VI. TRADE REGULATIONS AND STANDARDS A. Tariffs and Import Taxes Average import duties have been cut from 50 to 13 percent and should fall to 8 percent with implementation of the GATT Uruguay Round Agreement. Some 87 percent of Hungary's tariffs are "bound" to the GATT tariff schedule, meaning Hungary is obliged to refrain from raising tariffs above the agreed ceiling rates. Besides duties, there are other charges applied to imported products: a 2 percent customs clearance fee and a 3 percent statistical fee. If the product requires an import licensing, a 1 percent licensing fee is assessed. B. Customs Valuation Hungary is a signatory to the Agreement on Implementation of Article VII of the GATT. This agreement stipulates that the primary basis for customs valuation is "transaction value" as defined in Article 1. C. Import Licenses An estimated 90 percent of imported products no longer require an import license. Import licenses are still required for some consumer goods (those subject to quota) and products which are typically controlled in the United States and other Western countries such as arms/ammunition, military equipment, hazardous materials, materials for biological weapons, psychotropic products, nuclear products, uranium ore, are similarly controlled in Hungary. D. Export Controls In May 1992, Hungary was removed from COCOM's list of proscribed countries. Most technology can flow to Hungary without export licenses. However, some equipment (e.g., dual-use technology) still requires export licenses from the Bureau of Export Administration (U.S. Department of Commerce) and Department of State. E. Import/Export Documentation All importers and exporters must file a VAM 91 document which can be obtained from the Hungarian Customs. Essentially, this document serves as a declaration for the type and number of goods being imported or exported. This document must contain the Product Code Number which identifies the classification of the goods. The Product Code Number can be obtained from the Central Statistical Office. Upon the importation of goods, the importer must present certification documents from the Commercial Quality Control Institute (KERMI); goods cannot be custom-cleared without the KERMI permits. With reference to certain products, the KERMI permit may be substituted by documentation from other testing and certification agencies such as the National Institute for Drugs and the Quality Control Office of the Building Industry. For additional information on testing and certification, see Section VI, I, Standards. Finally, those products whose trade is still controlled by the government require the appropriate license from the Ministry of Industry & Trade. F. Temporary Entry Products may be brought into Hungary on a temporary basis for exhibition in trade fairs or to use as samples. Business people should obtain a carnet from their Chamber of Commerce (the carnet is good for 1 year). The carnet lists the products and provides duty-free entry. Upon entry in Hungary, the carnet must be presented to the Hungarian Customs. The Customs will stamp the carnet thereby validating it. Upon departure from Hungary, the carnet must be stamp thereby confirming that the goods have been taken out of Hungary. Goods -- typically materials or parts/accessories -- which are brought into Hungary for re-export after additional processing may enter duty- free. The Hungarian company demonstrated that it has a contract with a foreign company that commissions the work. The Customs will issue a temporary import permit. In some cases, Customs may request a deposit for customs duties. There are procedures for duty refunds on re- exports but these can be complicated. G. Labeling and Marking Requirements Law IV (1988) on food the implementing decree Number 10/1988 MEM- SZEM established rules for marking and labelling food products. The rules apply to both domestic and imported products. The primary requirement is that labelling information must be in Hungarian. The label must give the following information: net quantity, name/address of producer (or importer), consumption expiration date, recommended storage temperature, listing of ingredients/additives, energy content and approval symbols from the National Institute of Food Hygiene and Nutrition (OETI) and the Commercial Quality Testing Institute (KERMI). Cosmetics should indicate: product denomination, function, handling (precautionary) instructions, production date, utilization expiration date, quantity of product, producer/importer information. There are specific marking and labelling requirements for human and animal pharmaceuticals. H. Prohibited Imports Hungary does not prohibit the importation of any products. I. Standards Decree 78/1988 (XI.16) MT sets forth the legal requirements with respect to standardization and product quality. The Hungarian Standardization Office (HSO) is charged with overseeing the standards system. In turn, oversight of HSO is executed by the national Committee for Technology Development. HSO provides the technical background for drafting standards and related rules of law. There are currently 2 types of standards: national and sectoral. National standards are issued by the HSO. These standards are binding and supersede sectoral standards. Sectoral standards are issued by individual ministries and other central government agencies. National standards conform to international norms. Hungary is a signatory to the GATT Agreement on Technical Barriers to Trade (Standards Code). Hungary is also a participant in the International Organization for Standardization (ISO) and the International Electro- technical Commission (IEC). Quality control is integral to ensuring products' conformity to required standards in addition to protecting consumers. New consumer goods are subject to an approval process implemented by the Commercial Quality Control Institute (KERMI). The Hungarian Electro-technical Control Institute (MEEI) controls electronic/technical goods; approval is based on compliance with Hungary's standards on protection against electric shock. In order to import or market these highlighted products, the products must be submitted to these control institutes for a process of testing and certification. Without the certificates, imported products will not be custom cleared. J. Free Trade Zones Hungarian law provides for the establishment of companies in customs- free zones. The companies established there are exempt from customs and foreign-exchange requirements of the country as well as from indirect taxation tied to the turnover of goods. With respect to direct taxes (profit taxes, company taxes, etc.,) the companies enjoy transitory preferences. Customs-free zones may be established anywhere in the country. Pursuant to the law, they must securely perimetered with a 3-meter high fence. To obtain custom-free zone status, the company must receive the permission and approval of the National Command of the Customs and Excise Guard. A declaration from the Ministry of Finance must accompany the application attesting to the fact that the area is a customs-free zone. K. Special Import Provisions Equipment and other goods which are deemed capital in kind for joint ventures may enter duty-free. Hungary maintains tariff preferences for developing countries and some former communist countries. L. Membership in Free Trade Arrangements In December 1991, Hungary signed an Association Agreement with the European Union asymmetrical reduces tariffs over a specified transition period. The accord immediately removed EU duties on 70 percent of Hungary's industrial exports to the EU (duty-free access requires at least 60 percent local content), and lifted quotas on 60 percent of its total exports. Trade in textiles, steel, coal and farm products will be eased over several years. In June 1993, the EC agreed to accelerate the agreement's provisions and reaffirmed its commitment to Hungary's full- membership which is expected by the year 2000. In December 1992, the Czech Republic, Hungary and Poland completed negotiations on the creation of a Central European Free Trade Area. Modeled after the structure of the EU association accords, this agreement will reduce trade barriers over an 8 year period; duties on 15-30 percent of mutual trade were eliminated immediately upon implementation of the Agreement in March 1993. A supplementary agreement, signed on Jun 18, 1994, accelerates the agreement's provisions. Finally, Hungary concluded a free trade agreement with European Free Trade Association (EFTA) countries in July 1993. Again, this agreement was modelled after the EU accords and will eliminate trade barriers for Hungarian goods entering the EFTA countries by 1997 and for EFTA imports by 2001. EFTA accounts for an nearly 15 percent of Hungary's total trade In April 1994, Hungary and Slovenia signed a Free Trade Agreement which maps a three-phase elimination of duty on industrial goods by 2001 and an immediate 50 percent reduction of duty on certain categories of agricultural products.