Import Tax Reduction for the sake of Competitive Production

Import Tax Reduction for the sake of Competitive Production

Presidential veto has been overturned by National Congress on March 17, 2022 and now import tax reduction is final and binding (Law 14.301/22). It is all about the Additional Freight for the Renewal of the Merchant Ships (AFRMM)which has been under federal collection since 1987 burdening customs clearance proceedings with a tariff of 25% on the total amount of the ocean freight paid to the shipping lines. Now the rate has been lowered to 8% in long-haul navigation and from 10% to 8% in cabotage.

That tax has been excessively burdening Brazilian industries and distributors in need of imported goods, parts, components, food, medicine, and inputs for domestic production or exports of end-products worldwide.

Under such perspective, according to an estimate by the Ministry of Economy, the tariff decrease will reduce the costs of domestic production, boosting manufacturing and strengthening the competitiveness of the national goods, with an impact of up to 0.2% on GDP and a reduction of at least 4% in the price of basic food items, with rebates on the price of fuel and cooking gas.

Actually, AFRMM has never fulfilled its objectives, becoming, over time, a pure and heavy cost borne by importers and then passed on to the end-consumers. With the evolution of international trade rules, some concepts considered normal in the 1980s, such as import substitution, protectionism, encouragement of local content and discrimination between national products and services against imported ones, ended up becoming obsolete, harmful and also illegal before the multilateral trade rules established from 1995 onwards by the World Trade Organization – WTO.

If you would like to know more about that matter please contact Fischer Law Firm and we will be honored to perform joint efforts pursuing to render the customized support you are looking for.