Cocoa drawback window increases, reigniting industry clash

The lapse has reignited the dispute between cocoa producers and processors, much as the decree’s issuance did back in March 2026—except this time the positions have flipped: cocoa growers are criticizing the change, while processors argue the longer window is preferable. The drawback regime allows for the suspension, reduction, or exemption of taxes on imported inputs used to manufacture goods for export.

Under the rule that preceded the decree, and that has now been restored, processors have two years to import raw cocoa, process it and export the finished product in order to qualify for the tax benefit. The decree had cut that window to six months, sharply narrowing processors’ timeframe to complete the operation.

Fausto Pinheiro, president of Bahia’s Cocoa Industry Chamber, said cocoa grinders may use the change to ramp up imports. “It’s in the industry’s interest to buy large volumes from a single source, because that dilutes freight and fixed costs,” he said.

He added that the longer window also gives processors more leverage over domestic cocoa bean prices. “They know when the domestic harvest will happen, they calculate the best time to import, and by the time the imported product arrives, they’ve already built up substantial inventories,” he said.

For Anna Paula Losi, executive president of the National Association of Cocoa Processing Industries (AIPC), the decree’s expiration is a welcome development. She said the measure had upended a trade policy that had been in place for more than 60 years, with no evidence the change would actually work.

“It could have produced exactly the opposite of its intended effect, by reducing demand for Brazilian cocoa and lowering producers’ income,” she said. “We need to encourage domestic processing so that we can increasingly meet domestic demand while also growing exports.”

Producers and processors do seem to agree on one point: the issue should be worked out through dialogue involving both sides and the government. “If we don’t address this and come to the negotiating table, we risk ending up subordinate,” Pinheiro said. “We hope future discussions will be grounded in evidence and dialogue among everyone in the supply chain,” Losi added.

According to the AIPC, cocoa bean imports were “substantially reduced” in the first half of 2026, totaling 18,100 tonnes—the lowest volume in the recent data series and 57.1% below the same period in 2025.

Losi dismissed any link between that decline and the temporary change to the drawback rules, attributing it instead to softer demand for cocoa products and greater domestic availability of raw cocoa.

“The volumes imported during this period were contracted before the new rules took effect, and on top of that, there were no imports at all in the second quarter. Any impact from the new drawback rules can only be assessed in the coming months,” she explained.

Domestic cocoa bean receipts totaled 95,108 tonnes in the first half of 2026, up 63.4% from the same period in 2025 and nearly back to 2023 levels, before the supply crisis. The association attributes the increase mainly to the recovery of Brazil’s cocoa production.

Even so, that production rebound hasn’t translated into a meaningful pickup in industrial activity. Cocoa grinding totaled 101,426 tonnes in the first half of 2026, up 3.6% from the first six months of 2025, but still 19.8% below the volume recorded between January and June 2023.