Brazilian instruments for the defense of foreign trade

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The defense of foreign trade in Brazil involves the implementation of ANTI-DUMPING procedures, ANTI-subsidy actions (compensatory measures) and SAFEGUARDS.

Such trade defense instruments are only implemented after investigation and proof of damage to local producers and to the domestic market. This investigation and the resulting complaint proposal for trade defense purposes, as well as the conduct of administrative proceedings with the World Trade Organization – WTO are carried out by the Department of Trade Defense (“DECOM”), of the Secretariat Foreign Trade (“SECEX”), the Ministry of Development, Industry and Foreign Trade (“MDIC”).

SAFEGUARD measures aim to protect a specific sector of industry or agriculture against unpredictable increases in imports of goods from abroad and are based on the World Trade Organization’s Safeguards Agreement. – WTO and the Mercosur treaty.

They therefore constitute an instrument of temporary protection used against irreparable damage caused to a local production sector, when there is an excessive or unforeseen increase in the volume of imports of a given product, whatever its origin, even if it is not configured as an event of dumping or a verification of the existence of a subsidy in the country of origin.

The implementation of this safeguard instrument should only last until the domestic industry recovers, as it is not the result of a violation of free trade rules or unfair competition. or predatory, but rather emergency situations that can cause serious damage to local producers of a specific national productive sector, due to the loss of their competitiveness with foreign producers.

It should also be noted that serious injury is understood to mean a general and significant deterioration in the condition of a particular domestic industry, which must be demonstrated on the basis of facts and not just claims or claims. remote possibilities.

The application of safeguard measures is carried out through quantitative restrictions, quotas or an increase in import duties. In the event of an increase in the import duty, if it is determined, after investigation, that the imports have not caused serious injury or threat of serious injury to the domestic sector, the exporting country must be promptly reimbursed for amounts linked to the increase in taxes levied on the importation of goods.

Anti-subsidy actions or COUNTERVAILING MEASURES include an increase in taxes levied on the importation of a certain imported product, in particular to the extent that it reveals greater competitiveness, as it benefits from subsidies resulting from the receipt of tax advantages or credit in the country of origin.

Subsidies are understood to mean the granting of advantages or direct financial contributions made by the government or a public body of the exporting country, as a means of raising income or maintaining prices, in order to increase exports and / or reduce imports. Benefits or contributions to the production and transportation of products can be configured as subsidies, to the extent that they represent a benefit to the exporter or harm to the domestic industry of the importing country.

However, countervailing trade defense measures can only result from the verification of specific subsidies, that is to say specifically aimed at a particular company or region, or even at a particular production sector. As a general rule, research activities, aid to less-favored regions and to regions subject to specific legal requirements of an environmental nature are also exceptions.

It should also be noted that these specific subsidies may be linked both to the performance of the producer / exporter, as well as to the latter’s preferential use of domestic products to the detriment of foreign products.

In this case, the complaints are lodged by the Department of Trade Defense with the WTO, so that the latter grant countervailing measures to the injured country, in order to compensate for these subsidies, by charging a monetary amount equivalent to the amount of the subsidy. .

In addition, trade defense in Brazil today mainly involves ANTI-DUMPING measures, which aim in particular to curb unfair commercial practices that intentionally encourage the entry into the local market of an imported or similar product at prices lower than those. for which these same products are marketed in the country where they are produced.

These unfair practices of price discrimination practiced in different markets, to be punished by anti-dumping measures, result mainly from the granting of subsidies, that is to say from economic advantages or monetary aid that a government grants. producers of certain goods, with a view to strengthening their competitive position on the international market.

These economic benefits are usually artificial means of generating income through subsistence allowances or subsidies given to producers in the exporting country, so that these producers may charge lower prices than they would in practice be able to afford. to offer under normal market conditions.

For anti-dumping measures to be applied, an administrative procedure is necessary to prove the existence of dumping as well as the damage caused to the domestic industry or agriculture, as well as the causal link between them.

Once this assumption is made, the denunciation is also made by the Department of Trade Defense at the WTO, which in turn will then analyze the process mentioned and possibly grant the anti-dumping duty to the affected country.

In this case, the anti-dumping duty granted is applied by invoicing the importer of the product at the time of its nationalization. This charge corresponds to the percentage of the dumping margin determined in an administrative proceeding sufficient to remedy the injury or threat of injury caused to the domestic industry.

These anti-dumping duties will be levied independently of any tax obligation related to the importation of the products concerned. And compliance with the obligations resulting from the application of anti-dumping duties will be a condition for the introduction of dumped or subsidized products into the country.

Anti-dumping duties are payable on the date of registration of the import declaration, so that non-payment of these duties will result in the levying of a late payment fine of 20% and interest calculated on the basis of the variation of the reference rate of the special settlement and custody regime – SELIC, for federal securities. In the case of a requirement by way of tax adjustment, a punitive fine of 75% will be applied.

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