Brazil –
certain measures concerning taxation and charges
ReportS OF THE PANEL
TABLE
OF CONTENTS
1 Introduction.. 20
1.1 Complaints by the European Union and
Japan. 20
1.2 Panel establishment and composition. 20
1.3 Panel proceedings. 21
1.3.1 General 21
1.3.2 Working procedures on Business
Confidential Information (BCI) 21
2 Factual aspects. 22
2.1 General description of relevant aspects
of the Brazilian tax system.. 22
2.2 The measures at issue. 28
2.2.1 The Informatics programme. 33
2.2.1.1 Introduction. 33
2.2.1.2 Tax treatment 33
2.2.1.3 Product coverage. 34
2.2.1.4 Eligible companies. 35
2.2.1.5 Requirements for obtaining the tax
treatment 35
2.2.1.6 Related memorandum.. 38
2.2.2 The PADIS programme. 38
2.2.2.1 Introduction. 38
2.2.2.2 Tax treatment 39
2.2.2.3 Product coverage. 40
2.2.2.4 Eligible companies. 41
2.2.2.5 Requirements for eligibility. 41
2.2.2.6 Related memorandum.. 43
2.2.3 The PATVD programme. 43
2.2.3.1 Introduction. 43
2.2.3.2 Tax treatment 43
2.2.3.3 Product coverage. 44
2.2.3.4 Eligible companies. 44
2.2.3.5 Requirements for eligibility. 45
2.2.3.6 Related memorandum.. 46
2.2.4 The Digital Inclusion programme. 46
2.2.4.1 Introduction. 46
2.2.4.2 Tax treatment 46
2.2.4.3 Product coverage. 46
2.2.4.4 Eligible companies. 47
2.2.4.5 Related memoranda. 47
2.2.5 The INOVAR-AUTO programme. 48
2.2.5.1 Introduction. 48
2.2.5.2 Tax treatment 48
2.2.5.3 Product coverage. 50
2.2.5.4 Beneficiaries. 51
2.2.5.5 Requirements for eligibility. 51
2.2.5.6 Monitoring system.. 60
2.2.5.7 Related memorandum.. 61
2.2.6 The PEC programme. 61
2.2.6.1 Introduction. 61
2.2.6.2 Tax treatment 61
2.2.6.3 Product coverage. 62
2.2.6.4 Eligible companies. 62
2.2.6.5 Requirements for eligibility. 62
2.2.6.6 Related memorandum.. 63
2.2.7 The RECAP programme. 63
2.2.7.1 Introduction. 63
2.2.7.2 Tax treatment 63
2.2.7.3 Product coverage. 64
2.2.7.4 Eligible companies. 64
2.2.7.5 Requirements for eligibility. 64
2.2.7.6 Related memorandum.. 65
3 Parties' requests for
findings and recommendations. 66
4 Arguments of the
parties. 70
5 Arguments of the third
parties. 70
6 Interim review... 70
6.1 General issues and editorial matters. 70
6.2 Provisions pertaining to developing
countries. 71
6.3 The scope of the parties' requests for
review of the Interim Reports. 71
6.4 The "in-house" argument 71
6.5 Article 4.7 of the SCM Agreement 72
6.6 Confidentiality of the Interim Reports. 73
7 Findings. 73
7.1 Overview of the measures and claims, and
the Panel's order of analysis. 73
7.1.1
The measures at issue. 74
7.1.1.1
The Panel's terms of reference. 75
7.1.1.2 The categories of products concerned
by the various taxes at issue. 77
7.1.2
Overview of the relationship between the complaining parties' multiple claims. 78
7.1.2.1
Differences in scope between Articles III:2, III:4 and III:5 of the GATT 1994. 78
7.1.2.2 Differences in scope between Article III:4 of the GATT 1994,
Article 2 of the TRIMs Agreement, and Article 3.1(b) of the SCM Agreement 80
7.1.3 Order of analysis of the complaining
parties' multiple claims. 82
7.2 Brazil's general defences. 83
7.2.1 Whether the challenged programmes are
outside the scope of Article III of the GATT 1994, Article 2.1 of the TRIMs
Agreement, and Article 3.1(b) of the SCM Agreement, because they regulate
production and not products. 83
7.2.2 Whether Article III:8(b) of the GATT
1994 exempts certain of the challenged measures from the disciplines of Article III of the GATT 1994 and related
provisions. 85
7.3 The ICT programmes. 90
7.3.1 Claims under Article III:2 of the GATT
1994. 90
7.3.1.1 Introduction. 90
7.3.1.2 Whether the products that are the
subject of the challenged measures are "domestic products" in the
sense of Article III of the GATT 1994, Article 2.1 of the TRIMs Agreement, and
Article 3.1(b) of the SCM Agreement 93
7.3.1.3 Whether the imported and domestic
products are "like products" within the meaning of Article III:2,
first sentence. 95
7.3.1.4 Whether imported products are
"taxed in excess of" like domestic products, within the meaning of
Article III:2, first sentence. 100
7.3.1.5 Conclusion. 106
7.3.1.6 Judicial economy with respect to
Japan's claim under Article III:2, second sentence. 107
7.3.2 Claims under Article III:4 of the GATT
1994. 108
7.3.2.1 Claims with respect to the conditions
for accreditation, certain calculations related to required R&D
expenditures, and administrative burden under the ICT programmes. 108
7.3.2.2 Claims with respect to the alleged
imposition, under the terms of the PPBs, or similar requirements, of an
obligation to use domestic inputs in the production of the incentivized
products under the ICT programmes 119
7.3.2.3 Conclusion. 132
7.3.3 Claims under Article III:5 of the GATT
1994. 132
7.3.3.1 Introduction. 132
7.3.3.2 The legal standard. 133
7.3.3.3 Analysis by the Panel 134
7.3.3.4 Conclusion. 136
7.3.4 Claims under Article 2.1 of the TRIMs
Agreement 136
7.3.4.1 Introduction. 136
7.3.4.2 Whether the ICT programmes are
trade-related investment measures within the meaning of the TRIMs Agreement 137
7.3.4.3 Whether the ICT programmes are TRIMs
that are inconsistent with Article III of the GATT 1994, and therefore
inconsistent Article 2.1 of the TRIMs Agreement 138
7.3.4.4 Conclusion. 139
7.3.5 Claims under Article 3.1(b) of the SCM
Agreement 139
7.3.5.1 Introduction. 139
7.3.5.2 Whether the tax exemptions,
reductions and suspensions granted under the ICT programmes are contingent upon
the use of domestic over imported goods within the meaning of Article 3.1(b) of
the SCM Agreement and thus prohibited. 141
7.3.5.3 Whether the tax exemptions,
reductions and suspensions granted under the ICT programmes constitute
subsidies within the meaning of the SCM Agreement 143
7.3.5.4 Whether the subsidies granted under
the ICT programmes are specific within the meaning of Article 2 of the SCM
Agreement 169
7.3.5.5 Conclusion. 169
7.3.6 Brazil's invocation of Article XX(a) of
the GATT 1994 to justify certain inconsistencies in respect of the PATVD
programme. 171
7.3.6.1 Introduction. 171
7.3.6.2 Description of the legal test 171
7.3.6.3 Whether the discriminatory aspects of
the PATVD programme are provisionally justified under Article XX(a) 179
7.3.6.4 Whether the discriminatory aspects of
the PATVD programme satisfy the requirements of the chapeau of Article XX. 195
7.3.6.5 Conclusion. 195
7.4 The INOVAR-AUTO programme. 195
7.4.1 Claims under Article III:2 of the GATT
1994. 195
7.4.1.1 Introduction. 195
7.4.1.2 Reduced IPI tax rates. 197
7.4.1.3 Presumed IPI tax credits. 198
7.4.1.4 Article III:2, second sentence, of
the GATT 1994. 207
7.4.2 Claims under Article III:4 of the GATT
1994. 207
7.4.2.1 Introduction. 207
7.4.2.2
Whether the measures at issue are laws, regulations, or requirements
affecting the internal sale, offering for sale, purchase, transportation,
distribution or use of domestic and
imported products 209
7.4.2.3 Whether the relevant imported and
domestic products are "like products". 210
7.4.2.4
Whether imported products are accorded "treatment less favourable"
than that accorded to like domestic products. 212
7.4.2.5 Conclusion. 221
7.4.3 Claims under Article III:5 of the GATT
1994. 221
7.4.3.1 Introduction. 221
7.4.3.2 The legal standard. 222
7.4.3.3 Analysis by the Panel 222
7.4.3.4 Conclusion. 223
7.4.4 Claims under Article 2.1 of the TRIMs
Agreement 223
7.4.4.1 Introduction. 223
7.4.4.2 Whether the INOVAR-AUTO programme is
a trade-related investment measure within the meaning of the TRIMs Agreement 224
7.4.4.3 Whether the INOVAR-AUTO programme is
a TRIM that is inconsistent with Article III of the GATT 1994, and therefore
inconsistent Article 2.1 of the TRIMs Agreement 225
7.4.4.4 Conclusion. 225
7.4.5 Claims under Article 3.1(b) of the SCM
Agreement 225
7.4.5.1 Introduction. 225
7.4.5.2 Whether the reductions through presumed
tax credits granted under the INOVAR-AUTO programme are contingent upon the use
of domestic over imported goods within the meaning of Article 3.1(b) of the SCM
Agreement, and thus prohibited. 227
7.4.5.3 Whether the reductions through
presumed tax credits granted under the INOVAR-AUTO programme constitute
subsidies within the meaning of the SCM Agreement 228
7.4.5.4 Whether the subsidies granted under
the INOVAR-AUTO programme are specific within the meaning of Article 2 of the
SCM Agreement 231
7.4.5.5 Conclusion. 231
7.4.6 Brazil's invocation of Article XX of
the GATT 1994 to justify certain inconsistencies in respect of the INOVAR-AUTO
programme. 232
7.4.6.1 Introduction. 232
7.4.6.2 Whether the discriminatory aspects of
the INOVAR-AUTO programme are justified under Article XX(b) of the GATT 1994. 233
7.4.6.3 Whether the discriminatory aspects of
the INOVAR-AUTO programme are justified under Article XX(g) 250
7.4.7 Claims under Article I:1 of the GATT
1994. 259
7.4.7.1 Introduction. 259
7.4.7.2 Whether the tax reductions under
Articles 21 and 22(I) of Decree 7,819/2012 fall within the scope of Article I:1
of the GATT 1994. 261
7.4.7.3 Whether the relevant products at
issue are "like" products. 262
7.4.7.4 Whether the tax reductions at issue
confer an "advantage". 264
7.4.7.5 Whether that advantage is not
accorded "immediately" and "unconditionally" to other WTO
Members 265
7.4.7.6 Conclusion. 265
7.4.8 Brazil's justifications under the
Enabling Clause. 265
7.4.8.1 Introduction. 265
7.4.8.2 The burden of invoking the Enabling
Clause. 268
7.4.8.3 Brazil's affirmative defence under
paragraph 2(b) of the Enabling Clause. 271
7.4.8.4 Brazil's affirmative defence under
paragraph 2(c) of the Enabling Clause. 277
7.4.8.5 Separate opinion on Brazil's
affirmative defence under paragraph 2(c) of the Enabling Clause 282
7.5 The PEC and RECAP programmes. 283
7.5.1 Claims under Article 3.1(a) of the SCM
Agreement 283
7.5.1.1 Overview.. 283
7.5.1.2 Whether the tax suspensions granted
under the PEC and RECAP programmes constitute subsidies within the meaning of
the SCM Agreement 286
7.5.1.3
Whether the subsidies granted under the PEC and RECAP programmes are specific
within the meaning of Article
2 of the SCM Agreement 302
7.5.1.4 Whether the tax suspensions granted
under the PEC and RECAP programmes are contingent upon export performance
within the meaning of Article 3.1(a) of the SCM Agreement and thus prohibited 302
7.5.1.5 Conclusion. 305
7.6 Final comments. 305
8 Conclusions and
recommendations. 305
8.1 Complaint by the European Union (DS472) 305
8.2 Complaint by Japan (DS497) 308
9 Appendix to the Panel
Report. 311