43 2016 Drawback: exports as the solution for growth By Ana Carolina Fernandes Meira and Felipe Rainato Silva are lawyers in the Foreign Trade area at Honda Estevão Advogados IIt is no longer news that Brazil’s economy is having a hard time. The fall in commodity prices, along with economic slowdown in emerging countries, the repeated difficulties in establishing secure trade flows and the domestic political context dictate the challenges facing Brazilian businesspeople as they try to resume growth. Industry confirms these difficulties better than any other sector. According to the National Confederation of Industry (CNI), real revenues in the sector decreased by 8.8% in 2015, reflecting an 8.3% fall in productivity and a 6.1% fall in job creation(1). The highway implement industry is no exception to the trend. The international environment followed a different path from Brazil: in 2015 recovery was achieved in traditional economies in Europe and the United States, new and more comprehensive trade flows were established - especially with respect to the Pacific axis - and international demand other than from China increased. All these factors reveal an opening of new international markets and, coupled with the collapse of the Brazilian real against the US dollar, they create very favorable economic conditions for Brazil’s exports. However, high production costs, especially with regard to taxes, hold Brazilian products back in foreign markets. So, in an attempt to reverse this situation the Brazilian government launched the National Export Plan in mid-2015, making significant commitments to the Brazilian business community to improve the existing tools to increase exports. Currently, the drawback system is the one that most stands out in view of the degree of tax relief that promotes the production chain and operational facilities to its management. The good old drawback The drawback is nothing new for businesspeople who export and import. It was first established by Decree No. 994, in 1936, and later built on by DecreeLaw No. 37/1966, which suspended taxes on imports linked to respective exports. It was further improved upon by Decree No. 6,759 / 2009 (Customs Regulation) and SECEX Ordinance No. 23/2011. In general terms, the drawback system, in its “suspension” mode, allows the suspension of taxes on the importing or acquisition in the domestic market of inputs and raw materials used in making products to be exported. The suspension of tax also covers manufacturers who import and / or acquire domestic goods to be used in making intermediate products to be supplied to exporters to use in the making products for export. There is also an expected waiver on raw materials, intermediate products and components that are imported to the domestic market as a result of an international bid, provided they are used in the manufacturing of machinery and equipment in Brazil. The same applies to the ships built for sale in the domestic market. Drawbacks are also stipulated in the form of “exemptions,” allowing inputs and raw materials used in exported goods to be imported tax-free to replace stock. So, the system allows for real tax relief on inputs and raw materials, which is directly reflected in the composition of the final price of the finished products. On average, a 17% saving is estimated in federal taxes, which invariably promotes the competitiveness of goods abroad.
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