RESTRICTED
WORLD TRADE WT/ACC/ECU/2
17May1995
ORGANIZATION(95-1295)
Original: Spanish
ACCESSION OFECUADOR
Notification under Article 5,paragraph 1oftheTRIMs Agreement
_______________
Notification byEcuador Under Paragraph 1ofArticle 5
oftheAgreement onTrade-Related
Investment Measures
I. Description ofthemeasure anditsmain features
WithinthecontextoftheAndeanSubregionalPactandbyvirtueoftheprovisionsofChapterIV,
Section BoftheCartagena Agreement, on13September 1993, Ecuador together withColombia and
Venezuela signed theComplementarity Agreement fortheAutomotive Sector, withaviewtoadopting
acommon policy topromote specialization inthesector andtakeadvantage ofthewider subregional
market inarational manner andunder equitable competitive conditions.
Under theComplementarity Agreement fortheAutomotive Sector, theGovernment ofEcuador
requires vehicle assembly enterprises toincorporate apercentage oflocalcontent invehicles assembled
inthecountry.
ThispolicywasmademoreflexibleintheregionalframeworkoftheAndeanPact,whichrequires
assemblingenterprisestoincorporateaminimumcontentofmaterialsproducedinthesignatorycountries
totheAgreement, rather thanofdomestic production.
1. Which isthecategory intheillustrative listunder which themeasure falls?
Under theAnnex totheTRIMs Agreement, thecategory oftheillustrative listunder which
thismeasure fallsisNumber 1,paragraph (a).
2. IstheTRIM applied bytheGovernment under discretionary authority ormandatory legislation?
TheTRIM isapplied under ageneral law.
3. Where theTRIM isgeneral innature, whatarethecriteria fordetermining towhich enterprises
itapplies?
Themeasure applies toanynational orforeign vehicle assembly enterprise inEcuador.
4. Where theTRIM isapplied pursuant tomandatory legislation, doesthelegislation require the
measure tobeapplied tonewenterprises ornewinvestments ofexisting enterprises?
Therelevant Andean provisions apply toallexisting national orforeign assembly enterprises
inthecountry andtoanythatmaybeestablished inthefuture.WT/ACC/ECU/2
Page2
5. Whether compliance withthemeasure bytheenterprise is(a)mandatory orenforceable under
domestic laworadministrative rulings or(b)necessary toobtain anadvantage. Inthelatter case, the
nature oftheadvantage should bedescribed.
TheAndean provisions aremandatory andapply generally toallassembly enterprises inthe
country.
6. When theTRIM relates tospecific products, sufficient detail onthese products todefine the
scope ofthemeasure must beprovided.
Theminimum percentages tobeincorporated apply tovehicle assembly, divided intotwo
categories:
(a) Forcategory 1:thecurrent requirement is35percent, which willincrease to
40percentfrom 31December 1995.
(b) Forcategory 2:Therequirement iscurrently 35percent.
7. ThedateofimplementationoftheTRIMandthenatureofanymodificationoftheTRIMeffected
within 180daysprior totheentry intoforce oftheWTO Agreement.
Themeasure hasapplied inEcuador sinceitwassigned. TheAgreement introduced theconcept
ofapercentage ofsubregional purchases, aformula forcalculating itandrequirements forthe
corresponding content.
8. Inapplying theTRIM, under previous legislation, isthere aprovision foritsphasing down
and/or elimination?
Noprovision hasbeenmade foritsphasing down and/or elimination.
9. Thedomestic law,regulation oradministrative guideline under which theTRIM isapplied;
acopyshould besubmitted totheSecretariat tobeavailable forinspection byinterested members.
AcopyoftheComplementarity Agreement fortheAutomotive Sector isannexed.
10. ThelevelofGovernment applying theTRIM, thename oftheimplementing agency andany
information ontheprocedures governing itsapplication necessary toestablish itsnature andscope.
TheMinistry ofIndustry, Trade, Integration andFishery (MICIP) isthebodyresponsible for
applying andenforcing themeasure. TheMinistry requires areport every sixmonths byenterprise
andbycategory ofthepercentage ofsubregional purchases, andeachyearareport byspecialist audit
andcontrol entities, contracted directly byassembly andautopart enterprises.
II. General information ontheprogramme inquestion
Thepolicy ofsupporting theautomotive sector pursued byEcuador falls under the
Complementarity Agreement fortheAutomotive Sector oftheAndean Pact, which wasconceived as
ameans ofpromoting thedevelopment oftheincipient regional automotive industry.WT/ACC/ECU/2
Page3
Official Gazette oftheCartagena Agreement
Year XI,Number 168
Lima, 16December 1994
Resolution 355
Publication oftheComplementarity Agreement fortheAutomotive Sector
Signed byColombia, Ecuador andVenezuela on13September 1993
TheBoard oftheCartagena Agreement,
HAVING REGARD TO: Articles 37oftheAgreement and7ofDecision 370;
CONSIDERING: thaton13September 1993, Colombia, Ecuador andVenezuela signed the
Complementarity Agreement fortheAutomotive Sector withaviewtoadopting acommon policy to
promote specialization inthesector andtakeadvantage ofthewider subregional market inarational
manner andunder equitable competitive conditions;
Thaton20May1994, thesignatory countries totheabove-mentioned agreement signed an
Addendum tosupplement thesaidConvention;
ThattheConvention anditsAddendum weresubmitted totheCommission oftheCartagena
Agreement atitsLXIIIrd Regular Session, on25and26November 1994 inQuito, Ecuador;
Thattheabove-mentioned Convention anditsAddendum should bepublished inaccordance
withArticle 7ofDecision 370;
RESOLVES:
SingleArticle.TopublishasanannextothepresentResolutiontheComplementarityAgreement
fortheAutomotive Sector, signed on13September 1993 byColombia, Ecuador andVenezuela and
itsAddendum adopted on20May1994.
Inaccordance withArticle 13ofDecision 9oftheCommission, thepresent Resolution shall
becommunicated tothemember countries andshallenter intoforce from thedateofitspublication
intheOfficial Gazette oftheCartagena Agreement.
Done intheCityofLima, Peru, onthe9thdayofDecember of1994.
IvánGabaldon Márquez
Bruno Faidutti NavarreteWT/ACC/ECU/2
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ANNEX
Complementarity Agreement fortheAutomotive Sector
TheGovernments ofColombia, Ecuador andVenezuela.
HAVING REGARD TO: Articles 37and38oftheCartagena Agreement andArticle 6of
Decision 335.
CONSIDERING: Thatunder Decision 335,themember Countries undertook todefine as
quickly aspossible acommon policy fortheautomotive sector.
Thatinorder toachieve thestated objectives itisnecessary todefine thelevies applicable to
vehicles, andacommon policy forcontent ofcomponents andpartsandcomplementarity between the
member Countries.
APPROVE:
Article 1.Theconclusion ofthefollowing Industrial Complementarity Agreement forthe
Automotive Sector, withaviewtoadopting acommon policy totakeadvantage ofthewider subregional
market inarational manner andunder equitable competitive conditions, byincreasing competitiveness
andefficiency.
Article 2.Thefollowing definitions areadopted forproducts listed intheAnnex tothepresent
Agreement:
(a) Category 1:Includes motor cars; campers; passenger vehicles forupto16persons
including thedriver; goods vehicles withatotalweight fully-loaded oflessthanor
equal to4,537 tons(ortheequivalent to10,000 American pounds) andtheirbodies.
(b) Category 2:Allvehicles notincluded inCategory 1.
Article 3.Forvehicles inCategory 1,theparticipating countries shallestablish acommon
external tariff of35percent, whose application shallcommence atthelatest on1January 1994.
Forvehicles inCategory 2,theparticipating countries shallestablish acommon external tariff
of15percent,whose application shallcommence atthelatest on1January 1994. Ecuador maymaintain
itscurrent tariff level foroneyear, witheffect from thesigning ofthepresent Agreement. Atthe
endofthisperiod, itshallbestandardized at10percent.
Article 4.Forimported components andpartsforassembly ofvehicles inthesubregion, defined
asCKD, acommon external tariff withaminimum of3percentandamaximum of5percentshall
beestablished, tobeapplied atthelatest from 1January 1994.
Article5.Theparticipatingcountriesshallnotpermittheimportofusedvehiclesornewvehicles
from prior years ormodels, from 1January 1994 atthelatest. Ecuador shallapply thisprohibition
from 1October 1994 atthelatest.
Article 6.Forexports ofvehicles between theparticipating countries, thespecific requirements
oforigin inforce under Resolution 336oftheBoard oftheCartagena Agreement (JUNAC) shallbe
applied.WT/ACC/ECU/2
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Article 7.Forthemanufacture ofvehicles, theparticipating countries shallrequire aminimum
percentage ofcontent fromsignatory countries tothisAgreement, which shallbeaminimum of40per
centforCategory 1inColombia andVenezuela and35percentinEcuador. ForCategory 2the
percentage shallbe30percentforallsignatories.
These minimum percentages shallbemeasured asfollows:
I=1- (CKD)
____
PD
Where:
I: Theminimum percentage ofcontent from participating countries.
CKD: Sumofthetotalvalue ofCKD imports.
PD: Sumofsalestodistributors bycategory (excluding value-added taxorsalestax).
Theabove percentages shall beincreased to45percentforCategory 1inColombia and
Venezuela from 1January 1995 andto40percentfrom 31December 1995 forEcuador.
ForCategory 2,thepercentage shallbeincreased to35percentfrom 1January 1995.
Paragraph. Originating products oftheparticipating countries shallbedeemed those which
comply withtherules oforigin established intheAndean Group.
Article 8.Thegovernments oftheparticipating countries shallenforce compliance withthe
percentage ofcontent, forwhich purpose theyshall require atleastevery sixmonths areport by
assembler andbycategory andevery yearareport byspecialist audit andcontrol entities, directly
contracted bytheproducer enterprises inthesector andcomplying withthedomestic lawofeach
participating country. Theresult shallbesubmitted, withthesame frequency, totheCommittee for
theAutomotive Industry tobeestablished under thefollowing article.
Article9.AnAutomotiveCommitteeshallbeestablishedconsistingoftheparticipatingcountries
tothepresent Agreement, itscomposition, areaofactivity andobjectives being thesame asthose of
theSubregional Committee fortheAutomotive Industry established byDecision 298oftheCommission.
ThisCommittee shallcommence thefollowing tasks immediately:
- Determine astandardized formula forpartscontent atthelatest by31December 1993,
thepercentages ofwhich shallbeequivalent tothose established inArticle 7ofthe
present Agreement;
- Establish rules oforigin fortrade invehicles between theparticipating countries, at
thelatest by31December 1993;
- Harmonize thedefinition oftheoverall [...];
- Fixadate, atthelatest by1July1994, fortheunification oftheCommon External
Tariff andpercentages ofcontent;WT/ACC/ECU/2
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- Establish anautomotive sector export policy atthelatest by31December 1993;
- Draw upamedium-term programme topromote subregional content invehicles. The
programme shallbedefined atthelatest by1July1994;
- Propose arestructuring oftariffs required toapply thisAgreement;
- Evaluate theapplication oftheCommon External Tariff withaviewtomodifying it
astheeconomic policy oftheparticipating countries evolves; and
- Establish acommon policy fornegotiations withthirdparties.
Article 10.Thepresent Agreement shallbebinding fromthedateofsignature andshallenter
intoforce on1January 1994.
TRANSITIONAL PROVISION
One: Until suchtimeastheAutomotive Committee made upoftheparticipating countries
defines aharmonized content formula, theymayapply theirinternal rules without prejudice tothe
provisions ofArticle 7.
FOR THE GOVERNMENT OFCOLOMBIA
LuisAlberto Moreno
Minister forEconomic Development
FOR THE GOVERNMENT OFECUADOR
Jorge Garcia T.
Minister forIndustry, Trade,
Integration andFishing
FOR THE GOVERNMENT OFVENEZUELA
Gustavo Pérez Mijares
Minister forDevelopment
Miguel Rodríguez Mendoza
Minister ofState
President oftheInstitute of
Foreign TradeWT/ACC/ECU/2
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ANNEX
ANDEAN No. Description
8701.20.00 -Road tractors forsemi-trailers
8702.10.00 -Motor vehicles forthetransport ofgroups ofpersons withcompression
ignition internal combustion piston engine (diesel) orsemi-diesel
8702.90 -Other motor vehicles forthetransport ofgroups ofpersons
8702.90.10 --Trolley buses
8702.90.90 --Other
-Other vehicles, withspark ignition internal combustion reciprocating
piston engine:
8703.21.00 --Ofacylinder capacity notexceeding 1,000 cc
8703.22.00 --Ofacylinder capacity exceeding 1,000 ccbutnotexceeding 1,500 cc
8703.23.00 --Ofacylinder capacity exceeding 1,500 ccbutnotexceeding 3,000 cc
8703.24.00 --Ofacylinder capacity exceeding 3,000 cc
-Other vehicles, withcompression ignition internal combustion piston
engine (diesel orsemi-diesel):
8703.31.00 --Ofacylinder capacity notexceeding 1,500 cc
8703.32.00 --Ofacylinder capacity exceeding 1,500 ccbutnotexceeding 2,500 cc
8703.33.00 --Ofacylinder capacity exceeding 2,500 cc
8703.90.00 --Other
-Other, withcompression ignition internal combustion piston engine
(diesel orsemi-diesel):
8704.21.00 --Ofagross vehicle weight notexceeding 5tonnes
8704.22.00 --Ofagross vehicle weight exceeding 5tonnes butnotexceeding
20tonnes
8704.23.00 --Ofagross vehicle weight exceeding 20tonnes
-Other withspark ignition internal combustion piston engine:
8704.31.00 --Ofagross vehicle weight notexceeding 5tonnes
8704.32.00 --Ofagross vehicle weight exceeding 5tonnes
8704.90.00 --Other
8706.00.10 -Bodies forthevehicles ofHeading No.87.03
8706.00.90 -Chassis fitted withengines forthemotor vehicles ofHeadings Nos.
87.01 to87.05WT/ACC/ECU/2
Page8
ADDENDUM
TheMinister forEconomic Development ofColombia, Doctor Mauricio Cárdenas, theMinister
forIndustry, Trade, Integration andFishing ofEcuador, Doctor JoséVincente Maldonado andthe
Minister forDevelopment ofVenezuela, Doctor LuisCarlos Palacios, representing theirrespective
countries, agree tosignthepresent Addendum totheComplementarity Agreement fortheAutomotive
Sector, inthefollowing terms:
Article 1.From 1January 1995, Colombia andVenezuela shalladopt thefollowing formula
forparts content:
PCS= IS+Vex
________
IS+CKD
Where:
PCS: Percentage ofsubregional purchases
IS: Sumofthecontent ofparts andspares originating inthesubregion
Vex: Added value ofexports, measured asf.o.b. value
CKD: Sumofthetotalvalue ofimported content ofthevehicle, measured asc.i.f.
value.
Article 2.Forthepurposes oftheapplication oftheformula inArticle 1,theadded value
ofexports shallbeamaximum of25percentofthetarget content (PCS) defined inArticle 4.
Incalculating theadded value ofexports (Vex) thefollowing shallbetaken intoaccount:
(a) Theadded value ofexports tothirdcountries;
(b) theadded value ofexports within thesubregion bothofvehicles andmotor parts, in
accordance withthefollowing timeschedule:
Year Maximum percentage off.o.b.
value ofexports
1995 40
1996 30
1997 20
1998 10WT/ACC/ECU/2
Page9
Article 3.Ecuador shall maintain theapplication oftheformula defined inthe
Complementarity Agreement fortheAutomotive Sector which isthefollowing:
I=1- CKD
___
PD
Where:
I: Theminimum percentage ofcontent.
CKD: Sumofthetotalvalue oftheimported content ofthevehicle, measured asc.i.f.value.
PD: Sumofthesalestodistributors bycategory (excluding value-added taxorsalestax).
Ecuador shall evaluate theformula adopted byColombia andVenezuela andby
31December 1996 atthelatest shallchoose toapply oneofthetwoformulas.
Article 4.From 1January 1995andfortheformulas indicated inArticle 1thefollowing targets
forcontent shallbefixed forColombia andVenezuela:
Year 1995 1996 1997 1998
Category 1 30 30 32 33
Category 2 15 16 17 18
Article 5.InthecaseofEcuador theobligation shall be40percentforcategory 1and
35percentforcategory 2from 1January 1996.
Article 6.From 1January 1995, forthepurposes offulfilling targets, itshallnotbepermitted
touseexcess content overtherequired target levelfrom previous years.
Article 7.Inthecaseofanewmodel, assemblers mayrequest thatthemodel beexempted
from meeting therespective target, foraperiod notexceeding three months. Inthisevent, forthe
application oftheformula, neither CKD material imported forthemodel, norpartsincluded init,shall
betaken intoaccount, norshallacertificate oforigin beissued.
Article8.CKDmeansthetotalofcomponentsandpartsimportedbyvehicleassemblyindustries,
dulyauthorized bytheGovernment ofeachcountry. Components andpartsmaking upthetotalCKD
maybeimported fromdifferent origins, provided theyformpartofthesametotalCKD andareintended
forvehicle assembly andprovided thattheymeet, asaminimum, thefollowing levelofdisassembly:
1. Caborbodywork without finished paint work, disassembled intothefollowing
components: floor, cabsides androof, when applicable.
2. Disassembled chassis.
3. Frame disassembled orassembled incross pieces orrails.WT/ACC/ECU/2
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4. Power unitdisassembled intothefollowing parts: engine, transmission, clutch, brakes,
suspension andrearandfront axles.
Article 9.From 1July1994, thecommon external tariff fortheCKD defined intheabove
Article shallbe3percent.
Article 10.Inaddition tothetasks indicated inArticle 9oftheAgreement, theCommittee
shalldefine:
(a) By31December 1994:
Thecommon mechanism forsanctioning breaches oftheAgreement.
(b) by31December 1996:
(1) Targets forcontent tobemetby1January 1999.
(2) Rules oforigin tobeapplied within thesubregion, including theirpossible
elimination.
(3) Application ofastandard common content formula.
(4) Possible elimination ofthe10percentoff.o.b. value ofexports within the
subregion from1January 1999, asdefined inArticle 2,subparagraph (b)of
thisaddendum.
Done inSantafé deBogotá onthetwentieth dayofMay1994.
(signed)
FOR THE GOVERNMENT OFVENEZUELA
LuisCarlos Palacios
Minister forDevelopment
FOR THE GOVERNMENT OFECUADOR
JoséVincente Maldonado
Minister forIndustry, Trade,
Integration andFishing
FOR THE GOVERNMENT OFCOLOMBIA
Mauricio Cárdenas
Minister forEconomic Development