ASUTIL ‘confident’ of solution to restrictive Mercosur ruling

By Andrew Pentol |

New-Donagaray-lead

José Luis Donagaray, Secretary General, ASUTIL.

South American travel retail trade association ASUTIL believes the coming weeks will be crucial as it tackles the exclusion of traditional core duty free products following a resolution permitting land border duty free shops among Mercosur block countries.

This week, ASUTIL is expecting to have formal meetings with the Uruguayan and Brazilian governments in the hope of finding a solution. These two countries are deemed the main priorities because duty free sales have been taking place on the Uruguayan border for many years and the first Brazilian border duty free stores are scheduled to open by the end of March.

As reported, an agreement to harmonise regulations for border duty free stores to begin operating in countries subscribing to the Southern Common Market regional integration union took place on 16 December 2018.

The Mercosur resolution is due to be incorporated into state parties’ legal systems by 1 April, but this could be delayed, according to ASUTIL.

NO PRIOR CONSULTATION

While ASUTIL welcomes the resolution (Mercosur/GMC/Res. No. 64/18) in principle, this was agreed without consulting representatives of the region’s travel retail sector.

To make matters worse, the resolution also defines various merchandise excluded from the land border duty free and tax free stores regime.

This includes tobacco products and cigarettes; fabrics, yarns and footwear (except running shoes and flip-flops); and basic consumer basket items (including animal-based products, vegetable-based products, and warehouse goods).

It also precludes the sale of transportation parts (including oils and fuels); civil construction supplies (including electrical, hydraulic and sanitary materials); tyres; large appliances; and weapons and ammunition.

Speaking during a recent ASUTIL webinar, Secretary General José Luis Donagaray said the resolution had positive and negative points. He commented:  “The positive element is that there is recognition of the importance of duty free on the border and its impact on regional economies.

Mercosur_facade

The Mercosur headquarters in Montevideo, Uruguay. Source: Mercosur.

“The negative, is the restriction on sales of certain products which sets a bad precedent.”

While the aforementioned restrictions represent a significant problem, Donagaray is confident of a positive outcome. “We expect to be able to turn things our way in terms of the restrictions and want to continue selling what we have been in the shops.

“We have agreed not to sell the basic basket products and are working hard on this issue with all the different governments.”

Pressed on what the ideal eventual scenario would be, Donagaray reiterated: “It would be to continue selling, with a list of basic basket items which cannot be sold. We do not want to be IKEA. We have agreed not to sell certain products in duty free, but want to be be able to sell cigarettes and electronics etc.”

Brazil-Border-1

The first Brazilian land border duty free shop is expected to open in Uruguayan at the end of March.

TOBACCO ISSUE

The issue of tobacco, however, may well pose difficulties. He explained: “This will be the most difficult issue, but we have some good examples of solutions that exist in Uruguay. Liquor and tobacco products, for example, have a special taxation in duty free.”

Regarding the possible implementation of Mercosur legislation beyond Uruguay and Brazil and in countries such as Paraguay and Argentina, Donagaray says this will not happen for the foreseeable future. “The main aim is to affect the legislation in Uruguay and Brazil. At present, only Uruguay and Brazil have the border store duty free regime.

“Other border stores may eventually be rolled-out across the Mercosur, but internal legislation must first be passed in the relevant countries. It is unlikely anything will happen for one or two years.”

Offering an update on the Brazilian border store situation, Donagary confirms no stores have opened and that the first outlet is expected in Uruguayiana at the end of March. “A small store might also open after in Rio Branco, but the key cities with the big players will be Uruguayiana, Livramento and Foz do Iguaçu.”

See the March issue of TRBusiness for an update on the LATAM duty free landscape and preparations for the upcoming Summit of the Americas.

 

 

 

 

 

 

 

 

Middle East

JEDCO launches multi-category tenders at KAIA T1

Jeddah Airports Company (JEDCO KSA) has issued a request for proposals for several...

International

TR Consumer Forum 2024: Ticket sales now open

TRBusiness is thrilled to announce that you can now book your tickets to the TR Consumer Forum...

International

Alcohol insights: Conversion up, spend down in Q4

Conversion of visitors in the alcohol category in duty free has risen to 54% in Q4 2023,...

image description

In the Magazine

TRBusiness Magazine is free to access. Read the latest issue now.

E-mail this link to a friend