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Brazilian Government to Increase Import Duties on Textiles

Treasury Minister Guido Mantega announced 27 December 2011 that the Brazilian government intends to change its system of imposing tariffs on textile products. Imports of these goods are growing rapidly, particularly from mainland China, and the government wants to prevent more substantial increases of allegedly underpriced textile goods that could harm domestic producers. A press release from the Brazilian Textile Industry Association indicates that Brazilian authorities hope to implement these changes by the end of February.

Brazil currently assesses import duties on textile products on an ad valorem basis, that is, as a percentage of the customs value of the goods. However. the government is now proposing to establish variable duty rates that would increase along with the quantity of goods imported. Legislation to implement this change has been drafted but details have yet to be determined and no final measures have yet been taken.

The proposed change to the textile duty system, like the recent tariff increase on automobiles, reaffirms that Brazil is not hesitating to impose measures that may be seen as protectionist if it believes they will aid domestic industries still struggling with the global economic situation. Brazil has signalled its intention to defend any challenges to such measures at the World Trade Organisation by characterising them as provisional safeguard measures allowed under WTO rules. It should be noted that Brazil’s duties on a range of textiles and apparel are already at their maximum WTO bound rate of 35 percent, including knit apparel, woven apparel, textile made-ups of Chapter 63 and carpets and other textile floor coverings of Chapter 57.

Also of interest is that in August 2011 the Brazilian government established measures designed to identify and restrict shipments of goods (particularly apparel of Chapters 61 and 62) suspected of price or other trade compliance irregularities.

Mainland China is Brazil’s largest textile and apparel supplier with a 47 percent share of all imports (not including raw cotton imports) during January-November 2011 and growth of 35.8 percent to US$2,671.2 million from January-November 2010. India ranked second with a 9.4 percent share and a 1.1 percent to US$531.9 million decline during January-November 2011 while Indonesia was third with a 5.8 percent share and a 15.7 percent to US$330.4 million increase in shipments. For its part, Hong Kong ranked 14th with a 1.4 percent share and growth of 72.7 percent to US$80.9 million during January-November 2011.

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