VI. TRADE REGULATIONS AND STANDARDS Free trade, domestic and external is, since 1990, the Colombian's Government basic policy. Prior approval for import licensing was eliminated in 1991 and most goods may be freely imported and registered with the official Foreign Trade Institute (Incomex), except when required by customs regulations. With the exceptions of gasoline and a few other products and services, there are no price controls, they were eliminated in the period 1991-1992. The new Bureau of National Taxes and Customs (DIAN-Direcci n de Impuestos y Aduanas Nacionales) is to ensure that all imports and exports comply with legal regulations and proper documentation. The customs modifications and imports regulations issued in 1990s are intended to ensure the operation of free trade, except as regards a few activities that are still protected from foreign competition. The "DIAN" has announced the following measures to be implemented and or/reinforced: 1. A banking guarantee, covering the difference between importer's and custom's valuation of merchandise, will be an essential requirement for customs while the authorities started an investigation that could take up to eight months. In most cases, by the time the investigation is completed the merchandise could not be confiscated because it had already been sold or processed. 2. Merchandise Valuation. Special attention will be focused on: (a) Shipments coming from Panama, Netherland Antilles, Cayman Islands and other Caribbean countries; (b) large shipments of products not related to the importer's income of sales tax declarations. These imports will be subject to through inspection and valuation. 3. International Agreement. An agreement will be signed with the Caribbean Customs Association to exchange imports' documentation and data to compare prices and detect under-invoicing. 4. Reference Prices. Anti-dumping reference prices, based on international quotations, will be established for textiles and some agricultural products. 5. Exchange Rate Difference. In accordance with resolution 21, issued by the Central Bank, all international trade operations will be paid for through financial institutions. The related documents must state the exchange rate used for the operation. Cash transactions are not allowed. 6. Air Cargo Controls. An agreement will be signed with the civil aeronautics authority to obtain two hours advance notice on cargo flights and possible detours and landing time, to facilitate surveillance to be provided by the police and the "Departamento Administrativo de Seguridad - DAS". TARIFF AND IMPORT TAXES Since 1991 Colombia's has drastically lowered and simplified the import tariffs. Import duties are quoted ad valorem on the CIF value of shipments. All duties have been consolidated into four tariff levels: 1. 0 to 5 percent for primary goods, raw materials, intermediate and capital goods not produced in Colombia. 2. 10 to 15 percent for goods in the above categories but with domestic production registered in Colombia. A 10 percent duty is applicable to most used and rebuilt machinery. 3. 20 percent for finished consumer goods. There are some exemption to these general rules, such as import duties for automotive vehicles which remain at 35 and 40 percent levels. Tariff reduction program was largely completed in 1992, lowering tariffs to a trade-weighted average of 11.57 percent, including duty free entry for roughly 40 percent of tariff items. Most non-agricultural products are also subject to a 14 percent value added tax, 20 and 35 percent for motor vehicles and 45 percent for privately-owned aerodynes. Customs laws and import regulations allow preferential treatment for imports of equipment, materials, tools and accessories that are to be used by the oil, mining, and automobile industries. There are also preferential duty rates and regulations as a result of international agreements with the Andean Common Market (The External Common Tariff Code was finally approved in May of 1994), the Caribbean Common Market, and the Central American Common Market. Payments of invisible imports such as acquisition of technology must also be registered with Incomex. Most of the importation formalities have been eliminated, and imports registration is virtually automatic for 97 percent of the categories in the Customs Code. CUSTOMS VALUATION Valuation of imported merchandise, previously performed only by customs officials, is now being conducted in many cases directly by the importers - who self-value and pay tariff clearance duties and other taxes at commercial banks. Customs clearance can be completed in a matter of hours rather than months, as was the case under the previous system. Customs officials are responsible for inspecting merchandise to verify if description and classification are consistent with the importer's declaration. A customs inspection group has been trained to perform after clearance random investigations to detect fraud, foreign exchange irregularities or tax evasion. A carrier initiative program is also being implemented for major customs brokers who can now have a Customs network workstation at their offices and complete most clearance procedures at their own desks, before picking up the merchandise at the port of entry. IMPORT LICENSES Imports must be registered with INCOMEX in the form of a specific application named "Registro de Importacion". It is important to note that the prohibited import list has been eliminated, except for used autos, tires, used clothes and textile articles, but the prior license regime still exist and the following imports are subject to the prior approval of the Imports Committee: 1. Import made by government agencies and entities. 2. Imports of used goods not covered by a 1991 resolution of the Directive Council for Foreign Trade. 3. Imports of merchandise that, although deregulated, have a non- reimbursable character. There are certain chemical products whose import may be authorized only when intended for the military industry (INDUMIL); on the other hand, firearms are classified in the prohibited imports regime. Payment for imports must be made through authorized exchange intermediaries and related document must be attached to the documents supporting the foreign exchange operation (import, foreign investment, incurrence of external public or private indebtedness). Foreign exchange licenses are no longer required. EXPORT CONTROLS In general, the export of goods and services is free in Colombia. However, a prior favorable concept (Resolution 14, 1991) is required for the approval of export registration of eight customs positions in the agricultural and animal husbandry sector. No exports are authorized if they form part of the artistic, historical and archeological heritage of the nation. The Special Administrative Unit of the DIAN controls the exit of goods from the Colombian territory. Exports must be registered at Incomex. Reexports are subject to same regulations applicable to exports. IMPORT DOCUMENTATION 1. Import Licenses. An import license approval is required only for goods subject to prior Incomex approval. 2. Import Registration. In general, all imports must be registered at Incomex in the form of an application for which there is a fee of Col.$ 12,000 (US$ 15). The registration is valid for terms of 3, 6 or 12 months, which means that an import may be completed within that period of time. Extensions, additions or modifications may be requested by filling out additional forms. The registration form must include information on the importer, exporter, manufacturer, carrier, country of origin, port of origin and destination, amount imported and number of units, single and global prices, sales and payment terms, bulk and net weight and description of the merchandise. 3. Import Declaration. An import declaration, written or in magnetic media, must be submitted to the DIAN Special Administrative Unit of the Bureau of National Taxes and Customs, containing the same information included in the import registration form but adding the customs clearance data. EXPORTS DOCUMENTATION The export registration form includes information very similar to that required in the import procedures such as: exporter, importer, carrier, country of destination, port of origin and destination, amount exported and number of units, single and global prices, sales and payment terms, bulk and net weight and description of the merchandise. Certificate of origin and phytosanitary certificate (if appropriate), pro-forma invoice and certificate of free sale are also required. TEMPORARY ENTRY Non-fungible merchandise that can be thoroughly identified by marks, serial numbers, or other signals can be temporarily brought into the National territory for specific purposes. The merchandise must be re- exported immediately after the pre-authorized period of time, without being subject to any alteration or modification, except for the normal deterioration caused by use. There are two categories for temporary imports. The DIAN decides as to which of the two systems has to be applied to a specific case: Short Term: Allows the importation of merchandise for a specific purpose during a period of time that should not exceed six months;, one three-month extension can be requested and approval must be obtained before expiration of the initial authorization. Long Term: Are approved for a maximum and non-extendable period of five years. Under this regime, the government allows importation of machinery and equipment as well as related accessories and spare parts if they are included in the same and only shipment. This system is applied to equipment to be used in public works projects and other activities that are important for national economic and social development. Long term temporary imports are also approved for machinery and equipment brought into the country under leasing contracts within a term of six months to five years. Customs declaration for temporary imports must include U.S. dollar calculation of duties and taxes in accordance with the tariff schedule effective on the submission date. The total amount must be divided in equal quotas to be paid semi-annually, during the temporary import period. LABELING, MARKING REQUIREMENTS Specific marks or labels are not required except for food and pharmaceutical products. Labels on food products must indicate: specific name of the product, ingredients in order of predominance, name and address of manufacturer, and number of units. No label or illustration may be inaccurate or misleading in any way. Labels on pharmaceutical products must indicate in Spanish: "for sale under medical, dental or veterinary prescription", generic name, commercial name, net weight or volume, weight or quantity of active ingredients; license number and lot control number. For those products having limited shelf life, the date of expiration should be included. Insecticides and other toxic products should prominently display the skull and crossbones, the word "poison" in Spanish and information regarding usage and antidotes. Products for which there are no antidotes cannot be licensed and can be used in programs under the direct control of public health authorities. STANDARDS The Colombian Foreign Trade Institute (INCOMEX) does not require specific technical standards for any products. However, specifications established by the Colombian Institute of Technical Standards (ICONTEC) apply to Colombian Government imports made pursuant international bids. The Colombian Import Code states a preference, but not a requirement, for metric description of imports. FREE TRADE ZONES Free-trade zones (zonas francas) were created in Colombia in 1958 with the establishment of the Barranquilla Free Industrial and Trading Zone. They are industrial free zones for goods and services, technological free zones for technological services, and tourist free zones for the promotion of tourism. Free-trade zones have a special regulations regarding customs, capital investment, and enjoy certain tax benefits. For duty purposes such goods are deemed to be outside customs territory. Free-trade zones, which were previously privatized exist at present in the following locations. 1. Barranquilla, the main port on the Atlantic. 2. Palmaseca, close to the international airport of Cali in the southwestern section of the country. 3. Buenaventura, the main port of the Pacific. 4. C cuta, in the northeastern section of the country on the border with Venezuela. 5. Cartagena, an important port on the Atlantic. 6. Santa Marta, another important port on the Atlantic. 7. International Fair premises in Bogot (on a temporary basis). 8. Urab , on the northern border of the Department of Antioquia, close to the Atlantic. 9. Rionegro, near Medellin, the capital of the Department of Antioquia.