Brazil: Brazil’s top court to rule on beverage control system

Brazil’s Supreme Court has scheduled a hearing on the discontinuation of the Beverage Production Control System (SICOBE) for October 17th. The justices will deliver, in a virtual plenary session, their opinions on the decision of Justice Cristiano Zanin, the rapporteur of the case, which suspended the system’s reinstatement in April 2025, Valor International reported on October 10.

In the virtual session, the justices only deliver their opinions and there is no debate. The hearing begins at 11:00 am with the reporting justice’s vote and ends at 11:59 pm on October 24th.

SICOBE was used by beverage companies to record the quantity of beer, soft drinks, and bottled water produced, as well as identify the brand and type of product manufactured. It was supervised by the Federal Revenue Service but operated by a private company.

The system was discontinued in 2016 because it was considered costly and outdated, but it was reactivated by a decision of the Federal Court of Accounts (TCU), a public spending watchdog unrelated to Brazil’s judiciary branch. Justice Zanin later overturned TCU’s decision.

The resumption of the trial comes amid the ongoing crisis involving methanol contamination in distilled alcoholic beverages. The trial, however, will only address the tax issue.

In suspending TCU’s decision, Mr. Zanin accepted the arguments of the federal government, the plaintiff in the lawsuit, that there were “difficulties in effectively monitoring the sector,” which caused “damages to the public treasury.”

To resume the system operation, the TCU argued that the discontinuation could only occur by enacting a specific law on the matter, not at the discretion of the Federal Revenue. According to Justice Zanin, however, Decree 8442/2015 is explicit about the possibility of the agency dispensing with the use of “production measurement equipment” in the event of “technical unfeasibility” of the system.

Justice Zanin also noted that the system’s reinstatement would imply the resumption of the tax benefit for presumed tax credits, with a waiver of approximately R$1.8 billion per year, without the impact being considered in the Annual Budget Bill. This could violate Fiscal Responsibility Act.

The trial, therefore, will not address the quality of alcoholic beverages and is limited to the operation of the old system, which monitored the payment of taxes on non-distilled beverages (beer, soft drinks, and water).

In a statement issued on September 29, the Federal Revenue clarified that “the correlation made by the Brazilian Association for Combating Counterfeiting (ABCF) between the criminal addition of methanol to distilled beverages made available to consumers and the shutdown of the monitoring system known as SICOBE is false.”

According to the Federal Revenue, quality control of distilled beverages such as vodka, gin, and whiskey is achieved through the use of seals, which “are not related to, nor should they be confused with, SICOBE.” The system primarily controlled soft drinks and beers.

“SICOBE was a system used by the Federal Revenue that tracked, through machines installed in factories, the exact quantity of beer, soft drinks, and water produced,” the agency said in the statement.