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### Viewing cable 04BRASILIA2162, BRAZIL: PIRACY CPI'S FIFTH IPR BILL

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
04BRASILIA2162 | 2004-08-27 18:06 | 2011-07-11 00:00 | UNCLASSIFIED | Embassy Brasilia

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 03 BRASILIA 002162

    SIPDIS

    STATE FOR WHA/BSC, EB/TPP/MTA/IPC SWILSON, AND CA/VO
    STATE PASS TO USTR FOR SCRONIN, LYANG AND BPECK
    USDOC FOR
    4322/ITA/MAC/WH/OLAC/WBASTIAN/JANDERSEN/DMCDO UGALL/DRISCOLL
    USDOC FOR 3134/USFCS/OIO/EOLSON/DDEVITO
    TREASURY FOR OASIA/SEGAL
    NCS FOR DEMPSEY

    E.O. 12958: N/A
    TAGS: KIPR ETRD KCRM PGOV ECON BR IPR
    SUBJECT: BRAZIL: PIRACY CPI'S FIFTH IPR BILL

    REFS: A) BRASILIA 2150 B) BRASILIA 2017 C) BRASILIA 1668

    ¶1.  This is the final cable in a series of five on
    legislation put forward on July 16, 2004 by Deputies
    belonging to the Congressional Investigative Commission on
    Piracy (reftels).  Below is Embassy's unofficial
    translation of the text of the fifth bill.

    ¶2. Bill 3968/2004
      (of the Piracy CPI)

    Regulates the installation of a System of Flow Measurement
    (SMV) in industrial beverage establishments and provides
    other provisions.

    The National Congress decrees:

    Art. 1 - This law determines the installation of equipment
    to measure flow and conductivity and equipment to control,
    register and mark the quantities measured in the industrial
    establishments of beverages, alcoholic beverages and
    vinegars classified in position 2202 and 2203 of the Table
    of Incidence of Tax on Industrialized Products (TIPI),
    according to regulation.

    Art. 2 - The System of Flow Measurement (SMV) should be
    installed by industrial establishments covered under this
    law on each filler, understood as the equipment utilized to
    fill the barrels in which the beverage is conditioned for
    final sale to the consumer.

    Sole paragraph.  The system described in the caput should
    continuously measure the flow, electric conductivity and
    temperature of the liquids that feed each filler and flow
    through the tubing to which it is associated, without
    interfering with the regular process of beverage
    manufacture.

    Art. 3 - This law applies to all industrial beverage
    establishments subject to the IPI tax regulations according
    to current legislation, except those whose installed annual
    production capacity is less than five million liters,
    computing capacities of respective branches, associated
    companies, partners, controlled and controllers.

    Art. 4 - These industrial establishments have twelve months
    from the publication of this law to install said equipment
    and equipment for flow control.

    Art. 5 - The States, Federal District and Municipalities
    can make an agreement with the Union to operate together
    with the Union in the establishment of criteria and
    installation procedures, inspection and control of the Flow
    System.

    Art. 6 - This law goes into effect on the date of its
    publication.

    JUSTIFICATION

    During public meetings, one of the measures adopted by the
    Federal Government in 2001 to inhibit counterfeiting and
    tax evasion was mentioned, a project for installing flow
    measurement by manufacturers of beer and soft drinks,
    established by Federal Revenue, based on Provisional
    Measure no. 2.158-35 of August 24, 2001.

    On May 3, 2004, through Of. No. 689/2004, the Presidency of
    CPI requested information about the status of the project
    in question.

    In response to our request, SRF sent us a note with the
    following clarifications:

    (...)

    ¶2. The requirement for the installation of Flow Measurers
    by manufacturers of beer and soft drinks was established by
    art. 36da Provisional Measure no. 2.158-35 of August 24,
    2001, regulated by SRF through Normative Instruction SRF
    no. 265, of December 20, 2002 that attributed to the
    General Coordination of Inspection (Cofis) the
    responsibility for establishing:
    a) conditions of operation, as well as technical
    characteristics and equipment safety;
    b) procedures for ratification and licensing of equipment
    and respective manufacturers of same;
    c) minimum limits of production or invoicing, starting at
    which the installation of equipment becomes mandatory;
    ¶3. SRF, with the purpose of initiating the process of
    implantation in the sector of beer manufacture, signed
    several technical cooperation agreements with the National
    Union of the Beer Industry (SINDICERV), as well as States
    of the Federation, such as Bahia, Pernambuco, Ceara, Para,
    Sao Paulo, Rio de Janeiro, Minas Gerais and Parana, for the
    specification and installation of flow meters; in addition
    to the objective previously mentioned, also promotes the
    interchange of information and interchange of mutual
    assistance in the supervision of tax compliance, which will
    permit significantly greater control of this segment of
    fiscal interest.

    ¶4. The General Coordination of Inspection, with reference
    to above-mentioned items "a" and "c", then edited the
    Executive Declarative Act Cofis no. 20, of October 1, 2003,
    undertaking the specification of requirements for the
    System of Flow Measure to be installed in the beer
    industry.

    ¶5. The System of Flow Measurement will be composed of flow
    measuring equipment, conduction meters as well as equipment
    for the control, recording, marking and remote transmission
    of the quantities measured to SRF.  The System of Flow
    Measurement should continuously monitor production of
    fluids in the industrial establishments where it is
    installed, with the following functions:

    - measurement of flow (that is volume by unit and time);
    - measurement of electric conductivity and temperature of
    the liquids that feed each filler;
    - record measurements obtained from the flow, conductivity
    and temperature and make this information available for use
    by the Secretary of Federal Revenue;
    - remote communication with systems at the Secretary of
    Federal Revenue, for the transfer of recorded information.

    ¶6. The measurement of electrical conductivity and
    temperature will allow, under certain conditions, the
    differentiation between types of liquids that feed a
    filler.  The flow measurements supplied by SMV will allow
    an estimate to be made of the volume of fluids produced, in
    a specific period of time, at an industrial establishment.

    ¶7. The System of Flow Measurement for the beer industry, is
    in a phase of validation of norms and procedures related to
    the installation, verification of conformity and
    registration of the system to be established by an
    Executive Declarative Act by Cofis.  After publication of
    said act, the first equipment should be installed in a
    maximum of three months, and expectations are to install it
    on all beer production lines nationwide within six months,
    counted from the first equipment registered by SRF.

    ¶8. With reference to the soft drink industry, an agreement
    was signed on April 27, 2004 between SRF and the Brazilian
    Association of Soft Drink Industry (ABIR) for the
    implementation of a System of Flow Measurement for the
    sector.  The expectation is that there will be a reduced
    time frame for this segment due to the similarity in
    equipment and their requirements (...)
    According to the information received from SRF, it is felt
    that the project of installation of flow meters, short and
    medium term, is the solution for the control of
    counterfeiting of drinks and consequent tax evasion.

    It is also felt, however, that specific legislation
    currently in force, needs refinement with regard to
    definition of capacity and responsibilities for the
    improvement of control of the Flow Measurement System.

    Therefore, CPI debated presenting the bill mandating
    installation of flow measurement equipment in industrial
    establishments of beverages classified under TIPI, except
    those whose annual installed production capacity is less
    than five million liters, when computing the capacity of
    respective branches, associated companies, partners,
    controlled and controllers.

    The project also determined that Federal Revenue, INMETRO
    and ANVISA, within the scope of their power, define the
    flow parameters, electric conductivity, liquid temperature
    and interference caused by the flow system in the process
    of drink manufacture.

    Since this is precision equipment that requires investment
    by the industries, it will be convenient to allow a period
    of 12 months from publication of the law so that industry
    and public entities have time to make adjustments necessary
    to install the Flow System.

    In the end, the efficiency of the Flow System should be
    achieved with the joint efforts of the Union, States, DF
    and municipalities in the elaboration of procedures for
    installation, inspection and control of the Flow System,
    which is why the proposal anticipates an agreement between
    the Union and the rest of the entities.

    We are convinced that this proposal will make possible not
    just the fight against counterfeiting and evasion, but will
    permit better conditions for Brazil's participation in the
    highly competitive and global market that is today's
    beverage market.

    Sessions Room July 16, 2004

    Deputy Medeiros, President
    Deputy Josias Quintal, Reporter

    End unofficial Embassy translation.

    Danilovich

`