WORLD TRADE
ORGANIZATIONG/SCM/N/38/CRI
24 March 1999
(99-1178)
Committee on Subsidies and
Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
New and Full Notifications Pursuant to Article XVI:1 of
the GATT 1994 and Article 25 of the SCM Agreement
COSTA RICA
The following communication, dated 25 February 1999, has been received from the
Permanent Mission of Costa Rica.
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PERIOD UP TO 30 JUNE 1998
A. G RANTING OF TAX CREDIT CERTIFICATES
1. Description of subsidy
The Tax Credit Certificate (CAT) is a subsidy granted solely to enterprises that signed an
export contract before 2 December 1992 and which, through an addendum to this contract, received a
reduction of 30 per cent of the amount of the Certificate prior to 1996, calculated on the basis of the
f.o.b. value of the exports.
CATs granted to enterprises that meet the two criteria set out in the preceding paragraph give
the right to the following:
(a) A CAT of 10.5 per cent when the product exported includes 35 per cent to 50.50 per
cent of national content and is exported to third markets;
(b) a CAT of 14 per cent when the product exported has 50.51 per cent or more of
national content and is exported to third markets other than the United States and
Puerto Rico.
CATs are freely negotiable non-interest bonds valid for 24 months after the date of maturity.
They are issued by the Central Bank of Costa Rica in national currency and are used to pay direct or
indirect taxes collected by the Central Bank as the State Treasurer.
2. Period of notification
The period of notification is three years as from 30 June 1998.G/SCM/N/38/CRI
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3. Policy objective
The object of the subsidy is to promote non-traditional exports of products to third countries.
4. Background and authority
CATs were introduced and granted under the Tax Law, Law No. 7092, of 21 April 1988,
published in the official journal La Gaceta No. 96 of 19 May 1988, and the amendments thereto, and
are also regulated by the Rules on the Profits, Time-Limits and Conditions of Export Contracts of
17 October 1994 issued by the Ministry of Foreign Trade's National Investment Council and
published in La Gaceta  No. 229 of 1 December 1994.
Decree No. 23784-COMEX of 9 November 1994, published in La Gaceta  No. 228 of
30 November 1994, defines traditional products and "third markets" for the purpose of this subsidy.
Pursuant to Executive Decree  No. 25690-COMEX, published in La Gaceta  No. 5 of
8 January 1997, the functions previously carried out by the National Investment Council with respect
to the CATs will be taken over by the Ministry of Foreign Trade, with the support of the Foreign
Trade Promotion Agency, set up under Law No. 7638, published in La Gaceta  No. 218 of
13 November 1996.
5. Form of the subsidy
The subsidy is used for exemption from direct or indirect taxes collected by the Central Bank.
6. Beneficiaries and mechanism
The Tax Credit Certificate (CAT) is an incentive that is only granted to enterprises (national
or foreign natural or legal persons) that signed an export contract before 2 December 1992 and which,
through an addendum to this contract, received a reduction of 30 per cent of the amount of the
Certificate prior to 1996, calculated on the f.o.b. value of the exports.
An export contract is an instrument to grant benefits to enterprises  exporting non-
traditional  products.
Pursuant to Executive Decree No. 2 3784-COMEX of 9 November 1994, published in
La Gaceta  No. 228 of 30 November 1994, "non-traditional exports" mean exports of goods produced
or processed in Costa Rica with the exception of the following:
Product HS Line
- Coffee (excepting roasted, ground and packaged
coffee, in bags or tins with a net weight not
exceeding 5 kg. per unit)0901.1
- Fresh bananas 0803
- Cocoa beans 1801
- Refined cane sugar 1701.9
- Paddy and hulled rice 1006
- Beans 0713
- Maize 1005
- Sorghum 1007.1214.90
- Unmanufactured tobacco, including tobacco refuse 2401
- Untanned skins and hides, including parings o f
tanned hides4101-4103G/SCM/N/38/CRI
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Product HS Line
- Meat of bovine animals, fresh, chilled or frozen,
excepting veal0201-0206
- Logs and sawn wood 4403 and 4407
- Unprocessed mineral products 2601-2617
- Live bovine animals, excepting thoroughbreds 0102.9
- Live swine, excepting thoroughbreds 0103.9
- Live horses, excepting thoroughbreds 0101.19
- Cotton 5201, 5203
- Unprocessed non-metallic minerals, excepting
coal, petroleum, fertilizer and precious stones
- Iron ore and concentrates
- Scraps of iron and steel 7204
- Common non-ferrous metals and their
concentrates
- Non-ferrous metal scraps 7404, 7503, 7602, 7802, 7902, 8002 and
other scraps in Chapter 81
- Silver and platinum 2616
- Coal and briquettes 2701-2703
- Coke 2704
- Coins 7118.90
Executive Decree No. 23784-COMEX of 9 November 1994, published in La Gaceta  No. 228
of 30 November 1994, defines "third markets" for the purpose of this subsidy as countries to which
goods produced or processed in Costa Rica are exported with the exception of the following:
(a) Member countries of the General Treaty on Central American Economic Integration;
(b) countries with which trade agreements have been signed allowing goods to be
imported into these countries free of import duty.
The various stages in the procedure for granting Tax Credit Certificates are described below1:
(a) An exporter submits a CAT application to  the Central Bank of Costa Rica (BCCR).
The exporter has 24 months from the date of exporting the goods or declaring the
receipt of foreign currency in which to apply to the Central Bank of Costa Rica for a
CAT;
(b) after the CAT application has been submitted to the BCCR, the latter examines the
application and if it is in order issues the corresponding CAT;
(c) after a period of 18 months from the date of export or declaration of the receipt of
foreign currency has elapsed, the CAT is deemed to have matured;
                                                     
1 Terms used:  issued :  used by the Central Bank of Costa Rica (BCCR) to indicate that the date on the
certificate granting the CAT is the date on which the g oods were exported or the receipt of foreign currency was
declared;  procedures at the BCCR :  procedures carried out at the Central Bank of Costa Rica involving
consideration of the exporter's application for the subsidy;  granted :  date or time at which the BCCR gives the
beneficiary the document granting the CAT;  period of maturity :  18-month period following the date on which
the goods were exported or the receipt of foreign currency was declared;  application period :  24-month period
during which the exporter may submit a CAT application to the BCCR, beginning on the date on which thegoods were exported or the receipt of foreign currency was declared;  expiry period :  24-month period after the
Tax Credit Certificate has matured.G/SCM/N/38/CRI
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(d) the Certificate is valid for 24 months after its maturity and if not used during this
period becomes invalid.
7. Estimated amount of the subsidy
CATs granted to enterprises that meet the two criteria set out in paragraph 1 give the right to
the following:
(a) A CAT of 10.5 per cent when the product exported includes 35 to 50.50 per cent of
national content and is exported to third markets;
(b) a CAT of 14 per cent when the product exported has 50.51 per cent or more of
national content and is exported to third markets other than the United States or
Puerto Rico.
An estimate has been made of the amount lost to  Costa Rica's budget as a result of the CATs,
based on the number of CATs granted in previous years which will mature during the period covered
by the estimate.
8. Duration of the subsidy
CATs are granted up to the year 1999 to enterprises that meet the requirements set out in
paragraph 1.
9. Trade effects of the subsidy
No specific studies have been carried out to determine the direct impact of the subsidy on
growth in exports.  Nevertheless, it should be noted that the export sector is one of the most vigoroussectors of Costa Rica's economy, mainly due to sales of non-traditional products to third markets,
which, in United States dollar terms, grew at a ra te exceeding that of total exports over the period
1992-1996.  The trend in the export sector has been towards non-traditional products, whose share of
total exports rose from 33.8 per cent in 1986 to 60.6 per cent one decade later.
B. 
EXEMPTIONS AND OTHER INCENTIVES GIVEN TO ENTERPRISES EXPORTING NON -TRADITIONAL
PRODUCTS TO THIRD MARKETS WHICH SIGNED AN EXPORT CONTRACT BEFORE
30 SEPTEMBER  1996 AND, PRIOR TO THAT , REQUESTED EXTENSION OF THE CONTRACT
Exemption covers the payment of any taxes or fees, sales and consumption tax on imports or
local purchase of raw materials, processed or semi-processed products, components and parts,
wrapping materials and packaging, as well as other materials and goods necessary for the functioning
of the beneficiary enterprise or used as a component in the products exported.
This exemption applies until the expiry of the contract extension, which is up to
30 September 1999.
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