On July 17^th, the Foreign Trade Secretary (SECEX) of the Ministry of Industry, Foreign Trade and Services published the latest version of the manual for the drawback exemption regime. The alterations include new functionalities and procedures for information upload and changes in the virtual platform.

The special customs regime of drawback, created in 1966, consists in the suspension or elimination of applicable tariffs on imported inputs for use in exported products. The objective of the regime is to reduce production costs of exportable products and make them more competitive in the international market, fostering the growth of Brazilian exports. There are three drawback modalities: exemption of tariffs, suspension of tariffs, and restitution of taxes, although the last one is barely used nowadays.

The new version of the manual recently published refers to the exemption modality, in which the benefit is conceded for the import of products to replace domestic feedstock used in the process of industrialization of exported products, in order to benefit the domestic export industry or the domestic supplier, and to meet market conditions.

In February, SECEX published the previous version of the drawback exemption manual, where it had included the sectors of pesticides, defense material, and chemicals among the beneficiaries of the regime. The inclusion adds up approximately US$ 1.5 million to the total of yearly exemptions. The sectors that have traditionally benefited the most from the regime are aviation, automotive, electronics, machinery and equipment.

The importance of the regime is such that, on average, over the past four years, it has accounted for 29% of all the fiscal benefits conceded by the Brazilian federal government. Also, approximately 23% of Brazilian exports take advantage of the regime.

Although it benefits exports both to and from Brazil, the drawback regime is not devoid of controversy. It has hindered negotiations of a trade agreement between Mercosur and the European Union, which resists giving tariff preferences to products made in the Mercosur region and that have benefited from the regime.

Source: Ministry of Industry, Foreign Trade and Services (MDIC), Valor Econômico