Contributing Lawyers


Cyndee Todgham Cherniak

United States

Susan Kohn Ross


Andrew Hudson

Do Brazil's Export Processing Zone Laws Bestow an Illegal Export Subsidy?

Recently, Brazil’s House of Representatives approved Provisional Executive Act 418, which promotes the use of export processing zones (ZPEs).  It is suggested that the export processing zones are allowed states in the less-developed north, northeast and west-central areas of Brazil.

In order to qualify for beneficial treatment, the manufacturer must export 80 percent of their production. The benefits to a manufacturer of operating in an export processing zone include the following:

  • The Government will suspend for 20 years the obligation to pay import duties, federal value-added taxes (IPI), social contributions (Cofins), social integration program contributions (PIS/Pasep), foremanship, warehouse fees and merchant marine fund contributions (AFRMM) on imports and domestic purchases of goods and services.
  • The Government will eliminate of the requirement that the qualified manufacturer obtain (and pay the required fees for obtaining) an import license or other federal agency authorization for imports and exports, except those related to sanitary controls, national security and environmental protection.
  • The Government will forego certain amounts of income tax revenue by granting a full income tax exemption during the first five years and 75 percent reduction during the following five years. There are certain restrictions for foreign corporations.

The issue of illegal export subsidization should be considered given the long-standing aircraft dispute between Canada and Brazil.  Further, Brazil's MERCOSUR trading partners may experience trade diversion as a result of the export processing zone program.  We will have to wait and see if any WTO Member or MERCOSUR Member sees this program as problematic.

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