Case

meaning fragmentation and incompatible outcomes.

e) Rio de Janeiro

The Court of Appeals of the Rio de Janeiro issued five final rulings, presented below in groups according to their subject matter (i-ii), followed by an overall analysis of fragmentation (iii) and outcomes (iv).

i) ICMS: tax exemption on codfish and hake

The Court issued four final rulings regarding ICMS exemption to codfish and hake. Below, this thesis presents the cases (α), followed by fragmentation (β), and outcome (γ) analyses.

α) Cases⁴⁴⁷

Similar to cases in Pernambuco, these also involve ICMS exemption on imports of codfish and hake. They all involve importations that happened when ICMS Agreement 60/91 was still in force.⁴⁴⁸

All cases were similar. The State of Rio de Janeiro filed tax executions against Brazilian importers to charge ICMS on imports of codfish (cases 1-3) and hake (case 4), dating from 1998 (cases 1 and 2), 1996 (case 1-3) and 1997 (case 4). The importers then sued the State to stop the execution, arguing that the imports originated from GATT countries and, as such, should not pay ICMS because, at the time of importation, internal sales of pescados (fish) were exempt from that tax.

In 2016 (case 1) and 2017 (cases 2, 3 and 4), the Court ruled in favour of the complainants. Cases 1, 2 and 3’s rulings simply quoted the Superior Court of Justice precedent – Recurso Repetitivo – Resp 871.760/BA.⁴⁴⁹ In case 4’s ruling, the Court the Court identified Article III:2 GATT as the provision applicable to the facts, but did not focus on interpreting it:

instead, it quoted súmulas 575 (Supreme Court), 20 and 71 (Superior Court of Justice), as well as previous Superior Court of Justice’s case law, including the precedent previously referred to .

Cases 1, 2 and 4 are finished. Case 3 is still pending appeal to the Superior Court of Justice.

β) Fragmentation analysis

Below, this topic discusses problems of coherence (β.i) and consistency (β.ii).

β.i) Coherence

This topic analyses external (β.i.i) and internal (β.i.ii) fragmentation.

β.i.i) External fragmentation

The cases do not present any coherence-related matter.

β.i.ii) Internal fragmentation

The cases do not present any coherence-related matter.

β.ii) Consistency

This topic analyses external (β.ii.i) and internal (β.ii.ii) fragmentation.

β.ii.i) External fragmentation

This topic examines different overall patterns to establish external fragmentation of meaning: identification of the treaty provisions applicable to the facts (β.ii.i.i); textualist approach to interpretation (β.ii.i.ii); interpretation analysis (β.ii.i.iii).

447 Case 1: RIO DE JANEIRO. Tribunal de Justiça. Apelação Cível 0166185-16.2006.8.19.0001.

Appellant: Estado do Rio de Janeiro. Appellee: Gruta Rio Importação e Exportação Ltda.

Rapporteur: Des. Margaret de Olivaes Valle dos Santos. Rio de Janeiro, 24 August 2016 Case 2:

RIO DE JANEIRO. Tribunal de Justiça. Apelação Cível 0180126-28.2009.8.19.0001 Appellant: Casa Nunes Martins S/A Importadora e Exportadora. Appellee: Estado do Rio de Janeiro. Rapporteur:

Des. Carlos Azeredo de Araújo. Recife, 07 February 2017. Case 3: RIO DE JANEIRO. Tribunal de Justiça. Apelação Cível 0359614-69.2011.8.19.0001 Appellant: Estado do Rio de Janeiro. Appellee:

Super Mercado Zona Sul S/A. Rapporteur: Des. Wagner Cinelli de Paula Freitas. Rio de Janeiro, 26 July 2017. Case 4: RIO DE JANEIRO. Tribunal de Justiça. Apelação Cível 0175542-30.2000.8.19.0001 Appellant: Estado do Rio de Janeiro. Appellees: Souselo Empreendimentos e Participações S/A and Alexandre Siqueira Rodrigues Fontes. Rapporteur: Des. Cristina Tereza Gaulia. Rio de Janeiro, 05 September 2017. <www.tjrj.jus.br> accessed 05 August 2019.

448 See, above, Pernambuco – ICMS: tax exemption on codfish.

449 BRAZIL. SUPERIOR TRIBUNAL DE JUSTIÇA. Recurso Repetitivo. Tema 89. REsp 871.760/BA.

Appellant: State of Bahia. Appellee: J D Comércio e Importação Ltda. Rapporteur: Min. Luiz Fux.

Brasilia, 11.03.2009. < www.stj.jus.br> accessed 05 August 2019.

β.ii.i.i) Identification of the treaty provisions

The Court only identified the specific GATT provision applicable to the case in one case out of four.

β.ii.i.ii) Textualist approach to interpretation The Court did not focus on the treaty texts.

β.ii.iii) Interpretation analysis

Like the Court of Pernambuco, the Court of Rio de Janeiro neither adopted a textual approach to interpretation nor used treaty interpretation methods. It did not refer to WTO case law. In fact, it only identifies a specific treaty provision applicable to the facts in one of the four cases.

Nevertheless, the ruling, however, is not inconsistent with WTO case law. As seen above, ICMS Agreement 60/91 excepted codfish from ICMS exemption granted to ‘fish’ in general. The tax benefit was aimed at aiding the domestic fishing sector.

Moreover, codfish does not exist in Brazilian waters, so the Court could assume that the distinction was based exclusively on origin.

Consequently, the Court was consistent with WTO case law when presuming likeness in this case. Absent any other justification to differentiate between codfish and other salted and dried fish for the purposes of the ICMS exemption, the Court’s finding of discrimination was also consistent with WTO case law.

β.ii.ii) Internal fragmentation All cases were consistent.

γ) Outcome analysis

The four cases’ outcomes were compatible with WTO case law.

ii) ICMS: tax deferral on house appliances

The Court issued one final ruling regarding ICMS deferral on appliances.

Below, this thesis presents the case (α), followed by fragmentation (β), and outcome (γ) analyses.

α) The case⁴⁵⁰

A Brazilian importer of house appliances filed an administrative request to be released from paying ICMS on the importation of such goods. After the State International Trade Inspector denied the request, the importer sued the State of Rio de Janeiro to be released from tax payment at importation point.

State of Rio de Janeiro ICMS Regulations granted ICMS deferral on the importation of certain goods. Certain industries or commercial warehouses benefitted from the deferral when importing goods, machines or equipment, as well as parts and accessories, deploying their own financial resources, directly or through an importer. Among these, were industries and commercial warehouses selling domestic appliances manufactured in Brazil. Besides the deferral, they also benefitted from a presumed ICMS credit to limit their tax burden to 2% (two per cent).

The complainant argued that such regulations discriminated in favour of Brazilian appliances. As an importer of appliances originating from GATT member countries, it contended that the same tax treatment should be granted to the imported appliances.

The Court ruled in favour of the complainant in 2016. It quoted súmula 20 from the Superior Court of Justice (SCJ) and previous rulings on imports of codfish, and stated that GATT provides for ‘equivalence in tax

450 Case 1: RIO DE JANEIRO. Tribunal de Justiça. Apelação Cível 0354247-93.2013.8.19.0001.

Appellant: Hyats Comércio Ltda. Appellee: Estado do Rio de Janeiro. Rapporteur: Des. Benedicto Abicair. Rio de Janeiro, 22 June 2016 <www.tjrj.jus.br> accessed 05 August 2019.

treatment’ between imported goods and similar domestic goods, from the moment the former enter Brazilian territory on.

The case was appealed to the Superior Court of Justice and to the Supreme Court. Neither Court admitted the appeal, both on procedural grounds. The case is now finished.

β) Fragmentation analysis

Below, this topic discusses problems of coherence (β.i) and consistency (β.ii).

β.i) Coherence

The cases do not present any coherence-related matter.

β.ii) Consistency

This topic examines different overall patterns to establish external fragmentation of meaning: identification of treaty provisions applicable to the facts, in light of GATT/WTO interpretation (β.ii.i); textualist approach to interpretation (β.ii.ii); interpretation analysis (β.ii.iii).

β.ii.i) Identification of treaty provisions

The Court did not identify any specific GATT provision applicable to the case.

β.ii.ii) Textualist approach to interpretation The Court did not focus on treaty texts.

β.ii.iii) Interpretation analysis

The Court did not identify any specific treaty provision applicable to the facts. Accordingly, it neither adopted a textual approach to interpretation nor used treaty interpretation methods. It did not refer to WTO case law.

The ruling is in principle consistent with WTO case law. It gave a more favourable tax treatment to importers that also sold domestic appliances over importers that did not sell domestic appliances.

Consequently, it gave domestic appliances a competitive advantage inasmuch as the measure provided an incentive for manufacturing them at lower prices and selling them. According to WTO rulings, Article III’s purpose is to secure equality of competition between imported and domestic goods.⁴⁵¹

γ) Outcome analysis

The case’s outcome was compatible with WTO case law.

vii) Rio de Janeiro – overall analysis of fragmentation

Below, this thesis present overall findings related to coherence (α) and consistency (β).

α) Overall fragmentation: problems of coherence

This topic analyses external (α.i) or internal (α.ii) fragmentation related to coherence.

α.i) External fragmentation

The cases do not present any matter related to coherence.

α.ii) Internal fragmentation

The cases do not present any matter related to coherence.

451 Appellate Body Report, Japan-Alcoholic Beverages II, WT/DS8, (1996) (WT/DS8/AB/R;

WT/DS/10/AB/R; WT/DS/11/AB/R) 16.

β) Overall fragmentation: problems of consistency

This topic analyses external (β.i) or internal (β.ii) fragmentation related to consistency.

β.i) External fragmentation

This topic examines different overall patterns to establish external fragmentation of meaning: identification of treaty provisions applicable to the facts, in light of GATT/WTO interpretation (β.i.i); textualist approach to interpretation (β.i.ii); interpretation analysis (β.i.iii).

β.i.ii) Identification of treaty provisions in light of GATT/WTO interpretation Only in one out of five rulings did the Court identify the appropriate treaty provision applicable to the facts (Article III:2 of the GATT). There was no reference to any GATT provision in the remaining rulings.

β.i.ii) Textual approach to interpretation

The Court did not focus on the treaty texts.

β.i.iii) Interpretation analysis

Despite the facts that the Court of Rio de Janeiro identified specific treaty provisions applicable to the facts in only one out of five cases; that it neither adopted a textual approach to interpretation nor used treaty interpretation methods or referred to WTO case law, the rulings do not present meaning fragmentation in relation to WTO case law. They are also internally consistent.

It is also interesting that the Court used different wording to describe the obligation contained in Article III of the GATT. This, however, did not have the consequence of changing the provision’s meaning.

β.ii) Internal fragmentation

The Court of Rio de Janeiro does not present internal fragmentation.

viii) Rio de Janeiro: overall analysis of outcomes All five cases were compatible with WTO case law.

f) Rio Grande do Sul

The Court of Appeals of the State of Rio Grande do Sul issued eleven final rulings on the same subject matter. The cases are presented below (i), followed by an analysis of fragmentation(ii) and outcomes (iii).

i) ICMS: base reduction on low-income family ‘basic basket’ food products

452

452 Case 1: RIO GRANDE DO SUL. Tribunal de Justiça. Apelação/Reexame Necessário 70066195165.

Appellant: Estado do Rio Grande do Sul. Appellee: Reichert & Satamm Alimentos Ltda. Rapporteur:

Des. Marco Aurélio Heinz. Porto Alegre, 16 September 2015. Case 2: RIO GRANDE DO SUL.

Tribunal de Justiça. Remessa Necessária 70070673066. Complainant: Perte Distribuidora de Alimentos Ltda. Defendant: Estado do Rio Grande do Sul. Rapporteur: Des. José Aquino Flôres de Camargo. Porto Alegre, 23 November 2016. Case 3: RIO GRANDE DO SUL. Tribunal de Justiça.

Apelação Cível 70069162626. Appellant: Estado do Rio Grande do Sul. Appellee: Frigorífico Silva – Indústria e Comércio Ltda. Rapporteur: Des. Laura Louzada Jaccottet. Porto Alegre, 27 July 2016.

Case 4: RIO GRANDE DO SUL. Tribunal de Justiça. Apelação Cível 70071696330. Appellant: Estado do Rio Grande do Sul. Appellee: Frohlich S/A Indústria e Comércio de Cereais. Rapporteur: Des.

Newton Luís Medeiros Fabrício. Porto Alegre, 07 June 2017. Case 5: RIO GRANDE DO SUL.

Tribunal de Justiça. Apelação Cível 70073781346. Appellant: Frigorífico e Distribuidora de Carnes Boa Vista Ltda. Appellee: Estado do Rio Grande do Sul. Rapporteur: Des. Almir Porto da Rocha Filho. Porto Alegre, 21 June 2017. Case 6: RIO GRANDE DO SUL. Tribunal de Justiça. Apelação Cível 70073106536. Appellant: Estado do Rio Grande do Sul. Appellee: Panifício Mallet Ltda.

Rapporteur: Des. Almir Porto da Rocha Filho. Porto Alegre, 26 April 2017. Case 7: RIO GRANDE DO

Between 2014 and 2018, the court issued final rulings on nine cases on ICMS base reduction on low-income family ‘basic basket’ food products.

As seen above,⁴⁵³ Brazilian states grant ICMS benefits to certain goods selected as essential for low-income family ‘basic basket’. The selection can change over time and among different states.

According to State of Rio Grande do Sul’s Law 8820/89, the internal sales of goods making up the low-income family ‘basic basket’ benefit from a reduction on ICMS base. In the cases discussed below, among other arguments, the complainants – all of them Brazilian companies which had imported goods included in the ‘basic basket’ - sued the State of Rio Grande do Sul claiming that, due to GATT provisions, similar imported goods to those included in the ‘basic basket’ should also benefit from the reduction on the tax base. The complaints either involved ICMS charges already put into place by the state of Rio Grande do Sul, or new importations, in which case the importers sought to avoid paying a higher level of tax at the point of importation.

In case 1, adjudicated in 2015, the complainant sued the state of Rio Grande do Sul to avoid paying higher ICMS on imported goods making up the ‘basic basket’. Acknowledging that GATT applied to the facts, the Court ruled that it provided for ‘isonomic’ treatment to imported goods in comparison with internal operations with these goods.

Case 2 was adjudicated in 2016 and involved imports of fish – panga fish, angelfish, Alaska pollock, tope fish, flat fish⁴⁵⁴, gatuzo, saithe, Atlantic halibut, hake, palla and conger. ‘Fish’ is included in the ‘basic basket’, with the exception of haddock, cod, hake, pirarucu⁴⁵⁵ and salmon.

In this case, the court stated that since ‘fish’ is included in the ‘basic basket’ and, as such, has its ICMS base reduced, imported fish must benefit from the same reduction due to GATT provisions. The Court explained that Articles III:2 and III:4 applied to the facts; however, it did not refer to WTO case law nor discussed the interpretation of those articles.

Case 3, adjudicated in 2016, involved lamb meat, included in the ‘basic basket’. The Court referred to súmulas 575 of the Supreme Court, 20 and 71 of the Superior Court of Justice.⁴⁵⁶ It also stated that Article III:4 applied to

SUL. Tribunal de Justiça. Apelação Cível 0278284-38.2017.8.21.7000. Appellants: Center Mastersul Distribuidora de Alimentos Ltda. e Estado do Rio Grande do Sul. Appellees: Center Mastersul Distribuidora de Alimentos Ltda. e Estado do Rio Grande do Sul. Rapporteur: Des. Sergio Luiz Grassi Beck. Porto Alegre, 23 March 2018. Case 8: RIO GRANDE DO SUL. Tribunal de Justiça.

Apelação Cível 70075598979. Appellant: Estado do Rio Grande do Sul. Appellee: Moinho Taquariense Ltda.. Rapporteur: Des. Carlos Roberto Lofego Caníbal. Porto Alegre, 13 July 2018.

Case 9: RIO GRANDE DO SUL. Tribunal de Justiça. Apelação Cível 70077125458. Appellant: Estado do Rio Grande do Sul. Appellee: Unidasul Distribuidora Alimentícia S/A. Rapporteur: Des. Newton Luís Medeiros Fabrício. Porto Alegre, 13 July 2018. Case 10: RIO GRANDE DO SUL. Tribunal de Justiça. Apelação Cível 70077803666. Appellant: New Wave Royal Comércio e Importação Ltda.

Appellee: Estado do Rio Grande do Sul. Rapporteur: Des. Ricardo Torres Hermann. Porto Alegre, 29 August 2018. Case 10: RIO GRANDE DO SUL. Tribunal de Justiça. Apelação Cível 70078014404. Appellant: New Wave Royal Comércio e Importação Ltda. Appellee: Estado do Rio Grande do Sul. Rapporteur: Des. Laura Louzada Jaccottet. Porto Alegre, 28 November 2018. All cases: <http://www.tjrs.jus.br> accessed 05 August 2019.

453 See on this section, above, Pernambuco.

454 The court lists linguado, which can denominate different species of flat fish, such as flounder, sole or halibut. It is not possible to know which species were effectively imported in this case. Thus, this thesis translates linguado as `flat fish’, because linguado is used to denominate different kinds of fish with a flat shape in Portuguese.

455 Pirarucu is a native fish from the Amazon basin.

456 Súmula 71: ‘O bacalhau importado de país signatário do GATT é isento do ICM’. Translation: ‘cod imported from a country signatory to the GATT is exempt from ICM’. BRAZIL. Superior Tribunal de

Justiça. Súmula 71. Brasilia, 15 December 1992.

<http://www.stj.jus.br/docs_internet/SumulasSTJ.pdf> accessed 05 August 2019.

the case, but did not refer to WTO case law, or discussed the interpretation of the provision. In addition, it quoted the ruling given in a preliminary injunction in the same case, which had applied Articles III:2 and III:1 to the facts but made no reference to WTO case law or discussed the interpretation of these provisions.

In this case, the complainant had paid a higher amount of ICMS at the point of importation and sought to recoup the difference between the amount charged and the amount due had the tax base reduction been applied. The Court granted the complainant the right to recoup the difference. This is different from what happened in case 5, below, where the Court stated that, although the complainant was entitled to a tax base reduction by reason of GATT provisions, it could not recoup the difference because it had not proved that it had not transferred the tax burden to third persons. In case 10, ruled in 2018, the Court once more allowed the complainant to recoup the tax paid in excess, as explained below.

Adjudicated in 2017, case 4 involved beans from Argentina. Included in the ‘basic basket’ list, beans have the benefit of ICMS base reduction. By a majority decision, the Court, among others, applied Article III:4 of the GATT to the facts. It did not refer to WTO case law or discussed the article’s interpretation, but mentioned doctrine on MFN and national treatment as legal underpinnings of GATT and the WTO. It also referred to the Superior Court of Justice’s decision on EDREsp 696.713-RS, as in cases 2 and 5, and to several other decisions of the Superior Court. The case is pending appeal to the Superior Court of Justice.

Case 5 was adjudicated in 2017. In this case, the complainant sought to recoup the exceeding amount of ICMS paid on beef imports between 2009 and 2012 at the point of importation, without taking into consideration the tax base reduction due for products making up the ‘basic basket’. The Court, once more, applied Article III:4 to the case and equalled the expression ‘non less favourable treatment’ thereof with ‘isonomic tax treatment’. In addition, it referred to súmulas 20 and 71 of the Superior Court of Justice and extensive case law on this matter, as well as to súmula 575 of the Supreme Court.

The Court affirmed that GATT applied to the case and that the imported goods should have benefitted from the tax base reduction.

However, it denied the claim to recoup the excess of ICMS. It explained that whenever an indirect tax, such as ICMS, can be shifted to other persons, the Brazilian Tax Code provides that only the persons who support the tax burden can recoup any excessive or undue payment.

Regarding the impossibility of recouping indirect taxes that can be shifted to other persons, it is noteworthy that the Superior Court of Justice has ruled that this does not apply to taxes paid by importers on the importation of goods.⁴⁵⁷ Since the case is pending appeal to that Court, it is possible that it overrules this part of the state court’s decision.

Case 6, also adjudicated in 2017, involves wheat flour, a product included in the ‘basic basket’. In this case, the complainant sought a tax base reduction on ICMS on wheat flour imported from countries party to the GATT and MERCOSUR. The Court, among others, applied Article

Case 6, also adjudicated in 2017, involves wheat flour, a product included in the ‘basic basket’. In this case, the complainant sought a tax base reduction on ICMS on wheat flour imported from countries party to the GATT and MERCOSUR. The Court, among others, applied Article

Dans le document Fragmentation of international law: the application of WTO law by Brazilian courts (Page 154-0)