RESTRICTED
WORLD TRADE G/SCM/Q/2/COL/8
22January 1997
ORGANIZATION(97-0235)
Original: Spanish Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies ofCOLOMBIA toQuestions Posed byARGENTINA, CANADA
theEUROPEAN COMMUNITIES JAPAN, KOREA
THAILAND andtheUNITED STATES1
Thefollowing communication, dated 6January 1997, hasbeenreceived fromthePermanent
Mission ofColombia.
________________
I. Special machinery import-export system
1. How andtowhom isthesubsidy paidandwhat aretherequirements? (CANADA 4,
THAILAND 7and9)
Thesubsidytakestheformofexemptionfromcustomsdutyanddeferredpaymentofvalue-added
tax(VAT) when theprogramme iscompleted.
When aspecific programme istobecarried out,INCOMEX assigns aquota inUSdollars
forimporting capital goods andspare parts directly usedintheproduction ofagood orservice for
export.
Thesystem works intwopossible ways, asfollows:
1. Importation ofmachinery orspare parts usedintheproduction ofgoods thatare
exported orareusedintheprovision ofservices directly related totheproduction or
export ofsuchgoods. They mustbeusedforthepurposes laiddown inthelegislation
foraperiod notlessthanthatrequired foradepreciation of90percent, estimated
onthebasisofanumber ofhours worked, andtheexport commitments mustrepresent
atleast70percentoftheresulting increase inoutput. Inthisvariant ofthesystem,
theauthoritiesgrantexemptionfromcustomsdutyanddeferredpaymentofVAT,which
ispaidwhen theexport commitment hasbeenfulfilled.2
2. Under thesecond variant, theincentive islimited toadeferral ofpayment ofVAT,
which ispaidwhen theexport commitments given havebeenfulfilled.
Export commitments aremade invalue terms rather thanunitsofproduction, andamount to
atleastoneandahalftimes theauthorized import quota.
1G/SCM/Q/2/KOR/1, 2,3/Rev.1 and4-7.
2Article 173(c).G/SCM/Q/2/COL/8
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Anynatural orlegalperson whoisaproducer/exporter ortrader iseligible, afterlodging a
global guarantee inrespect oftheexport commitment made intheamount established intheapplication
toINCOMEX.
2. Isanyone whosorequests assigned anoverall import quota toimport capital goods or
spare parts? (CANADA 5,THAILAND 9.)
Anyproducer/exporter whosorequests andgives thecorresponding performance guarantee
isassigned aUSdollar quota forzero-duty import ofgoods andspare parts.
3. How istheimport quota managed? Arethequotas allocated atthebeginning ofeach
year? Arethequotas transferable when abusiness issold? (CANADA 5.)
Thisisnotanimport quota system. INCOMEX authorizes aquota inresponse tospecific
requests, anditisnottransferable: itmust beusedorcancelled bythebeneficiary firm.
4. Istheprogramme offered toalleconomic sectors including agriculture? (CANADA 6.)
Yes,toallproduction sectors oftheColombian economy.
5. Could Colombia confirm thatexport activity isarequirement fortheprogramme? Could
Colombia clarify thisissue, e.g.confirm thatexport activity isarequirement inorder tobeeligible
forthese incentives? (EC4.)
Yes,itisessential tobeanexporter inorder tobeeligible under thisprogramme.
6. Could Colombia provide thetableofhowthissubsidy willbephased outortreated? (EC5,
KOREA 2,JAPAN 6,THAILAND 10.)
There isnoprogramme forphasing-out thisincentive. However, Colombia hasaclear
commitment toeliminate thisincentive asfrom 2003.
7. There isadescription inparagraph 6ofthenotification thattoexercise thisright hemust
provide ageneral guarantee insupport ofanundertaking toexport theamount specified atthe
timeofauthorization. Inthisconnection, could Colombia explain thefollowing points?:
Iftheprogramme constitutes anexport subsidy (JAPAN 4.)
Inasmuch asthesystem grants anexemption fromtariff duties onimports ofmachinery used
intheproduction ofexport goods, wehavesofarconsidered thatthesystem fallswithin Article 3
oftheAgreement.
8. IfColombia hasalready notified thissystem under Article 28.1oftheSCM Agreement?
(JAPAN 5.)
Colombia notified thissystem under Article 25.1asweconsider thatArticle 28doesnotyet
apply todeveloping countries.
9. Does Colombia maintain anyother duty-free import ofrawmaterials andinputs besides
machinery andparts asanincentive toexports? (THAILAND 8.)G/SCM/Q/2/COL/8
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There isanexemption fromcustoms duties andvalue-added tax,forrawmaterials andinputs
usedwholly orpartially inproducts thatareexported.
II. Further information requested byThailand andtheUnited States concerning theVallejo Plan.
Please givedetails oftheVallejo Plansystem andtheimport-export system according tothe
notification format
Colombia notified theimport-export system formachinery andspare partsinaccordance with
theestablished format, asanalysed inthelightofthequestions thathavebeensubmitted. There is
alsoanimport-export system forrawmaterials known astheVallejo Planwhich wedescribe below.
Thisprogramme wasnotnotified because itdoesnotinvolve asubsidy.
Special import-export system forrawmaterials andinputs (Vallejo Plan)
1. Description oftheprogramme
Thisisamechanismpermittingproducers/exportersortraderstoimport,withexemption
fromcustoms duties andvalue-added tax,inputs, rawmaterials andintermediate goods
usedintheproduction ofgoods forexport.
2. Objective oftheprogramme
Theprogramme seeks toencourage exports, inparticular non-traditional exports, so
astoachieve greater export diversification.
3. Basis andlegislation
Articles 172and173(b) ofDecree Law444of1967.
4. Form oftheincentive
Exemption from payment ofcustoms duties andVAT.
5. Beneficiaries andmechanism
Anynatural orlegal person whose business isproducer/exporter ortrader inany
economic sector oractivity iseligible.
6. Duration oftheprogramme
Theprogramme isofindefinite duration.
III. CERT
TheCERT Programme wasnotified intheinterests oftransparency andwesubmit additional
information inthatspirit, asitmust bestressed thattheprogramme assuchisnotasubsidy except
insofar asitmight exceed therefund oftaxes.G/SCM/Q/2/COL/8
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1. Could Colombia givemore details onhowthelevelofthetaxreimbursement isdetermined?
(CANADA 1,THAILAND 2AND 4.)
Law48of1983established that,through theCERT, theGovernment could stimulate exports
byrefunding amounts equivalent toallorpartoftheindirect taxes, charges andother levies paidby
theexporter.
Law7of1991 subsequently endorsed thistheinstrument andrestricted therefund solely to
VAT, theindustry andtrade tax,andcustoms charges.
ThisLawalsoestablishedthattheForeignTradeCouncilwouldberesponsibleforrecommending
thecorresponding CERT levelinaccordance withtheproducts andconditions ofthemarket towhich
theywereexported, andinlinewiththeNational Government 'smonetary, fiscal, exchange andtariff
policies.
ThecurrentCERTisassignedby10-digittariffsubheadinginaccordancewithastructureadopted
in1992.
Certain products, suchasmade-up articles, footwear andpublishing industry products intended
forPanama andtheNetherlands Antilles arenoteligible fortheCERT because theGovernment has
found evidence offictitious salesorover-invoicing tothese destinations.
There arecurrently threeratesoftheCERT, which isgranted onthef.o.b. value oftheproduct:
2.25percent, 3.60percentand4.50percent.
2. Eligible sectors andlimits interms ofquantity andvalue (CANADA 2,JAPAN 1,EC1.)
TheCERT isgranted tonon-traditional exports regardless ofwhether theyareagricultural
orindustrial. Traditional export products, suchascoffee, petroleum andpetroleum products, coal,
ferronickel andsome minerals areexcluded, asareother exports suchasmeat, wood pulp, fireworks,
basemetals, weapons andworks ofart.
3. Towhom andhowisthesubsidy paid? (CANADA 3.)
TheCERT ispaidtoanyexporter ofaneligible product. ItispaidbytheBanco delaRepública
intheform ofabearer certificate thatisfreely negotiable onthestock market, oncethebeneficiary
hasrepatriated theforeign exchange fromtheexport operation. TheCERT iscalculated onthef.o.b.
value oftheexports. Inthecaseofexports under theimport-export system, theCERT ispaidonthe
domestic value added.
Thecertificates arevalid fortwoyears, during which period theexporter mayusethem to
paycustoms levies, salestaxes, withholding taxandother taxes andcharges.
4. Istheprogramme alsoavailable forimported capital goods? (EC2.)
Yes,theprogramme isavailable forimports ofcapital goods. Inthecaseofexports made
through thespecial machinery import-export system, theCERT isgranted onthebasisofthedomestic
value added, which means thattheincentive isnotcalculated onthef.o.b. value.G/SCM/Q/2/COL/8
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5. HasColombia notified thesystem under Article 28.1oftheSCM Agreement? (JAPAN 2.)
Colombia notified itunder Article 25.1.
6. ColombiaestablishedthedurationoftheprogrammewassubjecttotheWTOcommitments.
Inthisrespect, canColombia provide thetable indicating howthissubsidy willbephased out?
(EC3,KOREA 1,ARGENTINA 1,JAPAN 3,THAILAND 6.)
Aprogramme forphasing outtheincentive doesnotexist. Nevertheless, Colombia hasaclear
commitment tophase outthesubsidy component asfrom theyear2003.
7. Normally CERT iscalculated from thepercentage ofthef.o.b. value oftheexports. Is
there anyother method? Ifyes,please givedetails. (THAILAND 1)
When theproduct isexported through theimport-export system, theCERT iscalculated only
onthedomestic value added.
8. What isthedifference between CERT value andsubsidy value? (THAILAND 3)
Thesubsidy value equals thepartofCERT thatexceeds theamount corresponding totherefund
ofindirect taxesandtariffs involved intheexport. Detailed information doesnotyetexistontheamount
ofsubsidy byproduct andmarket ofdestination, butonlyontheCERT value actually granted.
9. Concerning theCERT Programme, thenotification states thatI.7thatin1994 CERT
amounted toUS$79.6 million, ofwhich US$17.5 million represents thevalue ofthesubsidy ...
Could youplease explain howtheamount ofthesubsidy wascalculated? (UNITED STATES 7.)
Forapreliminary calculation ofthevalue ofthesubsidy, thedifference wastaken between
theCERT actually grant foralleligible exports andtheamount ofthetaxrefund forthose exports.
Asforthevalue ofthesubsidy, anerror hasbeennoted intheamount estimated for1994,
which isUS$22 million rather thanUS$17.5 million. Colombia willtherefore submit thecorresponding
correction tothenotification.
10. Please givethelistofsecondary andnon-traditional exports andexplain howtheyare
classified (THAILAND 5.)
Non-traditionalexports,orminorexports,areallexportsotherthancoffee,petroleum,petroleum
products, carbon andferronickel.
Non-traditional exports maybeclassified asfollows: agricultural products other thancoffee,
fisheries products, agro-industrial products, made-up articles, textiles, graphic arts,footwear, leather
manufacture, plastics manufactures, soaps andcosmetics, metal-working products, basic chemicals,
andpaper, among others.
IV. Freezones
TheFreeZones Programme wasnotified intheinterests oftransparency andinformation
exchange, asweconsider thatthefreezones assucharenotasubsidy, except perhaps onlytheexemption
from income taxonexport earnings.G/SCM/Q/2/COL/8
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There isadescription inthefirstparagraph butthismeasure concerning theoperation
ofthefreezoneisnotified ontheunderstanding thatforallthecountries whoareMembers of
theWTO itisaquestion ofaninstrument covered byArticle 3oftheAgreement onSubsidies
andCountervailing Measures. Inthisconnection, could Colombia explain ifthere isanyreason
toexclude export subsidies inthefreezones from prohibited subsidies? (JAPAN 7.)
Atthetimewhen thenotification wassubmitted there didnotappear tobeaconsensus onthe
needtonotify freezoneprogrammes. Thatiswhythenotification contained theclarification that
Colombia interprets some components oftheprogramme asbeing covered byArticle 3oftheSCM
Agreement. Wetherefore hope thatattheconclusion ofthisprocess ofnotification andreview of
notifications there willbeacommon understanding onthisquestion.
1. Istheprogramme offered toalleconomic sectors including agriculture? (CANADA 7.)
TheFreeZones Programme onlycovers theproduction ofindustrial goods andservices.
2. How many freezones exist inColombia? What aretheGovernment 'scriteria for
establishing freezones? (THAILAND 11.)
Atpresent there aretenindustrial freezones forgoods andservices.
Persons interested inhaving anareadeclared afreezonehavetosubmit totheMinistry of
Foreign Trade thefinancial, technical andeconomic feasibility studies demonstrating theviability of
theproject, theinfrastructure development programme fortheareawhere thefreezone istobe
developed, andanenvironmental viability study.
3. According tothenotification (document G/SCN/N/3/COL/Suppl.1), page5,Section III(9),
please classify export value byproducts anddestination. (THAILAND 12.)
Information isnotavailable onthevalue ofexports bydestination andproduct.
V. Programmes notnotified
1. PROEXPO/BANCOLDEX loans (UNITED STATES 1andEC6.)
Under thisscheme loans aregranted atinterest ratesbelow themarket rates. TheEuropean
Union would likeclarification onwhythissubsidy wasnotnotified totheWTO andrequests that,
ifappropriate, Colombia supplies anotification under Article 25oftheSCM Agreement. Italso
asksforcommentsonthecompatibilityoftheschemewithitsobligationsundertheSCMAgreement
onplans tophase-out these subsidies.
Bancoldex loans werenotnotified totheWTO because theinterest ratesaregranted onmarket
terms andreflect theinstitution 'scosts.
2. Instituto deFomento Industrial (Industrial Development Institute) -IFI
(UNITED STATES 3.)
TheIFIprovides financing atmarket ratesindollars orpesos formanufacturing sector products,
inparticular forworking capital, fixed assets, modernization andenvironmental projects.
3. Fondo Financiero deProyectos deDesorrollo (Development Project (Financing Fund)
(Fonade) (UNITED STATES 4.)G/SCM/Q/2/COL/8
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FONADE isaninstitute which onlyfinances studies ofissues ofparticular interest tothenational
government, which doesnotinvolve asubsidy ofaproduction activity.
4. FINDETER (UNITED STATES 5.)
FINDETER isafinancial entity whose business purpose istopromote regional andurban
development through financing andconsultancy anddesign, execution andadministration ofinvestment
projects concerning infrastructure for:drinking water andbasic sanitation, urban andrural roads,
educational infrastructure, centralized transport installations, market places, slaughter houses andhealth
centres.
Tocarry outitsfunctions, FINDETER rediscounts loans toterritorial entities, decentralized
entities,metropolitanareasandassociationsofmunicipalities.Theterritorialentities(RegionalEconomic
andSocial Planning Councils -CORPES) arelocated infourregions ofthecountry.
5. SEGUREXPO (UNITED STATES 6.)
SEGUREXPO provides twoforms ofexport credit insurance: commercial risksandpolitical
risks. SEGUREXPO isaprivate entity, andpolicy costs arethemarket onesandvaryaccording to
thelevelofrisk,product anddestination.
6. Transport subsidies forfreight andtransshipment (EC7)
- Coverage: exports dispatched toplaces towhich direct, regular andsuitable dispatches
donotexistandtherefore connection through another portisrequired.
- Excluded products: coffee, leather, petroleum andpetroleum products, nickel, gold,
coal, precious stones, flowers, bananas, sugar, textiles andcement.
Although thelegalprovisions areinforce, thisprogramme isnotinoperation.