 Parts and accessories 19,667 20,336 24,789 2. WEAVING 61,257 83,375 68,996 Preparation and weaving 11,510 13,657 13,406 Looms for Fabrics 35,968 52,306 38,110 Complements for weaving 3,076 3,585 3,475 Parts and Acessories 10,705 13,827 14,005 3. KNITTING 23,964 34,971 34,976 Knitting machines 14,227 22,696 21,548 Parts and Acessories 9,737 12,275 13,428 4. FINISHING 22,716 31,521 34,880 5. FOR FELTS AND NON WOVEN 8,643 12,736 6,820 6. MAKING UP 37,460 57,027 76,299 For sewing 29,490 45,832 56,013 For embroider 4,055 6,637 15,729 Needles, parts and spares 3,915 4,558 4,557 TOTAL 210,795 293,289 320,090Source: IEMI Most of the inovations in the textile industry are a result of inovations in other sectors, mainly in the machine sector. But we can also say that the search for new types of fabric demand new technologies and new types of textile machinery in the Brazilian market. Between 1990 and 2005, investments of over US$ 10.5 billion were made in the modernization of the textile machinery , that is average US$ 656 million per year. US$ 3.0 billion were spent on spinning machinery, US$ 1.7 billion on weaving machinery, US$1.7 bilion on knit machinery, US$ 1.8 billion on finishing machinery, US$ 2.0 billion on clothing manufacturing machinery and US$ 0.3 billion on felt and non fabrics machinery.
In the chart below the annual amount of investments per segment and the participation of imported and Brazilian machinery in the total values.
Investments in textile machinery (in milion US$)
Segments
1990 1995 2000 2002 2003 2004 2005 Spinnings mills 239.2 248.8 168.8 178.5 128.5 166.8 213.6 Weaving mills 96.9 179.8 103.8 71.9 71.5 96.7 85.5 Knit mills 138.4 184.5 115.1 65.8 54.8 74.9 84.5 Finishing/Dying 90.3 168.1 113.7 86.7 73.9 98 117.4 Made up articles 106.5 239.6 109.3 81.9 73.4 103.6 134.1 Others 12.7 32.2 27.1 25.8 16.6 19.3 14.9 Total 684 1,053.00 637.8 510.6 418.7 559.3 650For U.S. companies looking to export and do business in Brazil for the first time, spending time in the country and establishing strong personal relationships with business partners is extremely important. Additionally, it is often a very good idea to visit potential partners at their business site to see first hand the sophistication of their business, the technology they use, and other intrinsic information that can help determine if the company is a quality match. Spending such face-to-face time with business partners is important, for while Brazil offers many opportunities in the textile machinery industry, it is a difficult, challenging and at times daunting market.
It is very important to note that when doing business in Brazil, it is important to consider a partner or opening a epresentational office that not only sells machines and parts, but also provides technical support and servicing for buyers. If a machine is sold and there is a malfunction or any other type of problem that needs technical support, it is important that it be solved locally. If not, opportunities for future sales could be seriously compromised.
Additionally, because of Brazil’s high interest rates, which have been lowered recently from 19% to 15%, local partners / customers often call for flexible financing options. Such specifics should be openly discussed and clearly spelled out in the written contract.
Tariffs on Textile Machinery
As a means of providing incentives for the renewal of Brazilian industrial parks, the GOB launched a program to reduce taxes on machinery/equipment that has no similar/alternative national product—the so-called “ex-tarifario” program. Import Taxes on these capital goods can be reduced from an average of 14% to 4% pending appropriate request and procedures submitted to the proper authority, which is CAMEX (International Trade Chamber), a government board.
The tariff benefit will only be granted if there is no similar machinery produced in-country. The influence of national producers associations is strong and can hinder the process. Associations such as ABIMAQ (Machinery producers) and ABINEE (Electronic and Electrical producers) are openly against a policy of tariff adjustment and can obstruct such requests by naming supposed national producers of machinery/equipment similar to that intended for import.
The process is not entirely transparent and alleged national producers of similar machinery are reportedly not required to provide proof of actual production. Consequently many of these reduced tariff requests are not granted.
Reducing the influence of national producers and improving the transparency of the ex-tarifario process would be beneficial to U.S. exporters of textile machinery. Nevertheless, Brazil is free to set its own tariff policies as long as it abides by its WTO bindings. Brazil’s higher tariffs on imports of capital goods, to include textile machinery, will ultimately only be addressed in the context of broader trade negoatiations such as the FTAA.
Sources
- U.S. Department of Commerce
