Shipping to Brazil? Every package must now include the CPF. The Global Data Consortium’s Bill Spruill explains more…
Quick overview: If you ship packages into Brazil, you need to be aware of some important changes taking effect in August that require all shipments to include a tax ID number – called the CPF. If you don’t have your customer’s CPF, the parcels will be returned or destroyed and you’ll be fined by Brazilian Customs. Many e-commerce merchants are not yet collecting CPF from their customers, and the new requirement could disrupt their Brazilian trade.
Brazil’s high import taxes caught the attention of financial media last year when Apple’s iPhone – which cost roughly US$600 when purchased in the USA – was selling for nearly twice that in Rio de Janeiro. Apple took some heat for marking up a high-demand product almost 50% above the monthly wage of Brazil’s average worker. But in reality, most of that price bump wasn’t going into Apple’s pocket. It was required to pay the Brazilian tax authority.
Like many governments, Brazil uses duties to encourage the growth of its domestic industries. By levying customs taxes on imports, it creates a price advantage for local businesses to help them compete. Still, Brazilian consumers continue buying brands they can only get through imports, at times paying taxes as high as 100%.
Brazil Customs requires any incoming parcels to be clearly marked with the recipient’s name, address and tax ID number. For individuals, that’s called the CPF (short for Cadastro de Pessoas Físicas) and for businesses it’s the CNPJ (Cadastro Nacional da Pessoa Jurídica). Customs uses the numbers to assess the tax, and requires the recipient to make the duty payment before he/she can collect the parcel. Private courier services have become quite efficient at collecting a customer’s CPF and tax obligation before shipping the parcel to Brazil, ensuring it moves through customs quickly.
But when using Correios for delivery (that’s Brazil’s government-run postal service) merchants and shoppers have found some loopholes to exploit. Correios would accept a parcel without a CPF, ship it to a local post office near its final destination, and send notice to the buyer to come in to pay the tax and accept the shipment. Correios was supposed to collect duties on behalf of Brazil Customs, but its enforcement was spotty at best, and plenty of people took advantage of that.
No more. Seeing that it was losing a lot of tax revenue, the Brazilian government has mandated that Correios do a better job of collecting duties. Starting in August 2015, all shipments into Brazil must be accompanied by an electronic manifest that includes the recipient’s name, address and CPF to make it past Customs. If it doesn’t have the CPF, the package will either be shipped-back or destroyed, and the sender will be responsible for paying a fine.
The problem is that many e-commerce merchants (and the technology platforms that support them) have not made the necessary changes to their shopping forms to collect the CPF. Things could get complicated for them in the coming months.
What options are available to businesses shipping into Brazil? We’re seeing three main responses.
First, some of the larger carriers and enterprise-level e-commerce platforms are taking a manual approach to getting their customers’ CPF numbers. Some are spinning up domestic call centers or even new ones in Brazil, using email or phone numbers to contact customers and ask for their CPFs. Obviously, this is neither a cheap nor an easy path to take.
Second, organizations of all sizes are working with data services (like Global Data Consortium) that can match a customer’s CPF to name, address and other identifying elements and provide it back in a file that can be appended to the electronic shipping manifests. This appears to be the quickest and most cost-effective approach.
But the predominant response seems to be this one…
Third, most cross-border merchants and their shipping partners are choosing to do nothing for now. Many believe that Brazil’s government will delay the new regulation once it sees how disruptive it will be to commerce. Others are simply not well-informed of the changes and their far-reaching implications. Either way, we suspect that these businesses will experience the most disruption starting in August.
Bill Spruill is co-founder and CEO of the Global Data Consortium, which helps e-commerce and payment remittance companies reduce their mis-delivery and fraud via its Worldview Global Verification Platform. Worldview enables its users to improve delivery of physical products and identify fraudulent transactions in global growth markets.
Bill has broad experience with the challenges facing high growth technology companies. He is currently a board member of the North Carolina based Council for Entrepreneurial Development (CED), one of the largest organizations focused on high-growth business. As part of his volunteer work with the CED, Bill has mentored over 50 companies through varied issues and challenges.