Brazil's New Auto Trading Rules

08/23/96

Earlier this week TACH reported Brazil's decision to cut its 70 percent tariff on imported cars by half and its new quota system. The Associated press has reported additional details about the arrangements, which came in response to international pressure at the World Trade Organization.

The new laws favor American firms that produce cars in Brazil. A spokesman for the Japanese embassy in Brasilia said his government wasn't satisfied with the partial tariff reduction. Japan wants Brazil to treat all foreign carmakers the same, whether they manufacture cars in the country or not.

The Brazilian government left the door open for further changes to the rule by saying the lower tariffs can be canceled and renegotiated if trading partners continue protests to the World Trade Organization.

Here are the facts:

Prior to the new law, which went into effect Wednesday, all imports from automakers with no local operations had to pay a 70 percent tariff.

Brazilian subsidiaries of foreign-owned automakers are allowed to import one car with a 35 percent tariff for every car they export from Brazil. (Ford, General Motors and Fiat benefit).

Chrysler will have to pay the 70 percent tariff until mid-1988 when it starts local production of the Dodge Dakota at a recently announced plant.

Under the new law, Japanese, Korean and European manufacturers without factories in Brazil can import up to 50,000 vehicles a year, paying a 35 percent tariff. Brazil had originally proposed a 40,000 units quota but unilaterally increased it by 10,000.

All imports above 50,000 will continue to pay the 70 percent tariff. The tariff reduction is renewable, but initially valid for one year.

The new laws entitles Japanese manufacturers to export 47.5 percent of the 50,000 vehicle quota, South Korea gets 33.1 percent, and the European Union gets 19.4 percent.

In the first half of 1996, Japan exported 3,207 automobiles to Brazil. The figure represents a 92 percent drop as compared to its exports during the same period last year.

Paul Dever -- The Auto Channel