The Customs Brokers Center (CDA) shared an informative note from its advisor in ALADI, MERCOSUR and ORIGEN, Mr. Carlos Canta Yoy on the extension of the Temporary Admission and Draw-Back regimes to manufacture products to export to Mercosur.
Last Friday, January 26, Argentina Note SM/041/24 of the same date informed the General Secretariat of ALADI of the validity of the extension to use the promotional regimes of Temporary Admission and Draw-Back for exports to Mercosur from the February 24 of this year until December 31, 2030.
The 215th Additional Protocol to AAP.CE/18 had incorporated CMC Decision No. 10/21 amending the previous CMC Decision No. 24/15 which had set a deadline until 31 December 2023.
Thus, starting next February 24, exports to Mercosur countries will be possible using Temporary Admission (for industrial improvement) and Draw-Back, until 31-12-30.
There is no official response to what happened from 31/12/23 until the new effective date of 24/02/24.
The recommended information note is attached below.
On December 31, 2023, the deadline established by CMC Decision No. 24/2015 to use the temporary admission and draw-back regimes to manufacture products that will then be exported to the other Mercosur member countries using the preferences established in AAP.CE/18 expired.
At the time of writing this report, an extension of the regime has not been established, as has been done on previous occasions. Therefore, it could not be legally used at this time because the deadline has expired. It is striking that not only has an extension regulation been officially published, but also no comments have been made by either the authorities or the numerous interested exporters who use these export promotion regimes. They are a very high percentage of Argentine exporters to the other Mercosur countries. Not being able to use the benefits of the aforementioned regimes would be extremely detrimental to them.
1. History
Since 1994, the issue of the use of promotional regimes of temporary admission and draw-back for the manufacture of products for export to other Mercosur member countries has periodically occupied the attention of operators.
In that year, the creation of a Common Market between the States Parties of Mercosur (which should have started to operate on December 31, 1994 according to the Treaty of Asunción) was postponed indefinitely and it was decided, instead, to put into operation a customs union. Something that we are still trying to achieve, after almost thirty years. The last deadline to put the customs union into effect expired on December 31, 2018 (CMC Decision No. 10/2010). In this case, there is also no extension, as is also the case with the temporary admission and draw-back cases at present.
It is very clear that the above-mentioned promotional regimes cannot be in force in a full customs union. And the reason for this is more than simple: in a customs union there is only one customs territory which is the sum of the customs territories of the member countries. Therefore, technically there will be neither exports nor imports between them. A manufacturer cannot use either of these two regimes to manufacture a product and sell it in another part of the customs territory, because obviously in that case there will be no export. Just as currently a manufacturer based in the province of Buenos Aires will not be able to use one of the two regimes mentioned to sell its merchandise in the province of Córdoba, for example. It could, however, export to a free zone because it is not part of the general customs territory.
Let us look at an example of the use of export promotion regimes: a Brazilian manufacturer of a machine uses Brazilian parts and materials (or those originating in any other Member State, which is the same for origin purposes) in its production, as well as inputs from other origins, say, German and Chinese parts and pieces. The resulting product complies with the origin requirements required by Mercosur, obtains the corresponding certificate and the goods are sent to Argentina. Here, it does not pay import duties or statistical taxes. But a disturbing question arises: does no one pay import duties on German and Chinese inputs? No one. Therefore, they are free from a tariff point of view, which contradicts the fact that if they were imported for consumption, they would pay the corresponding import duties and statistical taxes.
This example can be multiplied if we add Argentine exports to the other three countries, and those of these to the others. We do not know if anyone in any of the member countries has bothered to calculate the value (surely several times millions in dollars) of the taxes that have not been paid on goods that we are all sending to each other.
2. Regulations
In 1994, the deadline for using the temporary admission and draw-back regimes for intra-Mercosur trade was set at 31 December 1996. The reasons were reasonable if one took into account that from that year onwards we were forming a customs union that would be in force from the year 2000. The deadlines were extended numerous times until the last one was 31 December 2023.
Decision No. 24/2015 of the Common Market Council established the term of validity of the temporary admission and draw-back for intra-Mercosur trade on December 31, 2023. In 2019, the Common Market Group was expected to submit to the Council a proposal for harmonization of the national regimes of the Member States of both regimes.
CMC Decision No. 24/2015 was notarized by the One Hundred and Ninth Additional Protocol to AAP.CE/18 (Mercosur) (AAP.CE/18.109) dated November 19, 2015. By Note SM/345/18 of July 02, 07, Argentina informed the Mercosur Secretariat that the aforementioned Additional Protocol was incorporated into the legal systems of the Mercosur States Parties. It entered into force on August 18, 1.
The text regarding this comment (Arts. 1 and 2) is as follows:
MERCOSUR/CMC/DEC. No. 24/15 – SPECIAL IMPORT REGIMES
CONSIDERING: The Treaty of Asunción, the Protocol of Ouro Preto and Decisions No. 07/94, 22/94, 32/03, 56/10 and 59/10 of the Common Market Council and Resolutions No. 43/03 and 39/11 of the Common Market Group.
WHEREAS: The achievement of the objectives of the Treaty of Asunción requires the adoption of trade policy instruments that promote competitiveness in the region and provide certainty and predictability to productive activities. Appropriate management of MERCOSUR's tariff policy must take into account the international economic situation and the special and specific situation of the Member States.
THE COMMON MARKET COUNCIL DECIDES:
Art. 1 – States Parties are authorized to use draw-back and temporary admission regimes for intra-zone trade until 31 December 2023.
Art. 2 – The GMC shall submit to the CMC, at the latest before its last meeting in 2019, a proposal for harmonization of national “Draw Back” and temporary admission regimes.
3 conclusion
Currently, Mercosur is in a situation where there is not even compliance with the regulations, nor is the validity of the rules extended as was traditional. The rules simply seem to be extended in practice, ignoring compliance with their validity. In the case under study, the most logical thing would be to extend the use of the temporary admission and draw-back regimes to manufacture products intended for export to the other Member States, taking into account that nobody knows when we will have (if something like that ever happens) a customs union, nor do we have current regulations that have determined a deadline for establishing it. Although it is customary for these deadlines not to be met either.
Article published in the Customs Brokers Center of the Argentine Republic, with authorization to reply.
The author is an advisor at ALADI, MERCOSUR and the origin of the goods at the Customs Clearance Center of the Argentine Republic
