Mercosur Adopts New Rules for Tariff Reduction Due to Supply Shortages

On March 25, Decree nº 10,291 was published, incorporating Resolution No. 49/19 of the Common Market Group into the Free Trade Agreement No. 18 (ACE-18), which increases the number of tariff codes that may have their import duty tariffs reduced unilaterally by Mercosur member countries due to shortages, and facilitates the use of this mechanism.

According to the new Resolution, the measure consists of an authorization for the Member State beneficiary to adopt a temporary reduction of the Common External Tariff (TEC) that results in a rate of 2% or 0%, for the import of a product, by specific quantity and term (except for Paraguay, whose rates will be 0%). In the previous legal determination, the 0% rate would be authorized only in exceptional cases.

The tariff reduction may be effective initially for a period of one year, with the possibility of renewal. In the event that supply shortage conditions persist and pass a 3-year period since the adoption of the first measure, Mercosur may analyze the possibility of definitively reducing the TEC of the product.

The repealed legal determination established an amount of up to 45 tariff codes (NCM) per country, divided between the potential reductions, while the current legal text provides for a limit of 100 NCM codes per country, regardless of the reason for which they fall under.

The approved measures will be applied to imports of goods in cases of impossibility of normal and fluid supply in the region, resulting from imbalances between supply and demand, due to

i. temporary absence of regional production of the good;

ii. existence of regional production of the good, but the producing Member State does not have enough supply to meet the quantities demanded; or

iii. existence of regional production of a similar good, but which does not have the characteristics required by the production process of the industry of the requesting Member State.

Intra-Mercosur trade requirements must also be met, so the measures will only be approved as long as they do not involve restrictions on trade within the bloc, do not affect the conditions of competitiveness in the region, consider the seasonality of intra-bloc supply in the case of agricultural products and consider other relevant elements.

The new resolution also establishes the procedures and deadlines for the submission, treatment and approval of requests, renewal of measures and requests for urgent treatment, among other provisions.

Demarest’s International Trade and Customs team is available for any further information or clarification on this matter.