Brazil and Chile Revise Rules of Origin to Boost Bilateral Trade

The Rules of Origin framework sets the standards that determine access to preferential tariffs for traded goods. These rules specify, for example, the maximum percentage of imported inputs a product may contain and the required documentation to prove a product’s origin to customs authorities.

Chile is a key trading partner for Brazil, representing a priority market for Brazilian companies. In 2023, Chile ranked as the sixth-largest destination for Brazilian exports, while Brazil is Chile’s third-largest trading partner, behind only the United States and China.

Since January 2015, through Economic Complementation Agreement No. 35 (ACE-35), Brazil and Chile have achieved duty-free trade for all goods, meaning no import taxes are levied between the two nations. Key sectors in this trade flow include manufacturing, cosmetics, textiles, and commodities.

Modernizing and Harmonizing Rules of Origin

The updated Rules of Origin for trade with Chile were modeled after the new Mercosur Rules of Origin (ROM) introduced under Economic Complementation Agreement No. 18 (ACE-18), effective since July 18 of this year. This alignment aims to harmonize provisions and simplify their use for trade operators.

The ACE-35 revision incorporates a cap on the content of materials that can be used in manufacturing while still qualifying a product as originating from within Mercosur. This update also applies to automotive goods listed in the bilateral appendix.

For the automotive sector, the allowable threshold for materials non-originating from within Mercosur was raised from 40% to 50%. As a result, both vehicles and auto parts must now meet a maximum non-originating material content of 50% to qualify as originating within the agreement.

Additionally, various product-specific origin requirements (REOs), including rules for chemical products, were harmonized with the new ROM. These changes enhance production scalability and competitiveness for businesses operating in the region.

Proof of Origin Modernization

To access tariff preferences under the agreement, exporters must present proof of origin for their goods. Under the revised rules, this can now include a self-declaration of origin, allowing businesses to certify the origin of their products directly. This shift from relying solely on certificates of origin reflects modern production and trade realities, streamlining processes for exporters.

The new framework also includes guidance for completing the Producer’s Sworn Declaration, a key document supporting the issuance of a certificate of origin.

Simplified Origin Verification Procedures

The updated provisions introduce streamlined procedures for verifying and controlling origin. Customs authorities in importing countries may now consult producers or exporters directly without initiating formal investigations. This enables quicker clearance of goods under scrutiny, reducing burdens on exporters and importers while lowering administrative costs for governments.

Moreover, the revised agreement allows for the replacement of origin documentation if deemed necessary by customs authorities. This flexibility focuses on material facts rather than formalities, preventing minor errors in origin documentation from disqualifying goods. In such cases, operators can rectify errors by clarifying or submitting new documentation.

Trade Facilitation Enhancements

The ACE-35 revision marks a significant step toward trade facilitation between Brazil and Chile. It aligns the agreement with international best practices, such as self-certification and the inclusion of modern concepts like replacing “direct shipment” with “no alteration.” This change permits the use of distribution centers in third countries, provided customs controls are maintained.

The updated Rules of Origin will be formalized as an additional protocol to ACE-35 and will take effect 60 days after the ALADI Secretariat confirms that both Chile and Brazil have completed their domestic legal procedures.

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