G/SCM/Q2/BRA/42  
 
31 July 2014  
(14-4437)  Page: 1/3  
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES 
QUESTIONS POSED BY THE UNITED STATES REGARDING THE NEW 
AND FULL NOTIFICATION OF BRAZIL1 
The following communication, dated 29 July 2014, is being circulated at the request of the 
Delegation of the United States.  
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  Productive Development Policy (PDP) 
 Question 1  
 Brazil's notification states that this subsidy 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 stated 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 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.   
 
Question 2  
 As an initial question, does Brazil still maintain 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 various sections of the Secretariat Report of Brazil's 
latest Trade Policy Review (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 may be regional, aimed at developing research, or targeted at specific sectors. Specific programmes are in place for the automotive, 
information technology, 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 credit insurance. 
Incentives granted in the context of certain programmes promoting information 
technology and telecommunications are linked to Basic Productive Process (PPB) 
                                               
1 G/SCM/N/253/BRA. G/SCM/Q2/BRA/42 
 
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  criteria, which are product-specific and stipulate which stages of the respective 
manufacturing process must be carried out in Brazil. 
Question 3 
 
See also paras. 3.175-176 of the Report. Yet the Unit ed 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 the programs Brazil has chosen to notify. 
 
 Could Brazil please identify which of the prog rams it has notified are linked to the PPB 
criteria? And specifically, for those programs, could Brazil please elaborate on the working 
of the PPB criteria, especially in the context of Article 3.1(b)? 
 
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 offered for companies producing vehicles with more than 65% of 
regional content". Yet there is no discussion in Brazil's notification of any such program. 
 
 Can Brazil explain why it has not notified this apparent subsidy relevant to the reporting 
period? Could Brazil please provide an update d notification including this program? Are 
there similar programs for other industries? 
 Question 5 
 
Similarly, the Report discusses the Plano Bras il 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 fostering technological innovation as well as attenuating the 
impact of the global economic downturn. Th e measures implemented to date include: 
tax exemptions for manufacturers of laptop computers; substitution of employers' social security contributions by a (lower) tax on revenue from domestic sales for 40 
subsectors (covering about 3,300 tariff lines) ; and amplification of eligible sectors 
and favourable financing terms under federal programmes.  Besides increased BNDES resources and improved access to financing, the Plano Brasil Maior supplies additional 
public funds (up to R$25 billion) for the provision of guarantees through the newly-
created Brazilian Funds and Guarantees Ma nagement 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. 
Para. 3.180. A number of these provisions appear on their face to be notifiable subsidies. 
 
 Could Brazil explain why it has not notified any programs or provisions that make up part of 
the Plano Brasil Maior? 
 
Question 6  Similarly, Members expressed concerns about othe r 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 rais ed about the incompatibility of some of the 
programme's provisions with the WTO rules. 
 G/SCM/Q2/BRA/42 
 
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   Could Brazil explain why it has not notified the INOVAR-AUTO program, or when it expects 
to do so? In the meantime and in any event, can Brazil provide the membership with assurances that it complies with WTO rules? Please describe any successor programs to INOVAR-AUTO. 
 
In summary, Brazil's New and Full Notification for fiscal years 2011-2012 appears to potentially omit a number of notifiable subsidies. The above list is not a comprehensive survey of publicly 
available sources regarding Brazilian programs, but only a sample of matters evident from the 
review of materials already submitted to the WTO.  The United States welcomes Brazil's attention 
to this matter.   
 
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