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Brazil and Uruguay Agree to Free Trade in the Automotive Sector

By Federico Mazzella ,
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As of January 1, 2016, bilateral trade in automotive industry products will be duty free, replacing the tariff-rate quota scheme.

Brazil and Uruguay agreed (in Portuguese) to liberalize bilateral trade in passenger cars, buses, trucks, agricultural machinery, autoparts, chassis, and tires as of January 1, 2016. In order for each to benefit from preferential access to the other trade partner’s market, the regional content requirement is 55% for Brazilian products and 50% for Uruguayan ones, and there will be an additional quota of US$650 million for Uruguay and US$325 million for Brazil to apply to products that do not reach the above-mentioned regional value-added threshold.

The agreement also establishes a Productive Integration Program for vehicles and autoparts which is oriented towards supplier development and it provides for the temporary suspension of preferences in the case of significant imbalances.

The automotive sector is excluded from free trade within the MERCOSUR and trade is governed by bilateral agreements between member countries. Previously, trade flows in the sector between Brazil and Uruguay were subject to a quantitative restrictions scheme which allowed the tariff-free entry of a certain quantity of products in each period.

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