Rules of origin
Brazil recently regulated anti-circumvention measures for the import of goods and made it possible to launch investigations on the practice of circumvention. Shortly afterwards, the Foreign Trade Chamber (CAMEX) complemented such measures through CAMEX Resolution 80.
Based on the general principles and requirements established by the World Trade Organisation (WTO) Rules of Origin Agreement, Resolution 80 defines and establishes control parameters for the origin of imported goods. The resolution comes as a response to continued attempts to circumvent the application of trade remedies or the use of undue tariff preferences. It aims to reduce the quantity of goods with false declarations of origin entering the country.
Under the resolution, the Secretariat of Foreign Trade (SECEX) will now verify the certificate of origin of non-preferential goods during the licensing phase, specifically in relation to certificates' authenticity and veracity, and in keeping with prevailing regulations. The SECEX may apply penalties, including:
- a refusal to grant import licences;
- a fine applicable on the goods' customs value; or
- confiscation of the goods.
Foreign manufacturers and exporters supplying products to Brazil must fulfil the determinations concerning non-preferential rules of origin in order to avoid such penalties.
Resolution 80 generally determines that goods originate from the exporter country when:
- there is production in that country; or
- goods result from the material or labour of more than one country, provided that a 'substantial transformation' occurs in the exporter country.
Goods classified as being produced in an exporter country include:
- products of vegetable origin harvested in its territory;
- live animals born and bred in its territory;
- products obtained from live animals in its territory;
- goods obtained from hunting, trapping or fishing carried out in its territory;
- minerals and other natural resources extracted in its territory; or
- products produced in its territory for which the materials used solely and exclusively originate from that country.
'Substantial transformation' occurs when a new individuality is conferred on a product that has been produced with materials that did not originate in the exporting country. In such cases, 'individuality' is defined as the classification of the product into a different tariff position (ie, the first four digits of its record in the Harmonised System).
According to the resolution, a final product that results from an operation or process carried out in one country will not be considered to originate from such country if:
- during this operation or process, materials or inputs do not originate from the country; and
- if such operation or process consists only of:
- assembling, packaging, fractioning in lots or volumes;
- the selection, classification, marking, composition of assortments of goods or simple dilutions in water or other substances that do not alter the characteristics of the product as original; or
- other equivalent operation or process.
The above conditions apply even if the operation or process alters the classification of the product in the Harmonised System.
Finally, the resolution states that even if the above definitions are observed and the certificate of origin is genuine, where imported goods are subject to an anti-circumvention investigation and the existence of circumvention is verified, the rules of origin will not be applied.
Rules of origin result from the Uruguay Round discussions (1986 to 1994) and are regulated under the WTO Rules of Origin Agreement. This agreement presents the basic guidelines that should be followed by the signatory countries in their domestic legislation in relation to the non-preferential rules of origin, as well as a work programme for the multilateral harmonisation of the rules. However, to date, no rules have been established within the ambit of the WTO, requiring each country or economic bloc to define its own rules of origin.
For further information on this topic please contact Marina Amaral Egydio de Carvalho or Mariana Lucente Zuquette at Barretto Ferreira, Kujawski e Brancher - Sociedade de Advogados (BKBG) by telephone (+55 11 3897 0300), fax (+55 11 3897 0330) or email ([email protected] or [email protected]).