Mexico and Brazil grant each other tariff preferences under the Economic Complementation Agreement (ACE 53).
Preferential treatment under the ECA 53 is granted through a margin of preference over the MFN tariff rate.
Originally Brazil granted preferences for 767 lines and Mexico for 770 lines (with the 8-digit nomenclature of Naladisa 1996).
With very few exceptions, preferences are granted for the same products and the margin of preference is the same.
According to a WTO report, the Parties cannot unilaterally decrease or eliminate the margins of preference granted under ECA 53, except in the context of safeguard, anti-dumping or countervailing measures (Article II-4).
In the event that a Party increases the MFN rate for products covered by ACE 53, negotiations can be carried out with the objective of preserving the balance of concessions.
The Parties have agreed that national treatment is applied in accordance with the disciplines of Article III of the GATT 1994 (Article III-1).
Article III-2 includes a general prohibition on the application of non-tariff barriers to imports of all goods of the other Party, unless they are WTO-consistent.
At the request of a Party, the other Party must provide information on all measures, restrictions, or prohibitions applied to the importation of goods of export interest to the other Party.
The Agreement does not apply to used or remanufactured goods (Article I-4).
Margins of preference granted under ACE 53 range from 20 to 100 per cent.
Both Parties also grant tariff quotas: seven tariff lines in the case of Brazil and six in the case of Mexico.
As shown in the table, there is almost total reciprocity in terms of the number of lines that benefit from the different margins of preference, and almost half of the covered tariff lines are duty-free as of the entry into force of the Agreement.
The preferences were fully applied as of the entry into force of the Agreement.
The Agreement provides for adding products to be liberalized or increasing the margin of preference; consequently, in 2007 Brazil increased the margin of preference for terephthalic acid and its salts (HS 2917.36.00) from 40 to 100 percent.