G/SCM/Q2/BRA/46  
 
24 October 2014  
(14-6180)  Page: 1/4  
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES 
REPLIES TO QUESTIONS1 POSED BY THE UNITED STATES REGARDING THE NEW 
AND FULL NOTIFICATION OF BRAZIL2 
The following communication, dated 24 October 2014, is being circulated at the request of the 
Delegation of Brazil.  
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  Productive Development Policy (PDP) 
 Question 1  
 Brazil's notification states that this subsid y takes the form of a "[r]eduction in the 
indirect taxes PIS and COFINS for imports and acquisitions in the domestic market of goods and equipment …". The notification  does not elaborate on the amount of 
the reduction, but Brazil has previously stat ed that "the rates are reduced to zero". 
G/SCM/Q2/BRA/25. Can Brazil please discuss whether the reductions are identical 
for imports compared to acquisitions in the domestic market, that is, whether the 
initial base rates are the same? 
Programs Not Notified 
 
We understand that in 2013, regarding the prio r notification period, Brazil responded to 
a question from the government of Japan st ating that it had not introduced any new 
subsidy programs since 2008 that were notifi able for the N220 notification. The United 
States notes that a number of programs di scussed in the course of previous Brazilian 
Notifications, Annual Reports of the Trade Policy Review Body, and Brazil's own Trade 
Policy Reviews appear as if they should be notified. Specific questions about these programs are detailed below. The United Stat es notes that there appears to be other 
publicly announced measures which may be subject to the notification requirement. 
 
Reply: 
 
The reductions are identical. The standard initial base rate for PIS is 1.65% and for COFINS 7.6%. 
Those rates are equally applicable to imports and to acquisitions in the domestic market.  
Programs Not Notified 
 We understand that in 2013, regarding the prior notification period, Brazil responded to a question from the government of Japan stating that it had not introduced any new subsidy programs 
since 2008 that were notifiable for the N220 notification. The United States notes that a number of 
programs discussed in the course of previous Braz ilian Notifications, Annual Reports of the Trade 
Policy Review Body, and Brazil's own Trade Policy Reviews appear as if they should be notified. 
Specific questions about these programs are detailed below. The United States notes that there 
appears to be other publicly announced measures which may be subject to the notification requirement. 
                                               
1 G/SCM/Q2/BRA/42. 
2 G/SCM/N/253/BRA. G/SCM/Q2/BRA/46 
 
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Question 2   As an initial question, does Brazil still main tain that it has not introduced any new 
notifiable subsidy program since 2008 that would be relevant to the current 
notification period? 
For example, the United States notes that va rious sections of the Secretariat Report of 
Brazil's latest Trade Policy Re view (Report), WT/TPR/S/283, indicate what appear to be 
notifiable subsidy programs. For example, paragraph 20 of the Report states that: 
 
Incentives and government assistance are available at the federal and sub-
federal levels. Incentive programmes ma y be regional, aimed at developing 
research, or targeted at specific sector s. Specific programmes are in place for 
the automotive, information techno logy, aeronautics, and petroleum 
industries. The range of support measures includes: loans; tax incentives; 
financial contributions; long-term and equity financing; accelerated 
depreciation; guarantees; grants; and cred it insurance. Incentives granted in 
the context of certain pr ogrammes promoting information technology and 
telecommunications are linked to Basic Productive Proce ss (PPB) criteria, 
which are product-specific and stipul ate which stages of the respective 
manufacturing process must be carried out in Brazil. 
Reply: 
 
The Brazilian Government maintains that no new notifiable programme has been in place during 
the period covered by this NFN. All Brazilian Government programmes introduced since 2011 are 
aimed at boosting technological development and i nnovation in the Brazilian industry, with a view 
to the sustainable development of its economy. They  do not constitute specific subsidies as defined 
by the Subsidies and Countervailing Measures Ag reement (SCMA) and do not discriminate between 
foreign and domestic inputs. The broad, horizontal objectives pursued by such programmes include also increasing energy efficiency and di minishing the environmenta l impact of the economy 
as a whole, expanding and modernizing infrastructure, promoting consumer protection, supporting 
small and medium-sized enterprises and reducing  socio-economic and regional disparities. 
 Question 3 
 
See also paras. 3.175-176 of the Report. Yet th e United States observes that Brazil's 
Notification discusses very little of this – in particular, it is difficult to find any 
references to the PPB criteria in th e programs Brazil has chosen to notify. 
  Could Brazil please identify which of the pr ograms it has notified are linked to the 
PPB criteria? And specifically, for those pr ograms, could Brazil please elaborate on 
the working of the PPB criteria, especia lly in the context of Article 3.1(b)? 
Reply: 
 
Among the programmes notified, only the "Capacit y Building and Competitiveness Enhancement in 
Information Technology" programme is linked to PPBs. Regarding art. 3.1 (b), PPB criteria do not fall within the purview of the said article because they do not pertain to products, but to 
production processes. 
 Question 4  
The Report also discussed certain un-notified  programs, which appear troublesome on 
their face. For example, paragraph 29 of the Report notes that "Between December 2011 
and December 2012, tax breaks were offere d for companies producing vehicles with 
more than 65% of regional content". Yet there is no discussion in Brazil's notification of 
any such program.  G/SCM/Q2/BRA/46 
 
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   Can Brazil explain why it has not notified this apparent subsidy relevant to the 
reporting period? Could Brazil please provid e an updated notification including this 
program? Are there similar programs for other industries? 
Reply: 
 
The referred tax break was a temporary measure and is no longer in force. It does not constitute a notifiable subsidy as defined in the Subsidies and Countervailing Measures Agreement (SCMA). 
 
Question 5  Similarly, the Report discusses the Plan o Brasil Maior (2011-14) and a number of 
programs implemented therein.  
 
The Federal Government's recently  adopted policy Plano Brasil Maior 
comprises a raft of stimulus measures, such as broadening fiscal, investment, 
and innovation incentives, aimed at f ostering technological innovation as 
well as attenuating the impact of the global economic downturn. The 
measures implemented to date include: tax exemptions for manufacturers of 
laptop computers; substitution of empl oyers' social security contributions by 
a (lower) tax on revenue from domest ic sales for 40 subsectors (covering 
about 3,300 tariff lines) ; and amplificatio n of eligible sectors and favourable 
financing terms under federal prog rammes.  Besides increased BNDES 
resources and improved access to fina ncing, the Plano Brasil Maior supplies 
additional public funds (up to R$25 b illion) for the provision of guarantees 
through the newly-created Brazilian Funds and Guarantees Management 
Agency (ABGF). The ABGF will intervene to cover risks related to infrastructure, shipbuilding, and civil aviation projects, as well as public-
private partnerships and the hosting of  major sporting events; it will also 
provide guarantees for foreign trade transactions, social housing, education loans, and rural insurance. 
P a r a .  3 . 1 8 0 .  A  n u m b e r  o f  t h e s e  p r o v i s i o n s  a p p e a r  o n  t h e i r  f a c e  t o  b e  n o t i f i a b l e  
subsidies. 
  Could Brazil explain why it has not notified  any programs or provisions that make 
up part of the Plano Brasil Maior? 
Reply: 
 
No Brazilian Government programmes introduced since 2011 constitute notifiable subsidies as 
defined by the Subsidies and Countervailing Measures Agreement (SCMA) or discriminate between foreign and domestic inputs. All such programmes pursue broad, horizontal objectives such as increasing energy efficiency and the environmental sustainability of the economy as a whole, 
expanding and modernizing infrastructure, promot ing consumer protection, supporting small and 
medium-sized enterprises and reducing socio-economic and regional disparities.  
Question 6 
 Similarly, Members expressed concerns about other un-notified programs at the meeting 
on this Trade Policy Review. For example, Members noted the INOVAR-AUTO program, 
under which companies eligible for the programme may benefit from an IPI tax 
reduction of up to 30% on automotive products. Concerns have been raised about the incompatibility of some of the programme 's provisions with the WTO rules. 
 
 Could Brazil explain why it has not notified  the INOVAR-AUTO program, or when it 
expects to do so? In the meantime an d in any event, can Brazil provide the 
membership with assurances that it comp lies with WTO rules? Please describe any 
successor programs to INOVAR-AUTO. 
 G/SCM/Q2/BRA/46 
 
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  In summary, Brazil's New and Full Notificati on for fiscal years 2011-2012 appears to 
potentially omit a number of notifiable subs idies. The above list is not a comprehensive 
survey of publicly available sources regard ing Brazilian programs, bu t only a sample of 
matters evident from the review of material s already submitted to the WTO. The United 
States welcomes Brazil's attention to this matter.  
 Reply: 
 INOVAR-AUTO has been in force only since 2013. Therefore, the programme is outside the scope of the present notification (2011-2012).  
 
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