Main results of 2012-2015 period
Tax Information Exchange Agreement
The Tax Information Exchange Agreement, signed into force in Brasilia on March 20, 2007, was approved under Legislative Decree 211 of March 12, 2013, and enacted under Decree 8.003 of May 15, 2013.
The aforementioned treaty constitutes an important tool for cooperation in the taxation field, using the exchange of key information for the administration and enforcement of domestic tax law. It was claimed that ratification thereof is a pre-requisite to any progress in discussions on an agreement to prevent double taxation between Brazil and the United States.
Agreement to Improve Tax Compliance and to Implement FATCA
The Agreement to Improve Tax Compliance and to Implement the Foreign Account Tax Compliance Act (FATCA), signed on September 23, 2014, was approved under Legislative Decree 146 of June 25, 2015 , and enacted under Decree 8.506 of August 24, 2015 .
The agreement provides for mutual assistance in tax-related matters using an efficient automatic information exchange infrastructure, and was also considered as a condition to negotiations on bilateral agreement to prevent double taxation.
Social Security Agreement
The Social Security Totalization Agreement between Brazil and the United States was signed on June 30, 2015. Once in force, the agreement will allow social security contributions of nationals working in the other country to be recognized in each other’s country of origin. The agreement is an economic gain for companies of both countries, inasmuch as it helps to prevent double contributions to the two social security systems.
With the rapid growth of trade and investment between the two countries, the estimate offered in the Joint Communiqué of President Dilma Rousseff and President Barack Obama is that the agreement will help save more than US$ 900 million for Brazilian and American companies over the first six years that it is in effect. The agreement must still be approved by the National Congress, signed into law and enacted by the President of the Republic of Brazil in order to come into force.
In addition to the agreement, on the same day, the Administrative Adjustment for Implementation of the Social Security Totalization Agreement was signed, in keeping with art. 9º, “a”, which lists the Social Security Administration in the United States and the National Social Security Institute in Brazil, as the implementing agencies of the Totalization Agreement.
Defense Cooperation Agreement and the Agreement to Protect Classified Military Information
These agreements were signed in 2010; however, enactment of the Information Access Law in Brazil in November 2011 made it necessary to make adjustments to them.
The Defense Cooperation Agreement, signed on April 12, 2010, was approved under Legislative Decree 145 of May 25, 2015, and will pave the way for joint training, courses and fellowships and facilitate trade negotiations on hardware and armament.
The Agreement to Protect Classified Military Information, signed on November 21, 2010, was approved under Legislative Decree 147 of June 25, 2015, and is awaiting the signature of the President of the Republic. This agreement creates the legal framework for safe classified military information exchange and will help pave the way for potential technology exchanges with third parties. According to Statement of Purpose 287/2015, signed by Brazilian Defense Minister Jaques Wagner and Sérgio Danese, then acting Minister of Foreign Relations, the agreement on classified military information could help to foster trade and industrial partnerships, while protecting classified military information, as required under contract.
These agreements are important to the defense industry, which will be able to systematically take advantage of opportunities for bilateral cooperation.
On the occasion of the visit of President Dilma Rousseff to the United States, ceremonies included the exchange of letters between Minister of Development, Industry and Commerce at the time Fernando Pimentel and United States Trade Representative at the time Ambassador Ron Kirk, regarding mutual recognition of Cachaça as a typical Brazilian product and of Tennessee Whiskey or Bourbon as typical American products.
On December 13, 2012, at the request of the Brazilian government and based on discussions with the Office of the United States Trade Representative, the Alcohol and Tobacco Tax and Trade Bureau decided to amend the law applying to distilled beverages to include “Cachaça” as a type of rum and a unique product of Brazil, which is produced in the that country under Brazilian laws regulating Cachaça production for public consumption. The decision, which also regulates labeling, came into effect on April 11, 2013.
Opening the U.S. Market to Fresh Beef
Over the past 15 years, the U.S. has not purchased fresh (chilled or frozen) beef from Brazil because of sanitary restrictions. On December 23, 2013, the U.S. began to ease its import restrictions on Brazilian fresh beef. In early 2014, a public consultation was conducted in the United States for the removal of sanitary barriers to fresh and frozen beef from Brazil.
On July 2, 2015, the decision of the Animal and Plant Health Inspection Service of the United States Department of Agriculture was published, opening up the fresh and frozen beef market in the U.S. to 13 Brazilian States (Tocantins, Bahia, Espírito Santo, Goiás, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Paraná, Rio Grande do Sul, Rio de Janeiro, Rondônia, São Paulo and Sergipe) and the Federal District, provided that certain requirements were met, with the final rule effective as of August 31, 2015. The 14 entities of the Brazilian Federation listed above were deemed foot and mouth disease (FMD) free with vaccination and can qualify as fresh and frozen beef importers to the United States.
However, as was mentioned in the discussion above on sanitary barriers, implementation of that process is in jeopardy. This is because of two legislative bills, one introduced in the House (H.R. 3049) and the other, in the Senate (S. 1800), which make the release of resources for implementation of beef imports from certain regions in Brazil contingent upon certain measures pertaining to risk evaluation procedures.
General System of Preferences
The General System of Preferences (GSP) of the United States was renewed under the Trade Preferences Extension Act of 2015, signed by the President of the United States on June 29, 2015, after House Bill H.R. 1295 was approved by the U.S. Congress, with Brazil retaining its status as a beneficiary country.
It is the only tariff preference mechanism in effect between the two countries. Brazil’s retaining beneficiary status is not at odds with the interests of Brazilian industry in entering into a FTA with the U.S., inasmuch as the scope of goods benefiting from the GSP is limited, the preference is precarious and subject to a graduation clause.
Orange Juice Dispute (WTO - DS382)
On February 18, 2013, Brazil and the United States advised the WTO Dispute Settlement Body that a mutually satisfactory settlement had been reached in the orange juice dispute.
This dispute began on November 27, 2008, as Brazil filed a consultation request for the establishment of a panel to examine the legality of antidumping measures imposed by the United States on Brazilian orange juice imports. On June 17, 2011, the Dispute Settlement Body adopted the report finding that the use of zeroing in two administrative reviews, as well as continued use of that method in successive anti-dumping proceedings concerning orange juice, was inconsistent with art. 2.4 of the Antidumping Agreement. In short, the panel recommended that the United States take the necessary measures to bring its practices in line with its obligations under the Anti-Dumping Agreement.
Though Brazil reserved its right to decide whether the implementation measures taken by the United States put an end to the dispute or whether it would be necessary to establish implementation and retaliation panels, the dispute was settled in 2013 by mutual agreement between the countries.
Upland Cotton Dispute (WTO - DS267)
On October 1, 2014, the Brazil-U.S. Memorandum of Understanding was signed, putting an end to the cotton dispute before the WTO, which began on September 27, 2002, with Brazil’s request for consultations.
The United States pledged to adjust the export credit guarantee program (GSM-102) to operate under the bilaterally negotiated terms, providing a more competitive environment for Brazilian products on the international market. The bilateral agreement also provided for additional payment of US$ 300 million, with built-in flexibility for further disbursement of resources to help to compensate for damages endured by Brazilian cotton growers.
The signed agreement was restricted to the cotton sector and preserved Brazil’s right to challenge the new U.S. Agricultural Act before the WTO, should the need arise, as it pertains to the other crops.
Innovation and Education
The Science without Borders and 100,000 Strong in the Americas programs are being implemented by both governments with a significant number of beneficiaries.
On the topic of innovation, ongoing partnerships with U.S. institutions must be highlighted, under the scope of MEI.
In October 2014, along with other institutions of the Industry System, CNI entered into a partnership with the Harvard Business School (HBS) to implement the Brazilian Industry Innovation for Competitiveness Program. This program is an initiative of MEI, in response to the challenges of innovation in Brazil, combining on-site activities at companies’ facilities and classroom lectures at the HBS campus with innovation project development for participating companies.
In November 2014, on the occasion of the MEI event Dialogues on Strengthening Engineering Sciences, CNI, the Euvaldo Lodi Institute (IEL) and the US Council on Competitiveness (CoC) entered into a Memorandum of Understanding for the purpose of establishing a cooperation framework in the fields of innovation, entrepreneurship and competitiveness, through mobilization and training and improvement of public policies on innovation.
Through the National Service for Industrial Training (SENAI), the Industry System is engaged in a partnership with the Massachusetts Institute of Technology (MIT), under the Industrial Liaison Program (ILP), to hold a specific event for the Brazilian business sector, the Challenge of Innovation - Thinking out of the Box with MIT. The event took place in 2015 in the context of CNI’s National Innovation Congress, in an attempt to bring different initiatives together to motivate and guide executives in charge of new product and process development at business organizations on technological trends, generating innovative solutions and academia-business cooperation, as strategic tools to energize innovation and competitiveness. Additionally, since 2014, SENAI and MIT have been conducting a 5-year joint research project, for the purpose of examining the role of SENAI’s innovation institutes in the Brazilian innovation setting, at the regional and national level, and developing support strategies for those institutes.
The Conexão Mundo [‘World Connection’] program is an initiative of the Industrial Social Service (SESI) and SENAI, developed in partnership with the NGO US-Brazil Connect, beginning in 2012. In 2015, schools from 32 cities in 21 Brazilian States took part in the program to promote fluency in the English language and cultural exchange. Through this program, the Industry System provides one-of-a-kind skills-building experiences to Brazilians, by attaching importance to the English language for the students’ personal and professional lives. In addition to supporting enhancement of English language fluency, the program nurtures intercultural relationships and is innovative in the use of social networking in education.
SESI carries out the Health and Productivity Innovation Implementation Program through a strategic partnership with the National Institute for Occupational Safety and Health (NIOSH), instituted in 1970, under the Occupational Health and Safety Administration, for the purpose of conducting research and making recommendations for workplace disease and accident prevention. This partnership encompasses the following areas: information, research and article exchange; staff training; joint use of facilities and laboratories; and joint participation at events that are relevant to the sector.
Also in this field, we can highlight the partnership between SESI and the Center for Work, Health and Well-being of the Harvard School of Public Health with other agents (NIOSH, Center for Research of the Dana-Faber Cancer Institute, Bouvé College of Health Science of Northeastern University) for the development of effective programs and practices in the promotion and protection of worker health, by combining occupational safety and health with worker well-being.