Brazil — Certain Measures Concerning Taxation and Charges

 

Short title:	Brazil — Taxation (Japan)
Complainant:	Japan
Respondent:	Brazil
Third Parties (original proceedings):	Argentina; Australia; Canada; China; Colombia; European Union; India; Korea, Republic of; Russian Federation; Singapore; Turkey; Ukraine; United States
Agreements cited: (as cited in request for consultations)	Art. I:1, II:1, III:2, III:4, III:5  GATT 1994 Art. 2.1, 2.2, Annex  Trade-Related Investment Measures (TRIMs) Art. 3.1(b), 3.2  Subsidies and Countervailing Measures (SCM)
Agreements cited: (as cited in panel request)	Art. I:1, III:2, III:4, III:5  GATT 1994 Art. 2.1, 2.2  Trade-Related Investment Measures (TRIMs) Art. III  GATT 1994 Art. 3.1(b), 3.2, 1.1  Subsidies and Countervailing Measures (SCM)
Consultations requested:	2 July 2015
Panel requested:	17 September 2015
Panel established:	28 September 2015
Panel composed:	29 September 2015
Panel report circulated:	30 August 2017 (adopted on 11 January 2019 )
Appellate Body report circulated:	13 December 2018 (adopted on 11 January 2019)

 

Summary of the dispute to date

 

The summary below was up-to-date at 3 April 2020 

 

Consultations

 

Complaint by Japan. (See also DS472)

 

On 2 July 2015, Japan requested consultations with Brazil with respect to certain measures concerning taxation and charges in the automotive sector, the electronics and technology industry, and tax advantages for exporters.

 

Japan claims that the measures are inconsistent with:

 

- Articles I:1, II:1(b), III:2, III:4 and III:5 of the GATT 1994;

 

- Articles 3.1(a), 3.1(b) and 3.2 of the SCM Agreement; and

 

- Articles 2.1 and 2.2 of the TRIMs Agreement.

 

On 16 July 2015, the European Union requested to join the consultations.

 

Panel and Appellate Body proceedings

 

On 17 September 2015, Japan requested the establishment of a panel.

 

At its meeting on 28 September 2015, the DSB established a panel. Argentina, Australia, China, the European Union, India, Korea, the Russian Federation and the United States reserved their third-party rights.

 

Following the agreement of the parties, the panel was composed on 29 September 2015.

 

On 22 October 2015, the Chair of the panel notified the DSB that the panel in this dispute was composed with the same persons as the panel in DS472. The Chair also notified the DSB that pursuant to Article 9.3 and in agreement with the parties, this dispute and DS472 are following a harmonized procedure.

 

On 30 August 2017, the panel report was circulated to Members.

 

On 28 September 2017, Brazil notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the panel report. On 3 October 2017, Japan notified the DSB of its decision to cross-appeal.

 

On 27 November 2017, upon expiry of the 60-day period provided for in Article 17.5 of the DSU, the Appellate Body informed the DSB that it would not be able to circulate the Appellate Body report in this appeal by the end of the 60-day period, nor within the 90-day time-frame provided for in Article 17.5 of the DSU. The Appellate Body referred to the substantially enhanced workload it faced in 2017, the existence of several appeals proceeding in parallel, and the increasing overlap in the composition of the Divisions hearing the different appeals owing to the vacancies on the Appellate Body. The Appellate Body also referred to the scheduling issues arising from these circumstances, the number and complexity of the issues raised in this and concurrent appellate proceedings, together with the demands that these concurrent appeals place on the WTO Secretariat's translation services, and the shortage of staff in the Appellate Body Secretariat. The Appellate Body also informed the DSB that the circulation date of the Appellate Body report in this appeal would be communicated to the participants and third participants after the oral hearing.

 

Although the appeals in this dispute were initiated on 28 September 2017, due to the multiple appeals pending before the Appellate Body, the reduced number of Appellate Body Members, and the shortage of staff in the Appellate Body Secretariat, work on these appeals could gather pace only in March 2018. On 19 November 2018, the Chair of the Appellate Body informed the Chair of the DSB that the Reports in these proceedings would be circulated no later than 13 December 2018.

 

On 13 December 2018, the Appellate Body report was circulated to Members.

 

At its meeting on 11 January 2019, the DSB adopted the Appellate Body report and the panel reports, as modified by the Appellate Body report.

 

Reasonable period of time

 

At the DSB meeting on 28 January 2019, Brazil informed the DSB that it intended to implement the DSB's recommendations and rulings in this dispute. On 20 February 2019, Japan and Brazil informed the DSB that they were conducting consultations with respect to the reasonable period of time within which Brazil should comply with the DSB's recommendations and rulings. In their communication, Japan and Brazil also informed the DSB of their common understanding regarding the deadlines applicable to the arbitration procedure provided in Article 21.3(c) of the DSU.

 

On 10 May 2019, Japan and Brazil informed the DSB that they had agreed that the reasonable period of time for Brazil to implement the DSB's recommendations and rulings would be 11 months and 20 days. Accordingly, the reasonable period of time was set to expire on 31 December 2019. In their communication, Japan and Brazil noted that with regard to the subsidies that were found to be prohibited, they had agreed for the purposes of Article 4 of the SCM Agreement, that the time-period within which such measures must be withdrawn would be five months and 10 days. Accordingly, this time-period was set to expire on 21 June 2019.

 

On 27 December 2019, Brazil and Japan informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU (sequencing agreement).

 

Implementation of adopted reports

 

On 16 January 2020, Brazil informed the DSB that the measures found to be WTO inconsistent had expired without being renewed (i.e. the INOVAR-AUTO, PATVD, and Digital Inclusion), had been revoked or substituted in a WTO consistent manner (i.e. “Processos Produtivos Básicos” (PPBs)), or replaced in a WTO consistent manner (i.e. Informatics and PADIS programmes). Brazil notified the DSB that it therefore considered that it was in in full compliance with the DSB recommendations and rulings in this dispute.