Volume 5, Number 5, Page 2

Brazil

Banks Must Pay Importers' Tab

but is the central bank's order legal?

by Levy & Salomão Advogados

Lawmakers have repeatedly made clear their intention to fine importers who fail to meet specified payment terms. But the Central Bank of Brazil may have stepped beyond the bounds of constitutionality in a recent move to collect the fines from banks dealing with the importers in question.

Provisional Measure No. 1569, reissued for the eighth time last Nov. 13 in Article 1, Sections I to IV, sets up a daily fine — called a financial charge — which applies to importers and must be paid to the central bank in the following cases:

• the importer closes the foreign exchange transaction after the maximum term determined by the central bank;
• the importer pays for imports in Brazilian currency when such imports should be paid in foreign currency;
• the importer makes delayed payment for imports licensed for payment in Brazilian currency;
• the importer fails to make payment for imports within 180 days after the first day of the month subsequent to that shown on the import declaration.

Article 1, Paragraph 3, of the same provisional measure requires that the bank selling the foreign currency (in the case of imports to be paid for in foreign currency) and the bank with which the Brazilian reales have been credited for payment of the import (in the case of imports to be paid for in Brazilian reales) are responsible for withholding the fine.

The central bank issued Circular Letter No. 2.753 last April 30, requiring that the fine in question is to be charged to the reserve account of the banks responsible for the foreign exchange transactions (Consolidation of Foreign Exchange Rules — CNC 6.15.8 and 6.15.9).

However, such charge against the banks’ reserve accounts is clearly illegal. An analysis of Provisional Measure No. 1569 reveals that the party who must pay the fine is the importer. Financial institutions are only responsible for withholding it on behalf of the central bank, and not for actually paying it. Only if the provisional measure had expressly established joint liability or substitution of one of the subjects by the other could the central bank make such a requirement.

The central bank’s circular letter is an administrative act which, as an instrument of mere execution of law, may not modify the law by eliminating or modifying rights instituted by law.

The circular letter in question is an attempt to take collection of the fine from the importer away from the procedural authority of the judicial branch. It lacks legitimacy not only because there is no express legal provision to sustain it, but also because the constitution expressly prohibits such unilateral expropriation of property from financial institutions (Art. 5, Section II: Principle of Legality; and Section LIV: Due Process of Law).

Moreover, the fine itself is illegal because Provisional Measure No. 1569 fails to state the sum to be paid. As a result, the amount of the fine is determined by an act of the central bank (Circular Letter No. 2.753) which, as was seen above, is bound by the law and cannot go beyond written provisions lest it violate the principle of legality and the constitutional principle of separation of powers.

Even if Provisional Measure No. 1569 had given authority to the central bank to levy the fine, the granting of legislative power to a part of the executive branch to establish the amount of the fine would be unconstitutional. The fine cannot be applied if the law has only authorized it without specifying the amount.

The law firm of Levy & Salomão Advogados is located in São Paulo, Brazil. Its practice areas include international banking, contracts, taxes, litigation and corporations.