1.Overview of the Development of Cross-Border Direct Shipping Routes in Brazil

Before the launch of the Brazil cross-border Packet service under bilateral agreements, parcels bound for Brazil mainly utilized postal services under the UPU (Universal Postal Union) framework. This included services like China Post's ePacket, China Post Registered Airmail, and unregistered mail. Other postal services, such as those from Sweden, Switzerland, Singapore, and Royal Mail in the UK, were also used. However, in July 2018, Brazil Post announced a BRL 15 per item international postal handling fee for registered and unregistered mail under the UPU framework. Since then, parcels from China to Brazil have primarily relied on ePacket services under the UPU framework, mainly utilizing China Post's ePacket and Sweden Post's Swedepacket.

However, ePacket in Brazil faces the following issues:

1. Long delivery times: Air transport times are unstable.

2. Opaque processing: Handling issues cannot be addressed locally in a timely manner.

3. Lack of local customer service: No support for customs clearance issues or tax payments.

4. Returns management: No local processing for return shipments or second-hand sales.

The Brazil Packet service was designed to optimize the ePacket product by securing fixed air cargo space for stable air transport, placing tracking personnel at key transfer points in Brazil to address handling issues promptly, and interfacing with Brazil Post to provide complete tracking and optimize all handling issues. Additionally, a return warehouse was established in Curitiba, Brazil, to handle unsuccessful deliveries and returns, as well as second-hand sales.

For Brazil Packet products to qualify for duty-free entry into Brazil, the following conditions must be met:

1. The online sale price must be under $50.

2. The parcel must weigh under 3 kg (as of October 20, 2021, Brazil Post, Correios, has diverted customs clearance for parcels over 3 kg to either São Paulo or Rio de Janeiro, while those under 3 kg remain in Curitiba for customs clearance).

3. Customs clearance is limited to the international postal supervision center (Ceint warehouse) in Curitiba, Paraná.

4. The recipient must be an individual using a personal tax ID.

5. Final mile transportation and delivery must be performed by Brazil Post, Correios.

Given these conditions, parcels priced above BRL 10 per item, or those weighing over 3 kg or priced above $50, are excluded from duty-free entry eligibility. This concentration of cross-border parcels into the Curitiba postal system, along with the handling capacity of the Ceint warehouse, remains a major challenge for the Packet product's efficiency.

Key operating metrics for the Packet service are as follows:

After nearly two years of product optimization and refinement, the Brazil Packet service has become the primary cross-border product for entry into Brazil, accounting for about 60% of all cross-border parcels. Leveraging the Packet service, in April 2021, AliExpress launched the "X-Day Delivery" service for Brazil, promising a full-cycle delivery time within 15 days.

2.Current Status and Trends of Overseas Warehouses in Brazil

Currently, Brazil lacks third-party overseas warehouses dedicated to cross-border parcels, similar to those in Europe and the United States. Major e-commerce platforms operating in Brazil, such as Amazon, Mercado Livre, B2W, and Shopee, do not offer local warehouses in Brazil for cross-border sellers to store their goods. The main reason for this is Brazil's high import taxes and complex tax system, leading to frequent use of non-compliant declarations to evade high import duties. Brazilian law stipulates that in cases where the legal source of goods cannot be proven, warehouse operators may be held liable.

Compared to third-party overseas warehouses, traditional B2B warehouses are more prevalent in cities like São Paulo and Brasília. These warehouses typically have high shelving systems with a height of 14 meters and use standardized invoices (DANFE) and transport invoices (DACTE) for storage and transfer.

It is also worth noting that Brazil has many B2C storage warehouses catering to local e-commerce sellers or local suppliers. These To-C warehouses are primarily operated by large platforms, including Amazon, Mercado Livre, B2W, and Mugalu. In November 2021, Shopee established a local storage warehouse exceeding 10,000 square meters in São Paulo.

Generally, legitimate storage warehouses require goods to have proper invoices (printed by the tax authority system), and imported goods must have customs clearance documents and tax payment proof. Therefore, these warehouses are mainly used for local Brazilian goods. The local warehouses established by platforms such as Amazon, Mercado Livre, B2W, and Magalu primarily serve domestic e-commerce.

Regarding warehouses that receive goods from abroad, many exist in Brazil. However, these warehouses operate by receiving foreign goods and then distributing them domestically to supply e-commerce businesses. Due to compliance issues, these warehouses often operate in a covert manner, as they face significant risks of being seized by customs or tax authorities.

In March 2021, Anjun Logistics began constructing a 2,000-square-meter return sorting and processing warehouse in Curitiba, Brazil, specifically to handle the return of cross-border parcels in Brazil. It became the first warehouse in Brazil dedicated to cross-border return processing. In November 2021, Anjun Logistics expanded through mergers and acquisitions, constructing a 5,000-square-meter e-commerce storage and consolidation warehouse in the outskirts of São Paulo, primarily serving local Brazilian e-commerce suppliers for storage, consolidation, and parcel handling services.

By the end of 2023, Anjun Logistics signed a lease agreement for a 25,000-square-meter customs supervision warehouse (GRU Ceint warehouse) at São Paulo's GRU airport. The peak capacity for customs clearance at this warehouse is 1 million parcels per day, significantly enhancing customs clearance efficiency. This warehouse is currently the largest single international express customs supervision warehouse in Latin America.

On May 27, 2024, the first batch of commercial clearance parcels was successfully cleared through Anjun's São Paulo airport customs supervision warehouse, and on May 29, cross-border e-commerce parcels within São Paulo state were delivered, marking the official start of trial operations at the Anjun GRU airport international express customs supervision warehouse. This ended the previous requirement for cross-border parcels to use postal customs clearance to qualify for duty-free importation.

3. Trends in E-commerce Logistics Development in Brazil

In Brazil's e-commerce transactions, more than 92% of orders come from local sources, indicating a substantial demand for local e-commerce logistics. Brazil has over 2,000 regional courier or delivery companies offering such services, but so far, there has not been a single company capable of providing nationwide postal services.

Currently, over 85% of e-commerce parcel orders within Brazil use Brazil Post, Correios' services, mainly because postal parcels in Brazil can be exempt from the logistics invoice (DACTE). Additionally, if the sender is a natural person, they can use a product declaration to replace the commercial invoice (DANFE). Furthermore, Brazil Post has the most extensive network of post offices in the country, with a post office every 500 meters in major urban areas.

In recent years, Chinese logistics companies have been actively establishing last-mile delivery services in Brazil. In March 2021, J&T Express was the first to establish a courier network in Brazil. In June 2021, Cainiao formed an operations and product development team in Brazil, making significant investments in warehousing, parcel lockers, and local delivery services. In April, Cainiao signed a strategic cooperation agreement with Brazil Post, Correios, to collaborate on international air freight, local logistics infrastructure, and other areas, creating an "end-to-end" full-chain solution to optimize China-Brazil international express products and serve more platforms, merchants, and consumers.

Furthermore, major e-commerce giants continue to increase their investments in local logistics infrastructure in Brazil. For example, Shopee poached senior executives from Mercado Libre to head its logistics operations in Brazil, establishing partnerships with more than ten local delivery companies and opening multiple new distribution centers to improve last-mile delivery efficiency. Similar secondary distribution centers across Brazil now number over 100. SHEIN has taken a different approach, establishing its supply chain in the local market, producing and delivering locally to shorten the logistics chain, improve efficiency, and reduce customs clearance costs. With extensive investments in overseas warehouses, AliExpress can now deliver cross-border parcels to core cities in Brazil within 5-10 days.

Given Brazil's status as the fastest-growing e-commerce market globally, competition among e-commerce and logistics giants is expected to intensify in the future.

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