Global Trade Alert

On April 29th 2009, the Chamber for Foreign Trade (Câmara de Comércio Exterior, CAMEX) announced that it would start an investigation into the possible underinvoicing and circumvention of imports (altering the country of origin of a product in order to avoid tariffs) of powdered milk from Argentina. The investigation was initiated on behalf of the National Confederation of Agriculture and Cattle Raising (Confederaçăo Nacional da Agricultura e Pecuária do Brasil, CNA), who asked that automatic import licenses for powdered milk imports be cancelled for 60 days as the investigations progressed. The Secretary of Foreign Trade of Brazil stated that if evidence of triangulation was found, then non-automatic import licensing could be implemented in order to identify the origin of the products.
The next day, in a series of bilateral meetings coordinated by the Brazilian Ministry of Development, Industry and Foreign Trade (MDIC) and the Argentinean Ministry of Production, an agreement was reached between the dairy sector of Argentina and Brazil limiting the volume and the minimum price per ton of powdered milk exported to Brazil. The reference price was defined as the price estimate published by the United States Department of Agriculture (USDA) with respect to exports from Oceania. The monthly quantity permitted to enter the market was limited to the monthly average from the past five years, 2.5 thousand tones (FAEG, 2009).
According to the Federation of Agriculture and Cattle Raising (FAEG) of the state of Goias, the agreement permitted that import licenses for milk products remain automatic (FAEG, 2009).
In the first quarter of 2009, Brazilian imports of powdered milk from Argentina increased 285% when compared to the same period last year, from 4.8 thousand tons to 21.5 thousand tons. In value terms, this meant an increase in the value imported from US$22.4 million to US$ 45.1 million. (MDIC, 2009)
Powdered milk imports from Argentina have already been subjected to an investigation by the Department of Trade Defense (Departamento de Defesa Comercial, DECOM) in 2001. In the course of the investigations, the Argentinean companies agreed to increase their export price in order to avoid the imposition of anti-dumping duties. The price agreement lasted until February 2008. (MDIC, 2009)
It has been reported in the press that powered milk imports from Uruguay were also suspected of circumvention. According to a press article published in Brazilian newspaper Valor Econômico, in June CAMEX changed the import license regime for powdered milk products from automatic to non-automatic. The Brazilian dairy sector attempted to strike with Uruguayan producers an arrangement similar to that agreed to with Argentina. However, Uruguay refused to agree to a minimum price and quantity limit. Additionally, in a Mercosur summit held on 23rd July, Brazil suggested raising Mercosur's Common External Tariff on powdered milk from 16% to 28% as a way to prevent circumvention. Brazil's current tariff on powdered milk is 27%. Uruguay was against this proposal. (Valor Econômico, 2009)
Conaprole, Uruguay's main dairy food exporter, has stated in the press that the non-automatic licensing regime has affected its exports to Brazil, with licenses taking up to 60 days to be emitted and with more than 10,000 tons of powdered milk awaiting entry into Brazil. (Agęncia AnsaLatina, 2009)