Consumer Staples Author：EqualOcean News Jun 17, 2024 07:41 PM (GMT+8)

EqualOcean reports that after extensive preparations, Pinduoduo's(拼多多) e-commerce platform Temu officially launched its Brazilian site on June 8, marking its 70th country site globally. With this launch, Temu continued its tradition of offering significant discounts and free shipping, impressing Brazilian consumers. However, just a day before the launch, a new tariff policy from the Brazilian government posed a considerable challenge.

Temu

The Brazilian Chamber of Deputies approved a proposal to impose a 20% tariff on goods purchased from overseas platforms valued at less than USD 50. Previously, these goods were exempt from taxes, but the new regulation eliminates this exemption and adds a 20% import tariff. Additionally, a 17% ICMS sales tax from each state will be applied, bringing the total tax burden to approximately 44.5%. Known for its high taxes and complex regulations, Brazil's new policy undoubtedly increases the operational costs for cross-border e-commerce.

Despite these challenges, the Brazilian market remains full of potential. As the fastest-growing market in Latin America, Brazil achieved an USD 8.1 billion increase in e-commerce sales in 2022, with annual sales reaching USD 49.2 billion. Payment and Commercial Market Intelligence (PCMI) predicts that from 2023 to 2026, the Latin American e-commerce market will grow at a rate of around 21%, leading globally.

Although Brazil's tax policies frequently change, Temu remains confident about its market prospects. In mid-May, reports indicated that Temu had been certified under a Brazilian government tax incentive program that exempted goods under USD 50 from import fees. However, this exemption was no longer available when Temu officially launched, due to policy changes.

EqualOcean learned that back in April, Brazilian Finance Minister Fernando Haddad announced the cancellation of the tax exemption for goods under USD 50 purchased from overseas platforms. Although initially halted due to strong consumer opposition, the government's stance on small parcel import tax exemptions has been inconsistent. In April last year, the Ministry of Finance announced the cancellation of the tax exemption for C To C parcels under USD 50. This decision was reversed two months later due to public outcry, and in August, a new tax compliance plan was introduced, allowing participating e-commerce companies to continue enjoying the tax exemption for cross-border parcels valued at under USD 50.

It remains uncertain whether the Brazilian government will make further adjustments to the tariff policy for small parcels. However, globally, tightening tax exemptions for small parcels has become a common trend.

Before launching the Brazilian site, Temu had already expanded its operations to Chile, Colombia, Peru, Mexico, Uruguay, Ecuador, the Dominican Republic, Panama, and Puerto Rico, covering major markets in Latin America. Despite the heavy tax burden, Brazil remains an indispensable part of Temu's global expansion strategy.

In recent years, Chinese cross-border e-commerce has expanded rapidly, but in the face of constantly changing policies, companies must possess strong adaptability. This demands higher levels of risk management and cost control, allowing them to move forward amidst challenges.