Taiwan Machinery Association's visit to Brazil to expand market

Textile Machinery - Brazil 2007

Investments in machinery by the Brazilian textile and clothing industries totaled an estimated US$10 billion from 1990 to 2005. Of this total, US$2.9 billion were invested in the spinning segment; US$1.6 billion in the weaving segment; US$1.6 billion in the knitting segment; US$1.7 billion in finishing and US$1.9 billion in made up articles. The remaining US$300 million wereinvested in other segments, such as felt manufacturing and non-woven fabrics.

Consumption of textile machinery in units

The United States is Brazil’s largest trading partner, with bilateral trade totally US$40 billion. Over the last decade, Brazil has taken substantial steps to reduce trade barriers such as tariffs, import licensing and other regulatory requirements. Tariff rates in Brazil, though, do remain high; favoring locally produced products, with average tariff rates averaging 15%. In 1991, the United States signed a trade and investment framework agreement with Mercosul, a customs union organization that includes Brazil, Argentina, Paraguay and Uruguay. Under this framework, the United States and Mercosul agreed to encourage reducing barriers to trade and investment. Movement on further reductions has been slow as Mercosul continues to face internal debates between members. The United States government does continue to work to facilitate business in Brazil on a bilateral basis, though moving on the most contentious issues has proven difficult. In this report, we will explain the trade regulations and barriers that may affect US companies seeking to export to Brazil.

Tariffs, Non-Tariff Barriers, and Import Taxes

Tariffs, in general, are the primary instrument in Brazil for regulating imports. All tariffs are ad valorem, with rates between 0-35%, levied on the Cost Insurance Freight (CIF) value of the import, with the exception of some telecommunication goods. razil’s average applied tariff was 17% in 2002. The average tariff in 1990, by contrast, was 32%. Brazil also maintains a higher average tariff on processed items than on semi-processed goods and raw materials.

Brazil and its Mercosul partners implemented the Common External Tariff (CET) on January 1, 1995. In November 1997, after consulting with its Mercosul partners, Brazil implemented an across-the-board three-percentage point increase on all tariffs (inside and outside the CET), raising the ceiling from 20 to 23%. The surcharge is being gradually phased out, but given uncertainties over Argentina’s economic recovery, its elimination may be delayed. Other Mercosul members have also unilaterally adjusted their tariffs in response to economic crises, and given these developments, the CET is currently full of exceptions.

As a means of providing incentives for the renewal of Brazilian industrial parks, the GOB launched a program to reduce taxes on machinery/equipment that has no similar/alternative national product—the so-called “ex-tarifario” program. Import Taxes on these capital goods can be reduced from an average of 14% to 4% pending appropriate request and procedures submitted to the proper authority, which is CAMEX (International Trade Chamber), a government board.

The tariff benefit will only be granted if there is no similar machinery produced in country. The influence of national associations is strong and can hinder the process. Associations such as ABIMAQ (Machinery producers) and ABINEE (Electronic and Electrical producers) are openly against a policy of tariff adjustment and can obstruct such requests by naming supposed ational producers of machinery/equipment similar to that intended for import.