DECREE NO. 4,421, OF October 14, 2002

Disposes on the execution of the Sexagtieth Additional Protocol to the Economic Supplementation Agreement no 2 (Automotive Vehicles), between the Governments of the Federative Republic of Brazil and the Eastern Republic of Uruguay, of July 11, 2002.

THE PRESIDENT OF THE REPUBLIC, in the use of the assignment that confers it on art. 84, inciso IV, of the Constitution,

Considering that the Treaty of Montevideo of 1980, which created the Latin American Integration Association (ALADI), firmed by Brazil on August 12, 1980 and approved by the National Congress, through the Legislative Decree No. 66 of November 16, 1981, provides for the modality of Complementation Agreement Economic;

Considering that the Plenipotentiaries of the Federative Republic of Brazil and of the Eastern Republic of Uruguay, on the basis of the Treaty of Montevideo of 1980, signed on December 20, 1982 in Montevideo, the Economic Supplementation Agreement No. 2, between the Governments of the Federative Republic of Brazil and the Eastern Republic of the Uruguay, which was incorporated into the Brazilian legal planning by means of the Decree No. 88,419, of June 20, 1983;

Whereas the Plenipotentiaries of the Federative Republic of Brazil and the Eastern Republic of Uruguay, on the basis of the Treaty of Montevideo of 1980, signed on July 11 of 2002, in Montevideo, the Sexagtieth Additional Protocol to the Economic Supplementation Agreement No. 2 (Automotor Vehicles), between the Governments of the Federative Republic of Brazil and the Eastern Republic of Uruguay;

DECRETA:

Art. 1º The Sexagtieth Additional Protocol to the Economic Supplementation Agreement No 2 (Vehicles Automotors), between the Governments of the Federative Republic of Brazil and the Eastern Republic of Uruguay, apensed by copy to the present Decree, will be executed and fulfilled as entirely as it contains.

Art. 2º This Decree comes into force in the date of its publication.

Brasilia, 14 of oct. 2002; 181º of Independence and 114º of the Republic.

FERNANDO HENRIQUE CARDOSO

Celso Lafer

ECONOMIC SUPPLEMENTATION AGREEMENT No. 2, CONCLUDED BETWEEN THE FEDERATIVE REPUBLIC OF BRAZIL AND THE EASTERN REPUBLIC OF URUGUAY

Sexagonth Additional Protocol

The Plenipotentiaries of the Federative Republic of Brazil and of the Eastern Republic of Uruguay, accredited by their respective Governments second powers that were bestoed in good and proper shape, deposited opportunely in the General Secretariat of the Latin American Integration Association (ALADI),

CONVVE IN:

Article 1.-Objectives

The Governments of the Federative Republic of Brazil and the Eastern Republic of the Uruguay sign the present Protocol with the aim of establishing rules for bilateral trade in the Automotive Sector, up to the effective entry into force of the MERCOSUR Automotive Policy.

Automotive products will be marketed among Signatary Parts with a 100% preference margin (0% of ad valorem intra-zone tariff) whenever they satisfy the source requirements and the other conditions set out in this agreement.

Article 2.-Definitions

For the purposes of this Protocol will be considered:

Autopes: parts, assemblies and subassemblies, including tyres, necessary for the production of the vehicles included in the? a? a? i? of Article 3, as well as those necessary for the production of the goods indicated in paragraph? j? of Article 3, included those intended for the repose market;

Ask for: product drawn up and finished, technically characterized by its functional individuality, not composed of other parts or parts that may have separate application and which is intended to physically integrate a subset or joint, with mechanical specific function or structural and which is not liable to be characterized as a raw material;

Subset: group of pieces joined together to be incorporated into a larger group to form a set;

Set: functional unit formed by parts and / or subassemblies, with specific function in the vehicle;

Automotive products: the goods listed in points? a? a? i? of Article 3;

Automotive companies: companies producing the automotive products;

Competent Organ: governing body of each Signatary Party, responsible for the implementation, monitoring and control of the operational procedures of this Protocol;

Registration: process to be carried out by the Competent Bodies of the Signatary Parties, starting from the solicitation of the automotive companies concerned, to identify that they meet the minimum formal requirements to enjoy the preferential conditions of the this Protocol;

Producer registered: automotive company whose application for registration was approved by the Competent Body of the Government;

Programs for progressive integration: document by discriminating against the integration targets of automotive companies that, in a justified and documented manner, demonstrate to the Competent Body of each Signatary Party the difficulty of complying with?Regional Content Index? (ICR) at the time of the launch of the new model; and

Normal conditions of supply: supply capacity to the market of the States Parties in conditions of quality, price and with a guarantee of continuity in supply.

Article 3.-Scope of Application

The provisions contained in this Protocol will be applied to the commercial exchange of the goods listed below, henceforth called Automotive Products, whenever it comes to new goods, understood in the codes of the Common Nomenclature of MERCOSUR (NCM), with their respective descriptions, which are shown in Appendix I of the Thirty-first Additional Protocol to the Economic Supplementation Agreement No. 18 (ACE-18).

a) automobiles and light commercial vehicles (up to 1,500 kg of load capacity)

b) buses

c) trucks

d) road tractors for semi-trailers

e) chassis with motor

f) trailers and semi-trailers

g) carrots and cabins

h) agricultural tractors, harvesters, and self-propelled agricultural machinery

i) self-propelled road machines

j) autoparts

During the duration of this Protocol, the Competent Bodies of the Signatary Parties will, by mutual agreement, be able to introduce in Appendix I of the Thirtieth First Additional Protocol to the Economic Supplementation Agreement No. 18 (ACE-18) the modifications that they deem necessary.

Article 4.-Registration of Producers

The manufacturers of the Automotive Products included in Article 3 should register before the Competent Body of their country and meet the conditions set forth by it.

Article 5.-Access of vehicles and auto parts produced in the Eastern Republic of Uruguay to the Republic Federative of Brazil

a) Automotive companies installed on the territory of the Republic Eastern Uruguay will have access to the market of the Federative Republic of Brazil with the margin of preference set out in Article 1, without quantitative limitations in the following cases:

-When it comes to automotive products included in the? a? a? i? of Article 3, as well as the sets and subsets included in paragraph? j? of the same article, which meet the Regional Content Index (ICR) set out in Articles 8 and 11 of this Protocol.

-When it comes to auto parts considered parts (point? j? of Article 3) that meet the General Regime of Origin of MERCOSUR.

b) Automotive companies installed on the territory of the Eastern Republic of Uruguay that meet the preferential origin requirement set out in this Protocol (Articles 9 and 12) will have access to the market of the Federative Republic of Brazil with the established margin of preference in Article 1, limited to the following annual quantities:

-Cars and commercial vehicles light-(point? a? of Article 3): year 2002, 8,000 units; year 2003, 17,000 units; year 2004, 18,000 units and years 2005 and 2006, 20,000 annual units. For the following years the Parties shall establish the increase of the corresponding quota.

-Bus -(point? b? of Article 3): the Bilateral Monitors Commission will look at the bus access conditions (paragraph? b?) to the Brazilian market.

- Trucks-(paragraph? c? of Article 3): 800 units, of which up to 500 units could be of the category of heavy duty (more than 5 tonnes of maximum load), included in the defined quota for cars and light commercial vehicles.

Autopeples (parts, assemblies and subassemblies)-(point? j? of Article 3):

(US$ million)

	Year	2002	2003	2004	2005	2006
	Quota	20	50	55	60	65

During the year 2006, Signatary Parties shall establish the increase in quota for the following years.

Article 6.-Access of automobiles and light commercial vehicles, produced in the Federative Republic of Brazil, to the market of the Eastern Republic of Uruguay

The automotive companies producing the goods listed in point? a? of Article 3, installed on the territory of the Federative Republic of Brazil, shall have access to the market of the Eastern Republic of Uruguay with the margin of preference set out in Article 1, limited to the following annual quantities:

	Year	2002	2003	2004	2005	2006
	Units	2.000	5.000	5,500	6.000	6.500

On the import of units that surpass, in the year, the limits of the quotas set out above, the Eastern Republic of Uruguay will apply margins of preference on the national import tariff as per the following timetable:

	Year	2002	2003	2004	2005	2006
	Margin of Preference (%)	50	60	65	70	70

As of 1º of January 2007 The products referred to in this article, produced by manufacturers installed in the Federative Republic of Brazil, will have free access to the market of the Eastern Republic of Uruguay under the conditions set out in Article 1.

Article 7.-Access of other Automotive Products produced in the Federative Republic of Brazil to the market of the Eastern Republic of Uruguay

The Automotive Products included in the points? b? a? j? of Article 3, produced by manufacturers installed in the territory of the Federative Republic of Brazil, shall have free access to the market of the Eastern Republic of Uruguay under the conditions set forth in Article 1.

Article 8.-Regional Contents Index (ICR)

The Automotive Products included in the? a? a? i? of Article 3, as well as the sets and subsets included in paragraph? j? of the same article, shall be considered as originating in the Federative Republic of Brazil whenever they achieve a minimum Regional Content Index (ICR) of 60%, calculated with the following formula:

S CIF imports of auto-parts from 3os countries

non-members of MERCOSUR

ICR> {1 _ ________________________________________} x 100 ³ 60%

product price? ex-manufactures?, without taxes

Will tender for? ex-fabricica? the selling price to the domestic market.

Article 9.-Regional Content Index (ICR) for Automotive Products produced in the Eastern Republic of Uruguay

The Automotive Products produced in the territory of the Eastern Republic of Uruguay, included in points (? a?,? b? e? c? of Article 3, as well as the sets and subsets included in paragraph? j? of the same article, will have to observe a minimum ICR of 50%, calculated through the constant formula of Article 8, within the limits set forth in Article 5.

Article 10.-Regional Contents Index (ICR) for auto parts

For the calculation of the ICR of the Automotive Products included in point? j? of Article 3 shall be applied to the General Rule of Origin of MERCOSUR, as set out in the Eighth Additional Protocol to the Economic Supplementation Agreement No. 18 (ACE-18), except in the case of the subsets and sets that will follow the rule set forth in the Article 8, in the case of the Federative Republic of Brazil, and in Article 9, in the case of the Eastern Republic of Uruguay.

Article 11.-Regional Contents Index (ICR) in the case of new models produced in the Federative Republic of Brazil

They will also be considered originating in the Federative Republic of Brazil the vehicles, subassemblies and covered sets by the concept of the new model, produced in its territory, by the amparo of the Progressive Integration Programmes approved by the Competent Body, which in all cases shall provide for the compliance of the ICR referred to in Article 8 in a maximum period of two (2) years, being that at the beginning of the first year the ICR should be at least 40%, and at the beginning of the second year of at least 50%, reaching the minimum of 60% at the beginning of the third year.

Article 12.-Regional Contents Index (ICR) in the case of new models in the Eastern Republic of Uruguay

In the case of Automotive Products produced in the territory of the Eastern Republic of Uruguay for the export to the market of the Federative Republic of Brazil, the ICR for new models is expected to be at least 30% at the beginning of the first year of the respective Progressive Integration Programme, from 35% at the beginning of the second year, from 40% at the beginning of the third year, from 45% at the beginning of the fourth year, reaching 50% at the beginning of the fifth year.

Article 13.-New model concept

Will be considered new models of those in which it is demonstrated, in a documented manner, the impossibility of compliance, at the time of the launch of the model, of the basic requirements set out in Articles 8 and 9 and justifying the need for a time frame for the development of regional suppliers apt to meeting the demand of the manufacturer of the new model under normal supply conditions. The Competent Body of a Party shall communicate to the other Party the approval of Progressive Integration Programs for new models, which should meet, among others, the justification of each solicitation submitted by the manufacturers.

Article 14.-Treatment of goods produced from investment-amidst-like investments government

The Automotive Products produced in the amparo of investments realized with projects approved from the entry into force of this Protocol and to receive incentives and / or promotional, sectoral and / or regional supports in the states, both of the National Governments and / or their centralized or decentralized entities and of the Provinces, Departments or States or of the Municipalities, shall be regarded as extra-zone goods when they are exported to the other State.

In the case of the Federative Republic of Brazil, constitute exceptions to the provisions of this article the investments projects of automotive producing companies of the listed goods in points "to" the "g" of Article 3, protocolized for habilitation by October 31, 1999, to the amparo of Law No. 9,826, of August 23, 1999.

Article 15.-Treatment of goods produced with government incentive benefits

The Automotive Products that are benefited by export incentives via reimbursements, tax returns and other similar schemes will not be able to enjoy the conditions of this Protocol in bilateral trade.

In the case of the Eastern Republic of the Uruguay, constitute exceptions to the provisions of this article the contents of Decree No. 316/92 and its supplementary norms.

Article 16.-Technical Group Monitor Binational

The Binational Monitor Technical Group, established in the Seventeenth Additional Protocol to the Economic Supplementation Agreement No. 2, will administer the provisions contained in the present Protocol.

Article 17.-

Stay valid for Signatary Parties the provisions of the Thirtieth First Additional Protocol to the Agreement of Economic Supplementation No. 18, which were not included or modified by this Protocol, exceeding that provided for in Articles 10 and 35 of the said Protocol.

Article 18.-

This Protocol repeals the Fifty Ninth Additional Protocol to the Economic Supplementation Agreement No. 2.

Article 19.-Entry into force

This Protocol will enter into force from July 11, 2002, and will vigorously enter into the effective entry into force of the MERCOSUR Automotive Policy.

The General Secretariat of ALADI will be depositary of this Protocol, of which it will send duly authenticated copies to the signatory Governments.

IN FÉ OF WHAT, THE RESPECTIVE PLENIPOTENTIARIES SIGN THE PRESENT Protocol in the city of Montevideo, at the eleven days of the month of July two thousand and two in an original in the Portuguese and Spanish languages, being both texts being equally valid.

By the Government of the Federative Republic of Brazil:

BERNARDO PERICÁS NETO

ELBIO ROSSELLI FRIERI