VI. Trade Regulations and Standards Laws on privatization, customs, taxes, and foreign investment are in place in Poland, and follow-up amendments have theoretically reduced bureaucracy and government interference, modified tax incentives, and terminated restrictions on profit repatriation. Past needs for permission to establish operations, representative offices and joint ventures with Polish private partners have been reduced or eliminated. Where a permit is still necessary, the application process, though still cumbersome and tedious, has been simplified. A. Tariffs, Import Taxes, and Customs Valuation In January 1990, a new Customs Law came into force in Poland. This law defined and implemented the Harmonized Tariff System which reclassified products and ultimately formed the basis for new duty rates on imports. Tariff rates have changed several times since (and are still subject to change), and have proved to be a major frustration to U.S. companies actively involved in exports to Poland. In early 1993, a six percent import tax was added to the equation on all imports into Poland. Turnover taxes are no longer an issue, since the introduction of a general 22 percent Value Added Tax (VAT) on July 5, 1993. Significant excise taxes apply to certain products as well. The March 1, 1992, enactment of the trade provisions within Poland's association agreement with the European Union lowered or eliminated tariffs on many EU products imported into Poland, while tariffs on U.S. products remained the same. This immediately placed U.S. products at an uncompetitive and officially less preferential position than their EU competitors. Customs duties apply to all products imported into Poland. Tariffs range from 0 (zero) to 90 percent, with the average between 8-12 percent. The customs duty code which is currently binding in Poland has different rates for the same commodities depending on their point of export. There are basic, autonomous, preferential, and special customs rates. Basic customs rates apply to goods imported from the countries that are parties to the General Agreement on Tariffs and Trade (GATT) and from the countries which have been granted Most Favored Nation (MFN) status by Poland in bilateral trade agreements. Whenever no basic tariff has been fixed, autonomous customs rates apply. Autonomous customs rates apply to goods imported from countries and regions which do not enjoy MFN status in trade with Poland and are not on the GATT list. There are two levels of preferential customs rates, one applies to goods imported from developing countries (DEV), and the other to those from least developed countries (LDC). When no preferential rate has been fixed, autonomous or basic rates apply (if a country is on the GATT or MFN list). Special customs rates apply to certain goods imported from: EU countries, EFTA countries, Finland, and CEFTA countries including the Czech Republic, Slovakia, Hungary, where Poland has special trade arrangements (see below). In addition to customs tariff, all commodities imported into Poland are subject to an obligatory 6 percent import tax (including products with a zero customs tariff rate). In Poland, the customs tariff and the 6 percent import tax are levied on the customs value of the product (i.e. product value, plus transportation cost, plus insurance). This import tax is will be reduced to 5 percent in January 1995, and elimanated January 1, 1997. For some luxury and strategic products (e.g. alcohol, cosmetics, cigarettes, sugar confectionery, video cameras, satellite antennas, passenger cars, gasoline and oil) excise tax is also applied. Excise tax is levied on top of the customs tariff plus 6 percent import tax. As in much of Europe, a Value Added Tax (VAT) is also assessed. There are three VAT rates: 0 percent, 7 percent and 22 percent depending upon the product. According to the current customs tariff code, there are some products whose customs tariffs are suspended to specific values (0, or other values lower than autonomous and/or basic rates). But, the 6 percent obligatory import tax, excise tax and VAT still apply. Duty free quotas, or zero duty quotas, have been applied within certain industries including the automotive, computer, and pharmaceutical sectors in Poland. U.S. and foreign firms have benefited from these quotas. In some instances the quotas are targeted to products originating from specific export regions (e.g. cars from the EU), and in others they have been assessed to help protect local industry (e.g. pharmaceuticals), or to help develop industries (e.g. computer parts and components). Customs should refund all customs duty paid on all raw materials, semi-finished goods and products used in the manufacture of goods for export within thirty days. This is contingent on documentation certifying customs duty was paid on the goods when they were imported. B. Agricultural Levies A law on variable levies for imported food and agricultural products became effective in June 1994. The law targeted products deemed important for domestic agriculture and for restructuring the economy when imported in amounts that could seriously affect domestic producers and domestic markets. Variable levies are calculated on the positive difference between the threshold price and the foreign price of the product, increased by duties, taxes and other levies on the imported goods. The threshold price, which is intended to reflect the domestic price of the product, is set by the Ministry of Agriculture based on the prevailing government intervention price or price statistics published by the Central Statistical Office. The major product categories under this new regulation include: pork, poultry, milk and cream, flour, oils, and processed tomatoes. The variable levies are expected to be only temporary, to be withdrawn when new trade provisions of the Uruguay Round of GATT are concluded and implemented. C. Import Licenses, Export Controls and Documentation In general, the trade of goods and services is not restricted in Poland. In some areas, including imports of strategic goods (e.g. police and military products, radioactive elements, weapons, transportation equipment, chemicals) a license or concession is required. Imports of beer and wine, gas, and certain agricultural and food products (including dairy, poultry, and tobacco products) are also licensed. A permit is necessary to be able to sell imported alcoholic products. A Phytosanitary Import Permit issued by Plant Quarantine Inspection Service is required for the import of all live plants, fresh fruits, and vegetables into Poland. Certain goods are subject to import quotas in Poland. These include: gasoline, diesel fuel and heating oils; wine and other alcohols; and cigars and cigarettes. The import of some products is prohibited. These include: two-stroke engine cars; automobiles, racing cars and vans older than ten years; and trucks older than six years. A U.S. export license is required on shipments of certain commodities to Poland, as provided under the U.S. Bureau of Export Administration's Commodity Control List. Import documentation in Poland is compiled under a "Single Administrative Document" (SAD), and includes a customs declaration and certificate of origin. The SAD asks about 60 questions regarding the goods, the importer, the place of origin, and the method of payment. A completed customs value declaration is attached to the SAD. An original invoice or pro forma invoice proving the value of the goods is also required. The Ministry of Foreign Economic Relations issues import permits and concessions, and regulates quotas. However, other Polish ministries have special jurisdiction over products such as tobacco (Ministry of Agriculture), permits related to air, sea, or road transport (Ministry of Transportation), or natural resources (Ministry of Environmental Protection). The list of products requiring import certification in Poland is always subject to change, and appears to be growing. U.S. exporters should ascertain whether their product requires import certification in Poland before shipping. In most cases, before an issuing ministry grants import permission on a product, the product must be reviewed and recommended for import into Poland by one or more inspectorates or technical associations, depending on the nature of the product. This can be a costly, lengthy and confusing process for the U.S. exporter and the Polish importer alike. It is often necessary to submit samples of products or equipment for testing, regardless of the issuance of previous U.S. or international certificates. The presentation of detailed documentation on a product is a must, and all requests by relevant inspection agencies should be strictly adhered to, in order to speed-up certification procedures. When satisfied, the inspecting agency will make a positive or negative recommendation for import to the appropriate Polish ministry. Once import is approved for a specific product, further imports of that product are free from additional regulation. U.S. companies with several lines of like products (e.g. pharmaceutical, food preparation, or chemical products) should begin the approval procedure on all products they anticipate they will export to Poland as early as possible. D. Temporary Entry A license is also required for temporary import of goods, which takes place in Poland under Customs supervision. Written confirmation is required, stating that the goods will be sent out of Poland on specific dates. In some cases a deposit is required for the import of the goods subject to clearance, to equal the value of the goods to be exported or the total import customs duty. Commercial samples of zero or low value can usually be imported free from customs duty, by means of a written statement to Polish Customs confirming the value of the sample and that it will stay in the possession of the importing entity. Temporary imports may also enter Poland under an ATA Carnet. E. Standards, Labeling, and Packaging Standards for imported products vary as much as the products themselves. Basically, imported goods are required to meet not only international standards, but specifically Polish standards as set forth (and sometimes published) by appropriate Polish government inspectorates. Conformity with ISO 9000 procedures is as yet a relatively rare practice, though a number of Polish companies are in fact certified. Some products, once imported, also require registration. This is particularly true of products that come into contact with or can affect the health of the consumer. In the case of hazardous materials the importer must receive permission to use the product before applying for a concession to import the product into Poland. Labeling and packaging requirements also vary depending on the product. Consumer goods require a product description in Polish somewhere on, or inside the package. Packaging should clearly contain the country of manufacture. Packaged or canned food products require Polish language labels containing: the product composition, nutritional value, a "best before" date, the name and address of the producer, and the product weight. Some U.S. companies have found that using the English language somewhere on the packaging (e.g. product name, promotional slogan) helps give the product additional prestige or value in the eyes of the Polish consumer. F. Free Trade Zones, Enterprise Zones, and Warehousing There are currently four duty free zones (DFZ) in Poland, under a government policy of limiting the number of zones, but not all are yet operational. Polish Customs Law originally allowed for 16 separate zones, none of which were able to fulfill land usage requirements under the law and lost their operating licenses. All were required to re-apply for permission after securing ownership or perpetual usage rights to the land they were on. Two zones are located on Poland's eastern border, one at Warsaw's international airport, and the fourth in the south of the country. Plans are for two additional DFZs to be opened soon, including one in the north of Poland. Bonded warehouses and customs and storage facilities in Poland are adequate and secure. Customs duties are repaid to the importer for re-exports of products within 12 months from the date of customs clearance in full, or partially, depending upon their length of time in-country. The Polish government has approved a plan for the establishment of special enterprise zones in Poland. These will be established in areas of especially high unemployment and under-used industrial potential. Companies doing business in an enterprise zone will receive substantial tax relief or other preferential treatment. Companies not entitled to tax exemptions will be entitled to faster depreciation of their assets. The plan also foresees the introduction of a zero- rate duty on some imported goods and services into the zone, with VAT levied only on sales of products outside the zone. The first zone is planned for the southeast of Poland. G. Membership in Free Trade Arrangements EC Association Agreement: In March of 1992, Poland implemented trade provisions of an Association Agreement with the European Community (now the European Union). Signed in December 1991, the agreement called for the lowering or elimination of duties on most EU exports to Poland. Import duties on products from other countries, including the U.S., remained relatively high, although the United States governemnt has successfully negotiated many of the tariff barriers downward. Under these circumstances (and where Polish consumers are already price sensitive), U.S. exporters must be aggressive, flexible, and prepared to waive short-term profits for long-term gains to establish their presence in Poland. EFTA and CEFTA: A trade agreement with "European Free Trade Association" (EFTA) countries (Austria, Finland, Iceland, Norway, Sweden, Switzerland, and Liechtenstein), and a "Central European Free Trade Agreement" (CEFTA) including Poland, Hungary, Slovakia, and the Czech Republic, have allowed additional customs duty relief for Poland. The CEFTA agreement, signed in December of 1992, allowed for a staged reduction of customs duties on three separate lists of products among the member countries through the year 2001. The EFTA agreement, which came into force November 1993, allowed for duty free trade in manufactured goods, fish and fish products, and certain agricultural products between the EFTA countries and Poland. All trade barriers are expected to be removed between Poland and EFTA by the year 2000. Eighty percent of Poland's exports to EFTA countries are now duty free, as are about 25 percent of its imports. Poland's trade with EFTA countries constitutes about 15 percent of its foreign trade.