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A summary of Brazil’s foreign trade solutions to combat the pandemic in 2020

Dec, 30, 2020 Posted by Ruth Hollard

Week 202053

In terms of foreign trade, the year 2020 has been marked by a series of innovative solutions to circumvent the problems caused by the Covid-19 pandemic. Below are the main solutions, in chronological order:

Government signs Memorandum of Understanding with South Korea for investments in the port area: In January, the Ministry of Infrastructure signed a Memorandum of Understanding with the South Korean government to encourage foreign trade and promote the exchange of must collaborate to encourage economic growth through the exchange of information on business opportunities, which includes logistics parks and port development projects.

Brazil and Argentina sign a Cooperation Agreement in the agricultural sector: Representatives of Brazil and Argentina signed an agreement to diversify the agricultural agenda between the two countries. One of the themes agreed upon is Argentina’s approval of the International Health Certificate model for the export of frog meat from Brazil. The International Zoosanitary Certificate model was also approved for the export of swine semen from Brazil to Argentina. Brazil reciprocally approved the International Zoosanitary Certificate model proposed by the Argentines for the importation of breeding cattle from Argentina.

Single Foreign Trade Portal reduces import bureaucracy at ports, airports, and borders: The implementation of the Single Foreign Trade Portal, an initiative of the Ministry of Agriculture and SECEX (the Secretariat of Foreign Trade of the Ministry of Economy) allows low-risk cargo or cargo which only requires document control to be released within just a few minutes, optimizing the inspection team time.

Phytosanitary Certificates are now issued with an electronic signature: As a result of the Coronavirus pandemic, the Ministry of Agriculture implemented the electronic signature for Phytosanitary Certificates that accompany the export of plant products. The measure was aimed at reducing physical contact between foreign trade agents and federal inspection.

Brazilian Internal Revenue Service extends the deadline for submitting a Certificate of Origin for imports: The Brazilian IRS has extended the deadline for submitting the Certificate of Origin to 60 days after the registration of the Import Declaration. The Certificate of Origin is a document that certifies the origin of the merchandise traded between countries that have trade agreements, which results in tariff benefits for the importer. The extension of the deadline for the presentation of the document was due to the difficulty encountered by Brazilian importers to obtain the document from the official agencies of the countries since they were closed due to the coronavirus pandemic.

European Union-Mercosur agreement is under pressure from France, Germany, and 265 other entities: In June, France declared its opposition to the free-trade agreement between the European Union (EU) and Mercosur. In addition, 265 more organizations were also mobilized against the agreement. The attacks in Europe are also growing due to positions taken by President Jair Bolsonaro in the environmental area. At the same time, a “collective” of 265 organizations sent a letter to German Chancellor Angela Merkel and all 27 EU member states to reject the agreement with Mercosur. Among the entities are Attac, Agricole Confederation, League of Human Rights, and Foodwatch. The group tries to take advantage of the loophole opened by the parliaments of Austria, the Wallonia region of Belgium, and the Netherlands, which withdrew their support for the bi-regional agreement. The entities claim that the EU-Mercosur agreement implies worsening environmental destruction and the climate crisis to expand car exports and monocultures in the forest.

Mexico postpones free trade agreement with Brazil on heavy vehicles for three years: in June, the beginning of a free trade agreement between Mexico and Brazil involving heavy vehicles was postponed for three years. The pact was scheduled to start on July 1, 2020, but was postponed to July 2023.

“Operation Asia” Brazilian IRS Combats Billion-Dollar Fraud in Foreign Trade: In June, the Brazilian IRS and the Federal Police launched “Operation Asia” with the objective of combating the under-invoicing scheme for goods imported mainly from Asian countries, with a large amount of evaded taxes and irregular remittance of foreign currency through money changers. The operation targeted the scheme’s mentors, companies used by investigated groups and stakeholders who register under-invoiced statements and submit false documents to Customs Authorities.

CAMEX adopts new rules to zero the import tax to avoid shortages: In July, CAMEX (the Chamber of Foreign Trade) approved new rules to zero the import tax on up to 100 Mercosur Common Nomenclature (NCM) product codes to avoid shortages in the national market. In addition, the goods will now have the tax rate reset, replacing the 2% level of the previous rule.

Peru files a complaint against Brazil at the WTO over tariffs on PET: The World Trade Organization (WTO) issued a statement stating that Peru has filed a complaint against Brazil over tariffs on polyethylene terephthalate (PET) and the tax treatment of Brazilian imports to the country. According to the note, the Peruvian complaint applies to definitive anti-dumping measures in Brazil on this polymer used in weaving and packaging and the tax treatment of products in general through the imposition of the Tax on Industrialized Products (IPI). The complaint was circulated to entity members on July 15.

Government promotes Automotive Free Trade Agreement with Paraguay: In August, President Jair Bolsonaro enacted the Automotive Free Trade Agreement signed with the government of Paraguay in February. The document’s objective is to facilitate trade and customs cooperation between the two countries, especially for automotive products. Under the agreement, parts and vehicles sold by the two countries will have minimum or zero tariffs, but the range for free trade will vary between the two countries.

SECEX eliminates license requirements for 210 imported products: The Foreign Trade Secretariat of the Ministry of Economy (SECEX / ME) eliminated the requirement for automatic import licenses for 88 products and non-automatic licenses for another 122 different goods. This allows the dispensation of 159 thousand automatic licenses and 111 thousand non-automatic licenses approved in 2019, generating savings for Brazilian importers of more than R$ 23 million with the payment of fees that were charged for obtaining these documents. Among the products that can be imported without the need for licenses are wall coverings, acrylic wires, and steel tubes, which previously depended on SECES approval – directly or by delegating powers to Banco do Brasil – as a requirement prior to completion of imports into the country.

A free trade agreement with Brazil gains green light from the Chilean Senate: In August, the Chilean Senate approved a free trade agreement with Brazil that complements a 1990 pact with the Mercosur bloc and incorporates issues related to telecommunications, electronic commerce, environment, and SMEs. The treaty “will incorporate new cutting-edge terms, update existing ones, and allow small and medium-sized Chilean companies to have equal access to the large Brazilian public procurement market. It also provides for the elimination of ‘roaming’ between the two countries.

Government sanctions law that extends deadlines for exporters in drawback regimes: in September, President Jair Bolsonaro sanctioned Law No. 14.060, which allows the exceptional 1-year extension of the deadlines for complying with drawback suspension and exemption regimes. These regimes waive taxes on local imports and purchases of inputs used in the production of goods for the foreign market. The new legislation originated from Provisional Measure 960, issued on May 4, 2020, and is part of actions to reduce the impacts of the Covid-19 pandemic on the Brazilian economy.

Chamber approves a provisional measure that dispenses export target in SPA due to the pandemic: in September, the Chamber of Deputies approved Provisional Measure 973/20, which exempts companies located in export processing zones (ZPE) from reaching 80% of this year gross revenues from exported goods. The text went to the Senate. It is worth remembering that ZPEs are industrial districts, whose companies benefit from the suspension of taxes to export, among other benefits. To qualify for the tax benefit, at least 80% of the total gross revenue must come from exports, a rule created by Law 11.508 / 07.

About 68% of industries had difficulties obtaining inputs in Brazil: A special survey carried out by the National Confederation of Industries (CNI) pointed out that in October, 68% of the companies consulted had had difficulties in obtaining inputs or raw materials in the domestic market, and 56% of companies that use imported inputs regularly had difficulties acquiring them in the international market. According to the CNI, “the economy reacted faster than expected. Thus, there was a mismatch between supply and demand for inputs. And both producers and suppliers had low inventories. At the height of the crisis, we saw the demobilization of production chains and low stocks. In addition, we have a strong devaluation of the real, which contributed to the increase in the price of imported inputs”.

Argentina leaves US$ 100 million in Brazilian exports stuck at the border: According to the media, since the beginning of the year, the Argentine government has been slow to release the entry of Brazilian imports, not complying with the rules of the World Trade Organization (WTO) and the agreement bilateral agreement between both countries.

Brazil and the United States conclude investment facilitation agreements: In October, President Jair Bolsonaro reported that representatives from Brazil and the United States concluded negotiations on three agreements demanded by businessmen from both countries –  on trade facilitation, good regulatory practices, and anti-corruption.

Mercosur negotiates agreements with Lebanon, Tunisia, and Morocco: in October, the Special Secretary for Foreign Trade and International Affairs of the Ministry of Economy, Roberto Fendt, stated that Brazil is negotiating with Mercosur for new free trade agreements with some Arab countries. “In fact, Mercosur has already signed a free trade agreement with Egypt and Palestine. It is currently negotiating an agreement with Lebanon, and has also initiated negotiations with Tunisia and Morocco,” stated Fendt. The agreement with Palestine has not yet entered into force.

Brazil suspends import concessions from Costa Rica in retaliation for Brazilian sugar safeguards: In November, the Brazilian government suspended concessions on imports of certain products originating in Costa Rica. The measure was taken through a CAMEX resolution because of Costa Rica’s decision to apply unjustified safeguards to sugar imports from Brazil and is supported by the WTO Safeguards Agreement. In practice, the measure will represent a 27.68% surcharge on imports of Costa Rican products such as chocolates and teas. The decision was taken in retaliation for the application of safeguards to sugar imports from Brazil by Costa Rica, which represents a 27.68% surcharge on the Brazilian product.

Brazil is victorious against Indonesia in the WTO: In November, Brazil had a new victory against Indonesia in the World Trade Organization (WTO). According to a statement from the Ministry of Foreign Affairs, there was an “undue delay” by Indonesia in recognizing Brazil’s health certification process for exports of chicken meat to the Asian country.

CAMEX approves a reduction in the import tariff on toys: In November, the Executive Management Committee (GECEX) of the Chamber of Foreign Trade (CAMEX) – a collegiate body chaired by the Ministry of Economy – approved the reduction from 35% to 20% of the tariff applied to toy imports. The measure should start to have more expressive effects on prices at the beginning of 2021, considering the time necessary for the realization of new imports already supported by the tariff reduction. The reduction to 20% equates the Brazilian tariff to the Mercosur Common External Tariff (TEC) and eliminates the exceptional tariff increase that applied to imports since 2011.

Chamber approves basic text of BR do Mar: In December, the Plenary of the Chamber of Deputies failed to complete the vote on Bill 4199/20, to encourage coastal shipping, known as BR do Mar. Despite that, parliamentarians of the Chamber approved the basic text of the BR do Mar proposal, in the form of the substitute submitted by the rapporteur, Deputy Gurgel (PSL-RJ), to the original of the Executive Branch. Although most of the highlights have already been analyzed, six remain to be analyzed, which may alter the proposal. The project progressively releases the use of foreign ships in Brazil without the obligation to contract construct units at local shipyards. The text foresees that companies will be able to rent boats to operate in cargo transportation.

CAMEX extends zero tariffs for importing medicines and supplies against Covid-19: In late December, CAMEX extended the validity of Resolution No. 17/2020, which reduced the Import Tax rate to zero for products considered essential to face the pandemic of Covid-19. The extension was approved at a virtual meeting of the Executive Management Committee of CAMEX (GECEX), on December 18, and published on December 29 in the Federal Register, in GECEX Resolution 133/2020. The reduction in the rates would have expired on December 31, 2020, but was extended until June 30, 2021, for 298 products, covering medicines and their inputs, tests for virus detection, and vaccines.

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