SOME TRADE PROGRAMS AND TRADE AGREEMENTS WITH PREFERENTIAL

ORIGIN

ByALFREDO MORENO DAVILA

www.customs-trade.com Jan. 2014

SOME TRADE PROGRAMS

April 11, 2023

Purpose and Scope

Some Trade Programs for your consideration:

– Temporary Import regime–Customs Categories for Large Importers (“UAP”)

and for Large Exporters (ALTEX)– Free Trade Zone in the company´s facility– Inward Duty Relief (“Plan Vallejo”)

Trade agreements with preferential origin

April 11, 2023

Temporary Import Regime

BENEFITS:Short term temporary import regime.Possibility to import certain goods with no

customs charges (for a period up to 9 months).

Long term temporary import regime.Possibility to import certain capital goods and

their spare parts with deferral of the customs charges (customs duties and VAT) for a period up to 5 years.

April 11, 2023

Short Term Temporary Import Regime

Some specifics:– It allows the possibility of importing goods up to 6

months extended up to 9 months without having to pay import charges (duties and VAT

– However, those import charges should be liquidated in pesos in the import declaration at the time of entry.

– The law requires to establish a guarantee from an insurance company for the value of the import charges.

– Term: 6 months extended up to 9 months.– Lists of goods: In the Customs Statute.

AMD April 11, 2023

Long Term Temporary Import Regime

Some specifics:– It is a special form of entry/regime for goods.

– It accrues import charges (duties and VAT) at the time of entry and they should be paid in biannual installments according to the number of quotas indicated in the import declaration.

– Those import charges should be liquidated in the import declaration in USD dollars and the corresponding quota should be paid in pesos at the exchange rate of the due date.

AMD April 11, 2023

Long Term Temporary Import Regime

Some specifics (cont.):–A guarantee from an insurance company must be

obtained for the 150% of value of the import charges.

– Term: Up to 5 years (more years requires previous authorizations by Customs)

– Lists of goods in the Customs Statute

–Reparation or replacements are allowed.

Customs Categories for Large Importers and for large exporters (“UAP” and “ALTEX”)

MAIN BENEFITS FOR UAP:

1. No customs inspections at the entry

2. 30 day deferral to pay import charges liquidated in import declarations reported within a specific month. Imports made in April, the duties and VAT shall be paid in May.

3. Possibility to have customs bonded warehouses for processing.

4. Guarantee required by DIAN would cover any future custom guarantee requirements except for seizures and forfeitures.

April 11, 2023

Customs Categories for Large Importers and for large Exporters (“UAP” and “ALTEX”)

REQUIREMENTS ( for provisional UAP):

1.To demonstrate future importation goods for a minimum value of FOB USD 5 million (USD 3 million for high tax contributors)

2.To have a net worth of COL. $ 1000 million

3.To demonstrate that the company is a subsidiary of a foreign company

April 11, 2023

Customs Categories for Large Importers and Exporters (“UAP” and “ALTEX”)

MAIN BENEFITS FOR ALTEX: 1. No customs inspections at the entry except for the

cases in which the customs consider otherwise

2. Possibility to have customs bonded warehouses for processing.

3. Guarantee required by DIAN would cover any future custom guarantee requirements except for seizures and forfeitures.

4. Possibility to make partial loads with just one global shipment authorization.

April 11, 2023

Customs Categories for Large Importers and Exporters (“UAP” and “ALTEX”)

MAIN REQUIREMENTS ( for ALTEX):

1.To demonstrate exports for a minimum value of FOB USD 2 million; and that exports represent no less than 30% of total sales within a period of 12 months before the date of the ALTEX request. OR

2.To demonstrate exports for a value of USD 21 million in the same period indicated above.

April 11, 2023

Trade Programs - Free Trade Zones• Geographic areas designated by the government for the

purpose of promoting industrialization of goods and services, new investments and employment generation.

• How to have access: by obtaining the qualification of industrial free trade zone user (of goods and/or services).

• Income taxes benefit: Reduction from 33% to 15%. Of the applicable income tax corporate rate.

• Custom benefits :– From the rest of the world to a FTZ ( no importation)– From the rest of the national territory to a FTZ

(exportation)– From a FTZ to the rest of national territory importation)

Trade Programs - Free Trade Zones

• The Customs Statute allow companies to have their own FTZ at their facilities.

• Main Requirements:– New investment for a value of USD 44.3 million approx.– 150 new direct job positions– Full compliance with current laws (enviromental,

labour, municipal, customs, tax, etc).– Submission of a detailed and complex project to the

Government.– It may take about 1 year for approval.

Inward Duty Relief – Plan Vallejo•This is a sort of mutual benefit agreement with the Colombian Customs DIAN. •On the one hand, the company will be benefited with no customs charges (customs duties and VAT) at the entry of raw materials and supplies or it will be benefited with VAT deferral at the entry of certain capital goods.•On the other hand, the customs will demand full transformation of the raw materials into finished goods to be exported to third countries. As to the import of certain capital goods, the customs will require the company to export 1.5 times of the FOB value of those capital goods.

TRADE AGREEMENTS WITH PREFERENTIAL ORIGIN

TRADE AGREEMENTS WITH PREFERENTIAL ORIGIN

April 11, 2023

Trade Agreements with Preferential Origin

• Preferential origin determines whether goods are entitled to special trade benefits under a trade agreement

• Trade agreements come in various forms: multilateral, bilateral, and unilateral– ALADI– CAN (Ecuador, Bolivia, Peru and Colombia)– FTA México– FTA Chile – FTA CAN-MERCOSUR– FTA Salvador, Honduras, Guatemala– FTA EFTA Countries (Iceland, Norway, Swiss Confederation and

Liechtenstein).– FTA USA, – FTA EUROPEAN UNION, – FTA Canada, – FTA Korea

April 11, 2023

Trade Agreements, Cont’dAs a general rule, to claim a preference under a trade

agreement:• Goods must be eligible for preference under the

agreements.• They must satisfy the relevant rule of origin.

(Agreements specify criteria that must be satisfied so that products are eligible for preferential treatment. These criteria specify the working or processing that must be carried out by the manufacturers. When these rules of origin are complied with, the resultant products acquire “originating status” and this enables them to benefit from preferential treatment on export or import.)

April 11, 2023

Trade Agreements, Cont’d

As a general rule, to claim a preference under a trade agreement:

• They must normally be transported directly from the export country to the import market.

• They must be accompanied by documentary evidence of origin such as a Certificate of Origin.

However, each Agreement has its own terms.

April 11, 2023

ALFREDO MORENO DÁVILA

Abogado LL.M

U. Andes - U. Ottawa - U Carleton

Aduanas y Comercio Internacional

alfredomorenodavila@customs-trade.com

www.customs-trade.com