The Brazil Customs Challenge: How to Get Your Goods in and Get Paid

1. The Brazil Customs Challenge: How to Get Your Goods in and Get Paid Prepared by : Denise Carrion & Rubio Guimaraes Corporate Presentation

2. John Pattullo CEVA Logistics CEO CEVA Logistics Overview • GLOBAL • Revenue – €6.8 billion • Over 49,000 employees • 1,200 locations in over 170 countries • 10 million square meter combined storage space • BRAZIL • Employees : +6,500 • Warehouses : +585,000 sqm + • Branches : 60 Vision : “ CEVA will be the most admired company in the supply chain industry exemplifying Unity, Growth and Excellence”. Mission : Making Business Flow 4th largest global supply chain company 2 2 Corporate Presentation 5 September 2014

3. GlobalEnd-to-end Capabilities Manufacturing support Inbound Transportation Warehousing & Distribution Centers Outbound Transportation Aftermarket Services Final Mile Solution • Receipt and management of raw materials and products at source • Control • Re-packaging • Value-added services • A range of multi-modal capabilities • Time definite services • Customs brokerage • Web enabled tracking solutions • Dedicated and shared warehousing • Distribution network centers • Value-added services • Dedicated and/or shared transportation • CEVA Ground distribution services • Transportation network management • Spare parts warehousing • Spare parts distribution • Returns • Repairs • Reverse logistics • Call center services • Home delivery for finished goods • One and two man home delivery • After sales set up • Installation • Reverse logistics

4. Brazil AM GO RS CEVA Logistics Customers in Brazil MA PA PE PE MG ES SP RJ PR Apresentação Institucional

5. The Brazil Customs Challenge: How to Get Your Goods in and Get Paid Prepared by : Denise Carrion & Rubio Guimaraes

6. AGENDA The Brazil Customs Challenge Import License Process International Transportation Customs Clearance Transactional Process International Payments

7. Key Import Elements for a successful Clearance in Brazil Customs Clearance Transactional Process • In order to avoid penalties and delays at customs clearance for our customers, it is mandatory : • DECLARE CORRECTLY CONSIGNEE/SHIPPER'S NAME on all shipping documents. • MAKE sure that the consignee's CNPJ (Company's ID number in Brazil) is mentioned on all shipment documents (commercial invoice + packing list). • ENSURE that there is a perfect match among the weight shown on the invoice/packing list, and the actual weight of the cargo. • NOTE that a HAWB/HBL can be amended only before arrival of the cargo in Brazil, and those documents are only issued at origin based on all details of Shipper Commercial Invoice + Packing List. • PREPARATION of Commercial Invoice and Packing List as per Brazilian Legislation Requirements.

8. Key Import Elements for a successful Clearance in Brazil Customs Clearance Transactional Process According to Brazilian laws and in order to avoid fines and delays during the Customs Clearance process, commercial documents, such as commercial invoice and packing list must be prepared as per requirements below : • Issued under Exporter’s letterhead, hand-signed in BLUE ink, by an authorized person; identifying title and name •  – Commercial Invoice must be expressly written in the title, invoice number, date; • – Must contain : Exporter’s and Importer's complete name and address and Part number; • – Complete description of goods in English language. The description must be done with complete words • Quantity of goods with respective unit and total price in accordance with the conditions negotiated, • mentioning expressly, if agreed, the amount of reduction or discount offered to the Importer; • – Marking, numbering, and, if available, package reference number; • – Quantity and kind of package; • – Package gross weight, thus considered the weight of the goods with all its recipients; • – Net weight, thus considered the material free of any wrapper; • – Country of origin, thus considered that where the goods was manufactured or where the biggest transformation • was occurred; • Country of acquisition, thus considered that where the goods were acquired to be exported to Brazil, • independently of the country of origin of the goods or its parts; • – Country of shipment, thus considered that from where the goods was delivered at the moment of its acquisition; • – Payment terms and negotiated currency; • – Sales condition terms (Incoterms); No abbreviations ! Commercial Invoice

9. Key Import Elements for a successful Clearance in Brazil Customs Clearance Transactional Process •  - The phrase “Packing List” has to be expressly written in the document title; • The packing list must be hand-signed in BLUE ink, by the authorized person; identifying his title and name, • MUST CONTAIN : • - Packing list number; issuing date; • - Complete name and address of the Exporter (as it is in the commercial invoice); • - Complete name and address of the Importer (as it is in the commercial invoice); • - Type/ package model; • - Package content (part numbers and quantities); • - Package quantities; • - Package Dimensions or cubic meters; • - Total gross weight; • - Total gross weight per package; • - Total net weight; • - Total net weight per package. •  - All cargoes will be weighted by Brazilian Customs and if they state any discrepancy, it will delay the clearance • process and Customs will charge a penalty, therefore the correct gross weight must be mentioned in the document. • - It is necessary to have a Packing List for each Invoice issued. Packing List

10. Key Import Elements for a successful Clearance in Brazil Customs Clearance Transactional Process • Some products requires an Import License prior to be shipped to Brazil. Those licenses are based on import control defined by the government and it can change from time to time accordingly to market situation, internal production and other factors. • Prior to start exporting to Brazil, it is crucial to check if the product to be exported requires previous Import License. Based on the HC (Harmonized Code) is possible to check at Brazilian Customs Systems (SISCOMEX) the IL requirements. • There are many government entitites that regulate the import flow to Brazil, such as Ministry of Agriculture, Ministry of Health, Ministry of Army, Suframa (that controls Free Trade Zones) and many others. Those entities define Import License Procedures and requirements. • The Importer Company must attend all those requirements directly or using a broker company, procedures are executed through SISCOMEX or for some specifics Ministries, physical documentation must be presented. • The time to obtain an Import License varies from 5 working days to 30 days. Per law, the international transportation documents (air or ocean waybill) cannot be issued prior to the date of Import License issuance.

11. Key Import Elements for a successful Clearance in Brazil Customs Clearance Transactional Process • All goods that enters the country, imported permanently or not, is subject to customs clearance process, which is processed based on the Import Declaration (DI), prepared in SISCOMEX (Brazilian Customs Integrated System of Foreign Trade). • Import Declaration is controlled by SISCOMEX based on the import requests for each product. An automatic sequencial reference is provided for each declaration. This reference identify the entire import customs clearance process and will be used to check : • The status of Import Company with Customs for any irregularity; • The compliance with exchange rules as per Central Bank; • The arrival of the cargo (volumes, weight, documentation, etc); • The Duties & Taxes Payments; • And all kind of imported goods information

12. Key Import Elements for a successful Clearance in Brazil Customs Clearance Transactional Process IMPORT DECLARATION Importer Information Cargo Information Goods Value Duties & Taxes

13. Key Import Elements for a successful Clearance in Brazil Customs Clearance Transactional Process IMPORT DECLARATION Exporter Information Harmonized Code Goods Description Import Duty Duties & Taxes Details VAT PIS Cofins

14. Key Import Elements for a successful Clearance in Brazil Summary of Import Taxes IMPORT DUTY: it will be charged from 0% till 35% over CIF value depending on kind of goods; VAT: will be charged from 0% till 33% over CIF value + IMPORT DUTY; PIS: (Social Integration Program Tax/Worker’s Tax): will be charged from 0% till 2,30% over CIF value + IMPORT DUTY + VAT + % ICMS; COFINS: (Social Security Financing Tax/Social Tax): It will be charged from 0% till 10,80% over CIF value + IMPORT DUTY + VAT + PIS + % ICMS; LOCAL FEE: It will be charged between 7.5% till 25% over CIF value + IMPORT DUTY + VAT + PIS + COFINS; depending on the state in Brazil that cargo will be released;

15. Basic Import Regulations Requirements & FlowCustoms Channels & Conference Process • The Import Declaration will be accompanied by the following documents : • Original bill of lading or equivalent document • Original commercial invoice • Other documents required by specific legislation or international agreements • Once registered by SISCOMEX the system itself indicates the type of conference that can be : • Drives through an automatic Clearance Process • No Documents and Physical inspection required Average 1-2 days Green Channel • Requires a document review • No physical inspection is required unless some problems are found on the documents Average 3-4 days Yellow Channel • Requires a document review • Requires physical inspection • Red Channel is applied when customs systems identify a risk of fraud or issues • on products description or quantities, any inconstancy on Import Declaration, etc Average 7-10 days Red Channel • Requires a document review • Requires physical inspection • Gray Channel is applied when customs systems identify a risk of fraud or • issues on goods amounts pricing (under or over) Average 10-15 days Gray Channel

16. Basic Import Regulations Requirements & FlowImport Customs Flow START Import License Required CEVA receives copy of commercial invoice and/or instructions from the customer CEVA prepares the Import License in the Customs system (Siscomex) with detaild of goods, HS number and copy of proforma invoice CEVA types the data into Customs system (Siscomex) CEVA registers Import License in the system (Siscomex) Registration, Part Number/ Instruction ok? No CEVA requests information to customer CEVA checks the Import License regularly waiting for Customs approval Yes IL approved? Yes Registration OK CEVA stands for the pre alert to finish data typing No CEVA Authorizes customer to proceed with shipment Pre alert receipt Check requirements and proceed Checking OK? No CEVA requests for missing documents and eventual corrections Yes

17. Basic Import Regulations Requirements & FlowImport Customs Flow Import Declaration typing Import Declaration Checking Checking OK? No Provides proper adjustments Yes CEVA sends advanced cash for expenses CEVA awaits authorization from customer for debit of duties and taxes Flight or Vessel arrival CEVA access Siscomex and check diagnosis Siscomex suppies errors and correction or follow-up information (alerts: green, yellow, red) Diagnosis OK? No Yes CEVA proceeds with Import Declaration registration in Siscomex (register transfer): - Prints ID report - Pays ICMS – Enter ICMS information in Siscomex - Pays AFRMM (seafreight only)

18. Basic Import Regulations Requirements & FlowImport Customs Flow Check Siscomex Sorting Yellow Red/Grey Light ? Documents checking by Customs agent. Status informed in Siscomex Physical checking by Customs Status informed in Siscomex Green Status? Status ? CEVA meets the requirements Pending Cleared Cleared by Customs - CEVA gets orignal shipping documents Import Confirmation ticket issued by Siscomex Cleared Grey Light Pending Import Declaration built up according to Customs Clearance facility Registers discrepancy in Siscomex and performs warranty deposit CEVA meets the requirements Issuing Nota Fiscal de Entrada Forward Nota Fiscal to Customs facility where the shipment is Follows-up the process along with Customs agent CEVA performs payment of storage charges to Infraero Documents tendered to the trucking company File closing Paperworks build up for invoicing END

19. Key Import Elements for a successful Clearance in Brazil Penalties (some of them …) P.S.: Government can change these amounts without previous notice !

20. Advices to Companies Exporting to Brazil • Nothing is forbidden to be imported to Brazil ! • It is complex and bureaucratic, however can be done properly using correct partners and correct • process ! • Prior to start exporting to Brazil it is higlhy recommended to consult a Customs Expert that will • guide your company through the rules and requirements of our Country. Brazilian Customs Official Web-site English version available ! http://www.receita.fazenda.gov.br

21. CEVA Logistics Contacts Denise Carrion Brazil Managing Director for Freight Management Tel (55) (11) 2199-6723 Email : denise.carrion@cevalogistics.com Rubio Guimarães Brazil Customs Clearance Director Tel (55) (11) 2199-6724 Email : rubio.guimaraes@cevalogistics.com

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