THE CARICOM/DOMINICAN REPUBLIC FREE TRADE AGREEMENT EXPLAINED · with CARICOM’s Common External...

THE CARICOM/DOMINICAN REPUBLICFREE TRADE AGREEMENT EXPLAINED

TRADEWINS is designed withCaribbean business in mind. The series isintended to bring issues of trade policy to theprivate sector and other interested parties.

2 What’s it all About?

3 What are the Main Themes?

4 Agreement Establishing theFree Trade Area

5 Agreement on Goods

6 Agreement on Services

8 Agreement on Investments

On August 22, 1998 the AgreementEstablishing the Free Trade Area Between theCaribbean Community and the DominicanRepublic was signed. The two parties(CARICOM and the Dominican Republic) cametogether to establish closer economicintegration and to develop a more significantjoint presence in trade negotiations. Severalmeetings have since taken place to finalisedetails of the agreement and a draft protocolon implementation was agreed upon by bothparties in middle of 2000.

Globalisation and integration are already a partof the regional and sub-regional trade agendaand a successful Free Trade Area between thetwo parties will increase their viability at thelevel of hemispheric and global trade negoti-ations. The establishment of a Free TradeArea enhances levels of cooperation and aims

to stimulate economic development throughtrade liberalisation and increased competi-tiveness. It integrates systems such ascustoms, standards, investment and servicedelivery.

The agreement itself is a fairly complex,technical document. In this issue ofTRADEWINS , we have tried to address thetechnical issues by answering several generalquestions on Free Trade Agreements and howthey function. We have then provided a sort of"road map" which presents the key elements ofeach section of the FTA. You will find that wehave removed the detailed informationcontained in the annexes of the agreement andplaced them into appendices for easyreference. We hope that TheCARICOM/Dominican Republic FTA Explainedwill help the private sector to understand whatthe agreement means for business.

Critical Issues For Business

TRADEWINS is a publication of the Caribbean Export Development Agency (Caribbean Export). © 2000 TRADEWINS is made possible through the kind support of the European Union.

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What’s it allAbout?The agreement should be read in the contextof increasing trade liberalisation and the movetowards hemispheric integration with the FreeTrade Area of the Americas which is scheduledto come on stream in 2005. The creation of aFree Trade Area (which is established througha Free Trade Agreement) will grant each partyaccess to the markets of the other and facilitatecooperation.

What’s a Free Trade Area?

You can think of a Free Trade Area as ageographical space which includes more thanone country, developed for the purpose offurthering trade relations. It is establishedthrough the signing and implementation of aFree Trade Agreement (FTA) which sets outthe terms and conditions of the arrangement.Free trade, in this context, implies thewillingness of the parties (the countriesinvolved) to grant certain concessions to eachother in the area of trade. Essentially, this isabout preferential treatment. It favours thegoods and services of parties to the agreementover those of other countries.

What Does it Mean For Me?

A Free Trade Area allows you - as a memberof the private sector - to develop and accessmarkets for your goods and services. It givesyou the opportunity to share production andtechnical expertise and to take advantage ofavenues for trade development and promotion.

Is a Free Trade AgreementLegally Binding?

Once the parties have signed a Free TradeAgreement and agreed to all of the terms andconditions set out in the various annexes,appendices and attachments, it does become acontract. The agreement is said to “enter intoforce” or to take effect. This means that theparties (and the individual countries within aparty, as is the case with CARICOM) will thenensure that their national legislation reflects theterms and conditions of the agreement. TheFTA itself is not law but parties put legalmechanisms in place for its implementation.Parties also have recourse to internalmechanisms (such as councils established bythe FTA), national courts and internationaltribunals for dispute settlement.

What Does theAgreementLook Like?The agreement is divided into four mainsections. Each section contains a preambleand several articles. Core information is foundin the first section with the details contained inannexes and appendices. (We have removedthis detailed information and placed it in aseries of appendices at the end of thisdocument. If you need further information, forexample, on how the Rules of Origin arestructured and what kinds of measures are inplace to prevent the spread of pests anddisease through imports, you can turn to theappendices.)

The Agreement Establishing theFree Trade Area Between theCaribbean Community and theDominican Republic

This is the basis of the Free Trade Agreement.It tells us who the parties are and why they'vecome together to form an agreement. It alsooutlines the objectives, what the agreementcovers and how the agreement will beadministered. This agreement, on its own, issometimes referred to as the Free TradeAgreement (FTA).

Agreement on Trade in Goods

Trade in Goods currently makes up the bulk ofthe overall agreement. It is essentially aboutduty free trade in goods (duty free access tomarkets is the basis of the FTA). It outlineswhat kind of preferential tariff treatment will beexpected of the parties. It also outlinesprinciples for customs cooperation andsafeguard mechanisms for the protection oflocal industries and economies. There are currently three appendices to thisparticular agreement: Rules of Origin,Technical Barriers to Trade and the Agreementon Sanitary and Phyto-Sanitary Measures.

Agreement on Trade in Services

This agreement establishes a framework forthe liberalisation of trade in services. Trade inservices is one of the most significantemerging areas of trade collaboration and thisagreement sets up the definitions, scope andconditions which should govern liberalisation.


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It pays special attention to removingunnecessary barriers to trade. The relevantappendices and attachments are still to benegotiated.

Agreement on ReciprocalPromotion and Protectionof Investments

This is the final section of the FTA and itoutlines the rules which should governinvestment, the transfer of profits, compen-sation for losses and dispute settlement.Measures to facilitate the movement of capitaland personnel are also included.

What are theMain Themes?There are several key themes which runthrough this FTA. You may think of them asguiding principles which can help you tounderstand some of the finer details. Here aresome of the main themes:

Liberalisation

The basic premise of the FTA is that barriers totrade between the parties should and will beremoved. In some instances, the agreementmakes provisions for immediate removal. Inother instances, the removal is gradual.Parties are expected to identify and makeknown their existing barriers (tariffs, duties,regulations, etc.) and to refrain from imposingany new ones without sufficient justification.They are also expected to disclose their plansfor the removal of these barriers.

Reciprocity

This is a key element of the FTA andessentially means that the parties will beobligated to offer to each other duty freeaccess and other trade facilitating options.This will apply to goods, services andinvestments. Reciprocity means that theparties will operate as partners, removingbarriers to trade and offering mutual benefits.This is the basis of trade liberalisation.

Special Treatment forCARICOM LDCs

The Less Developed Countries (LDCs) ofCARICOM receive preferential treatment underthis agreement. Given the fact that thesecountries are considered to be entering theagreement on an unequal economic footing,

their obligation to grant reciprocity has beendelayed for a specific period after which theregulations will be reviewed.

Most Favoured Nation(MFN) Treatment

Most Favoured Nation (MFN) treatment isoften mentioned in this agreement.Essentially, MFN treatment means that acountry will not discriminate in the level oftariffs which it applies to other countries. Inother words, all other countries will be subjectto the same level of duties or tariffs - no onecountry will receive preferential treatment. Interms of the agreement, this means that eachparty will be subject to duties and tariffs whichare no less favourable than those which applyto other countries (which are not part of theagreement). This system is already in placewith CARICOM’s Common External Tariff(CET) which applies the same duties andtariffs to all countries outside of CARICOM. Inthe case of the Dominican Republic, there isan external tariff which applies in the samemanner. There are a few exceptions (e.g. inthe case of a customs or monetary union)where MFN treatment will not apply andcountries which are a part of these specialunions will receive preferential treatment.

National Interest

Under this agreement, parties are entitled(under certain circumstances), to adopt orrefuse measures in order to protect theirfinancial or security interests, the public goodand national heritage (culture, art,archaeology). There are also specialprovisions for the protection of human, plantand animal life and health and theenvironment.

Other Guidelines

The agreement also relies quite heavily oninternational conventions and guidelines. Inmost cases, the parties are already signatoriesto these conventions and the agreementmerely reiterates the parties’ intentions toabide by them.

What Does theAgreement do?The Free Trade Agreement establishes theparameters for trade liberalisation in goods,services and investment. It seeks to identifycurrent and potential barriers to this process ofliberalisation and put mechanisms in place for

This iskey!!

Protection


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Origin, Customs Co-operation and the Harmonisation of Technical, Sanitary and Phyto-Sanitary Procedures

• Progressively liberalise trade in services, the movement of capital and the promotion and protection of investments

• Promote the active participation of privateeconomic agents (and promote and establish joint ventures)

• Promote and develop cooperative activities in agriculture, mining, industry, construction, tourism, transportation, telecommunications, banking, insurance, capital markets, professional services andscience and technology

• Discourage anti-competitive business practices between and within the parties

Other areas of the agreement concern specifictrade facilitation initiatives and monitoring ofthe agreement.

i Trade Facilitation Initiatives

These initiatives provide greater opportunitiesfor businesses to access markets and benefitfinancially from their export efforts. Intellectualproperty, an area of increasing importance inthe region, is also addressed and should allowindividuals and businesses increasedprotection as they seek to expand their trade inservices and other non-traditional exports.

Business Forum

The parties have agreed to establish aCARICOM/Dominican Republic BusinessForum to analyse trade and investmentopportunities, exchange business information,organise business encounters and deal withother business-related matters.

Trade Financing, EconomicCooperation and DoubleTaxation Agreements

The parties have agreed to review tradefinancing arrangements between CARICOMMember States and the Dominican Republic.They have also agreed to work towardspreventing double taxation and to develop abroad cooperation programme in the areasoutlined in the objectives.

Government Procurement

Although the agreement does not guaranteegovernment procurement, the parties have

Note!

their removal. It establishes measures fordealing with conflicts which might arisebetween the parties and between individualfirms and parties. It provides a framework fordeveloping rules and regulations to facilitatefree trade.

The AgreementEstablishing theFree Trade AreaBetween theCaribbeanCommunity andthe DominicanRepublicThis is the first section of the overall agreementand it lays the groundwork for the rest of thedocument. It names the parties (CARICOMand the Dominican Republic) and specifies theterritories and subjects to be covered by theagreement. It essentially tells the reader whatthe Free Trade Area is.

The CARICOM countries covered by theagreement are: Antigua and Barbuda,Barbados, Belize, Dominica, Grenada, Guyana,Jamaica, Montserrat, St. Kitts and Nevis, St.Lucia, St. Vincent and the Grenadines,Suriname and Trinidad and Tobago. TheBahamas, because they are not members ofthe Caribbean Common Market, are not a partof the agreement.

CARICOM has identified among itsmembership the More Developed Countries(MDCs) and the Less Developed Countries(LDCs). The MDCs are: Barbados, Guyana,Jamaica, Suriname and Trinidad and Tobago.All others are classified as LDCs (with theexception of the Bahamas which is not a partof this classification scheme.)

The fundamental objective of the agreement isto strengthen the commercial and economicrelations between the parties. The Agreementproposes to do the following:

• Promote and expand the sale of goods originating in the territories throughfree market access, the elimination of non-tariff barriers to trade and the establishment of a system of Rules of

JointVentures


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agreed to work towards the adoption of anagreement which will facilitate greater partici-pation in this area.

Intellectual Property Rights

The parties have agreed to abide by theprovisions of the Agreement on Trade-RelatedAspects of Intellectual Property Rights (TRIPS)which forms part of the agreement establishingthe World Trade Organization (WTO) and anyother relevant international agreements towhich both parties are signatories. They havealso agreed to develop and adopt their ownagreement on intellectual property rights.

ii. Monitoring of the Agreement

There are several mechanisms in place formonitoring and implementing the agreement.These are safeguards which will protectbusinesses and the parties.

The Joint Council

The agreement establishes a Joint Councilwhich is a representative body set up tomonitor the implementation and administrationof the agreement. This is the body which willreview and evaluate the agreement periodicallyand settle disputes. The Council will alsosupervise the work of any ad hoc or standingcommittees. The Council will be made up ofrepresentatives of both parties and will meet atleast once a year.

Committees

The agreement establishes eight committeesto monitor the implementation of theagreement in the following areas: Trade inGoods; Technical Barriers to Trade; Sanitaryand Phyto-Sanitary Measures; Rules of Originand Customs Cooperation; Trade in Services;Investment; Intellectual Property Rights; andAnti-Competitive Business Practices.

Settlement of Disputes

The agreement establishes rules for settlingdisputes. The general rules cover all disputesexcept those involving investments. The firststep is an attempt to arrive at a mutuallysatisfactory solution through informal consul-tations. If this is not achieved, the JointCouncil may be requested to intervene. TheCouncil may then engage expert advisors andseek other means of resolving the dispute.There are very specific timeframes set up forthis process and special considerations aregiven in cases which involve perishable goods.

Amendments and Termination ofthe Agreement

The agreement, annexes and appendices canbe amended by the parties with propersubmission and notification. This is donethrough the Joint Council and diplomaticchannels. Parties may also withdraw from theagreement (on a phased basis) with propernotice.

Agreement OnTrade In GoodsThis agreement is the key to trade liberali-sation within the Free Trade Area. Essentially,it deals with reciprocity in the removal of tariffsand the granting of MFN treatment. It alsosets up a framework for greater customscooperation and establishes safeguardmeasures for Parties to protect them fromthreats to their domestic industries andexternal financial position.

The agreement establishes two negative lists:Products Which will be Subject to PhasedReduction of Duty and Products Which will beSubject to MFN Treatment. All goods exceptthose which appear on the lists will be subjectto immediate tariff reduction. Goods on thefirst list - which includes pasta, sausages, jamsand biscuits - will be eligible for phasedreduction of MFN duty to zero percent by 1January 2004 in the Dominican Republic andthe MDCs of CARICOM. Goods on thesecond list - which includes meats of bovineanimals, fish and milk - will be subject to MFNrates of duty in the Dominican Republic andCARICOM (LDCs and MDCs). A list ofagricultural products which will be subject tospecial trade arrangements has also beendrafted. The LDCs are not required to grantany treatment other than the MFN rate of dutyto goods originating in the Dominican Republicuntil the year 2005. (This will be reviewed in2004).

(The Rules of Origin, Technical Barriers toTrade and the agreement on Sanitary andPhtyo-Sanitary Measures provide the bulk ofthe information on how this agreement willactually work. You will find highlights of thesein the appendix at the end of this document.)

The key elements of this agreement are tradefacilitation initiatives, safeguard measures andprocedures for customs cooperation.

NegativeLists

Circumstances


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i. Trade Facilitation Initiatives

There is a special clause in this agreementwhich permits CARICOM entrepreneurs to actas economic agents in the Dominican Republic.If you intend to promote or manage products ofCARICOM origin you may do so on the samebasis as nationals of the Dominican Republic.This should significantly improve market accessfor CARICOM goods and facilitate a betterunderstanding of the trade and economicsystems in both parties.

In addition, the parties have agreed to establishtrade promotion programmes, organise fairsand expositions, facilitate trade missions andpromote the use of market studies and othermechanisms for maximising trade opportunities.

ii. Bilateral Safeguard Measures,Unfair Trade Practices and Anti-Competitive Business Practices

Many trade agreements have a built-inmechanism to protect their signatories frominjury and unfair practices. The safeguardsestablished by this agreement are referred toas bilateral safeguard measures – between twoparties. (The parties also have recourse tomultilateral mechanisms such as those offeredby the WTO.)

There are two circumstances which call forbilateral safeguard measures:

1) If imports from one party are large enoughin quantity to cause or threaten serious injury to a local industry which produces similar or directly competitive products.

2) If balance of payment deficits must be redressed or if the external financial position of the importing country must be protected.

Once safeguard measures are applied, tariffpreferences are suspended and the MFN dutiesof the product in question are reinstated.These measures are temporary and may applyinitially for one year. If the reasons for applyingthe safeguard measures persist, the measuresmay be renewed for a further year. However,the importing country must request a meeting ofthe Joint Council to consider this renewal.

CARICOM and the Dominican Republic havealso agreed to work to discourage anti-competitive business practices within the FreeTrade Area and to establish mechanisms tofacilitate competition policy. The GeneralAgreement on Tariffs and Trade (GATT) will beused as a guide in dealing with unfair tradepractices such as dumping and exportsubsidies.

iii. Customs Cooperation

This section of the agreement deals withissues of information sharing, the harmoni-sation of systems, the simplification ofdocuments and the speedy passage of goodsthrough customs. It will be important formembers of the business community tomonitor the implementation of these measuressince they will directly affect the export andimport of goods.

No new customs measures are established inthe agreement but there is consensus thatinformation and experiences on the followingare to be shared:

• Classification and customs valuation• Rules of origin• Documents and requirements for the

import and export of goods• General or specific statistics of imports

and exports• Goods subject to non-tariff measures• Customs regimes and procedures• Current domestic legislation relating to

import taxes, customs and port charges, and any subsequent amendments

• New technologies for preventing and detecting customs fraud

• New trends in customs infractions

The parties have also agreed to notify eachother’s customs authorities of any intention toimplement new customs regulations.

Agreement OnTrade In ServicesServices is one of the most rapidly expandingexport sectors regionally and internationally. Itis likely to be a key element of the upcomingFree Trade Area of the Americas (FTAA) andcountries in the region must be adequatelyprepared for negotiations in this area. Theservices sector has not been a traditional areaof focus in the region and policy developmentin the sector has only recently begun.

The objective of this agreement is to establisha framework for the liberalisation of trade inservices which is consistent with the GeneralAgreement on Trade in Services (GATS) of theWTO. The agreement outlines the scope ofactivities to be covered and the circumstancesunder which parties may be exempted fromcomplying.

Excellent!!!

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i. Scope

The agreement applies to measures affectingtrade in services including:

• Promotion, distribution, marketing, sale and delivery of a service

• Purchase and use of a service• Access to services offered to the pubic

generally (and use of those services) as this affects supply

• Presence of a service supplier (including a commercial presence) in the territory of the other party

• Provision of a bond or other form of financial security as a condition for the provision of a service

There is a sort of negative list to which liberali-sation will not apply:

• Promotion and support measures provided by governments or state enterprises (including loans, guarantees and insurance)

• Services which are supplied in the exercise of governmental authority

• Air services and their related supporting services other than aircraft repair and maintenance (when an aircraft is withdrawn from service)

• Specialty air service and computerised reservation systems

• Services or government functions such as social welfare, health and child care and insurance

Professional services, telecommunications andtourism and entertainment are some of theareas which will receive special attention infuture negotiations.

The agreement requires that parties take“reasonable measures” to ensure that regionaland local governments and authorities, as wellas non-governmental agencies, adhere to thearrangement. However, it is important to notethat a party is not obligated to give any rightsto nationals of the other party who may beseeking employment or who are alreadyemployed on a permanent basis in theirterritory.

ii. Trade Facilitation Initiatives

Market Access

Parties have agreed that service suppliers willnot be required to establish or maintain arepresentative office or any form of enterpriseor be resident in the other territory as acondition for providing a service.

In addition, where countries share “contiguousfrontier zones” the agreement does not preventarrangements which will facilitate the exchangeof local services. Negotiation on services isscheduled to begin in 2001.

Removal of Restrictions

Each party is required immediately to grantMFN treatment to services and servicesuppliers of the other party. However, partiesare allowed to adopt measures inconsistentwith the agreement if those measures will avoiddouble taxation and ensure the equitablecollection of direct taxes with regard to servicesor service suppliers.

Parties have agreed to identify any quantitativemeasures which are non-discriminatory and towork towards their liberalisation or removal.They have also agreed not to increase the levelof any non-conforming measures with regard toMFN and national treatment and the localpresence requirement (the LDCs have beengranted one year to identify their non-conforming measures).

Monopolies

The agreement does not prevent the existenceof monopolies but the provisions on MFNtreatment, local presence and nationaltreatment apply. Parties have agreed to ensurethat monopoly suppliers competing in thesupply of services which are not normally intheir scope of operations do not abuse theirmonopoly rights. The Committee on Trade inServices can be requested to provideinformation on suppliers thought to be actingcontrary to the agreement. This agreement alsoapplies to exclusive service suppliers. Nationaland international competition policy will guidedecisions on anti-competitive businesspractices which are not related to monopoliesor exclusive supplier arrangements.

Good

Employment


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iii. Restrictions on Application

Denial of Benefits

The agreement seeks to ensure thatonly nationals of the parties concerned derivebenefits from the arrangement. The origin ofservices is not as easily identified as the originof goods. If it is determined that a service isactually provided by an enterprise owned bypersons of a third party who conduct nosubstantial business in the second party, thenbenefits may eventually be denied. TheCommittee on Trade in Services must benotified and consultations will be held. If thereis no mutually acceptable agreement then thebenefits may be provisionally denied and theaffected party can seek resolution throughinternal dispute settlement mechanisms.

Balance of Payments

The agreement makes special provisions forprotecting and facilitating the economicdevelopment of the parties - particularly in thecase of serious balance of payment or externalfinancial difficulties. Parties may adopttemporary restrictions in order to deal withthese situations. They may give priority to thesupply of services which are more essential totheir economic development but the restrictionsshould not be protectionist. The restrictionsmust be phased out progressively as thesituation improves. The measures shouldfollow International Monetary Fund (IMF)guidelines and avoid any unnecessary damageto commercial, economic and financial interestsof the other party.

Agreement OnReciprocalPromotion AndProtection OfInvestmentsThis agreement covers several categories ofassets – particularly investments in property;stocks and shares; money; intellectual andindustrial property rights; and businessconcessions. Parties are committed topromoting investments in their territories byinvestors of the other party as far as possible.Any laws of either party or obligations underinternational law which give more favourable

treatment than that provided for in theagreement shall take precedence over thisagreement.

Foreign investment, like services, is a relativelynew area of negotiation in the region. Theagreement provides trade facilitation initiativesand extensive dispute settlement mechanisms.

i. Trade Facilitation Initiatives

Movement of Personnel

In principle, the parties have agreed to allowlicensing agreements for manufacturing and fortechnical, commercial, financial and adminis-trative assistance and to grant the permitsnecessary for professional staff andconsultants hired by the investors of the otherparty. Investors may also enter and remain inthe territory of the other party in order toestablish, develop, administer or advise ontheir investments.

Investments and Returns

Investments and returns shall enjoy fullprotection and security. Investments will notbe expropriated or nationalised directly orindirectly except for reasons of public interest.In such cases, the process shall be non-discriminatory and shall take place only afterpayment of prompt, adequate and effectivecompensation. Compensation must be madein freely convertible currency and inaccordance with due process of law.

Each party shall grant unrestricted transfer ofthe following:

• Returns• Proceeds from full or partial liquidation of

an investment (unless there are serious balance of payment difficulties in which case the transfers can be phased in over three years)

• Repayment of loans incurred for the investment

• Net earnings of the nationals of one partyworking in the other party in connection with an investment

• Payments arising as compensation for losses and expropriation

Parties may, however, prevent transfersthrough equitable application of laws relating tobankruptcy, securities, criminal or penaloffences, reports of transfers of currency orother monetary instruments or adjudicatoryproceedings. Parties are also entitled to take

Notethis!

Note

Origin ofservices


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measures which will protect their financialsystems and those who have invested infinancial services.

ii. Dispute Settlement

In the case of unsettled disputes involving aninvestor and a contracting party, the matter willbe submitted to the courts or to national orinternational arbitration three months afterwritten notification of a claim. In the case ofinvestment disputes between parties,diplomatic channels will be the first recourse.Failing a settlement, a request may be madefor submission to an Arbitral Tribunal made upof one representative of each party and a thirdperson who shall be a non-national. Thedecision of the Tribunal will be binding on bothparties.

What do wedo Next?The Agreement Establishing the Free TradeArea Between the Caribbean Community andthe Dominican Republic was agreed to inprinciple and signed in 1998.

Through your private sector institutions, TradePromotion Organisations (TPOs) andgovernment departments, you can get moreinformation on the status of the agreement.You can arrange public discussions on the FTAand seek to have discussions with yourgovernment as an organised body with clearobjectives and concerns. It may also be usefulfor you to contact similar organisations in theother parties which are a part of theagreement. Since this agreement is meant tofacilitate economic integration and cooperation,including nationals of the various territorieswould be a step in the right direction.

Remember, it’s about goods and services. Forgoods, you should ensure that you are awareof what the proposed negative lists contain. Ifyou have an export interest, prepare yourcompany by doing research in the market.Caribbean Export can help. We can facilitate:

• Market visits• Market research• General trade and economic information

You may also be interested in forming a jointventure or strategic linkages with a firm in yourterritory or the territory of the other party.Thorough marketing preparation would also beuseful in this regard.

If you are a service provider, you may beinterested in exploring the market of the otherparty as an outlet for your services. Youshould begin to learn about the potentialmarket for your services in the other party.Since negotiations on the services sector havenot yet begun this information could also helpyou in proposing a negotiating position to yourgovernment.

Finally, it will be up to you to ensure that theprivate sector monitors the implementation ofthe agreement and brings forward anyobservations for public discussion.

APPENDIX IMain Themes in Rules of Origin,Technical Barriers to Trade andSanitary and Phyto-SanitaryMeasures

The annexes and appendices to the mainagreement contain detailed information on theway in which the agreement will actually work.There are several themes which runthroughout these sections.

Information Sharing

The sharing of information is key to severalareas of the FTA. Each party must be madeaware of existing laws and regulationsaffecting the operation of the agreement and ofany modifications, additions or withdrawals.The agreement makes provision for theestablishment of a number of Enquiry Points.These will be the official contact agencies forinformation requests.

Competent Authorities

The agreement also refers to “CompetentAuthorities” which must be officiallydesignated. These authorities will beresponsible for such tasks as verification andcertification. It is therefore important that theybe officially sanctioned.

Notification & Speedy Process

The agreement sets timeframes for certain keyprocesses such as dispute settlement andnotification of intention to verify the processand materials of production. Proper and timelynotification is key to the administration ofseveral areas of the FTA.


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Confidentiality

Another key area in this FTA is the issue ofconfidentiality. Information on enterprises,products and records may be required byauthorities in the process of determiningqualifying conditions for benefits or preferentialtreatment. This information is not to be usedfor purposes other than those for which it wasintended.

APPENDIX IIRules of OriginThis is one of the most complex sections of theagreement and one which is of directrelevance to potential exporters since it sets upthe procedures for determining which goodswill qualify for preferential treatment. Thisinvolves a mechanism called the HarmonisedCommodity Description and Coding System(HCDCS) by which goods are classified underheadings and sub-headings.

Goods are considered to be “originating” in theterritory of one of the parties if they meet eitherof two criteria:

1) They must be wholly produced in one of the parties; or

2) If they are not wholly produced in the country (i.e. if they contain material imported from countries which are not a part of the FTA), they must satisfy a criterion of “substantial transformation”. This means that they must have undergone a production process which now places them in a different category orheading under the HCDCS. The “new” good must fall under a different sub-heading from the sub-heading of the imported material which was used in its manufacture. Alternatively, this transfor-mation may meet other criteria negotiatedin an attachment to the agreement.

There are five categories of goods which canbe said to be “wholly produced”:

• Mineral, plant or animal products which come from the territories of the parties or their territorial waters or exclusive economic zones

• Products of the sea extracted beyond the territorial waters of the parties and their exclusive economic zones by ships whichare wholly or partially owned by nationals of the parties or which are leased, etc. by

enterprises established in the territories ofthe parties

• Products of factory ships wholly or partially owned as above which are madefrom goods or products of the sea extracted by ships listed above

• Slag, ashes, residues, waste or scrap from manufacturing and processing operation which are carried out in the territories of the parties and which are only for the recovery of raw materials (provided they do not constitute toxic or hazardous substances)

• Goods produced in the territories of the parties which are made solely from originating goods

Materials and equipment such as fuel,catalysts, tools and protective gear which arenot physically incorporated into goods but usedin their production, verification or inspectionare considered as originating. Incorporatedmaterials or goods are considered to beoriginating in the territory in which finalproduction takes place.

The process of production is also important indetermining origin. The process must besubstantial enough to suggest that “production”has taken place. There are a number ofoperating processes which do not qualify.These include:

• Preservation processes such asrefrigeration, freezing and the addition of actual preservatives

• Dust removal, cleaning, peeling, sorting, drying, grading, crushing, diluting (in water) and filtering

• Formation of sets of goods• Packing, placing in containers or

repackaging• Assembly or dividing of packages• Affixing of labels or brands• Mixing of materials if the characteristics of

the product obtained are not essentially distinct from the characteristics of the materials mixed

• Slaughtering of animals

Regional Value Content

The Agreement makes provisions forcalculating the Regional Value Content (RVC)

Criteria!!

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of goods using the Transaction Value (TV)method. If the value of all non-originatingmaterials used in the production of goodswhich do not undergo a change in tariffheading is not more than 7% of the TV, theyare considered originating. In the case of sets,if all component parts are originating, the set isconsidered originating. If there is acombination of originating and non-originatingcomponents, the set will be consideredoriginating if the value of non-originatingcomponents does not exceed 7% of the FOBprice of the set. Assembly of goods will bedefined on a case-by-case basis in theattachment which is still under negotiation.

Accessories and NormalPackaging

Accessories, spare parts and tools sent with apiece of equipment, machine, apparatus orvehicle which are a normal part of theequipment are not considered in determiningthe originating status of the goods if they arenot billed separately. If they do not meet theseconditions their origin will be determinedseparately using the Rules of Origin.

If packing is presented with merchandise andclassified with the goods contained, and if it isused on a normal basis, it will not beconsidered in determining the origin of thegoods. If not, goods and packing may beconsidered separately. No part of packingrequired for transport or storage will beconsidered in determining the origin of goods.

Transport

Goods must be transported on direct consignmentfrom the exporting country to the importingcountry in order to receive preferentialtreatment. Direct consignment means goodstransported without going through thirdcountries. If the goods are transported througha third country they may still qualify if theymeet the following criteria:

• They are transported through the third country for geographical reasons or because of transport requirements

• They are not intended for trade or use in the transit country

• They do not undergo any operation other than loading or unloading or operations for conservation

Provision is made for official documentation oftranshipment through the parties.

Certification of Origin

All goods for export will have a Certificate ofOrigin. If you’re an exporter your certificate willinclude:

• Your declaration or the declaration of the final producer that the origin requirementshave been met

• A certificate from the authorised body of your territory (exporting country) stating that the declaration made above is accurate

• The signature of an official designated by the authorised body of your territory

Here are some other things you should know:

• If the exporter is not the final producer, then the exporter will be the one to present the declaration of origin to the authorised body

• The Certificate of Origin will always be prepared by an exporter in the country of final production

• The Competent Authority in the exporting country should carry out the necessary controls to permit certification and confirmthe data set out in the Certificate

• The Certificate must not be dated before the commercial invoice

• The exporter or final producer who completes and signs the Certificate must keep all records and documents regarding the origin of the goods for a minimum of three years from its date and may required to produce them later

• The Certificate will be valid for 180 days from the date of issue

• The Certificate will satisfy the requirementof the Consular Invoice

The bodies which are authorised by the partiesto carry out certification will verify thedeclarations presented to them by theexporters or final producers and provide theother party with the kind of administrativecooperation which is needed for the control ofdocumentary proof of origin. These bodies willsubmit approved lists of bodies authorised toissue certificates, lists of signatories withcopies of their signatories and official stamps.They will do this within 30 days after theagreement enters into force. Any changes to

Detailsforcertification


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the lists will enter into force 30 days afternotification has been received.

Origin Verification

This allows parties to verify whether importedgoods meet the criteria of “originating goods”.There are only three ways in which one partycan carry out verification procedures on thegoods of another party.

• They must submit a request to the competent authority in the exporting party for information from the exporter or producer in that territory

• They may visit the premises of an exporter or producer in the territory of another party to review records and observe the production process

• They may use other procedures once these have been agreed upon by both parties

The competent authority of the exportingcountry can ask the exporter or producer tomake accounting records and other types ofdocumentation available (if requested by theimporting country) and to allow inspection ofmaterial, production facilities and processes.

Sufficient notice must be given. Within 5 daysof receiving official notice, the competentauthority in the exporting country must notifythe exporter or producer of the verificationrequest. The authority must also obtain thewritten consent of the exporter or producerwhose premises will be visited. If the exporteror producer does not provide written consentor provide the information requested within 30days after notification has been sent, thecountry which has requested the verificationcan deny preferential tariff treatment to thegoods in question.

The competent authority of the importingcountry (the one which wants to make theverification) can grant an extension of notmore than 10 days to the correspondingauthority in the exporting country to deliver therequested documents. In addition, withinseven days of receiving notification, thecompetent authority of the exporting countrycan postpone the verification visit (for no morethan 15 days from the time of receiving notifi-cation - or a longer period if both partiesagree).

Notification of verification visits must includecertain kinds of information:

• Who is issuing the notification (official entity)• The name of the exporter or producer

whose premises are to be visited• The date and place of the proposed visit• The object and scope of the verification

(and specific reference must be made to the goods which are to be examined)

• The names and designations of the officials who will carry out the visit

• The legal basis for the visit

If there is any change in information afternotification has been given, this must becommunicated in writing to the competentauthority of the exporting party which will thennotify the exporter or producer. This must becommunicated no later than 15 days after thefirst notification.

An exporter or producer whose goods aregoing to be verified will be entitled todesignate two observers who will be presentduring the visit. If the exporter or producerdoes not designate any observers this will notpostpone the visit.

Within 21 days after the procedure has beencompleted, the party which conducted theverification must submit written determinationof whether or not the goods qualify asoriginating goods. This determination, whichgoes to the exporter or producer, must includethe findings and the legal basis for thedetermination.

Customs authorities are not permitted tointerrupt an import procedure once productsare covered by a Certificate of Origin.However, the competent authorities may takeaction which they feel is necessary to protecttheir fiscal interests. The authorities may alsotake appropriate action regarding any financialsecurity based on the outcome of the verifi-cation process. Each country will set upprocedures for reviewing the decisions oforigin verification procedures.

In its legislation, each country shall makeprovisions for breaches of these rules. Theseprovisions will be similar to those which applywhen its own laws and regulations arebreached in similar circumstances.

Extemelyimportant!!!

Strictprocedures

Note this


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APPENDIX IIITechnical Barriersto Trade

This section deals with standards andmeasures – the non-tariff barriers to trade.The basic guidelines for terms and definitionsare found in the ISO/IEC Guide 2 –Standardization and Related Activities –General Vocabulary (Seventh Edition, 1996).Other international guides and agreements arealso used as benchmarks.

Three main considerations guide thisagreement:

• Health• Environment • Protection of the consumer

In addition, countries are careful to preventthese measures from becoming unnecessarybarriers to trade. They are also committed tostandardisation and encouraging technicalcooperation and assistance amongthemselves and with third countries.

Risk Assessment

Countries can carry out what is known as riskassessment to determine the protection levelswhich are necessary. These determinationswill guide the levels of restriction on trade. Allassessments must make full use of availablescientific evidence and technology and the enduse of the products to be imported must alsobe considered. Once the protection level hasbeen established and the risk assessment hasbeen conducted, countries should avoidmaking any arbitrary distinctions betweensimilar goods and services.

Conformity Assessment,Compatibility and Equivalence

Parties will accept each other’s technicalregulations as being equivalent to their ownonce it has been demonstrated that they fulfilthe same objectives. If one party does notaccept a particular regulation, they mustcommunicate their reasons in writing. Theparties will review, revise and update theirstandards and regulations as necessary tofacilitate harmonisation.

Each party will also recognise the conformityassessment bodies of the other party. These

bodies are responsible for determiningwhether a product satisfies the necessaryrequirements of standards and technicalregulation. Parties can consult to determinethe technical competence of these bodies andtheir compliance with international standards.

Notification

Each party will notify the other of any changein standards-related measures. Each party isrequired to notify the other in writing (annuallyor as agreed) of its standardisation workprogramme.

If a party refuses a shipment or service due tonon-compliance with a measure it must notifythe owner of the shipment or the serviceprovider promptly, in writing, giving thetechnical justification. A copy of the justifi-cation shall go immediately to the EnquiryPoints of the other party. Enquiry Points willserve as a clearing house, providing relevantdocuments on standards-related andmetrological measures. These documents willbe available to the other party and interestedindividuals at the same cost - if any – at whichthey will (except for delivery charges) at whichthey will be available to nationals.

Hazardous Waste and theEnvironment

The agreement contains a clause which dealswith the handling of hazardous substancesand waste. Basically, each party will regulatethe introduction, acceptance, deposit, transportand transit through its territory of any suchsubstances whether they originate in their ownterritory or elsewhere. United NationsConventions, the Basle Convention and otherinternational agreements will apply in additionto national legislation. Protection and preser-vation of the environment will follow guidelinesset by the United Nations EnvironmentalProgramme (UNEP). No specific agreementswith regard to hazardous waste or theenvironment have been established by theFTA.

Yes!

Enquirypoints

Environment


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APPENDIX IV

Sanitary and Phyto-Sanitary Measures

The basis of this agreement is the protectionof human, animal or plant life or health. It isimportant to note that parties have the right toestablish measures for this protection whichare more stringent than relevant regional andinternational standards, guidelines orrecommendations. Scientific justification andappropriate risk assessment are veryimportant in determining and adopting thesemeasures.

The spread of pest or disease is a majorconcern. The Codex Alimentarius, theInternational Plant Protection Convention(IPPC), the Food and Agricultural Organization(FAO) and the International Office ofEpizootics (IOE) are among the documentsand agencies which will offer guidelines.

Sanitary and phyto-sanitary measures aremeasures set up to do the following:

• Protect animal or plant life or health within the territory of a party from risks which arise from the entry, establishment or spread of pest, diseases, disease-carrying organisms or disease-causing organisms

• Protect human and animal life or health from risks which might arise from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs

• Protect human life or health from risks arising from diseases carried by animals, plants or their products or from the entry, establishment or spread of pests

• Prevent or limit any other damage caused by the entry, establishment or spread of pests

These measures include laws, regulations andprocedures such as testing, quarantines,inspection, certification and approval. Theparties have agreed, however, to ensure thatthese measures do not constitute unnecessarybarriers to trade.

Inspection

Inspection may be carried out by designatedagencies of the parties only and theseagencies shall determine the inspectionperiods, the time limits for informing the otherparty and for signing protocols and specificbilateral agreements. If a request is made foran inspection, the competent notifyingauthority must conduct the inspection andreport findings and action taken to the otherparty within 30 days. If the inspection iscarried out at a specific export point in theterritory of the party, then the Certificate ofInspection will be valid for one year (with someexceptions that may be agreed upon). Thecost of inspection will be borne by theexporting country.

Accreditation

Parties have agreed to standardise theiraccreditation procedures. Private sectorinstitutions and professionals shall beappropriately certified. Governmentinstitutions will be recognised as accreditedand should select qualified and/or experiencedpersonnel.

Useful References

Agreement Establishing the Free Trade AreaBetween the Caribbean Community and theDominican Republic.

Caribbean Export Development Agency(2000). Negotiating Free Trade inCARIFORUM.


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TRADEWINS is a publication of the Caribbean Export Development Agency (Caribbean Export). It is animportant part of the agency's advocacy programme - making trade information accessible to those whoneed it most.

Caribbean Export has identified a need to broaden and consolidate private sector involvement in thebusiness of trade - identifying markets, improving market access, increasing competitiveness and playing akey role in the development of trade policy.

TRADEWINS is a series of edited reports, treaties and agreements reflecting trends in regional business andpointing the way to future development. The series will be published occasionally - as new documents cometo hand. Through TRADEWINS , we aim to inform members of the private sector, and others, of the importantrole of research, policy and negotiation in the development of regional and international trade. We hope thatthey will be encouraged to better organise themselves, to increase the present levels of research and tolobby their governments for changes which can improve the way they do business.

Caribbean Export welcomes your feedback on this series. Please feel free to contact us at the addressesbelow:

(Headquarters) (Sub-Regional Office)

Caribbean Export Development Agency Caribbean Export Development AgencyMutual Building Calle 6, No. 10Hastings Main Road Ens. ParaísoChrist Church Santo DomingoBARBADOS DOMINICAN REPUBLIC

Mailing Address: Tel: (809) 547-2005Fax: (809) 547-7532

P.O. Box 34B E-mail: [email protected]

Tel: (246) 436-0578Fax: (246) 436-9999E-mail: [email protected]

Website: www.carib-export.com

(Trade & Investment Facilitation Office)

Caribbean Export Development AgencyMiramar Trade CentreAve. 3rd, Esq. 80, Edificio Havana (1-B)4th Piso, Apt. 410, MiramarCiudad HabanaCUBA

Tel: (537) 248-808/810Fax: (537) 248-809E-mail: [email protected]

The Caribbean Export Development Agency serves the Caribbean Forum of ACP States (CARIFORUM).CARIFORUM comprises CARICOM states (Caribbean Community and Common Market), Haiti and theDominican Republic. The CARIFORUM Secretariat is located in Georgetown, Guyana.

(Member States of CARICOM are: Antigua & Barbuda, the Bahamas, Barbados, Belize, the Commonwealthof Dominica, Grenada, Guyana, Jamaica, Montserrat, St. Kitts & Nevis, Saint Lucia, St. Vincent & theGrenadines, Suriname and Trinidad & Tobago.) (Haiti has been provisionally accepted into the Communityand will attain full status once its accession has been completed. The Bahamas is a member of theCaribbean Community but not of the Common Market.)

Text: Gabrielle HezekiahDesign and Layout: Artistech Inc.

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