International trade operations, also known as comex, play a crucial role in a company’s internationalization and global market positioning. One efficient and secure way to conduct these operations is through the support of a trading company.
In this article, we will explain in detail what a trading company is, how it functions in the export and import process, the services it offers, and the advantages of working with this type of intermediary. Additionally, we will discuss the process of contracting international freight services safely and conveniently. Happy reading!
What Is a Trading Company?
A trading company is a specialized enterprise in international trade operations (comex). Its main role is to provide support and intermediation throughout all stages of the international logistics chain. This company acts as a bridge between businesses seeking to internationalize their operations and foreign markets.
The structure of a trading company comprises specialized professionals, including managers responsible for the administration and management of commercial and logistical processes, accounting professionals, and a team of traders. These traders are responsible for communicating with foreign suppliers and buyers, as well as engaging in negotiations and providing support throughout the entire logistics chain.
These companies acquire products or inputs necessary for export and import operations and pass on the costs of these acquisitions to the corporations that contract their services. One of the activities performed by a trading company is negotiating with foreign suppliers and arranging for transportation.
Services Provided by a Trading Company
A trading company can offer various services within the international logistics chain. Leveraging their market experience, these companies conduct buyer analyses, handle necessary documentation, and work to reduce risks and prevent costly errors for corporations engaged in imports or exports.
Among the primary services offered by a trading company are:
- Logistical Process Management: Trading companies are responsible for managing various processes necessary during international trade operations, such as customs clearance and selecting the mode of transportation.
- Consulting and Foreign Trade Advisory: In addition to operationalizing logistical processes, trading companies also offer consulting and advisory services to the corporations that engage their services. They provide solutions for reducing operational costs and increasing efficiency in foreign trade transactions.
- Contracting Services: Since trading companies manage logistical processes, they are also responsible for contracting the necessary services for import or export operations, including the hiring of international freight through quotations.
Types of Import and Export with a Trading Company
Trading companies act as intermediaries in different types of import and export operations. In the case of exports, they negotiate the sale of products directly to interested foreign companies. As the trading company passes the product on to the buyer, the commercial operation receives exemptions from taxes such as IPI, ICMS, PIS, and COFINS.
In the case of imports intermediated by a trading company, the main advantage is the security it offers to corporations with little or no experience in international negotiations. The trading company conducts background checks on both suppliers and buyers, increasing the chances of a successful operation.
There are different types of imports, with two of them being conducted through trading companies:
- Import on Order: In this type of import, a company purchases goods abroad using its own resources and handles the entire logistical chain. The purpose is to resell these shipments to another company that previously placed an order.
- Import on Behalf of a Third Party: In this modality, an intermediary like a trading company handles all customs clearance procedures. The buyer is listed as the acquirer, while the importing agent is the mandatary responsible for all operation processes.
Trading Company vs. Commercial Exporter
Trading companies differ from Commercial Exporting Companies (ECE) in several ways. ECEs engage in operations such as importing on order and focus on importing and reselling goods, primarily for small and medium-sized enterprises.
Trading companies are characterized by being joint-stock companies with a minimum capital to operate, enabling them to conduct complex transactions in the flow of foreign trade. Additionally, they assume responsibility for all risks associated with an operation.
Fiscal Benefits of Trading Companies
Trading companies play an essential role in foreign trade by facilitating import and export operations for businesses looking to expand into the global market. In addition to providing intermediation and logistical support services, these companies also benefit from tax differentials, making their activities even more attractive to corporations.
Indirect Exports and Tax Exemptions
Operations intermediated by trading companies are classified as indirect exports. In this scenario, goods are not sold directly by the producing or exporting company to foreign buyers but to the trading company, which subsequently resells the products to international buyers.
This type of operation is treated differently by tax authorities, allowing trading companies to enjoy specific tax benefits. Among these benefits, the following are prominent:
- COFINS (Contribution for the Financing of Social Security): Trading companies are exempt from this contribution on revenue, representing a significant reduction in tax liabilities for their operations.
- ICMS (Tax on Circulation of Goods and Services): ICMS, a state tax, does not apply to sales made by trading companies to foreign markets. This provides a competitive advantage and reduces the final cost of exported products.
- PIS (Social Integration Program): Similar to COFINS, PIS is not applied to the revenue from exports intermediated by trading companies, providing fiscal relief for these operations.
- IPI (Tax on Industrialized Products): IPI, a federal tax applied to industrialized products, is also not levied on exports intermediated by trading companie
These tax exemptions significantly contribute to making export operations intermediated by trading companies more competitive and attractive for companies. This allows them to achieve better profit margins by reducing their tax costs.
Maintenance of ICMS and IPI for Selling Companies
In addition to the fiscal benefits for trading companies, the companies that sell their products to these intermediaries also enjoy certain advantages. If they can prove that their goods were effectively sent abroad, these supplying companies have the right to maintain ICMS and IPI tax credits.
This means that supplying companies can continue to benefit from tax credits related to these taxes even after export operations intermediated by trading companies. This maintenance of tax credits is a way to encourage and support Brazilian companies in their international activities, fostering competitiveness and business expansion beyond national borders.
Conclusion
In summary, trading companies play a strategic role in foreign trade by facilitating and providing support for export and import operations. With a specialized structure and a range of services, these companies assist in cost reduction, optimization of logistical processes, and ensuring safe and efficient operations.
If you are looking to expand your business into the global market, relying on the support of a trading company is an excellent option.
About Cheap2Ship
Meet Cheap2Ship, a technology company specializing in logistics and foreign trade. Through our advanced platform for freight management and quoting, medium and large enterprises have experienced significant increases in operational efficiency and a reduction in logistics costs.
Our commitment is to provide greater transparency in the costs related to current freight providers, such as shipping companies, cargo agents, and carriers. With this information, our clients can make more informed and strategic decisions for their businesses.
To learn more about our innovative solutions, visit our website and follow us on social media. There, you will find relevant content on foreign trade, logistics, and supply chain. We are ready to drive the success of your company in the global market. Join us and discover how we can make a difference for your business.
