WORLD TRADE  
ORGANIZATION  G/SCM/Q2/BRA/18 
5 February 2008 
 (08-0527) 
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 28 January 2 008, is being circulated at the request of the 
Delegation of the United States.    
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1 G/SCM/N/155/BRA.   G/SCM/Q2/BRA/18 
Page 2  
 
  Amazon Development Authority and Northeast Region Development Authority (SUDAM and 
SUDENE)  
 Question 1  
 Brazil states that in August 2001, SUDAM and SUDENE were extinguished and replaced by 
Agência do Desenvilvimento da Amazônia (ADA) and Agência de Desenvolvimento do Nordeste 
(ADENE).  It is our understanding that on Janua ry 3, 2007, SUDAM and SUDENE authorities were 
re-established.  Can you please explain if th e programmes under the re-established SUDAM and 
SUDENE authorities provide different types of ince ntives which were not available before?  If so, 
please provide details of those incentives.   
 
Question 2 
 
 Could you also please explain whether th e ADA and ADENA authorities and programmes 
they administered have been extinguished or do they  continue to exist?  To the extent that ADA and 
ADENE provide different incentives than SUDAM and SUDENE, please provide the details.    
Programme for Diesel Oil Support
 
 Question 3 
  Can Brazil provide further details on how this  program works, including how the subsidy 
benefits are applied, dete rmined and disbursed?   
 
Decree No. 28.104/2001
 
 
 Responding to earlier questions from the United States, in G/SCM/Q2/BRA/16 (27 September 2006), Brazil previously provided info rmation on the State of Rio de Janeiro's Decree 
No. 28.104/2001.  We appreciate the information provided by Brazil on Decree No. 28.104/2001.  We 
would, however, appreciate further clarification on the following questions regarding this decree.   
 
Question 4  
 Please explain whether this law remained in effect during the current reporting period of 
fiscal years 2005 through 2006. 
 
Question 5 
 
In its September 27, 2006 response, Brazil explai ned that this law established a different tax 
regime for ICMS for all producers and retailers of table salt in the Rio de Janeiro, including those 
which also produce soda ash.  However, it is the United States' understanding that while this decree 
provides for a 2 percent ICMS rate calculated agai nst "gross revenues", soda ash producers also have 
the option of alternatively calculating their ICMS obligations under the "normal" ICMS regime, at a 
rate of 18 per cent (intrastate) or 12 per cent (interstate) calculated against value added.  As such, it appears that this provision could pr ovide a financial contribution as well as a benefit that is specific to 
this industry to the extent that it allows the qualifying domestic producer the option of paying the 
lesser of two tax amounts calculated under differe nt methodologies.  Please provide information 
regarding these different tax regimes for table salt and soda ash producers.    G/SCM/Q2/BRA/18 
 Page 3 
 
 
  Law 11.196 and Law 11.529  
 
Question 6  
  Responding to earlier questions from the United States, in G/SCM/Q2/BRA/16 
(27 September 2006) Brazil previously provided information on the "MP do Bem" provisional 
measure, that was subsequently converted into La w 11.196.  We would like to thank Brazil for the 
information provided above regarding Law 11.196.   We would, however, appreciate further 
clarification on the following questions regarding this Law:   
 
Question 7  
 
 Please explain whether this law remained in effect during the current reporting period of 
fiscal years 2005 through 2006.   
 
Question 8  
 
 Public information indicates that this law may have been modified by subsequent 
Law 11.529?  Would Brazil please confirm whether this is the case.  If so, could Brazil please explain any changes in the Brazilian tax code as a result of Law 11.529.   
 
Question 9  
 
 In its 27 September 2006 reply, Brazil stated  that Law 11.196 does not confer any benefit 
within the meaning of Article 1 of the Subsidi es Agreement because it "merely removes an inherent 
disadvantage that export oriented firms had under th e previous tax regime".  However, publically 
available information ( e.g., Banco Central do Brasil's June 17, 2005 publication entitled "Government 
Measures to Stimulate Investment") indicates that Brazil's Ministry of Finance has estimated the 
"reduction in tax revenues" (i.e., revenue foregone) under this progra m to be $R 263 million in 2005 
and $R 300 million in 2006.  Please explain how this figure was developed and what it represents.  In 
view of this estimate by the Ministry of Finance,  please explain further Brazil's view that there is no 
revenue foregone under this program.   
 
Question 10  
 
 Under Law 11.196, Brazilian companies whose e xports constitute at least 80 per cent of total 
revenues may take advantage of the PIS/Pasep and COFINS tax exemption.  Once a company 
qualifies for the exemption, however, it appears that  the PIS/Pasep and COFINS exemption applies to 
all purchases by the company of new machinery and equipment, even machinery and equipment used 
to produce the up to 20 per cent of revenues derived from domestic sales.  Would Brazil please 
explain how this export-contingent exemption from an indirect tax on domestic sales is consistent 
with Brazil's obligations under the Subsidies Agr eement?  (We note that the publicly available 
information seems to indicate that the 80 per cen t export threshold for eligibility has since been 
lowered under Law 11.529 to as low as 60 per cent.)   
   
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