V. MARKETING U.S. PRODUCTS AND SERVICES Distribution and sales channels The normal sales process used by U.S. companies is the agent distributor. Principal-agent relations are basically governed by the Civil and Commercial Codes. No special legislation has been enacted to regulate the termination of agency agreements. When the representative is a naturalized person the agency may be regulated by Law 11,544 of 1929, as amended. In particular, Law 14,546 of 1958 extends Labor Law benefits to business agents. The parties may not elect foreign laws to govern the agreement. If a contract is executed abroad to avoid Argentine law, it will not be enforced by Argentine courts. The Civil and Commercial Codes permit a principal to terminate an agency agreement at his discretion. However, the terminating party may be liable for damages resulting from a wrongful termination. All agreements, whether for a definite or undefined term should include a notice of termination clause. Labor laws similarly require the service of a termination notice some time prior to the actual termination date; otherwise, the principal may be liable to the employee for earnings that would be accrued during the notification period. In all termination cases, except for those based on a just cause, the agent is entitled to one month's compensation for each year of service, payable in a lump sum. FRANCHISING Franchise contracts are protected under the Argentine Commercial Code. Service, commercial trade market/name, know-how, and shared production elements are covered by contractual obligations on both franchisor and franchisee. Elements of the contract include the license, methods/systems or know-how transferred to franchisee, the supply of needed inputs, methods of sales, and quality standards, and ultimate control by franchisor of the contract elements. Franchises have been successfully used in Argentina, but obligations of the franchisor must be clearly delineated in the contract to avoid legal obligations associated to the operator, in case of default, bankruptcy, etc. Argentine law is somewhat unclear about franchisor obligations in case of bankruptcy or other commercial failings. Legal advice should be sought prior to contract signing. LICENSING ARRANGEMENTS Transfers of know-how from a foreign individual or company to an Argentine individual or company and transfers of patents or trademarks are governed by Law 22,426. This law establishes two categories of transactions: those between related companies and those with third parties. Transfers of know-how between related companies are subject to prior government approval. Lack of approval does not invalidate these contracts, but any payments made on the contracts will not be allowable for tax purposes and will be subject to the 27% withholding tax. Transfers of know-how between non-related companies are required to be registered only for information purposes. "Joint Ventures" Argentine legislation permits the establishment of joint ventures. A contract must be signed and registered with the Commercial Registry. The contract must contain a number of specific clauses and must also provide for the appointment of a legal representative in charge of management. STEPS TO ESTABLISHING AN OFFICE Foreign companies may carry out any single transaction. To carry on a habitual activity, a foreign company must establish a branch (sucursal) in Argentina. An individual must be appointed as the company's legal representative. It is not necessary to assign capital to the branch. Structures Commonly Used by Foreign Investors Regardless of whether they are associated with local investors, foreign investors may do business in Argentina as individuals or through corporations, branches of foreign corporations, limited liability companies, limited partnerships, general partnerships and joint ventures. Foreign corporations often operate in Argentina through a separately incorporated subsidiary rather than through a branch, primarily to minimize their potential liability. If a branch is used, all of the foreign corporation's assets, not only its Argentine assets, may be subject to potential liability. In contrast, if an Argentine or foreign subsidiary is used, the foreign corporation's liability would generally be limited to the assets owned by that subsidiary. Registration Procedures Corporations are regulated by a law effective throughout Argentina. Corporations are set up with the approval of at least two legal or natural persons, whether Argentine or foreign. A corporation may not be a partner in a partnership. A corporation can usually be established within three to four weeks if capital is supplied only in cash. If supplied in kind, the corporation can be established within approximately two months. The estimated total incorporation cost ranges from US$ 1,000 to US$ 2,000, including statutory books and excluding both professional fees and stamp tax (1% of capital). A minimum of two founders, whether legal or natural persons, is required. There is no maximum limit on the number of founders. The founders of a company must report a domicile in Argentina for the purpose of related proceedings. A minimum of two shareholders is required. No maximum is prescribed. The minimum initial capital is US$ 12,000, except for those corporations engaged in banking, insurance or related activities. If the capital is supplied in cash, at least 25% must be paid in at incorporation, with the remainder payable in two years; if in kind, it must be fully paid in at incorporation. U.S. firms considering establishing in Argentina are encouraged to investigate the tax and legal aspects of establishment with legal counsel prior to making any final decisions. There are a number of good law firms in Argentina to assist a U.S. company; most have English-speaking lawyers and tax consultants. The following are a representative list, but by no means is this list complete nor is it a recommendation as to their quality and reputation. BRONS & SALAS Marcelo T. de Alvear 624, Piso 1 1058 Buenos Aires, Argentina Tel: (54-1) 311-9271/79 Fax: (54-1) 311-7025 Dr. Thomas Boywitt, Partner ESTUDIO ABELEDO GOTTHEIL Maipu 757 1006 Buenos Aires, Argentina Tel: (54-1) 322-4848, 322-4869 Fax: (54-1) 322-4848 Dr. Julio Gottheil, Partner ESTUDIO ALLENDE BREA Maipu 1300, Piso 10 1006 Buenos Aires, Argentina Tel: (54-1) 313-9191, 313-9292 Fax: (54-1) 312-5288, 313-9010 Dr. Teodosio Brea, Partner ESTUDIO MARVAL & O'FARRELL Carlos Pellegrini 885/887 1338 Buenos Aires, Argentina Tel: (54-1) 322-8336/8266 Fax: (54-1) 322-4122 Dr. Alfredo O'Farrell, Partner ACTIO S.A. Lavalle 648, Piso 2 1047 Buenos Aires Tel: 322-1975/1994 Dr. Rodolfo Anibal Gonzalez, President BAKER & MCKENZIE Av. Leandro N. Alem 1110 1001 Buenos Aires Tel: 311-5412/5427/6845 Dr. Horacio Soares ESTUDIO CURUTCHET - ODRIOZOLA Lavalle 1171, Piso 6 1354 Buenos Aires Tel: 35-2127/3344 Dr. Julio E. Curutchet ESTUDIO ERNESTO GALANTE ABOGADOS Cerrito 1136, Piso 3 (Frente) 1010 Buenos Aires Tel: 812-2610/2786/2719 Fax: 812-2752 Dr. Ernesto Galante, Owner ESTUDIO BECCAR VARELA Cerrito 740, Piso 16 1309 Buenos Aires Tel: 35-2053/5, Fax: 372-6619/6941 Dr. Horacio Beccar Varela, Director ESTUDIO BUNGE Y ASOCIADOS Av. Cordoba 991, Piso 6, "A" 1054 Buenos Aires Tel: 322-4468/4602 Fax: 322-0116 Dr. Juan Carlos Mac Donnell, Partner ESTUDIO CARIOLA SANZ Lavalle 437, Piso 6. "A" 1047 Buenos Aires Tel: 322-8654, 394-2438 Fax: 394-2438 Dr. Luis Jorge Cariola Sanz, Director ESTUDIO DR. HECTOR ALEGRIA Av. Santa Fe 1621, Piso 4,5,6 1060 Buenos Aires Tel: 814-0738/39/48 Fax: 812-6245 Dr. Pablo Andres Buey Fernandez, Partner GOYTIA Y CIA. Av. Leandro N. Alem 651, Piso 5 1001 Buenos Aires Tel: 311-4547/3673 Fax: 311-4286 Dr. Daniel Goytia GUILLERMO WALTER KLEIN San Martin 1155, Piso 5, "J" 1004 Buenos Aires Tel: 311-6626 Dr. Guillermo Walter Klein JEFF LANIER FRAZIER Esmeralda 933 1007 Buenos Aires Tel: 313-0788/9011, Int. 241 Fax: 313-1279 Dr. Jeff Lanier Frazier M. & M. BOMCHIL Suipacha 268, Piso 12 1355 Buenos Aires Tel: 328-8400 Fax: 326-7217 Dr. Maximo Bomchil ESTUDIO QUATTRINI, LAPRIDA Y ASOCIADOS Av. del Libertador 602, Piso 4 1001 Buenos Aires Tel: 814-5109/10/11 Fax: 814-1091 Dr. Sergio Quattrini, Partner ZAEFFERER TORO, FRETES & BLANCO 25 de Mayo 432, Piso 5 1002 Buenos Aires Tel: 311-6011/6019, 312-7413/7429 Fax: 313-7766 Dr. Guillermo Fretes ESTUDIO ZANG, MOCHON, BERGEL & VINES Florida 537, Piso 4 1005 Buenos Aires Tel: 322-3033/0338/7010 Fax: 322-6970 Dr. Saul Zang SELLING FACTORS/TECHNIQUES Argentine requirements/standards may have to be used; however, U.S., British, or similar requirements or standards may be acceptable. Follow importer's instructions. Standard Code: Argentina has signed (subject to ratification by Argentine legislative bodies) the "Standards Code" negotiated and accepted during the Tokyo Round of MTN negotiations under the GATT. For specific information regarding existing foreign agriculture standards and testing, packaging and certification systems, contact the Office of Food Safety and Technical Services, Foreign Agricultural Service, 14th and Independence Ave., Room 4951-S, Washington, D.C. 20250-1000, Tel: (202) 720-1301. For non-agricultural standards and their testing and certification systems, contact the National Center for Standards and Certification Information, National Institute of Standards and Certification Information, National Institute of Standards and Technology, TRF Building, Room A163, Gaithersburg, MD 20899. Tel: (301)975-4040. U.S. exporters can also find more information on foreign standards from the American National Standards Institute, 11 W. 42nd. St., New York, N.Y. 10036. Tel: (212)642- 4900. FOOD/HEALTH/SAFETY REGULATIONS Sanitary certificates, issued by a competent authority in the exporting country, must accompany all shipments of livestock; plants, bulbs, cuttings, rhizomes, roots, and tubers for propagation; and (unless accompanied by Certificates for Industrial Use Only signed by a State or Federal Inspector and visaed by an Argentine Consul) for grains and plant products, such as barley and peanuts; and for all seed, except coffee and cocoa for immediate roasting without hulls. FDA and other recognized U.S. Government certification standards are usually acceptable to the Argentine authorities. More information on inspection procedures may be obtained from the Animal and Plant Health Inspection Service (APHIS), U.S. Department of Agriculture, Hyattsville, MD 20782. Tel: (301) 436-8590 (Veterinary Services) and (301) 436-8537 (Plant Protection and Quarantine). APHIS inspects and certifies that live plants, plant products, and live animals conform with health and sanitation requirements for export as prescribed by the country destination. Also, contact the Food and Drug Administration, International Affairs Office, at (301)443-4480, Fax: (301) 443-0235. MARKING AND LABELING OF RETAIL PACKAGES The Argentine regulations governing the marking of the country of origin on domestic and imported products are based on law 11,275 of November 10, 1923, known as the Merchandise Marking Act, as amended and regulated by numerous subsequent decrees and special rulings, and as changed radically in 1937, when it was determined that imported goods should be inspected for country-of-origin marking while being cleared through the customs. The U.S. Department of Agriculture will review processed food product labels and ingredients to determine if they meet local requirements of the foreign country. Exporters should call or write: Export Products Review Program, Dept. of Agriculture, Foreign Agricultural Service, 14th. and Independence Ave., Room 4951-S, Washington, D.C. 20250-1000, Tel: (202)720-1301. SAMPLES AND ADVERTISING MATTER Samples brought into the Argentine Republic by the traveling representative are admitted free of duty, if they have no commercial value. If the samples have value, bond may be given for the amount of the duty which would be payable on such merchandise. Such bonds are for a period of ninety days. Upon re- exportation of dutiable samples covered by bond, the amount paid is refunded. The handling of samples under bond should be entrusted to a customshouse broker. Samples sent by parcel post or in other ways are treated the same as any other commercial shipment and have the same documentary requirements. Advertising matter is subject to duty when imported to Argentina. The services of customs broker are generally not necessary to clear shipments of samples, with or without value. This also applies to advertising matter received by parcel post from abroad and not requiring foreign exchange. However, Customs may charge storage fees. ADVERTISING AND TRADE PROMOTION Argentina has a number of advertising agencies and many management consultants, but only the largest firms offer complete services. The leading agencies are members of the Asociacion Argentina de Agencias de Publicidad (Argentine Association of Publicity Agencies). Many of the major U.S. advertising agencies have branches or affiliates among the leading agencies. Advertising in the print media is the most widely used method, although television and radio advertising are highly effective and most generally aimed at the Buenos Aires market. Many daily newspapers are published in greater Buenos Aires, including Clarin, La Nacion and Ambito Financiero. The public and private sectors operate radio and television stations. There are over 469 T.V. stations (with various levels of power output) now broadcasting in the provinces; 163 AM stations and 10 shortwave stations. In addition, 200 cable companies are operating throughout the country. CLARIN Tacuari 1842 1139 Capital Federal Tel: (54-1)307-0330/0340/0350 Fax: (54-1)307-0311 LA NACION Bouchard 557 1106 Capital Federal Argentina Tel: (54-1)313-1003/1453 Fax: (54-1)313-1277 AMBITO FINANCIERO Pje. Carabelas 241 1009 Capital Federal Argentina Tel: (54-1)331-5528/9/5561/63 Fax: (54-1)331-1404 LA RAZON Rio Cuarto 1242 1168 Capital Federal Argentina Tel: (54-1) 303-2297/2270/1 Fax: 303-1233 BUENOS AIRES HERALD Azopardo 455 1107 Capital Federal Argentina Tel: (54-1) 342-8476/77/78 Fax: (54-1 334-7917 LA PRENSA Azopardo 715 1107 Capital Federal Argentina Tel: (54-1) 349-1000/1033 Fax: (54-1) 349-1040 EL CRONISTA Honduras 5665 1414 Capital Federal Argentina Tel. & Fax: (54-1) 777-1717 Fax: 775-0531/774-1016 PROTECTING YOUR PRODUCTS FROM IPR INFRINGEMENT Argentina officially adheres to most treaties and international agreements on intellectual property protection and belongs to the World Intellectual Property Organization. However, USTR placed Argentina on its "priority watch list" in 1993 because of the lack of patent protection for pharmaceuticals. *Patents: Argentina's patent law, enacted in 1864, is the weakest component of the country's IPR regime. It specifically excludes pharmaceutical "compositions" from patent protection, costing U.S. drug firms hundreds of millions of dollars a year in sales lost to "pirates". Furthermore, the law contains stringent working requirements and allows a maximum patent term of only 15 years. The Menem Administration submitted a new draft patent law to Congress in 1991. The revised law improves patent protection and extends it to pharmaceuticals but, as of July 1994, the bill was still not acted on. Under Argentine law, patents of invention may be granted for a term of 5, 10 or 15 years by the Patent Office, according to merit of the invention and the wish of the applicant. Foreign patents may be ratified for a maximum of 10 years, but not to exceed the term of the original foreign patent registered by the Patent Office. *Copyrights: Argentina's present copyright law is adequate by international standards. Recent amendments provided protection to computer software and extended the term of protection for motion pictures from 30 to 50 years. As in many countries, however, copyright piracy has become a serious problem for U.S. industries. Losses to American companies are estimated to be $200 million per year. Important efforts are underway to combat piracy, including arrests, seizure of pirated material, and introduction of security stickers for cassettes. *Trademarks: Trademark laws and regulations in Argentina are generally good. The key problem is a slow registration process. The government has moved to rectify this, and the situation has improved recently. An action for cancellation may be brought on the grounds of 5 year non-use. Only an act of force majeure will excuse non-use. MARKET RESEARCH The number of market research firms in Argentina is growing. Many international accounting and management firms, including U.S. companies, have branches and affiliates in Argentina. These firms provide complete business services including tax work, and many will undertake market research projects as well. WEIGHTS AND MEASURES: METRIC SYSTEM Regulations based on Law 11,275 of November 10, 1923, require metric labeling for packaged products. ELECTRIC CURRENT A.C. 50 cycle, 220 volts, one phase; 380 volts, 50 cycles, three phase. GOVERNMENT PROCUREMENT There is no requirement for Government sourcing with Argentine companies. The "Buy Argentina" program was suspended through decree law 1224/89 of November 9, 1989. This was replaced by a 10 percent preference for domestic goods and services. The "Buy Argentina" program preference system were permanently eliminated in October 1991.