In a nutshell: international trade law in Brazil

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Overview of trade remedies

Brazil is the ninth-largest economy in the world. The country coped well with the first years of the global economic crisis in comparison to other players, mainly owing to continuing domestic and foreign demand (especially Chinese demand for commodities). More recently, Brazil has had significant exports gains with agricultural products as a result of trade wars, especially the one related to the United States and China. Nonetheless, in the past couple of years, Brazil has been severely affected by an economic crisis and instability. In 2018, the country's trade balance reached a surplus of US$58,298 billon, 13 per cent lower than the trade balance of the past year. The World Bank's 2018 data and projections indicate that Brazil is expected to expand 2.2 per cent in 2019 'assuming fiscal reforms are quickly put in place, and that a recovery of consumption and investment will outweigh cutbacks to government spending'.

The new President of Brazil is guiding the country to an economic liberal administration (2019–2022). The government expects to align trade and economic policies. To do that, the government has conducted a ministerial reform. The former Ministry of Treasure, the Ministry of Labour, the Ministry of Planning, and the Ministry of Industry, International Trade and Services form the new Ministry of Economy. That is, the Ministry of Economy has the 'control' of all factors of production.

Brazil has been a WTO member since its creation in 1995 and has adopted trade remedies provided in the WTO Agreements to take corrective action against imports that, in general, are causing material injury to a domestic industry.

Trade remedies are broadly divided into anti-dumping, countervailing and safeguard measures. The most commonly used in Brazil are anti-dumping measures, imposed in more than 382 cases from 1988 to 2018. In the same period, countervailing measures were imposed in 12 cases and safeguard measures in six.

In 2014, Brazil ranked as the top imposer of anti-dumping duties according to the WTO, when the country initiated 45 anti-dumping investigations and imposed more than 40 anti-dumping measures. However, Brazil is experiencing a slowing down in trade remedy cases initiations, as the number of cases in 2015 decreased to 38 and in the following in year to 24. As at June 2019, only 22 cases have been initiated, four new investigations and 18 sunset reviews.

On the international front, Brazil was a target of 21 new trade remedies in 2018, which resulted in the application of 44 trade defence measures against the country's exports in the same year. The steel industry is still one of the most affected sectors with 24 measures applied against Brazilian exports. Brazilian poultry and sugar products have been targeted by China recently. The recent 'trade war' may affect other Brazilian exporter sectors.

Additionally, mechanisms designed to guarantee the effectiveness of trade remedies, such as anti-circumvention measures and investigations of origin, are being used more frequently.

According to the WTO report on G20 trade measures, from October 2018 to May 2019 there was a significant increase on import restrictive measures taken by G20 countries considering the value of trade. Nonetheless, Brazil is enforcing trade facilitation measures. Brazil is fulfilling its WTO commitments and implementing the Trade Facilitation Agreement to increase transparency and efficiency of customs and other procedures related to trade.

Brazil launched the Single Window web portal in 2017, which gathers online information that exporters and importers might need. It has significantly reduced time and paperwork necessary to complete customs procedures as it allows users to run simulations to get to know the administrative treatment, measures and tariffs applied to the product. The portal has been implemented in steps. In 2018, the portal was expanded to attend exports under the scope of drawback suspension. The country is also successfully implementing the authorised economic operator programme, which accredits operators that meet safety criteria and comply with customs requirements. Consequently, it triggers faster procedures and reduces the time necessary for port operations. The programme has been improved and is passing through some simplifications to expedite the certification process under the standard of international organisations.

Legal framework

In Brazil, the imposition of anti-dumping measures is set out by Decree 8,058 of 2013, which abides by the rules set forth by Article VI of the GATT 1947 and the WTO Anti-Dumping Agreement.

The agency responsible for conducting anti-dumping investigations is the Subsecretariat of Trade Defence and Public Interest (SDCOM), part of the Secretariat of Foreign Trade (SECEX), both of which are subordinate to the Ministry of Economy. The SDCOM is the authority responsible for both dumping and injury examinations.

An anti-dumping investigation in Brazil starts when local producers or business associations file a written petition with the SDCOM setting out evidences of dumping, injury to the domestic industry, and the causal link between the dumped imports and the alleged injury.

The dumping period shall be of 12 months, ending in March, June, September or December. Regarding the period for injury analysis, it shall comprise 60 months, divided in five periods of 12 months, given that the most recent period must be the same as the dumping period. Exceptionally, it can be of up to 36 months but no less than that.

Once accepted, the merits of the petition are reviewed and the investigation is initiated. Investigations must be concluded within 10 months of the initiation date, subject to an additional eight-month extension under special circumstances.

During the investigation, known interested parties are notified and have sufficient opportunity to present in writing any related evidence. Upon prior authorisation, the SDCOM may conduct on-the-spot investigations at the facilities of all parties (domestic industry, importers, foreign producers and exporters) to verify the information submitted.

Parties may also request confidential treatment of special information, provided they present sufficient arguments and a non-confidential summary that allows a reasonable understanding of the information. The SDCOM stores all confidential documents in special files.

However, if a party fails to provide information in a timely manner denies its access or creates obstacles to the investigation, the preliminary and final determination shall be made based on the best information available.

Additionally, within five months of the initiation of the investigation interested parties may request hearings pointing out the specific themes to be discussed. Nevertheless, attendance of the hearing is not mandatory.

According to the decree, within 120 days of the initiation of the investigation, the SDCOM provides a preliminary determination about dumping, injury and causal link. The Subsecretariat may recommend to the Special Secretariat of International Trade and Foreign Affairs (SECINT), which is under the Ministry of Economy, the imposition a provisional measure on imports of the product under investigation, providing that: (1) all interested parties have had opportunity to express their opinions about the investigation; (2) dumping, injury and causal link to the domestic industry are affirmatively determined on a preliminary basis; and (3) authorities understand that such measures are necessary to prevent any injury during the course of the investigation.

In case the provisional duty is applied and certain criteria are met, such as the rapid increase of imports after the investigation, a retroactive collection of the anti-dumping duty of up to 90 days may be imposed on the imports.

During the investigation, exporters may undertake satisfactory obligations to adjust prices or to cease exporting at dumping prices. The SECEX should accept and SECEX must accept this price undertaking. In this case, the dumping proceeding may be terminated or suspended with no imposition of duties.

At the end of the investigation, the SDCOM issues a final determination regarding the existence of dumping, injury and the causal link between them, recommending or not to SECINT the imposition of a definitive duty. Such anti-dumping duties are not imposed under the following circumstances: (1) insufficient evidence of dumping or injury caused by the dumping; (2) the dumping margin is de minimis (less than 2 per cent); and (3) the volume of imports subject of actual or potential dumping, or injury is insignificant. In case of a positive recommendation from the SDCOM, SECINT can decide on the imposition of the duty.

According to the decree, companies that fully cooperated in the original investigation are entitled to a lesser duty that is, the anti-dumping duties imposed shall be less than the margin of dumping where such amount is sufficient to remove the injury to the domestic industry caused by the dumped imports.

Anti-dumping duties and price undertakings remain in force as long as needed to mitigate dumping and the resulting injury. However, these duties cease five years following imposition, subject to extension, through a sunset review procedure if there is evidence that its extinction could result in dumping and injury to domestic industry.

In addition to the sunset review, the regulation also provides for a change in circumstances review (interim review). Regarding the scope and collection of the duty, procedures for new shippers', anti-circumvention and reimbursement reviews are set forth in the decree. In addition, the legal text provides for product scope and redetermination review, in case the effectiveness of an anti-dumping measure is compromised.

The application of countervailing measures in Brazil is governed by Decree 1,751 of 1995, which is based on the WTO Agreement on Subsidies and Countervailing Measures.

An investigation starts when local producers or business associations file a written petition with the SDCOM setting out evidences of subsidies, injury to the domestic industry, and the causal link between the subsidised imports and the alleged injury.

During the investigation, known interested parties are notified and have sufficient opportunity to present in writing any related evidence. Investigations must be completed within a year of the initiation date, subject to an additional six-month extension under special circumstances.

Prior to completion of the procedure, but never less than 60 days from initiation, the authorities may issue a preliminary determination and impose provisional measures on imports under investigation, provided that: (1) all parties have expressed their opinions about the petition; (2) actionable subsidies and injury to the domestic industry are affirmatively determined on a preliminary basis; and (3) authorities understand the measures are necessary to prevent any damage during the course of the investigation. Measures may be imposed by paying an additional amount to the import tax or granting a guarantee. Unlike the anti-dumping regulation, a preliminary determination is not mandatory.

Additionally, before the final report, which provides grounds for the final determination, there is a final hearing, whereby parties are informed of the essential facts under judgment. Afterwards, parties may submit their final arguments within 15 days.

During the investigation, the export country may, of its own decision, undertake satisfactory obligations to eliminate or reduce the subsidy, adopt an alternative measure to offset the effects and have exporters agree to a review of prices. Should the SECEX accept and approve such undertaking, the investigation may be terminated or suspended with no imposition of countervailing duties.

Countervailing duties are imposed when the SDCOM finds that an actionable subsidy, injury and causal link occurred; and the SECINT accepts the SDCOM's recommendation on the imposition. The amount of duty stipulated should never exceed the amount calculated of the actionable subsidy. Unlike the anti-dumping regulation, there is no provision on the obligation to apply the lesser duty rule.

On the other hand, definitive duties are not imposed under the following circumstances: (1) insufficient evidence of the occurrence of actionable subsidy or injury resulting therefrom; (2) the amount of actionable subsidy is de minimis; or (3) the volume of imports subject to actual or potential dumping, or injury is insignificant.

Countervailing duties remain in force as long as needed to mitigate or to prevent material injury. However, duties cease five years following imposition, subject to extension if there is evidence that the extinction of such could result in injury to national industry.

The imposition of safeguard measures in Brazil is governed by Decree 1,488 of 1995, which abides by the rules set forth by Article XIX of the GATT 1947 and the WTO Agreement on Safeguards.

A safeguard investigation submission shall be filed in writing with the SDCOM. The petitioner has to present sufficient elements of evidence regarding increases in imports, serious injury or threat of serious injury and causal link of both.

During a safeguard investigation, the interested parties have the opportunity to submit any evidence that might be relevant. Parties may request confidential treatment of special information, if they present sufficient arguments and a non-confidential summary that allows a reasonable understanding of the information. The SDCOM keeps confidential documents in special files. Moreover, hearings may be scheduled, but are not mandatory.

In critical circumstances, where a delay would cause damage that might be difficult to repair, it is possible to impose a provisional safeguard measure pursuant to a preliminary determination that there is clear evidence that increased imports have caused or are threatening to cause serious injury.

Consultations with countries involved must be initiated immediately after the provisional measures. It shall be applicable for 200 days at most and may be suspended once authorities decide before the 200-day period. In the case of definitive safeguard measures, the period applicable in the provisional measure shall be accounted for the first one.

Similarly to the proceeding for anti-dumping and subsidies investigations, the SDCOM issues a final determination recommending a safeguard or not. Then, if the SECINT accepts it, a safeguard is imposed.

Safeguard measures remain in force only to the extent necessary to prevent or remedy serious injury and facilitate adjustment of the domestic industry. It may take the form of an additional tariff, ad valorem or ad rem (specific), to the MERCOSUR External Tariff (TEC) or quantitative restriction. However, such measures cease four years following imposition.

Measures may be extended if there is evidence that: (1) they are still necessary to prevent or remedy serious injury; and (2) the domestic industry is not adjusting in accordance with the agreements settled with the government. Nevertheless, the entire duration of the measure will never exceed 10 years. Measures extended shall not be more restrictive than the ones that were in effect initially, and shall continue being liberalised.

In order to guarantee the effectiveness of the trade measures in force, Brazil issued anti-circumvention rules: CAMEX Resolution 63 of 2010, SECEX Order 21 of 2010, SECEX Order 14 of 2011 and SECEX Order 42 of 2013. The anti-dumping decree and SECEX Order 42 of 2013 provide rules for anti-circumvention in anti-dumping cases. The anti-circumvention investigations are initiated at the request of any interested party of the original investigation, such as the domestic industry, producers, the government of the exporting country, Brazilian importers, companies responsible for the manufacturing operation or other parties as decided by the SDCOM or by the SECEX. Once accepted, the merits of the petition are reviewed and the investigation is initiated. The investigations must be concluded by the SDCOM within six months of the start date, subject to an additional three-month extension under special circumstances.

Brazil has established legislation for non-preferential rules of origin of trade policy, regulated by Law 12,546 of 2011, CAMEX Resolution 80 of 2010, SECEX Order 38 of 2015 and RFB Normative Instruction 1169 of 2011. The procedure certificates the origin of imported goods and intends to curb avoidance of anti-dumping measures through minor product modifications in third countries. As a general rule, Brazil applies the wholly obtained and tariff jump criteria, which aim to prevent fraud in the declaration of origin. Therefore, according to the legal text, the country of origin is the one in which the last substantial transformation was carried out. It also establishes a substantial transformation test as a change in tariff classification (four digits level) but excludes mere assembling, packaging, fractioning in lots, selecting, marking or diluting from being considered a substantial transformation even if they change the tariff classification. Since then, numerous investigations to examine the origin of products have been initiated.

Treaty framework

Brazil is a member of the Latin American Integration Association (ALADI), which was instituted in 1980 through the Montevideo Treaty to 'promote economic and social development, harmony and balance throughout the region'.

As an ALADI member, all Brazilian exports to other members are granted with a minimum tariff preference called the regional tariff preference. ALADI members are Argentina, Bolivia, Brazil, Chile, Colombia, Cuba, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela. Additionally, Brazil has entered into free trade agreements and economic mutual assistance agreements (ACE) with several ALADI members, in which higher tariff preferences were negotiated.

Brazil also executed the Mercosur Treaty on 26 March 1991, in Asuncion, Paraguay, which intended to constitute a common market between the founders Brazil, Argentina, Paraguay and Uruguay. In August 2012, Venezuela became a full member, and in July 2015 Bolivia also joined Mercosur and is currently in the accession process. In December 2017, the Brazilian Representation in the Mercosur Parliament approved the accession. However, the analysis of the Brazilian Congress, which will finalise the process, is pending. The trade bloc associate members are Chile (since 1996), Peru (2003), Colombia and Ecuador (2004), and Guyana and Suriname (2013). Through ACEs, the goal is to establish a free trade zone throughout Mercosur and with all associate members.

Since 1 January 1995, there have not been tariff barriers between Mercosur member countries. Therefore, products originating in one member country and sold in other countries are not subject to customs duties. Furthermore, a customs union was established to take effect on the same date. Mercosur members have adopted the common external tariff (TEC), based on the Mercosur common nomenclature (MCN) to unify the import duties levied on each MCN code and, consequently, prevent cash-flow deviations in trade. The TEC acts as the bedrock for the Mercosur integration process. This tariff covers the majority of products imported from non-member countries.

Mercosur and India signed a fixed tariff preference agreement in 2004, enacted by Brazil in June 2009. This agreement is currently being expanded, and the Brazilian government initiated a public consultation in 2013 to map the private sector's interests at stake. In 2009, Mercosur signed a trade preference agreement with the South African Customs Union, which entered into force in 2016.

Brazil, as a Mercosur member, enacted its first free trade agreement with a non-member, Israel, in 2007, which entered into force in 2010. It also signed an FTA with Egypt in 2010, and in the following year an agreement with Palestine. The agreement with Palestine is still under the internalisation process and Brazil already internalised the FTA with Egypt in 2015.

New free trade agreements have become a priority in recent years, especially since the new presidency took office. Brazil now intends to gain greater access to markets through trade arrangements. On 28 June 2019, after 20 years of negotiations, Mercosur and the European Union reached an agreement for an FTA.

In 2015, Brazil opened public consultations to map out the industry's interest in new agreements to be negotiated with Mexico, Cuba, Canada, Lebanon, Tunisia and the EFTA (Iceland, Liechtenstein, Norway and Switzerland). In 2017, new consultations were opened for agreements to be negotiated between Mercosur and South Korea and Mercosur and Japan, focusing specifically on tariff reduction. Brazil and Mexico are negotiating the expansion of the agreement (ACE-53), focusing on market access, services, trade facilitation, rules of origin, sanitary and phytosanitary measures, technical barriers and dispute settlement. An expansion agreement with India is also being negotiated.

In March 2018, Brazil officially launched negotiations with Canada, and the first negotiation round occurred later that month. The CAMEX approved negotiations with Singapore in July 2018. In October 2018, Brazil and Chile concluded a free trade agreement negotiation under ACE-35. The agreement includes tariff reduction and other non-tariff subjects, such as services, digital trade, telecom, sanitary and phytosanitary measures; technical measures trade facilitation, intellectual property and small and medium enterprises. It is the first agreement in which Brazil assumes obligations on digital trade, good regulatory practices, corruption, global value chains, gender, environment and labour subjects.