RESTRICTED
WORLD TRADE WT/ACC/HRV/3
29August 1995
ORGANIZATION(95-2488)
Original: English
ACCESSION OFCROATIA
Questions andReplies
totheMemorandum ontheForeign Trade Régime
(document L/7466)
Inacommunication,dated23September1993,circulatedasL/7298,theGovernmentofCroatia
applied foraccession totheGeneral Agreement onTariffs andTrade onthebasis ofArticle XXXIII
oftheGeneral Agreement. Having regard totheDecision adopted bytheGeneral Council on
31January 1995, theWorking Party ontheAccession ofCroatia totheGATT 1947wastransformed
intoaWTO Accession Working Party. Theterms ofreference oftheWorking Party arereproduced
indocument WT/ACC/HRV/1. Indocument L/7466, members hadbeeninvited tosubmit questions
inwriting concerning theforeign trade régime ofCroatia. Thequestions submitted bymembers and
thereplies thereto provided bytheauthorities ofCroatia arereproduced hereunder.
Delegations wishing toraiseadditional questions concerning theforeign traderégime ofCroatia
might inform thedelegation ofCroatia (with acopytotheSecretariat) ofsuchquestions inadvance
ofthenextmeeting oftheWorking Party, sothatconsidered replies canbemade available byCroatia
tomembers atthetimeoftheWorking Party meeting.WT/ACC/HRV/3
Page2
II Economy andForeign Trade
II Economy
II.1(b) Main Directions ofOngoing Economic Policies.
Question 1.
Please indicate forwhich utility services prices aresetbythelocal authorities.
ANSWER:
TheRepublic ofCroatia doesnothaveaspecial lawbywhich theState directly regulates
(determines) prices ofutility services. Under theexisting PriceControl System Act("Narodne Novine"
(Official Gazette) no.53/91, 73/91, 29/92, 43/93 and94/93) andtheSocial PriceControl Act("Narodne
Novine" no.27/85, 53/90 and26/93), prices aresetaccording tomarket conditions forallproducts
andservices, butlocalauthorities andadministration bodies canundertake measures todirectly control
utility services prices (rent, water, sewerage, central heating andsanitation). Measures forthedirect
control ofprices (thehighest levelofprices, returning ofprices toacertain levelandtheprice setting
method) areprescribed ifitisestimated thatthemarket hasbeenorcould beupset orthatprice trends
havebeendisturbed.
Direct control measures canbeinforce notlonger thansixmonths andcertain conditions are
prescribed fortheirextension.
Since utility services prices areaveryimportant iteminpersonal spending andtheiramount
directly affects thesocial position ofpeople, almost alllocalgovernment bodies control theprices of
major utility services withoneofthemeasures ofdirect control.
Question 2.
Onpage13[oftheMemorandum ontheForeign Trade Regime] itisstated that:"The Government
isdetermined toprevent monopolistic behaviour inthemarket especially foragricultural and
foodproducts where some limitation: totrade stillexist intheform ofinterventions from the
State commodity reserves". Furthermore, onpage 57,itisstated that: "The roleofreserves is
especially important inimplementing aprotective roleinagriculture".
CanCroatia please provide evidence thatsuchinterventions willnotactasabarrier totrade?
ANSWER:
Aswasstressed inourMemorandum, thebasicfunction oftheStateDepartment forCommodity
Reserves istotakecareofpermanent reserves which areintended tobeusedintheevent ofwaror
astateofemergency, andalsoforintervention intheevent ofmajor market disturbances.
Since Croatia declared independence, commodity reserves havebeenusedtomeettheneeds
ofthepopulation andbusiness inwar-stricken areas where freetrade hasbeenimpossible ordifficult
duetowaroperations.
Interventions from commodity reserves, aimed atpreventing anincrease indomestic prices
ofagricultural andfoodproducts orthemonopolistic behaviour ofcertain manufacturers, areanWT/ACC/HRV/3
Page3
instrumentthatisusedbythegovernmentonlyexceptionally.Itsusehasdecreasedsincetheliberalization
oftheforeign trade regime andtheabolition ofimport quotas.
Thesentence quoted onpage13oftheMemorandum should beregarded inthecontext ofthe
envisaged stabilization programme enforcement measures -whose chief goalistoreduce inflation -
andbearing inmind particularly thatpartoftheprogramme which wasimplemented inlate1993, just
before theabolition ofimport quotas formost ofthebasic agricultural andfoodproducts (detailed
description inanswers No.8,9and15).
Ifanintervention onthemarket viatheStateDepartment forCommodity Reserves isdecided,
theDepartment doesnotdirectly import thegoods inquestion butissues aninvitation tobidandselects
themostfavourable bid.Thechosen bidder thenimports thegoods inhisownname, onbehalf ofthe
Department.
Withthisprocedure, theprinciple ofnon-discrimination isobserved inlinewithArticle XVII
ofGATT. Thebidder ischosen exclusively onthebasisofthecommercial conditions offered (prices,
delivery deadline, etc.)
Under theStateCommodity Reserves Act,oneoftheforms ofmarket intervention isthebuying
ofbasic agricultural products atprotective prices, ifthemarket conditions aresuchthattheseproducts
fetchapricethatislower thantheprotective price. Thus, domestic producers, particularly thefarming
population,aregivensomesecuritythattheirmarketsurpluswillbeboughtout,whichstimulatesinterest
infarming. However, theCommodity Reserves Department buy-out andintervention measures are
usedveryrarely andonlyinexceptional cases, because onlyasmall quantity ofproduce isbought
outinthisway,asyears ofpractice haveshown (only 5-10percentofthetotalbuy-out inthepast
fewyears).
II.1(c) Current Economic Situation
Question 3.
Please elaborate ontheinformal sector oftheeconomy. What percentage ofCroatia 'seconomy
does theGovernment attribute totheinformal sector? What goods andservices aretraded
informally? What arethecauses oftheexistence oftheinformal sector? What measures isthe
Croatian Government taking toreduce therelative sizeoftheinformal sector?
ANSWER:
Asregards thenumber ofpersons active intheinformal sector oftheeconomy, andtheshare
oftheinformal sector interms ofgross domestic product, there arenoestimates available resulting
from comprehensive andsystematic research intothisphenomenon.
Preliminary estimates based onananalysis oftheactivities ofcertain categories ofthepopulation
(unemployed persons, persons employed intheofficial economy, non-active persons ofworking age,
displacedpersonsandrefugees),withregardtotaxevasion,showthatfrom16.7percentto27.2percent
ofthetotalpopulation ofthecountry participates intheinformal sector oftheeconomy. Onthebasis
ofcertain indications regarding timespent working andwork efficiency, itmaybeestimated thattheir
work corresponds tothework of10.3percentto16.3percentoftheemployed intheofficial sector
oftheeconomy.
Withrelatively hightaxation onwages andhighturnover tax,itispossible tomake considerable
gains through taxevasion, which, consequently, encourages it.WT/ACC/HRV/3
Page4
Duetotheabove, taxrevenues areestimated tobedecreased byabout onefifth.
Itisestimated thattheproduct realized intheinformal sector amounts to16-21 percentof
theofficial gross domestic product.
Informalsectoractivitiesmostlytakeplaceintrading,catering,building,carservicing,domestic
appliance repairing, business premises andhousing rentals, business services, personal services in
households, and,toalesser extent, intheprocessing industry andagriculture.
TheRepublic ofCroatia isasmall andopencountry affected bywar,undergoing transition,
andwhich hasbeengoing through along-lasting economic recession, allofwhich haveencouraged
thedevelopment oftheinformal sector oftheeconomy.
Aconsiderable decrease inoverall economic activity, accompanied byadropinhousehold
revenues inrealterms, anincrease inunemployment, andalarge number ofdisplaced persons and
refugees hasresulted inalarge partofthepopulation becoming active intheinformal sector. Their
attempts toalleviate thedifficulties caused bythedecline inliving standards isreflected intheincreased
demand forgoods andservices from theinformal sector.
Inorder toreduce theinformal sector, theGovernment hasfocused onthedevelopment of
thetaxsystem,taxadministration,andlegalsystem,establishinglegalstabilityandderegulatingeconomic
activity, asprerequisites forthebetter functioning ofthemarket economy.
Inaddition, thepolicy ofstabilization, privatization andstructural adjustment oftheeconomy
haspaved thewayforeconomic growth, freeenterprise, anincrease inemployment andhousehold
revenues inrealterms intheofficial economy, allofwhich willreduce theneedforengaging inthe
informal sector, aswellasthedemand forcommodities andservices supplied bythissector.
Consequently, theincrease inthetaxbasewillresult inthereduction ofthetaxburden, which
willalsocontribute toadecrease intaxevasion.
II.2(c) Foreign Debt oftheRepublic ofCroatia
Question 4.
What isthecurrent situation andfuture prospect ofthesuccession regarding assets andliabilities
offormer Yugoslavia ?
ANSWER:
FollowingtheconclusionsoftheLondonConferenceonFormerYugoslaviaandtheestablishment
ofaspecial working committee forsuccession, theprocess ofnegotiation onthesuccession offormer
Yugoslavia began overtwoyears ago.
Thefirstphase ofnegotiations resulted inadraftoftherulesofsuccession andthedevelopment
ofanapproximate inventory ofassets andliabilities offormer Yugoslavia. These documents,
unfortunately, didnotresult inagreement ontheimportant issues ofsuccession. Basically, two
approaches tosuccession weredifferentiated: thefirst,onthebasisofinternational lawasrepresented
byfourofthesuccessor states (Bosnia andHerzegovina, Croatia, Macedonia andSlovenia); andthe
second, which denies theinternational regulations andthebreak-up offormer Yugoslavia, supporting
therighttocontinuity which should beattributed totheFederal Republic ofYugoslavia (Serbia and
Montenegro).WT/ACC/HRV/3
Page5
Inorder toresolve thediscord overtheapproach tosuccession, theco-chairmen ofthe
Conference requested theopinion oftheArbitration Commission asanorgan oftheConference.
According totheconclusions oftheCommission, thenegotiations onsuccession should havebeen
resumed inlinewiththefirstapproach mentioned, thatis,international regulations. However, the
delegation from theFederal Republic ofYugoslavia rejected theconclusions oftheArbitration
Commission, thusblocking thework onsuccession viatheuseofthenegotiation method.
Notreconciling themselves withthissituation, theConference leaders decided tocontinue work
onthesuccession issues using agroup ofinternational experts who,incooperation withtheConference
leadership andonthebasis ofalltheprevious work onthequestion ofsuccession, haveprepared a
draftproposal ofthecontract onsuccession. After comments havebeengiven onthecontract byall
oftheparties involved, theConference leaders willprepare afinalcontract which, itisplanned, will
bepassed bytheU.N. Security Council andwhich willbindalltheparties. Thecontract would be
implemented withtheuseofthemechanisms oftheSecurity Council andotherinternational institutions.
According totheConference leaders 'plan,theanticipated contract should bepassed inthefirstquarter
ofnextyearfollowed bytheimplementation phase ofthecontract.
Moreover, theunallocated debts offormer Yugoslavia arelisted intheInventory ofAssets
andLiabilities andmust bedivided between thesuccessor states according toapre-defined system.
Meanwhile, Croatia hasaccepted theobligations onthebasis oftheallocated debts anditwillalso
accept itsshare oftheunallocated debts.
III Instruments andMeasures oftheForeign Trade System oftheRepublic ofCroatia
III.1 TheLawonForeign Trade Operations
Question 5.
What arethemain features ofthealterations andamends totheLawonForeign Trade Operations?
What arethemain features ofthe"further liberalization ofimports" (page 21.para. 3)?
ANSWER:
Theamendments andalterations totheLawonForeign Trade Activities ofNovember 1993
expanded thepreviously existing Lawwithout delving anydeeper intotheoverall system offoreign
trade activities.
Theliberalization ofimportation wasachieved bytradesmen andfarmers being given the
opportunity tofreely import commercial vehicles andequipment fortheirownuse.Atthesame time,
thelegalbanonimports ofusedcommercial andpersonal vehicles byCroatian companies andcitizens
wasalsolifted.
III.I(e) Compensation deals withforeign countries
Question 6.
Please provide examples ofcurrent compensation agreements withforeign countries?
What istheGATT basis forthese agreements?
Does Croatia have anyintention toeliminate thedomestic legal basis forthese agreements?WT/ACC/HRV/3
Page6
ANSWER:
InlinewiththeTrade Bill,compensatory deals abroad maybeentered intobydomestic
commercial entities withtheapproval oftheMinistry ofEconomic Affairs. TheMinistry issues an
approval based onarequest fromdomestic legalentities andthecontract withtheforeign party which
should show apreviously agreed upon compensatory deal, meaning adealinwhich theexchange is
performed inkind.
Under conditions ofanunconvertible domestic currency andmajor hardcurrency restrictions,
approval ofcompensation tradedepends primarily onthegoods tobetraded andthenonwhich foreign
countries areinvolved, suchthatpriority isalways given tothose countries withbalance-of-payments
difficulties andhence fromwhich itisdifficult toreceive payment forexports inconvertible currency,
orfrom which itisnotpossible toreceive payment forexports byanyother means.
Under suchconditions, preference inapproving compensatory deals isgiven totraders who,
inexchange forexports, receive equipment input materials, rawmaterials etc..
Under theconditions existing today intheRepublic ofCroatia, astable domestic currency and
itsinternal convertibility, theapproval ofcompensatory deals abroad hasbeensimplified significantly
andislessrestrictive thaninpastyears.
Interest incompensatory deals isdiminishing particularly withpartners fromformer Eastern
European countries withwhom suchdeals previously comprised asignificant andunavoidable part
oftrade. With partners from developed countries (Europe, U.S.A., Japan etc.), theinterest in
compensatory deals, withsome exceptions, didnotexistpreviously nordoesitexisttoday.
Theonlyrealexiting interest byCroatia ’scommercial entities incompensatory dealsisintrade
withthestates which emerged after thedisintegration offormer Yugoslavia, thatis,Bosnia and
Herzegovina, Macedonia andSlovenia.
TheMinistry ofFinance approves compensatory dealsforcompanies based ontheirindividual
requests. In1994 theMinistry approved 400contracts forcompensatory transactions. Themajority
ofthese involved theexchange ofthefollowing goods: semi-manufactured ironandsteelproducts,
wooden building materials, cables, aluminum sheets, tyres, agricultural rawmaterials, plaster, glass,
industrial equipment, minerals etc.
Notonerequest fortheapproval ofacompensatory transaction hasbeenrejected.
Forallthat,itisnecessary toemphasize thatcompensatory transactions areregulated byall
import-export restrictions andtheconditions which apply toregular dealings inwhich charges and
payments aremade inforeign currency (quotas, custom duties, taxes etc.).
According totheproposal forthenewLawonTrade, compensatory transactions willcontinue
tobeperformed under aspecified formofcontrol from theMinistry. Thecomplete liberalization of
theperformance ofthesetransactions canbeexpected under conditions where thereisfullconvertibility
ofthedomestic currency, thestabilization andconsolidation ofthedomestic market andtheoverall
domestic economy aswellasthestabilization ofconditions inthecountries withwhich compensatory
transactions arepresently being performed.WT/ACC/HRV/3
Page7
Question 7.
Please describe infurther detail andgiveexamples ofthecriteria Croatia usestodetermine whether
acompensation dealisapproved.
Please indicate thetypes ofgoods andservices thathavebeenmostandleastsuccessful inattaining
approval aspartofacompensation deal. What compensation agreements arecurrently inforce?
What products arebeing traded under them, andwhat aretheterms?
ANSWER:
Under theLaw, domestic business entities mayengage incompensation dealswiththeapproval
oftheMinistry ofEconomic Affairs. TheMinistry issues approval upon therequest ofthedomestic
business entity, andonthebasis ofthecontract signed withaforeign legalperson, fromwhich itcan
beclearly seenthatacompensation dealhasbeenconcluded, i.e.thattheexchange isbeing made in
theform ofbarter.
Owing totheconditions prevailing intheRepublic ofCroatia atpresent, andthestability of
thedomestic currency anditsconvertibility, theapproval ofcompensation agreements withforeign
countries hasbeenconsiderably simplified, andconsequently hasbecome lessrestrictive thaninprevious
years.
Interest incompensation deals isdecreasing, especially withpartners from former Socialist
EastEuropean countries, trading withwhom constituted animportant partoftheoverall goods exchange.
Neither before noratpresent hasthere beenanyinterest incompensation deals withpartners from
developed countries (Europe, USA, Japan, etc.), withafewexceptions.
Croatian business entities areonlyinterested incompensation dealswithcountries formed after
thedisintegration oftheformer Yugoslavia, thatis,withBosnia andHerzegovina, Macedonia and
Slovenia.
TheMinistryofEconomicAffairsissuesapprovalforcompensationdealsuponindividualrequests
submitted bybusiness entities. Intheyear1994, TheMinistry issued approval for400compensation
contracts. Thegoods tobetraded were semi-finished products made ofiron, steel, timber, cables,
aluminum sheets, rubber, agricultural products, plaster, glass, industrial equipment, oreetc.
Notasingle request forapproval ofacompensation dealwasturned down.
Itshould beemphasized thatallexport/import terms andlimitations (quotas, customs duties,
feesetc.)equally apply tocompensation deals andtoregular business deals inwhich payments are
made inforeign currency.
Under thenewDraft LawonTrade, compensation deals willstill,toacertain extent, be
supervised bytheMinistry. Thefullliberalization ofcompensation deals canbeexpected onlyafter
theinternal market andtheoverall domestic economy havestabilized andconsolidated, andwhen the
economic conditions have become stable incountries which arethemost frequent partners in
compensation deals (thecountries formed afterthedisintegration oftheformer Yugoslavia).WT/ACC/HRV/3
Page8
III.I(f) Non-Tariff Measures applied toImports andExports
Question 8.
Please giveexamples of"international trade rules andprinciples offairtrading" thatCroatia
seeks touphold inadministering re-export agreements, andgiveexamples ofsuch agreements
thathavenotbeenapproved. Please confirm thatallsuchlicensing requirements willbeabolished
under thenewLawonTrade.
ANSWER:
Under thecurrent LawonForeign Trade Operations, re-export agreements refertothepurchase
ofgoodsabroadforfurthersaleabroad.Numerouspossibilitieshavebeenprovidedforthesetransactions:
thegoods canbetemporarily imported andstored without customs dutybeing paid, andsoldabroad
inanunchanged stateorinanessentially unchanged state; orthegoods canbefurther processed
(finishing, processing, improving, etc.)Atthetimeofthecommodity clearing arrangements withthe
countries oftheformer Soviet Union andsocialist Eastern Europe, re-export dealswereunder thespecial
control oftherelevant ministries oftheformer state, andparticular carewastaken astowhere, and
under whatconditions, thegoods obtained through theclearing arrangements concluded bytheformer
statewould besold. Atpresent, theapproval ofre-export deals isaformality, which isillustrated by
thefactthatin1994, 1400 requests forsuchdeals wereapproved, andin1995, 1,100 ofthem. Only
afewrequests havebeenrejected, because there wasreason tobelieve thatthedeals would involve
thebreaching ofsanctions imposed ontheFederal Republic ofYugoslavia (Serbia andMontenegro),
aswellasother relevant resolutions oftheUnited Nations imposing bansonthedelivery ofgoods,
weapons andammunition toareas oftheformer Yugoslavia.
Thequoted provisions oftheMemorandum refer tosuchandsimilar cases ofviolation of
agreements between Croatia andother countries, andinternational tradeprinciples (narcotics andarms
trafficking, trading indubious materials), andthecircumvention ofthelawsregarding theorigin of
goods. Considering thestateofwaror,rather, thestatebetween warandpeace, intheRepublic of
Croatia, which haslasted foralmost fouryears, itisnotsurprising thatthiskindofforeign trade is
given attention, andissubject tocertain regulations. ThenewLawonTrade doesnotprovide fora
system ofapproving re-export agreements, butconsidering thepresent circumstances, andthemeasures
takenbytheinternationalcommunitywithregardtotheneighbouringstates,itprovidesforthepossibility
ofdetermining special conditions forsuchdeals inexceptional cases.
Question 9.
TheEUwould appreciate alistofalltariff andnon-tariff measures foragricultural products
foreachtariff line.Forwhich products doquota andlicensing arrangements exist? Howarethese
administered?
ANSWER:
TheGovernment oftheRepublic ofCroatia regulated which export andimport goods aresubject
toquota andlicensing arrangements andwhich goods canbeexported andimported without any
restrictions initsDecision ontheClassification ofGoods According toForms ofExport andImport.
Agricultural products in54tariff positions aresubject toimport quotas. They mainly include
breeding animals, fish,milk, fruitplants, seed, black wine, vinegar, bran, etc.(Alistofgoods entitled
"Import Quotas" isenclosed).WT/ACC/HRV/3
Page9
Thevolume ofimport andexport quotas forindividual commodities isdetermined bythe
government attheendofthecurrent yearforthefollowing year. Theallocation ofquotas isinthe
jurisdiction oftheCroatian Chamber ofEconomy which should, notlaterthaneight daysbefore the
distribution, publicly announce viathemedia aninvitation fortheallotment ofquotas anddefine the
conditions, place andtimeofthequota allocation.
Theallocation isconducted bycommissions made upofatleastfivemembers, which are
established attheCroatian Chamber ofEconomy according totypes ofgoods (special commissions
foragricultural andfoodproducts).
Theexport ofagricultural andfoodproducts isnotsubject toquantitative restrictions.
Appendix 20contains asummary ofthecustoms andnon-customs protection ofproducts from
Chapter 01-024 ofthecustoms tariff.
Question 10.
CanCroatiaprovideGATTjustificationforeachoftheitemssubjecttoquotaslistedinTableA3.22
[oftheMemorandum ontheForeign Trade Regime]?
How doesCroatia intend toensure theconsistency ofthose quotas withtheGATT?
ANSWER:
TheRepublic ofCroatia, although notasignatory ofGATT, maintains theprinciples ofGATT
andthefreemarket inimplementing itsprotection policy. Forthisreason theGovernment passed a
decision tostartaprocess gradually moving awayfromthesystem ofquantity control ofimports (quota)
which represented asignificant measure intheprotection policy ofthelocaleconomy.
Thepreviously mentioned process willdevelop bydegrees depending onthespeed ofrecovery
ofthenational economy particularly thesections which were destroyed during thewarandonthe
requirements placed before Croatia aspartoftheacceptance procedure intotheWorld Trade
Organization.
Keeping inmind allthathasbeenrealized inthisarea, weholdthatitcanfreely beasserted
thatCroatia isonitswaytothecomplete elimination ofquotas from itseconomic system.
Namely, intheperiod 1991-1993, thatis,upto1April 1994, import quotas covered 848tariff
positions ofthecustoms duty(12percent)ofwhich 215wereagricultural products and633industrial
products.
Thefirstsignificantrevisionofthesystemofprotectionutilizingquotasoccurredon1April1994
when thenumber ofgoods covered bytheimport quota wasreduced to203tariffpositions or3percent
ofimports bywhich theimport quota intheagricultural products sector wasprescribed for71goods
while other industrial products were assigned 203tariff positions.
From June30,1994, theregime ofimport quotas wasfurther reduced to181tariff positions
(2.5percent) for56agricultural products and125industrial products.
Inlate1994another revision oftheexisting quota system wascompleted withtheaimoffurther
liberalizing imports.WT/ACC/HRV/3
Page10
Thus theregime ofimport quotas wasreduced to146tariff positions (2.2percent)ofwhich
49tariff positions relate toagricultural foodstuff products and97toindustrial products.
Thenextrevision oftheexisting system ofquotas willbecarried outduring 1995.
III.I(g) Services inForeign Trade Operations
Question 11.
Thissection mentions thatforeign entities mayparticipate inpublic construction projects. What
restrictions doesCroatia place onforeign participation inprivate construction projects?
Thissection mentions thatCroatia imposes noobligation toreport toauthorities ontrade inservices
other thanconstruction, maritime, andtourism services. IsCroatia willing tobindthispolicy?
ANSWER:
Services inforeign tradereferto,among other things, theprocurement ofconstruction works
tobedoneinCroatia byaforeign entity. Theparticipation offoreign entities inconstruction projects
isregulated insuchamanner thataconstruction contract canalsobeawarded toaforeign entity,
following anopeninvitation totender, andthecollection ofbids,which apply equally toforeign and
domestic entities. Other conditions regarding tendering andconstruction inCroatia arespecified by
theinvestor, andtheforeign contractor isrequired tosubmit abank guarantee, along withthebid,
forcompensation foranydamage thattheinvestor might suffer inthecaseofthecontractor notfulfilling
theterms ofthecontract.
ThenewLawonTrade doesnotenvisage anylimitations concerning theparticipation offoreign
entities inconstruction works intheRepublic ofCroatia, andtherefore, itshould bepointed outthat
infuture, thesame conditions willbeapplied tobothforeign anddomestic entities.
III.I(h) NewLegal Requirements inOperations withForeign Countries
Question 12.
Please describe thestatus ofthenewLawonTrade andprovide anydrafts andrecommendations.
WhichGovernmententitiesandfunctionsdealingwithtradeandinvestmentwillcontinuetooperate
under thenewLaw?
Please describe situations inwhich Croatia might findit"necessary" under thenewLawtoset
quotas onimports andexports.
ANSWER:
TheTrade Billiscurrently before Parliament. Acopyofanunofficial English translation of
theBillisprovided inAppendix 8.
TheBillprovides fortheintroduction ofprotective measures (quotas) incases ofmajor
imbalances intheforeign exchange andbalance ofpayments ofthecountry which cannot beremedied
byregular measures, inorder toprotect domestic production from excessive imports (safeguard
measures), andasregards exports, export quotas maybeimposed onlytoprotect domestic resources.WT/ACC/HRV/3
Page11
Suchmeasures willbeintroduced andimplemented inaccordance withtherulesandprinciples
oftheWTO.
III.I(i) Measures against Unfair Trade Practices
Question 13.
Please indicate thestatus oftheLawonCompetition andMonopolies andprovide anydrafts and
recommendations.Whydoesn'tthelawapplytoexportcartels?InwhichindustrysectorsinCroatia
doexport cartels exist? How aretheyregulated? Inwhat other ways doestheGovernment of
Croatia support these cartels?
Please describe what constitutes "monopolistic intentions" under thenewLawonCompetition
andMonopolies.
Please indicate theGovernment resources committed totheCompetition Protection Agency in
terms ofbudget andpersonnel.
ANSWER:
TheCroatian LawonCompetition Protection wasenacted onJune17,1995.
Theterm"export cartels" isusedinorder toexpress inshort thegeographic limitation ofthe
Competition Protection Agency jurisdiction.
Theprovisions ofrelevant article provide thatpractice andcontracts ontheexport ofgoods
andservices areexempted oftheapplication ofthisLawiftheyhavenoeffect ondomestic market
ifinternational agreements binding theRepublic ofCroatia donotstateotherwise.
There arenoexport cartels inCroatia regulated bylaworsupported inotherwaysexcept general
incentives forexport described indescribed intheMemorandum under III.4(page 40.).
Theterm"monopolistic intentions" hasbeeninthenewdraftabandoned because ithascome
toconclusion thattheprovisions onconcentrations canbetter serve thepurpose ofthese prohibitions.
Since theLawhasjustrecently beenenacted andtherespective enforcement hasnotyetstarted
therearenoparticular resources fortheCompetition Protection Agency envisaged inthecurrent Budget
orotherwise.
Please refertoAppendix 28.foranunofficial English translation oftheAct.
Question 14.
TheDraft LawonCompetition andMonopolies issaidtoinclude conditions prohibiting restraints
ontrade, exemptions, monopolistic practices etc.However theprohibitions incorporated inthe
lawdonotapply toexport cartels. Please specify thepresent situation asregards theexistence
ofexport cartels andtheir lineoftrade.
ANSWER:
Theterm"export cartels" isusedinorder toexpress inshort thegeographic limitations of
theCompetition Protection Agency jurisdiction.WT/ACC/HRV/3
Page12
Theprovisions ofrelevant articles provide thatpractices andcontracts ontheexport ofgoods
andservices areexempted oftheapplication ofthisnowenacted Lawiftheyhavenoeffect ondomestic
market ifinternational agreement binding theRepublic ofCroatia donotstateotherwise.
There arenoexport cartels inCroatia regulated bylaworsupported inotherwaysexcept general
incentives forexport described intheMemorandum under III.4(page 40).
Please refertoAppendix 28foracopyoftheCompetition Protection Act.
III.2(a) Evolution ofCustoms Tariff Regulation
Question 15.
Please provide english copies oftheCustoms Law, theLawonCustoms Tariff, theLawonCustoms
Administration andtheLawonFreeZones.
ANSWER:
Weenclose theCustoms, Customs Administration andFreeZones Laws inAppendices 10,
11and12.TheCustoms Tariff Lawiscurrently under review andassuchacopyofthenewBillwill
beforwarded oncethedrafthasbeenaccepted. Thechanges totheexisting Customs Tariff Laware
necessaryinordertoadjustthenomenclaturetothestandardsoftheWorldCustomsOrganisation(WCO)
bytheendof1995.
Question 16.
Which domestic industries doesCroatia protect andintend toprotect after entry intotheGATT
andWTO?
ANSWER:
TheRepublic ofCroatia hassofarapplied foreign trade policy measures withtheaimof
providing protection fortheoverall domestic market, while maintaining competition. Certain economic
activities aremore protected thanothers, buttheytakeplace inveryspecific conditions which justify
theirdifferent treatment. These industries areagriculture, thefoodstuffs industry, theironandsteel
industry, petrochemistry, other kinds ofchemical industries, thetextile andclothing industry, andthe
machinery industry, etc.
TheRepublic ofCroatia iscurrently inaveryparticular position. Theprocess oftransition,
thepresence ofpeace-keeping forces, thevicinity ofcrisis areas andarmed conflicts areonlysome
oftheaspects ofthecurrent situation. Atthispoint, ourprotection policy includes agradual transition
toprice protection measures, andthemaintenance oftheexisting levelofprotection ofthedomestic
economy. Inthisway,foreign trade policy contributes tothestabilization ofthedomestic economy.
Question 17.
What exemptions areoffered fromcustoms dutypayment? Onwhatbasisareexemptions awarded?WT/ACC/HRV/3
Page13
ANSWER:
Exemptions from customs dutypayments aregranted inaccordance withtheCustoms Law
oftheRepublic ofCroatia, ormore precisely with:
Article18(regulationsconcerninggoodsnotsubjecttocustomspayment,suchasgoodsimported
andtransported across thecustoms territory oftheRepublic ofCroatia, documents forinternational
tenders, andother kinds ofprinted orrecorded materials regarding culture, education, science, etc.);
Articles24-33(concerningspecificsocial,economicandsimilarinterests,orprovisionsresulting
frominternational conventions which require theintroduction ofexemptions fromcustoms payments.
These exempt thefollowing fromcustoms payments: items intended fortheofficial purposes offoreign
diplomatic andconsular offices intheRepublic ofCroatia, imported according totheirneeds and
requirements; articles forthepersonal useofpassengers fromabroad during theirjourney; orthopaedic
aidsandother aidsfordisabled persons, serving asasubstitute foramissing ordamaged organ; goods
received gratis fromabroad byfirms orother legalornatural persons, orgoods procured withfunds
obtained fromabroad asfinancial assistance, provided these goods areintended ashelpforthevictims
ofnatural disasters (earthquakes, floods, etc.); equipment imported onthebasis ofinvestment bya
foreign person inadomestic enterprise orbusiness activity)
Article 54(imports onthebasis ofcustoms quotas); and
Article 59(commitments under international agreements).
TheLawalsospecifies theprocedure bywhich theabove exemptions aregranted. Thelegal
textclearly shows thatthese exemptions arenon-discriminatory andofageneral nature.
Question 18.
Howistheright toappeal provided forwhen sanctions aretaken against anunpaid customs tax?
ANSWER:
TheCustoms Actensures therighttoappeal inArticles 242-244,which regulate theright
ofthecustoms declaration holder toappeal tothecustoms office, andinArticles 249-253ofthesame
Act,which regulate thesubsequent settlement ofaccounts, payment andcustoms dutyrefund. Wewill
notfurther elaborate onthese articles since weenclose atranslation oftheCustoms Actfrom which
themeaning ofthese articles isevident. Theright toappeal canalsobeexercised under the
Administrative Procedure Act.
Anappeal canbelodged withtheCustoms Administration asasecond-degree authority within
15daysagainst anydecision inthecustoms procedure made inthefirstdegree. Anadministrative lawsuit
canbefiledinthecompetent court against anydecision bytheCustoms Administration. Thesame
applies toanycaseinvolving theviolation ofprovisions, buttheperiod ofappeal iseight (8)days.
III.2(b) CustomsTariffNomenclature,TypesofDuties,GeneralDescriptionoftheCustoms
Tariff Structure
Question 19.
Please provide Croatia 'stariff schedule ineight-digit HSformat.WT/ACC/HRV/3
Page14
ANSWER:
Sincebytheendof1995thenomenclaturewillbeadjustedtothestandardsoftheWorldCustoms
Organization (WCO), wehavenottranslated thetariff schedule intoEnglish. Acopyofthenewdraft
Customs Tariff Billwillbeforwarded atalaterdateonceatranslation hasbeencompleted. Thecurrent
tariff levels areunder review andwillbeamatter forWTO bilateral negotiations which wehave
announced andwearenowready toaccept proposals fromtheWTO members indefining ourSchedule
ofConcessions fortheGATT 1994. Weexpect thatthebilateral negotiations willbegin inAutumn
1995. (Please refertoAppendix 1.)
Question 20.
IsCroatia prepared tobindallofitsapplied tariff rates?
ANSWER:
Aswehavealready said,theRepublic ofCroatia isatpresent inaveryparticular position -the
process oftransition, thepresence ofpeace-keeping forces, thevicinity ofcrisis areasandarmed conflicts
arejustsome oftheaspects ofthepresent situation. Atthispointourprotection policy includes agradual
transition toprice protection measures andthemaintenance ofexisting levels ofdomestic economic
protection. Inthisway, ourforeign trade policy willcontribute tothestabilization ofthedomestic
economy.
Following thisadjustment andtheresults ofnegotiations concerning entryintotheWTO, import
protection measures willbegradually converted totariffs, since theCustoms Tariffs donotquitemeet
theprotection requirements ofthecurrent economic situation intheRepublic ofCroatia. Inorder to
maintain thetransparency ofitssystem ofimport protection measures, theRepublic ofCroatia isready
tonegotiate aceiling tobeapplied ontheratesinvolved inthese measures.
Question 21.
Why doesCroatia apply thehighest tariff ratetoconsumer goods? Explain howthisconforms
withtheobjective stated inthissection toapply tariffs specifically toprotect domestic industries.
ANSWER:
Thestructure ofimports intotheRepublic ofCroatia shows thatmostimported goods areraw
materials andinput materials, capital goods and,toasmaller extent, consumer goods. Thismeans
thattheRepublic ofCroatia hasanindustrial structure using imported rawmaterials andinputmaterials,
aswellasimported capital goods, which arenotproduced inthedomestic economy, andforthisreason
thetariff ratesforthese groups ofproducts areverylowordonotexist. Inorder toprotect domestic
production toacertain degree, higher rateshavebeenimposed ontheimport ofconsumer goods, and
thatiswhythese tariff ratesarethehighest.
Question 22.
Please provide acomplete listbyHSnumber ofitems onwhich import quotas areimposed. Please
alsolistbyHSnumber anddutyleveltheitems onwhich additional, supplementary, compensation,
preferential, andseasonal duties areimposed. Which items receive customs refunds andthespecial
measures mentioned inthissection?WT/ACC/HRV/3
Page15
ANSWER:
Thelistofgoods onwhich import and/or export quotas areimposed hasalready beenenclosed
withtheMemorandum onForeign Trade. Inreply toyourrequest, weenclose itwiththerestofthe
answers.
There isnolistofitems subject totheabove customs duties, since in1994 and1995 nosuch
measures havebeenapplied.
Foracertain period, preferential duties were imposed ontheimport ofcertain goods from
developing countries orfromcountries formed afterthedisintegration oftheformer Yugoslavia, but
since 31December 1993 theyhavenolonger beenapplied.
Question 23.
What arethepurposes ofthe"additional, supplementary, andcompensation customs duties,
seasonal duties, customs refunds andspecial measures ofcustoms protection" aslisted inII.2.(b)
which arecharged onimported products? What criteria areusedtoapply these feesandarethey
withtheGATT?
ANSWER:
Thetaxprotection instruments mentioned intheMemorandum ensure additional protection
oftheCroatian economic system above thelevelensured bytheimplementation oftheTaxTariff of
theRepublic ofCroatia. These instruments areapplied invarious cases specified bytheCustoms Law.
Toourknowledge, theapplication ofthese instruments isnon-discriminatory andistherefore
consistent withGATT provisions.
Additionaltaxislevied,underArticle49oftheCustomsLaw,onlyintheeventofdiscriminatory
treatment ofCroatian goods ormeans oftransport, taking intoaccount theobligations arising from
international agreements.
Supplementary taxislevied onlyifthepriceofimported commodities islower thanthecontract
priceandifsuchimport isliable tobedetrimental totheCroatian economy, asisstipulated inArticle 52
oftheCustoms Law. Thelevied amount equals thedifference between thecontract priceandtheactual
price ofimported goods.
Seasonal taxislevied inorder toprovide additional protection toagricultural production over
alimited period. Itisregulated byArticle 50oftheCustoms Law.
Special protection taxmeasures, which include compensation tax,areapplied under Article 55
oftheCustoms Law, iftheprice offoreign commodities isliable tocause significant disturbances on
thedomestic market, orifacompany oraperson achieves amonopolistic position oramonopolistic
price foracertain commodity. These measures maybeintroduced onlyonastrictly temporary basis,
which must bestated.
Return oftaxisapplied todomestic goods andservices which areexported toforeign markets,
inlinewithArticle 57oftheCustoms Law.WT/ACC/HRV/3
Page16
Question 24.
Croatia levies anumber ofcharges inaddition totariffs, including Customs duties onagricultural
products, 15percentduties on"free" imports, unified customs duties of8percent. IsCroatia
prepared toenter intocommitments toeliminate these charges? (III.2.(b) page 32)
ANSWER:
Ashasbeen saidintheanswers toquestions 23and31ofthisdocument, thepresent
circumstances andthedegree ofdevelopment oftheCroatian economy impose theneedtoprotect the
Croatian market through theabove-mentioned instruments.
The15percentrateisaspecial customs protection measure andmaybeapplied onlytogoods
towhich theSLrateisapplied under theCustoms Tariff, thatis,inonlytwocases:
-ifthepriceofaforeign goodisliable tocause significant disturbance onthedomestic market;
-ifacompany orsome other entity would beinamonopoly position orimpose amonopolistic
price onthegood inquestion.
Eversince theRepublic ofCroatia wasestablished asasovereign state, thisratehasnotbeen
applied inpractice.
Thecaption "free import" (LB)means thattheimport ofthecommodities thusmarked isnot
subject torestrictive import regimes (import quotas), andthe"free" customs rate(SL)means thatthe
customs rateforthecommodity inquestion is0under theCustoms Tariff oftheRepublic ofCroatia.
Theunified customs rateisnotanadditional charge onimported goods applied aftertherate
prescribed bytheCustoms Tariff oftheRepublic ofCroatia. Thisrateisapplied mostly togoods brought
orreceived byCroatian orforeign nationals from abroad, which areintended fortheowner 'sown
use,andtogoods imported bycompanies andother entities which come under more thantwotariff
positions intheCustoms Tariff oftheRepublic ofCroatia andwhose import isfree(LBregime). This
ratedoesnotapply togoods forwhich theSLrateisprescribed bytheCustoms Tariff orthose which
areexempt fromcustoms duty. Theonlyreason whytheunified customs ratewasintroduced wasto
speed upcustoms procedures.
TheCroatian Government willplanthegradual transformation ofnon-customs protection
instruments intotariffs, taking intoaccount thestateofthebalance ofpayments andtheprovisions
oftheArticle XVIII ofGATT. Article XVIII ofGATT alone binds theCroatian Government totake
thiscourse. However, astheabolition orreduction ofthese ratesdepend onfurther developments,
theRepublic ofCroatia cannot commit itselftoadefinitive timeframe forthereduction ofthesecharges.
Question 25.
Does Croatia intend toadhere totheInternational Convention ontheHarmonized Commodity
Description andCoding System aslaiddown bytheCouncil forCustoms Co-operation inBrussels?
ANSWER:
OnthebasisofcooperationtodatebetweentheRepublicofCroatiaandtheCustomsCooperation
Council (i.e.theWorld Customs Organization, WCO), itisevident thattheRepublic ofCroatia is
anactive member oftheWCO (itgained fullmembership on1July1993) andthatittriestoadoptWT/ACC/HRV/3
Page17
theCouncil'srecommendationstothehighestpossibledegreeandwithintheobjectivelyshortestpossible
time. TheRepublic ofCroatia joined theConvention on26September 1994.
TheInternational Convention ontheHarmonized Commodity Description andCoding System
wasincorporated intheCustoms Tariff oftheRepublic ofCroatia andtherefore inthesystem of
statistical monitoring offoreign trade. Allitssubsequent modifications andadditions willbeadopted
andincorporated inthesamewayintheCustoms Tariff oftheRepublic ofCroatia within thedetermined
period.
Question 26.
Isthecustoms tariff nomenclature presently applied byCroatia compatible withthe1992revised
version oftheHarmonized Commodity Description andCoding System?
ANSWER:
Theanswer tothisquestion isaffirmative. When thelastmodifications oftheCustoms Tariff
Nomenclature oftheRepublic ofCroatia come intoforce, onwhich theCustoms Administration has
beenworking forsome time, itwillbepossible tosaythatthepresent version oftheCustoms Tariff
Nomenclature isfullycompatible withtherevised version oftheHarmonized Commodity Description
andCoding System of1992.
Question 27.
Does Croatia intend tomodify thepresently applied tariff nomenclature inaccordance withthe
alterations tothenewHarmonized Description andCoding System thatwillcome intoforce on
1January 1996?
ANSWER:
Asismentionedinpreviousanswers,theInternationalConventionontheHarmonizedCommodity
Description andCoding System isdirectly incorporated intheCustoms Tariff oftheRepublic ofCroatia,
andsoaretheRecommendations oftheWCO, andtherefore itisalsoincorporated inthesystem of
statistical monitoring offoreign trade. Allitssubsequent modifications andadditions willbeadopted
andincorporated inthesame wayintheCustoms Tariff oftheRepublic ofCroatia within atimelimit
which isthesame forCroatia asforallother fullmembers oftheWCO.
Along these linestheproposal ofCustoms Nomenclature (1996 version) hasalready been
submitted anditwillcome intoforce on1January 1996.
Question 28.
Which imported products currently aresubject toseasonal tariffs orthe15percentdutyintended
tocounter "major" disruptions inlocal markets? Please elaborate onthecriteria Croatia uses
todetermine whether toimpose seasonal tariffs orthe15percentduty.
ANSWER:
Although theyhavebeenprovided forbytheCustoms LawoftheRepublic ofCroatia, neither
seasonal duties norcustoms duties, asspecified inArticle 55oftheCustoms Law-Special Measures
forCustoms Protection, havebeenapplied inpractice. Suchadecision, including thecriteria regarding
theapplication ofthisArticle andseasonal tariffs, would bereached byconsultation between theWT/ACC/HRV/3
Page18
Government oftheRepublic ofCroatia, theChamber ofCommerce, theMinistry ofAgriculture and
Forestry, andtheMinistry ofFinance. However, sofartheRepublic ofCroatia hasfeltnoneedto
regulate itsforeign trade relations inthisway,andnotasingle caseoftheapplication ofthisArticle
hasbeenrecorded.
Question 29.
TheEUwould appreciate more details onthelevying of"seasonal customs duties". What isthe
economic rationale behind them?
ANSWER:
Thebasic economic rationale behind theintroduction ofsuchaninstrument intheCustoms
LawoftheRepublic ofCroatia istheneedforadditional protection ofcertain agricultural products
atthetimeoftheirmaturity (harvest) andtheneedtostabilize themarket forfoods produced onthe
basisofthese agricultural products. TheRepublic ofCroatia istrying tostabilize themarkets ofthese
productsbyvariouseconomicmeasuresinagriculturewhichinvolvemajorbudgetaryexpenditurebecause
thesemeasures arebased chiefly onthemechanism ofpricesupport (e.g.guaranteed minimum purchase
price). Therefore imports during thatperiod create additional andverydamaging competition onthe
markets ofthose products anddirectly affect thelevelofdomestic fiscal expenditure andtheamassing
ofstocks ofdomestic products which stateagencies buyfrom theagricultural sector. Foreign trade
policy measures (theintroduction ofseasonal customs duties) would thusadditionally protect domestic
markets within acertain period oftime.
However,ithasbeenestimatedthatwiththeintroductionofaspecialtaxonimportedagricultural
andfoodproducts (surtax), theeffect ofadditional protection isfullyachieved throughout theyear
toasufficient extent suchthatsofarthere hasbeennoneedtoapply thisinstrument.
III.3 Export Regulations
III.3(a) CustomsTariffNomenclature,TypesofDuties,GeneralDescriptionoftheCustoms
Tariff Structure
Question 30.
What areCroatia 'sintentions withregard tothefuture application andoperation ofexport duties
asmentioned inpara III.3.(a) oftheForeign Trade Regime document?
ANSWER:
Export duties oncertain articles maybecharged onlyexceptionally andforprotection reasons.
Their application lieswithin thecompetence oftheCroatian Government, which hastoissueaspecial
decree tothateffect (inlinewithArticle 34(2) oftheCustoms Act). TheCroatian customs system does
notstipulate theapplication ofexport duties, therefore theyarenotapplied inpractice.
However, inorder toremedy adisturbance onthedomestic market andprotect natural resources
which arenoteasily renewable, aspecial export dutyoncertain articles hasbeenintroduced ona
temporary basis. Only asmall number ofproducts areaffected bythislimitation (commodities listed
under tariffheadings 26.20, 44.01, 44.03, 44.07, 72.04, 76.02 and78.02, under current regulations).WT/ACC/HRV/3
Page19
TheCroatian Government considers thatthismeasure doesnotjeopardize foreign tradegrowth,
which isevident from foreign trade figures for1994.
III.2(c) Import Charges andFees
Question 31.
Isaspecial provisional taxcurrently levied forBOP purposes? Does Croatia intend toapply
measures under Article XIIoftheGATT from thetimeofitsaccession? Does Croatia consider
thatitisentitled tohave recourse toGATT Article XVIII? (III.2.(c)
ANSWER:
Under thecurrent legislation, thespecial provisional taxonimported goods hasbeenintroduced
inorder toadjust theforeign trade balance totheparameters setoutbyCroatia 'sdevelopment and
economic policy foragiven period.
TheCroatian Government determines which goods, orgroups ofgoods, willbesubject tothe
special provisional taxonimported goods. Italsodetermines theamount charged andtheperiod during
which itwillbelevied.
Taking intoaccount Croatia 'spresent situation andtheachieved levelofdevelopment ofthe
economy, theCroatian Government considers thatitisentitled torecourse toGATT Article XVIII.
TheRepublic ofCroatia already mentioned thisfactduring preliminary talkswiththeGATT Secretariat.
AgradualtarifficationofthistaxwillbeplannedtakingintoaccountthecapacitiesoftheCroatian
economy andtheresults ofthetalksonCroatia 'saccession toWTO.
8.Question:
Candetails beprovided ofthespecial feeonagriculture andfoodproducts? Does Croatia latent
toremove thisfeeupon accession? (III.2.(c)) CanCroatia please provide evidence thatsuch a
feewillnotconstitute atrade barrier?
ANSWER:
Thespecial feeonagricultural andfoodproducts hasbeenlevied inCroatia since July1993;
itwasintroduced asameasure toprotect thedomestic agricultural andfoodproduction andthefarming
population. Theamount charged equals thedifference between theimport prices andtheprices onthe
domestic market.
Theimport priceisdefined asthelowest purchase priceontheforeign market, towhich customs
andother import duties, aswellasimport costs, havebeenadded. Inpractice, theimport price is
determined onthebasis ofdataonprices which thegoods inquestion fetch onforeign markets, and
dataonprices inneighbouring countries. Thedomestic priceisdetermined onthebasisofmarket prices
inCroatia, production costs, domestic supply anddemand, andoutput trends.
TheCroatian Government decides whatproducts willbesubject tospecial fees.Theamount
charged isdetermined bytheMinister ofEconomic Affairs, nottheMinister ofAgriculture. In
accordance withgovernment decisions, thespecial feeislevied onlivestock (cattle, pigs), poultry,
meat(except mutton andhorse meat), meatproducts, milk, basic milkproducts, eggs, cereals (wheat,
barley), corn, flour, basic flour products, cooking oil,sugar andwhite wine.WT/ACC/HRV/3
Page20
Theamount ofthefeevaries from casetocase, asitdepends onprice fluctuations onthe
domesticandforeignmarkets,particularlywheregoodstradedonthecommoditymarketsareconcerned.
Itisimportant tostress thatthegovernment decided inFebruary 1994toabolish import quotas
forgoods onwhich special feesarelevied. Therefore, theimport ofthese goods isfree.
Theintroduction ofspecial feesonimported agricultural andfoodproducts isatransitional
measure, introduced onatemporary basis because ofthelackofother funds, whose main goalisto
allow therecovery andprevent thedeterioration oftheposition oftheagricultural sector, which has
suffered considerably duetothewar.Wardamage isthemainreason whytheprocess ofrestructuring
andtransformation oftheownership structure hasbeenslowed down inthissector.
Simultaneously, special feesarealsoaninstrument ofprotection from lowimport prices.
Question 32.
Aspecial feeislevied onimports ofagricultural andfood products inorder toprotect home
agricultural production. Please provide more details onthefeesrelated tocustoms clearance.
ANSWER:
Theimpositionofaspecialfeeonimportsofcertainagriculturalandfoodproductsisatemporary
measure whose main purpose istoprevent deterioration oftheposition ofthedomestic agricultural
sector. Itisalsousedasameans ofdefence against low-price subsidized imports.
Thegovernment hasdecided thataspecial feeshould belevied onlivestock (cattle andpigs),
poultry, meat (other thanmutton andhorse meat), meatproducts, milk, basic milkproducts, eggs,
apples, cereals (wheat andbarley), flour, basic flour products, cooking oil,sugar andwhite wine.
Thespecial feerepresents thedifference between import anddomestic prices andispaidupon
customs clearance. Theimport price isthelowest purchase price ontheforeign market towhich the
amountofcustomsandotherimportdutieshasbeenadded.Inpractice,thispriceisdeterminedaccording
toinformation onpurchase prices atwhich goods areoffered ontheforeign market andprices inthe
neighbouring countries. Thedomestic price isdetermined onthebasis ofmarket prices inCroatia,
production costs, supply anddemand onthedomestic market andproduction trends. TheMinister of
Economic Affairs isauthorized toprescribe theamount ofthefeeforeachproduct. Thespecial fee
ispaidperunitofmeasure upon import andcustoms clearance together withcustoms dutyandother
import duties.
Question 33.
What istheviewofCroatia ontheGATT consistency ofthe1percent"customs record keeping"
charge?
Please provide further information onthe"equalizing charge." What istheviewofCroatia on
theGATT consistency ofthe1percentequalizing charge"?WT/ACC/HRV/3
Page21
ANSWER:
Thedutyoncustoms registration ischarged onthebasis ofArticle 35oftheCustoms Law
oftheRepublic ofCroatia attherateof1percentofthecustoms valuation.
Among other exceptions, thisdutyisnotcharged fortheimportation ofgoods asrequired:
-bydiplomatic andconsular missions inCroatia,
-bynatural persons whoimport goods onthebasis ofvarious privileges,
-during theimportation ofgoods intended toeliminate theconsequences ofnatural disasters,
-shipments ofhumanitarian andother assistance,
-ifthegoods areimported duty-free onthebasis ofinternational contracts andconventions.
Thenon-collection ofthisdutydoesnotdepend onthecountry oforigin ofthegoods, that
is,itisindiscriminate. Inthissense thisdutyisconsistent withthebasic principle ofGATT. Itisalso
clear thatitisaninstrument which primarily affects theprice (linearly) andnotthequantity ofthe
imported goods.
Thedutyrepresents astrictly specified-purpose source ofrevenue asstated inArticle 35(3)
oftheCustoms LawoftheRepublic ofCroatia.
Theretention ofthismeasure istoremain foraspecified period untiltheCroatian Customs
Administration issatisfactorily equipped andhasthenecessary organization, thatis,during theprocess
oftariffication ofimport protection inCroatia.
Equalizing charge, i.e.thedutyforequalization ofthetaxburden ofimported goods nolonger
exists within Croatia ’ssystem ofpassive protection nordoesCroatia havetheintention ofintroducing
itagain.
Themeasure wasinitiated andapplied under other political andeconomic conditions sothat
there isnoneedforitsusetoday inCroatia.
Question 34.
What criteria areusedfortheGovernment oftheRepublic ofCroatia tostipulate which goods
maybeexempt from paying thecustoms record keeping charge of1percentofthecustom base
ofimported goods (III.2.(c)?
ANSWER:
TheCustoms Administration Charge ischarged inlinewithArticle 35oftheCustoms Law.
Theexemption criteria arestipulated intheCustoms Lawandother instruments oftheCroatian customs
legislation.
Among other exceptions, thecustoms administration charge isnotlevied on:
-goods imported bydiplomatic andconsular missions inCroatia;WT/ACC/HRV/3
Page22
-goods imported byphysical persons entitled tovarious customs benefits;
-shipments ofhumanitarian andother assistance;
-goods imported withtheintention ofeliminating theconsequences ofnatural disasters,
-goods exempt from customs dutybecause theyarebeing imported under international
agreements andconventions.
Theexemption from thischarge doesnotdepend onthecountry oforigin ofthegoods, and
isthusnon-discriminatory andconsistent withthebasic GATT principles. Itisalsoevident thatthis
instrument affects theprice (inalinear way) rather thanthequantity ofimported commodities.
Thischarge isastrictly allocated fiscal source, asisevident fromArticle 35(3) oftheCustoms
Law.
Croatia isplanning tomaintain thischarge forsome timetocome, untiltheCustoms Service
oftheRepublic ofCroatia hasreached acertain equipment andorganization level, i.e.during theprocess
oftariffication ofimport protection instruments.
Question 35.
Please specify byHScodeandprotection levelwhich imported products aresubject tothespecial
compensatory levyandthespecial provisional tax.Areanyother feescharged onimports, such
asstamp taxes orcustoms users fees? Ifso,atwhat rate?
ANSWER:
Concerning these twocustoms measures, special provisional taxes (asregards theapplication
ofArticle 55)andcompensatory levies, wecannot supply therequested listbyHScodeandprotection
level, because these measures havenever beenusedinpractice.
Inprinciple, aspecial provisional taxischarged onallimported goods totheamount of
10percentofthetaxbaseinaccordance withalltheregulations thatapply tothecollection ofcustoms
duties. There areseveral exemptions fromthisbasic rate(higher andlower nominal ratesareapplied
oncertain imported items). Weenclose thetranslation oftheLawonSpecial Import Tax,where the
structure ofexemptions canbeseen.
When importing goods, inaddition tocustoms duties andspecial provisional taxes, other fees
arealsocharged, suchasacustoms record-keeping fee(1percent), special charges ontheimport
ofagricultural products andfoodstuffs (products onaspecial list,andinspecific amounts), asales
tax(according toappropriate tariffs onspecified goods), andaspecial tax(incompliance withtheLaw
onSpecial Tax). Inaddition, when declaring, astamp taxisalsocharged atafixed amount which
doesnotdepend onthecustoms valuation, andisusually verysmall (i.e.10HRK, which isabout
US$2).
Question 36.
Please confirm thatCroatia willabide byGATT rules under Article XIIwhen itdecides tolevy
aspecial provisional taxonimports forbalance ofpayments purposes. Please alsoexplain how
Croatia willconform anyother lawstoGATT standards forbalance-of-payment measures.WT/ACC/HRV/3
Page23
ANSWER:
Iftheapplicationofaspecialprovisionaltaxonimportsprovesnecessaryforbalanceofpayments
purposes, theRepublic ofCroatia willabide bytheprocedures andrules specified intheAgreement
(Article XII).
Asaresult ofcooperation withtheInternational Monetary Fund andtheWorld Bank, domestic
statistics arebeing conformed tointernational standards. Inthisrespect, thestatistics regarding the
balance ofpayments isbeing brought intolinewithinternational standards, andatpresent, wecan
saythatthese statistics have, forthemostpart,mettheabove requirements. Tothebestofourbelief,
allother legalprovisions oftheRepublic ofCroatia which concern thebalance ofpayments arenot
contrary tothestandards ofGATT.
Question 37.
What plans doesCroatia have toretract thecustoms record-keeping fee?
ANSWER:
Sofar,record-keeping taxhasbeenanindependent source offiscal revenue intended forthe
development andimprovement ofcustoms administration.
TheRepublic ofCroatia considers itnecessary tomake thesystem ofimport restrictions more
transparent andmore oriented towards price protection measures. Thisimplies reducing thenumber
ofimport measures (unification), andtheirinclusion inthesystem ofCustoms Tariffs (conversion to
tariffs) intheform ofbasic customs rate.
Thesystem ofimport restrictions willbeorganized inthiswayinaveryshort time, andthe
customs record-keeping feewillbethenincluded inthetariff schedule.
However, inthetransition period, thismeasure willberetained untiltheconditions havebeen
created forstarting theprocess ofunification ofimport measures, andtheirconversion totariffs.
III.2(d) Taxation Regime
Question 38.
Please explain whyCroatia maintains a7.5percent excise taxoncertain imported alcoholic
beverages andtobacco products. IsCroatia prepared toreduce thistaxupon itsaccession tothe
GATT andWTO?
ANSWER:
Themainreason forintroducing excise taxinthetaxsystem oftheRepublic ofCroatia isthe
fiscal revenue. Ifcircumstances permit, theRepublic ofCroatia willreduce theaverage taxlevelin
general, andwithit,probably theexcise level. Atpresent, itisnotpossible tosaywhen thiswillhappen.
Question 39.
AreVAT orother taxes collected onimports? Ifso,arethetaxlevels thesame asthose ondomestic
goods? IstheVAT assessed ontheimport price only, oronthedutyimposed aswell?WT/ACC/HRV/3
Page24
ANSWER:
Apart fromthecustoms duties, special feesandimport taxesmentioned intheprevious answers,
thetaxlevels onforeign goods arethesame asondomestic goods. TheVAT Billwasenacted bythe
Croatian Parliament inJune1995, andaccording totheLawitshould beapplied from1January 1997.
InAppendix 26,weenclose theVAT, Income TaxandProfit Taxlaws, thushoping toprovide
answers totheother questions concerning thetaxsystem oftheRepublic ofCroatia.
III.2(e) Tariff Preferences
Question 40.
Onwhat basis doesCroatia extend preferential customs duties toother countries? IsCroatia
planning toextend thispreference tocountries other thanthose listed inthissection?
ANSWER:
Ashasalready beenmentioned, preferential customs duties were imposed oncertain goods
imported from developing countries, andwere retracted after31December 1993.
Ifinthefuture, theRepublic ofCroatia decides toextend preferential customs duties toitsforeign
partners, thiswillbedonecompletely inaccordance withtherelevant provisions ofGATT.
Question 41.
Arethecountries listed inthissection benefiting from preferential duties under atrade liberalizing
agreement covering substantially alltrade, inaccord withGATT Articles XXIV?
ANSWER:
Although regulations provide forpreferential duties, atpresent, therearenocountries benefiting
from them when engaged inthetrade withtheRepublic ofCroatia. Incasethismeasure isapplied,
Article XXIV ofGATT willbecompletely abided by.
III.2(f) Non-Tariff Measures applied toImports andExports ofGoods
Question 42.
Onpage34(III.2.(f), itisstated that:"Import quotas aresetforalimited number ofagricultural
products..." Given thatquantitative restrictions areinconsistent withGATT, what plans does
Croatia have toremove these import quotas?
ANSWER:
Inearly1994, itwasdecided toabandon import quotas intheagricultural sector andtoreplace
them overacertain period withspecial charges forcertain products.
Thus, import quotas arepresently setforonly49agricultural andfoodtariff positions.WT/ACC/HRV/3
Page25
III.2(f) 1 Quotas
Question 43.
Please provide alistbyHScodeandquantity allocation oftheitems subject toimport orexport
quotas in1991, 1992, and1993.
Please elaborate ontheeconomic andGATT justification forthenumerous import quotas--on
farm products inparticular--and detail Croatia 'splans forconverting them intotariff-rate quotas
asrequired bytheGATT/WTO. What plans doesCroatia have forending thepolicy ofusing
quotas toprotect domestic industries?
ANSWER:
Weenclose thelistofproducts byHScodewhich were subject toimport orexport quotas
in1991, 1992 and1993 (Appendix 13).Wealsoenclose thelistoftheeffective system ofquotas for
1995 (Appendix 14).
Thesystem ofimport/export quotas wasanimportant measure oftheprotection policy ofthe
Republic ofCroatia prior to1April 1994. Intheperiod 1991-1993, orprior to1April 1994, import
quotas wereimposed on848(12percent)tariff items, while bytheendof1994, thenumber ofitems
hadbeenreduced to146(2.2percent).
Agricultural products subject toimport quotas:
-prior to1April 1994 -215items
-after1April 1994 -71items
-after30June1994 -56items
-after29December 1994 -49items
Industrial products subject toimport quotas:
-prior to1April 1994 -633items
-after1April 1994 -203items
-after30June1994 -125items
-after29December -97items
Thenextrevision ofthesystem ofquotas currently inforce willbecarried outin1995.
Thereisnodoubtthat,atpresent,thesystemofquotasisprotectingacertainpartofourdomestic
industry. Thiscannot becompletely justified, iftheprinciples andprovisions ofGATT arestrictly
applied. However, thereduced number ofitems subject toquotas shows thattheCroatian Government
hasfirmly opted forthegradual abandonment ofquotas asprotection measures, andthepolicy ofusing
quotas willbecompletely abandoned when peaceful conditions prevail andeconomic activities are
resumed throughout thewhole territory oftheRepublic ofCroatia.
Question 44.
Appreciating thatCroatia 'ssystem ofquotas isapplied inaccordance withArticles XIIIandXVIII.
doesCroatia intend toretain these quotas afteraccession (III.2.(f).1)? Ifso,would theybejustified
under GATT Article XI?WT/ACC/HRV/3
Page26
ANSWER:
Although itisnotamember ofGATT, theRepublic ofCroatia bases itsprotection policy on
thebasic principles ofGATT andfreetrade. Thisisthereason whytheGovernment hasdecided to
initiate aprocedure forthegradual abandonment oftheimport quota system, which wasanimportant
instrument ofCroatia 'spolicy ofprotecting thedomestic business sector upto1994.
Theabove-mentioned procedure willbeimplemented onastep-by-step basis, depending on
thespeed ofrecovery ofthenational economy, thewarandthedemands Croatia willhavetomeet
during theprocess ofaccession toGATT andWTO.
Inviewofwhathasalready beenachieved inthisrespect, wemaysaythatCroatia isabout
tocompletely eliminate import quotas from itseconomic system.
In1993, andupto1April 1994, import quotas weresetforabout 848tariff positions, which
accounts for12percentoftotalimports. Outofthese 848tariff positions, 215areintheagricultural
sector and633intheindustrial sector.
From 1April 1994to30June1994, import quotas included 203tariff positions or3percent
oftotalimports; intheagricultural sector, import quotas weresetfor71products, while intheindustrial
sector, import quotas were setfor203tariff positions.
On30June 1994, theimport quotas regime wasfurther reduced, to181tariff positions
(2.5percentoftotalimports). Import quotas weresetfor56agricultural products and125industrial
products.
Since 29December 1994, import quotas havebeensetfor97industrial tariff positions and
49agricultural tariff positions, i.e.to146tariff positions inall(which accounts for2.2percentof
totalimports).
Inviewoftheabove-mentioned facts, itisevident thatCroatia iscommitted toabolishing the
quota system overacertain period oftime, ortouseimport quotas onlyinexceptional cases which
areenvisaged inandconsistent withGATT regulations, particularly Articles XIII, XVIII, XIX, XX,
XXIandXXV.
III.2(f) 2 Licences
Question 45.
Please provide acomplete listinHSnumber oftheitems thatarecurrently subject tomandatory
licensing.
Please describe theprocess ofobtaining import andexport licences.
ANSWER:
Weenclose alistofitems byHSnumber which arecurrently subject tomandatory licensing
(Appendix 15).
Import andexport licences areissued mostly forreasons oftraffic control, andnottoprotect
domestic industry. 90items or1.35percentaresubject toimport licensing, and124items, or
1.86percent, aresubject toexport licensing.WT/ACC/HRV/3
Page27
TheMinistry ofEconomic Affairs issues import andexport licences within 7-10days, with
theprior approval oftheState Agency fortheProtection oftheEnvironment.
Question 46.
Aretherequirements forimport andexports licences compatible withtheWTO provisions?
What proportion oftotalexports from Croatia issubject toexport licensing?
ANSWER:
Export andimport licences areissued onanautomatic basisandtheirpurpose isnottorestrict
exports orimports byamount orvalue buttomonitor trade ingoods, primarily forthepurposes of
security andrecording. Thus thesystem oflicences isinfullconformity withWTO regulations. The
system ofexport andimport licences covers 90export positions or1.35percentofexports.
III.2(g) Customs Valuation
Question 47.
Please describe infurther detail Croatia 'sprocess ofappraisement ofimported &exported
merchandise forcustoms purposes. Please alsoprovide anEnglish version ofCustoms Law
Articles 36through 48towhich thissection refers.
ANSWER:
Thecomplete English translation oftheCustoms LawoftheRepublic ofCroatia (including
Articles 36to48)isenclosed withthese answers.
Ashasbeenpreviously mentioned, andasshown inthetranslation, theformulation oftheabove
Articles completely conforms totheAgreement ontheApplication ofArticle VIIofGATT or,inother
words, therelevant value usedinthecustoms procedure isthecontract price (transaction value).
Question 48.
Istheformulation inArticles 36-48oftheCroatian Customs Law, asregards tothevaluation
ofcustoms, inconformity withArticle VIIoftheGATT Agreement. Doesthepresent formulation
used byCroatia correspond totheformulation used inrelevant legislation bytheformer
Yugoslavia?
ANSWER:
Attached tothese answers isthefullEnglish translation oftheCustoms ActoftheRepublic
ofCroatia.Thetranslationshowsthattheformulationoftheabove-mentionedarticlesisinfullconformity
withtheAgreement ontheapplication ofArticle VIIoftheGATT Agreement. Theformulations largely
correspond tothose usedintherelevant legislation oftheformer Yugoslavia (SFRJ).WT/ACC/HRV/3
Page28
III.2(h) Rules ofOrigin
Question 49.
AretheCroatian rules oforigin compatible withtheWTO Agreement?
ANSWER:
TheCroatian rulesoforigin arecompatible withtheWTO Agreement ontheRules ofOrigin:
thecountry oforigin isconsidered tobethecountry where goods havebeenentirely produced or,when
more thanonecountry isinvolved intheproduction ofgoods, thecountry oforigin isthatinwhich
thegoods weresubjected tothelastsignificant transformation; therulesoforigin arebased onpositive
standards; therules oforigin applied toimports andexports arenotstricter thantherules applied
intheprocess ofdetermining which goods areofdomestic origin, andtheydonothaveadiscriminatory
effectamongindividualcountries;theCroatianrulesoforiginarenotusedasaninstrumentofrestriction
intrade, whether direct orindirect.
Question 50.
Please clarify whether thevalue added bythecountry oforigin must be51-percent ofthefinished
product 'svalue.
ANSWER:
Ifimported materials areusedintheproduction ofgoods, theadded value inthecountry of
origin must amount toatleast51percentofthevalue ofthefinished product.
III.2(i) Customs Formalities
37.Question:
Please elaborate further onwhat ismeant by"theamount ofcustoms duty payable forgoods
liable forcustoms dutypayment willbeestablished according tothecondition ofthegoods...".
ANSWER:
Thequestion refers tothepartoftheMemorandum entitled Customs Procedure (III.2.(i), on
page37).
Article 22describes theprocedure fordetermining theamount ofdutypayable onimported
goods.Whenthegoodscrossthecustomsline,theybecomeliableforcustomsdutypayment(Article19),
while theamount ofcustoms dutyisestablished according totheconditions ofgoods; theconditions
ofgoods aredetermined onthebasis ofexamination carried outbytheCustoms andincompliance
withtheprovisions which areinforce onthedatethecustoms declaration issubmitted. Thetimeof
assuming liability forcustoms dutypayment maynotcoincide withthetimeofestablishing theamount
ofcustoms dutypayable, andtheabove mentioned Article further explains various situations involved
inestablishing theamount ofdutypayable.WT/ACC/HRV/3
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III.2(j) Standards andCertification
Question 51.
Weunderstand thatCroatia ismaintaining developments instandards andquality assurance
compatible withinternational standards. Inlinewiththisaim,isCroatia considering becoming
asignatory totheTBT Agreement?
ANSWER:
After declaring independence andabolishing stateandlegallinkswithformer Yugoslavia, the
Republic ofCroatia hastemporarily taken overandincorporated initslegalsystem anumber offormer
federal laws, which arenotcontrary totheCroatian Constitution, inorder tobridge apossible legal
gapuntilthepassing ofnewlawsandby-laws.
Theinstruments taken overinclude theStandardization Actandabout 400by-laws, 13,000
norms andanumber ofother instruments relating tostandards andquality assurance.
Intheformer Yugoslavia, thestandards andquality assurance systems were centralized and
adapted toitsoverall political andeconomic goals andcapacities, taking intoaccount theaverage
capacities oftheformer Yugoslav republics.
Assuch, theywereinthelongrundetrimental totheCroatian economy, which wasconsiderably
above theformer Yugoslavia 'saverage. Suchstandards tended toreduce thedevelopment andproduction
strength oftheCroatian economy, andparticularly itscompetitiveness, bothonthedomestic andthe
foreign markets.
TheRepublic ofCroatia isacountry intransition, which aimsforcoexistence withcountries
ofthefreedemocratic world. Itseconomic goals include theestablishment ofmarket relations, private
entrepreneurship andfreecompetition, inorder toachieve fullandvaluable participation atthe
international market, i.e.intheinternational exchange ofgoods andservices, including ideas, goods,
capital andpeople. Thestandards andquality assurance systems thathavebeentemporarily taken over
arenotadequate forachieving these goals. Asforthetechnical aspect ofthese regulations, theyare
mostly antiquated andnotsufficiently consistent withthecorresponding international andregional
regulations.
Since theRepublic ofCroatia wants totaketheplaceitisentitled tointheinternational exchange
ofgoods andservices, itmustestablish anew,modern standards andquality assurance system, which
isanecessary prerequisite forparticipation ininternational economic events. International know-how
andexperience, aswellastheexisting international, regional andnational norms already ineffect in
other countries willbeusedintheestablishment ofthenewstandards system intheRepublic ofCroatia.
Croatian statebodies havesought membership ofinternational (ISO, IEC,ITU) andregional
organisations (EOQ, ETSI), andoftheEUorganization CENELEC, andnegotiations onaccession
toanother EUorganization (CEN) areunder-way.
Thenewquality assurance system, which includes inspection andcertification, willbebased
ontheISO9000andEN45000 standards, thatisISO/IEC Guides. TheStateOffice forStandardization
andMetrologyisinchargeoftheestablishmentandimplementationofthestandardsandqualityassurance
systems, andthesupervision oftheirimplementation. Inorder toestablish thenecessary correspondence
withtheinternational andnational standards andquality assurance systems, familiarise itselfwiththeir
functioning andtakeactive partinit-withaviewtospeeding uptheestablishment ofitsownsystemWT/ACC/HRV/3
Page30
andmaking itmore systematic -theRepublic ofCroatia hasacceded toandactively participates in
anumber ofUNorganizations andagencies (FAO, WHO, UNCTAD, UN-ECE andothers). Croatian
statebodies havesought membership ofinternational (ISO, IEC,ITU)andregional organizations (EOQ,
ETSI), andnegotiations onaccession toEUorganizations (CEN, CENELEC) areunder-way.
Similarly, relations withanumber ofnational organizations havebeenestablished withaview
toexchanging materials andexperience.
Aiming toimprove itseconomy, andparticipate fullyintheinternational exchange ofgoods
andservices, theRepublic ofCroatia hasachieved observer status inGATT, andapplied forWTO
membership. Inorder toestablish modern standards andquality assurance assoonandasefficiently
aspossible, andtogaininsight intointernational andforeign experiences through adirect exchange
ofexperience andknow-how, theRepublic ofCroatia hasplanned tosignaTBTagreement within
theframework ofGATT. AsWTO member countries arebound toaccept theTBTagreement, the
Republic ofCroatia willbepleased tomeetitsobligations afteradmittance tomembership, expecting
fullassistance from other member countries.
Question 52.
Please indicate thestatus ofCroatia 'snewLawonStandardization.
ANSWER:
After thedeclaration ofindependence andthebreaking ofconstitutional tieswiththeformer
Yugoslavia, theRepublic ofCroatia hastemporarily included initslegislation anumber offormer
federal lawswhich arenotcontrary totheConstitution oftheRepublic ofCroatia, inorder tobridge
thegapuntiltheenactment ofnewlawsandregulations.
Among others, theLawonStandardization, about 400rulebooks, 13,000 standards, anda
considerable number ofother normative deeds, regulating standards andcertification have been
temporarily included.
About 85percentofthetemporarily adopted standards aremandatory.
Thesystem ofstandards andcertification wascentrally controlled intheformer Yugoslavia,
inlinewithgeneral political andeconomic objectives, andadjusted totheaverage levelofdevelopment
ofalltheformer republics which constituted Yugoslavia.
Inthelongterm,thiswasdetrimentaltotheCroatianeconomy,whichwasmuchmoredeveloped
thantheaverage economic level oftheformer Yugoslavia, thusreducing itsdevelopment and
reproduction capacity, andcompetitive abilities inthedomestic andforeign markets.
Similarly,itwasanobstacletoforeigntrade,owingtomaladjustmenttointernationalorregional
standards, orbecause ofthehighdegree ofmandatory application.
TheRepublic ofCroatia isacountry intransition, aiming forpeaceful cooperation withthe
countries ofthefreedemocratic world, and,intheeconomic field, fortheestablishment ofmarket
relations, freeenterprise andcompetition, sothatitcanparticipate onanequal footing intheinternational
market, andintheinternational exchange ofgoods andservices, ideas andpeople.WT/ACC/HRV/3
Page31
Thetemporarily adopted system ofstandards andcertification hasnotbeenadapted tomeet
theseobjectives oftheRepublic ofCroatia, andtheregulations aremostly outofdateandonlypartially
related tocorresponding international andregional regulations.
Since theRepublic ofCroatia wishes toparticipate intheinternational exchange ofgoods and
services, ithastoestablish anewandmodern system ofstandards andcertification inlinewiththe
systems accepted intheworld, andthisisaprerequisite foritsparticipation ininternational economic
developments.
TheRepublic ofCroatia has,therefore, decided toestablish anewsystem ofstandards and
certification inlinewithitsobjectives, needs andpossibilities.
Theestablishment, application and,toacertain extent, supervision oftheimplementation of
thenewsystem arewithin thescope ofthework oftheStateOffice forStandardization andMetrology,
founded in1992.
ThenewLawonStandardization, andnewrulebooks andregulations willbethelegalbasis
ofthenewsystem, drawing upon international expertise andexperience, andexisting international
andregional regulations, aswellastheregulations ofother countries.
TheCroatian standards (HRN) willinclude international standards andrecommendations (ISO,
IEC,ITU,Codex Alimentarius, UN-ECE andothers), aswellasregional standards (CEN, CENELEC,
ETSI), and,incertain areas, thestandards ofother countries (BS,NF,ASTM, DIN, etc.).
Thenewsystem ofquality certification, including accreditation, testsandcertificates willbe
based ontheadopted standards ISO9000 andEN45000.
General guidelines fortheintroduction ofthenewsystem, theregulations regarding certain
areas, aswellastheirapplication, willbeprovided bythenewLawonStandardization, which is
currently intheprocess ofbeing prepared andenacted.
TheLawenvisages thenon-mandatory useofstandards, except inareas important forthe
protection oflifeandhealth, theprotection oftheenvironment, andthegeneral protection ofconsumers.
Inthepreparation andenactment ofstandards, allcontracts andagreements binding theRepublic
ofCroatia willbehonoured.
Laws, regulations andstandards, obligatory testing andcertification willbeapplied equally
togoods andservices ofdomestic andforeign origin, andwillnotbeenacted withthepurpose of
rendering theimport ofgoods andservices more difficult.
Theresults ofthetesting andcertification ofother countries willberecognized, provided that
theirlegalbasis isidentical orsimilar.
ThenewLawonStandardization isexpected tobepassed bytheendof1995.
Inorder toestablish thenecessary connections withtheinternational andnational systems of
standardization andcertification, andtogetaninsight intotheirwork andtheopportunity toparticipate
init,theRepublic ofCroatia hasbecome amember of,andisactive in,anumber oforganizations
andagencies within theUN(FAO, WHO, UNCTAD, UN-ECE andothers).WT/ACC/HRV/3
Page32
BodiesappointedbytheRepublicofCroatiahavebecomemembersofinternationalorganizations
(ISO, IEC, ITU), regional organizations (EOQ, ETSI), andtheorganization oftheEuropean Union
(CENELEC), while negotiations onjoining theorganization oftheEuropean Union (CEN) arecurrently
inprogress.
Similarly, relations withanumber ofnational organizations havebeenestablished, andmaterials
andexperience areexchanged withthem inorder toadjust thesystem andtoavoid creating possible
obstacles totheinternational exchange ofgoods andservices.
Question 53.
Areproducts subject tomandatory certification upon importation inCroatia?
ANSWER:
RequirementsforproductsimportedintotheRepublicofCroatiaareidenticaltotherequirements
setfordomestic products.
Depending ontypeofproduct, some must beaccompanied byaproducer 'sdeclaration,
instructions foruseandaguarantee, withappropriate markings onthepackage, andintheCroatian
language.
Spare parts andservices must beensured forcertain types ofproducts. Products forwhich
therearemandatory norms inCroatia musthaveconfirmation oftheirconformity toprovisions ofsuch
norms, andproducts subject tomandatory certification must haveappropriate certificates.
Confirmation ofconformity andcertificates areissued byorganizations registered orauthorized
forinspection andcertification through competent authorities oftheRepublic ofCroatia.
Alltheabove procedures mustalsobeapplied toproducts made intheRepublic ofCroatia.
Question 54.
Please explain howenforced sanitary andphytosanitary requirements arebased onscientific
standards.
ANSWER:
Thebasic veterinary actoftheRepublic ofCroatia istheLawonanimal health protection and
veterinary medicine ("Official Gazette (NN)," no.52/91).
Inaccordance withthisLaw, alargenumber ofotherlegalprovisions havebeenadopted (rules,
decrees, instructions) especially ontheprevention anderadication ofcertain contagious diseases and
onthecontrol ofanimal breeding andthetrade inanimals andtheproducts ofanimal origin.
Theveterinary legislation intheRepublic ofCroatia isbeing permanently adjusted tothe
international standards, particularly tothose established bytheInternational Agency forEpizootic
Diseases (Paris) andCodex Alimentarius.
Plant protection inspection services atborder crossings areorganized within aspecial Section
intheDepartmentforagriculture,foodandtobaccoindustriesoftheMinistryofAgricultureandForestryWT/ACC/HRV/3
Page33
oftheRepublic ofCroatia. Plantprotection inspection services atborder crossings operate infiveunits,
controlling intotal19plantborder crossings asdetermined bytheMinistry ofAgriculture andForestry
inaccordance withtheLawonPlants Protection, international obligations andbilateral agreements.
Inspection services atborder crossings giveobligatory examinations when plants areimported
ortransported across theterritory oftheRepublic ofCroatia, while theInstitute forPlant Protection
inAgriculture andForestry examines theplants thatareexported. Border crossing inspection services
forplantprotectioncooperatewiththeInstituteinorganizingquarantinerelatedactivitiesandmaintaining
quarantine facilities inthecountry inaccordance withtheregulations ontrade inimported plants and
plant products.
III.2(k) Organisation ofInspection Services atBorder Crossings intheRepublic ofCroatia
Question 55.
Which imported farm products arehighly restricted oroutright banned foranimal orplant health
reasons, andwhat isthejustification foreachban? Please alsoelaborate ontherequired product
quality testing forfarm products.
ANSWER:
Theimport ofanimals andproducts ofanimal origin intheRepublic ofCroatia isallowed only
uponthecertificate stating thattheshipment hasfulfilled alltheveterinary andsanitary requirements.
Thetransport ofthese products across theterritory oftheRepublic ofCroatia isregulated inthesame
way. Theimport certificates areissued centrally bytheState Veterinary Agency, which alsotakes
careofthepreparation, printing anddistribution oftheinternational certificates accompanying shipments
exportedfromCroatia.Certificatesonthefulfilmentofveterinaryandsanitaryrequirements(guarantees,
quarantines, testing), aswellastheinternational certificates forshipments tobeexported, areconformed
totheInternational Codex onAnimal Health (OIE, 1992, Up-date 1994).
Theimport ofplants andplantproducts, andseeds andplanting materials inparticular, issubject
toobligatory health control inthecourse ofvegetation andtrading. Thetrade andproduction ofseeds
andplanting material tobeusedinagriculture andforestry maybebanned when these products are
found tobeinfected by:
- anypercentage ofquarantine plant pests which havenotbeenfound intheterritory
oftheRepublic ofCroatia orhavebeenfound onaverylimited areaoftheRepublic
ofCroatia (according totheListinAppendix 18.); or
- when theplants donotfulfiltheCriteria forhealth condition ofcrops, seeds andplanting
materials, thepercentage ofpests being above thepermitted level (according tothe
Criteria enclosed inAppendix 19.).
ThewholematterisregulatedbytheLawonPlantProtectionandtheimplementationprovisions,
whichcomplywiththeInternationalConventiononPlantProtection,andareconsistentwiththeprinciples
oftheEuropean Union Committee forAgricultural Plants Sanitary Conditions.
Theapplication ofplantprotection chemicals hasalsobeenconformed totheinternational rules
andissuited totheproduction, trade, distribution anduseoftheplants.
Itshould bepointed outthatwepermanently amend anddevelop ourlegalsystem, trying to
keepabreast withthetechnological andscientific advancement intheworld. These efforts willbeWT/ACC/HRV/3
Page34
continued, andinorder toimprove theorganization andtechnology ofwork, theInstitute ofAgriculture
andForestry,scientificinstitutionsandtheMinistryofAgricultureandForestrywillincreasethenumber
ofstaff, encourage theirfurther education andprocure theequipment fortheirwork.
Question 56.
Please explain howCroatia isready toapply theGATT Code onTechnical Barriers toTrade
andsupport theUruguay Round Agreement onSanitary andPhytosanitary Measures.
ANSWER:
TheRepublic ofCroatia hasalways beenengaged intheinternational trade inanimals and
productsofanimaloriginandwishestocontinueso.CroatiawillsupporttheUruguayRoundAgreement,
particularly inrespect ofsanitary measures, byadequately organized andefficient veterinary services;
efficient animal health protection; systematic andefficient control ofproduction andtrade inanimals
andproducts ofanimal origin (domestic andinternational trade) andveterinary regulations conformed
totheinternational standards.
Croatia isready toapply theGATT Code onTechnical Barriers toTrade, anditsupports or
hasalready started toapply themeasures under theagreement onphytosanitary measures, which have
beenincluded intheLawonPlant Protection; Croatia alsoshows itssupport bytheimplementation
oftheInternational Convention onPlant Protection andbyfollowing theguidelines oftheEuropean
andMediterranean Plant Protection Organization (EPPO), ofwhich theGovernment ofCroatia isa
member.
Being aware thatmaking andimproving theregulations intheareaofphytosanitary measures
isapermanent process, weaccept theagreement ontheapplication ofphytosanitary measures from
theUruguay Round atareasonably acceptable levelofrisk.
III.4 Incentives forExports ofGoods andServices
Question 57.
Please elaborate onCroatia 'splans forspecific market infrastructure services, research &
development, andprofessional training initiatives. Please indicate what means--such assubsidies
orfreeservices--Croatia willusetoachieve itsobjectives inthese areas, including mention ofhow
interested parties would qualify tobenefit from these initiatives.
Please describe which lawswould Croatia change tostimulate competition andthemobility of
thefactors ofproduction.
ANSWER:
Croatia doesnothaveaspecial industry policy directed towards strategic economic sectors.
Theactivities oftheState inthecontext oftheeconomic development ofCroatia, which isasmall
andopeneconomy undergoing transition, areconcentrated ontheshaping ofthelegalandinstitutional
prerequisites fornormal functioning ofthemarket economy withtheprevailing private ownership,
thedevelopment ofmacroeconomic conditions resulting ininternal andexternal balance andthe
mechanisms forstructural adjustment inthefinancial andrealsector oftheeconomy.WT/ACC/HRV/3
Page35
Toachieve theseobjectives, lawsconsistent withtheinternational legislation havebeenenacted
(Company Law, Banking Law, etc.), opening thedoors forfreeenterprise inallsectors oftheeconomy.
Freeaccess tothemarket, national treatment forforeign capital andaliberalized foreign trade
andcurrency regime create conditions forthedevelopment ofcompetition inthedomestic market.
Inthisliberal atmosphere lasting forthelastfewyears, theprivate sector hasbeendeveloping
rapidly,includingthesupplyofbusinessserviceswhichareanimportantpartofthemarketinfrastructure
andindispensable forthenormal functioning ofmarket economy.
Special attention ispaidtothedevelopment ofsmall andmedium firms, andtofacilitate theircrediting
bythebanks, theCroatian Guarantee Agency hasbeen founded. Inaddition, special financial
arrangements have been initiated bythecommercial banks andHKBO (Croatian Credit Bank for
Reconstruction) through which thecapital ofinternational andother foreign financial institutions is
channelled forcrediting thesmall andmedium firms.
Agency fortheinsurance ofexport deals against non-commercial riskshasbeenfounded with
theaimofencouraging exports.
Following thetechnological development initiative, support hasbeengiven tothecreation of
technological parks, thuscreating conditions fortransfer oftechnology from abroad. International
cooperation inthefieldofscience andresearch isbeing developed (i.e.participating intheCOST and
EUREKA programs). Thelawsonscientific research andadvanced education provide fortheprivate
initiative andforeign investment inthissector.
Thenewlegislation onlabour thatisbeing made isexpected toincrease theflexibility ofthe
labour market byliberalizing thejobcontracting forafixed period oftime, introducing retraining
programs andderegulating thedismissal procedure.
Besides, theGovernment subsidizes self-employment andtheemployers whoarewilling to
openupnewjobs.
Theliberalization offoreign investment andtheimprovement onthelegislation concerning
bankruptcy havecreated conditions forgreater mobility andmore efficient allocation ofthecapital.
Thiscourse ofevents hasbeenfavoured bybankrehabilitation processes, theprivatization ofsocially-
owned enterprises, andthecreation ofthelegal andinstitutional framework forthecapital market
development (Law onSecurities, LawonInvestment Funds, theestablishment ofthestock exchange,
etc.).
TheGovernmentisactivelyinvolvedinrestructuringthepublicinfrastructuresector,shipbuilding
andmetallurgy, including theunecological industries ontheAdriatic Coast. TheGovernment 's
involvement includes, among otherthings, subsidies, issuing guarantees forbankloansandperformance
guarantees, financing thestudies onrestructuring, thecosts ofclosing down factories andthesocial
security forworkers whohavelosttheirjobs.
Question 58.
TheEUwould appreciate anelaboration ontheincentives forexports inservices thatareenvisaged
byCroatia. Cananon-domestic funded company established inCroatia benefit inthesome way
from suchincentives?WT/ACC/HRV/3
Page36
Itisnotclear whether Croatia willgrant export subsidies ornot,asCroatia mentions thatit
"considers theintroduction ofexport incentives intheform oftax,customs andother refunds".
Inthisrespect theEUdraws theattention toArticle 3.1oftheWTO Agreement onsubsidies and
countervailing measures (SCM) andinparticular tofootnote 4,which prohibits subsidies which
areether dejureordefacto contingent upon export performance.
ANSWER:
Asspecified intheForeign Trade Memorandum (III4),theForeign Trade Operations Act
oftheRepublic ofCroatia contains measures which allow theintroduction ofincentives fortheexport
ofgoods andservices. However, fromthedayCroatia gained independence tothisdate,theCroatian
Government hasnotusedthese measures, i.e.ithasnotusedexport incentives todirectly stimulate
exports ofgoods andservices. Theexception istourist services. According toagovernment decision
in1994, about 25.6million HRK (about DEM 6.95million) fromthestatebudget hasbeenallocated
tothecostofpromoting theCroatian tourist industry ontheinternational market (fairs, catalogues,
studies etc.). Atthesame time, considering thebusiness Croatian tourism lostonthemarket, the
problems oftransport andotherdifficulties inDalmatia (Croatia 'smostimportant tourism region before
thewar), transport expenses ofgroup domestic andforeign tourist tripswhich included atleastaseven-
daystayinDalmatia weresubsidized in1994. Atotalof6.4million HRK (about DM1.74million)
from thestatebudget wasallocated tothese purposes in1994.
Itshould bestressed thattheTrade Bill,unlike existing law,doesnotenvisage anyform of
export subsidies, export stimulation measures orrefunds ofcustoms duties orother import levies. In
thisrespect, itisobvious thattheRepublic ofCroatia isacting inconformity withprovisions ofthe
SCM Agreement.
Question 59.
Please elaborate onthemeasures taken tointensify theexports ofservices.
ANSWER:
Ashasbeenstated intheForeign Trade Memorandum (III.4), Croatia 'sLawonForeign Trade
Operations provides forthepossibility ofintroducing export incentives, withtheaimofencouraging
theexport ofgoods andservices. However, sofartheCroatian Government hasnotusedthispossibility,
andhasnotdirectly encouraged exports, theonlyexception being tourist services. In1994, the
Government allocated about 25.6million HRK (about DM6.95million) from itsBudget forthe
promotion oftourism inCroatia ontheinternational market (fairs, catalogues, studies, etc.). Atthe
same time, taking intoaccount thelostmarket position ofCroatian tourism, andtransport andother
difficultiesinDalmatia(themostimportanttouristdestinationbeforethewar),theGovernmentsubsidized
partofthetravelling expenses forgroups ofdomestic andforeign tourists whostayed inDalmatia for
atleastseven days, andin1994, allocated 6.4million HRK (DM 1.74million) from theBudget for
thispurpose.
Itshould bepointed outthattheDraft LawonTrade doesnotforesee anyoftheexport subsidies,
indistinction withthepresent lawinforce. Italsodoesnotforesee thereimbursement ofthecustoms
duties andother import taxes. Bearing thisinmind, theevident intention oftheRepublic ofCroatia
istoproceed according totheregulation oftheSCM.WT/ACC/HRV/3
Page37
Question 60.
Thelistofservices inforeign trade operations recognized bylawisnotexhaustive. Please provide
acomplete listofservices thatareeither authorized or,alternatively, aresubject tolegal
restrictions.
ANSWER:
Theexisting Foreign Trade Actspecifies andelaborates onlyonservices (representation, sale
fromconsignment warehouses, performance ofconstruction works abroad, performance ofconstruction
works forforeign entities intheRepublic ofCroatia andthelike)forwhich special permission from
theMinistry ofEconomic Affairs isnecessary. TheTrade Billdoesnotenvisage special regulation
oftrade services operations orrestrictions inproviding services inforeign trade operations. (See
Appendix 8.fordetails).
III.4 (a) Protective Measures
Question 61.
TheEUwould appreciate aclarification regarding thecontents ofsub-paragraph nine(9)under
thisheading.
ANSWER:
Thefirstpartofthesentence inthequoted article oftheCustoms ActoftheRepublic ofCroatia
has,unfortunately, beeninappropriately translated intheMemorandum ontheForeign Trade System
oftheRepublic ofCroatia.
Thefirstpartofthetextshould readasfollows (Article 49(1)):
ConcerningthepaymentofcustomsdutiesongoodsofCroatianoriginorthecustomsprocedure,
ifacountry doesnottreatCroatian ships orother means oftransport ...
Webelieve thatthisisthesource ofdoubt about theaccurate formulation ofthisarticle, the
application ofwhich isveryclear: theRepublic ofCroatia reserves therightofreciprocity torespond -
inthiscasebyintroducing anadditional customs duty-topossible discriminatory treatment ofgoods
ormeans oftransport originating from Croatia byother countries.
Question 62.
When aspecial dutyislevied inexcess ofnormal customs duties, dotheconditions which need
tobefulfilled conform totheAgreement onSafeguards included intheFinal Act?Istheimposition
ofaspecial dutyasaprotective measure compatible withWTO provisions?
ANSWER:
Thepractical application ofthisArticle oftheCustoms Act(Article 55)would befullyadjusted
totheprovisions oftheAgreement onSafeguards. Adecision ontheapplication ofthisarticle would
bepassed inconsultation between theGovernment oftheRepublic ofCroatia, theChamber ofEconomy
andtheMinistry ofFinance. However, sofarthere hasbeennoneedfortheRepublic ofCroatia to
regulate itsforeign trade operations inthisway, hence wehavenorecorded example ofthisarticle
being applied inpractice.WT/ACC/HRV/3
Page38
Question 63.
What isthecriteria thatCroatia usestodetermine whether animport will"seriously harm" the
domestic economy? Please explain howCroatia isprepared toapply theGATT andUruguay Round
agreements onSafeguards.
ANSWER:
Onapplication, thisArticle oftheCustoms Law(Article 55)would becompletely adjusted
totheprovisions oftheAgreements onSafeguards. Thedecision, including thecriteria regarding the
application ofthisArticle would bereached byconsultation between theGovernment oftheRepublic
ofCroatia, theChamber ofCommerce, andtheMinistry ofFinance. However, sofartheRepublic
ofCroatia hasfeltnoneedtoregulate itsforeign traderelations bysuchmeasures, consequently, there
isnoinstance ofthisArticle everbeing applied inpractice.
TheTrade Bill(Articles 46and47)specifies theconditions forintroducing safeguard measures.
TheArticles havebeenadjusted tomeettheAgreement onSafeguards.
Question 64.
Please explain which "special customs protection measures" arecurrently inforce. What time
limits havebeenapplied? Which testsareusedtodetermine thattheprices ofcertain goods are
expectedtocausemajordisruptions,orenableacountryorpersontoattainamonopolisticposition?
ANSWER:
Ashasbeenstated intheanswer totheprevious question, onapplication, thisArticle ofthe
Customs Law(Article 55)would becompletely adjusted totheprovisions oftheAgreement on
Safeguards. Thedecision ontheapplication ofthisArticle would bereached byconsultation between
theGovernment oftheRepublic ofCroatia, theChamber ofCommerce, andtheMinistry ofFinance.
However, sofartheRepublic ofCroatia hasfeltnoneedtoregulate itsforeign trade relations
inthisway, consequently, there isnoinstance ofthisArticle everbeing applied.
Question 65.
Please provide anEnglish copyofCroatia 'santi-dumping lawanddescribe howCroatia isprepared
toapplytheGATTandUruguayRoundagreementsonAnti-dumpingandCountervailingMeasures.
ANSWER:
InCroatian law,theprovisions relating toanti-dumping measures willbeincluded intheLaw
onTrade(Articles48and49).UpontheenactmentofthisLaw,theGovernmentwillregulatethemanner
andconditions forapplying anti-dumping measures. Thecriteria andrulesestablished bytheAgreement
onAnti-dumping andCountervailing Measures willbecompletely abided by.(Please refer to
Appendix 8).
Question 66.
Please confirm thatnoprotective measures, suchasanti-dumping feesoradditional customs duties,
arecurrently invoked toprevent damage tolocal producers. Please make detailed reference to
anysuchmeasures taken, especially intheagriculture sector.WT/ACC/HRV/3
Page39
Please clarify whether thestatement "Croatia hascommitted itselfnottouseanyofthese 'inherited '
protective measures" means thatCroatia willnever useanti-dumping orother suchprotective
measures.
What criteria doesCroatia usetoforecast thelevels ofexports andforeign exchange flows for
thepurpose ofapplying anti-dumping andcountervailing duties?
ANSWER:
According totheregulations currently ineffect (Article 75oftheLawonForeign Trade
Operations, inherited from former Yugoslavia) andtheDraft LawonTrade, theapplication ofanti-
dumping duties hasinprinciple been conformed totherules oftheAnti-Dumping Code, butwe
emphasize thatthemeasures ofthiskindhavenever beenapplied toanysectors, agriculture include,
intheRepublic ofCroatia.
Thebasic principles underlying theregulations ontheapplication ofanti-dumping duties,
countervailing duties andsafeguard measures havebeenprovided bytheDraft LawonTrade. The
Government ofCroatia willstatetheconditions fortheapplication ofthisprocedure andwillspecify
theconditions foreachoftheabove-mentioned kindofprotection. Thebasisforthese regulations will
betheprinciples anddecisions ofWTO.
Inaccordance withthecurrent regulations, theGovernment oftheRepublic ofCroatia may
impose anti-dumping feesonlyifithasbeenestablished, according totherelevant procedure, thatthe
goods areimported atthepricethatislower thanthenormal value ofthegoods, which causes damage
orthreatens tocause damage todomestic producers.
Insuchacase, noadditional customs dutymaybeapplied inaddition toanti-dumping duty.
Asregardstheterm"additionalcustomsduties",itshouldhavebeentranslatedas"countervailingduties",
which areapplied toprotect domestic industry fromthesubsidized imports, andweregret thisinaccuracy
inthetranslation.
Question 67.
TheCroatian legislation envisages thepossibility ofdumping duties incaseof"prices below market
price". However, Anti-Dumping Agreement onlypermits ADaction incaseofprice differences
between thenormal value ofaproduct anditsexport price. Furthermore, anecessary prerequisite
fortaking remedial action isthatmaterial injury hasbeencaused todomestic industry ofalike
product intheimporting country. Towhat extent willthese provisions bereflected inCroatian
legislation?
ANSWER:
Inanswer tothisquestion, please refertoacopyoftheunofficial translation oftheTrade Bill
given inAppendix 8.
Question 68.
TheEUwould liketoknow whether incaseofprotective measures ADduties willbecumulated
withthe"additional customs duties" thatarementioned onpage 41.Ifthisisthecase, could it
them please beexplained under which WTO provisions thiswould bejustified?WT/ACC/HRV/3
Page40
Howcanananti-dumping dutybeimposed ontheexport ofgoods? Canthisbedoneautonomously
oronlyafter theimitation ofanti-dumping proceedings inanother importing country? Issuch
adutyimposed onanMFN basis oronlyonexports destined foraspecific import market?
Please provide acopy ofdomestic anti-dumping countervailing dutyorsafeguard laws.
ANSWER:
According totheexisting legislation (Article 75oftheForeign Trade Operations Act), the
introduction ofananti-dumping dutywasinprinciple brought inaccord withprovisions oftheAnti-
Dumping Code.
Therefore, theGovernment oftheRepublic ofCroatia canprescribe anti-dumping duties only
ifitisestablished intheappropriate procedure thatthegoods areimported ataprice lower thantheir
usual market value, thuscausing orthreatening tocause serious damage todomestic producers. In
thiscasenoadditional customs dutycanbeprescribed besides theanti-dumping duty.
Asfortheterm"additional customs duty", itisanimprecise translation which infactshould
be"countervailing duty", which isintroduced toprotect thedomestic industry fromsubsidized import.
Atthesametime,underCroatianlawtheanti-dumpingdutycannotbeprescribedforexportsofproducts,
which isevident from thetextonpage41oftheMemorandum.
TheTradeBillprovidesthebasisofthelegislationrelativetotheintroductionoftheanti-dumping
duty, countervailing dutyandsafeguard measures. Onthepassing ofthislaw,theGovernment ofthe
Republic ofCroatia isobliged toprescribe detailed conditions fortheimplementation ofprocedures
andthedetermination ofconditions forsetting measures foreachofthesaidforms ofprotection. Besides,
theprinciples andsolutions oftheWTO willserve asabasisforthepassage ofthese regulations. (See
Appendix 8fordetails).
IV.1 Industrial Property [andTRIPs]
Question 69.
What progress hasCroatia made ondrafting anewcopyright lawandnewlaws forpatents,
trademarks, andutility models?
ANSWER:
Croatiaisfacingaperiod(1-2years)ofintensiveworkonnewlegislationonintellectualproperty.
Itwillreplace theexisting regulations inthisfieldwhich weretaken overfrom theformer Yugoslav
legalsystem thatwasinforceattheendof1991. Accordingly, thefirstDraft ofthenewLawonPatents
hasalready beenmade andisbeing considered bytheWorking Group established forthatpurpose.
Inthemiddle of1995, thesame activities willbeinitiated, concerning thenewLawon
Trademarks andLawonDesigns (Industrial Designs). Activities concerning thenewLawonCopyright
willbeinitiated bytheendoftheyear.
Theoption istodrawuponthecontemporary achievements andpositive international experience
while making theabove laws, andtoconsult andcooperate withtheWorld Intellectual Property
Organization (WIPO) inGeneva andsome national andregional institutions specializing inintellectual
property. Itgoeswithout saying thattheprinciples andcontents ofTRIPS willbeadhered to.WT/ACC/HRV/3
Page41
Question 70.
When doesCroatia expect these lawstobeenacted andwhen willtheyenter intoforce?
ANSWER:
Theabovementionedlawswillbepassedgradually,sothatallofthemareexpectedtobeenacted
bytheendof1996 oratthelatest inthefirstmonths of1997. They willenter intoforce inthecourse
of1997. Forexample, thenewLawonPatents isscheduled toenterintoforceasearlyasthebeginning
of1996.
Question 71.
Please provide English copies ofthedraft lawstocomment onbefore theyaresubmitted foraction.
ANSWER:
Croatia willprovide English copies ofthedraftlawstocomment onwhen theyenterthefinal
phase ofpublic discussion andbefore theyaresubmitted totheParliament oftheRepublic ofCroatia.
Question 72.
IsCroatia 'sIPRlegislation nowpartofsome other section ofCroatian lawrather thantheforeign
trade law?
ANSWER:
TheLawonIndustrial Property (former federal Yugoslav LawonProtection ofInventions,
Technical Improvements andDistinctive Signs, which wasaltered andamended inApril 1992 -NN
RH19/92, when thetitlewasalsochanged) regulates almost completely thesubject ofindustrial property
intheRepublic ofCroatia.
Question 73.
Isalawfortheprotection ofsemiconductor chiplayout designs being drafted? Ifso,when is
itexpected thatthelawwillbeenacted? When willitcome intoforce?
ANSWER:
Thismatterwillbeapproachedseparatelytowardstheendof1996andtheLawonSemiconductor
Chip Layout Designs isexpected tobeenacted atthebeginning of1997.
Question 74.
Please explain howtrade secrets areprotected under Croatia 'slaw.
ANSWER:
Trade secrets intheRepublic ofCroatia aretoacertain extent regulated bythenewDraft Law
onTrade, which classifies anillegally obtained trade secret ofanother trader orunlawful exploitation
ofthecommunicated trade secret ofanother trader asunfair competition.WT/ACC/HRV/3
Page42
Theintention istocollect information onthemanner ofprotection oftradesecrets inindividual
countrieswithlongtraditionandexperienceinthismatterandtoselectamodelwhichmayoffersolutions
acceptable totheRepublic ofCroatia.
Question 75.
IsCroatia discussing withtheEuropean Patent Organization thepossibility ofallowing foreign
nationals todesignate Croatia when theyfilepatent applications withtheEPO? What progress
isbeing made inthese discussions?
ANSWER:
Croatia ortheState Patent Office oftheRepublic ofCroatia hasbeenincontact withthe
European Patent Organization since 1992. These contacts areexpected tobecome more intense during
1995, when consultation andcooperation withEPOisexpected concerning thenewLawonPatents.
Aspartofthismatter, thepossibility ofallowing foreign nationals todesignate Croatia when theyfile
patent applications withtheEPOwillalsobeelaborated andprovided for.
Question 76.
Does Croatia plantojointhePatent Cooperation Treaty and,ifso,when?
ANSWER:
Croatia plans tojointhePatent Cooperation Treaty attheendof1995.
Question 77.
Isthenewpatent lawbeing drafted tobefullyconsistent withtherequirements oftheUruguay
Round Agreement onTrade Related Aspects ofIntellectual Property?
ANSWER:
There isnodoubt thatthenewpatent lawbeing drafted willbefully consistent withthe
requirements oftheUruguay Round Agreement onTrade Related Aspects ofIntellectual Property.
Question 78.
Article 22oftheformer LawonInventions, Technical Improvements andDistinctive Signs makes
plantvarietiesandanimalbreedsunpatentable.Itisnotclearfromthelawwhethermicroorganisms
andmicrobiological processes arepatentable. Could Croatia clarify whether inventions ineither
category currently arepatentable?
ANSWER:
Microorganisms andmicrobiological processes arepatentable, which hasbeenregulated in
theRules onProcedure forPatent Grant (Articles 21-24 oftheRules onProcedure forPatent
Grant -NNRH53/91; Sl.list62/91).WT/ACC/HRV/3
Page43
Question 79.
Article139oftheformerlawonInventions,TechnicalImprovementsandDistinctiveSignsprovides
forcompulsory licensing iftheinvention isnotbeing "worked" inCroatia andexpressly states
thatimportation isnotconsidered "working". Please describe howCroatia willensure that
importation oftheproduct thatisthesubject matter ofthepatent istreated as"working" for
purpose ofanycompulsory licensing.
ANSWER:
Consideringcompulsorylicensing,thismatterwillbeadequatelyregulatedbythenewlegislation
andwillbeconsistent withtheprovisions ofTRIPS.
Question 80.
Please clarify whether Croatia 'snewlawonCopyright andrelated rights include protection for
sound recording (phonogram) producers.
ANSWER:
Asregards related rights, theCroatian Lawoncopyright from 1993, which iscurrently in
force, includes provisions ontherights ofperformers only, while thesubject matter relating tothe
rights ofphonogram producers isplanned tobeelaborated on,sothatalltheaspects canbeincluded
inthefuture legislation.
Question 81.
How willsound recordings produced prior tothedateofentry-into-force ofthenewcopyright
lawbetreated?
ANSWER:
Sound recordings produced prior tothedateofentry intoforce ofthenewCopyright Law
willprobably remain inthemarket onlyiftheyareproduced inaccordance withtheprovisions ofthis
newLaw.
Question 82.
Please describe theprotection currently available forsound recording producers toprevent the
unauthorized duplication andperformance oftheir sound recordings.
ANSWER:
Soundrecordingproducersarecurrentlyprotectedindirectlythroughthecollectiveadministration
ofcopyrights.
TheprotectionofcopyrightsiscarriedoutbytheCroatianAssociationofComposers,whichisamember
ofBIEM, andinaccordance withthestandard BIEM contract, thuspreventing theunauthorized
duplication andperformance oftheirsound recordings.
Question 83.
Industrial Property (stet)WT/ACC/HRV/3
Page44
ANSWER:
Inthenearfuture, foraperiod ofonetotwoyears, Croatia willfullyconcentrate onnew
intellectual property rights toreplace existing legislation from theformer Yugoslavia which wasin
force attheendof1991. Thedrafting ofthenewPatent Lawhasalready begun andisbeing considered
byaworking group setupforthispurpose atthecentral government level.
Inthemiddle ofthisyearalmost identical steps willbetaken concerning thenewTrademark
LawandtheLawonIndustrial Design. Activities concerning thenewLawonCopyright areexpected
tobegin attheendofthisyear.
Croatia isdetermined tofollow contemporary achievements andpositive experience intheworld
which willbeensured notonlythrough activities within theWorld Intellectual Property Organization
inGeneva butalsothrough cooperation andconsultations withcertain national andregional institutions
dealing withintellectual property. Itisunderstood thatcompliance withtheessence andcontents of
theTRIPS Agreement willbeensured.
Question 84.
Docurrent rules inCroatia oncompulsory andnon-voluntary licences forpatents comply with
theprovisions ofarticle 31oftheTRIPS Agreement?
ANSWER:
Provisions concerning compulsory andnon-voluntary licences willbefullybrought inaccord
withtheprovision ofArticle 31oftheTRIPS Agreement inthepreparation ofnewlegislation. We
would liketonotethat,despite existing legal provisions, notasingle compulsory licence hasbeen
issued inpractice.
Question 85.
TheMemorandum refers toregistered marks oforigin. What istheexact regime ofthese marks
oforigin? Does thisregime follow thegeneral legislation ontrade andservice marks?
ANSWER:
InMemorandum theterm"appellations oforigin" wastranslated as"marks oforigin" instead
of"geographical indications," which caused misunderstanding andhasresulted withtheabove question.
Question 86.
TheMemorandum notes thatnolegislation hasyetbeenpassed "onintegrated circuits (including
semiconductors)". When willlegislation ontheprotection oflayout-designs (topographies) of
integrated circuits beintroduced? Willthere beanyregistration requirements? Which willbe
thebody responsible forthese matters? Will thislegislation beinfullconformity with the
Articles 35-38 oftheTRIPS Agreement?
ANSWER:
Asforlegislationthatwouldregulatetheprotectionoflayout-designs(topographies)ofintegrated
circuit semiconductors, weexpect thisareatoberegulated in1996withanappropriate lawwhich will
beinkeeping withtheprovisions ofArticles 35-38 oftheTRIPS Agreement.WT/ACC/HRV/3
Page45
Question 87.
Isthere anyspecific legislation protecting geographical indications? Arethere anyregistration
requirementstoprotectgeographicalindications?IsthislegislationinaccordancewithArticles22-24
oftheTRIPS Agreement?
ANSWER:
AlthoughCroatiahaslegallyregulatedtheproblemofgeographicalindications(withintheexisting
Industrial Property Law), new, separate legislation isplanned tobeworked outinharmony with
Articles 22-24oftheTRIPS Agreement andanEUdirective forgeographical indications.
Question 88.
TheMemorandum notes that"incaseoneoftheparties tothecontract ofacquisition andcession
ofindustrial property rights andknow-how isaforeign legal entity ornatural person, legal
framework isprovided byChapter VIII, Articles 68-73 oftheLawonForeign trade Operations".
What does thismean inpractice? What istheexact regime, inrelation totheacquisition of
intellectual property right, towhich foreigners aresubject? Arethere anyrestrictions orlimitations
forforeigners asregards theacquisition ofintellectual property rights? Doanysuchrestrictions
alsoapply toCroatian nationals?
ANSWER:
AsforChapter VIIIoftheLawonForeign Trade Operations -Acquisition andCession of
Industrial Property Rights andKnow-How -despite provision oftheguarantees i.e.restrictive clauses
inArticles 71and72oftheLaw, theMinistry ofEconomic Affairs asthecompetent government body
requires inpractice thatacontract ensures aguarantee byaforeign entity asthelicensers ofpatents
andknow-how thattheirusewillnotaffect thelifeandhealth ofpeople, things ortheenvironment.
Newlegislation isbeing drafted, withChapter VIIIomitted andwiththeemphasis onmaintaining
records, butwithout giving consent fortheabove-mentioned contracts.
Question 89.
Which isthebody responsible inCroatia forcopyrights andrelated rights?
ANSWER:
Theresponsible body forcopyright andrelated rights inCroatia istheState Patent Office,
within thecompetence ofwhich is,ofcourse, industrial property. (Until May1995copyright andrelated
rightwere under thejurisdiction oftheMinistry ofCulture.)
Question 90.
Istheprotection ofcopyrights andrelated rights inCroatia fullyinthelinewiththearticles 9-14
oftheTRIPS Agreement?
ANSWER:
Copyrights andrelated rights inCroatia areprotected inaccordance withrelevant provisions
oftheTRIPS Agreement asfarasauthors andperformers areconcerned, butwhatiscurrently missingWT/ACC/HRV/3
Page46
isthelegalprotection ofphonogram producers andbroadcasting organizations. Thisaspect isyetto
beworked outandincluded innewlegislation.
Question 91.
Does Croatian copyright legislation provide forrental andlending rights? Who mayenjoy these
rights andtowhat extent?
ANSWER:
Croatian legislation envisages theexclusive distribution rights forartists andperformers of
from which follow lending andrental rights.
Question 92.
Arecomputer programmes protected asliterary works? Howaredatabases protected andtowhat
extent?
ANSWER:
Computer programmes areprotected asliterary, scientific andartistic works. Databases can
beprotected ascollections ofworks.
Question 93.
TheMemorandum mentions thattherights ofphonogram producers arenotyetcovered by
Croatia 'slegislation oncopyright andrelated rights. When willproducers ofphonograms be
protected? Willthisprotection beinconformity withArticle 14oftheTRIPS Agreement?
ANSWER:
Future legislation oncopyrights andrelated rights willalsoinclude therights ofphonogram
producers inlinewithArticle 14oftheTRIPS Agreement.
Question 94.
Arethere anylegislative provisions inCroatia fortheprotection oftrade secrets andundisclosed
information, notably inviewofArticle 39oftheTRIPS Agreement?
ANSWER:
Trade secrets intheRepublic ofCroatia aretoacertain degree regulated inthedraftofthe
newTrade Law, suchthattheillegal acquisition ofatrade secret fromanother trader ortheunlawful
utilization ofatrade secret confided byanother trader aretreated asunfair competition.
Itisconsidered necessary toobtain information ontheprotection oftradesecrets inindividual
countries withlong-standing traditions andpositive experience inthisareainorder toselect amodel
which could beusedfortheresolution ofthisproblem intheRepublic ofCroatia.WT/ACC/HRV/3
Page47
Question 95.
Which arethecivilandadministrative procedures andremedies available toenforce intellectual
property rights? Doforeigners enjoy thesame treatment asnationals inthisrespect? Arethese
remedies andprocedures inconformity withArticles 42-49 oftheAgreement onTrade-Related
Aspects ofIntellectual Property Rights (TRIPS)?
ANSWER:
Foreigners andnationals enjoy equal treatment inthecivilprocedure andcancallforprohibition
ofinfringement, destruction ofcounterfeits andcompensation, which isinlinewithrelevant provisions
oftheTRIPS Agreement.
Question 96.
Which arethecriminal procedures andpenalties available against theinfringements ofintellectual
property rights? Doforeigners enjoy thesame treatment asnationals inthisrespect? Arethese
procedures inconformity withArticle 61oftheTRIPS Agreement?
ANSWER:
Inthecriminal procedure foreigners andnationals alsoenjoy thesame treatment. Deliberate
violations aresubject toprison sentences andfines. Theprocedure isinkeeping withtherelevant
provision oftheTRIPS Agreement.
Question 97.
Dojudicial authorities have theauthority toorder injunctions orprovisional measures against
infringements ofintellectual property rights, asprovided forinArticles 44and50oftheTRIPS
Agreement? What exact measures arepossible andwhat istheprocedure tofollow? Do
administrative authorities enjoy similar authority?
ANSWER:
Astemporary measures, thejudicial authorities canorder withdrawal ofoffending material
fromthemarket andinjunctions onfurther offending activity. They areassisted bythefinancial police.
Question 98.
DoesCroatia already haveinplace asystem ofenforcement atborders against intellectual property
rights infringements inaccordance withArticles 51-60 oftheTRIPS Agreement? Ifso,what exact
rights arecovered bysuchasystem? Does itcover goods forexportation andgoods intransit?
Ifnosuchasystem isinplace, arethere anyplans toadopt one?
ANSWER:
There areplans tointroduce infuture legislation aborder control system concerning the
infringement ofintellectual property rights. Inthisrespect Articles 51-60oftheTRIPS Agreement
willbetaken intoconsideration.WT/ACC/HRV/3
Page48
Question 99.
TheEUwould appreciate iftheCroatia would submit copies ofallitslegislation related tothe
protectionofintellectualpropertyrightsincluding,notably,legislationonpatentsindustrialdesigns,
trade marks, topographies ofintegrated circuits, geographical indications, copyright andrelated
rights, trade secrets andundisclosed information andtheprotection against unfair competition.
ANSWER:
Croatia willdeliver totheEuropean Union English translations offuture legislation relating
totheprotection ofintellectual property rights aspartofthefinalstage ofpublic debate onthese laws
before theyenter theparliamentary procedure.
Question 100.
Wewould expect Croatia toaccede totheWTO induecourse andhence, take onTRIPS
obligations, withthatinmind:
Weunderstand thatCroatia isaparty tomostmajor intellectual property Conventions (e.g.Borne
Convention onCopyright, Paris Convention, WIPO etc.butnotyetamember ofthePatent
Cooperation Treaty. DoesCroatia intend toinitiate membership tothisTreaty inthenearfuture?
ANSWER:
TheRepublic ofCroatia hasjoined fiveinternational conventions relating toindustrial property,
namely:
-Convention Establishing theWorld Intellectual Property Organization;
-Paris Convention fortheProtection ofIndustrial Property;
-Madrid Agreement Concerning theInternational Registration ofMarks;
-NiceAgreement Concerning theInternational Classification ofGoods andServices forthe
Purposes oftheRegistration ofMarks;
-Locarno Agreement Establishing International Classification forIndustrial Designs,
andtwoconventions oncopyrights andrelated rights:
-Berne Convention fortheProtection ofLiterary andArtistic Works;
-Brussels Convention Relating totheDistribution ofProgramme-Carrying Signals Transmitted
bySatellite).
Regarding Croatia 'smembership ofthePatent Cooperation Treaty (PCT), theState Patents
Office intends tostarttheprocess ofapplying formembership towards theendof1995.
Question 101.
How andwithin what time-frame doesCroatia propose toimplement itsobligations under the
Agreement onTrade Related Aspects ofintellectual Property Rights (TRIPS)?WT/ACC/HRV/3
Page49
ANSWER:
Bypassing newlegislation, Croatia intends toharmonize itslegislation andpractice withthe
Agreement onTrade Related Aspects ofIntellectual Property Rights (TRIPS) within fiveyears ofthe
accession toWTO. ThePatent Law, which willincorporate thecommitments andobligations under
theTRIPS Agreement, iscurrently inpreparation.
Question 102.
Does Croatia consider thecurrent domestic legalframework tobesufficient fortheadequate and
effective protection ofintellectual property rights? How does Croatia propose tocover any
deficiencies?
ANSWER:
Weconsider thatthecurrent intellectual property legislation constitutes arelatively satisfactory
framework fortheeffective andadequate protection oftheserights inCroatia. However, afteraccession
toTRIPS, itwillbenecessary tocorrect andamend theexisting legislation. Anydeficiency inthis
respect willberemedied inthesame way. Weemphasize thatthecurrent legalframework includes
provisions forthecivil, penal andadministrative protection ofintellectual property.
Question 103.
What steps willCroatia takeinregard toobligations under theTRIPS Agreement relating to
enforcement ofintellectual property rights inCroatia?
ANSWER:
Theanswer tothisquestion isprovided above.
Question 104.
Does Croatia intend toaccede totheConvention fortheProtection ofPerformers, Producers of
Phonograms andBroadcasting Organizations? Ifyes,when doesCroatia envisage acceding?
ANSWER:
Croatia intends toaccede totheRome Convention fortheProtection ofPerformers, Producers
ofPhonograms andBroadcasting Organizations, within fiveyears.
Question 105.
Arethere anylegislative provisions inCroatia ontheprotection against unfair competition?
ANSWER:
Asforprovisions onunfair competition, thisissue isregulated bytheTrade Actandalsoby
theTrade Billandtherecently enacted Competition Protection Act(please refertoAppendices 8and
28,respectively foranunofficial English translation ofthese laws).WT/ACC/HRV/3
Page50
IV.2 Agricultural Policy
Question 106.
Please describe indetail which agricultural sectors Croatia protects andintends toprotect after
entry intotheGATT andWTO.
ANSWER:
Inreply toyourquestion, inAppendix *,weenclose theAgricultural Strategy oftheRepublic
ofCroatia which hasbeenmade withtheassistance ofUNFAO.
Question 107.
CanCroatia provide acopy ofthenewdraft legal framework? Willthenewframework be
consistent withtherequirements oftheWTO Agriculture Agreement? (IV.2.c) When willthe
newlegal framework outlining thesystem ofprotecting agricultural products andreducing the
number ofproducts thatareexposed tospecial feesbeavailable forexamination? (alsoseepage 48)
ANSWER:
TheMinistry ofAgriculture andForestry hasdeveloped adevelopment strategy foragriculture
incooperation withFAO experts (Please refertoAppendix 2.).Thisdocument clearly indicates the
orientationtowardsharmonizationofCroatia'sagriculturalpolicywithGATT.Thereisgeneralagreement
thatthepresent agricultural policy isundesirable sinceitchokes development intheagricultural sector.
Moreover itcannot bemaintained inviewofCroatia 'sinternational commitments toseekmembership
oforganizations suchasGATT, andtheEU.However, itisimportant tostress thatCroatia isseeking
DevelopingCountrystatuswhichallowsalongertimescaleandmorefavourableconditionsforadaptation
oftheagricultural sector during thetransition period.
Please alsorefertoAppendices 16.and17.
IV.2(a) System ofSubsidies inAgricultural Production
Question 108.
Areanysubsidies currently payable toexporters ofagricultural products? Ifso,please specify
typebyHSnumber andannual amount.
ANSWER:
Asregards theagricultural policy sofar,theagricultural sector hashadmodest direct financial
support. Support toagriculture ispartly allocated fromtheStateBudget asdirect support toagricultural
production (2.5percentoftheState Budget isspent onmonetary incentives andcompensations in
agriculture). Thelevelofdirect support hasbeenreduced inthepastfewyears. Theagricultural sector
isalsosupported bythesystem ofguaranteed prices, which aresetforthebasic agricultural products,
andadditional monetary incentives andcompensations andquotas andcustoms duties intended toprotect
theseprices.Monetaryincentivesandcompensationsareappliedtocertainagriculturalproducts,services
andinputs andtheyarethemain form offinancial support totheagricultural sector.WT/ACC/HRV/3
Page51
Subsidies fortheexport ofagricultural products arecurrently notapplied. Since thedeclaration
ofCroatianindependencein1991,directfinancialhelpallocatedfromtheBudgetintheformofeconomic
transfers inagriculture hasbeenintended forproduction stimulation (95percent) andforservices
(5percent).
IV.2(b) System ofGuaranteed Prices
Question 109.
Onpage 47(IV.2.(a), itisstated that: "thesystem ofbonuses forcertain groups ofagricultural
produce amounting toacertain percentage oftheguaranteed price hasbeen maintained". Can
Croatia please provide afulllistoftheproducts affected bythisbonus system? CanCroatia please
givefulldetails ofhowitiscalculated anddetails ofCroatia 'splans forreducing thelevel of
support?
ANSWER:
Theentitlement toabonus isregulated bytheAgricultural Bonuses andCompensations Act.
Theimplementation oftheActisregulated byBy-Laws onMethods andProcedures forGranting
Incentives intheAgricultural Sector.
Under theActandBy-Laws, physical andlegalpersons withheadquarters orresidence inthe
Republic ofCroatia, which produce agricultural products fortheCroatian market, areentitled toa
bonus onthefollowing products:
-cow's,goat'sandsheep'smilk;
-soy,sunflower, oilbeet, sugar beetandtobacco;
-olives;
-sperm from quality bulls;
-quality breeding cattle, pigs, sheep, goats andother animals.
Thebonus isdefined asapercentage oftheproduction price ofagiven product (20percent).
Thesumtotalofbonuses accounts foronly3percentofthevalue ofthetotalagricultural output and
foronly2percentoftheNational Budget. Itisevident thatthere ispractically noroom toreduce
these incentives -theycanonlybeabolished.
24.Question:
Onpage47(IV.2(b) itisstated that: "The instrument ofguaranteed prices forbasic agricultural
produce isaspecific technique usedforprotecting producers."
CanCroatia provide evidence thatsuchamechanism willnotconstitute atrade barrier?
ANSWER:
Protective prices aredetermined bytheCroatian Government inorder tostimulate domestic
agricultural production andtheinterest ofagricultural producers. They aresetforasmall number of
basic agricultural products.
In1995, protective prices weresetforsoy,sunflower, oilbeet,sugar beet, wheat andcrude
tobacco.WT/ACC/HRV/3
Page52
Protective prices arecalculated before thesowing, onthebasisofproduction costs, prices on
theworld market, prices onthedomestic market, domestic needs etc.
Protective prices undoubtedly affect market prices. However, market prices depend onthe
supply anddemand andmarket conditions andcanbehigher orlower thantheprotective prices. Thus,
in1994 themarket prices ofwheat were below theprotective price.
Inthisrespect, itisnecessary towarn thattheformulation onpage47oftheMemorandum
("thelawstipulates thatthecontract andsalesprices oftheseproducts maynotbebelow theguaranteed
price") onlyapplies toproducts bought bytheStateDepartment forCommodity Reserves, nottothose
bought bycompanies.
TheStateDepartment forCommodity Reserves buysabout 5to10percentofthetotalannual
agricultural output atprotective prices.
24.Question:
How would theguaranteed prices becalculated andadministered?
ANSWER:
Protective prices arecalculated onthebasis ofaverage costs perhectare ofseed, artificial
fertilizers, protection substances, machinery (tractors, harvesters, etc.), maintenance andother costs,
andaverage revenue perhectare forindividual crops. Protective prices areapplied intheevent ofstate
intervention (forexample when buying prices onthemarket arelower thanthedetermined protective
prices).
Question 110.
Aside from price guarantees, areanyfarmsupport programs stillineffect? Ifso,doesCroatia plan
tophase outthese programs under itsongoing market reforms?
Please listanywholesale orretail foodproducts whose prices arestillregulated orsubject tosubsidies.
ANSWER:
Theprice policy intheagriculture sector oftheRepublic ofCroatia isbased onthemarket
prices. Theinfluence oftheState intheareaofprices isreduced todetermining guaranteed prices
forwheat, soya, sunflower, rapeseed andsugar beet. These prices areapplied onlyforthepurchase
oftheabove products bytheStateAgency forCommodity Reserves. Other trading inthese products
isdoneatthemarket prices, which deviate form theguaranteed prices depending onthesupply and
demand.
In1994, forincentives andcompensations inagriculture, 501,729,000 HRK wasallocated
from theBudget. Thisamount wasintended forsubsidizing theproduction ofplants andanimals,
agricultural seedandartificial manure. Thenumber ofproducts subsidized directly form theBudget
willbereduced incompliance withtheprovisions ofGATT. Thesurplus offunds willbepaiddirectly,
inaccordance withGATT, totheagricultural producers (though notonthebasis ofthequantity of
thegoods produced) orwillbeusedasstructural investment assistance, foradvisory services, research,
protection oftheenvironment, etc.WT/ACC/HRV/3
Page53
Question 111.
Isthe"State Commodity Reserves" referred tounder thissection, theonlyutility which exists
inCroatia? Does italsopurchase major industrial equipment such astransport, electrical or
telecommunications equipment? Ifnotwhat administrative body isinvolved insuchpurchases?
Wouldprocurementoperatedbythe"StateCommodityReserves"becoveredbythenewlegislation?
ANSWER:
TheState Commodity Reserves istheonlyinstitution inCroatia engaged inthestoring and
purchase ofcommodity reserves, inaccordance withtheLawonStateCommodity Reserves ("Official
Gazette", 92/94).
TheStateCommodity Reserves donotpurchase larger industrial equipment. Suchpurchases
aremade mostly bycertain public companies (HPT, HEetc),orbycertain ministries (theMinistry
ofMaritime Affairs, Transport andCommunications, etc.)
Thepurchase ofgoods shallbe(except incasesinvolving statesecurity) conducted inaccordance
withthenewlegislation regarding theprocedure forthepurchase ofgoods andservices. Thesaleof
goods, aswellasobligatory purchase, isregulated bytheLawonStateCommodity Reserves (Official
Gazette, No.92/94) which iscurrently inforce.
IV.2(c) Special FeesonImports ofAgricultural andFood Produce (surtax)
Question 112.
Please describe thestatus ofthenewlegal framework being prepared toprotect agricultural
products andprovide anydrafts orproposals. Please alsodescribe howCroatia isprepared to
convert itsfees,surtaxes, andquotas totariffs asproscribed bytheUruguay Round Agreement
onAgriculture.
ANSWER:
Ithasnotbeenestablished sofarinwhatwaywillcertain products beincluded inthetariff
schedule.Acommitteewhichhasassumedthetaskofprovidingasolutionwilldepartfromtheprovisions
ofGATT, thatdomestic production should beprotected bycustoms tariffs, or,thatquotas andallother
taxes should beconverted totariffs. Theestablished customs value (customs rate)willbethebasefor
gradual customs duties reduction, inaccordance withthedynamics agreed upon inthenegotiations
withGATT. While adopting theprinciple ofconverting taxes totariffs, andtaking intoaccount the
special position oftheCroatian agriculture, theCroatian Government willretain therighttoprompt
adjustment ofcustoms protection measures within theframework oftheGATT provisions.
IV.3 Financial, Budgetary andExchange Rate Policy
Question 113.
Doesthetaxation regime discriminate inanywaybased onownership? Forexample, areforeign-
owned establishments taxed differently thanCroatian-owned firms, orarelong-term production
cooperation businesses afforded anyspecial taxprivileges?WT/ACC/HRV/3
Page54
WilltheVAT beapplied equally toallproducts from allcountries? Please describe anyother
taxes thatdiscriminate between domestic andforeign goods andprovide Croatia 'splans for
eliminating thediscrimination.
ANSWER:
Thetaxation regime oftheRepublic ofCroatia doesnotdiscriminate inanywayonthebasis
ofownership, andanyfirmregistered intheRepublic ofCroatia, regardless oftheownership structure
istreated according tothesame taxation criteria. Asregards special taxprivileges, aCroatian firm
owned byforeigners canbegiven privileges according tothesame criteria asaCroatian firmowned
bythecitizens oftheRepublic ofCroatia.
TheVAT Billhasalready beenenacted bytheCroatian Parliament anditisexpected tocome
intoforce atthebeginning of1997. Weenclose thisLawinAppendix 26.tosupply theanswers to
theremaining questions.
TheRepublic ofCroatia willeliminate allkinds ofdiscrimination between domestic andforeign
products incompliance withtherules oftheWTO.
IV.4 Foreign Exchange System andExchange Rate Policy
Question 114.
TheEUwould appreciate acopy oftheLawonBanks andSavings Institutions.
ANSWER:
AspartoftheMemorandum ontheForeign Trade System oftheRepublic ofCroatia, which
wasdelivered totheGATT/(now WTO) Secretariat inMay1994, aspecial appendix wasadded with
lawsandby-laws onbanking andforeign exchange operations translated intoEnglish.
Incaseyouwere notinaposition toobtain acopyofitplease refertoAppendix 21.
Question 115.
DoesCroatia differentiate between exporters andotherfirms incurrency exchange ratesandavailability?
Please confirm thatCroatia willmake consistent withGATT TRIMs provisions anyfuture export
incentives intheform oftaxes andcustoms treatment.
Please indicate thestatus ofconsiderations tointroduce export incentives intheformoftax,customs
andother refunds.
ANSWER:
TheRepublic ofCroatia doesnotdifferentiate between exporters andother firms incurrency
exchange ratesandavailability.
TheRepublic ofCroatia officially started theprocedure ofaccession tofullmembership in
WTO on22July1994, anditwillmost certainly conform allitsfuture export incentives toGATT
andTRIMs provisions.WT/ACC/HRV/3
Page55
Thefuture export incentives intheform oftaxes andcustoms treatment willmost certainly
beconsistentwiththerulesofWTO;consequently,onlytherecognizedmeasuresthattheWTOmembers
useasexport incentives willbeapplied.
IV.4(b) LawonCredit Relations withForeign Countries
Question 116.
Please provide anEnglish version oftheLawonCredit Relations withForeign Countries.
ANSWER:
InMay1994, wesenttotheSecretariat ofGATT, theMemorandum onForeign Trade System
oftheRepublic ofCroatia andenclosed withit,thecopies ofalllawsandregulations relating tobanking
andforeign currency operations.
Incasethismaterial isnotavailable toyou, weenclose additional copy ofthisLawin
Appendix 22.
IV.4(c) Relationship ofCroatia withtheIMF
Question 117.
HasCroatia, asamember totheIMF, made anyreservation under article XIV (Transitional
Arrangements) oftheAgreement?
ANSWER:
Croatia, asamember oftheIMF, doesnotmaintain anyreservation under article XIV. On
29May1995 theRepublic ofCroatia accepted theobligations from article VIII, chapters 2,3and
4oftheIMFCharter.
TheGovernment oftheRepublic ofCroatia hasnotified theInternational Monetary Fund(IMF)
thatithasaccepted theobligations ofArticle VIII, sections 2,3,and4oftheIMFArticles ofthe
Agreement, witheffect from May29,1995. IMFmembers accepting theobligations ofArticle VIII
undertake torefrain from imposing restrictions onthemaking ofpayments andtransfers forcurrent
internationaltransactionsorfromengagingindiscriminatorycurrencyarrangementsormultiplecurrency
practices without IMFapproval. Atotalof102countries havenowassumed Article VIIIstatus.
Twoofthemain purposes oftheIMF, asstated initsArticles ofAgreement, aretofacilitate
theexpansion andbalanced growth ofinternational trade, andthereby tocontribute tothepromotion
andmaintenance ofhighlevels ofemployment andrealincome; andtoassist intheestablishment of
amultilateral system ofpayments inrespect ofcurrent transactions between IMFmembers. Inseeking
toachieve these objectives, theIMFexercises firmsurveillance overtheexchange ratepolicies ofits
members, andoversees theelimination ofexchange restrictions which hamper thegrowth ofworld
trade.
Byaccepting theobligations ofArticle VIII, Croatia gives confidence totheinternational
community thatitwillpursue sound economic policies thatwillobviate theneedtouserestrictions
onthemaking ofpayments andtransfers forcurrent international transactions, andthereby contribute
toamultilateral payments system freeofrestrictions.WT/ACC/HRV/3
Page56
IV.5 System ofForeign Investments intheRepublic ofCroatia
Question 118.
Please provide copies oftheLawonForeign Trade Operations andtheCompany Law.
ANSWER:
TheLawonForeign Trade Operations isthatoftheformer Yugoslav system, andwillonly
beintemporary use.Since itwillbereplaced bythefuture LawonTrade which iscurrently before
Parliament awaiting ratification, weenclose thetranslation ofthisdraftLawinAppendix 8inorder
topresent youwithCroatia 'sviewonforeign trade operations. Weregret thattheEnglish translation
oftheLawtemporarily inforce isnotavailable, andsince thisLawwillsoonbecome redundant, we
havenothadittranslated.
TheCompany Lawcame intoeffect on1January 1995. Weenclose theunofficial English
translation ofthisLawinAppendix 9.
Question 119.
Itfollows from thesecond paragraph thataforeign legalentity establishing asubsidiary inCroatia
willbeconsidered asaforeign investor. Isasubsidiary established inCroatia likewise tobe
considered asaforeign investor? Does thesubsidiary benefit from National Treatment inits
undertakings? Ifnot,what treatment isexactly conferred upon aforeign investor?
ANSWER:
Aforeign investor isinterms ofCroatian Company Lawanylegalperson having acorporate
seatregistered outside theRepublic ofCroatia ornatural person whoisaforeign national. Foreign
investor isthefounder ofthesubsidiary inCroatia, butsuchasubsidiary isalegalentity, company
under Croatian law,witharegistered corporate seatinCroatia andisaccorded National Treatment.
Asubsidiary mustbeestablished insomeofthelegaltypesofcompanies regulated byCroatian Company
Lawandinaccordance withtheCompany Law.
Theexplicit wording oftherespective provisions oftheCompany Lawstatethattheforeign
investor byestablishing afullyowned ortaking partinsetting upacompany (mixed companies) acquires
thesame rights andobligations andunder thesame conditions andhasthesame status asadomestic
person (Article 620(1) oftheCompany Law). (Please refertoAppendix 9.)
Question 120.
Please alsospecify withrespect tobranches ofaforeign legal entity established inCroatia.
ANSWER:
Please refertotheanswer given forthepreceding question.
Question 121.
TheEUwould appreciate aclarification necessary fortheunderstanding ofthephrase "areas
marked asprohibited forreasons ofnational defence andsecurity inaccordance withthelaw.WT/ACC/HRV/3
Page57
Does Croatia foresee amaximum percentage offoreign investments inthelisted sectors. Ifnot
what isthepractical impact ofsuchmeasures?
ANSWER:
Thenewlegalregime offoreign investments embodied intheCompany Lawhasabandoned
therestrictions regarding thissector provided intheformer legislation. There arenolimitations for
foreign investments according tosectors except forthemilitary sector or"areas" under thesupervision
of,orinuseby,theMinistry ofDefence, where according tocurrent regulations aspecial procedure
isenvisaged.
There arealsonomaximum percentage requirements forforeign investments i.e.participation
inequity onalarge scale orinparticular sectors.
Theonlyspecial provision which applies toforeign investor isthataforeign corporate legal
formcompany withlimited liability ofthepartners (Limited liability company andStock corporation)
maybethepersonally unlimitedly liable partner inacompany which isregistered inCroatia andwhich
hasanon-corporate legalform withunlimited liability ofthepartners ifthere isinsuchcompany at
leastonedomestic partner inthecorporate form(Ltd., Stock corporation) orperson unlimitedly liable
toward thethirdcreditors (Article 621(2)).
Question 122.
Please explain -inthecontext oftheCompany Law-what constitutes "properly founded" and
what isinvolved inregistration.
ANSWER:
Properly founded companies, interms ofthenewCroatian Company Law, which isapplicable
fromJanuary 1995, implies exhaustive andveryprecise provisions concerning setting up,incorporation
andregistration ofcompanies andsoleproprietorship. Thementioned rules provide different
requirements depending onthelegalform andtypeofcompany concerned.
Theincorporationofalimitedliabilitycompanyrequirestheexecutionofadeedofincorporation,
which must beintheform ofaCroatian-language notarial deed, before aCroatian notary public. It
contains thearticles ofassociation andmustbesigned byanotary public andfounders ofthecompany
ortheirrepresentatives.
Registration ofalimited liability company requires theexecution ofanotarial deedofthearticles
ofassociation andtheappointment ofthemanagement.
Various other documents, suchasspecimen signatures ofthemanaging directors, alistof
shareholders, etc.havetobeattached totheapplication forregistration.
Theformation procedure followed forincorporation ofastockcorporation ismorecomplicated.
TheCompany Lawprovides twotypes offormation: ina"one-stage formation" allshares aresubscribed
bytheparties participating intheestablishment ofthearticles ofassociation. Otherwise, astock
corporation maybeformed bytheprocess of"successive formation" which provides forsubscription
totheshares ofthecompany bypublic offering.
Thelawregulates theindividual steps offormation ingreat detail.WT/ACC/HRV/3
Page58
Thecompany 'sarticles ofassociation arelegally established byanotarial certificate. The
certificate document muststatethefacevalue, theeffective rateofissueandthetypeofshares which
aretobeissued. Lawprovides various compulsory items which mustbecontained inthearticles of
association.
Inorder toperfect registration ofthecorporation, thecorporate name andseat,theobject of
business, theamount ofthestated capital stock, thedateofestablishment ofthearticles ofassociation
andthenamesofmembersofthemanagingandsupervisoryboardmustbecommunicatedtotheregister.
Inorder tosetupaGeneral Partnership orLimited Partnership, theCompany Lawprovides
lessformalities. Nospecial formal requirement existforthedrafting andexecution ofapartnership
agreement. Invarious cases, provisions inthepartnership agreement maydiffer from thestatutory
requirements.
Thegeneral partnership must beregistered withsuperior court inthedistrict where the
partnership hasitsprincipal place ofbusiness. Theregistration must statethename, birth, dateand
residence ofeachpartner, thename ofcompany representatives, thefirm'sname object ofbusiness
andtheseatofpartnership. Aspecimen ofpartnership agreement mustbeattached totheapplication
forregistration.
Theabove mentioned provisions regarding setting upandregistration ofGeneral partnership
apply toLimited Partnership accordingly ifitisnototherwise explicitly provided byLaw.
Thepartnership agreement establishing aLimited Partnership muststatethenames ofgeneral
partner(s) whoispersonally liable forpartnership 'sdebts andlimited partner(s) andlimited partner(s)
whoisliable toward thirdparty creditors totheamount oftheircontributions.
Inaddition tothedatarequired fortheregistration ofgeneral partnership inorder toperfect
aregistration oflimited partnership alldataabout limited partners andtheamount oftheirshare must
becommunicated totheregister.
Soleproprietorship (independent contractor) isanatural person whorunsthebusiness activities
inhisownname, independently, inaccordance withtheregulations oncrafts andisregistered with
thecourt.
Natural person ofthatkindmayregister ifitsannual profit amounts toDM500,000 andmust
register ifitsannual profit reaches theamount ofDM4,000,000.
Question 123.
Regarding theuseofprofits byCroatian companies operating abroad, please elaborate onwhich
specific usesareallowed under theLawonForeign Trade Operations andwhich usesarenot
permitted.
ANSWER:
Under theLawonForeign Trade Operations, thefounders ofCroatian companies operating
abroad mayusetheirprofits forthefollowing purposes:
- toincrease thefounder 'sstake inthecompany inwhich theprofit wasmade, orin
another company founded abroad;WT/ACC/HRV/3
Page59
- tocompensate forreductions inthefounder 'sstakecaused bybusiness losses reported
intheannual statement ofacompany established abroad;
- tofound newcompanies andtobuyupthefounder 'sstake inother companies abroad;
- toextend aloantothecompany inwhich theprofit wasmade, ortoother companies
abroad, forbusiness operations;
- toinvest inthecompany inaccordance withthecontract oninvestment.
If,according tothelawsoftheforeign country, itisnotpossible totransfer theprofit (profit
innon-transferable currency), itcanenter theRepublic ofCroatia intheformofgoods, oritcanbe
usedasthefounder 'sstake oraloanfrom thecompany abroad.
Iftheprofit isbrought intotheRepublic ofCroatia intheformofgoods, theimport procedure
must conform totheregulations governing theimporting ofgoods intotheRepublic ofCroatia.
Ifthefounder hasnotusedtheprofit fortheabove purposes, heisobliged tobring itintothe
country within 60daysofthesubmission orrevision oftheannual report.
TheBilldoesnotexpressly define which usesarenotpermitted, asitisimplied thatalluses
which arenotinaccordance withtheabove purposes arenotallowed. TheTrade Billdoesnotprovide
forthisaspect. Consequently, theuseofprofits made abroad maybedecided upon bythefounder
ofhisownfreewill.
Question 124.
Please elaborate onthepurpose oftheLawonForeign Trade Operations asitrelates tolong-term
production cooperation andrefer tothegoals oftheGovernment ofCroatia.
Why doesCroatia require equal amounts ofimports andexports inthese long-term contracts,
andhowdoesitenforce thisrule?
Why doesCroatia require thatdebit orcredit balances onthecurrent account maynotexceed
40percentoftheamount ofgoods andservices delivered asimports andexports theprevious
year?
Please comment onwhether goods under along-term production contract getdifferent treatment-
thanother traded goods withregard toimport/export quotas, licences, andMinistry approvals.
What aretheCroatian Government 'splans foreliminating these policies?
ANSWER:
Under thecurrent LawonForeign Trade Operations, which hasbeeninherited from former
Yugoslav legislation, special regulations onlong-term production cooperation arestillineffect, which
means thatsuchtransactions should bereported totheMinistry ofEconomic Affairs within 30days
ofthedateonwhich thedomestic andforeign persons signed thecontract.
These special regulations werebased ontheconditions prevailing intheeconomy oftheformer
Yugoslavia, which often hadbalance ofpayment difficulties andneeded allkinds offoreign currency
restrictions duetopolitical reasons andrestrictive conditions forforeign investment. TheintentionWT/ACC/HRV/3
Page60
oftheCroatian Government (alsostated intheTrade Bill)isnottoimpose anylimitations onthese
operations, buttoletthecontracting parties determine theterms themselves.
BasedonmonthlyreportstheCroatianCentralBankcontrolstheoperationsprimarilyforfinancial
andstatistical purposes. IftheBank finds thatthere isahighclaim upon theaccount oftheforeign
partner itwillorder alevelling oftheaccount within aprescribed period. Namely withthismeasure
theexternal liquidity ofthecountry isregulated inthesense thatitlimits foreign credits given by
economic entities thataredomiciled intheRepublic ofCroatia. Thismeasure functions asanincentive
fortherepatriation offoreign currency according totherealised exports andconsequently functions
asaprompt means ofpayments fortheexports from theRepublic ofCroatia intheconditions of
imbalances inthebalance ofpayments. Thislegallimitation isenforced onlyinthecasethataclaim
ontheaccount exists foralonger period during theyearandthattheamount claimed isgreater than
50percentofthevalue foreseen bythecontract. Thismechanism isregulated byArticle 46ofthe
existing LawontheFoundations oftheForeign Exchange System, Foreign Currency Operations and
Gold Trading.
Long-term production cooperation refers toacontinual exchange ofgoods inthesocalled tie-in-
trade, without payment operations between thepartners, foraperiod ofnotlessthan3years (thelegal
minimum). Theexchange taking place inlong-term production cooperation isthatofcomplementary
goods, theaimofwhich istomake afinished product, which isthensoldonthemarket ofoneor
bothofthecountries thepartners arefrom, orwhich issoldinathirdcountry. Forexample, inthe
carindustry, aproducer ofoneormore parts(batteries, cable sets,etc.)delivers these parts toacar
producer, apartner inlong-term production cooperation, andthenimports thefinalproduct -thecar.
Thebook-keeping andaccounting isdonebymeans ofcurrent accounting whereby theparty
tolong-term production cooperation should record alltransactions, andevidence them withinvoices
andtherelevant customs documents.
TheNational BankofCroatia monitors theprogress ofoperations, primarily fromthefinancial
andstatistical point ofview, andifitestablishes thatthecredit balance isexcessively highagainst the
foreign partner, theholder willberequired tosettle thebalance within acertain period.
Current accounting towhich parties tolong-term production contracts wereentitled tointhe
past,isnowtheonlyprivilege granted tobusiness entities engaged inthiskindoftrade. Thegoods
exchanged inlong-term production cooperation donotreceive different orbetter treatment thanother
traded goods withregard toimport/export quotas, licences etc.
Atpresent, intheRepublic ofCroatia, there areninety (90)effective long-term production
cooperation contracts which havebeenconcluded between Croatian andforeign enterprises, mostof
themfromGermany, ItalyandtheRussian Federation. Overtwothirds ofthese contracts weresigned
before Croatia gained independence.
Owing tothefactthatsuchcontracts aretreated inthesame wayasother foreign trade
operations, andthatallprivileges havegradually beenabolished (except current accounting), andthat
theterms forforeign investment havebeencompletely liberalized, theinterest inconcluding such
contracts isdecreasing.
Question 125.
Isprivate investment limited inanyway? Areanysectors excluded from foreign investments?WT/ACC/HRV/3
Page61
ANSWER:
Thenewlegalregime offoreign investments, contained intheCroatian Company LawAct
hasbeeninforce since1January 1995. Please refertoAppendix 9.foranunofficial English translation
ofthisLaw.
Itannulled allrestrictions determined byprevious regulations andaconsiderable freedom of
establishing companies andforeign investors gained fullnational treatment.
Aforeign investor, under theCompany Law, isanylegalentity witharegistered seatoutside
theRepublic ofCroatia oranynatural person whoisaforeign national. (Article 619oftheTrading
Companies Act).
Under thecondition ofreciprocity, foreign investors mayfound companies infullownership
orincooperation withother foreign ordomestic partners inthefounding ofcompanies intheRepublic
ofCroatia inwhich heacquires therights andobligations under thesame conditions andhasthesame
position asthedomestic person. (Article 620).
Inview ofsuchprovisions oftheTrading Companies Act,special requirements andtheir
fulfilment bytheforeign investor werenotenvisaged interms ofrequirements foracertain domestic
levelofprocessing, stability ofthebalance oftrade, import restrictions, thesaleofcertain amounts
ofgoods manufactured inaforeign ormixed company onthedomestic market, orother measures which
arenotinaccordance withtheTRIM Agreement.
Theaimoftheonlyrestriction envisaged istoprotect domestic creditors, suchthataforeign
capital company canbeamember which ispersonally responsible forthecompany 'scommitments
tothatcompany onlyifthereisatleastoneother domestic capital company ordomestic natural person
whoispersonally responsible forthose commitments (Article 620(2)).
Thelawdoes notrequire theevidence ofreciprocity because reciprocity ispresupposed
(Article 620(1)).
Provisions ontheapplication ofreciprocity during thefounding ofabranch canbeusedfor
theexplanation ofthequestion.
During theregistration ofabranch, itisassumed thatreciprocity exists ifthetrade register
doesnotrequire theforeign entity toproduce evidence ofreciprocity. Ifthere aredoubts about the
existence ofreciprocity, andattherequest oftheRegistration Court, theMinistry ofJustice determines
theexistence ofreciprocity.
Besides, theTrading Companies Actforesees thatifreciprocity cannot beproved, thebranch
canalsoberegisteredonthebasisofpermissionfromtheMinistryofEconomicAffairs.(Article613(5)).
When theabove-mentioned provisions become established inuse,itcanbeexpected thatthe
reciprocity inthese issues willbeformally recognized withregard tocertain countries andthattheir
citizens willgainthenational procedure ininvestment.
Anexhaustive listofareas which wereexcluded fromforeign investment under theprevious
lawwasannulled inthenewlegalregime ofinvestments, which tookeffect on1January 1995.WT/ACC/HRV/3
Page62
There arenorestrictions asregards sectors ofinvestment except thatspecial procedure is
envisaged forinvestment inthemilitary industry andtelecommunications, which areinthejurisdiction
oftheMinistry ofDefence andtheMinistry ofTransport andCommunications respectively.
Question 126.
Subsidiaries arefounded inaccordance withgeneral andspecific provisions oftheCompany law
andoncondition ofreciprocity. What arethemeaning andscope ofthereciprocity clause?
ANSWER:
Inorder todescribe correctly theCroatian legalframe ofdoing business inregard toforeign
undertaking,thedifferencebetweenlegalnotionsofbranchandsubsidiarymustbetakeninconsideration.
Thecontext oftheaforementioned question isdealing withlegal entities such asbranch
(podru nica,Zweigniederlassung, succursale). When discussing foreign investments interms offully
orpartly owned undertaking established byforeign investor, theonlyappropriate termissubsidiary
(filiales, Tochtergesellschaft, forwhich there isnospecific Croatian termexcept filijala).
Aforeign company intending todobusiness inCroatia hasafreechoice toestablish abranch
orsubsidiary.
Thebasic legaldifference among thetwolegalforms iswithregard toliability considerations
andincorporation i.e.registration requirements.
Abranch isalocalestablishment ofaforeign enterprise.
Consequently, thebranch office doesnothavelegalexistence separate formitsparent company,
nordoesithaveseparate capital stock These andother issues related tobranches areregulated by
Company Lawandthesame provisions apply todomestic andforeign company branches (Articles 7,
8,613).
Aforeign enterprise maycarry onbusiness inCroatia onlyintheform ofbranch office.
Thenotionof"carryonbusiness"mustbeinterpretedintermsofCompanyLawasacommercial
activity carried outindependently, onone'sownaccount, atone'sownrisk,regularly andwithintention
ofmaking profit byproduction ofgoods andtrade ofgoods andservices.
Anynewbranch ofanonresident foreign legalentity mustbeentered incommercial register
tocomplete itsformal incorporation.
These requirements related tosetting upabranch donotprejudice thefreedom ofcontract
among foreign anddomestic entities andfreedom ofchoice ofapplicable lawandforum.
Regarding reciprocity requirements, theyhavetobemetintheregistration procedure with
competent commercial register.
TheRegister canreject theincorporation ifthefounder ofabranch doesnotprove thatthe
Croatian companies i.e.nationals haveunder thesameconditions asinCroatia righttosetupabranch
inthecountry ofitscorporate seat(Article 614(4), (3)oftheCompany Law).WT/ACC/HRV/3
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Thiswording oftheCroatian Company Lawhastobeunderstood conditionally, because no
formal proof oftheexistence ofsuchreciprocal rights isrequired inadvance.
Inthecontinuation ofthesame Article, itisexplicitly stated thatitisassumed thatthefounder
hasproved thereciprocity iftheRegistration Court doesnotrequire himtoprovide proofs ofthe
existence ofreciprocity.
Inthecaseofdoubt about theexistence ofreciprocity, upontherequest ofRegistration Court,
theMinistry ofJustice confirms theexistence ofreciprocity.
Inaddition, theLawprovides thatevenifreciprocity cannot beproved abranch maybe
registered ifapproved bytheMinistry ofEconomy (Article 613(5) oftheCompany Law).
When theenforcement ofrespective provisions evolves, itistobeexpected thatreciprocity
willbeformally recognized regarding particular countries andfullnational treatment willbeaccorded
totheirundertakings.
Question 127.
Please describe anymeasures under thecurrent lawonForeign Investments orthatlaw'sproposed
replacement -theCompany Law-thatareinconsistent withtheUruguay Round TRIMs Agreement
orArticle IIIoftheGATT. Please alsoprovide Croatia 'splans forchanging these inconsistencies.
Please provide more information ontheapplication ofreciprocity described inthissection. It
isnotclearwhat"reciprocal" rights orissues theMinistry ofJustice recognizes. Howdoesaforeign
investor "prove theexistence ofreciprocity" intheregistration process?
Please explain whyforeign investors arenotallowed tostartafullyowned company intheareas
ofarms andmilitary equipment, rail&airtransport, communications, andtelecommunications,
insurance, publishing, andmass media. Towhat extent isCroatia willing toliberalize foreign
investment inthese sectors aspartofitsaccession toGATT andWTO?
IsCroatia prepared tooffer fullreciprocity toGATT/WTO members intheareaofdomestic
investment, including thebanking sector?
ANSWER:
Thenewlegalregime offoreign investment embodied intheCompany Lawhasapplies from
1January 1995(SeeAppendix 9.).Herewith alltherestrictions oftheprevious legislation areabolished
andaconsiderable freedom ofestablishment respectively fullnational treatment isaccorded toforeign
investor.
Foreign investor isinterms ofCompany Lawanylegalperson witharegistered seatoutside
oftheRepublic ofCroatia oranatural person whoisaforeign national (Article 619oftheCompany
Law).
Upon thecondition ofreciprocity, aforeign investor setsupafully-owned company ortakes
partinsetting upwithother domestic orforeign partners companies intheRepublic ofCroatia and
acquires inthem thesame rights andobligations under thesame conditions andhasthesame status
asadomestic person (Article 620).WT/ACC/HRV/3
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Concerning suchwording oftheCompany Law, noperformance requirements areprovided
foraforeign investor interms oflocalcontent requirements, tradebalancing requirements, maximum
importlimitationsordomesticsalesrequirementsorothermeasuresinconsistentwithTRIMsAgreement.
Theonlyspecial provision which applies toforeign investor isthataforeign corporate legal
formcompany withlimited liability ofthepartners (Limited liability company andStock corporation)
maybethepersonally unlimitedly liable partner inacompany which isregistered inCroatia andwhich
hasanon-corporate legalform withunlimited liability ofthepartners ifthere isinsuchacompany
atleastonedomestic partner inthecorporate form (Ltd., Stock corporation) orperson unlimitedly
liable toward thecreditors (Art. 620(2)oftheCompany Law).
There arenoformal requirements fortheproof ofreciprocity. Theprovisions explaining the
operation ofreciprocity forestablishment ofbranches mayserve clarifying thisquestion.
Namely inthebranch registration procedure, itisassumed thatreciprocity exists ifthe
Registration Court doesnorequire foreign party toprovide evidence ofexistence ofreciprocity. In
thecaseofdoubt about existence ofreciprocity ,upontherequest oftheRegistration Court, theMinistry
ofjustice confirms theexistence ofreciprocity.
Inaddition theLawprovides thatifthereciprocity cannot beproved abranch mayberegistered
ifapproved bytheMinistry ofEconomy (Article 613(5) oftheCompany Act).
When theenforcement ofrespective provisions evolves, itistobeexpected thatreciprocity
willbeformally recognized withrespect toparticular countries andfullnational treatment willbe
accorded totheirinvestors.
Asregards thesectors ofinvestment, therearenorestrictions, theonlyexceptions being military
industry andtelecommunications where special procedure isrequired under thecompetence ofthe
Ministry ofDefence andtheMinistry forTraffic andCommunications, respectively.
Croatia iswilling toofferfullreciprocity tothemembers oftheWTO inallsectors ofdomestic
investment, including thebanking sector.
Asregards foreign investment inthesector ofradio andtelecommunications atthecentral and
local level, aconcessionaire mayparticipate withtheforeign capital amounting to25percent. For
public telecommunications inamovable network, cable television andtheproduction ofprograms for
cable television, there isnorestriction concerning theamount offoreign investment.
IntheRepublic ofCroatia, foreign investment inenterprises orother form oforganization
producing ortrading inarms andother military equipment iscurrently notallowed, however, thisis
subject to,asmentioned earlier, special procedures through theMinistry ofDefence.
Intherailway andairtraffic sectors, aswellasinsurance business, there arenorestrictions
regarding foreign investment.
TheLawonForeign Investment wasabolished on1January 1995, when theCompany Law
entered intoforce ("Official Gazette," no.111/93).
Upon theCompany Lawcoming intoforce, foreign investment ceased tobeanexception, since
thenewLawprovides equal treatment todomestic andforeign persons.WT/ACC/HRV/3
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TheCompany Lawcontains onlytwoarticles regulating thesubject offoreign investment.
Article 619specifies whoisunderstood astheforeign investor, andArticle 620states thatforeign and
domestic investors aretreated onanequal basis. Please refertoAppendix 9fordetails ofCroatia 's
Company Law.
Treating foreign anddomestic investors onanequal basis isconditioned upon theexistence
ofreciprocity. However, thereciprocity isassumed.
Asregards thebanking sector, itisimportant tonotethatthebanks intheRepublic ofCroatia
receive anequal treatment regardless ofthefactthattheyhavebeenfounded bydomestic orforeign
persons.
Under theBanking Law("Official Gazette" no.94/93), aforeign investor mayfound abank,
branch office andrepresentation office intheRepublic ofCroatia. However, theLawspecifies the
obligation oftheforeign investor tosupply evidence ontheexistence ofreciprocity. Thisrequirement
isfulfilled ifunder theprovisions ofaforeign state, persons from theRepublic ofCroatia mayalso
found abank, branch office andrepresentation office inthisforeign country.
Likeother former socialist states, theRepublic ofCroatia hasapoorly developed financial
sector. Themainfinancial agents arecommercial banks, while non-banking financial institutions have
nosignificant role.Themoney market andtheZagreb Stock Exchange alsoexist, butthetrading is
reduced toasmall number ofshares ofCroatian enterprises.
There are51banks inCroatia founded asjointstock companies orlimited liability companies.
Under theBanking Law("Official Gazette", no.94/93), abank maybefounded bydomestic legal
andnatural persons, andbyforeign natural andlegalpersons, provided thatthereciprocity requirement
hasbeenmet,which isissued bytheMinistry ofJustice. Thefounding capital should amount toat
leastDM5,000,000.
Aforeignbankmayfoundabranchoffice,besidesthebank,withtheminimumcapitalamounting
to2,500,000, butitcannot havetherights andduties ofalegalperson. Itisrequired thatatleasttwo
persons should beemployed toconduct business operations andmanage theoffice.
Theminimum capital requirement when starting asavings institution is1million DM. For
afullylicensed bank i.e.toinclude foreign exchange operations theminimum capital requirement
amounts to15million DM.
Under thereciprocity clause, aforeign bankmayfound arepresentation office; theconditions
foropening andoperating representation offices offoreign banks arespecified bytheNational Bank
ofCroatia.
Atpresent ontheterritory oftheRepublic ofCroatia, there isoneforeign bankandseveral
representation offices offoreign banks.
IV.6 Government Procurement
Question 128.
Croatia mentions inthissection thatitisstudying theGATT Procurement Code. Does itintend
tosignthisCode? Ifso,onwhat types ofgovernment purchases willitapply theCode? Please
elaborate ingood detail onhowCroatia 'sstate procurements aretransparent andcompetitive.WT/ACC/HRV/3
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ANSWER:
TheRepublic ofCroatia passed theDecree onProcedures forProcurement ofGoods, Services
andWorks ("Official Gazette," no.13,28February 1995), thusregulating thematter ofprocurement
ofgoods, services andworks.
Indrafting theDecree, wedrewuponthemodels ofUNCITRAL, Agreement onGovernment
Procurement Code, World Bank, etc.,inorder toadjust itasmuch aspossible totheinternationally
accepted procurement procedures.
ADraft BillonProcurement ofGoods, Services andWorks hasbeenmade incooperation
withtheinternational (UNCITRAL andWorld Bank) anddomestic consultants anditisexpected to
besubmitted totheGovernment andother State bodies forfurther scrutiny. TheLawisexpected to
beenacted bytheendof1995.
TheDraft Lawwillbemade along thesame linesastheDecree, incorporating theprinciples
oftheProcurement Agreement, anditwillapply toallpublic procurement ofgoods, works andservices,
except theprocurement forstrategic interest ofthecountry, national defence, international credits and
loans agreed under different terms, anddonations.
Theprocurement procedure isbased ontheprinciples oftransparency andopenness topublic,
which means thatfollowing anopen invitation totender, allthebidders mayparticipate inthe
procurement regardless oftheir nationality andunder conditions which areequal forall,andare
guaranteed legalandeconomic security andfairandequitable treatment.
Asregards thesigning oftheAgreement bytheRepublic ofCroatia, thisdecision isconditioned
upon theresults oftheimplementation oftheDecree andthefuture Law.
Please refertoAppendix 27fordetails oftheabove mentioned Decree.
IV.6(a) Government Purchases
Question 129.
Please specify thedegree ofmonopolistic control exercised byTheGovernment Board for
Commodity Reserves indomestic commodity purchasing andinternational trade.
DoesCroatia intend toliberalize itsCommodity Reserves system aspartofitsoverall privatization
effort?
ANSWER:
Since thequestion assumes thatthemonopolistic position ofcommodity reserves isagiven
factandfocuses onlyonthedegree ofmonopolistic control, wewanttostress thefollowing:
Thepurpose ofcommodity reserves buildupisnotinsecuring anykindofmonopolistic power.
Thepurpose ofcommodity reserves build upisspecified inArticle 19oftheStateCommodity
Reserves Actinthefollowing way:
19/1: Commodity reserves shallbeusedforthefollowing:WT/ACC/HRV/3
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(i) meeting theneeds intimes ofwarorincaseofdirect threat totheindependence andunity
ofthecountry, aswellasintimes ofnatural disasters;
(ii) intervention inthemarket inorder toensure market stability incaseofmarket disruptions or
inorder toprevent theoccurrence ofmajor market disruptions.
19/2TheGovernment shalldecide ontheuseofcommodity reserves fromParagraph 1ofthis
Article.
Itcantherefore beconcluded thatanylevelofmonopolistic control isconceptually outofthe
question asArticle 19oftheActclearly defines thefunction ofTheCommodity Reserves StateAgency
asanindependent administrative body. Itisinteresting tonotethattheStateAgency isnotauthorized
toenter intoanyforeign trade agreements.
Wecanconclude thatalltheabove mentioned datashould disperse anyremaining dilemmas,
although thequestion might beunderstood toimply thattheStateAgency hastheposition ofapublic
enterprise, owned bythestateandthushaving monopolistic ambitions. Theassumption which must
beruled outduetotheabove listed formal andnotional reasons.
Itistherefore obvious thattheideaofstatecommodity reserves privatization must beruled
out,though thisshould notruleoutthere-examination oftheroleofcommodity reserves intheprocess
ofdeveloping thenewmid-term plan(acertain reduction inthenumber ofcommodities isenvisaged,
together withareduction involumes, although thefinaldecision willdepend onthedevelopment of
theoverallpolitical situation).
Question 130.
TheEUwould appreciate receiving thelistofthepublic enterprises andstate agencies refereed
tounder thissection, andwhich arerequired topublish invitations forpublic tenders inthedaily
press. What arethespecific publications (journals) concerned andrefereed toas"daily press"?
What istheadministrative level(central, regional, local) thatcorresponds withstate agencies?
What typeofinvestment orexpenditure (goods, works andservices) would becovered bysuch
open tendering regime? Isthere anyminimum value associated tothisprocedure? Would itbe
possible toobtain statistical information ontheamount ofexpenditure subject tothisregime by
category ofgoods, works andservices andbylevelofadministrative authority (central, regional,
local)?
Regarding foreign suppliers, isthere anydiscrimination withrespect totheirparticipation inthe
tenders mentioned above? Areforeigners qualified tosubmit anoffer andwilltheir bidsthen
betreated inanequal manner? Isthere anysector where procurement isclosed orpreferable
reserved orlimited infavour ofdomestic suppliers?
Asregards the"Special LawonPublic Purchases" which seems tobeunder preparation, could
theCroatian government anticipate some further information? Would theCroatian government
bewilling toinvite theCommittee oftheGATT/WTO Government Procurement Agreement to
comment onadraft textatanearly stage ofitspreparation?
ANSWER:
Theentities which arerequired tocomply withtheprovisions oftheDecree onProcedures
forProcurement ofGoods, Services andWorks, andwhich arealsoenvisaged bytheDraft Law, are
explicitly stated intheListofusers from Article 1oftheDecree, thislistbeing anintegral partof
theDecree.WT/ACC/HRV/3
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Theterm"daily press" refers todailypapers inwhich invitations forpublic tenders areusually
published, andwhich havelarge circulations andarereadalloverthecountry (such as"Vjesnik",
"Vecernjilist","Slobodna Dalmacija", etc.), orinternational papers (e.i.Financial Times), andjournals
withlarge international circulations (business, financial andengineering journals) orthose issued by
international organizations. Inaddition totheabove papers andjournals, theDraft Lawalsoprovides
forthepossibility ofpublication intheOfficial Gazette oftheEuropean Union.
TheDecree andtheDraft Lawapply toalladministrative levels (central, regional andlocal)
andtoalltypes ofinvestment andexpenditure forthepurpose ofprocurement.
Theminimal value ofprocurement is200,000 HRK.
Statistical dataisnotavailable atthemoment, astheDecree hasbeeninforce onlysince 28
February 1995, andbesides, nobody hasbeenestablished forthepurpose ofmonitoring suchdata.
Article 5oftheDecree provides thatallbidders havetherighttoparticipate inpublic tendering
regardless ofnationality, andareentitled toequal conditions andfairandequitable treatment.
National preferential islegally provided for,andintheevent ofitsapplication thepublic
invitation fortenders published inthepress should include thisinformation; international provisions
regulating thismatter alsoprovide fornational preferential. Theprocurement isclosed inthesector
related tonational defence andstrategic interests ofthecountry asprovided bytheDecree.
There arenoother restrictions favouring domestic suppliers.
ADraft Billisbeing made toreplace theDecree incooperation withtheinternational consultants
(UNCITRAL andIBRD). TheCommittee oftheWTO Government Procurement Agreement iswelcome
toconsider andcomment onthetextoftheDecree. Please refertoAppendix 27.foranunofficial English
translation oftheDecree.
IV.6(b) Government Commodity Reserves
Question 131.
WhatactionsmightTheGovernmentBoardforCommodityReservestaketoensuremarketstability
inarising market andinafalling market? How aresurpluses disposed?
ANSWER:
Commodity reserves, i.e.theGovernment Board forCommodity Reserves, areunder direct
Government jurisdiction. They aretherefore notexpected totakeanyindependent market decisions,
butshouldactwithintheparametersofGovernmentpolicy,usingtheinterventionmechanismasspecifies
bythelaws, which encompass thecompulsory purchase ofmarket surpluses ofagricultural andfood
products enjoying theprotective price status (wheat, sugar beet, oilcrops andlivestock).
Question 132.
Please specify which foodproducts canbeaffected byinterventions fromState commodity reserves.WT/ACC/HRV/3
Page69
ANSWER:
TheGovernment oftheRepublic ofCroatia andtheStateDirectorate forCommodity Reserves
manage thestatecommodity reserves which alsoinclude agricultural andfoodproducts. Measures
ofintervention inthecommodity reserves market ortheagricultural andfoodproducts market are
taken intheevent ofwarorother emergency situations, andincases ofmajor disturbances onthe
market.
Oneoftheways ofintervention inthemarket isthepurchase ofbasic agricultural products
atprotective prices ifcircumstances require thatprices ofthese products should besetatalevellower
thanprotective prices. Protective prices areprescribed forsoyabean, sunflower, oilseed rape, sugar
beet,wheat andtobacco leaves. Purchase through theStateDirectorate isexceptional andrare(about
5-10percentofthetotalpurchase).
IV.7 State Trading
Question 133.
WilltheState enterprises operate inamanner consistent withArticle XVII oftheGATT?
ANSWER:
Allstate-ownedcompaniesandcompaniesinwhichthestatehasastake,operateandwillcontinue
tooperate inkeeping withArticle XVIIofGATT. Regardless oftheownership structure, allcompanies
intheRepublic ofCroatia aresubject tothesame legislation, i.e.theTrade Companies Actandother
regulations.
Question 134.
Please indicate thestatus ofconsiderations fortheestablishment ofagovernment commercial
credit agency andprovide anydraft legislation.
ANSWER:
Croatia isintheprocess ofconsidering thepossibility ofalterations andamendments tothe
Lawonexport credit guarantees covering non-commercial risksinorder tocreate theconditions to
insure against acertain number ofcommercial risks, aswellasfinancial support andadvancement
ofexport transactions.
AstheCroatian Commercial Credit Agency hasnotbecome operational yet,theproposal is
stillunder consideration. Assoonasthedraftortheamendments willhavebeenpassed, wewillsend
youacopy.
Itisexpected thattheCroatian Export Guarantee Agency willbeoperational atthebeginning
of1996, andthattheratification procedure ofthedraftLawenlarging thescope ofactivities ofthe
Agency inaccordance withtheabove requirements willbecompleted inthecourse of1996.
Question 135.
Please elaborate ontheprogress ofprivatization intheagriculture sector.
How areformer socially-owned farms presently organized andadministered?WT/ACC/HRV/3
Page70
Does Croatia plantoprivatize itsentire foodprocurement andprocessing system?
ANSWER:
Former socially-owned farms areorganized asjoint-stock companies orlimited liability
companies. Themanagement ofthecompany isentrusted totheManagement Board.
Croatia intends toprivatize itsentire foodprocurement andprocessing system.
InCroatia, theprocess ofprivatization started withtheLawontheTransformation ofSocially
Owned Enterprises which wasenacted inApril 1991. Inaccordance withthisLaw, allsocially owned
enterprises, except those exempt from theLaw, could filearequest forsocalled "autonomous
transformation" upto30June1992, which meant thattheyweregiven theopportunity toselect their
ownmodel fromtheestablished transformation models, andincompliance withitbecome ajoint-stock
company oralimited liability company.
Theownership ofenterprises which didnotfilearequest forautonomous transformation by
theabove date,andwhich werenotgranted anextension tothetransformation period, wastransferred
totheCroatian Privatization Fund.
TheLawontheTransformation andPrivatization ofSocially Owned Enterprises alsoapplied
totheprivatization ofenterprises intheagriculture sector.
About 180cooperative-operative organizations should beadded tothese enterprises. These
alsofunctioned along thesame linesassocially owned enterprises, withtheproducers participation
inmanagement being insignificant.
Incontrast tothefarming sector, where asmall number ofenterprises didnotfinish the
transformation process owing toexternal circumstances, trading andprocessing enterprises were
completely privatized.
Certain enterprises were privatized ascomplete entities, orasjoint-stock companies, while
some ofthemweredivided intoindependent units, either asjoint-stock companies orlimited liability
companies, ortheychanged theirstructure inthemanner ofholding companies.
Farm cooperative-operatives stillremain tobeprivatized, andthiswillbecarried outassoon
asthelawonfarmcooperatives, which ispresently being prepared andwillbebased onthepositive
principles ofWestern European farmcooperative-operatives, isenacted.
Question 136.
PleasediscussinsomedetailtheprivatizationofCroatia'sformeragriculturaltradingorganizations.
Which ofthese stilldominate trade inthemajor agriculture commodity groups?
ANSWER:
Former agricultural trading organizations havebeenentirely privatized. Theshares owned by
thefunds aresoldontheStock Exchange, andcanbebought byinterested persons, either juristic or
natural. Most ofthese enterprises havebeensoldandcompletely privatized, andbeing companies,
theywilloperate incompliance withthenewCompany Law.WT/ACC/HRV/3
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Atpresent, itisnotpossible tosaythatanyoftheexisting organizations dominate trade in
themajor agriculture commodity groups.
Question 137.
Please provide anEnglish copyoftheLawontheTransformation ofSocially-Owned Enterprises.
Please alsoprovide more information ontheCroatian Privatization Fund, including yearly budget
outlays since itsinception.
Please elaborate onthestatus ofprivatization ofbanks, insurance companies, cooperatives, ports,
marinas, hospitals andschools, andtheoutlook forthisyear.
ANSWER:
Weenclose acopy oftheLawontheTransformation ofSocially Owned Enterprises in
Appendix 3.Itisimportant tonotethatthisLawhasbeenineffect since April 1991 andwillsoon
beredundant, since themajority ofsocially owned enterprises havebeentransformed. InAppendices
4to7,weenclose acopyoftheLawontheCroatian Privatization Fund, theReport onprivatization
fortheyear1994, andtheannual financial statements oftheCroatian Privatization Fund fortheyears
1993 and1994.
Themain objectives ofprivatization were todetermine theowner ofanenterprise, andto
transform social ownership intoprivate ownership, withthestatetemporarily holding onlythatpart
ofanenterprise which nobody wanted tobuy.
Aware ofthefactthatthestatehasbecome atemporary minority ormajority owner ofthe
enterprises which haveundergone transformation, theGovernment oftheRepublic ofCroatia has
established anewMinistry ofPrivatization andAdministration ofStateProperty inorder tofindnew
methods forfurther privatization ofitsstakeinCroatian enterprises. Inaddition, aLawonprivatization
hasbeendrafted andwillberatified bytheCroatian Parliament thisyear.ThisLawwillmoreefficiently
resolve theproblem offurther privatization oftheGovernment 'sstake inCroatian enterprises. Please
refertoanunofficial English translation ofthePrivatisation BillLawgiven inAppendix 5.
Intherestoftheabove-mentioned sectors oftheCroatian economy which havenotbeencovered
bytheexisting LawontheTransformation ofSocially Owned Enterprises orthefuture Lawon
Privatization, theprocess ofprivatization hasalready beeninitiated inaccordance withspecial Laws
andprograms specifically drawn upforeachsector, andadjusted totherelevant situation.
Question 138.
Itisstated intheMemorandum that"The present lawonprivatization doesnotdealwiththe
privatization ofpublic enterprises, banks, insurance companies, cooperatives, ports, marines,
hospitals andschools. Special regulations willbepassed todealwiththese." (page 14)
What isthedefinition of"public enterprises"? CanCroatia supply alistofthese enterprises?
What isthecurrent situation oftheprivatization ofthose "public enterprises"?
Have the"special regulations" already beenpassed? What arethemain features ofthese "special
regulations"?WT/ACC/HRV/3
Page72
ANSWER:
Theconcept ofthe“public enterprise ”isnotdistinctly defined other thanbythefactthatsuch
companiesperformactivitiesofapublicnatureorinterestandweresetapartfromstate-ownedcompanies
which entered privatization viatheLaw ontheTransformation ofSocially-Owned Enterprises.
Considering thatthemajority ofthese public enterprises wereperforming ofimportant functions for
theoverall administration oftheCroatian economy, thestatewasforced toassume responsibility for
theiractivities inorder toensure theworking conditions ofother companies andthenormal living
conditions ofitscitizens.
TheHEP, INA, Croatia Osiguranje andASTRA INTERNATIONAL companies havebeen
restructured intostate-owned jointstock companies. Theremaining companies ontheenclosed list
havethestatus ofpublic enterprises.
Inorder toillustrate thedifferences between theproposed “special regulations ”forthepublic
enterprise andthestate-owned joint-stock company, weareenclosing, asasupplement, acopy of
therestructuring programme ofCroatian Railways withthenewLawonCroatian Railways, thenew
Statute ofCroatian Railways andtheLawontheElectricity Industry withacommentary andthe
Restructuring Programme.
Please refertoAppendices 3to7,23,24and25fordetails.
Question 139.
How soon does Croatia expect thatprivatization ofstate-owned trading enterprises willbe
completed?
Please specify inwhich state-owned firms theGovernment ofCroatia stillholds equity andindicate
theprospects thatthese willbesoldduring theyear1995.
ANSWER:
Asspecified intheMemorandum, trade organizations currently owned bythestatewerenot
established bytheRepublic ofCroatia, butweretransferred tothestateownership intheprocess of
transition. Croatian stateistheowner ofonecompany thatmight beconsidered astatetrading company,
andthisis"Astra International d.d.", ajointstock company. Allother business entities, irrespective
ofwhether theyareclassified aspublic orstateowned enterprises duetothefactthatthestateistheir
shareholder, cannot beconsidered statetrading companies pursuant toGATT regulations, since they
operate under thesame trade regulations andbusiness terms asprivate trading entities.
Asfor"Astra International d.d.", itisajointstock company currently owned bythestate,
butitisexpected thatitwillverysoonbetransferred totheCroatian Privatization Fund inorder to
prepare theprocess ofitssale.
InAppendix 23.youwillfindthelistofpublic enterprises which arebeing privatized in
accordance withspecial legal provisions andprivatization programs, andinAppendix 6.thelistof
companies where theCroatian Privatization Fund haseither amajority stake oraminority stake.
TheFund isobliged tosellthese stakes anditisexpected thattheprocess ofprivatization will
bespeeded upafterthenewlegalprovisions willhavebeenpassed.WT/ACC/HRV/3
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IV.8 FreeZones
Question 140.
Thissection describes howtosetupafreezone. Doanyfreezones currently exist inCroatia?
Ifso,what isthelevelandpercentage ofannual trade thattheyhandle?
ANSWER:
There arecurrently eight zones operating ascustoms zones. Nocustoms oranyother duties,
except the1percentcustoms administration charge, arelevied onimports ofgoods intoorexports
ofgoods fromthezone. Special charges onimports ofagricultural andfoodproducts arealsonotlevied,
provided thegoods areimported forthepurpose ofproduction, useandconsumption inthezone.
When goods leave thezonetoenter thedomestic market, customs andother duties arelevied
onrawmaterials andproduction material, i.e.parts usedintheproduction ofthesame goods inthe
zone.
Given ourcurrent situation andthefactthatcustoms zoneturnover enjoys onlythepreferential
treatmentmentionedaswellasthefactthatproductionpossibilitiesinsidecustomszoneshavenotaroused
adequate level ofinterests, wecanconclude thattheannual turnover volume incustoms zones has
notyetreached significant proportions.
IV.9 Subsidy Policy
Question 141.
TheEUhasnoted withinterest theintention ofCroatia touseanumber ofdomestic subsidy
programstoassistitsindustrialpolicy.WoulditatthisstagebepossiblefortheCroatianauthorities
tosupply more details onthese programs andontheir financial volume, andtoindicate which
ofthese programs willbenotified under Article 8.3SCM.
ANSWER:
TheMemorandum ontheForeign Trade System oftheRepublic ofCroatia doesnotspecify
anydomestic subsidy programs aimed atassisting Croatian industrial policy. Should Croatia haveany
intentions ofusing suchmeasures itwillcertainly inform members inlinewithWTO rules.
Croatia doesnothaveaspecific industrial policy which would bedirected atcertain strategic
economic sectors. Theactivities ofthestate, inthecontext oftheeconomic development strategy of
Croatia asasmall andopeneconomy intransition, areaimed atconstructing legalandinstitutional
prerequisitesfornormalfunctioningofthemarketeconomywithpredominantprivateownership,ensuring
favourable macroeconomic conditions suchasinternal andexternal balance andthedevelopment of
mechanisms forstructural adjustment inthefinancial andrealsectors oftheeconomy.
Intheimplementationofthisstrategy,internationallycompatiblelegislation(TradingCompanies
Act,Banks Act)wasmade toopentheareatofreeactivities ofprivate entrepreneurship inalleconomic
sectors.
Freeaccess tothemarket, national treatment offoreign capital, andtheliberalized foreign
tradeandexchange regime create conditions forthedevelopment ofcompetition onthedomestic market.WT/ACC/HRV/3
Page74
Insuchaliberal environment theprivate sector hasdeveloped intensely inthepastfewyears
together withtheofferofbusiness services asanimportant partofthemarket infrastructure necessary
forthenormal functioning ofthemarket economy.
Special attention isdedicated tothedevelopment ofsmall andmedium-sized companies for
which purpose theCroatian Guarantee Agency hasbeensetuptofacilitate thegranting ofloans by
bankstosmallandmedium-sizedcompanies.Besides,specificfinancialarrangementshavebeenactivated
incommercial banks andtheHKBO (Croatian Credit BankforReconstruction) through which thecapital
ofinternationalandotherforeignfinancialinstitutionsisdirectedatapprovingloanstosmallandmedium-
sized companies.
TheOffice forInsuring Export Operations fromNon-Commercial Risks hasbeensetupwith
theaimofstimulating export.
Aspartofefforts toencourage technological development, thecreation oftechnology parks
andpreconditions forthetransfer oftechnology from abroad arebeing supported. International
cooperation inthescience andresearch isdeveloping (e.g.participation intheCOST andEUREKA
programs oftheEU). Laws onscientific andresearch activities andhigher education allow the
involvement oftheprivate sector andforeign capital inthose activities.
Thelegislature isintheprocess ofpassing labour legislation which willincrease theflexibility
ofthelabour market through liberalization oftheuseoffixed-term contracts, improvement ofthe
workers 'training program andderegulation ofthedismissal procedure.
Furthermore, thegovernment offers subsidies through theEmployment Bureau toencourage
employers totakeonmore workers, andself-employment.
Through liberal regulation offoreign investment andimprovement ofregulations inthe
bankruptcy procedure, conditions arebeing created forgreater mobility andmore effective allocation
ofcapital assets. Therehabilitation ofthebanking sector, theprocess ofprivatizing ofcompanies and
theconstruction ofthelegalandinstitutional infrastructure forthedevelopment ofthecapital market
alsocontribute tothis.(TheSecurities Act,theInvestment Funds Act,theestablishment ofthestock
exchange, etc.)
Thegovernment isactive intheprocess ofrestructuring thepublic infrastructure, shipbuilding
andmetallurgy, including thepolluting industries ontheAdriatic Coast. These activities include, among
others, subsidies, issuing guarantees forbankloansandperformance ofworks, financing thepreparation
ofstudies forrestructuring, financing thecosts ofclosing down factories andthesocial protection of
redundant workers.
Question 142.
Does Croatia provide subsidies toitsshipbuilding industry? Ifsowhat types?
ANSWER:
Shipbuilding isanimportant sector ofCroatia 'seconomy. TheStateisthemajority shareholder
(viafunds) infivemajor shipbuilding yards. Astudy entitled "ThePosition andPossibilities ofCroatia 's
Shipbuilding Industry" isbeing made, andthisanalysis willhelptheGovernment decide onthestructure
andorganization ofthese 5shipyards.WT/ACC/HRV/3
Page75
Since thefinalgoalisprivatization, andrestructuring isaprocess which lastsforacertain
period oftime, theGovernment credited theshipyards totheamount ofUS$70million (cumulative)
foraperiod of2years (1995 and1996), thusproviding them withtherestofthefunds theyneeded
tofinance thebuilding of10ships forRussia. These funds willberepaid uponthedelivery oftheships,
thatis,aftertheordering party haspaidthelastinstalment.
Sofar,theGovernment hasgiven noother "subsidies" totheshipbuilding industry.
Question 143.
Does Croatia intend tobecome amember oftheGATT Code onSubsidies andCountervailing
Duties?
ANSWER:
Given thattheRepublic ofCroatia applied forfullWTO membership on22July1994, we
willsurely ratify thisAgreement because itisoneofthemandatory agreements foradmission toWTO.
V. INSTITUTIONAL BASE FOR TRADE AND ECONOMIC RELATIONS WITH THIRD
COUNTRIES
Question 144.
Please indicate thepreferential treatment accorded totrading partners under ratified trade and
economic cooperation agreements.
Please elaborate onanycounter-trade arrangement thatCroatia maintains withformer CEMA
members.
ANSWER:
Ashort overview ofthecontents ofbilateral trade andeconomic cooperation agreements
TheRepublic ofCroatia encourages andenters trade andeconomic cooperation agreements
withother countries withthepurpose ofsupporting andcreating awide range ofmutually useful
economic andtrade relationships onalong-term, stable andequal basis.
TheRepublic ofCroatia hassofarentered anumber ofbilateral tradeandeconomic cooperation
agreements, thepurpose ofwhich isnottodiscriminate against thirdcountries, buttostrengthen bilateral
relationships based ontheprinciples ofequality, mutual respect, common benefits, andmutual
encouragement oftheauthorized agencies tospeed uptheissue ofexport andimport licences, which
arerequired intheprocess ofimplementation oftheagreements.
Trade andeconomic cooperation agreements aredefined inaccordance withtheGATT and
WTO provisions, which require thatcontracting parties grant oneanother themost preferred nation
status.
TheRepublic ofCroatia supports notonlytrade andeconomic cooperation agreements but
italsoencourages andenters contract onadvancement andmutual protection ofinvestments withthe
purposeofenlargingbilateraleconomiccooperationandcreatingfavourabletermsformutualinvestments
between contracting parties.WT/ACC/HRV/3
Page76
TheRepublic ofCroatia hassofarentered orisintheprocess ofratifying anumber of
agreements where contracting parties focus onthefollowing:
-incentives toinvestments
-definition ofterms andmethods ofinvestment
-repatriation ofprofit
-transfer ofrights -subrogation.
Agreements onincentives toandprotection ofinvestments ensure thatimpartiality andfairness
arepreserved intheinvestment process while themostfavoured nation status clause isnotinfringed
upon. Incaseofviolation ofcontractual stipulations, arbitrage procedures havebeensetupwhich are
atthedisposal oftheinvestor:
-Arbitrage procedures setupbytheStockholm Chamber ofCommerce;
-UNCITRAL;
-International Chamber ofCommerce inParis;
-ICSID, International Centre forSettlement ofInternational Disputes.
TheListofBilateral Trade andEconomic Agreements:
1.Trade andeconomic cooperation agreements
1.1.TheRepublic ofCroatia hassofarratified agreements withthefollowing countries:
Republic ofAustria
Republic ofHungary
Republic ofPoland
People 'sRepublic ofChina
Republic ofBulgaria
Russian Federation
Republic ofSudan
Republic ofYemen
United Arab Emirates
Islamic Republic ofIran
Romania
Slovak Republic
TheUkraine
Republic ofAlbania
Republic ofMacedonia
Republic ofSlovenia
Arab Republic ofEgypt
Republic ofArgentina
1.2.TheRepublic ofCroatia hassofarsigned agreements withthefollowing countries:
Republic ofGreece
Republic ofArgentina
Republic ofIndia
Malaysia
Republic ofBosnia andHerzegovina
Republic ofKoreaWT/ACC/HRV/3
Page77
1.3.TheRepublic ofCroatia hasstarted theprocess ofnegotiating agreements withthefollowing
countries:
South African Republic
Republic ofTurkey (initialled)
Republic ofMalta
Czech Republic
Republic ofFinland
Republic ofPortugal
Kingdom ofSpain
Kingdom ofSweden
Kingdom ofNorway
State ofKuwait
Sultanate ofOman
Kingdom ofSaudi Arabia
Republic ofPhilippines
Kingdom ofThailand
Socialist Republic ofVietnam
Republic ofTunisia
Republic ofTadzikistan
Republic ofIndonesia
2.Contracts onencouragement andmutual investment protection:
2.1.TheRepublic ofCroatia hassofarratified agreements withthefollowing countries:
Republic ofAlbania
People 'sRepublic ofChina
United States ofAmerica (OPIC)
2.2.TheRepublic ofCroatia hassofarsigned agreements withthefollowing countries:
Republic ofArgentina
Republic ofChile
Malaysia
Republic ofMacedonia
Romania
Republic ofPoland
Republic ofPortugal
2.3.TheRepublic ofCroatia hasstarted theprocess ofnegotiating agreements withthefollowing
countries:
Slovak Republic (initialled)
Republic ofTurkey (initialled)
Republic ofAustria
Australia
Federal Republic ofBrazil
Czech Republic (initialled)
Kingdom ofDenmarkWT/ACC/HRV/3
Page78
Arab Republic ofEgypt
Republic ofFinland
Republic ofFrance
Republic ofGreece (initialled)
Republic ofIndia
Republic ofIndonesia
Republic ofItaly
State ofKuwait
Republic ofHungary
Kingdom ofNorway
Federal Republic ofGermany
United States ofAmerica
Kingdom ofSaudi Arabia
Republic ofSlovenia
Kingdom ofSpain
Kingdom ofSweden
Swiss Confederation
United Arab Emirates
Please notethattheRepublic ofCroatia hasnotmade anycounter-trade arrangements with
theformer CEMA members.
Question 145.
Please provide examples ofthecurrent contracts forlongterm trade co-operation.
What istheGATT basis forlong-term trade co-operation? Does Croatia have anyintention to
eliminate thedomestic legal framework forlongterm trade co-operation?
ANSWER:
According tothecurrent LawonForeign Trade Activities which wastaken fromthelegislature
offormer Yugoslavia, thespecial regulation ofactivities oftheso-called long-term manufacturing
cooperatives isstillinforce. Thismeans thatthese activities mustbereported totheMinistry ofthe
Economic Affairs within 30daysofthesigning ofacontract between domestic andforeign parties.
Considering thatthespecial regulation ofthese activities isbased ontheconditions which
prevailed intheeconomy offormer Yugoslavia which oftenencountered balance ofpayments difficulties
andtherefore theneedforvarious types offoreign currency restrictions, andduetoideological reasons
andtherestrictive conditions forforeign investment, itisCroatia ’sintention, asexpressed inthedraft
ofthenewLawonTrade, nottorestrict theperformance ofsuchactivities inthefuture, thatis,to
leave thearrangement ofconditions forsuchactivities tothewillofthecontracting parties.
Theoperation oflong-term manufacturing cooperations assumes acontinued exchange ofgoods
inso-called counter-trade arrangements without anypayments exchanged between thepartners fora
timeperiod ofatleastthree years (thelegalminimum). Theexchange ofgoods intheframework of
thelong-term manufacturing cooperations involves complementary goods which areexchanged inorder
tocomplete afinalproduct which isthenmarketed inoneorbothofthepartners 'countries (ormay
bemarketed inathird country). Forexample, intheautomobile industry, themanufacturer ofone
ormore automobile parts (batteries, cable systems etc.) within theframework ofthelong-term
cooperations, delivers thepartstotheautomobile manufacturer which ispayment fortheimportation
ofthefinalproduct -theautomobile.WT/ACC/HRV/3
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Therecords andaccounts ofthetransactions arecompleted ontheprinciple ofcurrent accounting
onwhich theholder ofthelong-term manufacturing cooperation registers allchanges onthebasis of
invoices andcustoms documents.
Bymeans ofmonthly reports, theNational Bank ofCroatia controls thetransactions ofthe
business, firstly through financial andstatistical analysis and,incases where itisestablished thatthere
isahighdebtbalance totheforeign partner, itwillorder thesettlement ofthebalance within aspecified
period.
Thecurrent accounts, which theholder hadarighttoinaprevious period onthebasis ofthe
long-term cooperation, aretheonlybenefits given tothese legalpersons inforeign trade transactions.
Atthesame time, itmustbeemphasized thatgoods exchanged onthebasisofcontracts forlong-term
manufacturing cooperations donotinvolve different ormore favourable treatment,such asquotas or
permits, thanother types ofgoods which areexported orimported intheregular way.
InCroatia there arecurrently ninety (90)contracts inforce forlong-term manufacturing
cooperations between Croatian andforeign legalpersons mostly fromGermany, ItalyandtheRussian
Federation. Over two-thirds ofthese contracts were entered intoduring theperiod before the
establishment ofanindependent Croatia.
Considering thecomplete standardization between activities engaged inonthebasis ofthese
contracts andother foreign trade activities, andthegradual cancellation ofalmost allother benefits
(with theexception oftheuseofcurrent accounts) aswellasthecomplete liberalization ofconditions
forforeign investments, interest inentering intothepreviously mentioned contracts isdecreasing.