Warehouse auctions often occur when products are apprehended by a country’s Treasury Department or by its Federal Revenue Service. In this article we will take a closer look at warehouse auctions in Brazil.
Auctioning products is a good option to free up space in Brazil’s warehouses as well as being a source of revenue. As of September 2014, warehouse auctions generated more than BRL 118 million in revenue for the Brazilian government.
How the auction is done
Warehouse auctions in Brazil are organized by the Receita Federal, which is Portuguese for Federal Revenue Service, and can be held in two different ways:
- Presencial Auctions
- Electronic Auctions
The timeline for Receita Federal warehouse auctions is as follows:
- An announcement - edital - by the Receita Federal is made, announcing when and where the auction will take place; what items will be auctioned; period for checking the items that will be auctioned; who is allowed to participate in the auction; bidding process; payment methods and penalties; deadline for withdrawal of items
- Those interested in participating in the auction must register at the Receita Federal. Your personal documents are then checked by the government who look for any tax evasion cases or legal issues
- The period in which the auctioned items may be checked by the bidders
- The winner of the auction pay the bids
- The winners of the auction withdraw their items from the warehouse
As bids occur rather quickly in an auction, Receita Federal warn those participating in the auction to pay attention to not bidding on unwanted items, as well as making bids above their maximum intended limit. The lack of attention of the participant is not enough to cancel the sale.
Creation of an Online Auction
The Sistema de Leilão Eletrônico, Portuguese for System for Online Auctions or SLE, was launched by the Receita Federal in 2010 in order to ease the participation in warehouse auctions, as well as a means for all Brazilian citizens to keep up with what is the result of the auctions and how they take place. At first, only companies could participate in online auctions, but in 2012 individuals were also allowed to participate.
How to participate
People interested in participating in warehouse auctions in Brazil must keep track of the Receita Federal edital’s. This can be done here.
Auction participants, in the case of individuals, must submit, at the location, the Registro Geral and the CPF as a condition of validity for their bids. In the case of companies, they must be checked by the Receita Federal to see if they do not hold any unresolved legal or tax issues.
The participation of individuals in online auctions is only permitted when directly expressed in the edital issued by the Receita Federal. This happens only for batches of products intended for direct use or consumption. To participate in the online auction, individuals must present a regular registration status, which attests that the bidder does not hold any unresolved tax or legal issues on their Taxpayer Identification Number (CPF) and obtain a Digital Certificate for it. Then the individual must access the Centro Virtual de Atendimento ao Contribuinte, which is Portuguese for Online Service Center for Taxpayers, the e-CAC, by authenticating the Digital Certificate, and choose the “Sistema de Leilão Eletrônico” option.
The participation of companies in online auctions is automatically allowed, but they must be duly formed and registered on the Cadastro Nacional de Pessoas Jurídicas, Portuguese for National Registry of Legal Entities, or CNPJ. To participate in the online auction, companies - represented by their legal representative - must hold an active CNPJ number and obtain a Digital Certificate relating to it. Then, the company must access the e-CAC and choose the “Sistema de Leilão Eletrônico” option.
Information on how to acquire a Digital Certificate can be found in this article.
The goods that are auctioned by the Receita Federal are:
- Abandoned products
- Products delivered to the National Treasury
- Products that have been confiscated
The goods that are to be auctioned may be inspected prior to the auction. This is recommended by the Receita Federal since it is the only way to obtain detailed information about the condition of the goods, since they are auctioned as seen.
Thus, assuming that the goods have previously been examined by the participants of the auction, any subsequent claim regarding the condition, origin or quality of the products will not be considered after the bidding process. Also, the goods are not usually available for re-inspection on the day the auction occurs.
How payment is made
The payment of the acquired goods must be made via Documento de Arrecadação de Receitas Federais, Portuguese for Federal Revenue Collection Document, or DARF. On top of the value of the winning bid, ICMS will be added in a variable percentage, according to the laws of the state in which the auction was conducted. Apart from the ICMS charges, no other taxes can be levied on the bidder. In cases of payment by cheque, usually the goods will be available for withdrawal only after payment confirmation.
Failure to pay the winning bid will result in an administrative fine provided in the edital, but usually it is equal to 20% of the value of the winning bid.
Withdrawal of goods
The withdrawal of goods by the bidders will be performed at the place where the goods are being stored. The bidder or their legal representative must then present the Bidding Guide, who will receive a “Statement of Receipt” stamp.