VI. TRADE REGULATIONS AND STANDARDS The Romanian market is quite open, requiring no special conditions for access or operation. Tariffs and Import Taxes Romania adopted an 8-digit customs tariff in March 1993. This tariff is similar to the International Harmonized System of tariff nomenclature. The weighted average of customs duty is 11.7 percent with notable exceptions for fuels and ores for which the taxation is nil or reduced to 3-10 percent. However, tariffs are considerably higher for such items as cigarettes (60 percent), furs, carpets, fuels, vehicles and photographic equipment and supplies (30 percent), bicycles (40 percent), TV sets and sound and video registration equipment (42 percent). Duties applied to industrial equipment are generally about 15 percent ad valorem. As already mentioned, within the customs duties list, certain items are currently not dutiable. Examples include, in addition to various ores, coal, chemical products, and machine tools. Customs Valuation In Romania, customs duties are ad valorem duties. The customs value of imported goods is based on: -- the external price of the transaction, converted into lei at the exchange rate set weekly by the National Bank; and -- charges not included in the price of goods, such as freight, handling and insurance. If documentation concerning the value of imported goods is not available, the specific GATT provisions will apply; import prices usually charged for such goods or similar items are then used as the basis for valuation. As stated above, for most items customs valuation is based on the contract value. For those items which cannot be valuated according to this general rule the valuation can be done based on international quotations. Import Licenses Romania has eliminated all import licenses. However, sanitary and safety standards as well as special approvals for toxic substances, explosives and arms are in force. Export Controls As the pre-1989 monopoly of foreign trade enterprises has been removed, commercial companies, whether state of privately- owned, can import and export directly. For the majority of goods, no import or export license is required. Authorizations are, however, required for: -- Exports of goods with limited domestic supply, basically foodstuffs, fuels, and unfinished wood products; -- Trade conducted through international clearing accounts; -- Barter transactions; and -- Transactions using government lines of credit. Non-automatic export licenses are issued on a case-by-case basis by the Ministry of Commerce. Details are included in Government Decision 215/1992. Because imports have surged, some of the existing restrictions on exports have not been enforced, in order to help Romania reduce its trade deficit, thus meeting a requirement established by IMF and other international lenders. This explains why the only restrictions that apply are temporary non-automatic authorizations for items with export ceiling (including lubricating oils, chemical fertilizers and copper alloys) or goods for which production is subsidized. Import/Export Documentation No special import documentation besides that normally asked for by customs officials is required. The only exception is related to meeting sanitary and safety regulations. Special documents are, however, required to introduce guns, ammunition, drugs, and environmentally dangerous products. As for exports, most export licenses are issued for statistical purposes only. Consequently, for those products no special export documents are required. A special case is represented by products under quotas, mainly wood and foodstuffs, for which additional documents may be required, on a case-by-case basis. Temporary Entry Romania has a customs duty draw-back system. This system permits a refund of import duties previously collected at the time that the goods in question are exported from Romania in either the same condition or after having been transformed, processed or repaired, or after having been incorporated into products being exported. Labeling, Marketing Requirements Goods imported into Romania must comply with rules and regulations concerning health, safety and labelling; these rules are similar to those in other developed jurisdictions. There are no special rules applying to foreign products. Prohibited Imports Prohibited imports include products such as arms, ammunition, illegal drugs and other similar items which can affect national security, public health or good morals. Standards Romanian standards of quality and safety are under the jurisdiction of the Romanian Institute for Standardization. Generally, they match ISO and Western European Standards. Romania adopted, for instance, international quality control standards such as ISO 8402, 9000-9004 and 9004-2 and incorporated them in its national standardization system. Although the ISO standards are not compulsory by law for individual companies, the buyers increasingly impose on the suppliers to prove the quality of their products and services by the certification of the quality control system they practice. Generally speaking, American quality standards requirements are superior to local ones. However, Western European countries are acting very aggressively to adapt local standards of their own and this might in time discriminate against American products if countering measures are not taken. According to Decree No. 21/1992, an Office for Consumer Protection has been created. This office supervises product quality compliance with compulsory standards referring to life, health protection, work security and environment protection. Free Trade Zones/Warehouses Free Trade Zones and warehouses operate under Law No. 84/1992. General provisions include unrestricted entry and re-export of goods as well as exemption from customs duties and value added tax. They also include an exemption from profit taxes for the duration of a company's operations in the free trade zones. The law further permits the leasing or transfer of buildings or lands for terms of up to 50 years to either legal person or natural persons, Romanian and non-Romanian. Currently, there are four free trade zones: -- Sulina Free Trade Zone (located at the mouth of the Danube River); -- Constantsa-South Free Trade Zone (located close to the Romanian port of Constantsa, at the entrance to the Black Sea- Danube Channel); -- Galati Free Trade Zone (located about 100 km from the Danube mouth); and -- Braila Free Trade Zone (located 30 km up river from Galati). New free trade zones are proposed to be opened at Cristesti- Iasi, Curtici-Arad and Oradea. Warehouses operating under a free trade zone regime are also located in major cities. The free trade zones are operated by the Free Trade Zones Agency of the Ministry of Transportation. Special Import Provisions A) Several categories of goods are exempt by law from customs duties. These include: -- equipment imported as a foreign investor's initial or subsequent contribution to the capital of a company incorporated in Romania; -- samples and models with no commercial value, as well as promotional materials; and goods classed as humanitarian materials or as legacies. B) An important objective during the transition to a market economy is the protection of Romanian companies from goods being dumped or subsidized. Accordingly, in 1992 Romania introduced antidumping duties for goods imported at very low or dumping prices and countervailing duties for goods which have received subsidies. Safeguard measures can also be implemented to assist domestic producers adversely affected by imports. Safeguard measures may consist of additional customs duties or quantitative restrictions (quotas). The Ministry of Commerce investigates and sets remedies in cases of dumping, subsidized imports and import surges. Membership in Free Trade Arrangements Romania has been a contracting party to the General Agreement on Trade and Tariffs (GATT) since 1971 and has ratified most codes of the Tokyo Round. It has been an active participant in the Uruguay Round. On February 1, 1993, Romania signed an Association Agreement with the European Union (EU), the very first step in Romania's long-term plans for European integration. This Association Agreement will come into force after it has been ratified by the European Parliament as well as by the Parliaments of all EU member countries. In the meantime, an Interim Agreement is in place, permitting the application in advance of certain commercial aspects of the Association Agreement. Romania has also concluded a free trade pact with the European Free Trade Association (EFTA). This agreement will be implemented on a bilateral basis as it is ratified by individual EFTA members countries. Romania is also signatory to the conventions on Preferential Trade among Developing Countries ("The 16") and Generalized System of Trade Preferences among Developing Countries. Both the Trade Agreement with the United States (signed April 1992) and the Bilateral Investment Treaty (signed May 1992) provide the basis for trade relations, business operating conditions, and the protection of intellectual property and investments. The Trade Agreement with the U.S. provides, also, for the Most-Favored-Nation status. The free trade arrangements with the EU and EFTA are already triggering customs duty discriminations against some U.S. products. For instance, products under Ch. 85 Heading 8542 - "Electronic integrated circuits and micro-assemblies; parts thereof" are currently taxed 20 percent if imported from U.S. and only 16 percent if imported from EU and EFTA countries. In a 5-9 years period, taxes for many of the products imported from the EU and EFTA countries will be reduced to nil creating a barrier to American products unless appropriate measures are taken.