RESTRICTED
WORLD TRADE G/TRIMS/N/1/CRI/1
12April 1995
ORGANIZATION(95-0913)
Original: Spanish Committee onTrade-Related Investment Measures
NOTIFICATION UNDER ARTICLE 5.1OFTHE AGREEMENT
ONTRADE-RELATED INVESTMENT MEASURES
Costa Rica
Thefollowing communication, dated 30March 1995, hasbeenreceived fromthePermanent
Mission ofCosta Rica.1
_______________
Pursuant toArticle 5,paragraph 1oftheAgreement onTrade-Related Investment Measures,
theGovernment ofCosta Ricahereby notifies theonlyexisting measure thatisnotinconformity with
thatAgreement.
Description ofthemeasure anditsmain features
Thefollowing measure isnotified asatrade-related investment measure thatisnotinconformity
withtheAgreement: thepercentage oflocalcontent inexported products thatmustbeachieved by
subscribers toanExport Contract asanessential condition forreceiving theTaxCredit Certificate
(CAT).
1. Thismeasure corresponds toparagraph 1(a)oftheIllustrative ListintheAnnex tothe
Agreement.
2. Themeasure isapplied bytheGovernment ofCosta Ricaunder mandatory legislation: the
Income TaxLaw, No.7902 of21April 1988, andamendments thereto (the"Law"), andtheRules
ontheBenefits, Time-Limits andConditions ofExport Contracts (the"Rules") issued bytheNational
Investment Council oftheMinistry ofForeign Trade on17October 1994.
3. Themeasure isgeneral innature. Thecriterion forthegrant ofaCAT isthatthebeneficiary
musthavesubscribed toanExport Contract. Anynatural orlegalperson, national orforeign, engaged
inexportation maysignanExport Contract withtheCosta Rican Government andobtain aCAT as
anincentive. TheContract isaninstrument forgranting benefits tofirms thatexport non-traditional
products notcovered byfree-trade treaties. TheCAT wasnotavailable fortheexport ofservices.
Non-traditional products arethose defined assuchinExecutive Decree No.23784-COMEX
of9November 1994, published inLaGaceta No.228of30November 1994, acopyofwhich isattached
hereto. ThisDecree alsospecifies thattheproducts covered byfree-trade treaties arethose thatenter
1Thereplies inthisnotification follow theorder oftheagreed format fornotifications under Article 5.1,
contained indocument G/TRIMS/1.G/TRIMS/N/1/CRI/1
Page2
without being subject topayment ofimport duties ontheground thattheyareincluded inafree-trade
treaty ortheGeneral Treaty ofCentral American Economic Integration.
TheCAT isafreely negotiable, non-interest-yielding, bearer document which ceases tobe
valid 24months afteritsmaturity date. Itisissued bytheCentral Bank ofCosta Rica, denominated
inlocal currency, andisusedtopaydirect orindirect taxes which theCentral Bank isresponsible
forcollecting astheState cashier.
Thegrant oftheCAT isconditional upon theexporting firmthatsigns theExport Contract
complying withaspecified percentage ofdomestic content intheproduct. Broadly speaking, thehigher
thedomestic content, thehigher theamount oftheCAT. Thisamount isdetermined asapercentage
ofthef.o.b. value ofthefirm'sexports. Thesixtables inAnnex IIoftheRules indicate thepercentage
variation oftheamount oftheCATasafunction ofthedomestic content (wrongly called national value
added -"VAN" -intheTables). Asexplained below inpoint 8,these tables alsoshow theprogressive
reduction intheamount oftheCAT until itistotally abolished in1996. Furthermore, since
2December 1992, persons signing anExport Contract afterthatdatedonotreceive aCAT. During
thefirstyears ofapplication oftheCAT, itcould reach amounts ofupto25percentofthef.o.b.
value oftheexported products iftheyhad50percentormore regional content. With thegradual
reduction, themaximum CAT thatcanbegranted today is14percent,inveryspecial circumstances,
assuming thattheexported product hasover50.51 percentdomestic content.
There arenoadditional requirements which theenterprise hastofulfil, suchasnumber of
employees, geographical location, payroll, legalformoforganization asanenterprise, origin ofcapital,
origin ofpartners ororigin ofdirectors.
4. TheCAT isnotavailable forfirms whose Export Contract wasapproved bytheNational
Investment Council after2December 1992. Forthealready established firms entitled totheCAT
priortothatdate,newinvestment bythose firms canbenefit fromtheCATonlyifsuchnewinvestment
concerns anexport product specified bytheenterprise intheExport Contract oraproduct considered
tobewithin thesame lineofproduction oftheexporting firm. Inother words, CATs arenotgranted
forexports ofproducts notpreviously agreed upon anddefined intheExport Contract ornotinthe
same lineofproduction.
5. Compliance withthemeasure isnecessary toobtain anadvantage. Ifafirmwhich hassigned
anExport Contract doesnotcomply withtheregional content percentage itdoesnotreceive theCAT.
Thenature oftheadvantage isdescribed inpoint 3.
6. Themeasure relates tonon-traditional products asdefined inArticle 1ofExecutive Decree
No.23784-COMEX, annexed tothisnotification.
7. Themeasure hasbeenapplied since Income TaxYearNo.84(1984). Theonlymodification
made tothemeasure inthe180daysprior to1January 1995 related tothedefinition of"countries
withwhich free-trade treaties arecurrently inforce", specifying thatCATs would notbegranted to
products covered bysuchtreaties which enter theexport market without payment ofimport duties.
Thismeasure wasadopted inorder toclarify thispoint following theentry intoforce oftheFreeTrade
Agreement signed between Mexico andCosta Ricaon1January 1995.
8. Thecurrent legislation establishes provisions forthephasing-down andcomplete elimination
oftheCAT. Article 60oftheIncome TaxLawestablishes thatthebenefits itprovides infavour of
non-traditional exports tothirdmarkets maybegranted foramaximum period of12years asfromG/TRIMS/N/1/CRI/1
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Income TaxYearNo.84,inother words 1984. Consequently, inprinciple further benefits suchas
theCAT willnotbegranted asfrom 1996. These provisions areclear from thetables inAnnex II
totheRules.
Nevertheless, asof7January 1992 firms thathavesigned Export Contracts andapplied for
theCAT havetheoption ofextending until1999 theperiod during which theyareentitled toreceive
theCAT iftheyagree tothereduction oftheCAT amounts. Inother words, atanymoment upto
1996, ifafirmwishes toobtain aCAT until1999 itmaydosobutthepercentage oftheamount of
thef.o.b. value oftheexports itwillreceive willbereduced by30percentanditwillalsohaveto
paythedifferential of5percentbetween thetaxlevied onthereduced CAT andtheunreduced CAT.
There arenoprovisions foranyfurther extension ofExport Contracts orCATs afterthelast
dayofthe1999 Income TaxYear. AtthatdatetheContracts andtherelated benefits covered bythe
extension willdefinitively expire. Therestwillexpire onthelastdayofthe1996 Income TaxYear.
9. Copies areenclosed ofthecorresponding articles oftheIncome TaxLaw(Article 60-63) in
force asfrom21April 1988, Executive Decree No.23784-COMEX (published inLaGaceta No.228
of30November 1994) andtheRules ontheBenefits, Time-Limits andConditions ofExport Contracts
(published inLaGaceta No.229of1December 1994).2
10. Thismeasureisappliedatnationallevel;CostaRicaisaunitaryrepublic.Thebodyresponsible
forstudying andapproving applications forexport contracts andforadministering themeasure ingeneral
istheNational Investment Council oftheExport andInvestment Promotion Centre.
2CopiesofthesedocumentsareavailableforinspectionbyinteresteddelegationsintheSecretariat(Intellectual
Property andInvestment Division ).