After 20 years of negotiations, the European Union and Mercosur states - Argentina, Brazil, Paraguay and Uruguay, on June 28, 2019 reached a political agreement for an ambitious, balanced and comprehensive trade agreement. The EU is the first major partner to reach a trade agreement with Mercosur. It is a broad agreement, covering both tariff and regulatory issues, including services, government procurement, trade facilitation, technical barriers, sanitary and phytosanitary measures and intellectual property. In this alert, we will provide an update with regard to the key customs benefits.
Elimination of customs duties
Over a period of 10 years, the Mercosur trade agreement will remove 91% of the customs duties on EU exports to the Mercosur. The Mercosur states will remove high duties on industrial products and agricultural goods, such as:
- Cars and parts (taxed up to 35%)
- Machinery (taxed up to 20%)
- Clothing and textiles (taxed up to 35%)
- Wine (taxed up to 27%)
- Chocolate (taxed up to 20%).
The agreement also opens up the EU market to goods from Mercosur. Of the EU duties on imports from Mercosur, 92% will be eliminated over a transition period of up to 10 years. However, the EU will limit imports of sensitive agricultural products such as beef, ethanol, pork, honey, sugar and poultry and these products will have to comply with the EU’s rigorous standards, as is the case today. Mercosur exports will consequently not pose a risk to the EU market as a result of unlimited imports in sensitive sectors.
With regard to raw materials and parts, the agreement also offers industries in the EU and Mercosur easier access to boost their competitiveness. The agreement will reduce or eliminate duties that Mercosur currently imposes on exports to the EU of products such as hides and skins or soybean products (which are key materials for the EU leather industry and livestock). The agreement also prohibits import and export price requirements, and import and export monopolies.
Reducing technical barriers
In addition, the EU and Mercosur agreed to reduce technical barriers. Different technical regulations and standards on products in other markets can be a major obstacle to exporters because they impose extra costs for complying with them. The trade agreement promotes transparency and the use of international standards to facilitate market access. Furthermore, the agreement will make it easier for companies to prove compliance with standards and regulations, notably through the recognition by Mercosur states of conformity tests on EU products performed in the EU in certain sectors.
After reaching the trade agreement on June 28, 2019, the parties will now proceed to legal revision and a final text of the agreement will be produced. The Commission will then translate the final text into all EU official languages and submit the agreement for approval by the Council and the European Parliament. This could easily take another year or two.
We have specialists dedicated to international Trade & Customs in both the EU and Mercosur, ensuring that we are well placed to help understand local and global operating requirements and answer any questions you may have in this respect.