Introduction
Lack of domestic production
Production lines
Temporary admission regime
Comment
Introduction
The growth of the Brazilian economy has led multinational companies to consider exporting production capacity to Brazil. One way to implement this plan is to transfer capital goods under-used in other countries to Brazil, modernising and expanding the production of Brazilian and multinational companies operating in the country.
There are three main possibilities for the import of used machinery or equipment:
- import of machines and equipment for which there is no domestic production or equivalent products capable of providing similar functionalities;
- import of used production lines under an arrangement with the domestic industry; and
- import under the temporary admission regime for economic use.
Lack of domestic production
The import of used equipment is subject to proof that domestic production of such equipment does not exist. This evidence can be produced through a certificate attesting to the non-existence of domestic production. Certificates are issued by industry representative bodies - usually the Machine and Equipment Association.
The Department of Foreign Trade Operations (of the Foreign Trade Secretariat of the Ministry of Development, Industry and Foreign Trade) also holds public consultations, which are made available online, in order to verify domestic production.
After registration of the import licence, the results of the public consultation concerning the existence of local production are published through the Brazilian system for controlling foreign trade operations.
Production lines
The import of used machines and equipment that constitute plant, production lines or cells is permitted even if similar machines and equipment are produced in Brazil. To this end, prior approval of the Department of Foreign Trade Operations is necessary.
Within this context, an agreement for the purchase of Brazilian machines and equipment is normally entered into with the nationwide industry representative body - in this case, the Machine and Equipment Association.
In deciding whether to grant approval, the department will evaluate requirements such as:
- the impact of the project on the domestic economy;
- cost reductions;
- any increase in the generation of jobs; and
- productivity levels.
These requirements must be evidenced in the dossier on the project sent to the department, which also should contain information such as:
- the list of products to be imported;
- the products to be purchased in the domestic market;
- the number of jobs generated; and
- the increase in production capacity of the importer company.
The compensation agreement with the association should contain an agreement to purchase - on the part of the importer company - machines and equipment of Brazilian origin of a value at least equal to that of the imported used products for which there is production in Brazil.
Temporary admission regime
Imports without foreign exchange (payment remitted from Brazil) of used machines and equipment submitted to the temporary admission regime for economic use may constitute a means to import, for a certain time, items to be used for the provision of services or production of goods, including goods that will serve as industrial models. In this case the non-existence of domestic production is not a requirement, except at the time of final nationalisation of the product, if applicable.
Pursuant to the temporary admission regime, the payment of import duties and excise tax is proportionate to the length of time for which the product stays in Brazil.
Comment
The need to expand the supply of final products in various sectors of the Brazilian economy is prompting multinational and Brazilian companies to increase their production capacity. In these times of economic stress in some regions of the world, mechanisms for harnessing idle capacity should be considered; the export of this capacity may be a way to capitalise on economic growth in Brazil.
For further information on this topic please contact Luiz Eduardo Ribeiro Salles or Mariana Lucente Zuquette at BARRETTO FERREIRA KUJAWSKI E BRANCHER – Sociedade de Advogados by telephone (+55 11 3897 0300), fax (+55 11 3897 0330) or email ([email protected] or [email protected]).