Trade remedies are instruments available to World Trade Organization (WTO) members whose domestic industries are injured by imports; such instruments are anti-dumping duties, countervailing duties and safeguard measures.
The Brazilian trade remedy system has undergone fundamental changes since 2019. Before that date, the application of trade remedies was decided by the Foreign Trade Chamber (CAMEX) – that is, a board composed by the main ministries involved in the Brazilian international trade agenda. At the beginning of 2019, such decisions were centralised in the hands of the Special Secretary of Foreign Trade and International Affairs. Later, trade remedy decisions were taken back to CAMEX with the participation of non-traditional ministries, such as the Ministry of Agriculture and the Ministry of the Defence (appointed by the Brazilian Presidency).
In addition to its structure, Brazil is modernising its legislation regarding trade remedies and has changed its practice on anti-dumping, subsidies and public interest proceedings.
Finally, due to depreciation of the Brazilian currency (real) in the past two years, Brazilian export prices became much more competitive in the international market. In this scenario, Brazilian exports of goods have become a target of trade remedy investigations in other jurisdictions. According to the Ministry of Economy’s website, 17 countries are currently investigating Brazilian exports of goods, as of October 2020.
Anti-dumping duties may be applied on imports of foreign producers who export goods at lower prices than those sold internally in their domestic market, causing injury to the Brazilian domestic industry. Such duties can be in force for up to five years. After this period, anti-dumping duties can be reviewed on sunset review proceedings and can be extended provided certain conditions apply. Anti-dumping investigations and sunset reviews are proceedings determined by means of Decree No 8,058 of 2013.
According to statistics published by the Anti-dumping Committee of the WTO, historically, Brazil is the fifth-largest applier of anti-dumping duties, after India, the USA, the EU and Argentina.
However, in the first half of the last decade, Brazil was one of the countries that most applied anti-dumping duties. From 2013 to 2015, Brazil applied a record number of measures, accounting for 30 or more anti-dumping duties applied each year.
Considering anti-dumping duties are subject to sunset reviews after a five-year period, Brazil has been facing a wave of review proceedings since 2018. According to official data published on the Ministry of Economy’s website, as of October 2020, there are currently 17 ongoing anti-dumping proceedings, of which 15 are sunset reviews.
Currently, trade authorities are concerned about the stock of anti-dumping measures and their alleged impact on the Brazilian economy.
In addition to conducting numerous trade remedy investigations, the team of investigators is working to modernise the Brazilian Anti-dumping Legislation. Although the current Anti-dumping Decree is relatively recent, dating from 2013, the authorities changed some practices and released public consultations to further detail some provisions. These consultations concern the following matters:
With regard to the pre-submission, the proposed ruling merely consolidates an antique practice, under which the authorities receive a pre-submission by the petitioner who represents the domestic industry and give their feedback before the filing on the digital system. The proposed ruling established deadlines and procedures, as well as clarifying that pre-submission is not mandatory for the petitioner and will not necessarily be analysed by the investigators. Also, the proposed ruling provides that pre-submissions presented by "fragmented industries" will be analysed first by the authorities. Such provision prioritises sectors involving an exceptionally large number of domestic producers, which are treated as fragmented industry; for instance, footwear, garlic and milk are treated as such by Brazilian trade defence authorities.
With respect to the likely export price on sunset reviews, the proposed ruling provides a methodology to calculate the export price for those exporting countries who ceased to export the subject product to Brazil or exported non-representative quantities of the subject product to Brazil. In these cases, the authorities apply such methodology to determine what would be the likely price of the exports to Brazil in case they were resumed. The proposed methodology for determining the likely export price considers export statistics to third countries, the exporter performance and the imposition of trade remedy measures by third countries.
In relation to the possibility of suspension of anti-dumping measures on sunset reviews, the Brazilian Anti-dumping Legislation already provided that the authorities could recommend the extension of the extension of the duty with immediate suspension of its application due to uncertainty about the likely future evolution of imports of the product subject to an anti-dumping duty. The collection of anti-dumping duties may be resumed due to an increase in the quantity imported that could lead to recurrence of the injury to the domestic industry. The recommendation of suspension of anti-dumping duties will consider the likely price of the dumped imports and the likely effect thereof on the prices of the like product in the Brazilian domestic market, the exporter performance and changes in market conditions in the exporting country, Brazil, or a third market.
Regarding the reduction of anti-dumping duties on sunset reviews, it is possible when the exporting country under analysis ceased to export the subject product to Brazil or exported non-representative quantities in the relevant period. In such cases, the proposed ruling provides that the authorities may extend the anti-dumping duties but reduce them by 25% lower than the duties in force. Depending on the data submitted by the producer/exporter the reduction might even exceed 25%. The authorities will evaluate the following aspects: the behaviour of producers/exporters during the entire period of review, the imports of the subject product into Brazil after the relevant period and the findings of other proceedings.
The private sector submitted comments on these four matters in July 2020; the trade authorities have not yet published a final version of these rulings.
Finally, we note that the number of anti-dumping suspensions increased in 2019 and in the first half of 2020. Although the general provision authorising anti-dumping duties’ suspension on sunset review has been in force since 2013, it was seldom applied until then.
Subsidies and countervailing duties
Countervailing duties may be applied when the exporting country grant subsidies – directly or indirectly – to the manufacture, production, exports, or transportation of the subject product, causing injury to the Brazilian domestic industry.
In contrast to the Brazilian Anti-dumping Legislation, which was modernised in 2013, the Brazilian Subsidies Legislation dates to 1995, the beginning of the trade remedies system in Brazil. The subsidies investigations and the application of countervailing duties are subject to Decree No 1,751 of 1995.
The application of countervailing measures is rare in Brazil. Historically, Brazil applied only 35 countervailing duties, compared to 266 anti-dumping duties, according to the WTO’s statistics. Authorities reportedly attribute this fact and the small number of subsidies investigations to the complexity of this instrument and the discouragingly dry language of its legislation.
In this sense, the Brazilian team of trade remedy investigators is developing a new Subsidies Decree to make this instrument clearer and more accessible to the private sector.
Safeguard measures may be applied when there is a surge of imports of the subject product, in such quantities as to cause or threaten to cause serious injury to the Brazilian domestic industry. Safeguard investigations and the application of safeguard measures are covered by Decree No 1,488 of 1995.
The application of safeguard measures is exceedingly rare in Brazil, even rarer than the application of countervailing duties. Authorities usually attribute this to the particularities of the conditions to apply safeguard measures, conditions that are also rare in the wider world. Nevertheless, the Brazilian investigators team will work on new safeguard legislation after the new Subsidies Decree.
Public interest clause
The public interest clause is a non-mandatory clause designed for situations in which, despite the existence of dumping, injury and causality, a broader context is considered in the evaluation of whether trade remedy measures should be applied or extended. This is the major change in Brazil’s trade remedies system recently. The application of the public interest clause and the related procedures are provided on Ordinance No 13/2020.
In April 2019, Brazilian trade authorities published the new public interest ordinance alongside two public interest guides, one concerning material aspects and the other one regarding procedural aspects. In such guides, the authorities look back to the public interest clause application in Brazil and benchmarked other jurisdictions who also apply the clause: the EU, Canada, New Zealand, China and India. These countries have different approaches on how to evaluate public interest on trade remedy proceedings and different conceptions of what is public interest for trade remedies purposes.
After such research, the authorities set out that the Brazilian analysis of public interest should include the productive chain and market, international supply, national supply, the impact of the measure on the national market dynamics and the impact of the measure on the domestic industry, the upstream chain and the downstream chain. Also, price, quantity, quality, and variety gained importance and were defined as key elements in the public interest analysis.
The Brazilian public interest assessment could previously be summarised as the analysis of whether the negative effects of the measure on the downstream chain was greater than the positive effects of the measure on the domestic industry. Now, this evaluation incorporated competition elements and became more complex, summarised into the following question: does the imposition of trade remedy measures impact the supply of the subject product in the internal market in a way to significantly impair the dynamics of the national market?
These understandings were consolidated in the final Trade Remedies and Public Interest Guide, published in January 2020.
With regard to procedures, the major change was the convergence of deadlines to match trade remedies proceedings. Prior to 2019, interested parties could request the initiation of a public interest assessment at any time. Now, public interest applications can only be submitted when the trade remedy measure itself is under discussion, whether in an original investigation or a sunset review.
In addition, public interest assessment became mandatory for every original investigation, while in sunset review the public interest assessment is a faculty of the interested parties or at the authorities’ discretion.
Therefore, there is a trend towards an increase on the use of the public interest clause in Brazil, not only because of mandatory assessments but also because interested parties feel more encouraged to request the suspension of measures. There was already an increase in the number of public interest assessments, from ten in 2018 to 25 in 2019. Also, there were eight public interest assessments ongoing as of June 2020.
Tariff Structure and Trade Agreements
Brazil is very committed to a liberalisation agenda and reduction of the tariffs applied on imports of goods into the country.
With regard to the tariff structure, since Brazil is a member of the Mercosur common market, it is limited in its actions when it comes to unilaterally reducing the import duty levied on goods. Most Brazilian imports are bound to Mercosur’s Common External Tariff. Therefore, Brazil depends on the other members – Argentina, Paraguay, and Uruguay – to reform the tariff structure as it stands. There are negotiations in this sense, with Argentina reportedly resisting tariff reductions that would affect all Mercosur members.
Meanwhile, Brazil has reorganised its trade structure internally, creating the Committee for Tariff Modifications (Comitê de Alterações Tarifárias, CAT) within the Brazilian Chamber of Foreign Trade in February 2020. In addition to permanent tariff issues, CAT is also responsible for internal unilateral import duty modifications, such as the List of Exceptions to Mercosur’s Common External Tariff (Lista de Exceções à Tarifa Externa Comum, LETEC). LETEC is a list of 100 goods of which each member can unilaterally change its tariffs. Due to the structural reorganisation, there was a backlog of tariff modification requests that CAT seems to be analysing progressively.
Furthermore, Brazil will reportedly launch public consultations to receive the private sector’s inputs on tariff applied on all goods soon.
With respect to trade agreements, Brazil has made great strides, such as celebrating the trade agreement between Mercosur and the EU in 2019 and deepening the Automotive Agreement with Mexico in 2020. In August 2019, Mercosur also concluded negotiations on a trade agreement with the European Free Trade Association (EFTA). Moreover, on 19 October 2020, Brazil signed the Agreement on Trade and Economic Cooperation with the USA that concerns trade facilitation and customs co-operation, good regulatory practices, and anti-corruption provisions. Currently, there are ongoing negotiations for trade agreements between Mercosur and Canada, Lebanon, Singapore and South Korea.
However, Brazil is facing a challenging task on environmental politics and its relation to trade. The EU-Mercosur Trade Agreement includes a chapter named Trade and Sustainable Development, according to which the contracting parties shall pursue the sustainable development goals of the UN 2030 agenda and other multilateral agreements signed by both the parties on these themes, such as the United Nations Framework Convention on Climate Change and the Paris Agreement.
Brazil’s commitments in this agenda include:
Certain European countries, such as Germany and France, have indicated they might not ratify the EU-Mercosur Trade Agreement because, in their view, Brazil is not advancing towards the above commitments.
In addition, the Trade and Sustainable Development in the EU-Mercosur Trade Agreement provides politics on sustainable management and conservation of forests, conservation and sustainable use of the biodiversity, sustainable use of biological resources, sustainable management of fisheries and aquaculture and promotion of responsible business conduct. In this context, the EU is extremely concerned about Brazil’s response to recent environmental disasters such as the fires in Pantanal and (as seems likely) the fires in Amazonia. Moreover, the European Commission and the UK are studying ways to reduce the impact of deforestation and forest degradation of products placed on the EU market and whether the government should introduce a new law that would require businesses to manage “forest risk” on commodities, including imported commodities.
In this respect, Brazil will have to overcome its environmental and sustainable internal challenges to effectively benefit from access to markets that so far are agreed but not yet ratified/approved.
On the other hand, the Brazilian Ministry of Economy is studying how to enhance sustainable development through politics on export credits, investments, and tariff reform considering environmental compliance recommendations by the Organization for Economic Cooperation and Development (OECD). The Ministry of Economy aims to increase the country's environmental efficiency as an instrument for economic development, which may be a small step towards pursuing sustainability.
Brazil ratified the Trade Facilitation Agreement of the World Trade Organization in 2016.
As provided in Article 23.2 of such agreement, Brazil created the National Trade Facilitation Committee within the Brazilian Chamber of Foreign Trade in 2016. After the reorganisation of trade decisions by the Brazilian federal government authorities, the National Trade Facilitation Committee was reinstated in May 2020, by means of Decree No 10.373 of 2020.
The first meeting of the new National Trade Facilitation Committee after its recreation occurred only in August 2020.
In addition, the Federal Revenue Offices has been working on modernising the Brazilian Authorized Economic Operator (AEO) programme. On 20 October 2020, the AEO authorities launched public consultations to co-create with the private sector the new requirements for the AEO programme, which shall come into force in 2022.
The modernisation aims to increase international integration, accelerate negotiations, and reaffirm Brazil's commitment to always improve its AEO programme. Furthermore, the Brazilian authorities believe it is possible to achieve greater harmonisation with international standards through the modernisation of the AEO requirements. The private sector shall now provide its inputs.