EU–Mercosur trade deal: what European groups with Brazilian subsidiaries should check now

Brazil has applied the EU–Mercosur interim trade agreement since May 1, 2026. Five months in, the duty cuts are real but small in year one, and most of the value for a European group with a Brazilian subsidiary does not arrive by itself: it depends on proof of origin, on how each import is declared, and on who in the group captures the savings. One deadline is close, too. Goods that were already in transit on May 1 can only claim the preference if their proof of origin is presented within six months.

What is in force, and what is still pending

Two texts were signed in Asunción on January 17, 2026: the broad EU–Mercosur Partnership Agreement (EMPA) and a narrower interim Trade Agreement (iTA) covering trade only. The iTA is the one now running.

• In Brazil, Congress approved it through Legislative Decree 14 of March 17, 2026, the government deposited its ratification on March 18, and Decree 12,953 of April 28, 2026 incorporated the text into Brazilian law, applying it from May 1, 2026 under Article 23.3 of the agreement.
• In the EU, the Council authorized provisional application on January 9, 2026, the text was published in the Official Journal on February 27 (OJ L 2026/184), and the Commission confirms that tariff dismantling started on May 1.
• What remains open: on January 21, 2026, the European Parliament voted 334 to 324 (11 abstentions) to ask the Court of Justice of the EU for an opinion on the agreement’s compatibility with the EU Treaties. That suspends Parliament’s consent, which the Parliament’s own tracker estimates at 16 to 18 months. The iTA keeps applying meanwhile and will be replaced by the EMPA once all member states ratify it.

For planning, the practical reading is simple: the preferences are law in Brazil today and customs applies them, but the long-term framework still carries legal and political risk. Base decisions on the savings you can document now, not on the full 10- to 15-year schedules.

Where Mercosur is cutting duties on EU goods

Once fully phased in, Mercosur removes duties on about 91% of EU exports and the EU on about 92% of Mercosur exports, according to the European Commission. For the sectors where European groups most often ship to their Brazilian subsidiaries, the Commission’s factsheet describes the first steps this way:

These are summaries. The legally binding figures are in Mercosur’s schedule (Appendix 2-A-2), which lists Brazil’s base rate for each NCM code (the Mercosur version of the HS code). Brazil’s single-window portal, Siscomex, notes that when the rate Brazil actually applies is lower than the schedule’s, the importer gets the more favorable one. Check every NCM code you import against the schedule. Category averages hide big differences from one product to the next.

Why a small duty cut is worth more in Brazil

Brazil’s import duty (II) does not stand alone. It feeds into the base of other taxes charged at import:

• IPI (federal excise tax) on imports is calculated on the customs value plus the customs duties paid.
• ICMS (state VAT) on imports is calculated on the customs value plus II, IPI, PIS/Cofins, other charges and customs expenses, with ICMS itself included in its own base.
• PIS and Cofins (federal contributions) on imports use only the customs value, so they do not move.

A hypothetical example shows the effect. Take a machine with a customs value of BRL 1,000,000, an import duty that falls from 14% to 12.6%, IPI at 5% and ICMS at 18%. The duty drops by BRL 14,000, the IPI by BRL 700, and the ICMS by about BRL 3,227, because its base shrinks by BRL 14,700 grossed up for the 18% rate. A manufacturer that recovers IPI and ICMS as input credits keeps the BRL 14,000 duty saving as a real cost reduction. The IPI and ICMS savings mostly improve cash flow, unless those taxes are a cost for that company. From 2027, the federal CBS replaces PIS and Cofins on imports, and IBS gradually replaces ICMS through 2033, but the import duty stays. If you need the wider picture, see our overview of Brazil’s tax reform for foreign headquarters.

Origin is the price of the preference

The reduced rate applies only to goods that originate in the EU (or in Mercosur, on the way back) under the agreement’s rules. Shipping from Europe is not enough.

• Product-specific rules (Annex 3-B) set what counts as originating for each HS subheading: a change of tariff chapter, heading or subheading, a maximum share of non-originating materials in the ex-works price, or specific processing. A general tolerance of 10% of the ex-works price applies outside textiles. The EU’s free ROSA tool on Access2Markets lets the exporter test a product before shipping.
• Proof is mainly self-certified. The exporter writes a statement on origin on the invoice or another commercial document, using the text in Annex 3-C (Article 3.17). EU exporters may need registered exporter (REX) or approved exporter status to do this. A certificate of origin (Annex 3-D) remains an option for three years, which can be extended by two.
• Validity and records: proof of origin is valid for 12 months, and both exporter and importer must keep the supporting documents for at least three years. On request, the exporter has to show how the product meets the rule.
• In Brazil, the importer claims the preference in the import declaration (DUIMP), quoting the agreement code, and links the exporter’s statement on origin to it.

The deadline to check now: goods that were in transit or in temporary storage on May 1, 2026 can still benefit if the proof of origin is presented within six months of that date (Article 3.31), so by early November 2026. If the Brazilian subsidiary cleared EU goods in late April or May at the full rate, review those entries this week.

A preference claimed on a weak origin file is a liability, not a saving. If customs later denies it, the importer pays the difference with interest and may face penalties. Treat the origin file like any other tax support document.

Quotas: cars, chocolate and dairy

Some reductions apply only within tariff-rate quotas. On the Brazilian import side, the Foreign Trade Secretariat (Secex) runs them through an import licence in the single-window portal (LPCO), allocated in order of registration. The licence can be requested after shipment but before clearance, and the quota document is presented together with the proof of origin (Secex Ordinance 491 of April 30, 2026). Groups that import cars, chocolate or dairy should plan registrations early in each quota period instead of finding out at clearance that the volume is gone.

The intercompany question: who keeps the saving?

When a European parent sells to its Brazilian subsidiary, a lower duty changes the landed cost in Brazil, but the agreement says nothing about how the benefit is shared inside the group. That is a pricing decision, and it has to be consistent across three places:

• Transfer pricing. Since 2024, Brazil applies the arm’s length principle under Law 14,596/2023. Lower duties can shift the margins of the Brazilian distributor or manufacturer, which affects its benchmarking. Our transfer pricing guide explains the rules.
• Customs value. The duty is charged on the customs value. A price change made for transfer pricing reasons also changes the import tax base, so align both stories.
• Sourcing. A component bought from Asia and shipped through Europe will rarely qualify as EU-originating. Groups that supply Brazil from several regions should test whether moving some volume to EU plants pays off over the 10-year path.

If your Brazilian subsidiary exports to Europe

The agreement works both ways. Brazilian exports to the EU get duty cuts too, and the EU removes duties on industrial goods over ten years. During the transition, Brazilian authorized entities can issue certificates of origin (Secex Ordinance 249/2023, Annex VI). Exports of products under EU quotas, such as beef, poultry, sugar, ethanol or honey, also need an official quota certificate issued through the single-window portal (Secex Ordinance 492/2026). EU sanitary and phytosanitary standards remain unchanged.

Public procurement and services

Brazil opened procurement at federal and sub-central levels, with exceptions, and EU suppliers established locally receive national treatment once they meet the establishment criteria. Mercosur also made commitments in services, including financial services, telecommunications and e-commerce, and on the temporary entry of intra-corporate transferees. For a European group already incorporated in Brazil, this mainly widens the tenders the subsidiary can bid for. Check the exceptions in the procurement chapter before assuming a specific entity is covered.

A short checklist for the next 30 days

1. List the NCM codes the subsidiary imports from the EU and compare each with Brazil’s base rate in Appendix 2-A-2, using the Siscomex “Preferências Tarifárias” search.
2. Confirm with each EU supplier, including the parent, that the product meets the origin rule and that their statement on origin follows Annex 3-C (and that they hold REX or approved exporter status where required).
3. Review imports cleared since late April at the full rate and claim the preference for eligible goods in transit before the six-month window closes.
4. Recalculate landed cost with the lower duty and its effect on IPI and ICMS, and update budgets and price lists.
5. Decide how the savings are shared inside the group, and document it consistently for transfer pricing and customs value.
6. Build the origin file: invoices with statements, supplier confirmations and calculations, kept for at least three years.

How Solidy can help

We recalculate the landed cost of EU imports with the new rates and their effect on IPI, ICMS and the 2027 transition, review intercompany pricing against transfer pricing and customs value, and organize the tax support documents the subsidiary needs to keep. Solidy already serves subsidiaries of multinational companies in Brazil. Talk to Our Brazil Tax Specialists.