VI. TRADE REGULATIONS AND STANDARDS TARIFFS AND IMPORT TAXES Italy applies the EU tariffs (customs duties), which are based on the international Harmonized System (HS) of product classification. Duty rates on manufactured goods from the United States generally range from 5 to 8 percent and are normally levied on the c.i.f. value of the goods at the port of entry. The c.i.f. value is the price of the goods (usually the sales price) plus packing costs, insurance, and freight charges to the port of entry. Most raw materials enter duty free or at low rates while agricultural products face higher rates and special levies. For information on EU duty rates levied on agricultural products, contact the U.S. Department of Agriculture, (202) 720-1322. For information on EU duty rates of manufactured and industrial products, contact the U.S. Department of Commerce, Office of European Community Affairs, (202) 482-2905. The Harmonized System is an international system designed to classify goods for customs administration and to develop trade statistics. It is arranged into 99 chapters. The sections are established according to categories such as agriculture, chemi- cals, chief material of the product, or type of manufacturing industry. The chapters and sections start with agricultural and primary products in the initial chapters, followed by products that are more processed and technically more complex. The HS classification number consists of a minimum of six digits, which are common to all countries using the Harmonized System. Additional digits can be used to meet each nation's individual statistical requirements and give greater detail as needed. If a HS number of the product being shipped is requested by the Italian importer, this information may be obtained from any ITA district office or from the Office of European Community Affairs, (202) 482-2905. The HS number is usually requested by the Italian importer to determine what customs duty will be levied at time of importation. On entry, some stamp or administrative taxes may be levied. Italian customs officers may assess certain charges (Diritti Doganali) at the port of entry according to their judgment. The rate of these diritti doganali may vary substantially depending on the specific port of entry. CUSTOMS VALUATION Advance Rulings from Italian Customs Prior to signing a long-term contract or sending a shipment of considerable value, it may be prudent for a U.S. exporter to first obtain an official ruling on the customs classification, duty rate, and taxes. Such requests should be sent to: Ministry of Finance, Rome, Italy. The request should describe the product, the material it is made from, and other details needed by customs authorities to classify the product correctly. While customs will not provide a binding decision, the advance ruling usually will be accepted if the imported goods are found to correspond exactly to the full description provided when requesting the ruling. IMPORT LICENSES Import Licensing With exception of a small group of largely agricultural items, practically all goods originating in the United States and most other free-world countries can be imported without import licenses and free of quantitative restrictions. There are, however, monitoring measures applied to imports of certain sensitive products. The most important of these measures is the automatic import license for textiles. This license is granted to Italian importers when they provide the requisite forms. Various apparel and textile products, and controlled items such as arms and munitions are the most frequently regulated items. Import licenses are generally rapidly granted for goods of U.S. origin and delays are usually from lack of proper documentation or information. Licenses are not transferable. They may be used to cover several shipments within the total quantity authorized. In general, the goods involved are indicated on the license by the Harmonized System classification number and the corresponding wording of the tariff position. EXPORT CONTROLS U.S. Export Controls For the purpose of national security, foreign policy, or the short supply of materials, the United States controls the export of goods and technology by two broad categories of export licenses--general and validated. The vast majority of U.S. exports are shipped abroad under general licenses that do not require formal application or approval. To determine which kind of export license is required, exporters should consult the U.S. Export Administration Regulations for complete details or obtain assistance from the local U.S. Depart- ment of Commerce district office. As an overview, the first step in the export licensing process is to determine whether a product requires a general or validated license. Determine what is being exported, the destination of the product, its end-use, and the organization that will be using the product. Check the schedule of Country Groups listed in the U.S. Export Administration Regulations to determine the destination category; check the Commodity Control List to determine if the product requires a validated license for shipment to that particular country; and determine if any special restrictions are in effect. If the product is not on the control list, then it can be exported under a general license. The U.S. exporter simply completes the U.S. Shippers Export Declaration, Form 7525-V, providing details of the shipment; includes a commercial invoice; and exports the goods. If the product is on the control list, a validated license is needed. An application must be made and an export license granted. As a general rule, an exporter will need a validated license (1) if the products are controlled or in short supply regardless of the country of destination; (2) for any commodity to a destination with foreign policy concerns; or (3) for unpublished technical data to certain destinations. Certain special licenses are also issued to cover large projects or repeated sales through a foreign distributor. For assistance in determining what type of license is needed and to initiate the processing of an application, contact your local Department of Commerce district office or the Bureau of Export Administration, Office of Export Assistance, Room H-1099D, U.S. Department of Commerce, Washington, DC 20230, (202) 482-4811. IMPORT/EXPORT DOCUMENTATION Shipping Documents Documents required for exporting include the usual shipper's com- mercial invoice and the bill of lading or air waybill, none of which require consular legalization. For textiles and apparel, it is good practice to provide a certificate of origin, available through most state chambers of commerce. For other products, however, if substantive proof of U.S. origin is provided through other accompanying documents as well as through characteristic trademarks, a certificate of origin is not normally necessary. Shipments to Italy require one copy each of the bill of lading (or air waybill) and the commercial invoice for customs clearance. There are no consular requirements, but certificates of origin may be required as set out below. U.S. Customs also requires two copies of the U.S. Shipper's Export Declaration (U.S. Department of Commerce Form 7525V) for goods valued at 1,500 USD or more. A declaration form must be completed for all shipments by regular mail or parcel post valued at 500 USD or more. The form must include the harmonized commodity number of the exported product as well as the weight stated in metric units. When sending goods through the mail, the exporter should inquire at the post office as to the proper documentation needed for mail shipments. For additional information or assistance on export documentation, readers should consult publications such as the Exporter's Encyclopedia, published by Dun's Marketing Services or contact a local U.S. Department of Commerce International Trade Administration district office. Although no special format is prescribed for the commercial invoice, it is advisable to include the following: date and place of shipment; name (firm's name) and address of the seller and buyer; method of shipment; number, markings of the packages, and their numerical order; description of the goods using the usual commercial description according to kind, quality, grade, and the weight (gross and net, in metric units), along with any factors increasing or decreasing the value; agreed price of goods; unit cost; total cost f.o.b. factory plus shipping; insurance charges; delivery and payment terms; and the signature of a responsible official of the shipper's firm. Bills of lading should bear the name of the party to be notified. The consignee needs the original bill of lading to take possession of the goods. Certificates of origin are required for a small number of goods such as textile products. The need for a certificate of origin should be ascertained directly from the importer or from the appropriate customs authority. Letter of credit terms may stipulate that a certificate of origin be provided. Customs authorities accept certificates of origin issued by authorized local U.S. chambers of commerce or boards of trade. TEMPORARY ENTRY Temporary Imports Material may temporarily be imported into Italy without payment of duties and tax if such material is to be used in the production or manufacture of a product that is to be exported. The importer gives security, usually in the form of a guarantee from a bank or insurance company, for the amount of the usual duties and taxes. Upon exportation of the finished product, the guarantee is released or the deposit returned. Temporary entry of goods intended to be reexported in the same condition is permissible free of import duties and taxes upon approval of an application by Italian Customs. Samples without commercial value are admitted free of duty and taxes. Product literature should be marked "product Literature - no commercial value". Samples with commercial value are also admitted duty and tax free, provided that the following conditions are complied with: (a) The samples are accompanied by a representative of the U.S. firm with a statement, notarized by an Italian Consulate, identifying the commercial traveler and attesting to the intention that the samples are being imported into Italy for the purpose of being shown or demonstrated and they are to be reexported in due course. (b) A certificate of origin from a recognized chamber of commerce is submitted to identify the source of the goods. (c) A deposit or bond, in the amount of the applicable customs duties and taxes, is made at the point of entry. This will be refunded when the goods are reexported. (d) A list (in duplicate) with a full description of each sample, including weight and value, is submitted. It is helpful to have such a list in Italian. U.S. traders should be aware of another and more simplified procedure in the form of a carnet for the temporary importation of samples without posting guarantees. See the "Carnets" section in this chapter (under SPECIAL IMPORT PROVISIONS). In practice, samples valued in excess of lira 1 million (or about 1,250 USD) are practically impossible to clear through Italian customs. In such cases, it is advisable to engage the services of a local freight forwarder. Goods in Transit Goods may clear customs with an EU transit procedure that provides for the issuance of a single transit document under which the goods may be easily shipped across frontiers of the EU member states. These transit documents are completed for the importer by a freight forwarder in Italy. The EU transit document provides the basis for a single, comprehensive procedure covering the goods within the Community. Since single transit document is an EU form, the European importer, customs house broker, freight forwarder, or shipper must prepare the document at the point of entry. Inward and Outward Processing Inward processing is the temporary importation of raw material or products for additional manufacture or processing. Merchandise imported for additional processing and eventual reexport out of the EU is eligible for custom-free treatment. The reexported goods may be partly or totally processed. The import duty and taxes are levied only on those goods that are not reexported and are finally sold in the EU. To qualify for inward processing, an Italian (or EU) firm must satisfy customs that it is necessary to use imported goods instead of EU goods; state an intention to export products manufactured from the imported goods (or equivalent goods available in the EU); and assure that, upon reexportation, the conditions set forth in the authorization are satisfied, the exported products are accounted for, and the entered goods are identifiable and relate to specific importations. In outward processing, a firm in Italy may export goods for further manufacture or processing from the EU customs area and then reimport the final product. Duties and taxes are levied only on the increased value added by the expatriate manufacturing or processing when the goods are returned to Italy and not to the total value of the product. Only firms located in Italy or another EU country are eligible to take advantage of this option, and they should first gain approval of the Customs authorities. LABELING, MARKING REQUIREMENTS Marking and Labeling There is no general requirement that imports be marked as to country of origin. Under Italian legislation, the origin of imported merchandise is established through documentation accompanying the shipments arriving in Italy and not through marking of products or their containers. Certain specified commodities, however, must be marked or labeled to show composition, and name and location of manufacturer, in accordance with various laws and regulations. The following articles are subject to special marking or labeling regulations: lime, cement and similar binding agents; pianos, automatic pianos, harmonicas and similar instruments; clinical thermometers; ethical medicines; cosmetics. Hallmarking of gold and silver articles is required before they can be offered for sale. Only small tolerances are allowable for manufacturing errors. The hallmarking may be done by a hallmarking office after importation. Imports of certain commodities such as packaged foods, distilled spirits, beer, wine, vinegar and foodstuffs) are subject to special regulations regarding the manner in which they must be labeled to show manufacturer, composition, content (in metric units), and country of origin. In view of the complexity of these regulations and changing requirements, information should be requested from the importer prior to shipment. When the services of an importer are not available, information can be obtained directly from the appropriate Italian Government authority listed at the end of this publication. For agricultural and food products, the U.S. exporter should contact the U.S. Department of Agriculture for marketing and labeling information and exporting assistance. PROHIBITED IMPORTS There are a number of Italian regulations and European Community directives that prohibit certain foodstuffs, food colorings, drugs and narcotics, animal products, plants, seed grains, alcohol, cosmetics and toiletries, etc. It is therefore recommended American exporters contact the Italian importer prior to the shipment or use their freight forwarder to make the determination. STANDARDS Technical Standards The metric system is the key measurement system in international trade, with the United States being the only major nation where this system is not in full use. The 1988 Trade Act states that the metric system is the preferred system for weights and measures. American firms can be at a serious disadvantage in world markets since overseas buyers are reluctant to accept nonstandard (nonmetric) products since replacement parts and tools are less available and serious safety risks could result by mixing metric and nonmetric parts. As a member of the EU, Italy applies the product standards and certification approval process developed by the European Community. Italy is required by the Treaty of Rome to incorporate approved EU directives into its national laws. There is frequently a long lag by the various EU members on obtaining national implementation. With the development of a single harmonized EU product standard, U.S. exporters may find that it is usually much easier to comply with one EU-wide standard rather than having to meet several in- dividual national standards when exporting to Europe. There are numerous mandatory and voluntary standards in existence that define products, processes, or procedures and embrace many fields. The texts of these standards may be obtained directly from UNI, Ente Nazionale Italiano di Unificazione, Via Battistotti Sassi, 20133 Milan (Italian National Bureau of Standards) or through the American National Standards Institute, 1430 Broadway, New York, NY 10018, (212) 354-3300. As part of the unification program to establish common standards for all 12 member countries, key product areas will be regulated by the Community. Mandatory requirements to protect the health and safety of consumers, as well as the environment are constantly being developed and implemented. To indicate conformance to the mandatory EU requirements, a CE mark must be placed on all regu- lated products by the manufacturer or a representative before they can be sold on the EU market. The applicable product testing and certification requirements for individual product categories are specified in the various EU directives. The CE mark relates only to the mandatory health, safety, and environmental requirements established by the EU; it does not indicate conformity to European product standards. Thus, national marks of conformity with product standards remain compatible with the CE mark and both may be applied to the product. It should be noted, however, that the CE mark does replace all national safety marks for the regulated products. The EU Commission has released The Global Approach to Certification and Testing, a document that recommended harmonized testing and certification procedures within the Community. These proposals included establishing a "modular" system for demonstrating product compliance. Under this system, methods of demonstrating product conformity range from having the manufacturer self-certify the product to having a private testing company type-approve the product and provide market surveillance, depending on the probability and type of product risk. As standards and certification requirements are important in international trade, it is expected that more U.S. testing laboratories will be able to certify that products comply with EU requirements. U.S. firms exporting to Italy are confronted with both national and EU product standards. Further, these regulations occasionally change to meet new technology and more stringent demands. Exporters can stay fully informed of the latest EU technical standards activities by contacting the Standards Information Service of the National Institute of Standards and Technology (NIST) at (301) 975-4040. A part of the U.S. Department of Com- merce, NIST offers industry an in-depth reference system on EU standards information gathered from the two European standards bodies tasked to write the EU norms--the European Committee for Standards (CEN) and the European Committee for Electrotechnical Standardization (CENELEC). NIST also can provide updated information from the EU which will elaborate on directives and provide assistance in identifying EU and member state standards and regulations. For more information, contact NIST at (301) 975-4038. Also, the Single Internal Market Service, International Trade Administration, Room 3036, U.S. Department of Commerce, Washington, DC 20230, publishes regular updates on the status of the EU directives. To obtain copies of EU directives, amendments, and published updates, or to obtain a complete list of EU directives that could affect product sales to the Italy or to another EU country, call (202) 482-5276. Copies of all documents are available at a nominal fee. Other valuable sources of information with regard to foreign standards include the American National Standards Institute, 1430 Broadway, New York, NY 10018, (212) 354-3300, the Department of Commerce's National Technical Information Service, Springfield, VA 22161, (703) 557-4733, as well as various trade associations that follow international activities for their membership. Electrical power supplies are generally 220 volts, 50 cycles, single-phase and 380 volts, 50 cycles, three-phase. Electricity at 60 cycles is not available. American appliances, such as electric shavers or hair dryers, do not work and will be damaged if used without a transformer. Service interruptions are rare and the frequency of the current is stable. The electrical plug is the standard plug B. This is a plug that has two round pins instead of the flat prongs. Some outlets may require different plugs in other parts of the country. Italy uses the metric system of weights and measures, which is called the International System of Units (SI). The European Community has established standardized packaging units for numerous products which should be consulted by U.S. exporters. Labeling must be in metric units for all imported products to be sold in Italy. Products are allowed to be imported and then labeled in SI metric units prior to sale. Dual labeling information is permitted, but the nonmetric information must not predominate. The U.S. exporter would be well advised to first check with the Italian importer to ensure that the package size and labeling complies with all requirements prior to shipment. Metric measurements should be used in every quotation where size or weight is involved. The Italian buyer will expect products and literature to be labeled in metric units. Detailed information on the European Union's metric and packaging requirements may be obtained from: Office of European Community Affairs, Room 3036, U.S. Department of Commerce, Washington, DC 20230, (202) 482-2905. FREE TRADE ZONES/WAREHOUSES There are two free zones in Italy: one in Trieste and the other in Venice. Goods of foreign origin may be brought into the free trade zones without the payment of customs duties and taxes. The goods remain free of all such charges while held in the zones or if subsequently transshipped or reexported. The goods may be freely sold, manipulated, and processed. Italy also has numerous general warehouses that are located throughout Italy in all the port areas and cities. There are no limitations as to the type or origin of merchandise that can be stored in free trade zones or bonded or customs warehouses. The time limit for such storage is 5 years. Merchandise deteriorated while in storage can be destroyed without payment of duty. The advantage of a free trade zone or bonded warehouse to American firms is having a European base of supply to assure customers prompt delivery and service. Also being able to maintain inventory at low cost with a minimum of customs paperwork is also a distinct advantage. SPECIAL IMPORT PROVISIONS Italy participates in the International Convention to Facilitate the Importation of Commercial Samples and Advertising Materials. Samples of negligible value imported to promote sales are accorded duty-free and tax-free treatment. Prior authorization is not required. To determine whether the samples are of negligible value, their value is compared with a commercial shipment of the same product. Granting of duty-free status may require that the samples be rendered useless for future sale by marking, perforating, cutting, or other means. Imported samples of commercial value may be granted a temporary entry and exemption from custom charges. However, a bond or cash deposit may be required as security that the goods will be removed from the country. This security is the duty and tax normally levied plus 10 percent. Samples may remain in the country for up to 1 year. They are not permitted to be sold, put to their normal use (except for demonstration purposes), or utilized in any manner for remuneration. Goods imported as samples may be imported only in quantities constituting a sample according to normal commercial usage. Carnets As a result of various customs agreements, simplified procedures are available to U.S. business and professional people for the temporary importation of commercial samples and professional equipment. A carnet is a customs document that facilitates customs clearance for temporary imports of samples or equipment. With the carnet, goods may be imported without the payment of duty, tax, or additional security. The carnet also usually saves time since formalities are all arranged before leaving the United States. A carnet is usually valid for 1 year from the date of issuance and is issued at moderate cost. A bond or cash deposit of 40 percent of the value of the goods covered by the carnet is also required. This will be forfeited in the event the products are not reexported and duties and taxes are not paid. Carnets are sold in the United States by the U.S. Council for International Business at the following locations: 1212 Avenue of the Americas, New York, NY 10036, (212) 354-4480; 3345 Wilshire Boulevard, Los Angeles, CA 90010, (213) 386-0767; and 1930 Thoreau Drive, #101, Schaumburg, IL 60173. MEMBERSHIP IN FREE TRADE ARRANGEMENTS Italy has been a member of the European Community (EU) since its inception in 1958. The other EU members are Belgium, Denmark, France, Germany, Greece, Ireland, Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom and Austria. Other countries have applied for membership. The EU forms a customs union and a large unified market having free trade among the member states. It levies a common tariff on imported products coming from non-EU countries such as the United States, Japan, and Canada. The EU also has a common agricultural policy, joint transportation policy, and free movement of goods and capital within the member states. Other aspects of commercial activity are being harmonized. The EU grants tariff preferences to more than 100 developing countries and about 40 overseas territories under the EU's Generalized System of Preferences (GSP). Imports of nearly all semimanufactured and manufactured goods originating in these countries and territories enter the Community duty free. Annual duty-free quotas are established for those products and a system of providing certificates of origin has been established to ensure that goods are not diverted through the GSP countries to take advantage of the lower tariff concessions. Free trade agreements have been developed between the European Community and the European Free Trade Association (EFTA), which includes Finland, Austria, Norway, Iceland, Lechitenstein, Sweden, and Switzerland. Under the terms of these agreements, most industrial products and certain processed agricultural products are exempt from import duties if traded within this trading bloc of 19 nations. The result of the agreements reached between the 12 EU members and the 7 EFTA members is an open trading area for most industrial products of 19 nations with an affluent population of 380 million. While customs duty rates are the same for all 12 EU countries, the value-added tax (VAT) and excise tax on products and services usually differ from country to country. These taxes are levied in the country of final destination. See the "Value-Added Tax" section for the Italian rates. Trade Regulations and Standards Relating to Agricultural Products For the most part, Italy follows the agricultural policy of the European Union. As a member of the EU, Italy employs the same tariffs, levies and other EU regulations as the other eleven member states. However, Italy also employs some sanitary and phytosanitary requirements which are in some cases more rigid than other member states. These restrictions impede or prevent the following U.S. agricultural products from entering Italy: citrus (except Florida grapefruit), certain seeds for planting, poultrymeat, live horses (a new protocol is still being implemented), beef offals, and bull semen. With the completion and implementation of the Single Market, some import restrictions, unique to Italy, may be eliminated. However, his may take some time. In principle, the Single Market came into being on January 1, 1993; in reality, harmonization of member state legislation still has not been completed. Although EU-wide phytosanitary legislation finally went into effect on January 1, 1994, the livestock legislation, expected to be in force by January 1994, still has not been implemented. Similarly, there is legislation dating back to 1990 requiring EU-wide maximum pesticide residue levels be established. However, the harmonization process in this area has still not been completed. In July, 1993, the EU Commission published the first set of tolerance levels for some of the more commonly used pesticides. However, for the remaining pesticides Italy still sets the tolerance levels. The same situation exists in the food sector. The European Union has adopted a number of regulations covering production standards, analytical, characteristics, product specifications, allowable additives, and labeling. For example, there are regulations covering cocoa and chocolate products, sugars, fruit juices, fruit jams and jellies, milk and casein products. However, where no EU legislation exists, Italy can set its own requirements. Although EU law requires Italy to accept a product which comes from another member state provided it meets the other country's food laws, it should be noted that products imported directly into Italy must conform to Italian food laws.