International export contracts from Brazil to abroad

See, in this text, the importance of having legal advice specialized in exports and what are the main contracts that involve an export operation.

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Author: Bianca Noronha Anchieta Aragão

Acting with exports in Brazil can be considered a sea of opportunities, even more so because it is an area that, in addition to offering high returns, is in the process of expansion.

No wonder that, in 2022, Brazil became the 25th largest exporter in the world, according to a report by the World Trade Organization.

Prospecting for customers, hiring employees, production, and logistics are some inevitable steps for a well-done export operation, however, many businessmen forget the main thing, the contracts.

A well-drafted contract can make all the difference in an operation of this type, in addition to preventing various inconveniences that may arise in the future.

In addition, there are some procedures that can only be performed with a formalized contract.

Therefore, if you want to know the importance of having a well-prepared international export contract and what the main contracts involved in an export operation are, keep reading this article!

What is an export operation?

First of all, you need to understand what an export operation is.

Export is the temporary or permanent departure of national products, goods, and services to other countries.

That is, it’s an operation in which companies established in Brazil sell their products, goods, and services to foreign companies or people, that is, in the foreign market.

And, as it usually involves contracts for the purchase and sale of products, among others, Export requires legal formalization, an international export contract.

Therefore, it’s understood that international export contracts are intended to organize all sales and distribution of products between States.

What is the importance of international contracts in an export operation?

As already explained, international export contracts are extremely necessary for carrying out an export operation.

It turns out that, in order to sign a contract of this type, there are a number of factors that must be considered at the time of its elaboration.

We can cite, as an example, a clause assigning jurisdiction, choice of language, confidentiality, termination, payment methods and even defining valid forms of communication.

You also need to be aware of the specific laws and orders defined by the countries of each party to the contract for it to be considered valid.

And, for this to happen in a safe and reliable way, it’s very important to have legal advice specialized in exports so that you can avoid future legal problems due to forgetting an essential issue.

In addition, it will provide adequate guidance on the export process and help you review the contracts signed with banks so that you are not harmed.

What international contracts does an export operation involve?

Now that you know the importance of having a well-drafted or revised international export contract, you might be wondering which international contracts can usually be entered into in an export operation.

The main ones are:

• International Purchase and Sale Agreement;
• Exchange Contract;
• Advance on Exchange Contract (ACC);
• Advance on Delivered Exchange (ACE);
• Export Prepayment (PPE);
• Service Export Agreement;
• Assembly Contract.

International Purchase and Sale Agreement

The International Purchase and Sale Agreement can be considered the most performed in export operations.

As it’s the main instrument of the contractual relationship, since it defines the obligations and rules of the exporter and importer relationship, it must be well prepared and not obtained from any Google site.

General clauses, domain reservation clauses, price list clauses and even clauses to define the possibility of arbitration are some of the many topics that should be thought about carefully.

For this reason, an advisory can make you avoid a good future headache due to poor contract drafting.

Finally, from a contractual point of view, be aware that Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) will be levied.

Exchange Contract

Generally, when carrying out an export operation, payment for goods, products, or services is not made in reais (Brazilian currency).

And, as there is no free circulation of foreign currencies in Brazil, you must carry out an exchange operation to buy national currency.

These operations must be carried out with the intermediation of a bank authorized to operate foreign currencies. In addition, there is a need for a signed contract called the Exchange Contract.

It contains information like the name of the foreign currency, the contracted rate, the corresponding amount in reais and currency, and buyer and seller data, and must be registered with the Central Bank of Brazil (BACEN).

Despite being prepared by the bank itself, it’s important that an experienced professional analyze it to verify that the conditions are beneficial and are in compliance.

Advance on Exchange Contract (ACC)

 The Advance on Exchange Contract (ACC), a kind of Exchange Contract, is a form of advancing resources in national currency to the exporter.

As it’s considered one of the best-known export financing mechanisms, depending on the case, it can be very beneficial because it helps the exporter to relieve his cash.

To carry out an ACC, the exporter must seek or have a consultancy that already has a link with a commercial bank authorized to operate in foreign exchange.

Once authorized, the exporter will sign an exchange contract for the amount corresponding to the exports he wishes to finance, even before receiving payment for the sale or sending the product to the importer.

ACE – Exchange Advance Delivered

 The Advance on Delivered Exchange Rate (ACE) is similar to the ACC, however, in this case, the advance of funds in national currency must be made after the goods are shipped abroad.

After sending the goods, the exporter delivers the documents relating to the export to the accredited bank and enters into an exchange contract for future settlement.

In short, the exporter asks the financial institution to advance the amount in the national currency corresponding to the exchange contract.

In this case, further than obtaining financing to grant a longer payment period to the importer, there is the possibility of fixing the exchange rate for your operation.

Export Prepayment (PPE)

The Export Prepayment, like the previous ones, is also an advance of revenue, but by a financial institution abroad.

The purpose of this financing will be to finance the entire export cycle, from production to transportation.

Furthermore, it’s the importing company that makes the payment to the bank, that is, the exporter does not need to send funds abroad at the time of payment.

In this way, the exporter will only need to formalize a contract with the importer.

However, it must be clarified that this type of operation is very complex from a contractual point of view, as it requires an experienced professional with specific knowledge to set up the entire operation scheme.

Service Export Agreement

The Service Export Contract must be formalized when a Brazilian service provider sells a service to a foreign contractor.

In addition to this contract, it’s necessary to sign an Exchange Contract to receive payment.

It’s also necessary to clarify that not all services can be offered in the external market.

Therefore, it’s important to check whether the General Agreement on Trade in Services (GATS), which regulates these operations, allows the sale of your service.

Finally, as in the International Purchase and Sale Agreement, Income Tax (IRPJ) and Social Contribution on Net Income (CSLL) apply.

Assembly Contract

There is also the famous Assembly Contract.

In this modality, a Brazilian company looks for a manufacturer abroad to produce and sell its products in a foreign market.

Typically, they do this in search of a lower cost in the production of their products and have the possibility to continue with the decision-making power and the creative part of the products.

As seen, this is an operation that must be well delimited. For this reason, it’s extremely necessary to have a well-drafted contract to avoid legal problems.

Export contract closing

After drafting or reviewing the international export contract from Brazil to abroad, you must maintain an open dialogue with the other party to proceed with the necessary procedures.

If the other party is the importer, there may be a need to hold meetings to define criteria and specify contractual issues, whether obligations, payment methods, deadlines, and others.

At these times, you will also be able to count on an advisor to carry out intermediation work, in addition to drafting the contract.

Therefore, if you are interested in knowing how this legal support for export works, we at Koetz Advocacia will be delighted to assist you!

You can even contact us through our service area.