do business in the Dominican Republic - Pellerano & Herrera

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DOING BUSINESS INTHE DOMINICAN REPUBLICLAW 84-99 ON REACTIVATION AND PROMOTIONOF EXPORTSLaw 84-99 of 6 August 6 1999 on Reactivation and Promotion of Exports, seeksto eliminate the burden resulting from the payment of custom duties for materialsincorporated to export products, which reduce the competitiveness of thecountry's exports, as a necessary measure within the process of liberalization ofthe Dominican economy. Presidential Decree 213-00 of 22 May 2000 providedthe regulations for the application of Law 84-99, while Presidential Decree 1108-01 of November 2001 eliminated all remaining technical obstacles to the fullimplementation of this statute.The CEI-RD administers the system set forth in Law 84-99, and to make use of itsprovisions exporters must obtain an Exporter Registration with that entity.THIS LEGISLATION PROVIDES THE FOLLOWINGMECHANISMS TO ACHIEVE ITS OBJECTIVES:1) Repayment of custom duties paid on raw materials, inputs, semi-finishedproducts, labels, packaging and packing material, imported by the exporterhimself or by third parties, provided such materials have been incorporatedto export goods. Repayment may be made by check and/or by the TaxCompensation Bonds created by the law, which may be used to pay off anydebt or liability owed to the Dominican State. Repayment requests will befiled with CEI-RD who, after having verified the authenticity of the documentsand valuating the exporter's request, gives notice thereof to theMinistry of Finance, who then issues the respective checks and/or bonds.2) Simplified compensation of custom duties, under which individual or corporateexporters are entitled to the compensation of custom duties paid inadvance up to 3.0% of the FOB value of the exported products.3) Temporary admission regime of foreign components of export goods, whichmay enter the Dominican territory without paying custom duties, providedthey are re-exported within the next eighteen months. Raw materials, inputs,semi-finished products, labels, packaging, packing material, as well as parts,pieces, tools and other devices serving as complements to machinery used inthe production of export goods, may enjoy the benefits of this regime.Requests shall be filed with CEI-RD, who gives notice of its decision to theCustoms Office. Exporters admitted by CEI-RD to this regime must provide abond that guarantees the payment of custom duties that would be due in theevent of the goods being imported finally into the country.42
Pellerano & HerreraAttorneys at law3PREFERENTIALMARKETACCESS TOTHE UNITEDSTATES43The preferential market access rights granted to Dominican exports to theUnited States have been a key factor in the development of the sector, and themain tool for the growth of the Dominican textile industry and consequently ofthe free zones network, under which most textile companies are organized.OVERVIEW OF MAIN PROVISIONSThe Trade Act 1974 established the Generalized System of Preferences (GSP),which grants developing countries throughout the world, including Caribbeancountries, preferential access rights with respect to a wide range of manufacturedand semi-manufactured products that may therefore enter the US territorywithout paying custom duties.In 1983 the Caribbean Basin Economic Recovery Act (CBRA), also known as theCaribbean Basin Initiative (CBI),allowed the nations of the region to benefit froma preferential regime far larger than that provided by the GSP, and since thenmost of the export products of the area have been exempted from tariff barrierswhen entering the US market. Under the CBI and its further expansion in 1986(CBI II), products originating in one or more CBI countries (apart from textiles/apparels,footwear, petroleum, tuna and watches) may enter freely the USmarket provided that such products have been wholly obtained, produced ormanufactured in one or more CBI countries, and exported directly to the UnitedStates.In addition, CBI countries benefited from the general duty reduction provisionestablished in tariff provision 807 of the HTSUS (Harmonized Tariff Schedule ofthe United States), also called “production sharing” or “offshore production” tariff,under which apparel assembled in a CBI country from US fabricated componentsis dutiable only for the valued added abroad, excluding the value of U.S.components.Under the so called 807A program,apparels assembled in CBI countriesfrom fabric formed and cut to shape in the US were guaranteed access tothe US market (Guaranteed Access Levels Program-GAL). Furthermore, anotherquota provision known as 809 guaranteed entry into the US market to apparelcut and assembled from US fabric in a CBI country that, like the DominicanRepublic, has signed a bilateral agreement with the United States.In other words, for apparels assembled in CBI countries duty reduction was limitedto the value of US components, and for apparels assembled and cut in CBIcountries there was no duty reduction at all,being furthermore subject to importquotas.The Caribbean Basin Trade Partnership Agreement (CBTPA) passed by the UnitedStates Congress on 24 January 2000, enlarged the benefits granted to CBI countriesby implementing the textile parity on behalf of these countries. Pursuant tothis amendment,all of these,as well as other textile products made with US materials,are wholly exempted from the payment of custom duties, and may thus inthe future enter freely the US market, under the conditions set forth by the legislation,which are indeed stricter than those applicable until now but which are
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