Exporting soybean to China from Brazil, product analysis and development, documentation and requirements

Exporting soybean to China from Brazil, product analysis and development, documentation and requirements

 Countries description

This paper discusses the exportation of soybeans from Brazil to China. The Brazil-China informal trade partnership has lasted since the year 1949. In the 1990s and early 2000, Brazil and China dignified an agreement whereby China was supported to get an association position at the World Trade Organization (WTO) in exchange for the reduction of some of the present tariffs on imported goods from Brazil. This led to an affluent in bilateral trade between China and Brazil, whereby China could import products from Brazil at a lower cost. Additionally, Brazil adopted a free-floating trade rule which also contributed to an increase in trade. However, there has been a progressive growth of the bilateral trade partnership between Brazil and China over the past decade (Gale et al., 2019). For instance, in 2009, China imported non-processes mineral and agricultural products, costing 20.2 billion US dollars from Brazil. This made Brazil the largest trading partner with China after surpassing the United States. The growing Chinese population and decrease of croplands in the country, and Brazil’s rapid expansion of the agricultural production particularly soybeans, which surpassed Chinese trade partners for agricultural produce, Japan and the United States. This is because China had increased demand for soybeans. China has been ranked as the leading consumer and exporter of soybeans.

Product description

Soybean was first grown in eastern China, and during that time, China was the leading producer. Following the Second World War, the United States surpassed China and became the leading global producer of soybean. However, by the year 1970, the United States became a single exporter since it was producing approximately three-quarters of the global soybeans. In 1975, Brazil surpassed China’s soybean production and thus became the second-biggest soybean producer after the United States, but was the leading exporter. Currently, Brazil remains to be the top soybean exporter globally and the second major producer. However, Argentina has emerged to be the third soybean producer and exporter in the world. Soybean production in Argentina has doubled in the previous decade. Paraguay is the fourth global producer and exporter of soybean since it has gradually increased its production and exports in recent years (Péra et al., 2018, December). The combined soy produces for Brazil, Argentina and the United States totals about four-fifths of the global soy, and is 90 per cent of the world’s soybean exportation volume. However, the European Union and Japan were the leading importers of soybeans. Still, China has surpassed them and became the top soybean importer globally, due to the increase in population, hence the rise in demand for soybeans.

Coding System classification of the product

The customs systems for Brazil vary from the International Harmonized System. The Nomenclature Common Mercosul (NCM) is an eight-digit code which is used by the Brazilian government to categorize products which are traded for import or export business. However, one has to accomplish the custom system of products in the import-export business by organizing their HS codes in the NCM code. The NCM code determines the taxes and duties for exporting or importing products in Brazil; this is facilitated by the tariff codes used to categorize goods according to their complexity.

Export regulation

Exporting products from Brazil requisites adherence to the administrative process by providing the required documents to the local authorities. Regulations include;

• Checking the price category of the soybean to help in applying the correct tax rate (VAT) and know the anticipated costs of exporting.
• Acquiring and sending the certificate of origin to China as a guarantee of the source of the product and avoid inconveniences during negotiations.
• Obtaining an export permit by registering in the Exporter and Importer Register (EIR).
• Completing an export registration form.

Import regulation

China classifies imports as permitted, restricted, and prohibited. The prohibited imports include wastes, weapons and toxins, whereas the restricted goods need import licenses and quotas. Soybean import restrictions in China have been eased such that importers can use one license to clear imported cargoes up to six times (Péra et al., 2019). Currently, an automated import license which is renewable after six months is used to clear shipments for soybean in China.

Method and cost of transportation

The dominant mode of transportation of soy exported from Brazil to China is ocean freight. Chinese importers prefer shipping because the import regulations for importing soybean shipments are minimal. Again, export freight costs of waterway transport are less than for trucks.

The prices of transporting soybean from the northeastern and northern ports in Brazil to Shanghai in China range at US$30.75 in 2017, and US$34.81 in 2018 per metric ton of soy.

Payment and financing Method

The payment method used for the exportation of soy from Brazil to China is Cash in Advance by use of credit cards, since the exporter will have eliminated risks of credit or non-payment because payment for the goods is received preceding to the handover of possession of the goods before shipment (Oliveira, 2016). The better financing method for soybean exportation is the facilities development financing which enables Brazil to modernize, renovate and improve equipment and facilities used to produce soybean for export. This will initiate the upgrading of packaging methods and improvement of competitive advantage of soybean in Brazil and thus attract more customers and wholesale businesses to buy it.

Income statement

Documentation

• Certificate of origin
• Insurance Certificate
• Shipper’s export declaration

References

Gale, F., Valdes, C., & Ash, M. (2019). The interdependence of China, the United States, and Brazil in             Soybean Trade. New York: US Department of Agriculture’s Economic Research Service    (ERS) Report, 1-48.https://www.wita.org/wp-content/uploads/2019/07/ocs-19f-01.pdf

Oliveira, G. D. L. (2016). The geopolitics of Brazilian soybeans. The Journal of Peasant    Studies, 43(2), 348-372.     https://www.tandfonline.com/doi/abs/10.1080/03066150.2014.992337

Péra, T. G., Bartholomeu, D. B., Su, C. T., & Caixeta Filho, J. V. (2018, December). Transporting             Soybean from Brazil to China Through Green Corridors. In International Conference on    Production and Operations Management Society (pp. 635-646). Springer,             Cham.https://link.springer.com/chapter/10.1007/978-3-030-23816-2_62

Péra, T. G., Bartholomeu, D. B., Su, C. T., & Caixeta Filho, J. V. (2019). Evaluation of green       transport corridors of Brazilian soybean exports to China. Brazilian Journal of Operations    & Production Management, 16(3), 398-412.             https://bjopm.emnuvens.com.br/bjopm/article/view/807