The Secex Ordinance nº 47/2017 was published on December 21, 2017 and rectified on 26 on December, aiming to ensure preferential conditions and to set import quotas for tariff-free entry of automobile and value of regional content (which was set 55%), according to Economic Complementation Agreement (ACE) nº 72, between Mercosur and Colombia (Table VI, Annex II, Appendix 5.1 - Automotive Sector).

This act amended Secex Ordinance nº 23/2011, which regulates foreign trade operations. Concerning this scenario, it is worth highlighting four main changes. The first concerns the addition of Subsection I and amendment Article 19 of Section XII in Addendum XVII (Export of Products Subject to Special Procedures) in order to determine the distribution of the annual quotas of exports to Mexico of the vehicles as treats article 2, of the Fifth Additional Protocol to Bilateral Appendix II "On Trade in the Automotive Sector between Brazil and Mexico" of Economic Complementation Agreement nº 55 - Mercosur / Mexico, as following:

  1. the quota for the year 2017 for the indicated products is 9,000 units for vehicles in the quota type corresponding to the Regional Content Value (VCR) of 50% and 3,000 units for vehicles classified in the type of quota corresponding to the Value of Regional Content (VCR) of 35%;
  2. the quota for the year 2018 for the indicated products is 20,000 units for vehicles in the quota type corresponding to the VCR of 50% and of 5,000 units for vehicles in the quota type corresponding to the VCR of 35% and will be distributed according to the following procedures:

               1.      5%, equivalent to 1,000 units of vehicles classified in the quota type corresponding to the VCR of 50% and 250 units of vehicles classified in the type of quota corresponding to the VCR of 35%, as a technical reserve;

               2.      95%, equivalent to 19,000 units of vehicles classified in the quota type corresponding to the VCR of 50% and 4,750 units of vehicles classified in the quota rate corresponding to the VCR of 35%, allotted jointly, according to established criteria;

               3.      total quota of each company, obtained from the criteria listed in item II, should be proportionally divided between the quotas corresponding to the VCRs of 50% and 35%, considering, for this purpose, the export of the vehicles subjected to the quotas for Colombia in the year 2018, presented to DECEX by the interested parties.

 

It is also important to mention the inclusion of Subsection II and articles 22, 23, 24 and 25 in Section XII in Annex XVII to establish conditions for distribution of quotas. In addition, Articles 4 and 7 of Annex XXVIII on Tariff Quotas within the Latin American Integration Association (ALADI) have been amended to determine that for intracota on imports, DECEX, through a specific requirement from SISCOMEX, may request the submission of documentation that proves the effective shipment of the merchandise, as well as the respective Certificate of Preferential Origin or Certificate of Quota, as a requirement of deferment of the application for Import License (LI). In addition, another amendment that should be mentioned was the inclusion of Table VI in Article 9 of Annex XXVIII.

As a brief background, one of the main objectives of the mentioned Agreement was to lay the groundwork for free trade in the automotive sector. It also promotes the development and integration of trade relations, preserving and expanding existing trade flows between Mexico and Mercosur. In order to receive the preferential conditions, goods must meet the rules of origin set out in the Agreement. Furthermore, exported goods must be accompanied by a valid Certificate of Origin when imported into the territory of Signatory Parties.

Therefore, considering that the Certificate of Origin is the document that certifies the origin of the good  that is being traded between countries that maintain Agreements, through it, is possible to guarantee the preferential access of goods to the foreign market and to plead for the concession of the reduction or even exemption from import duty. Thus, it should be considered when targeting operations mainly related to the supply chain and importation of products from the automotive sector with the countries involved in those Agreements generating positive impacts on tax planning.

 

RSM is available to assist in any queries about the application of such a change.

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