IN DEPTH ANALYSIS OF TRADE AND INVESTMENT BARRIERS OF CERTAIN THIRD COUNTRY MARKETS IN THE WOODWORKING AND RELATED SECTORS Final Report Frankl

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					     IN DEPTH ANALYSIS OF TRADE AND INVESTMENT
   BARRIERS OF CERTAIN THIRD COUNTRY MARKETS IN
       THE WOODWORKING AND RELATED SECTORS
                     Final Report




          Franklin Dehousse / Katelyne Ghémar/ Tsonka Iotsova




     CENTRE D‟ETUDES ECONOMIQUES ET INSTITUTIONNELLES - C.E.E.I.




                                                                      Brussels – 15 August 2002




Market Access study in the Woodworking sector –Final report, 15 August 2002_                 1
     IN DEPTH ANALYSIS OF TRADE AND INVESTMENT
   BARRIERS OF CERTAIN THIRD COUNTRY MARKETS IN
       THE WOODWORKING AND RELATED SECTORS
                     Final Report




          Franklin Dehousse / Katelyne Ghémar/ Tsonka Iotsova




  This Report was prepared with financial assistance from the Commission of the
European Communities. The views expressed herein are those of the Consultant, and
                                do not represent
                      Any official view of the Commission




Market Access study in the Woodworking sector –Final report, 15 August 2002_    2
                                   TABLE OF CONTENTS


EXECUTIVE SUMMARY                                                              9

§1. ORGANISATION OF RESEARCH                                                   11

1.1.    THE OBJECTIVES OF THE STUDY                                            11

1.2.    METHODOLOGY                                                            11
  1.2.1.      The questionnaire to the EU industry                             12
  1.2.2.      Meetings with the woodworking industries                         12
  1.2.3.      Meetings with Commission services                                13
  1.2.4.      Field missions                                                   14
  1.2.5.      Legal analysis                                                   14

§2. TRADE BARRIERS IDENTIFIED BY OPERATORS OF THE
WOODWORKING SECTOR                                                             15

2.1.       MEXICO                                                              16
  2.1.1.      EU Industry assessment                                           16
  2.1.2.      The mission to Mexico                                            16
  2.1.3.      Tariffs and import taxes                                         17
  2.1.4.      Customs formalities                                              17
  2.1.5.      Technical measures                                               19
  2.1.6.      Legal analysis                                                   25

2.2.       TURKEY                                                              28
  2.2.1.      EU Industry assessment                                           28
  2.2.2.      Mission to Turkey                                                29
  2.2.3.      The Customs Union                                                29
  2.2.4.      The certification procedures                                     30
  2.2.5.      Other problems                                                   31
  2.2.6.      Legal analysis                                                   32

2.3.    RUSSIA                                                                 34
  2.3.1.      EU Industry assessment                                           34
  2.3.2.      The mission to Russia                                            34
  2.3.3.      The Import duties                                                35
  2.3.4.      Customs formalities                                              36
  2.3.5.      Certification procedures                                         39
  2.3.6.      Other problems identified                                        47
  2.3.7.      Legal analysis                                                   48

2.4.    THE US                                                                 50
  2.4.1.      EU Industry assessment                                           50


Market Access study in the Woodworking sector –Final report, 15 August 2002_    3
  2.4.2.      Missions to the US                                                50
  2.4.3.      The situation of the US woodworking industry                      51
  2.4.4.      Tariffs and import taxes                                          51
  2.4.5.      Customs formalities                                               52
  2.4.6.      Certification / US standards                                      53
  2.4.7.      Labelling rules                                                   55
  2.4.8.      Legal analysis                                                    56

2.5. JAPAN                                                                      57
  2.5.1.      EU Industry assessment                                            57
  2.5.2.      The mission to Japan                                              58
  2.5.3.      The Japanese market                                               59
  2.5.4.      Import duties                                                     61
  2.5.5.      Clearance process                                                 63
  2.5.6.      Technical measures                                                63
  2.5.7.      Legal analysis                                                    68

2.6.    SOUTH AFRICA                                                            70
  2.6.1.      EU Industry assessment                                            70
  2.6.2.      The South African market                                          70
  2.6.3.      Applied tariffs                                                   72
  2.6.4.      The import procedure                                              74
  2.6.5.      Certification and conformity assessment                           75
  2.6.6.      Investment and investment incentives                              75
  2.6.7.      Legal analysis                                                    75

2.7.    EGYPT                                                                   77
  2.7.1.      EU Industry assessment                                            77
  2.7.2.      The market                                                        77
  2.7.3.      The applied tariffs                                               79
  2.7.4.      Clearance procedure                                               80
  2.7.5.      Investment and investment incentives                              81
  2.7.6.      Legal analysis                                                    82

2.8.    AUSTRALIA                                                               84
  2.8.1.      EU Industry assessment                                            84
  2.8.2.      The mission to Australia                                          84
  2.8.3.      The Australian market                                             86
  2.8.4.      Applied tariffs and import duties                                 86
  2.8.5.      Customs formalities                                               87
  2.8.6.      Phyto-sanitary requirements                                       90
  2.8.7.      Legal analysis                                                    92

2.9.    POLAND                                                                  93
  2.9.1.      EU Industry’s assessment                                          93
  2.9.2.      The mission to Poland                                             94
  2.9.3.      Applied tariffs                                                   94
  2.9.4.      Customs’ formalities                                              95
  2.9.5.      Technical approval and conformity assessment                      96
  2.9.6.      Legal analysis                                                   100


Market Access study in the Woodworking sector –Final report, 15 August 2002_    4
2.10.       ROMANIA                                                            102
  2.10.1.     EU Industry assessment                                           102
  2.10.2.     The market                                                       102
  2.10.3.     Applied tariffs                                                  104
  2.10.4.     Customs’ formalities                                             104
  2.10.5.     Investment and investment incentives in Romania                  106
  2.10.6.     Legal analysis                                                   107

2.11.       CZECH REPUBLIC                                                     109
  2.11.1.      The EU Industry assessment                                      109
  2.11.2.      The mission to the Czech Republic                               109
  2.11.3.     The market                                                       109
  2.11.4.      The applied tariffs                                             112
  2.11.5.     The import procedure                                             113
  2.11.6.     Certification and technical requirements                         114
  2.11.7.     Investment                                                       115
  2.11.8.     Legal analysis                                                   116

2.12.       ARGENTINA                                                          118
  2.12.1.     The EU Industry assessment                                       118
  2.12.2.     The mission to Argentina                                         118
  2.12.3.     The development of the market                                    118
  2.12.4.     The applied tariffs                                              121
  2.12.5.     The Customs’ formalities                                         122
  2.12.6.     The technical requirements                                       124
  2.12.7.     Legal analysis                                                   124

2.13.       BRAZIL                                                             126
  2.13.1.     The EU Industry assessment                                       126
  2.13.2.     The mission to Brazil                                            126
  2.13.3.     The market                                                       127
  2.13.4.     The applied tariffs                                              128
  2.13.5.     The customs formalities                                          130
  2.13.6.     The certification requirements                                   132
  2.13.7.     The investment in the woodworking sector                         133
  2.13.8.     Legal analysis                                                   133

2.14.       URUGUAY                                                            134
  2.14.1.     The EU Industry assessment                                       134
  2.14.2.     The Mission to Uruguay                                           134
  2.14.3.     The market                                                       134
  2.14.4.     Applied Tariffs                                                  135
  2.14.5.     Customs’ procedures                                              136
  2.14.6.     Technical barriers                                               137
  2.14.7.     Legal analysis                                                   137

2.15.       CHILE                                                              138
  2.15.1.     The EU Industry assessment                                       138
  2.15.2.     The Mission to Chile                                             138
  2.15.3.     The Market                                                       138


Market Access study in the Woodworking sector –Final report, 15 August 2002_    5
  2.15.4.     Applied Tariffs                                                  139
  2.15.5.     Customs formalities                                              140
  2.15.6.     Investment and investment incentives                             140
  2.15.7.     Legal analysis                                                   141

2.16.       INDIA                                                              142
  2.16.1.     The EU Industry assessment                                       142
  2.16.2.     The mission to India                                             142
  2.16.3.     The Import permit                                                143
  2.16.4.     The Import duties                                                143
  2.16.5.     Phytosanitary inspections                                        145
  2.16.6.     Labelling requirements                                           146
  2.16.7.     Legal analysis                                                   147

2.17.       KOREA                                                              148
  2.17.1.     The EU Industry assessment                                       148
  2.17.2.     The mission to Korea                                             148
  2.17.3.     The Korean market                                                149
  2.17.4.     Applied Tariffs                                                  150
  2.17.5.     Customs procedures                                               151
  2.17.6.     Technical measures                                               152
  2.17.7.     Legal analysis                                                   153

2.18.       CHINA                                                              154
  2.18.1.     The EU Industry assessment                                       154
  2.18.3.     The Chinese market                                               155
  2.18.4.     Import duties                                                    158
  2.18.5.     Technical standards and certification                            158
  2.18.6.     Phytosanitary requirements                                       159
  2.18.7.     Legal analysis                                                   161

2.19.       PARAGUAY                                                           162
  2.19.1. The EU Industry assessment                                           162
  2.19.2. The market                                                           162
  2.19.3. Applied Tariffs                                                      162
  2.19.4. Clearance procedure                                                  163
  2.19.5. Technical barriers                                                   164
  2.19.6. Legal analysis                                                       164

2.20.     THE SLOVAK REPUBLIC                                                  165
   2.20.1. The EU Industry assessment                                          165
   2.20.2. The market                                                          165
   2.20.3. The applied tariffs                                                 167
   2.20.4. The import procedure                                                167
   2.20.5. Certification and technical requirements                            168
   2.20.6. Investment                                                          171
   2.20.7. Legal analysis                                                      172

2.21.       INDONESIA                                                          174
  2.21.1.     EU Industry assessment                                           174


Market Access study in the Woodworking sector –Final report, 15 August 2002_    6
  2.21.2.     The market                                                       174
  2.21.3.     The applied tariffs                                              177
  2.21.4.     Clearance procedure                                              177
  2.21.5.     Technical measures                                               179
  2.21.6.     Investment and investment incentives                             179
  2.21.7.     Legal analysis                                                   179

2.22.       MALAYSIA                                                           180
  2.22.1. The EU Industry assessment                                           180
  2.22.2. The market                                                           180
  2.22.3.Applied Tariffs                                                       181
  2.22.4. Customs clearance                                                    181
  2.22.5. Technical barriers                                                   182
  2.22.6. Investment possibilities                                             182
  2.22.7. Legal analysis                                                       183

2.23.       OTHERS                                                             184

§3. LEGAL ANALYSIS                                                             186

3.1.    TARIFFS                                                                186

3.2. ADDITIONAL TAXES                                                          187

3.3. INTERNAL TAXES                                                            188
  3.3.1.      The distinction between import duty and internal tax             188
  3.3.2.      The principles relating to internal taxes                        188
  3.3.3.      The tax subsidies                                                189

3.4. THE CUSTOMS FORMALITIES                                                   190
  3.4.1.      The certificate of origin                                        190
  3.4.2.      The customs valuation                                            192
  3.4.3.      The import licences                                              193

3.5. THE PRINCIPLE OF NON-DISCRIMINATION                                       193
  3.5.1.      The national treatment clause                                    193
  3.5.2.      MFN (Most Favorite Nation) clause                                194

3.6. THE EXCEPTION FORESEEN IN GATT ARTICLE XX                                 194

3.7. SANITARY AND PHYTOSANITARY REQUIREMENTS                                   194

3.8. THE TECHNICAL REGULATIONS                                                 196
  3.8.1.      The general obligations included in the agreement                196
  3.8.2.      The scope of the agreement                                       197

§4.COSTS – BENEFITS ANALYSIS                                                   199




Market Access study in the Woodworking sector –Final report, 15 August 2002_     7
4.1. MAIN TRADE BARRIERS EXPERIENCED BY THE EU
COMPANIES                                                                      199
  4.1.1.      Tariff barriers (customs duties and other taxes)                 199
  4.1.2.      Customs formalities                                              200
  4.1.3.      Technical rules                                                  200
  4.1.4.      Phytosanitary rules                                              201
  4.1.5.      Investment barriers                                              201

§4.2.      THE BENEFITS OF FURTHER TRADE LIBERALISATION 202
  4.2.1.      Improved application of the WTO rules                            202
  4.2.2.      Improvement of the bilateral agreements                          203




Market Access study in the Woodworking sector –Final report, 15 August 2002_    8
                                  EXECUTIVE SUMMARY


1. Some 22 markets were investigated to map out trade and investment obstacles
   met by Community operators. These barriers hamper community exports in
   woodworking products. The study aims to fulfil four objectives: (1) identify trade
   and investment obstacles implemented by third countries; (2) evaluate the impact
   of such barriers on the EU operators, (3) assess the legality of these restrictions
   and (4) identify the benefits of removing identified barriers.

2. Work methodology (§1) was elaborated according to these objectives. In the first
   stage of the research, the consultant collected information from the EU
   woodworking sector (companies, European associations and their members) and
   Commission services in order to identify the most damaging restrictions and the
   most worrying markets. Since May 2001, the consultant has conducted missions
   in most of the third countries covered by the study in order to meet importers of
   European products and to interview the competent authorities and the Member
   States trade representatives. The missions have enabled the consultant to
   prepare detailed trade and investment obstacles fiches and to conduct a legal
   analysis of the most damaging restrictions. For the countries which were not
   identified as priority countries by the EU industry a desk research has been
   conducted by interviewing the EU exporters and the EU trade representatives.

The sector has fully supported the research

The European Woodworking association (CEI Bois) has fully supported the research
while the European Association of furniture producers (UEA) has shown a lesser
interest in the survey, even if they have accepted to distribute the questionnaire to
their members. CEI bois members have co-operated in answering questionnaires
and participating in specific presentations and interviews conducted by the
consultant. This shows that the sector is highly interested in the identification and
removal of identified restrictions.

It has been requested to include China in the research

EU companies and EU industry associations have insisted in having China taken on
board in the research. They also indicated that some markets are of less interest:
Pakistan and Thailand. An addendum of the contract has been concluded between
the consultant and the European Commission, which introduce the modifications in
the country coverage, enabling the consultant to conduct the mission in China
instead of the trips previously foreseen for Pakistan and Thailand.




Market Access study in the Woodworking sector –Final report, 15 August 2002_        9
The categories of barriers involved

The main measures identified by EU operators for the countries under review are as
follows:

 Most of the countries under review (Mexico, Russia, Mercosur countries, India,
  China, Egypt …), currently implement high import taxes (tariffs and additional
  duties) which are identified as causing major difficulties to our exporters of
  processed wood and furniture. These are sometimes discriminatory and increase
  significantly the total amount of import duties.

 Some of the trade barriers mentioned concern customs rules (import
  documentation, classification and valuation issues) and the controls conducted by
  Customs authorities during the customs clearance (e.g. physical checks of the
  imported goods, controls on marking or labelling requirements …).

 Certification issues – two types of certification issues are involved. The technical
  certification is of major concern for the companies exporting to Russia, Poland,
  India and Slovakia. The grading rules are a main concern for the European
  exporters to USA, Japan and Indonesia. The USA and Japan have adopted their
  own grading rules and do not recognise the European grading. Therefore, the EU
  exporters must comply with burdensome testing and certification procedures.

 Phytosanitary rules applied by various countries under review (Japan, Australia,
  Mexico, Egypt, Poland, Indonesia, Egypt) are also identified as non-tariff barriers
  aiming at protecting the third country domestic industry. The sanitary and
  phytosanitary rules identified could also be of different types. A large number of
  countries require phytosanitary certificates. Some countries require the certificate
  to be issued in the country of origin. Others require a certificate issued from their
  national authority. The certificates could be accompanied with a phytosanitary
  inspection during customs clearance. Another phytosanitary requirement
  constitutes the compulsory fumigation treatment that is required for the importation
  of wood and wood packaging.

 Investment rules applied by third countries have not been reported as creating
  difficulties for the European companies. European companies are participating in
  several co-operation projects in the countries under review. The companies, which
  have invested in the third countries woodworking and furniture sector have not
  reported problems related to their investments.

In each case, the consultant has checked whether the practices denounced are (or
not) based on existing regulations. Implementation of the measures has been also
carefully studied in interviews with importers, their customs agents and the Customs
authorities during the missions.




Market Access study in the Woodworking sector –Final report, 15 August 2002_        10
                         §1. ORGANISATION OF RESEARCH


1.1. THE OBJECTIVES OF THE STUDY


CEEI research methodology has been adapted to the objectives of the study. The
first objective is to identify trade and investment obstacles implemented by third
countries. The second objective is to evaluate the impact of such barriers on EU
exports of woodworking products. The third objective is to assess the legality of these
restrictions under international or bilateral agreements and to set up legal files. These
will help the Commission and the Industry in removing identified trade barriers. An
additional objective of the study is to identify the benefits of removing the identified
barriers.


1.2. METHODOLOGY


Originally CEEI had divided its research into three stages:

                (1) investigation conducted with the EU industry on the problems
                    encountered in the markets under review;
                (2) Field missions carried out in most of the countries under review;
                (3) Legal analysis on the barriers damaging EU exports (measures and
                    their implementation).

It was foreseen to first complete the research with the EU industry before organising
the field missions, and then conduct the missions and start in parallel the legal
analysis. However, the problems encountered by the industry to collect information
on trade barriers and the necessity to give a prompt answer on their access problems
in the markets under review has led the consultant to adapt the original time-
schedule and methodology. It has therefore been decided start the missions in May
2001, while continuing the survey with the EU industry.

This report gives an overview of the main problems identified for most of the
countries under review. The consultant has concentrated his work on countries
identified as priority by the EU industry and on the problems pointed out by the
operators in interviews and questionnaires. This explains why the analysis on some
countries and requirements is more detailed than the information and analysis for
other countries. The consultant has tried to explain the procedures to be followed in
order to obtain specific information on some issues and the competent national
authorities to be contacted.




Market Access study in the Woodworking sector –Final report, 15 August 2002_          11
1.2.1. The questionnaire to the EU industry


Our first task has been the identification of trade barriers to the EU exports and
investment in countries under review and the evaluation of these barriers impact on
operators‟ individual businesses. For this purpose, a standard questionnaire1 was
drafted in close co-operation with the EU Commission.

 After some preparation meetings with the industry (CEI- Bois), a draft
  questionnaire was sent in February 2001 to all EU Representative Associations of
  the woodworking industry for comments.

 Following the comments made by the Industry and the Commission services, the
  draft questionnaire was finalised and translated into French, German and Spanish.

 The questionnaire was then transmitted to both concerned EU associations. These
  have forwarded the questionnaire to their members (National associations) and
  their most interested companies members.


1.2.2. Meetings with the woodworking industries


It was decided that meetings would be organised with the most motivated and
representative national and sectorial associations. These associations know their
export oriented members (those who answered questionnaires). They can also
gather operators from different sub-sectors of the woodworking sector.

The CEI Bois association asked the consultant to make various presentations on the
study during meetings with different sectorial associations. These meetings enabled
the consultant to inform the national associations and the companies about the
research and to convince them to identify the problems (through the questionnaire
exercise or individual meetings). These meetings gave CEEI some more precise
information on practices and measures identified by the industry as potentially
hampering their exports.

The meetings were held in Brussels, Vienna and Paris:

Date                                Association                Purpose of meetings
February 2001                       CEI Bois and members       Presentation of the study
                                                               Drafting       of         the
                                                               questionnaire
March 2001                          CEI Bois                   Finalisation and distribution
                                                               of the questionnaire by CEI
                                                               Bois
22 March 2001                       CEI Bois, Plywood Industry Presentation      for     the

1
    See Annex 1 of the Report.


Market Access study in the Woodworking sector –Final report, 15 August 2002_             12
                                                                        Plywood industry
23 March 2001                       CEI Bois,         International     Meeting with the Working
                                    Affairs                             Group International Affairs
30 March 2001                       CEI Bois                            Meeting        with        EU
                                                                        companies
21 May 2001                         EOS             (European           Presentation of the study
                                    organisation of Sawmills)           Discussion      on    several
                                    General Assembly                    markets
25 September 2001                   CEI Bois, International             Current results of the
                                    Affairs                             research, time-schedule of
                                                                        cooperation for the future
                                                                        missions etc …
October 2001                        Meeting with the French             Problems experienced by
                                    Wood Association                    the French exporters on
                                                                        the third countries market
January 2002                        Meeting with the Swedish            Problems experienced by
                                    Wood Association                    the Swedish companies on
                                                                        the US, Japan and Russian
                                                                        markets. Priorities of the
                                                                        Swedish       Woodworking
                                                                        industry.
January – May 2002                  Follow up of contacts with          Information collected on
                                    CEI Bois                            the     current     problems
                                                                        encountered       by     their
                                                                        members        in     various
                                                                        markets (Japan, Australia,
                                                                        Poland) .

The meetings with the European and national associations have been conducted on
a regular basis. The European and national associations as well as the some
individual companies have reported the problems experienced in third countries
during all the duration of the research and the consultant has tried to take into
consideration and analyse all reported problems.


1.2.3. Meetings with Commission services


The consultant arranged several meetings with various Commission officials in the
different services concerned by the study:

        -       meetings with the DG TRADE unit (Mr Ilkka Saarinen, Mr Christoph
                Huter)
        -       meetings with the participation of officials of DG ENTERPRISE (ex: Mr
                Mike Schmall (Turkey) and Mr Jean Pierre Bou (Russia)




Market Access study in the Woodworking sector –Final report, 15 August 2002_                       13
1.2.4. Field missions


Field missions have been conducted in all the countries identified as priority countries
for the European industry. The consultant have conducted missions in Turkey, US,
Mexico, India, Russia, China, Korea, Argentina, Brazil, Chile, Uruguay, Poland,
Czech Republic, Australia and Japan. In some countries, where important problems
have been experienced or which represent important markets for the European
companies, second missions have been conducted. It has been decided to conduct
these second missions in US, China and India. The additional missions have enabled
the consultant to collect more precise information on problems experienced by the
European companies.

It has been decided after consultation with the EU industry and with the express
authorisation of the European Commission to conduct a second mission in China and
India instead of the foreseen missions previously foreseen to take place in Indonesia
and Malaysia.

During the field missions, the consultant has met and interviewed the importers of
European woodworking products and furniture, the EU trade representatives and the
third countries‟ competent authorities.

The meetings with the third countries‟ authorities have been kindly arranged by the
EC Delegations in the concerned countries. The missions have been fruitful and
enabled the consultant to get a more precise picture on the access of the European
companies to third country markets.


1.2.5. Legal analysis


In parallel to field researches, a study on legal bilateral and multilateral agreements
has been done (WTO agreements, regional trade agreements and bilateral trade
agreements of the European Community). This legal analysis is illustrated by
regulations and texts implementing identified barriers. The consultant has taken into
consideration the most damaging barriers for the European industry, representing a
real barrier for the market access to third countries. The consultant has supplied also
a general legal analysis indicating which WTO or bilateral agreement provisions are
applicable on the most frequently encountered restrictions.




Market Access study in the Woodworking sector –Final report, 15 August 2002_         14
      §2. TRADE BARRIERS IDENTIFIED BY OPERATORS OF THE
                    WOODWORKING SECTOR


This part of the study gives an overview on barriers identified by EU operators in
questionnaires, meetings and personal interviews conducted with the EU industry.
For the countries where field missions have been conducted, this information has
been further developed following the meetings with third country importers and EU
Member State Trade Representatives during the missions conducted in these
markets.

Most questionnaires received by the consultant indicate the presence of the same
type of problem: tariffs and import taxes, customs formalities and certification issues.
The presentation which follows has therefore been made according to this typology of
problems.

EU companies mentioned their interest for the Chinese market in the beginning of the
research. This has led the consultant, in agreement with the Commission services, to
extend the scope of the survey with the EU industry on the Chinese market.




Market Access study in the Woodworking sector –Final report, 15 August 2002_         15
2.1. MEXICO



2.1.1. EU Industry assessment


Mexico is considered as an important market for some EU companies (Finnish,
Spanish, Italian companies, which are the main exporters to this country). However,
the country is listed in some questionnaires and in interviews as a problematic market
where EU exporters have recently encountered problems (DE, FIN). This explains
why these operators have reported a larger number of trade barriers than in other
markets. These are mainly:

-       Tariffs and Import taxes
-       Burdensome customs formalities
-       Technical measures



2.1.2. The mission to Mexico


The consultant carried out a mission in Mexico (23 June-2 July 2001). The mission
had the following objectives (1) to collect the rules applied to the importation of
woodworking products (wood and furniture); (2) to interview the authorities on their
implementation (3) to interview the Member State trade representatives on the
potential difficulties encountered by their companies and (4) to interview some
importers of EU woodworking products in Mexico.

The access for woodworking products can be described as follows:

1.      The existence of various regulatory measures applied for wood and related
        products: these measures were enforced by various ministries. Ministry of
        Environment (NOM EM 002 and EM004 RECNAT), Ministry of Energy (NOM
        018 ENER), Ministry of Economy (NOM SCFI 050 and 118), Ministry of
        commerce and transport (NOM 003 SCT).

2.      The low level of complaints by EU operators on these specific measures:
        given the complexity of import measures, the number of concrete complaints
        received until now from the wood exporters seems quite modest. In
        questionnaires and interviews, the industry has only complained about import
        duties, certification procedures and phytosanitary certificates.

3.      The existence of complaints on horizontal import related issues. These
        measures hinder de facto the importation and seem to constitute the crux of
        importers daily problems (import documents, labelling, classification, delays),
        while the specific measures further hamper importation procedures ;



Market Access study in the Woodworking sector –Final report, 15 August 2002_        16
4.        The sensitiveness of some wood related articles resulting in protectionist
          focused rules (e.g. matches) (e.g. NOM 118 SECOFI).


2.1.3. Tariffs and import taxes


Despite the implementation in July 2000 of the Free Trade Agreement between
Mexico and the EU, the level of tariffs remains particularly high for certain items.
They constitute a significant obstacle for numerous EU operators (FIN, IT, ES). This
explains that various wood processing companies have indicated in filled-in
questionnaires that import duties in Mexico represent a serious obstacle to their
exports.

For products of chapter 44 tariffs are 0% or will be progressively reduced:

-         List B: (0% in 2002): HS 4409.10 (wooden coniferous panels, block board),
          HS 4409.20 (wooden panels others than from coniferous)
-         List C: (0% in 2005) most products of chapter HS 44.

The tariff rates for HS chapter 44 are between 0% (for products of headings 4401,
4402, 4403) and 12 % for some wooden boxes, builders jointure and carpentry. The
rates for the most exported products are around 10%.

The rates for wooden furniture are between 10 and 12% (heading 9403). Almost all
furniture products are in the C list.

In addition to the tariffs, the importers have to pay the DTA (“Derecho de Tramite
Aduanero”). The DTA is to cover the inspection fees. It is fixed at 159 pesos.


2.1.4. Customs formalities


According to the Customs Agents and the private operators, the main problems are ;

*         Specific Importer Registration

In addition to the general importer registration (“padrón de importadores”), the
importer of woodworking products should apply for a specific registration (“padrón
sectorial”)2. According to EU Member States, the Ministry of Economy is very slow to
deliver the registration and various importers have recently suffered from excessive
delays (months).

*         Documents




2
    Anexo X de la Resolucion Miscelanea de Comercio exterior. See Ley Aduanera 2001.


Market Access study in the Woodworking sector –Final report, 15 August 2002_           17
In questionnaires, EU operators have complained about the complexity of the
required import documents, the excessive customs clearance delays, and some
problems of valuation, as well as some classification problems.

For main woodworking products, a prior import authorisation is required (“ permiso
previo ”). Under these new rules, the importer should request the authorisation to
SECOFI before the importation is made3. However, according to the Customs
Agents, the authorisation is usually given quickly.

For most products of Chapter 44 and some of chapter 94, a Phytosanitary certificate
is required. Customs will then check if the certificate is among the import documents.
SEMARNAP will conduct a detailed physical examination of the goods at the points
of entry before the customs clearance can start.

Some products are subject to detailed product composition requirements. These
requirements are set up by the Anexo XVIII4. These products are matches and wood
pencils.

The other documents are the same as for most imported goods :

-       Invoice
-       Detailed description of the product (Anexo XVIII)
-       Bill of loading
-       EUR 1

Various importers explained that they have encountered problems with the EUR 1
certificate during months since the entry into force of the Free Trade Agreement.
Therefore, these importers were required to let a financial guarantee to the Customs
(covering the difference between the preferential tariff and the erga omnes tariff).
Some importers are waiting for the recovery of their guarantees since more than 6
months (e.g. matches and furniture importers).

*       Classification issues:

No concrete problem has been reported until now. However, in questionnaires some
exporters (upholstered furniture) alleged that Customs systematically question the
classification of their products, which results in delays and additional costs.

*       Valuation issues:

No specific problem reported until now (but general complaints in questionnaires).
Some woodworking and furniture products are still in the list of products subject to
the “Price estimated System”.




3
  Acuerdo que establece la clasificación y codificación de mercancías sujetas a la presentación de un
permiso previo (Acuerdo de permiso previo).
4
  Anexo XVIII de la Resolución Miscelánea de Comercio Exterior. See Ley aduanera 2001.


Market Access study in the Woodworking sector –Final report, 15 August 2002_                      18
2.1.5. Technical measures


*        General overview

Interviews carried out with the Customs Authorities, Ministry of Economy (Secretaría
de Economia), The Customs Agent Association and private operators have enabled
to identify various measures applied for wood products (chapter 44) and furniture
(chapter 94). The mere examination of the list of measures illustrates already a
certain level of difficulty:

3 measures apply to all products of SH Chapter 44:

  NOM5 050 SCFI (labelling requirements)
  Phytosanitary Certificate (since 1 January 2001)
 NOM 018 – ENER – 1997 (applies to thermo-isolating materials)

In addition, for various products of the same chapter, are also applied:

   NOM 003 SCT (dangerous materials and waste).
   NOM ME 004 RECNAT of 1996 (sanitary requirements for pallets, boxes,
    containers).
    NOM 002 RECNAT of 18.1.2001: (phytosanitary rules) .
    NOM 118 SCFI : (certification for matches)


Furniture:

  Phytosanitary certificate is required at the entry point (for some products of SH
   chapter 94 (furniture, display stands and others).
 NOM ME 004 RECNAT of 1996 ;
 NOM 002 RECNAT of 18.1.2001: (phytosanitary requirements)
  NOM 050 SCFI (labelling requirements).
  NOM 133 SCFI

Basically, the following tables present an overview of the measures applied and
illustrate a certain level of sensitiveness of both sectors:

                         Wood products (HS Chapter 44)
Product code NOM 003 NOM 004                 NOM 002       NOM 050      NOM        018 PHYTOSANIT.
and          SCT     RECNAT                  RECNAT        SCFI         ENER           PERMIT
description
Chapter 44                                                      X              X            X
        6
(Wood)

5
 Norma Oficial Mexicana
6
 According to the Customs, the three measures (Phytosanitary permit, NOM 050 and NOM 018
ENER apply to all products of HS chapter 44.


Market Access study in the Woodworking sector –Final report, 15 August 2002_                         19
4403.4901                                         X             X              X            X

4404.20.03         X     X                        X             X              X            X
4407.10.02         X                              X             X              X            X
tables
4407.29.01         X                              X             X              X            X
Tropical wood
4408.10.01         X                              X             X              X            X
Wood panels
4409.10.01         X                              X             X              X            X
Moulders
4410.11.01         X                                            X              X            X
Tables
agglomerates
4412.13.01         X                                            X              X            X
Plywood,vene
ered panels
4413.00.01         X                                            X              X            X
Densified
wood
4414.00.01         X                                            X              X            X
Wooden
frames
4413.10.01         X     x                        X             X              X            X
Boxes …
4415.20.99         X     x                        X             X              X            X
Palets ..
4416.00.01         X                                            X              X            X
Barrels, tubes
4417.00.99         X                                            X              X            X
tools
components
4418.10.01         X                              X             X              X            X
Windows
Product code NOM 003 NOM 004                 NOM 002       NOM 050      NOM        018 PHYTOSANIT.
and            SCT   RECNAT                  RECNAT        SCFI         ENER           PERMIT
description
4418.20.01         X                              X             X              X            X
Doors      and
their frames
4418.30.01         X                                            X              X            X
Parquet
panels
4418.40.01            X                                         X              X            X
Shuttering
4418.51.01            X                                         X              X            X
Panels

4418.90.01            X                                         X              X            X
Others
4419.0101             X                                         X              X            X
Tableware
4420                  X                                         X              X            X
Wood
marquetry
4421.10.01            X                                         X              X            X
Clothes
hangers
4421.90.01            X                                         X              X            X


Market Access study in the Woodworking sector –Final report, 15 August 2002_                         20
wood       for
matches
4421.90.04             X                                        X              X   X

Cerillas


       This table illustrates the measures applied to EU imported furniture products:
Product     code PHYTOSAN NOM 004                NOM 050            NOM 133
and description IT.PERMIT RECNAT                 SCFI
9401.50.01                                            X
Seats of cane
9401.61.01                   X                         X
Upholstered
Wooden
furniture
9401.69.99                   X                         X
Wooden seats
9403.30.01                   X                         X
Wooden
furniture     for
offices
9403.40.01                   X                         X
Wooden
furniture     for
kitchen
9403.50.01                   X                         X
Bedroom
wooden
furniture
9403.50.01                   X                         X
Wooden drawing
tables
9403.60.99           X       X                         X                 X
Others


Sanitary certificates and inspections

    The legal basis for sanitary certificates and inspections is the “Acuerdo que
     establece la clasificación y codificación de mercancías cuya importación y
     exportación está sujeta a regulación por parte de la secretaria de medio
     ambiente, recursos naturales y pesca” (Agreement establishing the
     classification and the codification of the products which import and export are
     submitted to regulation by the Ministry of Environment, natural resources and
     fisheries)7. The “Agreement” establishes which are the products, the importation
     of which is subject either to the delivery of a CITES certificate or a specific import
     authorisation. The import authorisation must be delivered by the Dirección
     General de Vida Silvestre del Instituto General de Ecologia (Directory General of
     Plant life of General Ecologic Institute). The woodworking products covered by the
     Agreement are as follows: 4403.49.99, 4407.29.99, 4409.20.01, 4409.20.99, even
     6403.30.01 (shoes with wood platform). Under article 5 of the “Acuerdo”, most of

7
    DOF 27 October 1997, last modification 30/11/2000.


Market Access study in the Woodworking sector –Final report, 15 August 2002_            21
    the products of chapter HS 44 and two products of chapter 94 (furniture) 8 are
    subject to the delivery of phytosanitary certificate and inspection by the same
    authorities.

   Phytosanitary Certificate Inspection carried out by SEMANARP before the
    clearance process in order to check that the good complies with phytosanitary
    rules. A phytosanitary certificate is required at the entry point (measure published
    in the Official Journal of 31/11/2000). This permit applies for some products of
    chapter HS 94 (furniture: “escaparates y otros”) and products from chapter HS 44
    (wood). It must be stressed that recently importers of textile products which were
    also importing display stands alleged their containers getting stuck in Customs
    given the non acceptance of phytosanitary certificates or non conclusive
    inspections.

   NOM 018 – ENER – 1997: applies to thermo-isolating materials, components and
    elements.

In addition, for various products of the same chapter, are also applied:

   NOM 003 SCT of 19 November 2000 applies to all dangerous materials and
    waste (contaminants, explosives …). Also applies for the placement of labels
    while the wood is aimed to transport or pack other goods.

   NOM ME 004 RECNAT of 1996 apply to wood which needs to be imported free of
    insects. It concerns the revision of pallets, boxes, containers. These products are
    inspected during the customs clearance by competent Authorities. In February
    2000, Mexican Authorities (Procuradura Federal de Protección al Ambiente)
    defined the inspection procedures applying to all wood packaging
    (SNR/CGIPAF/DIFC/0120/20009).

   The compulsory inspection is carried out by PROFEPA on 30% of all vehicles
    carrying wood packaging originating in Germany, Spain and Italy. The importers
    must submit to PROFEPA inspectors at the entry point the following documents:
    specific filled-in form from the verification register, demand for importation and the
    declaration of paid customs duties10. The aim of the verification is to check the
    presence of any forestall plague on the inspected goods. Inspected goods are the
    tariff subheadings 4415.10.01 and 4415.20.99. Inspection is carried out according
    to the rules defined under SEMANARP rules11.

   NOM 002 RECNAT of 18.1.2001: applied to imported products. A certificate is
    required in order to check that the product is free of insects.


8
  SH 9403.60.99, 9406.00.01.
9
  Modified in March 2000 by the Oficio n° 295 of PROFEPA.
10
    Formato prellenado del Registro de Trámite de Verificación, pedimento aduanal, Declaración
General del pago de derechos.
11
   Manual de Procedimientos para la importación y la exportación de especies de la flora y Fauna
silvestre y acuática, sus productos y subproductos, así como para la importación de productos
forestales, sujetos a regulación por parte de la SEMARNAP. DOF 31 July 1996, as modified in March
1999, Chapter VI, par. 4, points b) to h).


Market Access study in the Woodworking sector –Final report, 15 August 2002_                  22
Labelling

 NOM 050 SCFI regulates the labelling requirements applied for the majority of
  imported (and domestic) products, including most woodworking products
  (processed wood and furniture).


Certification of matches


                                            IMPORTANT:

  The consultant has just received a “non official” information according to
 which the rules of importation for matches are in the process to be modified.
            This information must therefore be taken with caution.

Mexican Authorities consider matches as so sensitive products that they have
submitted the importation of matches to various obstacles to be hardly (or not)
overcome by the importer. The consultant has interviewed a European importer of
matches who is trying since 1998 to make an importation business in Mexico. It is
worth to describe the succession of difficulties encountered (including the certification
issues).

The importer must apply for a specific registration

First of all, the importer must apply for a specific registration (“padrón de
importadores para armas de fuego” –“authorisarion to import fire arms).

The importer must request a fire arms permits

Mexico is the only world-wide country which classifies matches as “explosives”.
Lighters, which could be considered as much or even more explosives than matches,
are not considered as such. Therefore, matches are subject to the import rules
enacted by the Ministry of National Defence (SEDENA).

The potential importer must therefore apply for a special permit for “fire arms”
(“armas de fuego”). Even for the certification purposes (if he wants to import only one
box of 1000 small matches boxes), the permit is compulsory. Cost of the permit is
700 – 800 USD. The delay to get the permit is about 6 months. To get the certificate,
the importer must previously construct a specialised warehouse (for fire arms). This
means to pass the following steps:

(1)     To find a place for the warehouse and adapt it to the security requirements
(2)     To have the warehouse inspected by the army (1 – 2 months delays) and get
        from the army a favourable opinion ;
(3)     To present a file to the Governor of the State of Mexico in Toluca for getting
        the required authorisation. The importer travelled every day during three
        months to Toluca.



Market Access study in the Woodworking sector –Final report, 15 August 2002_          23
(4)     Once the authorisation given regarding the warehouse, the import permit for
        explosives can be solicited.

In October 1998, the importer makes a request for a general permit for importation.
There is no constraining time-limit in the Mexican regulation. The importer has waited
one year to get the General permit. Meanwhile, the importer applied also for a
specific permit and gets it in March 1999 for 6 Million boxes.

The specific permits is very restrictive: it is only given for 6 months for a fixed amount
of boxes of matches. The importer can change neither the trademark, the content nor
the size of the individual boxes.

The importer must obtain the certification (NOM 118 SCFI)

Domestic and imported matches are to be certified under the rules of NOM 118 SCFI.
The certification can only be conducted by authorised laboratories from SECOFI.
There are only two laboratories which can certify domestic and imported matches.
These are the laboratories of domestic producers and this situation causes important
difficulties to the EU exporters.

An EU importer tried to get its goods accepted by the laboratory for testing during
several months. The products were continuously refused and never tested.

After having complained during months to SECOFI, the authorised laboratory
accepted to make the required testing for the certification. Cost of the test was $200.
The testing period was again one-month delay. After the tests were carried out, the
importer got the certification accepted by the Directorate General of norms in 2
weeks. The importer had got the import authorisation after almost 2 years of
procedures.

In August 2001, the importer was still waiting for another certification test to be
conducted on its products. In May 2001, he has received a new permit. However, no
laboratory had accepted the products for testing during months. The importer
complained to ANSE (body which carries out the certification for other products).
ANSE designated another laboratory after having discredited the first one. The
second laboratory asked for about 100.000 pesos to carry out the certification of the
imported matches. The laboratory was then also discredited. The importer was
therefore left without any laboratory for testing.

Other measures hamper the distribution of imported products

A label is required on each consumer unit (10 small boxes) and an additional one on
the box. Customs verify carefully the content of labels and refuse the goods in case
of problems.

To transport the matches boxes from the warehouse of the importer to the client
warehouse, the importer is required by law to use a special truck “ anti-explosives ”.
Independently from the volume of boxes transported, the cost will be $1600 (even for
the boxes to be tested of a value of $ 20). If the importer imports 2.000 boxes, he will
not supply this quantity to one supplier in one time. However, he is required to use


Market Access study in the Woodworking sector –Final report, 15 August 2002_           24
the anti-explosive truck. The importer alleges that domestic producers do not use this
truck to supply their clients and that they are not controlled or penalised for not doing
it.

Theoretically, the importer‟s customer must also have required a permit of fire arms
(the import permits provides that the importer can only sell the imported products to
clients provided with a permit to distribute fire arms). It is also alleged that there is
some discrimination among clients of EU exporters, which will be controlled, and
clients of domestic suppliers.

Domestic producers are not competitive

According to various interlocutors, domestic producers have a quasi monopoly on the
matches distribution in the country and are not competitive. It is reported that the
imported product costs about $32 the box (1000 units), while the domestic box costs
about $46.


2.1.6. Legal analysis


a)         main problems experienced by the EU companies in Mexico

The problems experienced by the European companies in Mexico are mainly related
to customs clearance, to conformity to the Mexican standards and to problems to
obtain some specific authorisations by the Mexican authorities. The customs
clearance has been reported to be difficult and the conformity of the products to the
Mexican standards is strictly verified. The difficulties encountered have impeded the
exports of several EU companies to Mexico.

b)         legal analysis of the problems experienced

The legal framework of the trade relations between Mexico and the EU is defined by
the Economic Partnership, Political Coordination and Cooperation Agreement
between the European Community and Mexico12. The agreement contains provisions
on customs co-operation and technical regulations.

This agreement provides in its article 18 that the Parties undertake to cooperate on
technical regulations and conformity assessment.       On the other side the article 19
provides for customs co-operation and for facilitation of the clearance procedures.

The framework agreement is completed on these issues by the Decision 2/2000 of
the EC-Mexico Joint Council of 23 march 2000.

The decision introduces more detailed requirements on standards, technical
regulations and conformity assessment procedures (article 19). According to these
requirements the standards, technical regulations and conformity assessment

12
     Official Journal 2000, L 276 , 28/10/2000 P. 0045 - 0079




Market Access study in the Woodworking sector –Final report, 15 August 2002_          25
procedures are defined in the same way as in the WTO Agreement on Technical
Barriers to Trade (hereinafter "the TBT Agreement"). The Parties confirm their rights
and obligations relating to standards, technical regulations and conformity
assessment procedures under the TBT Agreement. In order to avoid unnecessary
barriers to trade, the parties should work towards exchange of information on their
respective standards, technical regulations and conformity assessment procedures,
bilateral consultations on specific technical barriers to trade, promotion of
international standards and facilitation of the adoption of their respective standards,
technical regulation and conformity assessment procedures. Each party is obliged to
provide to the other party technical advice and assistance on the terms and
conditions to enhance this party standards.

This article is designed to facilitate trade between the two parties by providing
sufficient information on the each party compulsory and voluntary standards.
However, the implementation of this article remains quite low, which causes
difficulties to the EU companies exporting to Mexico, because they cannot invoke
directly the application of this article because it does not define precise obligations for
the two parties.

The wood products exported to Mexico should also satisfy some phytosanitary
requirements. As the definition of article 19 refers to the definition of standards and
technical regulations in the TBT agreement, it does not include the sanitary and
photosanitary requirements. Therefore, the decision 2/2000 introduces specific article
on sanitary and phytosanitary requirements (article 20). According to this article the
Parties shall cooperate in the area of sanitary and phytosanitary measures with the
objective of facilitating trade. The Parties recall their rights and obligations set out in
the WTO Agreement on the Application of Sanitary and Phytosanitary Measures and
establish special Committee on sanitary and phytosanitary measures. The special
committee should monitory the application of the article, identify and address
problems related to specific sanitary and phytosanitary measures in view of reaching
mutual acceptable solutions. The committee should also consider specific
arrangements on harmonisation and information exchange. It is also difficult to
challenge under this article specific Mexican sanitary and phytosanitary
requirements, but it allows the discussion of certain problems during the meetings of
the joint committee.

It must be underlined that the majority of problems experienced by the EU companies
in Mexico are related to the controls performed by customs authorities. In these
cases, the provisions for customs cooperation could be applied. The decision 2/2000
introduces additional provisions on customs cooperation – article 17. This article
foresees for transparency in customs procedures and provides for the creation of
special committee for customs cooperation.

On the other side excessive customs inspections might be defined as quantitative
restriction. The article 5 of the framework agreement mentions the necessity of
elimination of quantitative restrictions. In addition, the Decision 2/2000 provides for
the elimination of all the quantitative restrictions between the two parties upon the
entry into force of this decision (article 12).




Market Access study in the Woodworking sector –Final report, 15 August 2002_            26
The EU companies also experience some difficulties, when performing investment in
some specific sectors. The framework agreement contains provisions on investment
in its article 15. According to this article the Parties shall help to create an attractive
and stable environment for reciprocal investment. This stable environment supposes
inter-alia the development of harmonised and simplified administrative procedures.

In addition of these rules, the rules of the WTO could be invoked by the EU
companies (see §3 Legal analysis). The articles, which could be used are article VIII,
article X and article III. They deal respectively with excessive customs formalities,
transparency and non-discrimination. The provisions of the TBT and SPS agreement
could also be used.




Market Access study in the Woodworking sector –Final report, 15 August 2002_            27
2.2. TURKEY


2.2.1. EU Industry assessment


The relative absence of problems for import of woodworking products

Turkey is an important market for the European woodworking industry. The country
does not have sufficient forest resources and it is expected that, when Turkey will
overcome the present economic crisis, the demand in EU wooden products will
increase.

However, with the current economic crisis (since 1998) in Turkey, the demand for
woodworking products has been negatively affected. The construction sector, which
is the most important sector for woodworking products, has experienced strong
recession since 1995. The number of construction permits is decreasing with more
than 10% every year. The situation has also a negative impact for the EU exports of
woodworking products to Turkey. Even if in 2000, exports to Turkey have almost
doubled compared to the 1999 levels (Russian crisis), it is expected that the 2001
level decreases (economic crisis currently experienced).

In Turkey, 99% of the forest is owned and managed by General Directorate of Forest
(GDF). Almost nearly all round wood production is realised by GDF. GDF determines
the prices of its production. In some cases, these prices are fixed on very low levels
for domestic companies (processed wood products and paper companies). On the
other side, wood prices, which have been decreasing since 1987 gradually, seem to
have hit the bottom and have started to recover. There is a gap between domestic
industrial wood production and demand totalling 1 million m³, which is met by imports.
Industrial wood is imported mainly from the Russian federation and other transition
countries. Some tropical logs are imported from South Africa. Imports are mainly of
high quality logs and processed wood. Importation of all secondary forest products
such as, plywood, particle and fibre board is increasing significantly.

According to the EU exporters and Turkish importers of woodworking products, there
is a relative absence of trade obstacles affecting imports. The main problem
mentioned in questionnaires and interviews relates to testing and certification
procedures (see point 2.2.3.).

Our exporters are also facing tough competition from Baltic countries and Russia.
According to the Turkish statistics, imports of processed wood from EU amounts to
only 4% of the overall imports, whereas imports from Russia are 37% and from Baltic
countries 20%. Prices in the Turkish market are low and sometimes are considered
as insufficient by the EU producers in order to recover their production and transport
costs.




Market Access study in the Woodworking sector –Final report, 15 August 2002_       28
2.2.2. Mission to Turkey


The mission to Turkey has been conducted from 22 to 30 May. The mission aimed to
meet the Turkish authorities, the Member states Trade representatives and private
companies in order to discuss problems related to import and investment in the
woodworking industry.


2.2.3. The Customs Union

The achievement of the Customs Union between Turkey and EC, applicable to the
woodworking products and furniture, has significantly simplified the trade between
the two parties. Import duties and quantitative restrictions are prohibited between the
Community and Turkey. Therefore, the customs clearance procedures have been
simplified.

a) Absence of import duties

There are no import duties between EC and Turkey for woodworking products and
furniture. The achievement of Customs Union has increased the trade between the
two parties.

The only tax paid by importers on the same basis as for domestic products is the
VAT of 18%.

b) Customs formalities

According to importers, the clearance procedure for woodworking products and
furniture lasts about 1 – 1 ½ days if the products are not submitted to compulsory
certification. In case of compulsory certification process, the clearance can take place
only after the certification is obtained. The documents, which should be presented by
the importer to the customs authorities, are as follows:

-       TIR Carnet (Customs Transit Convention of 1975)
-       Certificate of origin
-       Export declaration
-       Customs declaration
-       In case of credit payment, documents from the bank for the transfer of credit
        fees

Importers reported having experienced problems related to credit restrictions.
According to them, it is compulsory to pay around 6% transfer fees on the total
contract value to the customs in case of credit granted the importer by the EU
exporter. These fees are calculated according to the CIF value of the goods. The
payment of transfer fees must arrive on the customs‟ account before import and the
bank document should be presented during clearance. Importers consider this
requirement as completely unjustified. The consultant was not able to obtain
additional information about this subject: Turkish Customs have refused to attend a



Market Access study in the Woodworking sector –Final report, 15 August 2002_         29
meeting arguing that the Customs Union renders without justification a market access
study on Turkey.

Under the Turkish Customs Law, goods in Customs warehouses not cleared during
45 days are sold on auction. However, for woodworking products this problem is
currently considered as less important given the fact that importers are authorised to
use private warehouses.


2.2.4. The certification procedures


Some of the woodworking products in Turkey are submitted to compulsory
certification. Compulsory certification is not applicable to furniture but to processed
wood products. According to the Turkish authorities, this procedure was mainly
elaborated to stop the importation of low quality woodworking products from the
Russia and other transition countries. The following products are submitted to
compulsory certification:

-       Sawn timber and timber for general purposes (TS 51)
-       Oak Saw logs (TS 276)
-       Waste, yield and Residues Coming out in sawing or saw logs (TS 654)
-       Beech logs for peeled veneer (TS 1002)
-       Poplar logs for matches (TS 1067)
-       Pine logs for peeled veneer (TS 1109)
-       Blockboards for general purposes – with peeled veneer (TS 1047)
-       Sliced veneer (TS 1250)
-       Fibre building boards – hard and medium boards (TS 64)
-       Particle board (TS 180)
-       Wooden stick and bushwood (TS 1215)
-       Gluelaminated timber structural members (TS 3842).

When the product is submitted to mandatory certification, it should be presented to a
Turkish Certification Institution before clearance. The products included on the
mandatory list should be certified in Turkey, although they have already been
certified in Europe. Some exporters have complained about the delays of the testing
inspections carried out by the Turkish Standard Institution.

The inspections are carried out in respect of minimum health, safety and protection
of the environment, providing adequate information to the consumer. The elasticity,
humidity, surface resistance and density of the product are performed depending on
the standards applied.

Therefore, the procedure is considered as over-prescriptive by the EU importers
because they have to undergo all the testing and conformity accession procedures
although their goods are already tested and approved in Europe. In other cases, the
goods are submitted in EU to simple declaration of conformity made by the producer
and the existence of mandatory standards in Turkey is surprising and burdensome
for the European companies.



Market Access study in the Woodworking sector –Final report, 15 August 2002_        30
The Turkish system for standardisation exists since 1995 and standards adopted
differ from those applied in the EU. The Turkish Standardisation Institute (TSE) is
responsible for certification.

The Authorities have started the procedure of harmonisation of the Turkish standards
with the existing European standards (EN) but the process is still not achieved.

Two situations must be distinguished in case mandatory conformity assessment is
required:

(1)     the product is processed in conformity with one of the EU (EN)
        standards: the company can present the tests and the file attesting that the
        product is elaborated in accordance with the EU standards. The procedure
        undertaken by the TSE will be shorter and less complicated. Although the
        product is in conformity with the EU regulation, the product must be tested.

(2)     the product is not elaborated in conformity with EU standard: the whole
        spot examination must be carried out in Turkey. The importer could request
        examination also according to the relevant international standards.

The testing procedure in the TSE can last 3-5 days to one week depending on the
product concerned. The conformity of the product to the Turkish standard is verified
as well the conformity of the product composition to the information indicated on the
label. All Turkish standards contain labelling requirements. In case the results are
found unsatisfactory by the TSE, the importer could object and start legal procedure.
The result is transmitted to the Ministry of Industry and the Customs department.

Nevertheless, number of EU exporters has experienced important problems with the
Turkish standardisation requirements, mostly due to the differences between the EU
and Turkish standards. On the other side, samples taken for testing represent in
some cases important costs for importers.


2.2.5. Other problems


a)      Respect of designs

Importers from the furniture sector complain about the non-respect of their designs.
In fact, the country has not important furniture industry; the production is mostly
performed in small ateliers. Therefore, the Turkish producers copy the design of EU
furniture but the products are of very poor quality.

Although Turkey has adopted the relevant legislation about the protection of
intellectual and industrial property rights, its implementation still can not be assured
by the authorities. Therefore, the impossibility to have design‟s protection restricts the
market share of the European producer because Turkish consumers focus on the
design but seek also for lower prices sometimes despite the difference existing in the
quality of the products.



Market Access study in the Woodworking sector –Final report, 15 August 2002_           31
b)      The economic crisis in Turkey

The current economic crisis in Turkey has adverse effects on consumption and
subsequently on trade. The woodworking sector (except furniture) is in crisis since
1997. Prices are low and consumption is decreasing progressively. Domestic
companies were not able to cope with the crisis and 5 factories have been closed in
1999. Despite of the potentialities of the market, the situation is also not satisfactory
for the EU exporters. In the furniture sector the crisis started more recently but has
lead to very quick drop in consumption. A number of importers of EU furniture were
obliged to close their shops, due to sharp decrease in demand. However, eventual
recovery of the Turkish economy might be profitable for EU companies already
involved in business with Turkey.


2.2.6. Legal analysis


a)      main problems experienced by the EU companies in Turkey

The problems experienced by the European companies in Turkey are mainly related
to certification requirements. The customs clearance is reported to be quite easy and
the sanitary requirements have not been quoted by the EU companies as particular
problem. The importers of EU goods have only mentioned some difficulties related to
credit restriction and to the possibility given to Turkish customs to sell the goods on
auctions if they are not cleared upon certain time-limit.


b)       legal analysis of the problems experienced

The Customs Union (CU) came into force on 1 January 1996 as foreseen in the 1963
Ankara Agreement, which established the EU-Turkey Association13.

According to the agreement the customs duties between the two parties are
eliminated and provisions for customs co-operation have been introduced. The
achievement of the customs union has facilitated significantly trade between the two
parties according to the importers of EU goods into Turkey.

The remaining difficulties in the woodworking sector are related mostly to the
certification requirements. These difficulties affect more processed wood products
than furniture products.

According to the Decision 1/95, article 8 " within five years from the date of entry into
force of this decision, Turkey shall incorporate into its internal legal order the
Community instruments relating to the removal of technical barriers to trade". The
Decision 2/97 of the EC-Turkey Association Council enumerates the list of the
instruments to be implemented.

13
  Decision No 1/95 of the EC-Turkey Association Council of 22 December 1995 on
implementing the final phase of the Customs Union, Official journal 1996 L 35.


Market Access study in the Woodworking sector –Final report, 15 August 2002_          32
According to these provisions, Turkey shall implement all the relevant Community
provisions concerning technical standards until the 31st of December 2001. The
Turkish authorities have indicated the existence of some technical difficulties and the
necessity of important inter-ministerial work needed for the implementation of the
provisions of article 8. Therefore, the EU companies still experience difficulties with
the certification of some products, which normally should be eliminated.

The article 9 of the decision 1/95 states that "when Turkey has put into force the
provision of the Community instrument or instruments necessary for the elimination of
the technical barriers to trade in a particular product, trade in that product between
the parties shall take place in accordance with the conditions laid down by those
instruments, without prejudice to the application of this Decision". That means that
trade between the parties in the field in which Turkish legislation is harmonised with
the EU legislation will be subject to the provision of the relevant Community
instrument. In case some disparities exist between EU legislation and Turkish
legislation, however, it would be very difficult for the EU company importing into
Turkey to prove that its products are conform to the EU legislation. As Turkey is not
part of the Community, the company cannot invoke possible direct effect of the
Community legislation in case of wrong transposition. One possible way of dealing
with EU instruments receiving non-correct transposition in Turkey is via bilateral
negotiations between the two parties.

Moreover, as far as the article 10 of the Decision 1/95 imposes some obligations to
Turkey before the incorporation in its internal legislation of the instruments related to
the technical barriers to trade. Turkey shall not impede the placing on the market of
the Community products the conformity of which with the Community directives has
been attested. These provisions imply that Turkey cannot introduce unjustified
restrictions to trade for EU products conform to the requirements of European
legislation. Additional testing and certification performed in Turkey for the EU
products are in contradiction with these requirements, especially because Turkey
submits a large number of EU products to the Turkish standards and conformity
assessment. On the other hand the Community has taken the obligation to accept
the results of the procedures applied in Turkey for assessing the conformity with the
requirements of the Community law. According to this provision Turkish products
exported to the Community market could be tested in Turkey and are not obliged to
undergo any other certification procedure.

The traders experiencing difficulties with the Turkish legislation could also use the
provisions of the WTO Agreement on Technical Barriers to Trade or other WTO
provisions (see §3. Legal analysis). However, the Customs Union provisions seem to
be stricter and more appropriate on these matters.




Market Access study in the Woodworking sector –Final report, 15 August 2002_          33
2.3. RUSSIA


2.3.1. EU Industry assessment


Russia is an interesting partner for the EU woodworking industry. The country is an
important exporter of raw material. The consumption of the processed wood in
construction and furniture is constantly growing. However, the market is very difficult
to access for the EU companies due to the important tariff and non tariff barriers. EU
companies estimate that the market opportunities are actually growing, given the
recovery after the 1998 crisis but the market is still much closed. Main suppliers of
processed wood products in Russia are Estonia, Byelorussia, Finland and Latvia.
Main suppliers of furniture are Italy, Poland, France and Germany.

In questionnaires and interviews, EU companies (wood + furniture) have mainly
complained about:

-       Import duties
-       Complicated clearance procedures
-       Certification requirements (in particular complaints made by wood-based
        panels and parquet producers).


2.3.2. The mission to Russia


The consultant representatives have conducted a mission in St Petersburg and
Moscow from 22 July to 2 August 2001. The objective of this mission were (1) to
collect the applied rules for the importation of woodworking products, (2) to interview
Russian Authorities on their implementation, (3) to attend meetings with Member
States trade representatives in order to discuss the problems faced by EU companies
and their customers (4) to interview Russian importers on the practical difficulties
hampering their business during and after the clearance process.

Meetings with the Authorities were kindly arranged by the EC Delegation in Moscow:

-       Ministry of Economic Development and Trade (MEDT)
-       Ministry of Agriculture
-       Gosstandardt (Russian Standardisation Institute)
-       State Customs Committee

In addition, the consultant has attended meetings with the Institute of Certification of
St Petersburg and various importers of wood processed products and furniture.

The mission enabled the consultants to collect the following information (see 2.3.3
and after).



Market Access study in the Woodworking sector –Final report, 15 August 2002_         34
2.3.3. The Import duties


Applied duties constitute a significant obstacle for direct import

Two cases should be distinguished:

(1)       the customs duty for processed wood products: Customs duty for
          processed woodworking products range between 15% and 20% according to
          the sensitivity of the product. This duty is calculate ad valorem. According to
          the Customs code14, the customs value of goods, defined in accordance with
          the Law of Russian Federation on customs tariffs, shall be the basis for the
          calculation of the customs duties.

(2)       customs duties for furniture: the calculation of customs duties is much more
          complicated. The duty is composed from 20% ad valorem duty but not less
          than certain amount of euro component per kilo. The euro component was 2
          euro per kilo. It was reduced last year. Currently the euro component for
          furniture varies between 0.5 and 0.8 euros per kilo. Customs calculate the
          duties resulting from the 2 schemes and levy the euro component if superior to
          the ad valorem calculation.

However, according to the EU importers of furniture, the reduction of euro component
did not result in a reduction of the customs duties. The problem consists in the
collection of duties by the customs authorities. Under the old regime, the collection of
customs duties was not properly insured by customs authorities and bribery in
customs was significant.

Currently, customs are becoming much stricter about the application of customs
duties. Importers also complain about non-transparency of the current regime: they
do often not know how exactly the duties are calculated and which elements have
been taken into account. The new regime disadvantages cheap products and
products designed for middle class consumers. The main reason is that Russia is
trying to develop furniture and wood processing industries. Despite the abundance of
domestic natural resources, competition of imported products is still very strong.
Therefore, the country has not the capacity to develop high quality industry and
import protection hinders mainly middle quality products.

On the other side, as far as processed wood products other than furniture are
concerned, the customs duties are still maintained very high in order to protect the
domestic industry.

VAT is the only additional tax to the customs duty

Under the Customs code15, the customs value of goods together with the customs
duties) is the basis for the calculation of VAT. According to Russian Federation Law
on VAT, the VAT rate is 20%. It is therefore charged on duty paid value. Reduced

14
     Art.117§1
15
     Art.117§2


Market Access study in the Woodworking sector –Final report, 15 August 2002_          35
VAT rates may be applied for some products of chapters 44 and 94. The subheading
N°4421.90.990 (pencil cases, number and letter cases) are submitted to 10% VAT.
Furniture for children falling under the subheadings ex 9403.20.910, ex 9403.50.000,
ex 9403.70.900 (beds for children with dimensions of the base not exceeding
1,190mm x 600mm), headings ex. 9404.21/ex. 9404.29 (mattresses of dimensions
not exceeding 1,190mm x 600mm) may also be assessed at 10% VAT.

In addition, clearance services charges of 0.15% are collected by Customs

Under the Customs code16, clearance fees called “duties for customs clearance” are
applied. Their amount is the following :

     -   0,10% of the customs value of goods, paid in Russian currency.
     -   0, 05% of the customs value of goods, paid in foreign currency.

For the goods imported on a non-profit basis, only the first fee is applicable.

These fees are aimed at paying the services rendered by Customs authorities. They
are at valorem duties.

Payment of customs duties is to be done before clearance

Under the Customs code17, customs payment shall be made before acceptance or
simultaneously with the acceptance of the customs declaration. The Customs will
accept the Customs Declaration only when they have received the payment of import
duties on their bank account.

Importers complained about this obligation to pay customs duties in advance. This
obliges them to send the money at least 10 days ahead before the shipment arrives
(it goes first to the Central Bank account of the customs and then to the customs post
bank account). The importer will need to provide a receipt from their Bank that the
Bank account of Customs has already been credited.


2.3.4. Customs formalities


Customs have a large power of interpretation

The import documentation does not seem to constitute in practice a significant
problem for Russian importers. They did not mention a specific problem regarding the
import documentation.

However, theoretically, the customs officials have a large power of interpretation in
this field. According to the Russian Customs code18, documents and additional
information for customs clearance are determined by the State Customs Committee.
The competent customs agency can impose terms for the submission of the

16
   Art.114
17
   Art.119
18
   Article 174


Market Access study in the Woodworking sector –Final report, 15 August 2002_       36
documents. The Russian State customs committee recognises that there is no well-
established list providing the identity and content of required import documents. The
list can be different depending on the products. The importer should therefore consult
the Customs before import.

In most cases, the following documents are required for clearance:

-       Customs declaration (in Russian)
-       Commercial invoice
-       Contract and copy
-       TIR carnet (Customs Transit Convention of 1975)
-       Currency Passport legalised copy
-       Packing list
-       Bill of lading
-       Proof of payment of customs duties
-       And in certain cases certificate of origin.

The customs sometimes require an export declaration in order to verify the veracity of
the declaration of the importer.

The certificate of conformity is also required during customs clearance. According to
some importers, they are allowed to put the product to be imported in warehouse until
the delivery of the certificate before the clearance takes place. However, the products
should be presented for customs clearance 15 days after the entry on the Russian
customs territory, otherwise a penalty could be charged to the importer. According to
the Customs Code, customs clearance lasts no more than 10 days, therefore this
time limit can be easily prolonged by the Director of the relevant customs point. The
clearance process for furniture is reported to be much slower than for processed
woodworking products (see infra).

According to the customs there is no minimum import price system in Russia

According to several importers, customs are implementing minimum import price for
woodworking products and furniture. Customs have established average prices for
woodworking products and do not accept invoices below these prices. If the declared
prices are inferior, importers are charged with penalties. Therefore, importers prefer
to ask their suppliers to invoice higher values and to pay customs duties on a higher
basis in order to avoid conflict with the customs authorities. The importers underlined
that this practice prevents them to sign contracts, for which they know that the price
will not be accepted by the customs authorities.

According to importers of furniture, customs are applying system called "correction of
customs value". They unilaterally decide in certain cases that the customs value
should be increased by 2 or 2,5% and the importer has difficulties to object to this
decision.

According to Customs Authorities, minimum import prices are not implemented.
However, they stressed that Customs are confronted with important fraud in furniture
import of (allegedly 60% of the total customs duty fraud). Therefore, since the end of
2000, the controls on these imports were significantly strengthened. Customs


Market Access study in the Woodworking sector –Final report, 15 August 2002_        37
authorities alleged that they take into account the invoice, the export declaration and
the import declaration in the valuation of imported goods.

The importer may theoretically launch an administrative recourse against the decision
of customs to implement a higher duty. However, this procedure is costly and time
consuming. Consequently, importers prefer to pay the customs duties on the customs
value established by the customs.

The clearance process is reported as the main difficulty by the EU exporters and
Russian importers. The use of a customs broker is a common practice. Otherwise, it
is very difficult to cope with the requirements of the Russian customs. Importers can
ask and obtain statement concerning the classification of the products before import.
This classification statement must be requested to the Central Customs Committee
and costs the average of 5 Russian monthly salaries. When the classification
statement is made, only the identity between the goods and the statement will be
verified. The classification of products should then normally not be challenged.

At the end of 2000 and the beginning of 2001, new and more stringent rules have
been implemented for the import of furniture. The customs decided to submit
these goods to stricter customs duties because of alleged violation of the customs
legislation.

The 1st of January 2001, Customs stopped customs clearance for all commodities
during one month and for furniture for two months. They introduced new rules for
Customs clearance. According to these rules, furniture can be imported only through
specialised customs points. Only 4 customs points in Moscow are entitled to clear
furniture. This has created significant delays in imports. One should notice that 80%
of furniture imports are concentrated in the Moscow region.

Moreover, the Decree of the Central Customs Committee of 20.02.2001 has
established special rules for the transportation of furniture to warehouse importers in
Moscow and Moscow region. According to these rules, the goods could be delivered
in the private warehouse of the importer only if the value of these goods is equal or
superior to $ 40 000. Importers prefer to use this rule, even in case the value of their
products is less important, in order to avoid their products being sent to customs
warehouse. In fact, they fear losses or thefts of their products.

The furniture must be handled with care and it can be significantly damaged in
customs warehouses. Therefore, importers feel often obliged to pay customs duties
on the basis of a customs value of $ 40 000. Additionally, according to the Decree of
Central Customs Committee from 17.11.2000, the furniture should be accompanied
to the private warehouse by a customs official. One should notice that these rules
existed already for other products such as household appliances and some
machinery.

Once the products are delivered in the private warehouse, the customs officials
should make conclusion about the customs value of the product and make physical
verification of the goods.




Market Access study in the Woodworking sector –Final report, 15 August 2002_         38
These new procedures create serious difficulties for furniture importers. The situation
can stop the important growth in furniture exports which was registered in 2000. In
particular, imports of furniture from Italy have increased by 33% in 2000.


2.3.5. Certification procedures


Most products exported to Russia are submitted to compulsory certification,
according to the Russian standards. However, for a few number of woodworking
products it is currently permitted to use the declaration of conformity. Nevertheless
Russian procedures for certification are very complicated and require detailed
explanation.

Moreover, other types of certification are also applied for woodworking products:

                          i. the hygienic certification
                         ii. The State Fire Safety certification and
                        iii. The Gostroj19 certification.


a) Certificate of conformity

The compulsory certification GOST- R was introduced by the Law of June 10, 1993
"On the certification of goods and services”20 The Resolution "On the approval of the
list of goods and services subject to compulsory certification" identifies the products
subject to mandatory certification. The majority of woodworking products are subject
to mandatory certification (90%). The certificate of conformity is compulsory for all
types of furniture and a large part of the products from processed wood. The
Government determines groups of goods subject to certification. Afterwards,
Gosstandart establishes a mandatory list containing all the products subject to
compulsory certification (on a tariff line basis). This list is called “Nomenclature"21.

On the basis of the “Nomenclature”, Customs Authorities establish a second list of
products for which a certificate of conformity is required for import. They check the
certificate of these goods during import. The products subject to the declaration of
conformity are not on the customs list.

They can be imported in Russia without certificate, but this certificate is needed in
order to introduce the products on the retail market.

EU producers must choose between production certificate and shipment
certificate

Certification normally has to be done before the goods are shipped to Russia.
However, in some cases, importers are authorised to request the certificate at the

19
   Gostroj is the Russian specialised institute responsible for certification in the construction industry
20
   In the Editions of federal laws of December 27, 1995; March 2, 1998; July 31, 1998
21
   Latest edition was introduced by Gosstandart resolution of February 23, 1998 and become effective
on October 1, 1998.


Market Access study in the Woodworking sector –Final report, 15 August 2002_                           39
arrival of goods in Russia. The certificate should be issued by one of the certification
bodies accredited by Gosstandart. There are 102 accredited certification bodies in
Russia. In Europe, there are apparently only two authorised organisations – SGS
(Société Générale de Surveillance - Swiss Certification Body) and Din Gos Tuv (TÜV
Suddeutschland – German certification Body), which issue the Gost R22 certificates.

The Gosstandart resolution sets up 10 basic certification schemes (art. 2). In
practice, these schemes can be divided into two groups, depending on the identity of
the applicant (manufacturer or the importer). The EU producer can request a
production certificate for a serial production (hereinafter "production certificate") or a
shipment certificate (requested for each shipment). The importer can request a
certificate by shipment ("shipment certificate"). The scheme is proposed by the
applicant and the certification body takes the definitive decision.

The production certification is considered by some EU companies as the easiest
way of certification, in particular when they have regular business with Russia. This
certification requires that experts from accredited Gosstandart Bodies evaluate "in
situ" the production system of the EU company. The evaluation must determine the
capacity of the company to maintain the quality of serially produced goods, its
capacity to control the production of its branches and to maintain the same quality if
the supplier changes. This procedure is not the same as the one followed to get the
ISO 9001 certificate. However, if the EU company has already its products with ISO
certificate, the GOST-R procedure may be simplified.

Under the Russian rules, the Certification Body issues one certificate by
"homogeneous group of products"23. The production certificate is normally issued for
three years if delivered by Russian accredited experts. In any case, experts should
check the system of production yearly in order to ensure that Russian standards are
respected. This could explain why the European accredited bodies issue the
production certificate for only one year and renew the certificates while conducting
the yearly checking.

The original certificate is delivered to the EU producer. This latter gives a copy with
the stamp of the company to his different customers in Russia.

The shipment certificate must indicate the quantity, the type and references of the
product, the number of the contract and the invoice number. The exporter or the
importer should request one certificate by tariff line. It is the less expensive way of
certification (in particular when a few different products are exported). However, it is
less convenient for exporters having regular business with Russia. This certificate
allows selling the products during one year. If after one year, there are any unsold
stocks, new certificates have to be requested from the Certification Body. The first
certificate is more expensive, but afterwards, if the certification is required for the
same type of products the certificate is cheaper, because some basic tests are not
performed.

However, given the specificity of the woodworking products and the difficulties to
import these products for testing before starting the import procedure, importers are
22
     Certificates according to the Russian certification rules and procedures
23
     Decision 1271/97, Art. 2.7


Market Access study in the Woodworking sector –Final report, 15 August 2002_           40
authorised to put products in the warehouse and to perform the certification
procedure before presenting goods for customs clearance.

The procedure and the costs are dependent on the contract negotiated

The European producer or exporter must contact one of the Russian or European
certification bodies accredited by Gosstandart. These will indicate the required
documents and the procedure to be followed during the certification. The applicant
(importer or EU producer) submits the application form to the Certification Body. The
form must be accompanied by copies of the documents confirming the origin,
assortment quality and quantity (for some schemes), copies of the documents used
to manufacture the product and hygienic certification (if the product is subject to
hygienic certification). If the product is subject to other types of certification (Gostroj
and Fire safety certificate) they should also be presented.

The applicant must also present all documents confirming the established quality
indicators of the products - commodities materials, tests protocols issued by the
executive bodies within their competence, previous certificates. Compliance with
National, International and European standards (CE, IEC and ISO) is not sufficient to
sell products in Russia (even if the producer or the importer can present these
certificates to speed up the procedure).

The certification is based on a contract concluded between the Certification Body and
the applicant. The price for the certification services in Russia is determined by the
Recommendation of Gosstandart "Payment for works of certification of goods and
services"24. The Foreign Accredited Bodies are not bound by this requirement.
However, even in Russia, there are different prices applied by the various certification
bodies. This is, according to the Russian Authorities, because the competent body
can determine the certification scheme to be used and the number of tests and
analyses to be performed.

The products are tested according to Russian standards elaborated by Gosstandart.
These standards are still not unified with the European and International ones, even
if Gosstandart has started a process of modernisation. Gosstandart authorities have
indicated that they could increase the number of products submitted to declaration of
conformity (probably to almost al the products from CN chapter 44).

 However, furniture will not be subject to the declaration of conformity . Authorities
have recognised that furniture remains a more sensitive commodity for the Russian
industry and the Authorities.

Where shipment certificate is required, the producer or the importer should normally
require one certificate by tariff line contained in the Gosstandart mandatory list.
However, the certification body can authorise the applicant to do certification by
group of homogenous products25.




24
     Recommendation R 50.3 001-96, amended the 19 October 1999
25
     For example skirts and blouses for women with the same composition


Market Access study in the Woodworking sector –Final report, 15 August 2002_            41
While the certificate of conformity is issued, the product has to be marked with the
GOST R certification logo on the package or on the label of the product. The marking
requirements are:

        -       the number of the certification body.
        -       the minimum size of the mark is 8 mm.
        -       the label and the size of the conformity logo should be verified before
                commercialisation by the certification body.

The certificate is compulsory for the commercialisation of products in Russia. An
inspection body from Gosstandart carries out inspections of goods subject to
mandatory certification. It verifies whether all the products subject to certification are
sold with a conformity certificate.

In case of disputes or conflicts among the participants in the certification process, a
party concerned may apply to a dispute settlement commission. If the party disagrees
with the decision of the commission, it can appeal directly to Gosstandart. The
decision of Gosstandart may be appealed in the Court.


b) The declaration of conformity

The Russian version of the declaration of conformity

In July 1999, under the pressure of the future accession to WTO, the Government of
the Russian Federation has adopted a Decree on the Declaration of Conformity 26.
According to the Russian authorities, this is the first step of the future Law on
certification, which will modernise the Gost system. However the Russian rules for
the declaration of conformity differ significantly from the declaration of conformity
established by the EC legislation.

Foreigners cannot make the Declaration

The Russian version of the declaration of conformity presents some notable
particularities. It has to be differentiated from the producer declaration in the
European Union. The Gost declaration of conformity can be done not only by the
manufacturer, but also by the seller or performer. Foreigners can not make the
declaration. According to the Decree, a Russian producer or organisation registered
as a juridical person in Russia and representing the interests of relevant foreign
manufacturers should adopt the declaration (art. 1). Therefore, the certification
cannot be realised by the European producer or exporter, if not registered under
Russian Law. (art. 2) The strict interpretation of this regulation will mean that even a
representative office of a foreign company can not issue the conformity declaration
because under Russian Law, it is not a juridical person, registered under Russian
Law. The EU operator has to set up a company in Russia or to grant a Russian
company the rights to represent his interests.


26
   "Decision of the Government of the Russian Federation n° 766 of July 7, 1999 on the approval of the
list of products whose conformity may be confirmed by the conformance declaration and the procedure
for the adoption of the conformance declaration and its registration.


Market Access study in the Woodworking sector –Final report, 15 August 2002_                       42
Declaration concerns only a limited number of woodworking products

The Declaration of Conformity only applies for products included in the list of
Decision n°766. The declaration applies to the following woodworking products:

        -       General purpose plywood with outer layers of veneer of deciduous and
                coniferous species,
        -       bakelized plywood,
        -       Birch plywood (for aircraft),
        -       Birch plywood (to be exported),
        -       Plywood boards,
        -       Bent and glued banks.

All other products are submitted to compulsory certification.

Different documents can be used for the Declaration

The following documents can be used as the basis for the declaration : the protocols
of acceptance, the acceptance delivery or other check tests of the products carried
out by the manufacturer or outside laboratories, the conformity certificates or
protocols of the test for raw and other materials or accessories, the certificates for the
system of production quality, the documents stipulated for the given products by
relevant federal Law and issued by bodies and organisations authorised thereto,
other documents confirming directly or indirectly the conformity of the products with
the established requirements (art. 4).

There is no time-limit for the validity of the Declaration

The Declaration of conformity is established with respect to concrete products or
group of products for a period established by the manufacturer. The text does not
establish any specific time-limit (art. 6). The declaration has to be established
according to the form given in the annex27.

An accredited Gosstandart Body must register the Declaration

A particular feature of the Declaration is that it should be registered by a certification
Body accredited by Gosstandart. This Body should be authorised by Gosstandart to
conduct certification for woodworking products. The certification body must check the
correctness of the declaration and the related documents within seven days. It
decides to register (or not) the Declaration. The certification body has to check
whether the product is on the list of the products authorised for the declaration of
conformity and whether all the documents attesting the conformity of the product are
available.
27
   The details that have to be given in the conformity declaration are the following: " name of the
organisation or surname first name and patronymic of the individual businessman that adopted the
declaration; data about the registration of the organisation or individual business (name of registration
body, date of registration, number); address, telephone, fax; post , surname, name and patronymic of
the head of the organisation on whose behalf the declaration is being adopted; name type brand of the
product covered by the declaration, Russian classification code, data about the serial output or lot ( lot
, numbers of articles, requisite, elements of the agreement, contract, invoice, name of manufacturer
and of a country and so on".


Market Access study in the Woodworking sector –Final report, 15 August 2002_                          43
The registered Declaration of conformity has the same legal effect as a conformity
certificate. On this ground the manufacturer is entitled to mark the product with the
conformity mark.

The price of the declaration was set up in the amendment of the Law "Payment for
the work on certification of products and services" amounted to two minimal month
salaries in Russia.

Federal organs conduct the controls on the products covered by the Declaration of
conformity. If they reveal an unconformity of the products, the effect of the declaration
is terminated.

c) the Hygienic certification

Hygienic certification is required for an important number of woodworking products
and also for furniture. These requirements are not clear, as the hygienic certification
aims mostly to protect the consumer health and is applicable to products entering in
contact with the skin, foodstuffs and cosmetics. The hygienic certification is issued in
accordance with the Law «On Sanitary - Epidemiological Well-being of the
population»

The Hygienic certification must be performed before certification procedures

The hygienic certification is mandatory for furniture and various woodworking
products. It should be done before GOST-R certification procedure is engaged. The
coverage of products requiring hygienic certification is not clearly defined. The
nomenclature of the products subject to hygienic certification is not detailed. This
opens the door to subjective appreciation by the administration. The exporter or the
importer should request from the certification body or the Ministry of Health an
assessment whether his products are submitted or not to hygienic certification. In any
case, the hygienic certification is needed when a new product is commercialised for
the first time in Russia.

The hygienic certification is required by the Department for Sanitary and
Epidemiological State Control of the Ministry of Health (DSESC). The hygienic
certification has to be well distinguished from the certificate of conformity, established
by Gosstandart. The aim of the certificate is to prove that the European product is in
conformity with the standards for security and health established by the Russian
federation.

The certificate is done by type of products. Its validity is one year. The time limit for
delivery of the certificate is 4 weeks from the moment all the documents and samples
have been presented to the competent body. The competent body is not always the
certification body but the majority of the accredited certification bodies are also
accredited to carry out tests for the hygienic certification or have contracts with
accredited laboratories. The results of the tests are transmitted to DSESC, which is
the only body competent to deliver the hygienic certification. DSESC issues a
registration number for the hygienic certification, which is necessary to obtain GOST
R certification and will be reproduced on the certificate of conformity.


Market Access study in the Woodworking sector –Final report, 15 August 2002_           44
Certificate of conformity

The producer has the choice between:

Production certificate                                 Shipment certificate
Validity: 1-3 years, with compulsory checks This certificate is done for every shipment
every year.                                   if the producer does not have a production
                                              certificate.
                                              Validity: The certified products can be
                                              sold during one year; afterwards a new
                                              certificate has to be requested.
Procedure: Experts from a Gosstandart Procedure: 2 Samples of each product
authorised body are coming to evaluate the have to be sent to the authorised
system of the company in situ. They deliver certification body. Normal time limit: 2
one certificate by type of products. The weeks. One certificate by tariff line is
producer also presents samples of the requested. It is possible to regroup the
products. Different tests are performed.      products in the group of homogenous
                                              products.
Costs: The company has to pay all travel Costs: The price depends on the number
and related costs as well as those related to and complexity of the tests performed and
the work and stay of the experts              the contract with the certification body.
Competent          certification     bodies: Competent           certification      bodies:
Certificate can be issued by a Russian (102 Certificate can be issued by a Russian
certification bodies in Russia) or a foreign (102 certification bodies in Russia) or a
(apparently only 2 certification bodies in foreign (apparently only 2 certification
Europe) authorised certification body.        bodies in Europe) authorised certification
                                              body.
Additional comments: ISO certification Additional comments: The products
and other International certificates are not imported into Russia must have Gost R
sufficient to sell products in Russia. certification. The conformity is evaluated
However, they can be taken into according to the Russian standards.
consideration during the audit.          The International and European certificates of
conformity is evaluated according to the conformity are not sufficient, but can be
Russian standards. The goods have to be taken into consideration. The goods have
marked with the conformity mark.              to be marked with the conformity mark.

The importer can only request a shipment certificate.




Market Access study in the Woodworking sector –Final report, 15 August 2002_          45
Hygienic certification:

Competent authority:                                  Department         for      sanitary      and
                                                      Epidemiological State control
Has to be requested from:                             The certification body, if it is authorised to
                                                      perform the tests or the competent
                                                      accredited laboratory. The certification
                                                      body can advise the EU operator how to
                                                      get the certification.
Procedure:                                            3 samples, time-limit: 2 weeks.


Declaration of Conformity

In some cases the Producer or importer has the choice between:

Certificate of conformity                             Declaration of conformity
The producer can do:                        The declaration can be done by the
                                            producer or by the importer.
Production certification: experts from Product coverage: Only a limited
the authorised certification body come to number of products, enumerated in the
evaluate in situ the production system of decree 766.
the company. One certificate by group of
homogenous products. Validity: 3 years Procedure: Only a Russian producer or
with regular checks every year. The an organisation registered as a judicial
producer can give a copy of the certificate person in Russia can make the
to the importer.                            declaration.
                                            Declaration has to be accompanied by all
Shipment certificate: One certificate by the documents, certifying the conformity
tariff line. The certificate has to be done of the products.
for every shipment. Products can be sold
with this certificate during one year.      Registration of the declaration: has to
                                            be     registered    by  an  accredited
The importer can only request certification body. Time limit for
shipment certificate.                       registration: 7 days.

                                                      Validity: no time limit for the validity.

                                                      Cost: 2 monthly salaries in Russia.

                                                      Additional comments: Same legal
                                                      effects and procedure for dispute
                                                      settlement as the old system. The product
                                                      has to be marked with the conformity
                                                      mark.




Market Access study in the Woodworking sector –Final report, 15 August 2002_                      46
        b) State Fire Safety Certification

State fire safety certification was introduced mainly for woodworking products used in
housing construction. This system is supervised by the Ministry of Industry, which
establishes the rules and gives accreditation to the certification bodies allowed to
perform this certification. 26 agencies and 65 laboratories are accredited by the
Ministry of Industry. It is important to notice that the State fire safety certificate is
required in order to obtain the certificate of conformity. Therefore, this procedure
increases the administrative burden on importers of woodworking products. Moreover,
it can not be easily justified for safety reasons, as the resistance to fire normally should
be verified during the procedure for evaluation of conformity.

Additionally, according to the importers, the use of woodworking products is
restricted for the construction of multi-floor houses. The Russian authorities did not
give comments on this point and the consultant is still looking for the relevant
legislation.

        c) Gosststroj certification

Gosstroj certification is the certification applicable to the construction industry. It was
designed mainly as voluntary certification but 6 products are subject to mandatory
certification – including wooden cottages, windows and locks. Moreover, technical
approval by the Federal Certification centre for construction is required for new
products prior to utilisation at a construction site according to the Russian Government
decree N°1636.


2.3.6. Other problems identified


Truck weight restrictions

The Ministry of transport has introduced weight limits for trucks. According to these
restrictions, the net weight of products transported by trucks can not exceed 20
tonnes. Importers of woodworking products consider this limitation as an important
obstacle as previously they were allowed to import 40 tonnes in one truck. According
to the importers, the measure has no objective grounds but was taken under the
pressure of the transport lobby.

Protection of intellectual property

In the furniture sector, EU importers often complain about the non respect of their
intellectual property rights by the Russian manufacturers. Small domestic workshops
are manufacturing low quality copies of furniture imported from the EU. Although this
practice does not restrict significantly the market share for the EU companies, given
the poor quality and low price of counterfeited articles, it must be noticed that the
protection of models and design is still not correctly implemented by the Russian
authorities.

Nevertheless, Russia has made considerable progress regarding the adoption of the
legislation for protection of the intellectual property. Since 1993, Russia has adopted
Market Access study in the Woodworking sector –Final report, 15 August 2002_

                                                                                         47
generally acceptable laws on trademarks and appellations of origin, patents and
copyrights. Russia is party to the Paris, Berne and Geneva conventions.

Restrictions on distribution for Foreigners

Foreign companies are not authorised to exercise a commercial activity on the
territory of the Russian Federation. For example, foreign companies can not open
shops or set up distribution systems on the territory of the Russian Federation. A
foreign company needs to register a company in Russia, which may be a 100%-
owned or a JV (Joint Venture), in order to engage directly in any kind of commercial
activity.

The legal framework is set by the Law on Foreign Investment of 1999, a series of
laws on taxation and a number of government regulations governing specific legal
issues involved.

Investment rules

Investment rules in Russia are very restrictive. Even if a new Law for Foreign
investment was adopted in 1999, it is very conservative and does not encourage
foreign direct investment.

The rules of investment in Russia vary with the regions and sectors of activity. The
regions have competence to adopt laws on the investment in order to promote
economic activities. Some regions such as Nijni Novgorod have tax exemptions for
investment. Foreign investors desiring to invest in Russia should request information
from the Ministry of Economy and the regional authorities on the laws and regulations
applicable on investment.

Another serious barrier for investors is the non-transparent tax and accounting
legislation in the Russian Federation. The Russian accounting system is different
from the international recognised ones and the complexity of the tax legislation
makes it difficult to comply with all rules and regulations.


2.3.7. Legal analysis


a) main difficulties experienced by the EU exporters to Russia

The main problems experienced by the EU exporters to Russia are related to
certification requirements imposed by Goststandard and Gostroj, which are
compulsory for the majority of the woodworking products, sold on the Russian
market. In addition, the importers of woodworking products and especially the
importers of furniture have complained about the existence of problems related to
customs valuation and existence of minimum prices.




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                                                                                  48
b) legal analysis of the problems experienced

The main text in the EU-Russia bilateral trade relations is the Partnership and Co-
operation agreement28, which have entered into force on 1st of December 1997.

As far as the certification procedure is one of the most important provisions is article
55 of the PCA. According to this article "the two parties recognise the importance of
the approximation of law" and Russia took the commitment to adopt legislation
compatible with EU legislation. The approximation of law includes the field of
standards and technical regulations. Article 60 PCA recognises the importance of
approximation of law in the field of standards and conformity assessment, the use of
international standards and the conclusion of mutual recognition agreements.

Under the pressure of the EU, Russia has adopted the new scheme for certification,
which is the declaration of conformity, but some details in the implementation of this
scheme still hinder the export of EU products to Russia. Some woodworking products
are included in the list of products submitted to the declaration of conformity.

Russia is still not a member of the WTO and the provisions of the TBT agreement are
still not applicable. However, in view of the future accession of Russia to the WTO, it
should be mentioned that Russian standards are not in conformity with the
requirements of the TBT agreement. The agreement (article 2) requires that the
members should use international standards already existing, except if those
standards are ineffective. The standards should not create unnecessary obstacle to
trade and be more trade restrictive than necessary to fulfil legitimate objectives.

Russia has not provided sufficiently clear information about the current system of
conformity assessment with articles 55 and 60 PCA.

The Russian authorities do not accept any certification to internationally adopted
standards. The procedure of certification is not in conformity with the international
guides and recommendations. Only few European laboratories and certification
bodies are accredited to provide Gosstandart certification.

The PCA contains also provisions on valuation issues. These provisions recall the
obligations existing under article VII-2 of the GATT agreement.

The provisions of the PCA could not in most of the cases be invoked directly by the
traders because they do not contain strict obligations or timetable for their
implementation. However, traders could report their problems to the European
Commission, which could rise the issues in bilateral negotiations.




28
 Official Journal L 327 , 28/11/1997 p. 0003 - 0069
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                                                                                     49
2.4. THE US



2.4.1. EU Industry assessment


The USA is an important market for many EU operators. In particular German,
Austrian, Swedish and Finnish sawmill companies export mainly to the US market (as
well as to the Japanese market). There is therefore a strong interest for the market
access improvement for some EU products (e.g. EU sawmill products). Exports are
concentrated on specific items (sawn softwood, parquet panels and coniferous sawn-
wood).

Various reasons were evoked:

1. The importance of the transport costs (mainly for European SME, not present in
   the US, which consider that transport cost as a disincentive for exports);
2. The competitive advantage of the US competitors (mainly for SME). However, big
   companies say that the US industry is losing competitiveness. However, in 2000,
   the prices in the US have increased, given the reduction of the production. EU
   exports to the US market have increased, in particular Finnish and Swedish.

Exporting companies have complained about the following:

-       Tariffs and Import taxes
-       Customs formalities (in particular classification issues)
-       Standards and certification issues

Nevertheless, attention must be paid to the fact that during the mission to the US, all
Member State Trade Representatives interviewed alleged that they had never heard
about any specific problem encountered by their companies to import wood or
furniture into the US. The consultant had made further investigation with the EU
companies in order to assess an accurate impact of the problems mentioned in
questionnaires or during meetings with the wood industry (e.g. difference in
standards or classification issues).


2.4.2. Missions to the US


The first mission to the US took place from 10th to 23rd June 2001. The aim was to
meet the competent authorities as well as the private sector‟s representatives. A
second mission to the US took place in April 2002 and aimed to collect more
information on some specific issues such as wood grading standards, classification
and furniture labelling.



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                                                                                    50
2.4.3. The situation of the US woodworking industry


The US is the second biggest wood exporter in the world (after Canada) and the US
woodworking industry is very dynamic. The total number of woodworking companies
is estimated to be about 86 000, including 19 000 primary manufacturers, 53 000
manufactures and 14 000 furniture manufactures. All the 50 States have wood
manufacturing business. Oregon is the US state with the highest woodworking
production, while North Carolina is the first furniture producer. The US industry is
very active in export and the average volume of export per year amount to 6 billions
USD. However, in the recent years the dynamics of the woodworking industry has
been slowed down, mainly because of the high prices of the American products due
to the high value of the US Dollar internationally and the consequent decrease in the
production. The US has increased its import of woodworking products, coming from
Canada and the European Union.


2.4.4. Tariffs and import taxes


The level of tariffs is globally low. They do not constitute an obstacle for the largest
exporting companies.

For wood products of HS chapter 44, tariffs vary between 0% and 10.7%. However,
in some questionnaires, tariffs are qualified as being a significant obstacle (IT). There
are indeed “tariff peaks“ for plywood (8% and more). Applied tariffs for furniture (HS
Chapter 94) range from 0% to 8%.

Some companies (wood flooring companies) complained about the financial burden
for importers of additional import taxes, which increase the level of total import duties.
These are as follows:

       -       Merchandise Processing Fee (MPF) (0,21%) of f.o.b. (freight on board)
               value with minimum of 25 USD and maximum 485 USD. The tax is
               collected by the US Customs and Puerto Rico.
       -       Harbour Maintenance Tax (HMT)(0,125 %) of f.o.b. value
       -       Others (Customs clearance handling fee and bond requirement29).

Trade Statistics

The EU had very important trade deficit in wood and wood products with the United
States in the beginning of the eighties. Recently, the EU exports to the United States
have grown and the deficit in 2001 was very small considering the volume of trade
involved. The levels of import/export of wood and wood products are as follows:

29
  The bond is a part of a formal entry documentation required for the importer, the consignee or the
authorised agent for releasing the imported goods (Customs regulation 19 CFR). The purpose of the
bond is to guarantee that proper entry covers not only the payment of estimated duties but also “any
duties and taxes subsequently found to be due”.
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                                                                                                 51
US Imports to the EU:

Year         1998                     1999                    2000             2001
Volume       1,484,208,950            1,334,633,060           1,550,821,110    1,303,389,580
             Euros                    Euros                   Euros            Euros



EU Exports to the US:

Year         1998                     1999                    2000             2001
Volume       658,846,910              736,885,710             1,023,307,260    1,203,385,430
             Euros                    Euros                   Euros            Euros



According to the EU companies, the volume of trade between the two parties is
highly dependent on the export potentials between them and on the evolution of
international prices.


2.4.5. Customs formalities


Processed Wood (HS chapter 44)

-       Documents for clearance: are alleged to be too long and difficult for the EU
        exporter to provide.
-       Classification issues: US Customs have made a proposal to re-classify the
        engineering flooring (HS 441830: multi-layer parquet) as plywood (HS 4412),
        rather than parquet panels, which means that the product is subject to an
        import duty of 8%. For the time being, a response has not been received by
        the US customs. The European Federation of Parquet Industry has addressed
        several letters to the US Customs, insisting on the fact that the “engineering
        wood flooring – laminated flooring” is internationally classified under 441830.
        The measure of the Customs would affect several European companies,
        exporting laminated flooring to the United States. The US Customs Service
        has several times refused to meet the consultant. Therefore, the classification
        issue was not discussed with the US customs. The EU companies have often
        insisted on the fact that they encounter classification problems with the US
        customs.

Furniture (HS Chapter 94):

Customs formalities were not reported to cause major difficulties (interviews with EU
industry, importers and Member States). The importation of wood products and
furniture is subject to the general rules as defined in the Code of Federal Regulations
(imports documents, 19CFR141; customs inspection (19CFR151 and customs duties
19CFR159).
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                                                                                          52
All the products entering into the US should be marked with the country of origin. The
US customs have a general requirement for the indication of the country of origin of
every article of foreign origin entering the United States. These articles must be
legibly marked with the English name of the country of origin unless the exception is
provided for this by the law. Among the wood products only sawn lumber, wooden
pickets and wooden tiles are exempted from country of origin marking.
This requirement creates problems for the European exporters. The indications “EC”
or “EU” or “European Community” are not recognised because they do not indicate
an individual country of origin. According to the US requirements the expression
“country” means the political entity known as a nation. European exporters consider
this requirement as excessive for two reasons. First, the EU exporter should furnish
additional documentation for customs clearance in order to satisfy the US
requirements. Second, the EU producers should prepare special marking for the
United States, on goods which bear EU as country of origin. This implies additional
costs.
The marking of origin must be legible. It should be located in a conspicuous place.
The article should be marked as indelibly and permanently as the nature of the
product will permit. However, any reasonable method of marking is permitted,
including adhesive marking. The only condition is that the adhesive marking should
remain on the product and can be destroyed only by a deliberate act.
The articles, subject to country of origin marking, which enter the US without proper
marking of the origin, shall be submitted to additional duties unless properly marked,
exported or destroyed under customs supervision prior to the liquidation or entry. The
European exporters are advised to mark correctly their products with the country of
origin in order to avoid additional fees and penalties in customs. Normally a penalty
of 10% is applicable in customs (19 CFR 134).


2.4.6. Certification / US standards


Pallets and wood packaging have to be imported with a phytosanitary certificate. This
certificate can be delivered by the EU exporter himself. It must certify that the
products are exempted of plague and wood diseases. The rules are contained in the
7CFR 300 and 7CFR 319 and are issued by the Animal and Plant Health Inspection
Service (APHIS). The heat treatment certificate is requested for importation of any
wood packaging material.

CEI Bois transmitted to the consultant the following complaints regarding the difficulty
for its members to comply with some US standards. The association also criticised
the fact that EU standards were not recognised by the US competent Authorities.

-       Structural sawn softwood: the strength values of the European sawn timber
        components must be tested and accepted by the American Lumber Standards
        Committee (ALSC) based on the geographical location of the growth area.
        Design (strength) values presented in European relevant EN standards are not

Market Access study in the Woodworking sector –Final report, 15 August 2002_

                                                                                     53
         recognised in USA.

-        Sawn softwood (HS 4407): ALS system requires substantial technical testing
         and monthly quality supervision at sawmills for construction grades.

-        Parquet: Higher freight costs due to low weight allowed on lorries (21 tonnes).
         According to the exporters and US importers, the US transport regulations do
         not allow lorries with weights over 21 tonnes.

In addition, in questionnaires, there were several additional complaints:

-        Upholstered Furniture: complaints about the US Phytosanitary rules and the
         requirements of Phytosanitary certificates.

-        Plywood panels: US testing rules differ from the European norms (however no
         specific complaints were addressed by the industry).

    The main complaint of the European companies concerns the grading rules for
    wood. The grading programs are implemented by the American Standard Lumber
    Committee (ALSC). The ALSC consists of manufacturers, distributors, users, and
    consumers of lumber and serves as the standing committee for the American
    Softwood Lumber Standard (Voluntary Product Standard 20 – PS 20). It is in charge
    to administer the accreditation programme for the grade marking of lumber produced
    under the system in accordance with PS 20. The American Lumber Standard (ALS)
    system, is an integral part of the lumber industry's economy and is the basis for the
    sale and purchase of virtually all softwood lumber traded in North America. The ALS
    system also provides the basis for acceptance of lumber and design values for
    lumber by the building codes throughout the United States.
    As noted above, a function of the ALSC is to maintain the American Softwood
    Lumber Standard. The ALSC, in accordance with the Procedures for the
    Development of Voluntary Product Standards of the U.S. Department of Commerce
    and through a consensus process establishes sizes, green/dry relationships,
    inspection provisions, grade marking requirements and the policies and enforcement
    regulations for the accreditation programme.
    The activities above are carried out through the ALSC or, through framework
    established by the ALSC and PS 20, by the National Grading Rule Committee
    (NGRC). The NGRC is an autonomous body functioning under by-laws approved by
    the ALSC and has specific functions with regards to maintaining the National
    Grading Rule for dimension lumber.
    Even if the ALSC standards seems not to be compulsory, the European exporters to
    the United States consider necessary to respect the US standard in order to sell
    their product to the United States. The respect of this standard implies additional
    costs for the European companies, because they have to perform new tests and to
    install new machinery.
    According to the foreign lumber policy of the ALSC, the foreign agency could be
    accredited to grade mark and supervise the grade marking of lumber products. For
    lumber of foreign origin to be grade-marked under the ALSC system, it must be
Market Access study in the Woodworking sector –Final report, 15 August 2002_

                                                                                      54
 graded under established ALSC procedures, the national grading rule for dimension
 lumber, or grading rules as published by the U.S. rule-making agencies.
 In addition to the untreated lumber accreditation programme, the ALSC also
 administers accreditation programmes for the quality marking of treated lumber
 produced under standards written and maintained by the American Wood
 Preserver's Association (AWPA) and for the labelling of non-manufactured wood
 packing material produced under the International Plant Protection Convention
 (IPPC)30. Since July 2001, the non-manufactured wood packing programme has
 been implemented.
 According to some European companies they are not exporting to the US, because
 of the costs required to conform with the US grading standards. According to them,
 in order to be able to export untreated wood to the United States, the American
 standards require specific sterilisation and the requested equipment is very
 expensive. Further, the plants should be inspected by the US accredited agency.
 The companies are reluctant to introduce this technology because they do not know
 if their business with the United States will be successful. According to some of the
 EU companies, the same rules are implemented in Canada and this situation limits
 the EU exports to the North American market.


2.4.7. Labelling rules


Furniture products should be labelled in conformity with the Fair Packaging and
Labelling Act – 15CFR, Section 500-503.

The Fair Packaging and Labelling Act requires each package of household
"consumer commodities" (that is included in the coverage of the act) to bear a label
on which there is:
           o   a statement identifying the commodity
           o   the name and place of business of the manufacturer, packer, or
               distributor;
           o   and the net quantity of contents in terms of weight, measure, or
               numerical count (measurement must be in both metric and inch/pound
               units).

As regards the household furniture, the Federal Trade Commission has adopted a
Guide for the Household Furniture Industry. The furniture and components have to
comply with specific rules aiming at protecting the consumer. (16CFR250). The guide
foresees specific labelling describing wood and wood imitation, as well as the
labelling concerning the wood‟s identity. The labelling should also contain information
about the style and origin of the products. The guide also regulates the use of some

30
  The European companies willing to export to the US are strongly advised to contact the ALSC at
www.alsc.org , tel : +301 972 1700, fax : + 301 540 8004. The Postal address is American Lumber
Standard Committee, P.O. BOX 210, Germantown, Maryland 208750210.
Market Access study in the Woodworking sector –Final report, 15 August 2002_

                                                                                             55
specific terms such as “new”. A complete version of the guide could be found on the
Federal Trade Commission web site31. The respect of these requirements is not
compulsory for customs clearance, but must be respected in order to commercialise
the goods in the United States.

Still, there are some additional requirements for children‟s furniture (beds) contained
in the Federal Hazardous Substances Act (see 16CFR1508, 16CFR1500.18,
16CFR1513). The importers of upholstery should also pay attention to the fact that a
large number of states have additional labelling rules for children‟s furniture or other
type of furniture.

There are also anti-fire specific standards established by the Flammable Fabrics Act
(1953), which only apply to fabrics used for apparel (and not yet decoration fabrics,
which are subject to voluntary standards). It was reported by the Member States that
some voluntary standards at federal level for decoration fabrics might be compulsory
at state level (California, Illinois, Massachusetts).


2.4.8. Legal analysis


Some of the difficulties experienced on the US market could be assessed under the
WTO rules. As far as the certification is concerned, the provisions of the TBT
agreement could be used in order to verify if the measures are more trade restrictive
than necessary. A detailed analysis of this agreement and other WTO provisions
could be found in §3 – Legal analysis.




31
 http://www.ftc.gov/bcp/guides/furniture-gd.htm#g9
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                                                                                     56
2.5. JAPAN


2.5.1. EU Industry assessment


The EU operators qualify the Japanese market as a closed market affected by
several tariff (tariff quotas) and non-tariff barriers (mainly standards). In
questionnaires, the operators have complained about the following measures:

a)      Tariffs and import duties: Plywood producers complained about excessive
        tariffs.
b)      Customs procedures: delays in customs clearance, long and burdensome
        procedures.
c)      Standards: non recognition of EU standards, complexity of Japanese
        standards, burdensome procedures, different application for measuring
        formaldehyde).

However, the degradation suffered by several tropical forests in Asia has led to a
decrease in the local production since 1996. The subsequent increases in the US
prices have led Japanese clients (e.g. construction sector) to look for other supply
markets, including Sweden, Finland and other EU markets.

EU exports concern mainly laminated Douglas fir for construction and maritime pine
for plywood. The demand is mainly focused on hardwood and softwood. Hardwood is
expensive in Japan, given the high price of electricity and the scarcity of space for
storage. In 1998, the Building Standard Law was largely modified in order to
introduce functional standards, replacing specification oriented standards. This was
followed by the adoption of a separate piece of legislation, the Housing quality
Assurance Law. In Japan, there is a policy towards the use of soft-wood. Preference
is therefore given to foreign suppliers of soft wood. Among the different EU products,
there is a market share for three types of products:

-       Douglas fir as building beams
-       Maritime pine for plywood
-       Interior products (pine parquet, furniture).

According to the EU sawmills producers, the exports to Japan have significantly
increased. This resulted mainly from the US decrease in production. North American
companies are not anymore able to satisfy the domestic demand in Japan.


CEI Bois members have complained about several certification measures applied for
different types of wood:

-       Beech Plywood: there are different requirements to those applied in the EU to
        measure formaldehyde which cause difficulties to plywood exporters.


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                                                                                   57
-      Sawn softwood32: There are differences between the EU and Japanese
       standards. Japan Agricultural standards JAS 111 classify the strength value of
       European Spruce (Picea abies) inferior to those of American Yellow Pine and
       Douglas Fir. The EU standard EN 1912 classifies the strength values of
       European spruce equal to those of the American Yellow Pine and Douglas Fir.
       Japan does not recognise the EU standard. The EU companies (in particular
       Swedish companies) have complained that Japan gives priority to the US
       standards.

-      In addition, the size of log houses is restricted, based on the properties of raw
       materials. According to the EU Industry, the restrictions are not based on
       tested data and should be removed.

-      Laminated wood: Equivalence of melamine glue and urea resin glue with glues
       used in Japan is not accepted by Japanese Authorities.


2.5.2. The mission to Japan


The consultant conducted a mission in Tokyo from 11th to 15th March 2002. The
mission aimed at meeting the Member States‟ Trade representatives, some importers
of EU products, and the Japanese Authorities in order to collect the information on
the measures applied to imported wood products, their implementation and their
impact on EU exports. The mission has been organised with the kind support of the
EC Delegation in Tokyo, which arranged the meetings with the Ministries and the
Member States‟ Trade representatives.

The consultant attended meetings with the following authorities:

Authority                                        Issues addressed
Ministry of Economy, Trade and Industry (METI)   Presentation of the research; policy regarding
Mr Namba, Manufacturing industries bureau        wood products; technical standards and labelling
                                                 requirements for wood furniture
Ministry of Agriculture (MAFF)                   Situation of the domestic industry
Mr.Tetsuya Kurata, Deputy Director for wood Standards (JAS) applied to wood products
products
Int‟l Standardisation, standards and Labelling
Division, General Food Policy Bureau
Customs, (MOF)                                   Measures applied for imported woodworking
Mr Teruaki Kato, section Chief, International products, controls carried out by Customs
Affairsand Research Division, Customs and Tariff
Bureau
Mr Yukari Kawanaka, Chief, Customs clearance
division
Mr Shuji Namri, Team leader, Customs clearance
Div.




32
 CN 4407, slices of European spruces (Picea abies) for glulam manufacturing.
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Main outcome of the mission is as follows:

1.      Among the countries under review, Japan appears to be one of the most open
        markets: tariffs are quite low, there are no burdensome phyto-sanitary
        requirements, the customs clearance process for wood processed products
        (including furniture) is reported to be fast and easy.

2.      However, there is a concern from some Member States and some operators
        regarding the existence of different standards for wood products used in the
        construction sector, which have lead our companies to adapt their production
        process for the Japanese market. These operators would therefore welcome a
        bigger deregulation and a greater recognition of the EU standards by
        Japanese Authorities.

3.      If other difficulties are sometimes quoted regarding the penetration of the
        Japanese market, these are however not directly linked with “traditional”
        market access trade barriers. They are more caused by difference of
        language, lack of transparency of some technical rules and the complex import
        structure offered by the Japanese market (based on various intermediaries in
        the import and distribution channels between the EU company and the final
        consumer).


2.5.3. The Japanese market


     Structure of EU exports of woodworking products to Japan.

     The products considered are products from HS chapters 44 and 94 (wood and
     furniture). According to the Ministry of Agriculture, the main wood products exported
     are glue laminated lumber, spruce and European pine.

     Japan market is an important market for the European industry. The level of
     development of the Japanese economy and the extensive use of wood in the
     construction sector in Japan renders the market highly attractive. In Japan, 75% of
     the houses are in wood and the demand concerning wooden finished products for
     home decoration (wooden floor covering, doors, shelves, furniture) is important.
     Japan massively imports wood in order to cover the increasing demand in wood
     (mainly construction) and the effects of the forest policy (the forest is mostly
     protection forest, preventing soil erosion and land-slides and not therefore
     exploited).

     Before 1994, there were practically no EU exports of wood products. EU exports
     of wood products started from the scratch in 1994. The penetration of the EU
     products to the Japanese market resulted from a combination of different factors

     (1)         the reduction of the available forest in Japan and the neighbouring
                 countries;
     (2)         the sharp and sudden increases in prices by the US traditional
                 suppliers combined with problems of quality and time deliveries with
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                 traditional US suppliers; EU suppliers are regarded as reliable
                 suppliers
    (3)          the increase in demand for high quality wood products, in particular dry
                 wood
    (4)          the yen over-valuation compared to the European currency: the
                 European products became more competitive in price and in quality.
                 Nowadays, the EU exports of HS chapter 44 are estimated to reach 2
                 Million m3/year. Of this total Finland and Sweden represent 700,000
                 m3 each, followed by Austria and Germany.

    However, the EU companies are sharp competition with the South Asian suppliers
    (for tropical wood) and with the US and Canada.

    The construction sector is the main consumer of EU products. The recent
    modification of the Building Standard Law has also increased the quality
    standards for construction. This explains that the EU products became more
    competitive and EU companies started their business in Japan by contacting
    importers.

    According to the EU Member States‟ Representatives and the operators
    interviewed, the market offers good opportunities for the following items:

    1. Wood for construction

    There is a demand for high quality and high strength sawn-wood (pine and
    spruce). In this field, the demand is increasing in logs and sawn Douglas aimed at
    the processing of poles. Finnish and Swedish producers started to expand their
    exports with the rough sawn timber (big volumes) and than developed the exports
    of planned sawn timber (more value added).

    In addition, according to other interlocutors, there is also a trend towards the
    softwood, which is considered more environmentally friendly. Investment by the
    domestic industry in highly sophisticated plywood machinery enables also a more
    extensive use of softwood, for example maritime pine for plywood.

    In 2001, EU exports of wood products (HS 44) were mainly concentrated on the
    following items:

    -     Sawnwood (exported mainly by Finland, Austria, Germany and Sweden)
    -     Glue-laminated timber, Laminated Douglas fir and maritime pine for plywood
          (France, Austria, Germany, Sweden and Finland)
    -     Pre-fabricated houses (Sweden, and to a lesser extent, Finland, export wood
          panel homes.




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    2. Related wood items for decoration

    -   Floor covering the exports of the EU wood floor covering have increased and
        there is a higher interest for EU products in the market (Spain, Sweden,
        Austria and Italy).

    -   Doors: there is an interest but usually EU doors are bigger than Japanese
        doors. The size of the doors (only one metre large) should therefore be
        adapted to the market.

    -   Frame windows: idem.

    3. Furniture

        Exports of furniture are quite limited. The main segment of the market taken by
        our companies is the up-market furniture (for home, hotels and restaurants).
        They are various reasons for the scarcity of exports of furniture. One very
        important reason is linked to the house living in Japan. The limited available
        space in houses and apartments (as well the relatively small size doors) renders
        the exports of furniture (big furniture) difficult. A good example lies in beds.
        European beds are often not adapted to the Japanese style of life (use of
        “tatamis”, which occupy a limited space).

        Another reason for limited exports is the importance of the system of
        intermediaries in Japan, which renders the products more expensive. It is
        therefore often difficult for the EU companies to export directly. It has also to be
        remembered that the high quality requirement of the final consumer (which puts
        sometimes SMEs aside from the market if they do not adapt to Japanese
        requirements).

        The office furniture segment is nevertheless more promising for our industry
        (exports from Italy, Spain and Austria). Nordic operators have also developed the
        segment of furniture for elderly and handicapped people (Finland).

        However, some investments in the furniture sector are foreseen. For example
        IKEA is planning to install eight stores in Japan. This will constitutes the biggest
        foreign investment in this sector in Japan.


2.5.4. Import duties


    Applied tariffs in 2002

    Customs duties for chapter HS 44 range from 0% to 20%. However, most of the
    tariffs applied for these products are free or range between 5% and 7%. All wood
    furniture is free of access (0%).

    For logs (HS 4401) and wood charcoal (HS 4402) the access is free of duties.
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    For rough wood (HS4403), tariff is 0%, except 4403.99 (wood of kiri): 3.5%

    For wood poles and sticks (4404), the applied tariffs range from 0% to 7.5% (some
       coniferous poles: 4404.10).

    For wooden flooring (HS 4405), applied tariff is 2.5%

    For railways and tramways slippers, the access is free (0%).

    For sawnwood (HS 4407), the duties range from 0% to 10%. Sawnwood being
       exported mainly by Finnish, Austrian, German and Swedish companies in the
       form of pine and spruce, these products are levied with a duty of 6 to 8% (some
       positions being 0%).

    For veneer sheets and sheets for plywood (HS4408), most of the products range
       from 0 to 5.6%.

    For wood floor covering and moldures, (HS 4409) tariffs range from 0% to 7.5%,
       most of the products being levied with a 3.6%.

    For particle boards (HS 4410), the duties range from 5% to 6%.

    For fibre board (HS 4411) the duties range from 2.6% to 3.5%.

    For plywood (HS 4412), most of the products are levied with a 6% duty.

    For densified wood (SH 4413) the tariff is 7%.

    For wood frames, (SH 4414), applied tariff is 3.2%.

    For packing cases and boxes (HS 4415), it ranges from 2.8% up to 3.9%.

    For barrels, the applied tariff is 2.2%.

    For tool, tool and brushes handles (HS 4417) the applied tariff ranges from 2.2% up
       to 2.8%.

    For carpentry wood (HS 4418), the applied tariffs range from 0% to 5%.

    For table ware and kitchen ware (HS 4419) , the duties range from 2.8% up to 4.7%.

    For wood marquetry (HS 4420), the applied duties range from 2.7% to 10%.

    For other articles of wood (HS 4421), duties range from 0% up to 10%.

    For wooden furniture, the applied tariff is 0% for seats (HS 9401) and medical
       furniture (9402). For office furniture (HS 9403), the applied tariff is also free.



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2.5.5. Clearance process


    There was no complaint regarding the documents to be provided for the clearance
    process (except for the certificate of treatment).

    The documents to be provided by the EU exporter are:

            -   Air Waybill
            -   Bill of lading
            -   Commercial invoice
            -   Entry document
            -   Quarantine Entry Document
            -   Certificate of treatment

There are no specific phytosanitary requirements for imported wood, except for logs.
Wood and sawn timber are not covered by the quarantine rules. However, according
to the Ministry of Agriculture representative, sawn timber could become subject to the
quarantine inspection.

Logs should be accompanied by a certificate of treatment. Wood packaging is not
required to be treated before shipment.


2.5.6. Technical measures


The mission has been conducted on the basis of the complaints made by the EU
operators on the technical rules and standards alleged to hamper EU exports of
woodworking products in Japan. The main result of the meetings conducted with EU
trade representatives and importers enabled however to come to a more balanced
conclusion.

According to Member States Trade Representatives, the EU companies only face a
limited number of problems on the Japanese market. Some interlocutors have
even explained that the technical standards do not constitute a key issue for their
exporting companies. The Japanese market is a major market. Therefore, EU
companies have made the necessary steps to adapt to these standards. In addition,
various interlocutors expressed the view that the situation will improve in the medium
/long term and that Japanese authorities will harmonise their own standards with the
EU standards. The domestic industry and the importers are lobbying the Authorities
very strongly in that sense.

The importance to adapt to Japanese standards

The EU exports have started from zero in 1993 and have significantly increased,
gaining market shares previously detained by US exporters (in particular in spruce
spices, pines). The sawn timber market has increased significantly for the saw mills.
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Japan has become a key market for them and they have worked to adapt to the
standards of this important customer. The sawmills have succeeded in exporting
more value-added products. 75% of all sawn timber exported is made according to
Japan technical specifications (JAS standards and according to additional customers
specifications, as specific dimensions for doors frames for example).

In 2000, Nordic exports have represented some 370 Mio Euros (more than half of the
exports are origination from Sweden and Finland). The competition has however
become more intense, including among EU exporters. Austrian exporters have also
increased their direct exports of wood to Japan. The main difficulty for these
exporters consists in the adaptation to the building standards, which are influenced
by the US standards.

Austrian companies also faced some difficulties at the beginning to comply with the
Japanese standards. However, they made the necessary steps to comply. For
example, regarding the problem of the production of the glue-laminated products,
they have accepted to produce without the glue, which was forbidden by the
Japanese standards.

Regarding the strength requirements, it was said that the Japanese system requires
higher standards than in Europe. For example the duration for strength has been
extend up to 10 years. According to EU operators, this does not practically make
sense. However, it is not considered as a trade barrier as such.

The JAS 2000 (the certification system)

The consultant attended a meeting with Representatives of the Ministry of Agriculture
who kindly underlined the main features of the certification system applied for some
wood products.

JAS (voluntary standards)

The products covered by JAS standards can be certified using two procedures:

                             1. The RFCO (Registered Foreign Certification Organisation)
                                certifies the mill factory. When the mill is certified, it is
                                certified forever, except if some problems occur.
                             2. The RFGO (Registered Foreign Grading Organisation),
                                the producers have to register every five years in order to
                                review the original certificate.

For sawn lumber, the certification is made by RFCO. The testing is on the grading,
every 15 days. If the tests are positive on five consecutive times, the testing is only
made every 50 days. Otherwise, the products have to be tested before every
shipment.

Before 2000, the FTO (Foreign testing organisation) was in charge of the testing and
submitting the tests‟ results the tests to RFGO. Since the adoption of the new rules
(JAS 2000) there is transitional period of three years (from 2000 – 2003). During this
transitional period, the FTO is still allowed to certify the products. Under the new

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system, FTO will no longer exist. The companies which are not certified mills desiring
their products to be marked with JAS (JAS is voluntary) will have to export their
products to Japan and to ask the grading to a RGO in Japan.

 he mandatory requirements (in form of functional standards) under the Building
Standard Law may be met by compliance with the relevant JAS Standards, while
other specifications may well be acceptable so long as they are proved to satisfy the
functional standards, in some cases the JAS specifications are the only one accepted
as meeting the mandatory functional requirements;

Glue-laminated issue: a Ministerial ordinance implementing the Building Code has
decided that the JAS standard became mandatory. Under the article 37 of the
Building Code, there is only a JAS standard quoted for structural laminated veneer
lumber.

Under JIS (Japan Industrial Standards) there are some mandatory standards for
MDF particle board. JIS standards are elaborated by the Ministry of Construction.

For example the “OSB” (orientated strand board) logo designates the product made
out of wood saw-dust. In Austria there is a company certified to issue this logo.

The building standards

For Swedish exporters that are not representing the bulk of EU exports in wood
products to Japan, the main difficulty encountered is the existence of different
standards for home construction under recent changes in the Building Code.

Up to now, exporting companies had not reported major difficulties regarding the
compliance with Japanese standards. They were not reported to constitute an
unbearable barrier for the operators. Swedish companies were getting the required
approval on their finished products by the Norwegian Technical Institute. This
Institute is an accredited organism for the certification to JAS standards issued by the
Ministry of Agriculture and the Ministry of Transport.

Other EU institutes are also accredited Centre Technique du Bois et d‟Ameublement
(CTBA) in France). They can give the JAS authorisation. However, this apparently
requires the presence of a Japanese expert. Therefore for practical reasons, French
companies often do the certification through the importer.

For particle-board, most of the sawmills have got their approval and are exporting
directly to Japan. In 2000, 300,000 tons were exported, including 200,000 tons for
pre-fabricated houses.

Concerns regarding timber construction issues

In 1998, the building legislation has been modified with a three years‟ transitional
period to adapt to the changes. Under the new rules, the impregnated timber should
comply with specific standards. Following the recent changes, however, the approval
will be on the components, and not the structure anymore. This means the
requirement to certify the whole process on how the timber has been graded. This

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certification process is very long and will probably result in additional costs for EU
companies. At the end of the process, there is not a guarantee that the particleboard
will get the certification.

Under the construction quality law, pre-fabricated houses are divided into different
categories according to their durability. EU exporters (Nordic, German) produce and
export non-impregnated timber. Nevertheless, the law considers, that non-
impregnated timber has less value than impregnated (the duration would be shorter).
This is strongly opposed by EU exporters, who argue that durability is not a question
of impregnation but a question of “constructive use” or “way of use” (for example, the
timber will have a longer duration if it is not put on the ground directly). Therefore, the
law classifies the non-impregnated timber in a bad category.

Some timber cannot be impregnated technically, even using heat. (spruce).
Consequently, the law sets up conditions which cannot be fulfilled by Nordic and
German exporters. This is considered as an administrative barrier by various
interlocutors and various Member State Trade Representatives. The process is going
on through discussions with Japanese Authorities in order to put the EU non-
impregnated timber at the same level as impregnated timber. There is now an
understanding with the Japanese Authorities. However, there must be a
parliamentary initiative to amend the basic law or to modify the interpretation of the
law. The Ministry is unlikely to act for that. This would therefore need the support of
the importers to lobby the Parliament. The situation looks for the moment without
issue.

It is difficult to assess the impact of such measure on the EU exports.

According to various interlocutors, a more tightened dialogue is required between the
EU and Japanese Authorities on timber construction issues. The Nordic Timber
Council has already approached the Japanese Authorities in order to find solutions to
them.

For solid lumber, the importer puts a stamp on the imported product, which makes
the grading easier. The costs of becoming JAS certified are about 20,000 EUR.

The issue of glue-laminated

JAS certification for construction lumber is easier, because the manufacture could
stamp the products it-self during the production process. For glue-laminated beams,
the certification is a more complex issue. Since glue-laminated timber (GLT) is mostly
used in the structures of homes, this requires that exporters get the certification for
their products. The exporters from Nordic countries consider that it is technologically
proved that Nordic Spruce is stronger specie than others. For this reason, the Nordic
Timber Council has applied for an upgrading of Nordic White Spruce (as opposed to
spruces of other sub-spices) with MAFF Standards and Labelling Department. The
technical data submitted has been approved, and the Nordic Timber Council is in
principal waiting for amendment of JAS rules, before the formal process in Japan will
be finalised33.


33
 Information provided by the Swidish Embassy/Mr Oscar Lindvall.
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However, the glue liminated issue continue to be a concern for the EU industry. Glue
laminated timber is processed cut timber glued together. Japanese Law stipulates
that given the risks of earthquake and humidity; make a prescription of which kind of
glue is allowed and the process how it should be done. EU companies find it too
costly (are not paid to change their production process). Even if the glue issue is on
the deregulation list between EU and Japan, operators are convinced that Japan will
not move easily on this issue. Japan simply follows the production process
authorised in the US. The European companies are forced to use the American types
of glues.

As a matter of principle, the EU operators consider that the components must comply
with the basic requirements as regards durability. Finally, it is only on the top of that
that the products fulfil the requirements finally with the minimum standards, NOT the
components set forth for the glue-laminated timber (strength, durability). It is
therefore important that the European Commission insist on deregulation in order to
avoid discrimination. The European Commission is waiting for the response of the EU
industry associations to the proposal made by MAFF of 23.2.2000 on “the list of
necessary data and information for examination of equivalency in performance under
JAS for structural glued laminated timber.


Some other concerns are evoked in the meetings:

According to the Austrian Trade representatives in Japan, some operators would like
to see some standards adopted. For example some EU operators use a technique to
join the woods (fingers), which can be used for all types of woods. There are no
standards in Japan for this type of product. The Austrian operators would like to have
a JAS label.

Labelling of furniture

Under the Quality Indication Law applicable to consumer products, there are some
mandatory labelling requirements for some products, including furniture. This is the
case for desks, tables and chairs (in wood and other components).

It is not compulsory for the EU producer to affix the label in the country of origin.
Therefore the label can be affixed by the importer just before retailing. There are no
compulsory requirements on the size of characters.

The compulsory data to be affixed are:

            -   Size or dimension of the item
            -   Material (ex natural wood)
            -   Surface processing (if resin)
            -   Cushion material
            -   Care instruction (ex : not to expose to sun). This is mandatory only for
                some components: for synthetic leather.




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In addition, the beds for children must follow a certification process under the
Consumer Product Safety Law and its rules of implementation (not translated) as
revised last in 1999.

The products must be tested by a third party organisation accredited by METI. No EU
organisations have been accredited to deliver the certification (never been any
application). Therefore the product should be certified in Japan by a Japanese
accredited organisation. The EU exporter should send a sample in advance. The
product should be labelled with the logo PSC (Product Safety Consumer)

EU trade representatives also mentioned that sometimes importers require additional
data on the product‟s composition. For example, it is often required to indicate the
absence of formaldehyde (not mandatory).


Conclusion: Japan remains a promising market for EU wood products

The mission conducted by the consultant in Japan has enabled to come to the
following conclusions:

   Japan seems to be a significant outlet for wood producers.

   The limited number of trade measures (mainly standards) identified by our
    exporters is often overcome by our companies. Japan is a key market for them
    and they have generally found the solutions to comply with the Japanese
    requirements.

   The problems encountered by EU exporters are rather related to the peculiarities
    of the Japanese market and Japanese society than to regulatory import
    measures. In the furniture segment, exporters are limited by the Japanese style of
    living (small spaces, small doors etc) and the high quality requirements of the final
    consumers. In the wood sector, language constitutes often a difficulty, which
    prevents direct exports from EU SMEs to carpenters, offices, wood products
    wholesalers. These final consumers would like to buy directly wood products but
    cannot given the existence of the said barrier. It is likely however than in five
    years, the situation would change (the situation is already changing in this sector.
    An increasing number of trading companies have closed since Japanese
    companies started to buy directly (such as home centres). It is also expected that
    some issues be found in order to allow these direct exports and therefore counter-
    act the negative impact of the current distribution system. In this perspective,
    operators would welcome a Commission initiative. An idea launched by exporters
    would be to create EU buying offices in Japan in order to help our SMEs to
    establish direct connection with the final consumers and the retail shops.


2.5.7. Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
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III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.6. SOUTH AFRICA


2.6.1. EU Industry assessment


Until now, the only remarks collected by the consultant were about:

-High customs duties
-Complicated documents for the clearance process (long and difficult to obtain).

The European exports and investment in South Africa are expected to grow due to
the decrease in customs duties and increased investment and co-operation
opportunities foreseen by the EC-South Africa Free Trade Agreement. South Africa
has large natural resources and the capacities to increase its exports to the EU. The
EU companies should take advantage of the investment opportunities existing in
South Africa or search market niches in the sectors where there is no domestic
production or the quality of the production is not good enough.


2.6.2. The South African market


a) Furniture

The domestic market presents good opportunities for the importation of furniture. The
local production accounts for 4 Million Rands (400 000 €), whilst the market is
estimated to represent 12 Million Rands (1 200 000 €). The demand has been
continuously increasing since the economic conditions were improved during the last
years: incomes increase, better access to credits, and the emergence of a new
consumer class. In addition, the Government has launched a number of programmes
aiming at building new social houses and infrastructures (schools), which have
boosted the domestic demand.

Imports of furniture into South Africa are concentrated on up-market furniture, which
has a lot of competitive advantages compared to the domestic production (medium
range class furniture). EU Imports represent 30% of total imports (16%), UK (17%)
and DE (5,8%). The import duties are of 20%. The domestic companies are very
competitive in this sector, given the fact that the working force and energy costs are
significantly lower in South Africa than in Europe. Some EU companies (essentially
from Germany) have invested in the South African furniture sector. The companies
willing to import to the South African market, should concentrate on the sectors
where domestic production is not sufficient to satisfy the demand or on high-value
design furniture.

b) Wood

The domestic production of wood is significant and competitive. This enables the
wood-processing industry to offer good products at competitive prices (low price of
raw materials and low labour costs). More than a half of the wood and furniture
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production is exported to the EU markets (DE: 31%, UK 17%). The main wood-
processing industries in the country are timber mills. Some match factories and
charcoal plants are also operational. A fast concentration took place in the saw-
milling industries. Some German and Swedish companies were participating in this
evolution and have invested in the South African woodworking sector.

EU exporters of sawn hard and soft-wood are also interested to export to South
Africa and take advantage of the further market opportunities in the construction
sector. The South African demand for timber can be expected to double over the
coming ten years.

c)Trade statistics

The trade between the EU and South Africa is constantly growing and expected to
become even more important due to the trade liberalisation, foreseen by the Free
Trade Agreement. The EU has an important trade deficit with South Africa, but this
situation is rather a consequence of the South African competitive advantage than of
the existence of trade barriers.

The exports of EU woodworking products from chapter 44 to South Africa are as
follows:

Year         1998                1999                    2000
Volume       32         millions 27             millions 32            millions
             Euros               Euros                   Euros


The EU imports of South African woodworking products are as follows :

Year         1998                1999                    2000
Volume       60         millions 86             millions 110millions
             Euros               Euros                   Euros


The EU exports of furniture of Chapter 94 are as follows:

Year         1998                1999                    2000
Volume       54         millions 67             millions 76            millions
             Euros               Euros                   Euros


The EU imports of products of the Chapter 94 are as follows:

Year         1998                   1999                    2000
Volume       353millions            363millions             390millions
             Euros                  Euros                   Euros




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The trade from the South Africa‟s side is growing much more rapidly than the EU
trade. This situation is mainly due to the fact that the South African woodworking
sector is much more export-oriented than the European industry. Moreover, the Asian
crisis, which has also affected South Africa, has caused a devaluation of the national
currency and has stimulated the exports. At the same time, the imports have been
reduced, because of the consumers‟ lower purchasing capacity.


2.6.3. Applied tariffs


Applied tariffs for products of HS Chapter 44 range from 0% to 30%. However, the
majority of the products are subject to a duty of 10 % or 15%. For the furniture (HS
Chapter 94) applied duties are of 20%.

According to the EC-South Africa Free Trade Agreement, these tariffs will be reduced in
conformity with the time-schedule set up by the Article 12 and the Annex III of the
Agreement. According to the Article 12, tariffs for the products originated from the
Community, other than those mentioned in annex III, were abolished on 1st January
2000. The remaining products (the majority of the industrial products) are divided into
six lists for which different timetables for tariff reduction are established. The
woodworking products are mainly concentrated in the list 2, 3 and 4. In list 2, one can
mainly find the products from headings 4402, 4405, 4407, 4411, 4412, 4415 and 4417.
The liberalisation of the furniture sector will take place according to the schedule
established by the list 3. Some products of heading 4410, 4411, 4413, 4414, 4415,
4417, 4418, 4419, 4420 and 4421 will be liberalised according to the list 4.

                The reduction of customs duties for different lists is as follows:

List 1                   List 2                       List 3                     List 4
75% of the original duty 67% of the original          90% of the original        88% of the original
       at the entry into         duties       three          duties      three          duties 5 years
       force of the              years after the             years after the            after the entry
       agreement                 entry into force            entry into force           into force of the
                                 of             the          of            the          agreement
                                 agreement.                  agreement
50% of the original duty 33% of the original          80% of the original        75%   of the original
       one year after            duties four years           duties four years          duties six years
       the entry into            after the entry             after the entry            after the entry
       force of the              into force of the           into force of the          into force of the
       agreement                 agreement                   agreement                  agreement
25% of the original duty Five years after the entry   70% of the original        63%   of the original
       two years after           into force of the           duties five years          duties     seven
       the entry into            agreement the               after the entry            years after the
       force of the              customs duties              into force of the          entry into force
       agreement                 are eliminated.             agreement                  of            the
                                                                                        agreement
Three years after the                                 60%   of the original 50%        of the original
      entry into force                                       duties six years           duties      eight
      of           the                                       after the entry            years after the
      agreement the                                          into force of the          entry into force
      tariffs      are                                       agreement                  of            the
      eliminated.                                                                       agreement
                                                      50%     of the original 38%      of the original
                                                               duties     seven         duties       nine
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                                                                                                      72
                                                             years after the     years after the
                                                             entry into force    entry into force
                                                             of             the  of            the
                                                             agreement           agreement
                                                      40% of the original 25% of the original
                                                             duties       eight  duties ten years
                                                             years after the     after the entry
                                                             entry into force    into force of the
                                                             of             the  agreement
                                                             agreement
                                                      30% of the original 13% of the original
                                                             duties        nine  duties     eleven
                                                             years after the     years after the
                                                             entry into force    entry into force
                                                             of             the  of            the
                                                             agreement           agreement
                                                      20% of the original Twelve years after the
                                                             duties ten years    entry into force
                                                             after the entry     of            the
                                                             into force of the   agreement the
                                                             agreement           customs duties
                                                                                 are eliminated
                                                      10% of the original
                                                             duties     eleven
                                                             years after the
                                                             entry into force
                                                             of             the
                                                             agreement
                                                      Twelve years after the
                                                             entry into force
                                                             of             the
                                                             agreement the
                                                             customs duties
                                                             are eliminated



The liberalisation from the Community side is faster and the tariffs for the industrial
products will be eliminated six years after the entry into force of the agreement.

However, the improvement of market access conditions for the European products in
South Africa will not be immediate.

Other taxes applicable during importation are:
VAT of 14% assessed on the FOB value +10% of this value
Port fee of 1, 78% of CIF value with a maximum amount of 9000 ZAR (South African
Rands) per freight ton.

The Agreement on trade, development and co-operation provides also for prohibition of
discriminatory fiscal measures and fiscal duties.




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2.6.4. The import procedure


Some EU companies have complained about the difficult import procedures in South
Africa, and especially concerning the documents to be presented and the duration of
customs clearance.

The general documents, which should be presented for customs clearance for the
products of chapter 44 and 94 are as follows:

    -   transport documents
    -   packing list
    -   commercial invoice
    -   mouvement certificate (EUR 1)
    -   bill of entry

In addition, additional documents are required for some products of chapter 44.

A plant and quality control permit is required for the goods from chapter 4401, 4402 and
4406. The importers should ask for this permit the National Department of Agriculture.
The application must be submitted at least 30 days before the arrival of the goods in
South Africa. The form also obliges the applicant to attest that the goods concerned do
not contain any genetically manipulated organisms.

Upon receipt of the application, a pest risk assessment (PRA) based on scientific data
is conducted and specific conditions are set according to the phytosanitary risks
involved. These conditions are then communicated to the importer and he could be
obliged to face a number of conditions or the import could be prohibited. If the goods do
not represent any risk, they can be imported in South Africa. In some cases, a
phytosanitary certificate, issued by the competent authority in the country of origin is
required.

Some additional requirements for products of heading 4401, 4403, 4404, 4406, 4407,
4408, 4409, 4415, 4416 and 4421 could exist at the provincial level. The provinces are
competent to enforce the nature protection legislation. It is important for the EU
exporters or South African importers to verify whether their products are submitted to
any nature protection legislation prior to export. When the products are subject to such
requirements, the relevant certificates should be obtained before the importation of
goods takes place.

According to some EU exporters, the customs clearance procedure in South Africa is
quite slow. In fact, the South African customs and administration are undergoing a
process of reconstruction with the technical assistance of international partners
(including EU). It is expected that this process will reduce the duration and complexity of
importation. Generally speaking, in South Africa, the customs‟ office is empowered to
interpret the terms and conditions of importation, including, the required documentation,
specified in the import legislation, as well as the health and other guidelines provided by
various other governmental agencies.

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2.6.5. Certification and conformity assessment


The South African Bureau of Standards is the national agency responsible for
certification and conformity assessment. The majority of the South African standards
are consistent with the international standards and the products do not need to undergo
an additional procedure in South Africa if they already have obtained a certificate in
Europe. No complaints have been mentioned by the EU industry as regards the
certification of woodworking products. Apparently, there are no compulsory standards in
the woodworking sector. The majority of the South African standards are concentrated
in the foodstuffs, electric products and automotive sectors. The consultant has
addressed an enquiry to the South African Bureau of Standards on the existence of
specific woodworking standards and conformity assessment requirements in South
Africa.


2.6.6. Investment and investment incentives


The investment of EU companies in South Africa is expected to grow as a consequence
of the Free Trade Agreement between the EU and South Africa. According to the
Agreement, the parties shall establish a climate, which favours and promotes mutual
beneficial investment. The Agreement should facilitate the conclusion of investment
agreements between South Africa and the EU member states, as well as the
conclusion of agreements to avoid double taxation and the exchange of information on
investment and administrative procedures.

South Africa offers various investment incentives for domestic and foreign companies.
Among them the “strategic Industrial projects” incentive package is one of the most
recent. The programme represents an incentive step by the South African government
to raise levels of private sector investment in innovative, profitable and wealth-creating
business enterprises in South Africa, whilst simultaneously creating jobs opportunities
within the industrial sector. Tax incentives are granted to the companies, selected to
benefit from the project. The project is managed by the Department of Trade and
Industry. This project can be profitable for the EU woodworking companies, willing to
invest in South Africa.


2.6.7. Legal analysis


a)      main problems experienced by the EU companies in South Africa

The main problems experienced by the European companies in South Africa are
related to the existence of high customs duties for some products and to the
requirement for phytosanitary certificates. Some companies also have reported
difficulties in the clearance procedure.




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b)       legal analysis of the problems experienced

The trade relationship between the EU and South Africa is based on the Agreement
on Trade, Development and Cooperation concluded in 199934. The agreement
provides for the establishment of free trade area between the EU and South Africa.

As far as customs duties are concerned, the agreement foresees progressive
elimination of customs duties. Customs duties applicable on import into South Africa
of industrial products originating in the Community other than those listed in Annex III
shall be abolished upon the entry into force of the Agreement.

Customs duties applicable on import into South Africa of products originating in the
Community are listed in Annex III, lists 1,2,3,4,5 and 6 shall be progressively
abolished in accordance with 6 different schedules. (see article 15 of the agreement)
The customs duties applied in South Africa for different products could be challenged
only if they exceed the level provided for these products in the agreement.

In the field of phytosanitary protection, the agreement allows restrictions on imports,
exports, goods in transit or trade in used goods justified on grounds of public
morality, public policy or public security; the protection of health and life of humans,
animals or plants; Such prohibitions or restrictions shall not, however, constitute a
means of arbitrary or unjustifiable discrimination where the same conditions prevail or
a disguised restriction on trade between the Parties. (article 27) If the phytosanitary
measures applied by South Africa are found to constitute a disguised restriction to
trade, they should be eliminated in application of this article.

The two parties should also cooperate in the field of standardisation, metrology,
certification and quality assurance in order to reduce differences between the Parties
in these areas, remove technical barriers and facilitate bilateral trade (article 47).
However, this provision does not contain exact time limit and enforcement procedure.

In some cases, the provisions of the WTO agreements could be used. The WTO
provisions, which seems to be applicable are article VIII on excessive customs
procedures, article X on transparency and the SPS agreement. A detailed analysis of
these and other WTO requirements could be found in §3. Legal analysis.




34
     Official Journal 1999 L311
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                                                                                     76
2.7. EGYPT


2.7.1. EU Industry assessment


Egypt is considered as an attractive market, given the lack of raw material on the
domestic market and a high demand for construction and furniture wood. However,
Egypt is also a market characterised by burdensome procedures and high import
duties. There is therefore a certain need from the industry side to see these barriers
clearly identified and quickly removed.

In filled in questionnaires, complaints were mostly focused on:

-       High customs duties (for example for chipboard plywood the duty rate is
        35%-40%). Import duties for woodworking products in Egypt are relatively
        high. They range between 5% and 40%. For the most sensitive products the
        duties are between 20% and 30%. 40% peaks are applicable for some
        builders‟ joinery and carpentry, tableware and kitchen-ware and for the
        ornaments of wood. Companies complained that total import duties increase
        significantly the cost of landed goods and impede sales. In particular, Finnish
        and Swedish sawn timber companies complained about additional taxes,
        meant to compensate tariff reduction.

-       Import documents There is no specific, but a general complaint in regard to
        the documents required for clearance, which are burdensome and difficult to
        obtain. In addition, EU operators complained about credit restrictions and
        difficulties in Letter of Credit (L/C) opening.

-       Technical requirements related to labelling and marking requirements
        (furniture).
-       Phytosanitary requirements: The EU exporters of parquet and floor covering
        complained about the requirement of a phytosanitary certificate for wooden
        flooring.


2.7.2. The market


The Egyptian market is considered as an important market for the European
companies, especially in the woodworking sector, given the scarcity of wood in the
country. Therefore, Egypt represents an important potential market for the EU
companies, despite the competition of the Russia, East European countries,
Indonesia, South Africa and the United States. The indigenous wood is limited to
tamarisk, acacia and carob and the supplies of domestic wood sources are
insufficient. The furniture industry and the construction industry are highly dependent
on the wood imported. The imports of wood amount to more than 500 millions Euros.
The general level of imports remains stable, but varies slightly depending on the
economic conjuncture of the country and the region. Another factor, that have
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                                                                                    77
influenced the wood imports since the second half of 1999 until now, is the instruction
given by the Egyptian Central Bank to the other commercial banks not to open letters
of credit unless the importer deposits 100% cash of the value of the imported
products. The majority of the imported woodworking products are sawn coniferous
wood. The floor covering, doors and windows are also imported but some of the
companies producing furniture are also producing floor covering, doors and windows,
because the high tariffs on these products render imports very expensive for the
Egyptian consumers.

a) Woodworking products

Given the absence of the wood resources in the country, Egypt is importing different
kinds of soft- and hardwood. Sweden, Finland and Russia continue to be the main
suppliers of low-grade softwood, although there are some quantities being imported
from Estonia, Latvia, Chile and Canada. In 1999, Sweden and Finland controlled
about 70% of the total Egypt‟s softwood market, while Russia held some 20% of the
market share. However, since 2000, the market share of Russia is constantly
increasing at the expense of both Sweden‟s and Finland‟s products, which cannot
compete with the prices of the Russian products. On the other side, the quality of the
Russian products is lower than the quality of the Scandinavian ones.

Romania, Croatia, Yugoslavia and the United States are currently the main suppliers
of hardwoods to Egypt. The beechwood market is dominated by Romania, which
controls more than 95% of the market. The hardwood is mainly used for furniture
production and some of the furniture manufactures import their raw materials them-
selves without using trading companies.

b) Furniture

Egypt has a long tradition in wooden furniture production. The total production of
furniture is estimated to be around 100 million Euros per year, whilst the total import
of furniture is about 11 million Euros. The majority of the domestic production goes
for the domestic consumption. The imported furniture is submitted to a 40% import
tax with 10% of sales‟ tax, which render the imports expensive for the Egyptian
consumers. The main categories of imported furniture include low quality, low price
furniture or either high-price design furniture. In order to diminish the costs of their
production, the Egyptian furniture manufactures started to use medium density
fibreboard (MDF) that is less expensive than the hardwood. The majority of the
furniture production of Egypt is concentrated in the Damietta area, where 37,000
furniture manufactures have been registered.

The leading importers of finished furniture to Egypt are Italy and Germany. European
production is competitive, despite the high customs‟ duties. The European products
are mainly purchased by the Egyptian consumers for their quality or design.
However, according to some companies interviewed, the Egyptian tariffs remain
prohibitive and represent the main obstacle to imports.




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c) Trade statistics

The Egyptian market is an important export market for the European Union.
However, due to the high tariffs especially for furniture, the levels of imports remain
quite meagre in comparison with the market‟s potential. The entry into force of the
Euro-Mediterranean Association agreement, signed in June 2001 which was aiming
to dismantle tariffs, will probably be very beneficial for the EU woodworking exports to
Egypt.

The levels of export-imports between the EU and Egypt are as follows:

Products from chapter 44

EU exports to Egypt :

Year         1998              1999                           2000
Volume       235 million Euros 208 million euros              225 million Euros



Egyptian exports to EU:

Year         1998                    1999                     2000
Volume       770 000 euros           one million euros        834 000 euros



Products from chapter 94

EU exports to Egypt:

Year         1998                    1999                      2000
Volume       57 million euros         60 million euros         63 million euros



Egyptian exports to EU:

Year         1998                    1999                      2000
Volume       13 million euros         17 million euros         20 million euros



2.7.3. The applied tariffs


Import duties for woodworking products in Egypt are relatively high. They range
between 5% and 40%. For the most sensitive products the duties are between 20%
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                                                                                     79
and 30%. 40% peaks are applicable for some builders‟ joinery and carpentry,
tableware and kitchen-ware and for the ornaments of wood. The tariffs for semi-
processed wood are 5%, but the tariffs for finished products remains very high.
According to the EU companies, the tariffs remain the main obstacle for their imports
to Egypt.

In addition to the customs duties, the following additional taxes are applied to
imported products:

-       sales’ tax – 10% of the adjusted value established by the Egyptian customs.
        The following products are exempted from sales‟ tax: 4401.10.00, 4401.30.00,
        4403, 4404 (if without ornamentation, prepared for canes, umbrellas or tool
        handles) and 4406. For some products the sales tax is 5% of the adjusted
        value – 4407.10, 4407.21.00, 440799.00 (except planed, sanded or finger-
        jointed), 4408 (except planed, sanded or finger-jointed), 4410, 4411.11.00,
        4411.21.00, 4411.30, 4411.90.00 and 4411.12. Some exemptions of sale tax
        are also applied for the furniture, except for the wooden furniture.

-       the customs’ surcharge – 2% of the consignment value if the duty applicable
        to the product is between 5% and 30% inclusive. The surcharge is 3% of the
        consignment value if the duty applicable to the product is over 30%. It is
        important to add that the duty applicable to furniture is 40% and therefore it is
        submitted to 3% customs surcharge.

The Euro-Mediterranean Agreement foresees a progressive dismantling of customs‟
duties for industrial products within a 12-year term.


2.7.4. Clearance procedure


The EU companies have complained about the difficulties related to the clearance
procedure in Egypt. According to them, the clearance procedure is slow and the
customs authorities sometimes require, in order to clear the goods, additional
documents, which the importer cannot present immediately. Some importers of floor
covering have mentioned that the Customs demand phytosanitary certificates,
despite the fact that apparently, the document is not required by the Egyptian
legislation for floor covering. However, the possibility of a formal appeal process for
Customs officers‟ decisions has been lately introduced by the Decree 987/2000. The
Egyptian authorities are also currently implementing the WTO rules related to the
Customs‟ procedure and especially those regulating the Customs‟ valuation.

The general documents required for Customs‟ clearance are reported to be as
follows:

-       importer card,
-       request to finance imports in foreign currencies,
-       import declaration,
-       invoice,

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-       packing list,
-       bill of loading,
-       certificate of origin,
-       declaration on the production requirements.

The importer card is the importer‟s registration with the Ministry of Economy and
Foreign Trade. The registration takes several days. The company should be a
member of the chamber of commerce for at least one year and should be located in
Egypt. The members of the company should be in possession of Egyptian passports
for at least ten years.

The request to finance imports in foreign currencies is a document, which permits to
finance the import in foreign currencies. The document should be completed in
English or in Arabic.

The declaration on the production requirements confirms that the goods correspond
to the production requirements in the producing company. The document should be
in English or in Arabic.

Some additional documents are required for the importation of specific wood
products:
-     a permission to import plants and plant products and a phytosanitary
      certificate is required for the products of heading 4401.30. These documents
      are also required for the products of headings 4415.10, 4415.20 and 4416, if
      they are used for packaging materials. The permission should be issued by
      the Ministry of Agriculture and Land Reclamation. The application should be
      prepared as a letter of request in the Arabic language. The application should
      be made before the shipment of the goods and remains valid until December
      of the following year. The phytosanitary certificate, that should be enclosed
      together with the authorisation for customs clearance should be issued by the
      competent authorities in the country of origin, but should meet all the Egyptian
      requirements.

-       a certificate of conformity is required for upholstered seats (4401.71) and other
        seats (9401.79). The document is required for customs clearance. The
        importer should apply for the certificate to the General Authority for Import and
        Export and present samples of the product, the security documentation of the
        products and eventually, the sanitary certificates.

European companies have complained that the Customs‟ authorities demand the
phytosanitary certificate for products for which it is normally not necessary. On the
other side no particular complaints have been received on the certification
procedures and the certificates of conformity.


2.7.5. Investment and investment incentives


Since the beginning of the eighties, Egypt has been open to foreign investment. The
opportunities in the woodworking sector do not exist, because of the lack of raw
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                                                                                      81
materials and the relatively low import taxes on these products. In contrast,
investment opportunities in the furniture sector do exist. The local companies have
out-dated machinery and need foreign investment. They are still strongly influenced
by the traditional styles and modern designs are totally absent. The Egyptian
production is not competitive on the international markets and only a very small
quantity of the production is exported. The Italian government has developed a
project for establishment of a technological centre for the furniture industry in
Damietta, which should contribute to the development of the Egyptian furniture
industry. Italian companies have big interest to invest in Egypt, given the fact that
Italy is the first exporter of furniture to the country and the Customs‟ duties are very
high. The companies willing to invest in Egypt should seek joint ventures with already
existing Egyptian companies.

The legislative framework for investment in Egypt is the Law 8/1997, which gives new
incentives to foreign investors. The investors could have the majority of the capital of
the company and in the board of directors. The investors could also benefit from tax
exemption if they set up activities in particular Egyptian regions, called “regions with
priority development”. However, the level of investment in Egypt is quite low, due
mostly to administrative difficulties, complicate fiscal and Customs‟ procedures.


2.7.6. Legal analysis


a)      main problems experienced by the EU companies in Egypt

The main problems experienced in Egypt are related to the requirements for
phytosanitary certificates and high customs duties for some products. The importers
have also complained about punctual problems with customs clearance and technical
requirements.

b)      legal analysis of the problems experienced

The following analysis is based upon the 1978 Co-operation agreement between the
EC and Egypt35. However, this agreement, which can be characterised as a „donor-
recipient‟ agreement, may soon become obsolete. As the region and the two Parties
have changed, a new agreement was needed. Therefore, the Euro-Mediterranean
Association Agreement between the European Union and Egypt was signed on 25
June 2001. It is a more complete agreement than the 1978 one. This agreement is
still not into force.

The old agreement does not contain particular provisions on customs cooperation
and technical requirements. This means that if some Egyptian phytosanitary
requirements are found burdensome or discriminatory, they can not be challenged
under the scope of the existing agreement. In addition, the agreement provides for
the possibility to apply restrictions of imports, exports or goods in transit justified on
grounds of public morality, public policy or public security, the protection of the health
and life of humans, animals or plants (article 32). Such prohibitions or restrictions
must not, however, constitute a means of arbitrary discrimination or a disguised
35
 OJ 1978, L266
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                                                                                       82
restriction on trade between the Contracting Parties.

These provisions do not go beyond the WTO requirements and could not be applied
in case of difficulties experienced with the Egyptian requirements.

The new agreement contains more precise provisions on phytosanitary requirements
(article 47) and on customs co-operation (article 55). These provisions would allow
more effective protection for the European companies exporting to Egypt.

As far as customs duties are concerned the 1978 Co-operation agreement deals only
with customs duties of the Egyptian products imported into the EU. The new
agreement deals also with the reduction of customs duties of products originating in
the Community. The entry into force of this agreement will allow progressive
reduction of the customs duties for some products. The timetable for tariff elimination
for industrial products is contained in article 9 of the new agreement.

Until the entry into force of the agreement, the trader could use the provisions of the
WTO agreement in some cases. The WTO provisions, which seem to be applicable
are article VIII on excessive customs formalities, article X on transparency, and the
provisions of SPS and TBT agreements. A more detailed analysis of WTO
requirements could be found in §3. Legal analysis.




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2.8. AUSTRALIA



2.8.1. EU Industry assessment


In questionnaires and meetings conducted with the wood industry (CEI Bois and
members), the consultant has collected some specific complaints on measures
hampering the export of EU wood:

-       Tariffs
-       Import documents: complicated, difficult to obtain, expensive…
-       Technical measures: Phytosanitary certification and labelling and packaging
        requirements.


2.8.2. The mission to Australia


The consultant conducted a mission to Australia from 4 to 8 March 2002. The mission
aimed at meeting the Member States Trade representatives, several importers of the
EU products and the Australian Authorities, in order to collect the information on
measures applied to imported wood products, their implementation and their impact
on the EU exports. The mission started in Sydney (meetings with Member States,
importers and forwarding agents) and ended in Canberra (meetings with Authorities
and the EC delegation). The EC delegation had kindly arranged meetings with the
following authorities:

Authority                                             Issues addressed
Dpt of Foreign Affairs and Trade                      Presentation of the research; policy
                                                      regarding wood products
Australian Customs Service                            Measures applied for imported
                                                      woodworking products, controls carried
                                                      out by Customs
AQIS (Quarantine and Inspection                       Inspections carried on woodworking
Service)                                              imported products and on wood
                                                      packaging, documents and treatments
Dpt of Industry, Tourism and resources                Labelling database




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                                                                                               84
The main outcome of the mission is as follows:

    1.      Applied tariffs do not constitute a problem insofar as they range from 0%
            to 5% for products of SH chapters 44 and 94. In addition to the applied
            tariffs, Customs will charge GST (Good and Services Tax) and a wood levy
            (see 2.8.4.). Total import duties were not identified as hindering EU
            exports.

    2.      Import documents are not reported to be problematic as such. However,
            some exporters and importers have expressed their concern about the
            phyto-sanitary requirements to comply with for wood based packaging and
            for most of the woodworking products exports to Australia. These items will
            need to be fumigated before or after arrival in Australia.

    3.      The importer of wood products must present for each shipment a
            «Quarantine Entry Document» along with an additional certificate
            attesting that the goods have been appropriately fumigated or treated
            accordingly to AQIS requirements (treatment certificate). This also
            applies for wood packaging.

    4.      In this regard, two sources of problems were identified. First, the phyto-
            sanitary requirements applied to all wood packaging (boxes, pallets) can
            prevent EU exporters from using wood packaging for their products. If not,
            this would raise the costs for the exporter (while treated before export) or
            for the importer (while treated in quarantine).

    5.      The second type of difficulties is related to the acceptance of the certificate
            of treatment. The treatment in the EU before shipment with a certificate of
            treatment does not exclude any additional treatment decided by AQIS. The
            importers of EU products often face problems (either regarding their
            packaging or wood products) while exporters have shared a container with
            other products, non sufficiently treated or while the treatment conducted in
            the EU was not appropriate, according to AQIS. In this context, some
            improvements could be achieved if the exporters would stick to the
            companies recommended by AQIS, and if the control on the containers
            would be increased before export.

    6.      The exporter can also choose to let the goods be treated in the Australian
            port of entry. However, this would lead to an additional testing and
            additional checks on the products (with additional storage costs).

    7.      However, the requirements do not impede EU exports. Operators
            interviewed recognised that the inspections carried out by AQIS authorities,
            are quite serious and rapid. Most of the EU exporters have adapted their
            shipments to these requirements (e.g. replacing wooden pallets by plastic
            pallets, or treating the products before shipments).




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2.8.3. The Australian market


The good shape of the Australian economy offers good opportunities for the exports
of wood products.

Swedish, Finnish and Danish exporters have increased exports of wood to Australia
(in particular sawn timber and floor covering). Australian soft wood has similar
characteristics than Nordic pine (which is however harder). The demand is increasing
and cannot be met by the imported New Zealand timber (shortages). However, other
exporters (newcomers and SMEs) expressed a different opinion. They consider
Australia as a difficult market, due to the distance, transport costs and the
competitive advantage of New Zealand suppliers. These suppliers benefit from a
shorter distance and the same quarantine procedures. The Australian authorities
have also implemented a policy aiming at increasing the forest, in order to be self-
sufficient in wood.

The market of consumer goods in home furniture has benefited from a significant
growth (+ 10% in 2000)36. In 2000, imports of furniture have increased by 25%
representing $AUD 1,458 billions compared to $AUD 1,170 billions in 1999. Local
production remains low. EU investors (IKEA) are present and, along with other
foreign companies, dominate the mass market. China remains however the first
supplier (25% of total imports, while all Asian imports reach 65% of total furniture
imports).

EU products occupy the high market segment. In 2000, Italian exports have
increased from 70 Mio AUD to 112 Mio AUS. The products are often assembled in
Australia (office furniture). French exports of high design and antiques have also
increased.


2.8.4. Applied tariffs and import duties


Customs duties for chapter HS 44 range from 0% to 5%. Even if the majority of these
products are submitted to a 5% duty, this can not constitute a barrier to EU exports.

The tariffs applied for furniture (HS 94) are of 5%.

In addition to the applied tariffs, the product is charged with the Good and Services
Tax (GST) of 10% and a wood levy charged on behalf of Agriculture, Fisheries and
Forestry. Australian Customs Notice No.94/40 implements the imposition of this
import charge of forest and wood products. New rates were notified by the Australian
Customs Notice No. 97/65 of 24 July 1997.



36
  « Le marché de l‟ameublement et de la décoration intérieure ». Août 2001. Ambassade de France.
PEE Sydney.
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The import charge contributes to the funding of the Forest and Wood Products
research and Development Corporation (FWPRDC), which was established under
the 1989 Primary Industries and Energy Research and Development Act.

Under the 1993 Forest Industries Research Import Charge Act, the levy rates on
imported products are proportional to rates levied on domestically produced
equivalents37.

The wood levy is different depending on to the product concerned. The wood levy
goods are identified by a chartc Code which is linked to a tariff item/statistical key.
The levy is calculated by multiplying quantity 1 of the import entry line by the unit
value for the appropriate chartc code according to the table below:

Chartc Code                         Description                         Unit value
                  7                 Softwood Sawlog Rough               0.58
                  8                 Hardwood Sawlog Rough               0.44
                  9                 Softwood Sawn or chipped            0.72
                 10                 Hardwood Sawn or chipped            0.55
                 11                 Plywood Logs Veneer m3              0.30
                 12                 Plywood Logs Veneer m2              0.30/1000 or 0.0003
                 13                 Softwood Sawlog Wood                0.72
                 14                 Hardwood Sawlog wood                0.37
                 15                 Wood panels pulplogs Particle       0.15
                 16                 Wood panels Pulplogs                0.17
                                    Fibreboard
                 17                 Plywood logs Plywood                0.37



2.8.5. Customs formalities


The EU industry (questionnaires and meetings) has not pointed out any specific
complaint about the Customs clearance procedures. This aspect has been further
investigated during the mission conducted in Australia in January 2002 (meetings
with EU member States and customs agents).


2.8.5.1.          Import documents

There was no complaint regarding the documents to be provided for the clearance
process (except the certificate of treatment).

The documents to be provided by the EU exporter are38:

            a)   Air Waybill
            b)   Bill of lading
            c)   Commercial invoice
            d)   Entry document
            e)   Quarantine Entry Document

37
 Australian Customs Service. Australian Customs Notice No. 97/65.
38
 For detailed description, see Export guide, Market Access database.
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            f) Certificate of treatment

     a)     The Transport Bill

     The document is prepared by the freight company, the Airline or the Custom
     broker. It evidences the details related to the contract signed between the
     exporter and the air/sea freight carriage. The following general information is
     required:

            -   Airport of departure and destination;
            -   Transport (Flight details)
            -   Names and addresses of the EU exporter and the buyer in Australia
            -   Export clearance number
            -   Nature and quantity of goods
            -   Special handling information
            -   Marks, numbers and method of packing
            -   Valuation of goods)
            -   Freight, insurance and other charges

b) The bill of lading

The document shows the particulars of a contract of carriage of goods by sea. It is
required for the customs clearance. The following data is required: names and
addresses of the goods‟ buyer/shipper and seller, port of loading, discharge and
destination, vessels details, dates, cargo information, description of goods, weight,
measurement, marks and numbers, number and type of package, containers
numbers, total number of packages, freight and other charges, and the delivery
agent39.

c) Commercial invoice

Australian Customs do not require the seller to complete a special form of invoice. A
commercial invoice is required for the Customs clearance. It should incorporate the
following data: data of the seller, data of the buyer, complete description of the
goods, country of origin, number of packages and marks and number of each
package, quantity of the goods, selling price (to the buyer), labour costs incurred in
packing the goods into outside packages, amount of royalties (if any) payable in
respect of the goods, particular of all arrangements or undertakings that have or may
have effect of a varying selling price (…)40

d) Entry document

The document is prepared by the importer or its Customs agent for goods above AU
$250 when transported by air or sea. The time processing will be of 4 hours for air
freight and from 24 to 48 hours for sea freight. Various clearance fees are associated
with Customs entries41.

39
   Market access exporter Guide, http://mkaccdb.eu.int/wtdoc/wtdout.pl [this link doesn‟t work, given it
is password protected I would just use http://mkaccdb.eu.int/]
40
   Idem.
41
   Idem for details.
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The data required concerning the consignment is as follows:

           -   Name of owner and supplier
           -   Port of destination and discharge
           -   Country of origin code
           -   Sales tax details
           -   Port of first arrival and date
           -   Ship name and relevant details
           -   Weight, valuation, invoice details of goods
           -   Packing, freight, insurance and other charges
           -   Customs requirements (tariff classification, quantity, currency, customs
               value, duty, and sales tax
           -   Description of goods
           -   Total number of packages
           -   Air waybill or bill of lading number.

e) Quarantine Entry Document and wood certificate

Quarantine Entry Document

Australian Quarantine and Inspection services (AQIS) require for each shipment a
«Quarantine Entry» document and an other document certifying that the products
have been properly fumigated according to the AQIS requirements42. This document
must be presented by the importer before the clearance process.

According to AQIS, the quarantine entry is a letter submitted to them by the broker.
This document specifies the goods tariff code and specifying whether the goods were
subject to any treatment. AQIS decides on the basis of this information to conduct (or
not) a random surveillance. If AQIS decides to conduce the inspection, it would be
performed within 48 hours after the arrival of goods.

For more details see infra (Phyto-sanitary requirements )

the packing declaration

All importers are required to make a «Packing Declaration» signed by the EU
exporter attesting:

               (1) the absence (or presence) of «straw» in the containers containing
                   the goods to be imported
               (2) the presence or absence of packing wood in containers;
               (3) Specific treatment certificates will be provided if there is packing
                   wood in containers
               (4) that all timber packing used in the container(s) listed is free from
                   bark43.


42
   « Cargo containers : quarantine aspects and procedures ». AQIS web site (Brokers and commercial
importers). www.aqis.gov.au .
43
   Idem, p. 38.
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According to AQIS, the wood used for wood packaging is often a low quality wood.
The packaging coming from the EU are often affected with the «puec wilt nematode»,
a small worm attached to the wood. Wood packaging from the EU is often imported
from North America or South East Asia and this worm has been recently identified in
the EU. Therefore the Australian quarantine officials conduct serious controls on the
EU packaging wood. The wood packaging should have been treated at 74° during at
least 30 minutes.

2.8.5.2.       Controls conducted by Australian Authorities


The EU products (wood packaging and imported wood) are subject to strict controls
conducted by AQIS officials before the clearance process. The controls are
sometimes time-consuming. However, private operators and customs agents
generally admit that these controls are serious, professional and non-discriminatory.
There are no particular complaints as far as those controls are concerned.


2.8.6. Phyto-sanitary requirements


a) The treatments required

The imported timber must be either

               (1) treated before shipment and accompanied with a certificate of
                   treatment.

               (2) inspected on arrival by AQIS inspectors and treated if necessary.


The certificate of treatment

The mission enabled to collect different opinions from member State trade
representatives and importers. It seems that for some exporters the certificate of
treatment is not a source of concern and that conversely, it is a source of concern for
other operators:

    Some exporters (Nordic exporters in particular Swedish and Finnish) estimate that
     the treatment at the source is the easiest and the cheapest solution (compared to
     inconveniences resulting from treatment in the point of entry, time lost, additional
     storage costs, etc). These member States representatives did not report any
     problem regarding the acceptance of the certificate of treatment by AQIS
     Authorities.
    On the other side some companies estimate that the conditions for treatment by
     foreign companies are very strict44. Written declaration of treatment by foreign
     fumigation companies is accepted as long as they follow the model set by AQIS. It
     has to be stated that the timber has been permanently immunised, or fumigated,
44
  Idem (Conditions described in Appendix 2, §4). The wood must have been fumigated or treated by
heat in conformity with the AQIS requirements (Appendixes 1, 2, 3, 4).
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    or treated by heat, in accordance with the AQIS‟s guidelines. Therefore, some
    operators have also complained about the new criteria applied by AQIS regarding
    Foreign treatment companies (Italy and France). For example, for Italy, the AQIS
    list does not mention (as it is the case for other suppliers) the non accepted
    treatment companies BUT the only accepted companies. AQIS officials confirmed
    that they will shift to a new system listing only the authorised treatment companies
    (companies with ATN - Australian treatment numbers). They want to make sure
    that the fumigation companies understand and implement the required fumigation
    standards (e.g. treatment below 10°, during a 21-day period).

   According to AQIS, while a product is well treated at the appropriate temperature,
    it can not arrive at the port of entry infected with insects. Some products are to be
    fumigated twice because either it has not been properly fumigated (full container
    load) or it has not been fumigated by all exporters. Under the new system if all the
    importers have not fumigated their products the container will automatically
    inspected.

   According to some member States, even if the companies conduct the required
    treatment with the accepted companies, AQIS is entitled to conduct inspections
    on the products at the entry point, which results in delays and additional costs.
    Some interlocutors have also stated that the provisions regarding the treatment to
    be conducted are not clear enough. It has been reported that recently, AQIS was
    often refusing to accept the information forwarded by the EU company
    considering it as sufficient (on the treatment conducted). Treatment has to be
    performed once again in quarantine (time lost and additional costs). Another
    complaint concerns the cost of fumigation, which is more expensive than in the
    EU.

   More problems occur with wood packaging and pallets (insects often enter during
    the trip). Containers are therefore often fumigated and the importer has to pay for
    it. The exporters cannot be completely sure that their products (already treated in
    Europe) will be accepted without problem.

   According to some Members States‟ representatives, the requirements for
    treatment for wood furniture constitute a disincentive for some EU exports.
    However, according to AQIS, the furniture should not be subject to a special
    treatment but is subject to an inspection upon arrival at the port of entry. A
    random (detailed) inspection is conducted on these products.

   Regarding the treatment of containers by AQS Authorities: according to a
    forwarder agent, the imported containers will not be fumigated if they do not
    contain wood or straw or other living organism.

Exemptions of certificates of treatment

Plywood or chipboard panels used in crates and containers being produced within
the 3 last months in Europe, Australia, Canada, Israel, Japan New Zealand and the
US are exempted from the wood treatment certification, if they have never been
used. A specific declaration must therefore accompany the imported goods.

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        b) The packing declaration

The packing declaration is a declaration made by the exporter attesting that the
packaging does not contain any wood or it has been adequately treated.

Without packing declaration, the container will be fumigated by AQIS authorities at
the importers costs (average of 200 EURO/full container). These costs are higher for
containers containing products of various origins.

In the practice, foodstuff products are not exported in wood pallets or in wood
containers.

According to the Member States and the forwarding agents, when AQIS inspects the
wood products or the wood packaging, inspections are conducted seriously. No
excessive time delays were mentioned. Often AQIS informs before arrival, that the
consignment will be inspected either in the port, or in the bounded warehouse. The
importer pays the storage costs and the inspection (75 AU/hour). The inspection lasts
one hour (average). For furniture (antiques) the inspection is reported to be fast.

Standards

Some EU trade representatives explained that the excessive anti-fire standards have
prevented or stopped some exports of wood panels for construction purposes.

Exporters can consult the Building Code and enquire regarding the Standards
requirements in Australia.


2.8.7. Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.9. POLAND


Poland is not among the most interesting markets for the European woodworking
industry. The country is a large wood and furniture producer. The prices of the
domestic production are often lower than those applied by the EU companies.
However, in some segments of the woodworking sector, such as doors and windows
frames and furniture, the EU companies are competitive.

The Polish woodworking industry has recovered more rapidly through the
transformation process compared to other industrial sectors. Poland is the largest
producer of sawnwood and wood-based panels in Central and Eastern Europe and
this sector has benefited from the large foreign investment (especially from
Germany)45. Development potentials of the woodworking sector are closely linked to
export possibilities. The proportion of exports reached 15% in sawnwood, over 22%
in floor materials, 22% in particleboard, and over 40% in fibreboard. The imports in
relation to domestic production attained about 5% in sawnwood, 7% in particleboard
and 12% in fibreboard.

 In 1998, the level of foreign investment in the sector (mostly EU companies) was
estimated to be about 24%46. The demand for particleboard is mainly for the
domestic furniture industry (about 78% of all sales).

The quality of the furniture produced in Poland has not yet reached the EU level and
possibilities for import of high-value and high-quality furniture still exist for now.

In 2000, an important part of Polish production in the woodworking sector (semi-
finished, finished products and furniture) was exported. Export in 2000 has reached
3.228 million dollars, whereas imports were only 760 million dollars. The part of the
woodworking products in total Polish exports has reached 10,2%. The traditional
export product remains furniture (65% of the total woodworking exports).


2.9.1. EU Industry’s assessment


The EU operators and CEI Bois complained about various technical measures
affecting EU woodworking products exports to Poland:

a) Phytosanitary documents required for Customs‟ clearance,
b) Certificate of conformity with local standards,
c) Complex customs clearance mainly caused by non-acceptance of EUR 1
   certificate by Polish Customs.

The consultant addressed these issues during the mission to Poland in the meetings
with the EU companies and Polish authorities.
45
   The Vienna Institute for International Economic Studies – “ Competitiveness of the Industry in the
candidate countries – forest-based industries “ – Final report – July 2000
46
   Idem.
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EU investment in Poland is important but the sector still offers investment possibilities
in some segments such as furniture and wood panels. The concentration in the
sector is very important. In the woodworking sector (without furniture), 136
companies hold 50% of the market. In the furniture sector, 107 companies represent
50% of the sector. The main woodworking producers in the country are: Kronopol Sp.
Z oo, Black Red White S.A., Kronospan Sp. Z oo, Mazurskie Meble International Sp.
Z oo, Krono Wood Sp. Z oo, Zaklady Plyt Wiorowych S.A., Forte Fabryki Mebli S.A.,
Prospan Zaklady Plyt Wiorowych S.A., Nowy Styl. Sp. Z oo and bydgoskie Fabriki
Mebli S.A.. In 2000, the investment in the woodworking sector amounted to 1,637,3
million Zloty, which is 17,9% more than in 1999. Nevertheless, the woodworking
sector has registered a decrease in investment of 5,2% whereas the furniture sector
has registered an increase with 52,1% of new investment.

On the other hand, the profitability of the woodworking and furniture companies is
decreasing due to the competition of other low-value, low-price products coming from
other Central and Eastern European countries and the rate fluctuation of the Polish
Zloty. This tendency is mainly visible in the furniture industry, where 80% of the
production is intended for export.


2.9.2. The mission to Poland


The consultant representatives have conducted a mission in Poland from 7 th to 13th
October 2001. The objectives of this mission were (1) to collect the applied rules for
the importation of woodworking products, (2) to interview Polish Authorities on their
implementation, (3) to attend meetings with Member States‟ trade representatives in
order to discuss the problems faced by EU companies and their customers, and (4)
to interview Polish importers on the practical difficulties hampering their business
during and after the clearance process.

The following meetings were arranged with the kind support of the EC Delegation in
Warsaw:

-       Ministry of Economy (MEDT)
-       Office of the Committee for European Integration
-       Central Board of Customs

In addition, the consultant has conducted various meetings with importers of wood
processed products and furniture.


2.9.3. Applied tariffs


According to the Europe Agreement between EC and Poland, applied tariffs for
products of HS chapters 44 and 94 are 0%.

These products are charged with VAT (7 - 22%).

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2.9.4. Customs’ formalities


The documents needed for the importation of woodworking products in Poland are as
follows:

-       Invoice
-       Valuation documents
-       Registration of the company (the importer)
-       EUR 1 certificate (this certificate attest that the goods are from EU origin and
        are not submitted to customs duties in application of the EC-Poland
        Agreement)
-       Phytosanitary decision for some woodworking products

If the importer uses a Customs‟ agency an authorisation to act on the behalf of the
importer is also needed.

The documents considered as much burdensome by the EU exporters and Polish
importers, are the phytosanitary documents. Some EU exporters have mentioned
that the customs Polish Customs require phytosanitary documents along with the
cargo. If the certificate cannot be presented, the goods are held in Customs. EU
exporters of sawn and planned softwood (HS 4407) have stressed that such
documents are not required in the EU.

According to the Polish Central Customs‟ Committee, some woodworking products
are subject to phytosanitary control certificate, which should be obtained before
customs‟ clearance. The competent authorities in specified entry points should check
these products. According to the Polish rules, the phytosanitary conclusion should be
performed before customs clearance. In the majority of cases, only a visual
inspection is performed. If during this inspection symptoms of disease are
discovered, samples are taken for laboratory analysis. The customs‟ clearance of the
products could start after the certificate is issued.

According to the Customs authorities, the decision is issued immediately (few hours)
if no laboratory tests are required. Otherwise, the authorities could take the time they
consider necessary (up to 90 days), to perform the phytosanitary inspection.

The relevant legal text on the phytosanitary inspection is the Regulation issued 12th
July 1995 on cultivated plant protection (Official Journal – 99/item 751) and the
Regulation issued on 24th March 2001 (Official Journal – 22/ item 248). However, all
the products submitted to phytosanitary decision were not mentioned in these
regulations and a new regulation was under preparation and had to be published in
the Official Journal in mid – October 2001. During the mission, the customs
authorities have kindly provided the text of the draft regulation to the consultant.
According to this text, the products form HS chapter 44 requiring phytosanitary
conclusion for importation in Poland are as follows: HS 4401 10, 4401 21, 4401 22,
4401 30, 4403 (all the products of this sub-heading), 4406 1000, 4407 (all the
products of this sub-heading), ex 4415 10 and ex 4415 20.

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According to the EU exporters and Polish importers, the clearance process could be
quite fast, but some difficulties still exist especially as far as the phytosanitary
inspection and the recognition of EUR 1 certificate are concerned.

The Polish Central Board of Customs confirmed that the average time of clearance
for woodworking products is 2 hours after the delivery of the phytosanitary certificate
and when no irregularities are found in the provided documents.

No specific problems were mentioned on the valuation issues. On the classification,
the Customs reported that they have experienced problems with the classification of
woodworking products, because the applicable VAT rates vary between 7% and
22%. The problems have occurred on the classification of floor panels, a procedure in
the World Customs Organisation in Brussels has been started for the unification of
this classification.


2.9.5. Technical approval and conformity assessment


Poland has implemented a complex regime of certification. EU exporters of plywood
(wood-based panels) have complained about the requirement related to the
certificate of conformity with Polish standards. They have alleged that this certificate
is difficult to obtain.

The issue was discussed with EU Member States Trade counsellors and with the
importers of EU products in Poland. The certification process in Poland seems to be
very burdensome, given the fact that two kinds of certification could be applied for the
same products. The technical approval and the quality certification should be
obtained before the commercialisation of the product. These procedures should be
clearly distinguished. The technical approval is performed by the Polish Institute for
Construction Techniques (INSTYTUT TECHNICKI BUDOWLANEJ). The conformity
certification is performed by the Polish Centre for Testing and Certification (PCBC)
and in case the products are conform to the Polish norms, they will be granted with
the “B certificate”.

    a) the technical approval

The majority of the products intended for use in the construction sector are
submitted, before their commercialisation in Poland, to technical approval by the
Polish Institute for Construction Techniques.

According to the Ministerial Decree of August 5th, 1999 (Official Journal Nr 107/98),
the products submitted to these requirements are wooden products used for
construction as well as windows, doors and gates. There is no specific nomenclature,
establishing a detailed list of products submitted to the technical approval. All
wooden material used in construction as well as wooden flooring should undergo the
approval procedure before commercialisation.

 The technical approval should be obtained prior to the submission of demand for
conformity certification. In some cases, the importers are also required to obtain other
types of approval before applying for technical approval. For windows, for example,
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                                                                                     96
an approval from the Institute for Glasses and Ceramics and from the Ministry of
Health should be obtained.

Exporters, willing to export their products to Poland should request detailed
information about the documents needed for technical approval to the Institute for
Construction Techniques47. In general, the documents required are as follows:

-     the demand for technical approval,
-     accompanied with complete documentation about the product
-     special form (in Polish) filled in by the producer
-     authorisation granting a Polish entity with the power to represent the interest of
      foreign producer or exporter towards the Institute for Construction Techniques.

The process for technical approval is divided into two phases. The first phase is the
analysis of the presented documents in order to appreciate the admissibility of the
demand. If the demand is admitted, then laboratory analysis will be conducted in the
laboratories of the Institute of Wood.

The costs of the procedures are as follow:

-     for the registration of the demand for technical approval (2000 Polish zloty
      around 500 Euro)
-     for the laboratory analysis, the cost varies depending of the products and the
      analysis required. When one type of product is analysed, the cost is about
      25,000 and 30,000 PNZ, about 7,000 Euro
-     For the delivery of the technical approval, the costs vary between 7,300 PNZ
      and 11,300 PNZ (1,800 and 3,200 EURO)

The time needed to obtain technical approval in Poland varies depending on the
product and the laboratory analysis needed. However, according to the EU
companies working in Poland, the process takes between six months and two years.

The technical approval is considered as the most important problem for the
importation of woodworking products in Poland. According to the EU companies and
Polish importers, the process is very time-consuming and burdensome. The EU
certificates of this type are not recognised by the Polish authority.

The fist step for the importer is to submit the demand for technical approval and in
many cases, the authorities do not inform him about missing documents. He should
check by himself if the demand is accepted. As the laboratory analyses are very long.
A problem could occur if the producer changes its product during the approval
procedure. In this case, all the procedures should be stated again in order to take
into consideration the changes in the products. Even small changes in models delay
the procedure for several months. The importer is requested to conclude a contract
with the Institute for Construction Techniques for five years, which defines the
analysis to be performed and the costs of the procedure. In some (exceptional)
cases, it is possible that the Institute for Construction Techniques gives the technical


47
  INSTITUTE TECHNIKI BUDOWLANEJ – ul. Filtrowa1, Warszawa Tel. (00 48) 22 825 52 29, Fax
(00 48) 22 57 96 295; www.itb.pl
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approval and the B certificate, but in the majority of cases, a B certificate should be
requested after the end of the technical approval procedure.

Various EU companies have complained about the difficulties to obtain a technical
approval. For some of them, the process lasts already for two years; other companies
prefer not to enter the Polish market, because they fear the difficulty of the existing
certification procedure. According to the EU companies interviewed, the process is
very burdensome for newcomers on the market.

    b) the conformity certification

The conformity certification is compulsory for various woodworking products,
according to the Polish importers. Even if the Polish system for certification was
reformed, the EU importers are still experiencing various difficulties to enter the
Polish market. The main problems are related to the non-recognition of the EU
conformity certificates or the non-recognition of the EU producers‟ declarations of
conformity. In some cases, the products are submitted in the EU to the producer
declaration, but according to Polish law they should undergo compulsory third party
certification, which creates additional difficulties to the EU exporters and Polish
importers.

The certification and the marking with the B mark is a very sensitive issue in the trade
between Poland and the EU. A large number of EU producers have complained
about the market access difficulties related to certification in Poland.

Polish certification is based on Law on Certification of April 3rd 1993 and provides that
an important number of products are subject to third party certification. The
mandatory third party certification system was consolidated by the Ordinance of the
Director of the Polish Centre for Testing and Certification (July 21st, 1994). This
ordinance specified the list of products subject to compulsory certification. These
products are marked after the procedure with the so-called “B-mark”. The B mark is
given to the products after third party mandatory certification if the product conforms
to the Polish norms. The majority of the Polish norms are mandatory, as the country
does not have producer liability legislation.

In 1998, Poland and the European Union have signed an Agreement in the form of
an exchange of letters regarding a protocol on a European Conformity Assessment
Agreement. The purpose of the Agreement is to prepare the adoption by Poland of
the EU certification rules prior to the Polish accession. According to the Agreement
(article 5), for the products originating from the Community and subject to the
mandatory third party certification, the Polish Conformity Assessment bodies should
issue the B certificate automatically after the presentation of the relevant documents
to the Polish Conformity assessment body. For the products, which are subject to the
declaration of conformity in the EC, the Polish Government will present to the
Parliament a proposal for the necessary amendments to the law on testing and
certification. This proposal will enable the acceptance in Poland of the EC declaration
of conformity of producers in the EU. As soon as these amendments are adopted,
such products will be automatically given B-certificate by the Polish authorities. The
cost of the procedures is understood to be limited to the normal administrative costs.


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The amendment of the 1993 Law on testing and certification was adopted on 22nd of
July 1999. This law provides for the creation of the Declaration of Conformity in
Poland. The list of the products was shortened and number of products was
submitted to producer‟s declaration of conformity. The new law organises a
procedure for the verification of the certificate of conformity and the producer‟s
declaration.

According to the new article 13 of the law on certification “the products which are
coming from country of origin with which Poland has concluded an agreement on
recognition of certificates of conformity or producer’s declarations of conformity, shall
be admitted to the market after a certificate of conformity or producer’s declaration of
conformity are verified by the Polish certifying bodies”.

The period of time for the verification of conformity cannot exceed 21 days starting
from the date of submission of a complete set of documents. According to the article
26 “an entrepreneur who has introduced, to the commercial traffic, the products
which are subject to safety marking and fail to be marked with such mark, which have
been produced inconsistently with the requirements that make ground for granting
the right to apply that mark or which fall to have the documents admitting the same to
the commercial traffic or which fail to satisfy the requirements marking ground for
such a document being issued, shall pay the State budget the amount equal to 100%
of the sum acquired from the sale of the questioned products”.

The Regulation of the Ministry of Economy of January 13 th, 2000 makes some
clarification on the procedure of verification of the conformity certificates and of the
producer‟s declarations. According to this regulation, the certificate of verification of
the certificate of conformity and of the producer‟s declaration is the ground for
marking the product with the B-mark. The regulation provides that within seven days
following the submission of the application the verification body should conduct a
formal evaluation of the said application. The application meeting the formal criteria
shall be registered in the accredited body on its receipt date. Within a period not
exceeding twenty-one days following the registration date of the application, the
verification document shall be issued by the accredited certifying body.

The implementation of the new system was subject to numerous difficulties. First,
some of the products not submitted to certification in the EU or submitted to the
declaration of conformity are still subject to mandatory certification in Poland.
Second, the accredited body had various difficulties to implement the verification
system as foreseen by the law. Third, the majority of the Polish standards being
mandatory and the existing differences between EC and Polish standards will render
the EU products not in conformity with the Polish standards and they will be
submitted to certification.

According to the Ministry of Economy, measures have been taken by the Polish
Government to remedy to these difficulties. In February 2001, the first draft of the
new Law on standardisation has been sent for consultation. Its aim is to continue the
harmonisation of the Polish standardisation system. The draft law contains many new
clauses such as the voluntary status of polish norms. The new law on standardisation
is expected to enter into force at latest, from the first of January 2003.


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                                                                                      99
According to the importers of the woodworking products is submitted to compulsory
certification. In order to request the certification, the EU producer or the importer
should present the following documents:

-       the technical approval
-       the results of the tests performed by the laboratories of the Institute for Wood
-       the document authorising a Polish entity to represent the producer

If the certificate is requested by the producer, the company should present the
conformity certificate or the conformity declaration. In order to obtain the certificate of
conformity, Polish experts must visit the production plant in Europe. (The company
should pay the travel and related costs for 2 experts and minimum three working
days at the plant).

If the certificate is requested by the importer, the control will be performed in the
warehouse of the importer – supervision of the quality, storing conditions, etc.
Sometimes, laboratory tests would be necessary.

The cost of the certificate is 3,000 Euro and the time limit is approximately four
weeks. The process normally cannot exceed 90 days.

One can notice that some products are subject to technical approval and certification,
others are only subjected to certification procedures. However, the existence of
different procedures and the difficulties occurring during the test and certification
process are considered by the EU companies as hampering their exports to Poland.
According to the companies interviewed, their most important problem is the time lost
to perform all the procedures. The situation could be very burdensome for
woodworking designed for the construction. Sometimes contracts are cancelled,
while the product fail to obtain certification and technical approval before the
beginning of the construction works.

However, it should be noticed that there is no woodworking products in the annexes
of the Agreement between Poland and EU and according to Polish Authorities there
is no compulsory but only voluntary.


2.9.6. Legal analysis


a)      problems experienced by the EU companies

Poland is regarded as quite difficult market by the European woodworking
companies. The EU companies have experienced difficulties with the technical
approval performed by the Polish authorities for certain products. In addition, some
difficulties with customs clearance and phytosanitary requirements have been
reported.




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                                                                                       100
b)      legal analysis of the problems experienced

The relationship between Poland and the EU is organised by the Europe
Agreement48. The Europe Agreement provides for progressive elimination of customs
duties and taxes and for the elimination of quantitative restrictions. Presently, all
customs duties for woodworking products have been eliminated between the two
parties.

As far as the technical measures are concerned, article 69 stipulates that protection
of health and life of humans, animals and plants, the technical rules and standards
are among areas49 to which the approximation of laws shall be extended. The
existence of specific technical approval procedure is in contradiction with this article
and should normally be removed.

The requirement of specific phytosanitary inspections in Poland for products already
having an European phytosanitary certificate could be in contradiction with article 77.
This article provides that, in order to increase the agriculture and the agro-industrial
sectors effectiveness, there is a need to “develop co-operation on health, animal and
plant health, including veterinary legislation and inspection, vegetal and phytosanitary
legislation with the aim of bringing about gradual harmonisation with Community
standards through assistance for training and the organisation of checks”.

The Europe agreement also provides for customs cooperation in its article 91. The
article recognises the need for the two parties to simplify the import formalities.
Excessive customs clearance procedures could be dealt under this article.

However, the provisions of the agreement are not always very easy to be put in
practice by the EU companies involved in business with Poland but could be very
important in bilateral consultations with Poland. In addition, Poland is applying for
membership in the EU and is implementing progressively its national program for the
adoption of the aquis communautaire, which will allow harmonisation of the Polish
legislation with the EU one prior to accession.

Given the fact that Poland is applying for EU membership and that the Europe
Agreement contains more detailed provisions on some issues than the WTO
agreements, the use of the WTO provisions is not taken into account in this analysis.
However, a detailed analysis of the WTO provisions on some specific issues could be
found in §3. (Legal analysis).




48
  OJCE 1993, L348/2.
49
  Other areas, to which the approximation of laws must be extended according to the article 69 are:
customs law, company law, banking law, company accounts and taxes, intellectual property,
protection of workers at the workplace, financial services, rules on competition, protection of health
and life of humans, animals and plants, consumer protection, indirect taxation, transport and the
environment.
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                                                                                                  101
2.10. ROMANIA



2.10.1. EU Industry assessment


EU operators and CEI Bois complained about various measures applied by
Romanian Authorities and hampering EU exports of woodworking products or supply
of raw materials:

        Some complaints were made by upholstered furniture, wood planks and
        chipboard plywood producers.

        The main complaints concern the import documents and the Customs‟
        clearance procedure.

        Import documents: operators complain particularly about the presentation of
        the EUR 1 certificate to Romanian Customs Authorities. In Romania, Customs
        are reported to create excessive delays in the examination of the import
        documentation.


2.10.2. The market


Romania has a significant potential in raw materials, as the surface occupied by the
forest represents about 27 % of the country‟s territory. However, the production has
decreased over the years. In the early 1990‟s, the annual production was estimated
to 20 Mio m3, while the current targets decided by the Government are 14 m3 – 16
m3. 70% of the brut volume of wood is destined for the transformation purposes.

In January 1998, the trade in wood was fully liberalised. The Government has
removed all existing export restrictions (logs, oak).

The wood processing industry is composed of 6.800 companies, including 220
previous State companies, the rest being SMEs. The Industry produces mainly “sawn
softwood” panels, construction wood, wood packaging (pallets, boxes, containers)
and furniture. The main outlets exported to Romania are parquets and massive
panels.

The foreign investment in Romanian woodworking industry has recently increased via
the purchase of former state enterprises and the modernisation of equipment. These
investments are regulated and controlled by the National Authority for Privatisation 50.
Some new production units have been also installed. Among the main foreign
investors in the wood processing and furniture sector, German and Italian investors

50
 http : www.privatizationauthority.ro
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are quite successful. French companies have also installed wood transformation
units.

The Romanian market is highly competitive. However, the majority of the companies
have very low profitability and experience financial problems mainly due to their out-
dated technology. The foreign investment in the woodworking sector in Romania is
estimated to be about 30% of the sector. It is mainly oriented towards timber
production. The majority of the production is exported to the EU. Romania is
competitive in all the segments of the woodworking sector, which explains the low
level of EU exports to Romania. In addition, the Romanian production is cheaper, due
to the lower labour cost and the modest transport costs. Therefore, EU products are
only competitive in the segments where Romanian production does not exist.

The furniture industry in Romania is well developed. However, due to different
structural difficulties, Romanian companies have reduced their production and their
import share to the EU market has significantly decreased since 1995. The difficult
situation in the Romanian furniture sector is basically the consequence of the low
level of foreign investment. The majority of the producing units are micro companies
with fewer than nine employers. Some big companies exist and they account for
more than 30% of the production. Those undertakings are integrated companies,
which produce a big variety of products ranging from timber to furniture. They
strongly influence the development of the sector in Romania. However, the
reconstruction and privatisation of these industries are still a problem for the
Romanian government. In 1989, Romania was the first supplier of furniture to the EU
among the countries of Central and Eastern Europe and represented 15% of the EU
imports of furniture. Progressively, Poland became the first supplier from the Central
and Eastern European countries and the market share of Romanian companies was
significantly reduced. Nevertheless, since 1998 the Romanian exports to the EU are
increasing due to the privatisation of the majority of the companies in the furniture
sector.

Trade statistics

The EU has very important trade deficit with Romania in the woodworking and
furniture sector. The trade between the two parties is constantly increasing, probably
due to the constant removal of trade barriers and the liberalisation foreseen by the
Europa Agreement.

The exports of EU woodworking products to Romania are as follows:

Year         1998                    1999                      2000
Volume       20 millions euros        29 millions euros        37 millions euros



The Romanian exports of woodworking products to the EU are as follows :

Year         1998              1999                2000
Volume       126 millions euros 222 millions euros 270 millions euros

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The imports of EU furniture into Romania (products from chapter 94) are as follows :

Year         1998                      1999                     2000
Volume       55 millions euros         59 million euros         72 millions euros



The Romanian exports of woodworking products to the EU are as follows:

Year         1998                      1999                     2000
Volume       345 millions              380 millions             447 millions



2.10.3.Applied tariffs


Since the 1st February 2002, the products form chapters 44 and 94, originating in the
Community are exempted from customs duties.

In addition, these products are charged with VAT of 19% levied on the CIF value. The
following suspensions from the application of VAT apply: 4408.10.93, 4408.39.85,
4408.90.85 and 4410.32.00/33.00.

A Customs‟ fee of 0,5% of Customs‟ value is applicable to all products. However, the
imports from the EU, EFTA and CEFTA countries, as well as imports from Israel,
Moldova and Turkey are exempted from this tax.

The reduction of the Customs‟ duties in accordance with the Europe Agreement will
probably be beneficial for the EU exports to Romania, because during the preliminary
research, several European companies have complained about high customs duties
in Romania. Before the final stage of the liberalisation, customs duties for some
products were up to 8%.


2.10.4.Customs’ formalities


General requirements

Various companies have complained about problems occurred during the clearance
process: in particular, with the import documents and the excessive delays for
clearance (wood products, planks). One company has also complained about the
problems related to the recognition of the EUR 1 certificate by the Romanian customs
authorities.


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The general requirements for the importation of goods of chapter 44 and 94 into
Romania are as follows:

     -   import declaration
     -   declaration of dutiable value
     -   invoice
     -   bill of lading
     -   way bill
     -   packing list
     -   EUR 1
     -   Letter of guarantee
     -   Declaration of conformity

The letter of guarantee is not required for customs clearance. However, Romanian
importers do often require it. The letter of guarantee certifies that the goods are
delivered in conformity with the contract.

The declaration of conformity is a document confirming that the imported goods
satisfy the compulsory quality standards in Romania. The document is required for
customs clearance. The declaration is prepared by the manufacturer or its local
representative and the importer responsible for the statements included in the
declaration. The manufacturer‟s representative or the importer should be established
in Romania. There is not a specific form for the declaration. It should be prepared in
Romanian and must contain at least the following statements:

-name and address of the manufacture
-trade registration number
-goods to be imported
-norms and standards to conform with
-place and date of issue
-signature and seal

The declaration of conformity may be replaced by:

-the certificate of conformity issued by recognised certification body
-the Romanian conformity mark
-the EU Conformity mark

The European companies interviewed, have not encountered specific problems with
certification in Romania. The certification performed in Europe and the certificates
issued are recognised by the Romanian authorities. Furthermore, Romania is
committed to take over the European acquis in this field during its preparation for
accession51.




51
   Additional information on certification issues in Romania could be obtained by contacting the
Romanian Standardisation Association – 21-25 Mendeleev str, RO Bucharest. Tel. 40 1 650 20 80, fax
40 1 2102514.
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Specific requirements

A large number of woodworking products of chapter 44 should be presented for
customs‟ clearance accompanied by the phytosanitary certificate and an
authorisation to import goods, subject to phytosanitary quarantine. The phytosanitary
certificate is a document confirming that the plants and plant products to be imported
are free from quarantine and do not have any dangerous plant diseases. The
certificate should be prepared by the competent authorities in the country of origin
and should be in English.

Along with the certificate, an authorisation to import goods subject to phytosanitary
quarantine is required for customs clearance. The authorisation should be issued by
the National Phytosanitary Agency of the Ministry of Agriculture. The application must
be in Romanian. The decision to grant the authorisation is made within one day.
However, the application should be submitted 15 days before exportation. The
processing fees for the declaration depend on the quantity imported. The
authorisation remains valid for six months. It is important to notice that the majority of
the imported products are submitted to this certificate.

No import licences are required for woodworking products in Romania. However, in
some cases, export licences can be required for some products. These are automatic
export licences, implemented mainly for statistical reasons and could be obtained by
addressing an application to the Ministry of Foreign Affairs (direction of Licences).
The application forms for the demand of licences are not transferable and can only
be used by the economic agent, who have made request to the ministry. The annex
14 of the order n°106c/2001 contains the export licence‟s rules of issue.

There are no more non-automatic export licences for wood products. According to
the Romanian Ministry of Industry and Trade, the Ministry issues export certificate of
export only for agricultural products, according to the EU Regulation 616/2000,
certificate for sheep, goats and sheep meat and export licence for some ECSC
products.


2.10.5. Investment and investment incentives in Romania


Foreign direct investment in the woodworking and related sectors was less important
than was planned in the beginning of the liberalisation of the Romanian economy.
After a strong increase in 1998, the investments have significantly decreased in 1999
and 2001. In the woodworking sector, the main investment have been realised by
German, Italian and French investors. The investors are mostly small and medium-
sized companies which have rapidly became leaders on the Romanian market.
Contrary, to the big groups, which have invested in other sectors and are more
oriented on the domestic market, companies which have invested in the woodworking
sector are concentrated on export. Those companies intend to insure a good quality
and the security of the supplies on the EU market.

On the other hand, those companies expect to be in a very competitive position on
the internal market once Romania enters into the EU. One of the main projects to be
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                                                                                      106
realised in the woodworking sector is the Austrian group Kronospan‟s 159 million
dollar project. This project will be divided into two phases and include a particleboard
line with a melamine facing facility and a medium density fibreboard line. The project
is financed by the European Bank for Reconstruction and Development and will be
realised near Bresov. The project seems fundamental: it is supported by a strong
expected demand growth for wood in the region and benefits from its geographical
location. The project will complete Kronospan‟s manufacturing and distribution chain
between Poland, the Czech Republic, Hungary and Bulgaria. The project will
contribute to the modernisation of the Romanian wood panel industry, which is
currently characterised by old/inefficient operation, and would have a potentially
strong impact on the industrial development of the country. This investment will be
the most important in the Romanian woodworking sector and could represent an
incentive for other big companies dealing in the sector.

Given the decrease of foreign direct investment in the last years, the Romanian
government has decided to adopt, on June 19 th 2001 a new law providing incentives
for the investment having substantial economic impact. To benefit from this law, the
investment should exceed one million US dollars and should be realised in a period
of 30 months after the registration (for statistical purposes) in the Ministry of
Development.

These investments could be realised in all the sectors of the economy, except for
banking and insurance, as well as sectors regulated by specific laws. In case the
investment meets the requirements of several laws and could benefit from several
investment incentives, the investors are required to chose only one of these laws and
to reject the possibilities offered by other investment laws. The law of 19th June 2001
is applicable only to new investments realised after the adoption of the law.
According to the law, the equipment necessary for the investment could be imported
in Romania free of Customs‟ duties and they are exempted of VAT until the
realisation of the investment. The investment could also benefit from several fiscal
advantages.

This new investment law could be beneficial for further investments in the
woodworking industry, given the required level of investment is only one million
dollars. However, the advantages offered to the investors are not so significant given
the fact that the goods from EU origin are already exempted from customs duties.
The complicated legislative framework on foreign investment in Romania could be a
barrier for further EU investments in the country.


2.10.6.Legal analysis


a)      problems experienced by the EU companies

The European companies do not experience significant difficulties on the Romanian
market. Some punctual difficulties during customs clearance have been pointed out.
On the other side, some companies have complained about the existence of
burdensome technical requirements, but this issue does not seem to be a problem for
the EU companies anymore.

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b)      legal analysis of the problems experienced

The relationship between Romania and the EU is organised by the Europe
Agreement52. The Europe Agreement provides for progressive elimination of customs
duties and taxes and for the elimination of quantitative restrictions. Presently, all the
customs duties for woodworking products have been eliminated between the two
parties.

As far as the technical measures are concerned, article 70 stipulates that protection
of health and life of humans, animals and plants, the technical rules and standards
are among areas53 to which the approximation of laws shall be extended. According
to the EU companies exporting to Romania, Romanian authorities recognise the EU
and other international standards.

No particular difficulties have been experienced with the sanitary and phytosanitary
measures implemented in Romania. In respect of these measures, article 78
provides that, in order to increase the agriculture and the agro-industrial sectors
effectiveness, there is a need to “develop co-operation on animal health, agrifood
health (including ionisation) and plant health with the aim of bringing about gradual
harmonisation with Community standards through assistance for training and the
organisation of checks”.

Some European companies have complained about the fact that they experience
sometimes difficulties during customs clearance, due to excessive delays in customs
clearance or non-recognition of the EUR 1 certificate. The customs co-operation is
dealt in article 94. This article provides for the creation of single administrative
document and for the simplification of the customs procedures.

Given the fact that Romania is applying for EU membership and that the Europe
Agreement contains more detailed provisions on some issues than the WTO
agreements, the use of the WTO provisions is not taken into account in this analysis.
However, a detailed analysis of the WTO provisions on some specific issues could be
found in §3. (Legal analysis).




52
  OJCE 1994, L357/2.
53
  Other areas, to which the approximation of laws must be extended according to the article 69 are:
customs law, company law, banking law, company accounts and taxes, intellectual property,
protection of workers at the workplace, financial services, rules on competition, protection of health
and life of humans, animals and plants, consumer protection, indirect taxation, transport and the
environment.
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                                                                                                  108
2.11. CZECH REPUBLIC



2.11.1. The EU Industry assessment


No specific complaints about the Czech Republic‟s market were collected during the
preliminary research. According to the European operators, the trade with the Czech
republic is going quite smoothly and no major problems exist. Only one operator
complained in the questionnaire about too long clearance procedures (board
exporter).

The European companies often consider that they are nor very competitive on the
Czech market. The Czech Republic is one of the most important producers of wood
in Europe and the Czech companies are very competitive and export oriented.
Therefore, the EU companies can enter only those market niches where the Czech
companies are not competitive or not active.


2.11.2. The mission to the Czech Republic


The mission to the Czech Republic took place between 28th January and 1st February
2002. The objective was to meet the competent national authorities. The EU Member
States trade representatives and the individual private companies. The consultant
met the following authorities:

    -       Ministry of Industry and Trade
    -       Ministry of Agriculture
    -       Customs Administration
    -       Czech Standardisation Institute

During these meetings, the consultant discussed with the private operators, industry
associations and the authorities the opportunities existing for the EU woodworking
companies in the Czech Republic, the current level of trade and the eventual
problems experienced on the Czech market.


2.11.3.The market


a) Wood

The Czech Republic has taken advantage of its important forest surface (33,4% of
total surface). 63% of the forest is still state-owned. The Czech Republic is the fourth
wood extractor in Central Europe, just behind Germany, Austria, and Switzerland.
Exports are mainly directed to Austria, its first customer. Exports are subject to an

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automatic export licence, which is implemented only for statistical reasons, according
to the information given to the consultant by the Ministry of Industry and Trade.

The wood-processing industry employs 23.000 workers. It accounts for 1% of total
industry production (without furniture). The production covers a wide range of
products: “sawmill”, plywood, wood construction elements, furniture, packaging, wood
toys, music instruments etc. According to the Ministry of Industry and Trade, the most
important sector in the Czech woodworking industry is the manufacture of building
carpentry and joinery such as the production of windows, doors, frames and wooden
building (42% of the total woodworking production). The second most important
industry is the sawmilling and impregnation of wood sector, which amounts to 32% of
the total woodworking production.

The sawmill sector is the sector in which the EU companies have made the most
important investments. For example, Stora Enso Timber has performed the most
important sawmill investment. The Austrian Kronospan has acquired the largest
Czech chipboard producer. The origin of foreign capital is mostly Austrian and
German. The Austrian companies are mostly operating near the Czech-Austrian
border. Despite the important size of the Czech woodworking sector, the
opportunities are now reduced, since the privatisation of the Czech companies has
been practically completed. However, a number of former public companies have
been sold to domestic companies and the European companies could seek
partnership with these companies. Currently, among the companies with more than
150 employees, about 25% are foreign-owned or are linked with a foreign company.
Various production units work under sub-contracting for the EU (mainly German)
companies.

The Czech wood production is much more important than the demand of the market.
This explains that the industry is mainly export oriented and dependant on the
situation of the wood market in Germany and Austria. The Czech companies also try
to export to the other East European markets and some Asian countries such as
China and Japan.

The market is favourable to EU exports especially as far as it concerns some species
not available in the Czech Republic or are of a high quality. For example, the
domestic quality of beech is bad and imports of beech products are quite successful
in the Czech Republic. There are also opportunities for parquet and cork flooring,
because the Czechs are not very active in this sector. On the other hand, the import
of wooden frames (windows, doors) does not reach the levels, expected in the
beginning, mainly due to the consumer considerations. The Czech consumer prefers
plastic or PVC materials, wooden frames are considered as out-dated.

Given the availability of raw materials, a high-qualified workforce and the sufficient
capacities of production, the Czech Wood Industry offers good opportunities.

The Czech authorities have implemented a new programme to support the wood
consumption in the country, called “Czech wood”. The objective is to promote the
wood utilisation for construction purposes.



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b) Furniture

The Czech Republic has build a significant tradition in furniture production. The
Czech industry was selected to supply the COMECON countries during the
communist regime. Even if the transition period was difficult, the furniture production
remains a very important sector in the economy. The sector is characterised by an
over-production capacity and a large number of small and medium-sized enterprises.

In contrast with other neighbouring countries, such as Poland and Slovakia, the major
part of the production plants are Czech and the presence of foreign investment is
quite modest. The Czech furniture industry consists of 6500 companies, among
which 98% are small and medium enterprises. The furniture industry represents 2%
of the total manufacturing industry. The biggest companies export 70-90% of their
production. The most important companies of the sector are Tusculum, Jitona, Ton
and Alpha. The distribution of the local companies is done mainly in small shops and
ateliers, although some of the big companies have stated to implement their own
distribution networks.

The foreign companies are present in the sector, since the beginning of the eighties.
Some European companies such as IKEA, Europa Möbel, Walther and Sconto have
developed a large network of specialised supermarkets. They offer medium-low price
level. They offer Czech and imported furniture. IKEA, for example, has chosen
several Czech companies for exclusive suppliers for its shopping centres in the
world. These companies have been obliged to increase their efficiency, because the
efficiency of the Czech companies is lower than that reached by the EU companies.

As far as the other imports of furniture are concerned, some market niches for
furniture subsist in the high price level. Import of high price design furniture from Italy,
Sweden, Finland, Denmark and France, are successful. However, the volume of
these imports is quite modest, given the average low purchase capacity of the Czech
consumer.


c) Trade statistics


According to the Czech Ministry of Industry and Trade, the total import-export of
woodworking products (chapter 44) in 2001 are as follows:

Imports of woodworking products in the Czech Republic – 349 million Euro
Export of woodworking products from the Czech Republic – 885 million Euro.

The main imported products are the products from chapter 4403 (wood in the rough,
whether or not stripped in or sapwood, or roughly squared), chapter 4407 (Wood
sawn or chipped lengthwise, sliced or peeled, whether or not planed, sanded or end-
jointed, of a thickness exceeding 6mm), 4408 (Sheets for veneering (including those
obtained by slicing laminated wood), for plywood or for other similar laminated wood
and other wood, sawn lengthwise, sliced or peeled, whether or not planed, sanded,
spliced or end-jointed, of a thickness not exceeding 6 mm) and chapter 4418

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(Builders' joinery and carpentry of wood, including cellular wood panels, assembled
parquet panels, shingles and shakes).
The main exported products are from chapter 4403, 4407, 4410 (Particle board and
similar board (for example, oriented strand board and waferboard) of wood or other
ligneous materials, whether or not agglomerated with resins or other organic binding
substances), 4412 (Plywood, veneered panels and similar laminated wood), 4415
(Packing cases, boxes, crates, drums and similar packings, of wood; cable-drums of
wood; pallets, box pallets and other load boards, of wood; pallet collars of wood),
4418 (Builders' joinery and carpentry of wood, including cellular wood panels,
assembled parquet panels, shingles and shakes) and 4421 (Other articles of wood).

The trade in the woodworking sector (chapter 44) between the European Union and
the Czech Republic, according to Eurostat, is as follows:

1999
   -        imports in the EU – 619 million euro
   -        exports from the EU – 173 million euros
2000
   -        imports in the EU – 615 million euro
   -        exports from the EU – 188 million euro

The trade between the two partners has remained stable in 2001, even if exact
figures are not available on the EU side. However, the above-mentioned figures,
provided by the Czech Ministry of Industry and Trade show that the majority of the
Czech exports go to the European Union and that the EU is the main trade partner of
the Czech Republic in this sector.

In the furniture sector (chapter 94), the trade between the EU and the Czech
Republic is as follows:

1999
   -        imports in the EU – 786 million euros
   -        exports from the EU – 316 million euros
2000
   -        imports in the EU – 928 million euro
   -        exports from the EU – 340 million euro


2.11.4.         The applied tariffs


Under the provision of the Europe Agreement, tariffs are 0% for all products of HS
chapters 44 and 94. The VAT in Czech Republic is 22%. However, reduced VAT of
5% is applied to the products of heading 4401, as well as for the products, classified
under the heading 9402 and the heading 9405.40.




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2.11.5.The import procedure


According to the Czech Customs‟ administration, the following documents are
required for customs clearance:

    -       trading certificate
    -       company registration
    -       summary declaration
    -       customs import declaration
    -       declaration of dutiable value
    -       movement certificate
    -       certificate of origin
    -       commercial invoice
    -       waybill
    -       packaging list

For some products of the Chapter 44 (4401.21.00.10, 4401.21.00.90,
4401.224401.30.90, 4403.20.10.90, 4403.91.00.90, 4403.9110.90, 4403. 91.00.90,
4403.99.98.11, 4403.99.98.19, 4403 99 98 90, 4404, 4406.10, 4407.10.91,
4407.10.93, 4407.10.98, 4407.91.15, 4407.91.90, 4407.99.97), a phytosanitary
certificate is required.

This certificate confirms that the products are not contaminated with different plant
diseases or insects. The certificate is required for customs clearance and should be
presented with the customs‟ declaration. The phytosanitary certificate should be
issued in the country of origin and should be either in French, German, Russian,
Spanish, Slovakian or Czech language. The maximum period of validity is 14 days
from the day of issue.

According to the customs administration and the importers, the clearance process is
easy and rapid. The average time for clearance is one day. According to the customs‟
authority, the majority of the goods are not cleared on the border, but can enter in the
country under the national transit procedure. The customs officer at the border verify
the documents and if the driver can present all the documents, he informs the
customs officer at the destination point and the goods should be cleared their. The
importer is obliged to present the goods and the document within three to seven days
from their arrival.

Customs‟ procedures are often done by specialised private companies (customs
agents), which take care of all the formalities. In some cases a simplified customs
procedure is authorised – the declaration is done automatically and the goods are
presented to the customs, only if the customs officer makes a special request.

According to the importers, the clearance process is easy and the situation is
improving if compared to the situation some years ago. They have not encountered
significant problems during customs clearance or problems related to the documents
required by the Czech authorities for customs clearance.

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No problems of valuation have been experienced on the Czech border. However, the
importer should always be able to present a document about the value of goods
during customs clearance.

Some problems have also been experienced in the past with the classification of
laminated flooring but the problem has been submitted to the World Customs
Organisation and resolved accordingly to the decision of the WCO.


2.11.6.Certification and technical requirements


a) Certification and conformity assessment


During the mission realised in the Czech Republic, the consultant has investigated
the existence of specific standardisation and technical approval procedures. The
situation of the woodworking sector should be presented as follows:

The woodworking sector is not among the sectors in the annex of the Pan-European
Conformity Assessment Agreement, concluded between EU and the Czech Republic
in February 200154. Therefore, the sector cannot benefit of the mutual recognition of
conformity assessment set up by the Agreement. However, apparently due to the
adaptation of the Czech to the EU standards, few compulsory standards remain in
the woodworking sector. In the furniture sector, only furniture for children and
furniture for special purposes should be certified. In the processed wood sector,
certification of floor covering exists.

During the meeting with the Czech normalisation institute, the consultant has
requested additional information on the compulsory standards. The Institute was not
willing to provide this information stating that the Czech standards are equivalent to
the European standards.

According to the importers, the procedure has been facilitated since 1999. They are
obliged to submit the certificate from the country of origin and a sample. The Czech
Institute is examining the documents and apparently doing some tests. The
procedures takes in average two months and the certificate is valid for two years. It
can be prolonged. In this case, the procedure is less complicate than the first
demand for certificate.

b) Voluntary certification

According to the Czech forestry association, some companies also participate in
voluntary certification for forest management, such as the certification of the Pan-
European Forest Certification Council. These certification states that the wood is
obtained from forests, growing in sustainable environmental conditions.




54
 OJ 135/1- 17 May 2001
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2.11.7.Investment


European investment in the Czech woodworking industry is less important than the
level expected in the beginning of the liberalisation. Some big investments have been
realised, but the majority of the woodworking companies have been acquired by the
Czech co-operatives. The level of investment is less important than this in the
Poland, given the size of the sector. However, the amount of investment depends on
specific factors in individual product groups. Thus, the production of saw-based
panels and the construction of new modern sawmills is highly capital-intensive.
Interest in in-flow of foreign capital into the wood-processing branch was not so high
as in the other branches of the woodworking industry until 1997. In 1998 and 1999,
the volume of investment has increased, but started to diminish in 2000.

The main investments were realised by German and Austrian companies. Only one
US company has invested in the Czech market. The main Austrian investment was in
sawmill, realised by Holzindustrie Schweighofer. In 2001 however, the company was
bought by Stora-Enso Timber.

Czech law does not provide specific incentives for low-scale investment, which might
explain the low level of investment in the woodworking sector. The incentives for
foreign investment (reduced tax rates, State aids per employee) are given only to
companies, which invest more than 5 million dollars. In the woodworking sector,
where small-scale investments are required, this rule could not apply in the most of
the cases. However, some additional incentives exist at regional level or in zones
with high-unemployment rates. However, in these cases, the advantages should be
discussed on a case-by-case basis.

According to the industry and the EU trade representatives, the adoption of the new
law on land acquisition represents an important step towards sector liberalisation.
According to this law, the foreign persons can acquire land in the Czech Republic.
Beforehand, EU companies were allowed to buy land in the Czech republic only in
the case that they have set up a company in the country. The Czech Forestry
Association has considered that this law could be important in the forestry sector. In
this way the companies could buy forests and eventually invest in the woodworking
sector. The law can improve the management of Czech forests which have become
the property of a large number of small landowners.

A foreign company, willing to start activities in the Czech Republic could chose
between setting up a branch office, a limited liability company or a joint stock
company.

A branch office of a foreign company is not considered as a Czech legal entity, but
functions as a representative of a foreign company and incurs obligations on the
foreign company‟s behalf. Branch offices must fully list their planned activities in their
application for the commercial register, as they are only allowed to engage in the
listed activities.


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The limited liability company (spolecnost s rucenim omezenim –s.r.o.) is the most
common form of company for small and medium sized business and subsidiaries of
foreign partner companies. This company does not issue shares. The minimum
charter capital required to set up such company is 200 000 CZK. (6 350 Euro).

The joint stock company (akciova spolecnost – a.s.) is established by a founding
contract and the issue of shares. The founding contract should include the statutes of
the company. The minimum capital required for this company is 2 000 000 Czech
Crowns ( 635 000 Euro).

The limited liability company and the joint stock company are Czech entities. They
should be registered in the commercial register. In order to obtain this registration,
they should apply for a trade licence to the trade licensing office in the area, where
the company has its registered office.

The EU companies interviewed have not reported problems related to the investment
regime in Czech Republic. The only problem in the woodworking sector is the
absence of investment incentives for the small and medium-size companies.
According to the companies, these incentives should come from the Czech side or
from the EU side. The co-operation project in the woodworking sector should also be
implemented.


2.11.8.Legal analysis


a)        the assessment of the European industry

The European industry considers the Czech Republic as open and quite easy
market. According to the importers and exporters of EU products interviewed during
the mission in the Czech Republic, the trade conditions have significantly improved
since Czech application for membership to the EU. However, some punctual
problems related to customs clearance and technical approval could occur in certain
cases, which renders necessary to examine the provisions of the Europe agreement
signed between the Czech Republic and the EU.

b)        legal analysis

The relationship between Czech Republic and EU is organised by the Europe
Agreement55. The Europe Agreement provides for progressive elimination of customs
duties and taxes and for the elimination of quantitative restrictions. Presently, all the
customs duties for woodworking products have been eliminated between the two
parties.

As far as technical regulations are concerned the article 70 stipulates that protection
of health and life of humans, animals and plants, the technical rules and standards
are among areas56 to which the approximation of laws shall be extended.

55
     OJCE 1994, L360/2.
56
 Other areas, to which the approximation of laws must be extended according to the article 69 are:
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In addition, the article 78 provides that, in order to increase the agriculture and the
agro-industrial sectors effectiveness, there is a need to “develop co-operation on
health, animal and plant health with the aim of bringing about gradual harmonisation
with Community standards through assistance for training and the organisation of
checks”.

Czech Republic is negotiating its entry in the European Union and is adopting the
relevant EU legislation according to its National Program for the Adoption of the
“acquis communautaire”.

The difficulties experienced during customs clearance could be analysed under
article 93, which provides for simplification of customs procedures.

The articles of the Europe agreement are difficult to be invoked directly by the
concerned companies, because in some cases they do not provide for specific
timetable or for the fulfilment of the obligations. However, the problems could be
reported to the Commission and addressed in bilateral consultations.

Given the fact that the Czech Republic is applying for EU membership and that the
Europe Agreement contains more detailed provisions on some issues than the WTO
agreements, the use of the WTO provisions is not taken into account in this analysis.
However, a detailed analysis of the WTO provisions on some specific issues could be
found in §3. (Legal analysis).




customs law, company law, banking law, company accounts and taxes, intellectual property,
protection of workers at the workplace, financial services, rules on competition, protection of health
and life of humans, animals and plants, consumer protection, indirect taxation, transport and the
environment.
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2.12. ARGENTINA


2.12.1.The EU Industry assessment


The questionnaires (wood and furniture) revealed some general complaints:

-       high customs‟ duties
-       complicated import documents
-       certification requirements

The EU industry does not consider the Argentinean market as an important market.
Argentina has substantial wood reserves and the domestic wood production is quite
sufficient to supply the needs of the domestic market. In addition, imports from
neighbouring countries with large woodworking production capacities such as Brazil
and Chile are more competitive on the Argentinean market. However, the European
companies are interested in developing partnership with the Argentinean firms and in
investing in the Argentinean woodworking sector.


2.12.2.The mission to Argentina


The mission to Argentina took place from 19th to 24th November 2001. The mission
aimed to meet the competent Argentinean authority, the EU trade representatives
and the EU woodworking products and furniture importers.


2.12.3.The development of the market


In 1995, the Argentinean Government has launched various initiatives aiming at
attracting the foreign investment in the Forest and wood sectors. In 1997, The Law of
Fiscal Stability (Law n° 24.857/97) has granted fiscal advantages to potential
investors. For example, the investors have been granted a standstill of their fiscal
situation for 33 years (investments in natural forests, new plantations and
management of cultivated forests).

In January 1998, the Menem Government has decided to increase the forested
surface by 200.000 ha /year within 10 years. The Government has adopted the Law
25.080 to promote investment in Forestry. The Law was enacted at the end of 1998.
An implementation decree N°133/99 was adopted with the aim to promote both
national and foreign investments. The fiscal tools proposed by the Government are
(1) fiscal stability for 30 years, (2) forest subventions non-reimbursable for plantations
and work to realise until 2010, (3) anticipated devolution of VAT and other fiscal
incentives. The regulation establishes this regime for investment in new timber
plantations and in extension of existing woodland. The benefits, with certain
limitations, also encompass new forestry projects and extension programmes. The
benefits, established by the Investments in Forestry Law can be available to physical
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persons and those public and private (national or foreign entities) that are resident in
Argentina. Important provinces have adopted the Law N°25.080 (Misiones, Salta,
Chaco, Jujuy, Corrientes, Santiago del Estero). The provinces (competent in Forest
management) have first to adopt this law in order to be able to benefit from the
advantages foreseen by the latter.

The Argentinean Government is trying to increase the employment in the forestry
sector and the production capacities in the wood-processing industries. However, for
the time being, the transformation has not been very important. Unprocessed wood
pieces represent still 86% of exports.

In 2000, the Government authorities started the implementation of the programme
“Forest-AR 2000” aiming at developing the existing forests. Since then, more than
140 000 ha of forests were planted (mainly conifers and Eucalyptus). Consequently,
big domestic holdings (mainly PEREZ COMPANC) have significantly increased their
production capacities in the provinces of Misiones and Corrientes (sawmills).

These incentives have also attracted Chilean investors (more than $ 800 Million
invested). The main leader, the ARAUCO group, has invested $450 Million in
afforestation and increased production capacities (sawmills and production units of
wood panels). Other Chilean investors are MASISA ($ 170 Million invested) and
PROTISA ($ 120 Million invested).

EU investments are less important: a German group (Danzer) has invested $ 10 Mio
in the province of Misiones in a high quality wood panel production unit. Other
investors are American (Union Camp), New Zealand‟s (Fletcher Challenge) or
Brazilian (Kleabin: $ 20 Mio in the production of industrial sacks).

Investments conducted in the forestry sector have totalled more than 1.1 billions USD
during three last years. It was expected that in the coming five years, these
investments will increase by 5 billions USD57. However, the economic crisis in
Argentina has impeded the new investments in the woodworking sector.

a) the situation of the Argentinean market for woodworking products

Argentina has great potential as concerns the wood industry because of its
comparative advantage in climate, fertility and suitable and available land, which is
ten times larger than the currently planted area. The main woodworking products
produced in Argentina are sawnwood (more than 70% of the total woodworking
production), particleboards, fibreboards and plywood. The quantity of laminated wood
produced is very low.

The sawnwood sector consists of a large number of small and medium-sized
companies. Those companies diversify their production according to the customers‟
needs. The major companies are integrated with timber production. Imports from
Brazil represent some 50% of the imported products.



57
  Ambassade de France : « Le renouveau du secteur forestier argentin » (janvier 2000). PEE. Buenos
Aires.
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In the board sector, there are twelve plants, from which four produce together 80% of
the total board production. The Argentinean industrial capacity in this sector is 800
000 m³. The capacity has expanded over the last years to respond to the increasing
domestic demand for furniture and construction. Argentina exports board products
mainly to Brazil.

In the plywood sector the Argentinean capacities have been reduced in recent years,
because the availability of wood suitable for lamination has been reduced. This
explains the low production level of plywood and laminated wood. However, due to
the fast growth of new plantations, good quality wood will be available soon. Brazil is
major source of import in this area.

The foreign investment in the forestry industry and the wood industry comes mostly
form Chile (46%), USA (31%) and Canada (15%). The investment from the EU
amounts to 6% (United Kingdom – 2%, Netherlands –2%, Germany – 1% and Ireland
– 1%).

In 2001, the Argentinean government has decided to improve the competitiveness of
the industry in some sectors such as wood and woodworking industry, paper and
pulp industry, textile industry and footwear industry. The plan of the wood and wood
working industry competitiveness has been adopted, according to the agreement
signed 19th June 2001 between the Federal State, provinces and the Industrial
Association of the woodworking industries. According to the agreement the Federal
State has taken commitments to:

-       grant credits to the woodworking sector small and medium-sized companies of
        the woodworking sector,
-       promote the sale of houses with domestically produced furniture,
-       grant national preference for the locally produced woodworking products in
        public procurement tenders,
-       promote the wood furniture for the new constructions,
-       simplify the implementation of procedures of safeguard and anti-dumping in
        this sector,
-       adopt effective trade policy instruments to regulate imports and to ensure
        market access to third countries markets,
-       include the woodworking sector in the bilateral negotiations with Brazil,
-       include the woodworking industry workers in the regime of family allowance.

The Provinces have been committed to:

-       promote the sale of homes with woodworking furniture produced in Argentina,
-       open special credits for the retail of Argentinean wooden furniture.

The companies have been committed to:

-       increase the productivity, production and export

This agreement has established a special commission to supervise the
implementation of the plan until 31st December 2003. The resolution 65/01 of 21st
June 2001 established the criteria for registration in order to benefit from the plan.

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The implementation of this plan has been slowed down by the Argentine crisis.
However, it is important to notice that the woodworking industry is among industries
considered as most sensitive for the Argentinean economy like textile and footwear,
which are submitted to stricter and difficult import procedures. That might mean that
woodworking industry would be submitted to more burdensome procedures.

b) the furniture sector

The Argentinean furniture sector consists mainly of small and micro-companies. The
total number of furniture companies in Argentina is estimated to be about 3430. The
total number of workers employed in the sector amounts to 20 960 58. The most
important production is concentrated in kitchen and office furniture. According to the
Argentinean Federation of the Woodworking Industries, the production of furniture is
constantly decreasing due to the low consumption. Argentinean production of
furniture represented 1150 million dollars in the year 2000.

Currently, 98% of the furniture production is destined to the domestic market.
Argentina has not traditionally been an importer or an exporter of furniture. However,
in the recent years some Argentinean companies started to export, mainly to the
Middle East, the United States and Brazil. Some exports are also directed to Chile
and Uruguay. The main imports are from Brazil and the United States. Among the
European countries, Italy is the first importer of chairs into Argentina (5 millions Euro
of imports in 1999). Some furniture is also imported from Spain, Italy and Germany.
However, the European imports of furniture have decreased since 1998, mainly due
to the low consumption and the Argentinean economic crisis.

As far as the machinery for the woodworking industry is concerned, the main
providers are Germany and Spain. The imports of woodworking machinery remain
steady with about 40 million Euro per year.


2.12.4.The applied tariffs


For products of HS Chapter 44, applied tariffs range from 4,5% (headings 4401 and
4402) to 35% (e.g. particle boards, wooden frames). Fibreboards are charged with
28% applied duty, while the duty for plywood is 12,5%.

Applied duty for furniture is 35%.

In addition, Customs charge on duty-paid value:

-import statistic fee of 0.5%
-VAT of 21%
-advanced VAT of 10%
-anticipated profit tax of 3%.


58
   According to the Argentinean Federation of Woodworking Industries (Federación Argentina de la
Industria Madera y Afines).
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Trade Statistics:

The trade between Argentina and the EU is quite modest in the woodworking sector.
Argentina has not developed large exporting capacities and the European products
are not competitive on the Argentinean market. The level of import/export in the
recent years is as follows:

EU exports to Argentina:

Year         1998                      1999                     2000
Volume       14 million Euros          19 million Euros         16 million Euros



The Argentinean imports in the EU:

Year         1998                      1999                     2000
Volume       37 million Euros          32 million Euros         28 million Euros



In the furniture trade, EU has a trade surplus but the trade‟s level remains very low.
The import/export statistics for the recent years are as follows:

EU exports to Argentina:

Year         1998                      1999                     2000
Volume       73 million Euros          66 million Euros         60 million Euros



The Argentinean imports to the EU:

Year         1998                      1999                     2000
Volume       1,6 million Euros         2 million Euros          6 million Euros



2.12.5.The Customs’ formalities


As it is the case for other commodities, import procedures are reported to be
burdensome. The importers must register in the Importers and Exporter Register of
the Customs‟ Bureau. The registration is not compulsory, but if the importers are not
registered they will be obliged to pay twice the Advanced Value Added Tax and twice
the anticipated profit tax. Most of companies are using the Customs‟ agents‟
(despachantes aduaneros) services in order to facilitate the Customs‟ clearance. The
woodworking products are not submitted to pre-shipment inspection, as it is the case
of other sensible products such as textile or machine tools.
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When the products enter the Argentinean territory, they are divided in three channels:

-      green channel – the products are cleared after the presentation of all the
       Customs‟ documents
-      orange channel – a detailed check of the documentation is performed
-      red channel – physical and documentation check of the goods is performed

Some sensitive products are submitted to a more detailed control called “canal
morado”. However, no complaints for woodworking products submitted to “canal
morado” have been reported.

The main documents required for customs clearance in Argentina are:

-      packing list,
-      commercial invoice,
-      freight documents,
-      certificate of origin,
-      customs import declaration.

Some additional documents are requested for woodworking products. These
documents could depend on the product‟s sensibility.

A prior authorisation for the importation of agrochemical products is required for the
products of chapters 4401, 4402, 4403, 4404, 4405, 4406, 4407, 4408, 4409 and
4419. This authorisation aims to ensure that the products, which are active elements
for manufacture of agrochemicals, must be fitted for direct sale and are not suitable
for human consumption. The import must be previously approved by the Argentinean
Institute of Plant Quality (Instituto Argentino de Sanidad y Calidad Vegetal).

A prior approval to import wild flora is requested for all products of chapter 44, except
for 4402. The approval should be given by the National Board of Natural Resources
(Direción Nacional de Recursos Naturales).

Some products must obtain an automatic import licence in order to be imported in
Argentina. It is about products of chapters 4407, 4410, 4411,4412, 4421 and 9403.
The licence should be granted by the Ministry of Industry, Trade and Mining. The
licence is valid for a 60-days‟ period starting from its approval.

In addition, some products of chapter 44, which could be considered as wood pieces
of furniture and the wood furniture products of chapter 94 must undergo an
inspection performed both by the Customs and the Argentinean Federation of
Woodworking Industry (Federation Argentina de la Industria Madera y Afines).
Anyway those products will be subject to a physical Customs‟ control. Because of
this, the clearance procedure could be significantly delayed. The absence of the
representatives of the woodworking industry shall not prevent the inspection
procedure59.


59
 For more information on the import requirements, please consult the EU market Access data base –
www.mkaccdb.eu.int - the guide to exporters.
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It should be pointed out that some wood products that might be considered as toys.
Consequently, those products must be labelled according to the Argentinean
labelling regulations and undergo a certification procedure. The labelling and
certification requirements for toys in Argentina are very strict and the products must
be certified before entering the Argentinean Customs‟ territory.
New regulation exists for importation of wood packaging materials. According to the
Resolution 19/2002 issued by the Agro-alimentary Health and Quality National
Service (SENASA), effective from 21 January 2002, wood used in the packing,
support, and accommodation of all types of goods into Argentina must comply with
the following specifications:
        1. Wood packing should be free of bark, insects, and signs of damage
           produced by insects.
        2. A sworn exporter declaration attesting the condition mentioned
           above, must be attached to Customs‟ Import Clearance documents.
           Declaration must be made for "all" wood packing material, both solid
           and manufactured wood.
The purpose of this new process is to prevent the introduction and/or dispersion of
pests that attack wood used in the packing, support and accommodation of goods
imported. Relevant pests of phytosanitary concern to Argentina are: Anoplophora
glagripennis, Monochamus, Ips, Dendroctonus, Heterobostrychus, and Synoxilon,
which can cause damages to the environment, production, and the country‟s
economy.
Once the cargo shipment has arrived in Argentina, wood packing materials will be
inspected by SENASA and if bark, live insects, or damage cause by insects are
found, a certificate of intervention will be issued. The merchandise will be held by
Argentine Customs until the importer has subjected the affected wood to all the
phytosanitary measures required by SENASA, which may take up to 5 days.



2.12.6.The technical requirements


In questionnaires, some complaints concerned burdensome certification
requirements (for upholstered furniture). However, according to IRAM (the
Argentinean Institute for Standardisation), there is no compulsory certification for
woodworking products. Importers of wood products interviewed (sawn wood,
plywood, furniture) did not complain about specific requirements.


2.12.7.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
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and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.13. BRAZIL



2.13.1.The EU Industry assessment


In questionnaires, some companies mentioned that they have been facing very
serious problems. In particular, they have complained about:

Import duties: increase of total value of the imported goods.

Visas and import documents: too complex and difficult to obtain.

Certification requirements: are requested for various products, including upholstered
furniture.

However, a large number of companies stated also that they are not doing business
in Brazil, because their products are not competitive on the Brazilian market. Brazil is
a big producer of wood and the prices for processed wood and furniture are quite
low. The national products are not of a very good quality but they satisfy the needs of
the Brazilian consumers. Only very a small part of the population can afford buying
expensive processed wood or furniture. This situation has been confirmed by the
Trade Representatives of EU Member States. According to them, few European
companies are currently operating in Brazil. They occupy very specific market niches
for products not produced in Brazil or have interests to set up a production line in the
country.


2.13.2.The mission to Brazil


The mission to Brazil took place between 3rd and 13th of December 2001. The
objective was to meet the competent national authorities, the Member States Trade
Representatives and the individual private companies. The consultant has
interviewed the following authorities:

    -       Ministry of Development, Industry and External Trade
    -       Ministry of Health (Agency for Sanitary Vigilance)
    -       Ministry of Agriculture
    -       Ministry of Finance
    -       INMETRO

The consultant interviewed the private operators and the authorities on the existing
opportunities for the EU woodworking companies and the difficulties experienced by
them in Brazil.




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2.13.3.The market


a) Wood

Production of wood has slightly decreased over the years (-12% in 2000). The
principal customers are furniture (45%), construction (34% and the packaging
industry (17%). However the production of sawn wood is in progression (mainly
directed at public and private construction). According to the companies operating in
Brazil and to the Member States Trade Representatives, the Brazilians do not
consider wood as an appropriate material to use in construction and furniture and
often prefer to use other materials, which can substitute wood for construction,
windows, doors, etc. The wood constructions are mainly used for holiday houses
outside the big cities. A large part of Brazilian woodworking products is exported.
However, the Brazilian producers are not very efficient, their losses seem to be very
important, but this does not influence the prices, given the availability of natural
resources in Brazil.

Regarding the raw material, the Brazilian authorities have started various
programmes aiming at developing the forest and increasing the existing production
units.

b) Furniture

The furniture industry is composed mainly of SMEs (about 13 500 production units).
They produce wood furniture (70% of the total in value terms). Wood processed into
furniture are pine, Eucalyptus, mahogany, cherry wood and cedar. The use of
plywood is increasing. Only 80 companies currently export outside Brazil. Likewise,
under the National Programme of promotion of furniture exports (Promovél) launched
in 1998, the number of export companies is expected to increase to 300 by 2003.

During last years, the furnishing market was developing significantly: the number of
design centres and specialised shopping malls has increased. Since the opening of
the Brazilian market in 1994, the Brazilian consumer has been more open to
imported sophisticated products. Even if the furniture market is dominated by
American companies, some EU companies have already penetrated the market (e.g.
Roche Bobois, Ligne Roset etc.).

c) Trade statistics

The EU has an important trade deficit in the woodworking sector with Brazil. Even if
the EU exports to Brazil in the woodworking sector (chapter 44) have increased, they
amount only to 17.312.000 Euro, whereas the Brazilian exports to the EU amount to
737.929.000 in 2000. The increase in the Brazilian exports into the EU is much more
important because in 1999 they were representing only 546.288.000 Euro, whereas
the EU exports to Brazil amounted to 14.718.000.

On the other hand, the Brazilian exports are constantly increasing in sectors where
the EU exports have decreased in comparison with 1997 and 1998. In the furniture
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sector the EU has also a trade deficit. In 2000, the EU exports to Brazil represented
256.289.000 Euro, whereas the exports to Brazil reached 115.882.000. However, the
trade between two parties is constantly growing. This trade deficit is basically a result
of big-volume Brazilian exports of semi-processed wood and of the Brazilian industry
competitive advantage, because it can offer lower prices through lower costs and
availability of raw materials.


2.13.4.The applied tariffs


The import duties for Chapter 44 range between 4.5% and 20.5%. Some tariffs peaks
are as follows:

-       12.5% for particleboard, for packing cases
-       16.5% for builders‟ joinery and carpentry

The import duty for wood furniture (heading 94) is 20.5%.

In addition, the following import taxes are levied:

-       Merchant Marine Renovation Fee: 25% of the total Ocean freight cost
        indicated on the Bill of lading60. Only the products imported by ship support
        this tax.
-       Industrialised Product Tax (IPI): 5 to 10% of duty paid value61.
-       Merchandise Circulation Tax (ICMS): 17% of duty paid value + IPI (the
        Merchandise Circulation Tax vary from state to state, but its value is generally
        17- 18 with some exceptions in some states for the goods with a considered
        essential for the state economy. In this case the goods can enter the state by
        paying a reduced amount of the ICMS.

Importers are required to register with and pay a fee to the Secretariat of Foreign
Trade (SECEX). Exemptions to the registration requirement apply to government
entities as well as to transactions involving the import of commercial samples. The
importers should pay a fee for every importation for the use of the International Trade
System (SISCOMEX). The SISCOMEX system informs the importers if they need an
import licence or an authorisation and if their product is submitted to quotas. The fees
for the utilisation of the SISCOMEX systems are 30 Reals (20 euros) per import
declaration, plus a fee per additional item included in the declaration. The fees are
paid when the import declaration is registered.

The other fees, which should be paid, are as follows:

-       wharfage fee (capitazias)
-       bill of lading fee

60
   Some exemptions are applied for the Merchant Marine Renovation Fee for the product entering
Brazil via the port of Manaus, for the imports originating from Argentina, Uruguay and Paraguay, for
imports destined for consumption or industrialisation in Western Amazonia, imports intended for use in
scientific and technological research in the Ministry of Transport.
61
   The IPI is not levied for the semi-finished products of chapter 44.
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-       unloading fee
-       harbour dredging fee
-       translation fee
-       storage fees


According to the French Trade Services, in October 2001, the taxes supported by the
national and imported products are as follows:

                              Imported product                          Domestic product
FOB (Freight on board) 100, 00                                          100, 00
PRICE
+ freight (10% FOB)             10,00
+ insurance (1,5% FOB)           1,5
CIF VALUE                      111,5
Import duties (average 20,7
17%)
IPI (10% of CIF+ import 13,6                                             12,19
duties)      for     imported
product and 10% of FOB
price for domestic products
Merchant               Marine    2,5
Renovation Fee (25% of
total Ocean freight)
Terminal Handling Charge         0,10 for 10kg
(10 Reals/tonne)
Municipal Tax on Services        0, 0245
Indemnification of Harbour       0
Workers (temporally 0%)
Bank fees                        0,22
Different fees for clearance     2,23
(2% of CIF)
Other      fees     including    2,23
financial fees (2% CIF
value)
Merchandise       Circulation    26,10                                  21,95
Tax (ICMS) –18%
TOTAL                         178, 58                                   134,14

The difference consists mainly in the fact that the IPI and ICMS are calculated for the
imported products on CIF price plus the import duties and other fees. The amount of
these taxes is more important for the imported than for domestic products.




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2.13.5.The customs formalities


The Customs‟ formalities in Brazil are quite complex. The importer of woodworking
products should present the following documents for customs clearance of
woodworking products, excepted furniture:

-       Bill of lading
-       Air waybill
-       Commercial invoice
-       Packing list
-       Pro-forma invoice
-       Transportation insurance certificate
-       Import declaration
-       Certificate of origin
-       Declaration of customs value
-       Certificate of fumigation treatment

For the importation of furniture, all the above-mentioned documents are required,
except the certificate for fumigation treatment.

According to the importers and the EU exporters, the certificate of fumigation
treatment is the only document which is difficult to obtain. According to importers and
forwarding agents, this certificate was not required for wood from EU origin until the
end of 2001, but is compulsory for products exported since 1st January 2002.
According to the Ministry of Agriculture the relevant legal text is the Regulation
99/499 on Inspection of Wood which requests that wood and wooden packages
should be accompanied by a certificate for fumigation treatment.

This legislation is also very important for products imported in wooden packaging,
because they should be accompanied by the certificate of fumigation treatment. If the
importer does not have this certificate, its products can be refused or submitted to
fumigation treatment in the port of entry. Various importers of the EU products have
pointed out that they have been subject to fumigation treatment in the port of entry.
According to the Ministry of Agriculture, as far as the wooden packaging is
concerned, it is never evident that the packaging has European origin even if the
imported product has. Consequently these packages should be submitted to
fumigation treatment when the importers do not have the said certificate.

For the other wood products, importers are invited to consult the Ministry of
Agriculture prior to importation or to collect the sanitary legislation for their products
on the web site of the Ministry of Agriculture at www.agricultrura.gov.br. The
fumigation treatment certificate should be issued in the country of origin and should
include the following information:

-       certificate number
-       date of issue
-       treatment used
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-       chemical ingredient
-       duration
-       concentration
-       temperature
-       number or description of packages or goods
-       name and address of the exporter
-       name and address of the consignee
-       shipping marks
-       signature

However, the existence of phytosanitary certification for the European wood, except
for wood packaging from Asian countries, is difficult to justify according to the
Brazilian legislation. In fact, Regulation 499 concerns only wood packaging
originating from China, Hong Kong, North Korea, South Korea, Taiwan and the
United States. In April 2000, the United States have been removed from the list of
countries required to comply with the Brazilian phytosanitary legislation. The Ministry
of Agriculture has not quoted any other legal text, which requires phytosanitary
certificate for the EU wood products.

The EU exporters and Brazilian importers should also respect the other formal
requirements for the importation in Brazil. It is compulsory that the importer is
registered in the Secretary for External Trade. The importer should follow
burdensome registration guidelines; including minimum capital requirements in order
to register with SISEX. This registration is required for statistical and information
reasons. Without this formality the importer cannot exercise its activities.

The automatic system for registration of imports and exports has been in force since
1997. The products are submitted to automatic or non-automatic import licensing.
The automatic import licences are required for statistical reasons and do not require
that the importer obtains pre-approval before the shipment.

During clearance, the importer should only present the Import declaration. The import
declaration contains all the important information about the imported products. This
information is entered by the importer himself in the SISCOMEX system. For the
products requiring the non-automatic import licence it is necessary that the
information on the imports is entered in the system before the shipping of goods. This
information is analysed by the Brazilian authorities before granting the importation
licence. The importation licence (LI) and the import declaration (DI) should be
presented for Customs‟ clearance. None of the woodworking products is submitted to
non-automatic licence for the moment. However, since 1998, the list of products
submitted to non-automatic import licence is not published any more and the importer
should verify via SISCOMEX if the product requires a non-automatic licence, before
shipping the goods in order to avoid further problems.

According to the Ministry of Agriculture, the Brazilian Government foresees to change
the import regime for some goods. All the goods under the responsibility of the
Ministry of Agriculture would be submitted to a pre-shipment licence, which should be
required by the exporter from the country of origin. According to the Brazilian Ministry
of Agriculture, this procedure will facilitate imports and will avoid the destruction of
products after their arrival in Brazil. The pre-shipment licence will ensure, according

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to them, that goods respect all the necessary requirements. According to the draft
law, the vegetal and related products will be submitted to pre-shipment inspection.
According to the Brazilian authorities this regulation should have been ready by the
beginning of 2002. For the moment, this regulation is not adopted, but the situation
should be closely monitored. It is not sure that the regulation will have a positive
effect on trade between Brazil and third countries.

The Customs’ clearance procedure in Brazil:

The Customs‟ clearance procedure in Brazil aims to verify the conformity of the
declaration entered in SISCOMEX by the importer and the products imported, as well
as the respect of the specific Brazilian legislation on the products concerned such as
phytosanitary requirements. The principal document used for clearance is the import
declaration. It should be registered in SISCOMEX before the arrival of goods for
clearance. Depending on the first brief verification of the declaration, the products are
oriented in green channel, the yellow channel or the red channel:

-       If the products are sent to the green channel, the importation is allowed, a
        certificate of importation is granted to the importer and the goods are released.
-       If the products are sent to the yellow channel, a detailed check of the import
        documentation is performed
-       If the products are sent to the red channel – a detailed check of the
        documentation and physical verification are performed

Sometimes, the products could be sent to the grey channel, if the value of the
products is challenged. In this case, the importer should present all the required
documentation to prove the value of goods. The procedure of valuation can last up to
120 days.

A fifth channel is progressively implemented by the Brazilian authorities – the blue
channel. It offers some advantages such as preferential storage of the products and
their non-automatic orientation toward the green channel.

In order to import into Brazil, an EU company should use a Brazilian partner in order
to deal with the Brazilian requirements and import procedure. The importers use in
the most of the cases Customs‟ agents, called “despachante aduaneiro”. The
Customs‟ agent is in charge of the import procedure and deals with the Customs‟
authorities.


2.13.6.The certification requirements


European exporters have also complained about the implementation of certification
requirements in Brazil. The consultants have conducted a meeting with the Brazilian
Institute for Metrology, Standardisation and Industrial Quality (INMETRO). Thus, the
consultant has discussed the existence of certification requirements for European
wood products. According to the INMETRO and to the research performed by the
consultant, there is no compulsory certification for woodworking products in Brazil.
Some voluntary standards exist, but the EU exporters are not obliged to respect them
in order to export their products to Brazil.
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2.13.7.The investment in the woodworking sector

The investment in the woodworking sector in Brazil is quite modest. According to the
figures provided by the Ministry of Development industry and External Trade, the
investment in the woodworking sector in the last years was as follows:

1996 – 43,4 millions US dollars – 0,57% of the total FDI in Brazil
1997 – 131,5 millions US dollars – 0,86% of the total FDI
1998 – 60,9 millions US dollars – 0,26% of the total FDI
1999 – 22,5 millions Us dollars – 0,08% of the total FDI.

The representatives of the EU member States have also confirmed that the EU
companies have not expressed interest to develop business in the woodworking
sector in Brazil. Significant investments exist in the pulp and paper sector, because
the Brazilian wood is particularly good for paper production purpose. Nevertheless,
the EU trade representatives stated they are sometimes contacted by EU companies
searching for the Brazilian exporters of wood, which they want to process in the EU.

The investment is quite important in the retail sector. Several EU supermarkets
specialised in construction materials have opened shops in Brazil. The construction
market is very important in Brazil (around 13 billions Euro per year). This market
concerns all construction materials, but also some wood products. The main
Brazilian shops on the market are Casa & Construção, Telhanorte (group Saint
Gobain) and Peg & Faça. The main European shops present on the market are
Castorama and Leroy Merlin. The EU companies offer essentially Brazilian
production, but have also some European products.

The Brazilian market has, however, high potential for investment in the woodworking
sector, despite the fact that the EU companies must look first for a local partner
before investing in Brazil. The Joint Venture project could render investment easier
and facilitate the contact with the Brazilian authorities.

2.13.8.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used, are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.14. URUGUAY



2.14.1.The EU Industry assessment


The EU companies have not expressed specific complaints about the Uruguayan
market. Some EU exporters (producers of upholstery furniture) complained about
burdensome import documents, slow import procedures and certification
requirements for furniture.


2.14.2.The Mission to Uruguay


A short mission to Uruguay took place at the end of November 2001. The consultant
interviewed Member State representatives, EU companies, Uruguayan importers of
wood and furniture.


2.14.3.The market


EU companies do not consider the Uruguayan market as very important for them
given its small size and the availability of natural resources. In addition, the
neighbouring countries have significant natural resources and the European products
are less competitive, because of the freight costs. The forest sector in Uruguay is in
expansion. Under the provisions of the Forest Law of 1987, the area of forest has
been significantly increased since the early 1990s (420 000 currently ha of forests
compared to 45 000 ha in 1990). 80% of these additional plantations were
eucalyptus.

According to the Uruguayan Authorities, the expected capacities for 2004 represent 2
Million m3 of wood. The country is currently exporting 104 Million USD of forest
products, amongst which wood represents 37% (mainly used for the pulp) and 13%
of wood. It is expected that in 2004, forest exports will reach 11% of total exports of
agricultural products.

The wood sector has also benefited from important investments, which have
increased the existing production capacities. Among Foreign investors, Brazilian
operators are planning to invest in cellulose plants. More investments are expected
when the volume of wood produced will be sufficient to develop the processing
industry. It is expected that new Chilean investors could move to Uruguay. The
country has already attracted Chilean companies, which own almost 20% of the
existing forest industry capacity. In addition, US investors (e.g. Weyerhaeuser) have
already extended their forest plantations in Uruguay (from 24 000 ha to 75 000 ha)
and are planning to install new treatment units.
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EU operators are also attracted by wood transport and wood treatment. There are
several projects aiming at building transport terminals involving Spanish and Dutch
companies (ENCE, UNION FENOSA, SHELL, Industrias aragonesas, Caligran and
MQM).

The main woodworking product produced in Uruguay is sawnwood. The majority of
the production is designed for the internal market. The imports and the exports are
limited compared to the local production. The Uruguayan industry produces also
wood pulp and wood-based panels, but not enough to satisfy the demand of the
domestic market. Despite the fact that recently the size of the Uruguayan forest has
significantly increased, the size of the woodworking production has been constant.
The majority of the new forestry plantations are used for the paper industry.

Uruguayan imports of wood products are low, they mainly consist of small quantities
of sawnwood and wood panels, coming mainly form Brazil and the other
neighbouring countries. The Uruguayan exports are composed of industrial round
wood and sawnwood. Recently, the Uruguayan exports have significantly increased,
due to the development of the capacity of the local industry.


2.14.4.Applied Tariffs


Applied tariffs for products of HS Chapter 44 range from 4.5% (logs) to 16.5%
(tableware and kitchen-ware of wood). However, the majority of the products are
subject to a 12.5% Customs‟ duty. For products of HS Chapter 94, the applied tariff is
20.5%.

In addition, the 23% VAT is charged on duty paid value.

Some additional taxes are applied when the products are imported to Uruguay:

Customs Tax for Extraordinary Services (tasa por servicios extraordinarios)- the tax
is between 12 and 600 USD depending of the Customs‟ value of the goods.

Tax for Additional customs services – 0,20% of CIF value with a maximum amount of
50 USD.

Tax of Import control by the National Bank of Uruguay – the tax is 1,1% of the
Customs‟ value. However, according to some importers the tax is about 3%.

According to the importers, they should also pay a contribution for the social security
(about 3% of the products‟ value after the calculation of all import taxes).

The importers of goods are obliged to pay a provision for the services of unloading
provided by the port or airports, which is calculated according to the value of goods.




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Trade Statistics

The trade between the EU and Uruguay is quite low, especially on the EU export
side. The Uruguayan exports of woodworking products to the EU have almost
doubled in the recent years. The export/imports levels for the recent years are as
follows:

EU exports to Uruguay:

Year         1999                      2000                     2001
Volume       2 943 970 euros           2 374 240 euros          1 598 390 euros



EU imports from Uruguay:

Year         1999                      2000                     2001
Volume       27 610 140 euros          45 594 160 euros         54 487 230 Euros



2.14.5.Customs’ procedures


The clearance procedure in Uruguay is reported to be sometimes difficult. The
majority of the companies use the services of Customs‟ agents (despachantes) in
order to speed up the procedure.

All the companies involved in import or Customs‟ agent should not have any debts
related to

-   VAT payments
-   Social security payments
-   Payment of the insurance related to work accidents.

The general documents, which should be presented for Customs‟ clearance are the
following:

-   freight documents
-   commercial invoice
-   freight invoice
-   packing list
-   Customs‟ value declaration
-   sworn statement of responsibility
-   Customs‟ declaration
-   official envelope for Customs‟ documents.

The importer must submit the Customs‟ declaration and the Customs‟ value
document via the national electronic system. After check of these documents he will
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receive two other documents called “single Customs‟ document” and the “Customs‟‟
value declaration” and will be able to present all the documents for customs
clearance.

Some additional documents are required for some woodworking products – a
phytosanitary certificate and a sanitary certificate for vegetables.

The phytosanitary certificate should be issued by the Uruguayan Ministry of
Agriculture. The importer should submit an application before the arrival of goods.
The normal time limit for the authorisation is five days.

The sanitary certificate for vegetables is issued by the Services of Agriculture
Protection of the Ministry of Agriculture. The importer should apply for the certificate
by submitting the phytosanitary certificate issued by the competent authority of the
country of origin. The Uruguayan authorities will take a sample of the imported
products. The merchandise will be kept in special warehouse until the end of the
expertise. The duration of the procedure could be up to 10 days.

The products, which are submitted to phytosanitary certificate and sanitary certificate
for vegetables are the products from chapters: 4401, 4403, 4404, 4405, 4406, 4407,
4408, 4409, 4412, 4415, 4416 and 4418.

No specific certificates are required for the products of chapter 94.


2.14.6.Technical barriers


According to the Uruguayan authorities, no compulsory certification for woodworking
products or furniture exist in Uruguay. All the international and European certificates
are recognised.

No specific complaints on labelling or other technical barriers have been collected by
the consultant.


2.14.7.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 - Legal analysis.




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2.15. CHILE



2.15.1.The EU Industry assessment


European companies have not expressed difficulties to access Chilean markets.
Some general complaints have been mentioned on the import documents. However,
the overall impression is that Chile is an opened market with relatively easy access
for the EU companies.



2.15.2.The Mission to Chile


The mission to Chile has been conducted from 17th to 19th December 2001. During
the mission the consultant met the competent Chilean authorities, the Member States
Trade Representatives and the Chilean importers of EU woodworking products and
furniture.


2.15.3.The Market


Chile has large natural resources and is one of the main producers of forest-based
products in Latin America. The development of the forest processing industry has
been very intense over the last years and this industry constitutes now around 3% of
the GNP. The forest industry employees over 200 000 persons and is one of the
major exporting industries of the country. The volume of the exports in 2001 is
estimated to more than 2 billion dollars. The Chilean companies have taken
advantage of the rapid development of their industry and have made several
investment in forestry or forestry based industries in other Latin American countries
such as Argentina, Uruguay and Paraguay. The Chilean forest processing industry is
based mainly on the production of three products – sawnwood, wood-based panels
and wood chips.

The sawnwood sector is characterised by the variety of producers, ranging from
small portable sawmills to large facilities. The six largest plants account for more than
65% of the production. One third of the production is consumed domestically. The
rest is exported. The domestic consumption of sawnwood is increasing over the last
years and the sawmilling companies have been obliged to increase slightly their
capacities. On the other hand exports were growing less rapidly than foreseen due
mainly to the Asian crisis in 1998-1999 and to the decreasing price of the wood
products on the world markets over the last two years.




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The wood-based panel sector produces several types of products: fibreboard,
chipboard, plywood and medium density fibreboard. The sector is growing mainly due
to the domestic consumption in the furniture industry.

The wood chip sector produces wood chips for pulp production. It has been
developed recently and is mainly linked to the rapid development of the pulp and
paper industry in Chile. It is important to note that large paper companies have
invested in Chile and important part of the forest production is used for the pulp and
paper companies.

The furniture industry in Chile is also growing rapidly. In the recent years the Chilean
producers of furniture have increased their investments in technology and have
started furniture production of good quality.

The Chilean exports are mainly oriented to the US and Asian countries (particularly
Japan, South Korea and China). The export sawnwood and wood-based panels to
EU have also rapidly increased over the last years and have almost doubled since
1998.

The woodworking products imports to Chile are composed mainly of products, which
are not produced in Chile or are not of good quality. The main imports include
fibreboard, waferboard and furniture.


2.15.4.Applied Tariffs

The products of the chapter 44 and 94 are submitted to 7% Customs‟ duty. In
addition, they should pay 2% of airport fee and 18 % of VAT.

Import-Export Statistics

The EU has a trade deficit with Chile but given the relatively easy access to the
Chilean market the EU exports to Chile are also growing. The main problem for the
EU industry is that the EU products are not competitive on the Chilean market in
comparison with domestic products and the exports are mainly concentrated on
articles non produced by the domestic companies. The import-exports statistics for
the recent years are as follows:

EU imports from Chile

Year      1999                         2000                     2001
Volume in 76,617,480                   86,076,020               75,793,030
euros


EU exports to Chile

Year            1999                   2000                     2001
Volume          36,961,610             50, 293,270              56,333,410
in еuros
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It is expected that the entry into force of the Free Trade Agreement with Chile will
further reduce the barriers in the woodworking sectors and the trade between the two
parties will increase.


2.15.5.Customs formalities


The EU exporters to Chile have not addressed particular complaints on the customs
clearance process in Chile. Only general complaints on punctual difficulties with the
customs documentation have been expressed.

The general documents needed for customs clearance of woodworking and furniture
products:

    -   bill of lading
    -   packaging list
    -   pro-forma invoice
    -   certificate for insurance
    -   automatic import licence
    -   Customs‟ bill of entry
    -   Customs‟ value declaration
    -   certificate of origin

    In addition of these documents for the woodworking products, except the
    woodworking products of sub-heading 4413, 4414, 4417, 4418, 4419, 4421 some
    additional documents should be presented. These are:

    -   phytosanitary certificate – it should be obtained form the competent authorities
        of the exporting country
    -   a Customs‟ certificate for agricultural products, the document should be filled
        in by the importer. Once the document is presented the competent authority
        perform an inspection allowing the release of goods
    -   phytosanitary inspection report – it is issued by the Chilean authority after the
        inspection of goods during the Customs‟ clearance

    According to the importers the customs clearance and the inspections are
    performed rapidly.


2.15.6.Investment and investment incentives


The Chilean government is seeking for foreign investment and is offering equal
treatment for the foreign investors. The Law DL 701 regulates the incentives for
forestation. The law offers bonuses to small landowners, which cover from 75% to
90% of the cost of forestation. The Chilean government has also adopted number of
environmental laws and is requiring environmental impact study for new


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establishments. The Government also has obtained ISO 14001 certificate for 60% of
the Chilean forests.

The private investments in the forestry sectors over the next 10 years are expected to
be around 3,5 billion dollars, including Chilean investments but also investments from
the foreign companies.


2.15.7.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.16. INDIA



2.16.1.The EU Industry assessment


Despite the recent liberalisation of the market (lifting of quantitative and reduction of
Customs‟ duties), EU wood processing companies and Indian importers consider the
Indian market as a very difficult market (existence of various non-tariff barriers).

However the Indian market offers huge potentialities for our exporters of processed
wood and furniture. The constantly growing population cumulated with the economic
development of India increases constantly the domestic demand for wood products
for construction and decoration purposes. Since the Supreme Court has prohibited in
1996 the cutting of wood in the Eastern part of India, which provided the majority of
wood for construction, the demand for imported products has significantly increased.
This has also led the Indian Authorities to decrease significantly the applied levels of
tariffs for raw materials (e.g. logs). The domestic demand for wood is estimated at 30
million m3 and is expected to be 40 million in 2006. Main outlets for construction are:
plywood, plywood doors and windows. The plywood sector offers new opportunities,
given the lack of quality products on the market.

In questionnaires, EU exporters complained mainly about:

-       import duties
-       Customs‟ formalities: too complex import documents, duration of Customs‟
        clearance, Customs‟ valuation issues.

In addition, EU Trade representatives in India and importers reported the following
difficulties:

-       Compulsory requirement to affix the Maximum Retail Price (MRP) in the Indian
        market from the EU country of origin
-       Labelling requirements (furniture and some wood processed goods)
-       Recent implementation by the Ministry of Agriculture of import permit for wood
        products.


2.16.2.The mission to India


The consultant carried out a mission in India from 12th to 22nd September 2001. A
second mission to India was conducted from 23d to 29th May 2002. The CEEI
representative attended meetings with the Indian Authorities responsible for the
various measures affecting the importation of woodworking products into India
(DGFT (Directorate General for Foreign Trade), Ministry of Agriculture, Customs,
Bureau of Indian Standards, Office of Weights and Standards). These meetings were
kindly arranged by the EC Delegation in Delhi.
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The consultant also consulted the Member States‟ Trade Representatives on the
implementation of various measures identified as potential trade restrictions (import
authorisations, import duties calculation, obligation to affix the MRP (Minimum Retail
Price) on exported products, labelling requirements etc). The Member States‟
Representatives also provided the consultant some names of importers. Most of
these importers were contacted and interviewed. The report presents the main
outcomes of the missions.


2.16.3.The Import permit


The Ministry of Agriculture has confirmed that it has recently decided to require
import authorisation for wood products (most products of chapter 44 and 94).
However, it has not been clearly identified if these rules are already implemented (all
importers interviewed said that they could import until now their products without
presenting the import authorisation to the Customs). Representatives of the Ministry
have however insisted that importers of woodworking products should now apply for
such authorisation.


2.16.4.The Import duties

India import duty structure is one of the most complex worldwide. Even if basic duties
for wood and processed wood products have been reduced gradually over the
years, their level still remains high for some processed wood products or furniture.

The Indian Customs Tariff 2002 indicates, for each HS position, the import duties
levied by Customs authorities for products imported into India. These duties are listed
in columns 3 to 6 and in footnotes of the code. In addition, supplement with Easy
reference Customs‟ Tariff 2002-2003 must also be consulted.

These are:

     Column 1:   HS code,
     Column 2:   Description of the product,
     Column 3:   Basic duty (customs duty),
     Column 4:   Additional duty (popularly called countervailing duty “CVD”),
     Column 5:   Special additional duty
     Column 6:   Import policy.

 An additional duty of excise for goods of special importance between 5 and 8
  % of landed value can also be charged.

 The standard mathematics formula to calculate the total import duty is as follows:

(A)     Basic duty value = Basic duty rate x assessable value of goods62

62
 The assessable value of goods is equal to the landing charges @ 1% of CIF value + CIF value.
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(B)    Additional duty value = Additional duty x (assessable value of goods + Basic
duty value
(D)    Special additional duty (Sadd) value = Sadd rate x (Assessable value + basic
duty + additional duty + antidumping and safeguard duty if necessary)
(E)    Total duty = (A) + (B) + (C)+ (D) above.


 Example : Value of goods          100
            Assessable value        101
    (A)     Basic duty                     25%
            BD x assessable value = 25.25%
    (C)     Additional duty                16%
            Add x (AV+ BD + others duties) = 20.2%
    (D)     Special additional duty        4%
            Sadd x (AV + BD + Add + others duties) = 5.86%

In this example, the total import duty rate is: 51.31%

For the products of HS chapter 44, the import duties vary according to the
competitiveness of the domestic products and the needs of the country. For example,
the duty rate is only 5% for fuelwood logs (HS 4401), wood charcoal (4402) wood in
the rough (4403). However, for other wood products, the basic duty is 25% (ex wood
floor 4405) or 35% (sheets for plywood, particleboards etc …)

The customs duties for some important goods for the European industry are as
follows:

Product              Basic    Additional      Special   Total       Import policy
                     duty     duty            Additio
                                              nal
                                              duty
             63
Wood floor           25%      0%              4%        30%         Free       –BoP
(4405.) -                                                           (balance        of
                                                                    payment
                                                                    requirements)
Sheets for           30%                      4%        40%         Free
Plywood
Wood                 30%      16%             4%        56.832%     Free
continuously
shaped
Plywood              30%      16%             4%        56.832%     Free
 (4412)
Wood Furniture       30%      16%             4%        56.832%     Free
for kitchen,
offices
(9403.30, 9403.40)
Other wooden         30%      16%             4%        56.832%     Free
furniture
 (9403.60)




63
  Under the classification of the Indian Customs tariff, the water treatment chemicals are classified
under the heading 3824.90 Others.
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Various problems regarding the import duties calculation are stressed by
Indian Importers:

-       The high level of basic duty ranges from 25% to 30%. Indian importers
        consider that this high level of duties is an important obstacle. They have
        underlined that there is a huge domestic demand for imported wood (for
        furniture, household and construction). Since 1996, the Supreme Court has
        prohibited the cutting of wood in order to stop the deforestation in the country.
        The wood domestic industry is not yet well developed (for example, there are
        only two big producers of particleboard made out of sugar waste and mango
        trees), which increases the necessity to import processed wood. In the
        furniture industry, which is mainly composed of small artisan companies,
        important investments took place over the last years, which also mean a
        potential development of imports.

-       Valuation issues: the main problem identified by both wood importers and
        furniture importers is that Customs Authorities increase unilaterally the
        assessable value of goods by 30, 50, or even 100% without any justification.
        There is no effective judicial recourse against such practices (the importers
        having launched administrative complaints alleged that they had abandoned
        the recourse, given the delays and the additional storage costs, their products
        being stuck in Customs.

-       Application of CVD (additional duty) for particleboard: under Indian rules,
        particleboard is exempted from CVD (and sales tax for domestic products)
        given the fact it is made out of agricultural waste. However, if Indian
        Authorities accept to exempt domestic particle board from CVD while it is
        made out of sugar waste ”Bagasse” or rice husk, they do not implement this
        exemption for the EU particleboard made out other agricultural waste
        (branches and flax waste). Importers of particleboard have therefore argued
        that there is discrimination with domestic producers.

-       Calculation of CVD based on MRP: since 2001, the Customs are entitled to
        charge the CVD of 16% on basis of the Maximum Retail Price (MRP) for 83
        products. Even if the Ministry of Finance has defined an abatement as a
        percentage of the retail sale price (for example 35%), the total amount of CVD
        charged is superior than before (it is estimated to be 22% on average).
        Woodworking products are not in the list of these 83 commodities (mainly
        foodstuffs, cements, carbon paper, facial tissues ..). However, importers of
        wood furniture have complained that Customs‟ charge the CVD on their
        products on the basis of the MRP.

-

2.16.5.Phytosanitary inspections

Once the importer has paid the total amount of import duties, the products are
subject to Phytosanitary inspection in order to detect the existence of any organism
affecting the product. If the inspectors find any disease, the product is either treated
or can also be destroyed.

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2.16.6.Labelling requirements


In November 2000, the Directorate General for Foreign Trade (DGFT) has issued
new rules on labelling and marking rules for imported products64. These rules
implemented since 1st January 2001 are of great concern for EU exporters and their
customers. The notification stipulates that Customs Authorities must verify before
the clearance process if the imported packaged products comply with the provisions
of the “Standards of Weight and Measures Act” of 1977: “the compliance of these
shall be ensured before the import consignment of such commodities is cleared by
Customs for home consumption. All pre-packaged commodities, imported into India,
shall in particular carry the following declarations:

(a) Name and address of the importer
(b) Generic or common name of the product,
(c) The net quantity in terms of standards units (…)
(d) The month and year of packing
(e) The maximum retail price at which the commodity packaged form may be sold at
the ultimate consumer. This price shall include all taxes or otherwise, freight,
transport charges, commission payable to dealers, and all charges towards
advertising, delivery, packing, forwarding and the like, as the case may be.”

These requirements must then be met before the Customs‟ clearance.

These rules cause two types of difficulties to our exporters:

1) According to Customs and DGFT (Directorate General for Foreign Trade)
   Representatives, the EU product must be labelled in origin (before shipment) and
   must arrive at the port of entry already adequately labelled. This obligation results
   in higher production costs for the EU producer which must produce a different
   label by Indian State of final destination. It must be underlined that the MRP
   varies from one Indian State to another. In the meeting conducted with the
   Customs Chief Commissioner of Delhi, it was stressed that there is no possibility
   anymore to affix stickers, even in the bounded warehouses (which was allowed
   during a transition period). However, various importers have stated that the
   Customs still enable them to affix the stickers after arrival in the port.

2) In case of a mistake (e.g. spelling mistake of importer‟s name), the importer is not
   allowed to correct the label and the product will be either returned or destroyed.
   According to DGFT, however, the Customs could decide on a case by case basis
   whether the mistake can or not be corrected.

3) Labelling requirements are apparently only applicable to those commodities in
   pre-packaged conditions, which are earmarked for retail sale in India. Therefore,
   for imported goods used as inputs of Indian manufacturers, such as raw
   materials, components, bulk imports etc … imported for further processing in
   India, the labelling requirements could be disregarded (Policy Circular N° 38 (RE
   2000) 97 –2002 dated 21.01.2001). However, importers of furniture components
   aimed to be assembled in India (e.g. components for a table) have complained
64
 Notification N° 44(RE) 24.11.2K of 24 November 2000.
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    that Customs Authorities have requested the MRP to be affixed on every
    packaged component (which is impossible for the EU exporter) and have
    pretended to charge the CVD (Additional Duty) on the MRP (Minimum Retail
    Price). It is then alleged that there are abuses from Customs Authorities on the
    basis of these rules.

Importers fear that Customs may misuse these marking and labelling requirements to
harass them even more than usual. Member State Trade Representatives have
expressed the opinion that these moves signal the Government intention to raise new
barriers to imports in the post quantitative restrictions regime.


2.16.7.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 - Legal analysis.




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2.17. KOREA

2.17.1. The EU Industry assessment


In questionnaires and interviews, it has been estimated that the Korean market offers
good development perspectives for processed wood for construction, the shipbuilding
industry and for use in the furniture sector.

During the survey with the industry (questionnaires, meetings with industry
associations), no specific complaints have been received regarding non-tariff
barriers. The information on the Korean market has been completed during the
mission conducted in Korea (end of October 2001).


2.17.2.         The mission to Korea


The mission in Korea was conducted from the 24th of 0ctober to 30th October 2001.
The consultant met

(1) the relevant Korean Authorities (Ministry of Construction, Customs
    Administration, International Quarantine Service, Agency for Technology and
    Standards) in order to complete the collection of relevant applicable rules related
    to the importation of the EU woodworking products;

(2) the EU Trade Member State Representatives in order to assess the
    potentialities of the Korean market and to verify if EU companies had
    encountered recently difficulties regarding the import procedures for products of
    HS chapters 44 and 94.

(3) importers of the EU products

(4) the EU – Korea Chamber of Commerce Representatives in order to discuss
    practical issues regarding labelling rules for cosmetics and other products.


The main outcome of the mission is as follows:

1.      Most interlocutors (Member State representatives, operators) have qualified
        the Korean market as a relatively open market for EU products. The import
        requirements for woodworking products appear at first sight to be less
        restrictive and more flexible than in most of the other markets investigated.

2.      Applied tariffs for wood products (chapter 44) do not constitute a significant
        obstacle for EU exports.


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3.      Most of the standards for furniture products are voluntary (e.g. labelling
        requirements). Among the furniture products, there are however some
        products for which labelling requirements are compulsory: i.e. children‟s
        furniture.
        For woodworking products, there are rather strict construction standards (in
        particular anti-fire and resistance standards), which could prevent the access
        of some EU companies. However, the market is quite limited and the EU
        companies suffer from the competitive disadvantage in comparison with Asian
        producers.      .

4.      Constraints affecting EU exports are mainly of non-regulatory nature. They are
        more distance-related and quality-related (the domestic demand being more
        focused on low quality softwood and hardwood). This explains why our
        exporters are not competitive compared with South American exporters
        (softwood) or South Asian exporters (hardwood). Another constraint that limits
        the penetration of European wood is related to the low use of wood materials
        in the construction sector (compared for example with Japan).


2.17.3.The Korean market


The products considered are products from HS chapters 44 and 94 (wooden furniture).
According to the Member States, the main wood products exported are laminated
lumber, spruce, European pine.

The Korean market is a rather limited market for our industry. Various factors explain
     this situation:

     (1) the    size    of     population      (compared        to    China    or   even   Japan)

     (2) the low use of wood materials in the construction sector. It is reported that most
         of the houses are not wood components based. The windows are rarely in wood.
         There are now many skilled carpenters (“stone country”). This contrast for
         example with the market situation in Japan, where 75% of the houses are in
         wood and the demand concerning finished wooden products for the home
         decoration (wooden floor covering, doors, shelves, furniture) is important. This
         explains why the demand for European products remains low.

     (3) Wood is therefore used for other applications such as auxiliary materials and
         wood packaging. In this market segment, where the EU suppliers suffer from the
         tough competition of South American suppliers (softwood is mostly used for
         packaging).
     (4) Finally, there is a lack of understanding of the product (wood) and its
         applications. There is a need for an educational campaign on the ability and
         the potential to improve some products/facilities through a more extensive
         wood use.

     According to the EU Member States Representatives and the operators
     interviewed, the market offers good opportunities for the following items:

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    Building technologies

        According to the Austrian Trade Office in Seoul, Korea offers nevertheless
        potential for building technologies (with laminated veneer). For example,
        Austrian exporters can propose sports facilities out of laminated wood.
        However, practice in the building sector tends more to the use of steel.

    Related wood items for decoration

        Floor covering: the exports of EU wood floor covering have slightly increased,
        but the market remains small and the use of floor heating prevents the use of
        parquet, because the heating technology used is not adapted for the use of
        wooden materials. Materials used for the floor covering are more often
        oilpaper and linoleum.

        Musical instruments: wood is also imported for the manufacturing of musical
        instruments.

    Furniture

        Exports of furniture are quite limited. The main segment of the market taken by
        our companies is the up-market Furniture (for home, hotels and restaurants).
        However, Italian exporters are quite confident about the design market.

        The domestic industry is quite weak and not competitive, due to the low quality of
        the domestic production.

        The office furniture segment is nevertheless more promising for our industry
        (exports from Italy, Spain, Austria).


2.17.4.Applied Tariffs


For wooden products (HS chapter 44) the applied Customs‟ duties are ranging from
1% to 8%.

Logs: 2%.

Most of the processed woods are subject to a duty of 5 - 8%.

For wooden furniture, the applied duty is 8%.

The Customs will collect the following duties:

                             Customs‟ duty on CIF value
                             VAT (10%)
                             For some products: special consumption tax
                             Educational tax: 30% of 3 (for all products)


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                             Special tax for agriculture and fisheries for some items of HS
                             44: 10% of the special consumption tax.


Some member States (Italy) have complained about the Luxury tax applied for luxury
furniture (HS 94). For pieces above 3 Million WON, or sets of furniture above 5
Million Won, Customs levy a 30% tax. According to Customs, the tax is charged on
the duty paid value (CIF +Customs‟ duty). VAT is therefore charged at the end.


2.17.5.Customs procedures


No specific complaint was made on customs procedures.

Import documents

Import documents required for products of HS chapters 44 and 94 are:

-     Invoice
  - Bill of lading
  - Packing list
  - Phyto-sanitary certificate (for some processed woods)
  -
Phyto-sanitary requirements

   Imports of logs are not required to be accompanied by a phyto-sanitary
    certificate. However, quarantine authorities will conduct inspections on the logs
    upon arrival. On the basis of the results, the importer will be required or not to
    treat the goods. The products will be inspected after treatment and given a
    certification document that the product is free from disease. The Quarantine
    services will give the green light after 10 days.

   Imports of processed wood should provide a phyto-sanitary certificate from the
    country of origin, which will be accepted. However, additional checking will be
    carried out.

   Imports of furniture are not required to carry such a certificate. Inspections on
    imported furniture are conducted randomly.

Quarantine Authorities will also check the origin of the goods. Some wood originating
in USA, Canada, Taiwan, China and Japan are prohibited from import. In this case
the wood will be immediately rejected or destroyed.

On August 16th, 2001, the Korean Authorities have also decided to prohibit the
import of alder originating from UK, Sweden, Germany, France, Austria, the
Netherlands, US (applicable for oak coming from some Californian counties) and
Hungary in order to avoid the Phytophtlora disease (preventive prohibition).



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2.17.6.Technical measures


a)     Construction standards

The EU exporter should comply with construction standards implemented by the
various regulations on construction law 65. In particular, under the Regulation for the
construction structure, there are various structural strengths standards (chapter
devoted to woodworking products).

Under Article 59 of the Construction Law (part 3) they are some technical standards
(implemented by Ministerial law). The Government Research Institute on Academic
Activities drafts these standards. There are also some private institutions that
establish standards, which are to be approved by the Ministry for Construction
(similar system than in the US). Most of standards for wood architecture belong to
this category. The private regulations are estimated to be more flexible than
Governmental ones.

There are some standards on wood architecture. For example, when the total surface
of the wood construction is above 10 sqm, there should be protected with some kind
of anti-inflammable materials (presidential Decree and Regulations adopted to
implement article 57). These are very old regulations (30 years old) and therefore
believed not to correspond to the evolution of the woodworking industry.

Under Korean rules, the maximum height for wood constructions is 13 meters, and
less than 3.000 sqm for the structure strength. Above these limits, it is required to
prepare a technical file and ask for an authorisation.

These standards are additional to the general standards for construction (structure
safety standards, earthquake, trembling, height …). As the anti-fire standards are
very strict, it is almost impossible to comply with these standards for wood
construction materials (for example, wood pillars should resist to fire three hours).

According to the Officials of the Ministry for Construction, it is rather exceptional to
build in wood. The wood construction is considered as inefficient in Korea.

There is no mandatory certification for imported woodworking products.

b)     Other technical measures

Under the Quality Management and Consumer Product Safety Act, some industrial
products are subject to safety inspections and compulsory labelling requirements.
Among the products, there are two categories of furniture: double beds for children
and children‟s chairs. The importer is required to send a sample for inspection to the


65
   There are various legal texts to be consulted in the construction law: the Construction law,
presidential decrees, the Ministerial Decree from Ministry of Construction, regulation for the
construction structure …
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                                                                                           152
certification institutes before the importation. When certified, the importer can affix the
certification logo.


2.17.7.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.18. CHINA



2.18.1.The EU Industry assessment


China has been identified by the industry as an significant potential market, in
particular for construction board and furniture.

In the first phase of the research, CEI Bois has informed the consultant on specific
complaints made by their members on the implementation by Chinese Authorities of
certification procedures for imported products of HS chapter 44. Inspections carried
out by Chinese Inspections Offices were alleged to be costly, burdensome and
discriminatory compared to inspections conducted for domestic products.

These measures have been investigated by the consultant during its mission to
China (30th October 2001 to 13th November 2001).


2.18.2.The mission to China


The consultant conducted a mission from 30th October 2001 to 13th November 2001
(Beijing, Shanghai, Hong-Kong). The mission enabled the consultant to realise an
assessment on the import requirements for woodworking products. The consultant
met

    (1) the relevant Chinese Authorities (AQSIQ – State Administration for Industry
        and Commerce, Department of Quarantine) in order to complete the collection
        of current import requirements for products of HS chapters 44 and 94 and in
        particular phyto-sanitary requirements. These meetings enabled also to
        understand the position of the Authorities on their implementation;

    (2) the EU Trade Member State Representatives in order to identify the
       companies having recently encountered difficulties regarding the importation
       of woodworking products, the trade flows of these products and the market
       opportunities for our exporters;

    (3) importers of EU woodworking products (mainly processed wood, windows,
        stairs, furniture). Individual interviews have been conducted in Beijing,
        Shanghai and Hong Kong. In Shanghai the consultant also visited and
        interviewed companies in the International Construction Fair (November
        2001);

During this first mission, a first assessment of the situation was made. The main
outcome of this mission was as follows:


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1.        There is an increasing demand for woodworking products of chapter 44, in
          particular of the construction sector. The market for furniture is also promising
          at least for the medium and high segment sector (up-market furniture).

2.        The Chinese authorities have defined a number of phytosanitary requirements
          in 2001 in order to prevent the importation of plagues and diseases. This first
          set of regulations has not proved to be more difficult to comply than other
          countries‟ requirements. Importers have not reported major difficulties.

3.        However, very recently the Chinese Authorities have announced the
          strengthening of these rules. These new rules are to be published on 31st May
          2002. They should be implemented from 1st August 2002.


2.18.3.The Chinese market


a) The increasing demand of wood products

In 2000, the demand in wood was evaluated to be 60 M cubic meters (m3). Local
supply represents currently 40 M cubic meters. About 20 M m3 of woodworking
products of chapter 44 are imported.

It is estimated that the construction market in China is particularly promising 66. This
market is expected to grow significantly, by 15 to 20% over the next five years. Over
the next 10 years, the population growth is expected to be 5% per year and
urbanisation (334% in 2000) to reach 45% in 2010. This will require an additional 660
M m2 of living space. The average urban construction was 2-4 million apartments
/year during the last 10 years67. The development of imports has been mainly
located in the coastal areas. However, it is expected that the development policy
decided by the Central Government in the Centre and the West should also enhance
imports of wood in the coming years.

b) The import of logs

Chinese trade data indicate a noteworthy surge in imports of logs between 1999 and
2000. In 1990, they represented 10 M of m3. In 2000 they were 13.6 million m3. In
2001, this tendency has been confirmed. It has been favoured by governmental
measures aiming at ensuring best management of the forest, partly by reducing the
national production, as well an increasing demand for wood products.

The main suppliers were Russia, Malaysia and Gabon. Russia exports some 5.9 M
m3 of mainly coniferous logs. The other suppliers are Malaysia (1,6 million) and
Gabon (1,1 million m3), Papouasie (775,000 m3), Indonesia (563,000 m3). These are
mainly used in the manufacturing of pulp paper and low range furniture. Germany
and France are the main suppliers of European beech(“). In 2000, they have


66
     See for example, The building Products market in China, Canadian Embassy in Beijing, June 2000,


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exported to China respectively 469,000 m3 and 229,000 m368. European exporters
(France, Germany, Denmark) have benefited from a higher demand in beech logs, in
particular in the Guandong province, for the plywood industry and furniture.

c) The imports of sawnwood

Exports of sawnwood have also increased over the last years. In 2000, imports of
sawnwood represented 3,6 M m3 in volume (+ 33%) and 982 Mio USD (+49 %).
Imports of non-coniferous sawnwood are originating mainly from Indonesia (997,000
m3) and Malaysia (536,000 m3). Coniferous imports are originating in the US
(295,000 m3),Canada (183,000 m3), Russia (165,000 m3), New Zealand (146,000
m3).

d) The imports of plywood

The demand for plywood averages 9 M m2, 80% being satisfied by domestic
output. Domestic industry is composed of 7713 wooden material processing
enterprises and 8062 artificial wood production companies (artificial wood, plywood
and fibreboard). The demand for deciduous timber and decorative timber is growing.
Main suppliers of China are Russia, Indonesia, Hong Kong and Malaysia. Even if
these products are more expensive, they are purchased for their quality and
durability. It is estimated that individual buyers prefer imported wooden doors and
frames. However, the competition of the US in this sector is very important. There is
a market for wood, embossed wood or plywood entrance doors, veneer covered
interior doors.

Wood decoration is considered as a sign of luxury. The market is promising. Many
apartments are totally wood-decorated. For example, there are currently 700,000
apartments to be decorated in Shanghai. If the South American woods and South
East Asian woods are currently fashionable, the cherry woods are also demanded,
which leaves our exporters in a good position.

e) The market for other processed wooden products

There is also a big market for wooden windows and wooden stairs. An importer of
Spanish wooden windows explains however that a main difficulty lays in the lack of
uniformity of sizes for windows. The apartments are sold without windows and doors.
However the sizes vary significantly, which prevents the exportation of standards
units.

About 3% of population can afford to buy pre-fabricated wood-frame modular houses.
The market is dominated by US and Australian companies. In November 2001, the
local Government of Shanghai has signed three MoU (Memorandum of
Understandings) with the Province of British Columbia (BC), Canada, to better
develop the local wood product market. The wooden villas‟ market is very promising.
Under a recent market survey, 80% of property projects in Shanghai are focused on
villas.


68
   Information given by the Economic French Mission in Shanghai. See also « Importations de grumes
et de sciages en Chine, evolutions et perpsectives » PEE Shanghai, October 2001.
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f) Main reasons for the development of wood imports

There are various causes for this development of the wood market in China:

                             1. The Government has decided to improve the forest
                                management and to reduce the level of cutting from 16
                                million m3 in 2000 to 11 million m3 in 2003.

                             2. Import duties have been removed (O% duty) on the
                                importation of logs. Import quotas have been softened,
                                which has enabled increased imports (the big importers
                                are all granted with import licences). Most imports are
                                direct imports;

                             3. The policy on property access and the surge in incomes
                                have resulted in a development of the decoration sector
                                and a surge in the demand of wood products.


g) The Furniture market

The market

The Chinese market is a promising market for furniture. Some EU Member States
companies (IT, SP) have already penetrated the market in Beijing and Shanghai.
Imports are composed out of veneer cover, DMF and particles furniture, low use of
metal, some glass furniture. Sofas are also popular. However, regarding sofas,
importers are sometimes faced with additional restrictions regarding the fabrics (for
example, it is very difficult to obtain the required certificate for polyester fabric
covering sofas, which leads the importer to import cotton fabric sofas instead).

The Chinese customer pays in local currency and the trading house changes the
money in foreign currencies. Most of the companies avoid the Letter of Credit, for
which the applicant must provide a very detailed file, loss of time). Usually the foreign
supplier asks for an advance of 30% of the price.

The clearance process (furniture)

There are no major problems with the furniture during the clearance process.
According to an importer, while all documents are correct, the clearance takes only
three days (including inspection).

The products have to carry a specific label on the package containing:

    -   The name of the company
    -   The number of the container
    -   Description of the container

Import duties are : 22% + 17%. Agent fee is estimated to 2-3%.

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The importer has to let a 10,000 RMB bond during three months per container
imported for pricing purpose. Chinese authorities can ask the price quotation from the
EU supplier, make an enquiry in the shops.

Most imported furniture is of middle and high quality range. Exporters and importers
face however a serious problem of copies and counterfeiting.


2.18.4.Import duties


For products from HS chapter 44, applied duties range from 0% to 20%. Duties are
charged on CIF value. The products from headings 4401, 4402 and 4403 can be
imported freely into China. The veneer sheets are subject to duties between 5% and
8%. The parquet flooring is submitted to 15% duty. For particleboard and plywood,
applied duty ranges from 16% to 18% duty.

The wooden furniture from heading 9403 is submitted to 22% duty.

In addition, Customs Authorities levy 17% of VAT on duty paid value.


2.18.5.Technical standards and certification


The Ministry of Commerce publishes a list of new products approved for usage in
Chinese construction projects Exporters must comply with national, provincial and
local standards. However, no specific complaint was collected regarding the
construction standards.

According to the importers interviewed and the Member States Trade
Representatives, the importation of products of chapters 44 and 94 (furniture) do not
encounter specific difficulties. Various reasons explain the situation:

    -   The demand on wood products, in particular in the construction sector
    -   The relatively simple import procedures for these products

However, the authorities have decided to strengthen their current rules on wood
packaging. New rules are to be published on 31st May 2002. It is likely that EU
products will therefore be subject to additional requirements and controls at the ports
of entry.




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2.18.6.Phytosanitary requirements


a) General provisions on quarantine inspection for animal and plants

Under The Law of the People‟s Republic of China on the Entry and Exit Animal and
Plant Quarantine, Animals and Plants 69, containers and packaging materials used to
transport animal and plants, their products and other quarantine objects shall be
subject to quarantine inspections (art. 1)

Import animal and plants, their products and other quarantine objects shall be
quarantined at the port of entry; without the consent of the port animal and plant
quarantine office, the same shall not unloaded from the means of transport. (art. 14).

Under the Regulations for the implementation of the Law of the People‟s Republic of
China on the Entry and Exit Animal and Plant Quarantine, Animals and Plants , the
following products can be subject to quarantine inspections:

1)the animal and plants, their products and other quarantine objects for entry , transit
and exit;
2) other goods (…) in accordance of the provisions of relevant laws, administrative
rules and regulations, international treaties or with the agreements of trade contracts
.
b) Requirements implemented in 2001

Since 1st July Announcement of AQSIQ, all logs should be treated before export.
The treatment should be recognised by the export country. This measure was
decided after the Quarantine Authorities had found too many infected imported logs.

The AQSIQ announcement of July provides the following measures:

                           The imported logs must be accompanied by a sanitary
                           certificate issued by Official Quarantine authorities in the
                           country of origin. The certificate must indicate that logs are
                           free from harmful organisms.

                           Before shipment, logs with bark must be treated adequately
                           in the exporting country. The certificate must describe the
                           treatment method, the measuring, the time duration and the
                           temperature of treatment. If the product does not contain any
                           bark, this must be declared in the certificate.

                           Logs without certificate and untreated logs with barks are
                           prohibited to be imported into China. In these cases, the
                           quarantine authorities can cease the logs. In case of disease,

69
   Promulgated by Order 53 of President of the People‟s Republic of China on October 30st, 1991, and
effective since 1st April 1992. See also regulation of implementation, which came into force on 1st
January 1997.
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                             the logs will be treated at the costs of the importer. If the
                             treatment is not possible, the consignments will be rejected
                             and sent back to the country of origin.

                             The commercial           contract     must        mention   the   sanitary
                             conditions.

                             After the quarantine approval, the logs can be cleared with
                             the clearance form delivered by the quarantine services.


According to AQSIQ, the requirements on other wood products vary according to
the countries:

   Wood from USA and Japan must be treated before imported into China (wood
    packaging and other materials).

   From other countries: inspections are carried out by the quarantine services but
    the treatment is not required. However, if the products arrive at the port of entry
    accompanied with a certificate of treatment, this can speed up the clearance
    process. If some disease were found, the products will be treated
    correspondingly. Only the packaging materials could be destroyed.


According to AQSIQ, for processed wood and other articles, the importer should
anyway provide a certificate of plant health attesting that the product does not carry
any kind of disease. If the quarantine services found any problem in the harbour the
wood is to be treated (for all products of chapter 44).

It is important to note that according to AQSIQ officials, these certificates are also
required for windows, furniture and floor covering (even if these products are
manufactured out of processed and treated wood). However, Member States can
apply for consultations with Chinese Authorities in order to have their products
accepted without certificates.

During the clearance process, quarantine authorities take random samples to
conduct the necessary testing.

c) The announcement of new rules (to be published on 31st May 2002)

Importers and Member State Trade representatives did not report any difficulty
regarding their companies regarding the impact of the current phytosanitary rules for
woodworking products (e.g. regarding the acceptance of the phytosanitary
certificates by Chinese quarantine authorities at the port of entry).

However, it should be stressed that AQSIQ has announced the publication of new
phyto-sanitary rules for woodworking products for the 31st May 2002. AQSIQ
has made public its intention to strengthen the existing rules on the wood packaging
from EU. It is likely that the new regulation will require that wooden packaging be
subject to additional treatments than those presently required (treatment by heat and
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fumigation). These products will be put into quarantine when arrived and examined
by the quarantine services. On the basis of the tests reports, quarantine officers will
decide either to proceed further treatments or to reject the wood packaging and the
products contained in these. These rules have not yet made been public.


2.18.7.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.19. PARAGUAY




2.19.1.The EU Industry assessment


The European industry has not expressed specific complaints as regards the
Paraguayan market. Only very few companies have an experience of dealing in this
market and the exports are very discontinued depending on punctual needs of the
Paraguayan industry.


2.19.2.The market


The EU companies do not consider the Paraguayan market as very important given
its small size and the availability of natural resources in the country. The Paraguayan
forest resources and the development of the woodworking sector are sufficient to
satisfy the demand. A very small quantity of woodworking products is imported in
Paraguay and the imports are mainly originating from the neighbouring counties.

The main woodworking products produced in Paraguay are sawnwood and
woodbased panels. Almost half of the domestic production is exported. The forest
exploitation and forest production represents 2.8% of the GDP.

Given the importance of the forest sector for the development of the country, in 1995,
the Government has adopted the Forestry Law (536/95). This law regulates and
promotes investments in the forestry sector, realised by the national and foreign
companies. The advantages granted to the investors include subsidies to the
plantations and tax exemptions. In order to benefit from the law, the potential
investors are required to submit the project to the National Forest Service.

There is no information available as far as it concerns European investment in the
Paraguayan woodworking industry. However, co-operation with Paraguayan
companies or investment in the Paraguayan woodworking sector could be interesting
for the European companies.


2.19.3.Applied Tariffs


Applied tariffs for products of HS Chapter 44 range from 4.5% (logs) to 16.5%
(tableware and kitchen-ware of wood). However, the majority of products are subject
to a 12.5% custom duty. For products of HS Chapter 94, the applied tariff is between
8% and 20.5%.

Some additional taxes are applied.
The products entering Paraguay are submitted to an administrative fee of 0,5%.
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The consular charges might represent between 15 USD and 30 USD. The consular
charges are linked to the requirement that the majority of the original documents
must be stamped by the Paraguayan embassy in the country of origin.

The Customs broker charges are determined according to the value of the products
and a fixed amount.

The value added tax of 10% is calculated on duty paid value plus other taxes.


Trade Statistics

The trade between the EU and Paraguay is very low, especially on the EU export
side. Nor are the Paraguayan exports of woodworking products important. The
export/imports levels for the recent years are as follows:

EU exports to Paraguay:

Year         1999                      2000                     2001
Volume       183 220 euros             762 210 euros            177 010 euros



EU imports from Paraguay:

Year         1999                      2000                     2001
Volume       15 043 700 euros          16 785 880 euros         14 860 210 euros



2.19.4. Clearance procedure


The clearance procedure in Paraguay is not reported to be difficult. All the importers
must be registered with the Paraguayan Central Bank.

The general documents, which should be presented for Customs‟ clearance, are the
following:

-   freight documents
-   commercial invoice
-   certificate of origin
-   transportation insurance declaration
-   Customs‟ value declaration
-   Customs‟ value itemisation
-   Customs‟ declaration
-   Import endorsement for customs


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A phytosanitary certificate could be required for some woodworking products. The
phytosanitary certificate should be issued by the Ministry of Agriculture and
Livestock. The certificate is requested for the products from chapters 4401, 4402,
4404, 4405, 4406, 4407, 4408 and 4409.

No specific requirements are applicable for the products of chapter 94.


2.19.5.Technical barriers


No complaints have been received about technical requirements (certification and
labelling) in Paraguay. The National Institute for Technology and Standardisation
sets up the standards requirements, but apparently there are no specific compulsory
standards for furniture and woodworking products in Paraguay.


2.19.6.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.20. THE SLOVAK REPUBLIC



2.20.1.The EU Industry assessment

As far as the Slovak Republic is concerned, no specific complaints were collected by
the consultant during the preliminary research. The Slovak woodworking industry is
considered as rather competitive compared to the EU industry. The availability of
wood in the country is high and the costs of workforce are low.

However, the Slovak Republic is not quoted as a very interesting market for the EU
companies, especially as far as imports are concerned. Moreover, investment
possibilities exist and several EU companies have invested in the country.

According to the EU companies, there are no particular barriers, even if sometimes,
the import procedures are very complex and time consuming. According to some EU
companies, the Customs and certification procedures are more complicated in
Slovakia, compared to those applied in the Czech Republic.


2.20.2.The market


According to the Slovak Association of Wood-processing Industry, 143 woodworking
companies and 99 furniture companies are operating in the country and a large
number of them are small and medium-sized companies. In 1999, the Slovak
government has adopted a proposal of the Slovak association of wood-processing
industries: the programme “Wood – raw material of the 21st century”. This
programme aims to prepare the Slovak Industry for entry into the EU. The main
objective of the programme is to increase the production capacity of the Slovak
industry and to stimulate exports.

a) Wood

As mentioned above, the Slovak Republic has important forest resources, which
favour the development of the woodworking industry. The main sub-sectors in the
country are sawmilling and wood panels production. The privatisation of the existing
facilities is achieved and around 30% of the companies are working with foreign
investment. The Austrian and German companies are the main investors on the
Slovak market.

However, most Slovak companies are not profitable. The companies, working without
foreign investment still lack modern technology, needed in order to increase their
production and to acquire more important market shares. Demand on the Slovak
market is quite low. This explains why the companies are more export-oriented. The
leading products exported are plywood, fibreboard and shutters. The country is also a
producer of wooden doors and windows.



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The European products could be competitive on the Slovak market only in some
segments, where domestic production does not exist. This situation is due to a strong
domestic production, the market‟s small size and the low purchasing capacity of the
Slovak consumer.

Given the availability of raw materials, a highly qualified workforce and the sufficient
capacities of production, the Slovak Wood Industry offers good opportunities for
investors.

b) Furniture

The Slovak furniture industry has also experienced difficulties after the transformation
process and the production has declined. However, since 1997, the production of
furniture has been increasing and the Slovak companies have became more and
more export-oriented.

Several EU companies have invested in the furniture industry in Slovakia, because of
the availability of wood and qualified working force. IKEA, for example, has opened
production facilities in Slovakia in 2001 and is working under contract with several
Slovak companies. Some German companies also co-operate with Slovak
companies.

As far as other imports of furniture are concerned, some market niches exist in the
high-price level. Import of high-price, design furniture from Italy, Sweden, Finland,
Denmark and France are successful. However, the imports of these products remain
limited.

c) Import statistics

According to Eurostat, the trade in the woodworking sector (chapter 44) between the
European Union and the Slovak Republic, is as follows:

1999
   -        imports in the EU – 178 million Euro
   -        exports from the EU – 36 million Euros
2000
   -        imports in the EU – 206 million Euro
   -        exports from the EU – 40 million Euro

The trade between the two parties is constantly growing, but the EU deficit in this
sector remains very important. The Slovak exports are growing more rapidly than the
EU exports.

In the furniture sector (chapter 94), the trade between the EU and the Slovak
Republic is as follows:

1999
   -        imports into the EU – 142 million Euros
   -        exports from the EU – 63 million Euros
2000

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    -       imports into the EU – 195 million Euro
    -       exports from the EU – 75 million Euro

In this field, the trade between two partners has also been growing since 1997,
except for 1998, when a decrease of the EU exports to Slovakia has been registered.


2.20.3.The applied tariffs


Under the provision of the Europe Agreement, tariffs are 0% for all products of HS
chapters 44 and 94. The VAT in Slovak Republic is 23%. The reduced VAT of 10% is
applied for the products of the chapter 4401, for the products of chapter 9402 and the
products under the heading 9405.40.


2.20.4.The import procedure


The following documents are required for Customs‟ clearance in the Slovak Republic:

    -       summary declaration
    -       Customs‟ import declaration
    -       declaration of customs value
    -       commercial invoice
    -       movement certificate (EUR 1)
    -       certificate of origin
    -       waybill
    -       trading/concession licence

In addition, some documents are required for customs clearance of the products of
the chapter 44. A phytosanitary certificate, a confirmation of the existence of storage
facilities for plant products and a registration of importers of goods, subject to
phytosanitary inspection is required for all the products from headings 4401, 4402,
4403;4404, 4405, 4406, 4407, 4410, 4411, 4412, 4413, 4414, 4415, 4416, 4417 and
4418.

The phytosanitary certificate confirms that the imported goods are not contaminated
with any disease. The certificate is required for Customs‟ clearance and should be
issued by competent authorities of the country of origin, not more than 15 days
before to the importation of the concerned goods takes place. It should be drafted in
English, French, German, Spanish, Russian, Portuguese or Slovak.

The confirmation on the existence of storage facilities for plant products is a
document confirming that the importer possesses storage facilities for plant products.
The document,needed for Customs‟ clearance, should be in the Slovak language and
stamped by the local phytosanitary inspector.

The registration of importers of goods, subject to phytosanitary inspection, is a
document certifying that the importer willing to import goods subject to phytosanitary
inspection has undergone a specific registration. Registration is required for
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Customs‟ clearance and should be requested to the Central Agricultural Control and
Examining Institute. The application should be submitted in Slovak. The registration
certificate is granted after 15 days and costs 500 SKK (12 Euros). The documents,
which should be annexed to the application, are as follows: confirmation of the
existence of storage facilities for plant products (original or verified copies) and the
extract from the commercial register of trading/concession licence.

In addition, for some documents and automatically granted import licences are
required for some products of Chapter 44. The products submitted for import licence
are as follows: 4401.10, 4401.21, 4401.30, all the products from 4402, 4403.20.1010,
4403.20.10.90, 4403.20.30.10, 4403.20.30.90, 4403.20.90.10, 4403.20.90.90,
4403.91.00.10, 4403.91.00.90, 4403.92.00.10, 4403.92.00.90, 4403.99.10.10,
4403.99.10.90, 4403.99.50.10, 4403.99.50.90, 4403.99.98.10, 4403.99.98.90, all the
products from 4410, all the products from 4411, 4418.10 and 4418.20.

This import licence is automatic and it is implemented for statistical reasons.
However, some requirements should be observed in order to obtain the import
licence. Only the importer himself can apply for the import licence. The licence should
be requested with the Ministry of Economy‟s – Licensing and Registration
Administration. The application should be done in the Slovak language and the
decision to grant a licence is made within 14 days. The cost of the licence is 0,1% of
the value of the goods, but at least 1000 SKK (24 Euro). The licence remains valid
until the end of the calendar year. The documents to be enclosed together with the
application are: an officially verified copy of the extract from the commercial register
or a legalised copy of the trading/concession licence, the corresponding sanitary
certificate, the quality certificate and a copy of the business contract.

For some other goods such as 4401.30 and 4403.10, a permission to import
hazardous waste is required if the product is considered as hazardous. The
document has to be accompanied by a notification of hazardous waste movement.
The document should be issued by the Ministry of Environment.

No specific measure is applied to the products of chapter 94.


2.20.5.         Certification and technical requirements


Slovakia is still applying a certification system for some products. The standardisation
and certification is under the responsibility of the Slovak Office of Standards,
Metrology and Testing. This institution appoints the certification bodies, which are
responsible for the performing of tests on different products in Slovakia. The main law
on certification is the Act 264/1999 on technical requirements for products and
conformity assessment. As far as the woodworking products are considered, in the
ordinance of the Government 400 of 22nd December 1999, the annex specifies some
products for which certification and conformity assessment are required. The
products of the woodworking and furniture sector, mentioned in the annex of the
ordinance are as follows:



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  4403 10          Wood for mining gallery supports.
  4407 10          Wooden floor prefabricated elements for scaffolds.
  4408 10
  ex 4410          Wood-waste boards and similar boards of wood or other
                   woody materials. Thereof only: - wood-waste boards
                   without surface finish, laminated and varnished for
                   universal purposes including working boards.
  ex 4411          Wood-waste boards or similar boards of other woody
                   materials. Thereof only: - those for universal purposes
                   including working boards .
  ex 4412          Other plywood veneered panels and similarly treated
                   boards and materials. Thereof only: - blockboards,
                   plywoods with core of material other than growing wood,
                   honeycombed boards for general purposes.
  ex 4412          Plywoods composed of wooden sheets only. Thereof
                   only: - flat plywoods for general purposes.
  ex 4415 20       Standard pallets, box pallets and other loading platforms
                   of wood. Thereof only: - returnable and EUR pallets.
  4418 90          Wooden frames for pictures, photographs, mirrors and
                   similar wooden objects. Thereof only: - wooden ladders,
                   ladder staircases and stairways, including item - ladder
                   fittings and ladders used in mining.
  ex 9401 30       Seats with prevailingly wooden carcass. Thereof only: -
  ex 9401 40       chairs, chairs with arms, collapsible armchairs,
  ex 9401 61       multipurpose armchairs - rocking and revolving ones,
  ex 9401 69       with convertible position of back and seat, chairbeds,
  ex 9401 80       armchairs with inconvertible position of back and seat,
                   sitting sets and couches.
  ex 9401 30       Other seats not specified or included elsewhere. Thereof
  ex 9401 61       only: - sitting furniture for children and schools.
  ex 9401 69
  ex 9401 71
  ex 9401 79
  ex 9401 80
  ex 9401 50       Wooden furniture not specified or included elsewhere.
  ex 9401 61       Thereof only: - wooden furniture for exterior, thereof only:
  ex 9401 69       chairs and garden armchairs.
  ex 9403 60
  9401 50    Furniture of plastics and other materials including furniture
  9403 70    of Indian reed, wicker, bamboo or similar materials.
  9403 80    Thereof only: - chairs, armchairs and armchairs with
             convertible position of seat and back, sitting sets and
             beds.
  ex 9402 90 Medical, surgical, dental or veterinary furniture; barber's
             and hairdresser's chairs and similar chairs, their parts and
             components. Thereof only: - examination tables and beds
             except installations with electric equipment.
  ex 9402 90 Medical, surgical, dental or veterinary furniture; barber's
  ex 9402 10 and hairdresser's chairs and similar chairs, their parts and
             components. Thereof only:
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                   - equipment of surgery and operating rooms,
                   - furniture of hospital rooms and care institutes, special,
                   - equipment for dental laboratories, thereof only: -
                   dentist's chairs.
  ex 9402 90       Medical, surgical, dental or veterinary furniture; barber's
  ex 9403 20       and hairdresser's chairs and similar chairs, their parts and
                   components. Thereof only - equipment of hospital rooms
                   and educational establishments, special, - thereof only:
                   beds.
  9403 10          Fire-proof cabinets.
  ex 9403 10       Metal furniture not specified or included elsewhere.
  ex 9403 20       Thereof only:
                   - storied metal beds,
                   - children‟s metal beds,
                   - metal beds and twin-beds,
                   - children's metal desks.
  ex 9403 30       Wooden office furniture. Thereof only: - furniture using
                   agglomerated or plywood materials and/or materials
                   releasing formaldehyde and dismantlable joints.
  ex 9403 40       Kitchen furniture and bathroom furniture. Thereof only: -
  ex 9403 60       furniture using agglomerated or plywooded materials
  ex 9403 70       and/or materials releasing formaldehyde and dismantlable
  ex 9403 80       joints.
  9403 50          Wooden furniture for bedrooms, dining rooms and sitting
  ex 9403 60       rooms. Thereof only: - cabinet, unit and bed furniture,
                   dining tables and writing desks using agglomerated or
                   plywood materials and/or materials releasing
                   formaldehyde and/or upholstery materials supporting
                   burning and joints

  ex 9403 90 Parts and components of furniture. Thereof only: - shaped
             plywoods and working boards.
  9404 21    Mattresses.
  9404 29

These products should undergo a certification in accordance with the Act 264 of 7th
September 1999. This certification should represent a conformity assessment of a
sample of type (prototype) of product by authorised body and issuance of certificate
by authorised body (certification of product type) or a conformity assessment of the
product with certified product type. The certification procedure should be done by the
importer, who is responsible for all the formalities. The process lasts about three
months and the costs vary between 230 and 1150 Euro. According to some Member
States trade representatives, the certification is needed for customs clearance. This
was not confirmed by the EU companies, but anyway, the importer should present
the certificate while submitting the demand for the import licence.
The importer should present a standard sample of the products, the description of the
product, results of the realised tests, other certificates obtained by the product –
European, ISO along with the application for certification. When the product is
certified in Europe, the certification in Slovakia is estimated to be easier. The importer

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can sometimes obtain a shorter certification procedure. The conformity assessment
body could allow the importer to follow another procedure for the conformity
assessment and even to use a producer‟s declaration of conformity.
According to the Slovak Certification Institute, the products with the EU certificate do
not need to undergo any additional testing in Slovakia when they comply with the
standards, which already have been implemented into the Slovak standard system.
The Slovak Certificate is issued after submitting the protocol of tests, which were
performed for these specific products. At present, some EU standards were already
implemented into the Slovak Standard System and others are undergoing the
implementation procedure. The institute responsible for the certification in the
woodworking and furniture sector is Lingotesting70.
The certification requirements in Slovakia should be harmonised with those applied in
the EU before the country enters the EU and some burdensome requirements need
to be eliminated. In fact, in the EU, the majority of the woodworking products are not
submitted to compulsory third party certification and the obligation to carry a third
party certification in Slovakia could constitute an important barrier to the EU exports
to Slovakia.
In the beginning of 2001, the Slovak government has proposed to the EU to start
negotiation for the conclusion of the Protocol to the Europe Agreement on conformity
assessment (PECA agreement). The negotiation of this agreement is not achieved
yet. Anyway, the agreement will cover only those sectors, that are mentioned in the
agreement‟s annex. Consequently, the woodworking products will not be under the
scope of the agreement.

2.20.6.Investment


The European investment in the Slovak woodworking sector is less important than
expected in the beginning of the liberalisation. Some important investment have been
realised by Austrian and German companies in the wood-processing industry and
also by IKEA in the furniture industry. The Slovak Investment law was not very
favourable to foreign direct investment until 1999, which probably explains the low
level of investment in the country.
The Slovak government has reviewed its investment incentive package in 1999. This
new package granted new foreign investors a five-year, 100 percent tax holiday for
the investment of at least 5 M Euros, with a possible five-year prolongation. However,
investors were required to comply with strict export requirements, restrictions on debt
financing, and a re-investment requirement in order to obtain an additional five-year
tax holiday. Following complaints, Parliament approved an amendment, effective
January 1st, 2000, which granted investment also for non-exporting companies.
However, the provisions of this law are not clear and left foreign investors uncertain
about whether they would qualify. The requirements for the investment level were
reduced to 2,5 M € in the poorest regions and to 3,5 M € in the regions, where
unemployment was more than 15%. These requirements were applicable until 31st
December 2001. Starting from the beginning of 2002 until the end of 2003, other
requirements are applicable. The participation of the foreign investor should be at

70
  For further enquiries on the certification of specific woodworking products, the importers could
contact the Slovak Institute Lingotesting – info@lti.sk, contact person Mr Martin Kovar.
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least 60%, the level for tax incentives is 4,5 M € for the regions, where
unemployment is less than 10% and 3 M € for the other regions. A level of 2 M €
investment is applicable to the tourism and some services sectors. The
manufacturing companies have the obligation to export 60% of their production.
Generally speaking, the investment incentives in Slovakia are not considered
sufficient for the development of foreign direct investment in the woodworking sector
and this can explain the low level of foreign investment in this sector. In addition,
some of the neighbouring countries propose more attractive investment incentives
and have the same availability of forests and a low-cost working force.

2.20.7.Legal analysis


a)      Problems experienced by the EU companies

The European companies consider the Slovak Republic market as quite open for the
European woodworking products. However, some problems related to certification
requirements still remain.

b)      Legal analysis of the problems experienced

The relationship between Slovak Republic and the EU is organised by the Europe
Agreement71. The Europe Agreement provides for progressive elimination of customs
duties and taxes and for the elimination of quantitative restrictions. Presently, all the
customs duties for woodworking products have been eliminated between the two
parties.

As far as the technical measures are concerned, the article 70 stipulates that
protection of health and life of humans, animals and plants, the technical rules and
standards are among areas72 to which the approximation of laws shall be extended.
Slovakia has started harmonisation of its legislation, but some additional certification
requirements in the woodworking sector still remain. These requirements must be
eliminated because Slovakia is negotiating its accession to the EU and should
harmonise its legislation with this existing in the EU. The provisions of this article are
difficult to be invoked directly by traders because they do not contain specific
timetable for the implementation of all the EU requirements. However, according to
its national program for the implementation of the acquis communautaire, Slovakia
should adopt all the EU legislation before accession.

The EU companies exporting woodworking products to Slovakia do not experience
particular difficulties with the sanitary and phytosanitary requirements. However, the
Europe Agreement contains specific requirements in this field. Article 78 provides
that, in order to increase the agriculture and the agro-industrial sectors effectiveness,

71
  OJCE 1994, L359/2.
72
  Other areas, to which the approximation of laws must be extended according to the article 69 are:
customs law, company law, banking law, company accounts and taxes, intellectual property,
protection of workers at the workplace, financial services, rules on competition, protection of health
and life of humans, animals and plants, consumer protection, indirect taxation, transport and the
environment.
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there is a need to “develop co-operation on animal health and plant health with the
aim of bringing about gradual harmonisation with Community standards through
assistance for training and the organisation of checks”.

The provisions of the agreement deal also with customs co-operation. They could be
used if particular difficulties in customs have been experienced. According to article
93, one of the objectives of the customs co-operation is to reduce the complexity of
the clearance procedures.

Given the fact that the Slovakia is applying for EU membership and that the Europe
Agreement contains more detailed provisions on some issues than the WTO
agreements, the use of the WTO provisions is not taken into account in this analysis.
However, a detailed analysis of the WTO provisions on some specific issues could be
found in §3. (Legal analysis).




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2.21. INDONESIA


2.21.1.EU Industry assessment


Indonesia is a significant producer of wood products. The European companies
consider Indonesia more as a competitor in other third-countries‟ markets than as a
potential export market for their products. In discussion with the European industry,
the complaints not only focused on traditional trade barriers, but also on subsidised
Indonesian products, alleged to restrict the EU exports to third countries.

The companies complained about the lack of information on the Indonesian market.
Some of them have pointed out the following problems:

-       High Customs’ duties – duty rates in Indonesia are between 0% and 25%.
        The highest tariff duties are applied for the products from chapters 4412 to
        4418. For the less processed woodworking products the duties vary between
        5% and 15%.

-       Import documents – the economic operators consider that the procedure is
        non-transparent and complex.

-       Export subsidies – the European companies stated that the Indonesian
        exporters are subsided and this affects the competition on some third
        countries‟ markets such as Japan, Korea and China.

-       Phytosanitary requirements: The EU exporters have also complained about
        the fact that the Indonesian authorities require phytosanitary certificate and
        phytosanitary inspection for all types of woodworking products.


2.21.2.The market


During the „eighties, Indonesia has become one of the most important players on the
world plywood market. The country has developed important export capacity,
especially after the decrease of the export tax on wood products. This tax was
progressively diminished and, at the end of 2001 was 5%. The country has important
woodworking industry and quite developed furniture industries. The EU has very
important trade deficit with Indonesia but the Indonesian exports have decreased in
the recent years, mainly because of the sector‟s structural difficulties and the scarcity
of raw material.

a) Woodworking products

The Indonesian forest-based industry is dominated by large and medium-scale
plywood and sawmills industries. Most of the downstream industries are small and
medium-sized. According to the Indonesian Ministry of Forestry, the production of the

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woodworking industries is rather designed for export than for the domestic
consumption.

Forest exploitation in Indonesia has been regulated through a concession system.
Nevertheless, due to the boost of the export sector, large areas of forest have been
cleared without sustainable logging management or replanting programmes. The
consequence was that Indonesia is currently experiencing a shortage of raw
materials and is not able to maintain its position on the international market. It is
important to add that the illegal logging is a serious problem in Indonesia. The
seriousness of the deforestation issue has obliged the Government to adopt a ruling
on a minimum tree coverage. If the industry respects this regulation, it will be obliged
to stop tree logging. The Indonesian Association of Wood Panel Producers
(APKINDO), has stated that it would respect the government policy only when the
latter is implemented in the context of a long-term objective.

The shortage of raw materials in Indonesia could represent a business opportunity for
importers from other countries and producers of raw materials able to supply the
Indonesian wood-processing industry. According to Indonesian statistics, the forest
products (woodworking products and furniture) bring 3 billion dollars export earnings
and provide jobs for more than a half million people.

The woodworking sector in Indonesia has experienced structural difficulties for
several years. In the beginning of the „eighties, 15 business groups controlled 59% of
the plywood industry and one third of all forest area under logging concessions. The
Indonesian government gave to APKINDO, the power to fix the amount and the
prices of plywood that each producer could export. Consequently, the plywood was
sold for very low prices and the increasing volumes of export led to an important
deforestation. In 1998, under the pressure of the IMF, the Indonesian government
has revoked exclusive powers, previously granted to APKINDO and the latter was
transformed into a voluntary industrial organisation.

The level of import in Indonesia is quite low. The main products imported are
products from wood species or specific wood products that are not present in
Indonesia. European products are expensive for the Indonesian market but some
market niches do exist. The presence of European companies on the market is very
modest. Some European companies are implementing projects for technical
assistance with the Indonesian companies, but without investing directly in the
Indonesia.

According to the German-Indonesian Chamber of Commerce in Jakarta, the most
interesting activity in the recent years was the import of woodworking machinery and
working tools for the high-growing Indonesian industry. However, due to the new
restrictions in logging and the decrease of the plywood prices on the international
market, the import of woodworking machinery is expected to decrease.

b) Furniture

Indonesia also has a notably developed furniture industry. According to Indonesian
statistics, there are more than 600 rattan and solid furniture plants. The majority of
the plants are transforming tropical wood species. The majority of the furniture

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industry is designed for export. The imports are very low. The European furniture is
too expensive for the average Indonesian consumer and the design does not suit
local requirements. Some European furniture companies, mostly from Northern
Europe, are buying tropical wood for furniture production in Indonesia. They have
helped the local concessionaires to certify the management of their forests according
to the European rules. The majority of the products made in Indonesia by EU
companies are re-exported to Europe.

c) Trade statistics

The European Union has a very important trade deficit with Indonesia. The
Indonesian imports were growing in the mid-eighties. Later they have decreased due
to the Asian crisis. Recently, the decrease of plywood prices and the risks of raw
material shortage as well have affected the volume of the Indonesian exports.

The levels of export/imports between the EU and Indonesia are as follows:

Products from chapter 44

EU exports to Indonesia:

Year            1998                    1999                    2000
Volume          4 millions Euros        7 millions Euros        10 millions Euros


Indonesian exports to EU:

Year            1998                      1999                     2000
Volume          635 million Euros         572 million Euros        896 million Euros



Products from chapter 94

EU exports to Indonesia:

Year            1998                      1999                     2000
Volume          10 millions Euros         18 millions Euros        21 millions Euros


Indonesian exports to EU:

Year            1998                      1999                  2000
Volume          507 millons Euros         674          millions 837 millions Euros
                                          Euros




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2.21.3.The applied tariffs


Import duties for woodworking products in Indonesia range between 0% and 15% for
the products of chapters 4401 to 4411 and between 10% and 20% for the products of
chapters 4412 to 4418, according to the information supplied by the Indonesian
Customs. For furniture, the duties range between 0% and 25%.

In addition of Customs duties, the importers must pay the VAT of 10% on all the
products with an exemption of 4401.10.00.

For furniture, in addition to the VAT, some supplementary sales taxes are paid:
Sales Tax on Luxury Goods:
   40% of duty paid value levied on the following products:
       9306.10.900
       9306.21.900
       9306.29.900
       9306.30.910
       9306.30.990
       9306.90.900
   50% of duty paid value levied on the following products:
       ex9301
       ex9302
       ex9303
       ex9304
       ex9305


2.21.4.Clearance procedure


The clearance procedure in Indonesia seems to be quite burdensome and represents
an important disincentive for the European companies, willing to export to Indonesia.
The Indonesian Customs authorities require an important set of documentation.

The general documents required for customs clearance are reported to be as follows:

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-       trade business licence
-       import declaration
-       invoice
-       packing list
-       bill of lading
-       certificate of origin
-       import payment receipt
-       tax payment receipt
-       weight note

On the one hand, all the companies involved in trade activities in Indonesia must
obtain a specific trade business licence. On the other hand, the authorised importers
could only conduct the imports and the Indonesian law foresees several registration
procedures according to the purpose of the importation. If the company, willing to
import does not possess import registration, it should present a letter of approval of
sole agent and a letter of authorisation. The duties must be paid and perceived by
the Customs‟ administration before the arrival of goods for clearance procedure, and
the importer should present the proof of payment and reception of the duty (import
payment receipt and tax payment receipt). The importer must also present a
document certifying the weight of the goods (weight note).

Some additional documents are required for the importation of specific wood
products:

-       a phytosanitary certificate is required for all the products of chapter 44. The
        certificate could be established in the country of origin and the Indonesian
        authorities will accept if matching all the requirements of the Indonesian
        legislation

-       a phytosanitary inspection is required for all the products of chapter 44. The
        phytosanitary inspection is a document certifying the phytosanitary inspection
        on plant and plant products. The importer should apply for the inspection to
        the Ministry of Trade and Industry. The Ministry of Trade and Industry will
        direct the application to the Ministry and the Division concerned. The time for
        the phytosanitary inspection and the fees applicable depend on the product
        concerned. The phytosanitary inspection must be performed for every
        shipment.

The Indonesian procedures seem trade-restrictive. According to the EU companies, it
is not necessary to require phytosanitary certificate for all the goods from chapter
4404. For the goods that have undergone significant transformation, the risk of
infection from pests does not exist. An additional requirement for phytosanitary
inspection is even less justified.




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2.21.5.Technical measures


The sawnwood products imported in Indonesia could be submitted to voluntary
grading procedure. No complaints have been received by the European companies
concerning the acceptance of the European grading by the Indonesian authorities.

Indonesia is currently studying the projects for the introduction of voluntary eco-
labelling for the woodworking products produced and imported in the country.


2.21.6.Investment and investment incentives


Indonesia was one of the Asian countries with the highest flow of foreign investment
in the mid-„90s. However, after the Asian crisis, the level of foreign direct investment
is constantly decreasing. The foreign investment was mainly concentrated in the
forestry sector. Several foreign companies have obtained forest concessions.

The investment law in Indonesia was adopted in 1967 and was modified by several
ministerial decrees. The law allows 100% foreign investment as well as the
establishment of joint ventures. The minimum Indonesian participation required in the
joint ventures is of 5%. The majority of the foreign investment should be authorised
by the Indonesian Capital Investment Co-ordination Board (BKPM). The authorisation
procedure is viewed as time-consuming and burdensome. The investment in the
Forestry sector must be authorised by special technical agency. The European
investment is quite low in the Indonesian woodworking sector. As mentioned above,
some investments have been realised in the forestry sector and European companies
have established joint ventures in the furniture production sector.

Indonesia‟s Investment law is expected to be modified in 2002. For several years the
Government has been preparing a new law and it was expected that the new law
would be much more protective for the foreign investors.


2.21.7.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.22. MALAYSIA



2.22.1.The EU Industry assessment

The EU companies have not expressed specific complaints regarding the access to
the Malaysian market. Malaysia is considered as a competitor on third country
markets. The European companies believe that the Malaysian companies benefit
from tax exemptions based on their export performances, which make them more
competitive in third countries‟ markets. Malaysia possesses abundant natural
resources and the import of woodworking products and furniture is very limited.


2.22.2.The market

Malaysia is among the leading world importers and producers of woodworking
products. The export of woodworking products represents 5% of the total Malaysian
exports. 43% of the country‟s territory is covered by forests and they represent a large
bio-diversity of spaces. However, the increasing production and export potential of the
country has caused important deforestation and the Government was obliged to take
measures to stop the deforestation process.
It has introduced on the 1st March 2000, an export tax for woodworking products with
low added value. The products submitted to the tax are logs, sawn timber, plywood,
moulding and veneer. The exporters should request an export licence from the
Malaysian Timber Industry Board (MTIB). These taxes vary between 2 RM and 255
RM per m3. All timber exporters, suppliers, processors, graders should be registered
with the Malaysian Timber Industry Board73. The government has also reduced the
surface authorised for exploitation from 52 250 ha to 45 000 ha since 2000.
The woodworking industry is one of the most challenging economy sectors in
Malaysia. According to the Malaysian statistics, the furniture and the sawmills
industries are the most important. There are 1,193 sawmills and 2,947 furniture
manufactures in the country. The Malaysian companies have already introduced very
efficient technologies for wood transformation that make them extremely competitive
on the international market.

The local market is also very dynamic. The demand exists mainly for the construction
wood and wood products with high added value. Malaysia is importing mainly
sawnwood, plywood and wood panels for construction purposes and for some
furniture manufacturers. The wood products imported are mainly those from species
that are do not exist in the country. The main importers are Indonesia, Somalia,
South Africa, Thailand, New Zealand and the US. From the EU countries, only
Germany has significant exports to Malaysia. European companies are buying
Malaysian wood for further conversion in Europe. Some European companies have
created joint ventures with Malaysian companies in order to have regular supplies of
wood. Some big furniture companies also have invested in production plants in

73
   Information on all the procedures for registration and export licences could be obtained on the web-
site of the Malaysian Timber industry board – www.mtib.gov.my
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Malaysia and their production is exported to the European market. The main export
products of Malaysia are wood-based panels and sawnwood.

The European companies have important competitive advantage as far as the
importation of woodworking machinery is concerned. German and Japanese
companies are among the leaders on the Malaysian woodworking machinery market.


2.22.3.Applied Tariffs


Applied tariffs for products of HS Chapter 44 range from 5% to 40%. The tariff peaks
of 40% are for the products of chapter 4412 (plywood), which is the most imported
product in the country. However, the majority of the products are subject to a 20%
Customs‟ duty. For products of HS Chapter 94, the applied tariffs are between 0%
and 30%. The majority of the woodworking furniture is submitted to a 20% Customs‟
duty.

In addition, a sales‟ tax ranging from 5% to 10% is levied during clearance procedure
for woodworking products. For the furniture products the sale tax is of 10%.

Trade Statistics

The EU experiences a very big trade deficit with Malaysia in the woodworking sector,
despite the fact that Malaysian exports are decreasing due to the deforestation. The
EU exports to Malaysia are increasing, but remain insignificant. The level of
import/export in the recent years between the two countries is as follow:

EU exports to Malaysia:

Year         1999                      2000                     2001
Volume       11,192,360 Euros          17,193,430 Euros         18,824,690 Euros


EU imports from Malaysia:

Year         1999                       2000              2001
Volume       488,024,500 Euros          618,254,880 Euros 494,941,040 Euros



2.22.4.Customs clearance


No specific complaints have been received regarding the Customs‟ clearance in
Malaysia.

The importers of woodworking products should present the following import
documents:

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    -   bill of lading
    -   freight documents
    -   commercial invoice
    -   packing list
    -   customs declaration

No additional documents such as phytosanitary certificates are not required for the
importation in Malaysia.

An import licence is required for the products of the subheading HS 4403. The import
permit must be issued by the Malaysian Timber Industry Board. The permit is
normally issued for one day. The importer should also present a certificate of origin
along with the application form required by MTIB. The goods coming under this
heading should be inspected by the Malaysian Forestry Department. Following the
inspection a removable pass will be issued and the goods can be removed from the
Customs‟ warehouse. The goods from the heading 4403 are not submitted to
Customs‟ duties.

No specific certificates are required for the products of HS chapter 94.


2.22.5.Technical barriers


No complaints have been received by the consultant as regards the technical
requirements in Malaysia.

The country is implementing voluntary grading requirements. MTIB provides training
to timber graders to qualify them to grade sawn timber under the Malaysian Grading
Rules (MGR). MTIB is requested by the Malaysian authorities to establish the
Malaysian grading rules. However, no problems with these requirements have been
reported by the European companies.


2.22.6.Investment possibilities

 In Malaysia, tax incentives, both direct and indirect, are provided for in the
 Promotion of Investments Act 1986, Income Tax Act 1967, Customs Act 1967,
 Sales Tax Act 1972 and Excise Act 1976. These pieces of legislation cover
 investments in the manufacturing, agriculture, tourism and approved services
 sectors as well as R&D, training and environmental protection activities.
 The direct tax incentives grant partial or total relief from income tax payment for a
 limited period, while indirect tax incentives come in the form of exemptions from
 import duty, sales tax and excise duty.
 However, investment opportunities are often granted for exporting companies. For
 the companies competing on the national market, the participation of foreign
 companies is often limited.
 Some European companies have made limited investment in the Malaysian
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                                                                                  182
 Furniture sector. On the other hand, the German Technical Co-operation Council
 (GTZ) and the Danish Development Agency have implemented co-operation
 projects in the Malaysian forestry sector.

2.22.7.Legal analysis


The rules of the WTO could be invoked by the EU companies in some cases (see §3
Legal analysis). The articles, which could be used are article VIII, article X and article
III. They deal respectively with excessive customs formalities, transparency and non-
discrimination. The provisions of the TBT (Agreement on Technical Barriers to Trade)
and SPS (Agreement on sanitary and phytosanitary measures) could also be used. A
detailed analysis of these provisions, their scope and implementation could be found
in §3 Legal analysis.




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2.23. OTHERS


In questionnaires and interviews, EU operators and Industry representatives have
mentioned other markets of interest for them and which present difficulties:


Ex-Yugoslavian Republics, Albania

Greek exporters have experienced important problems in FYROM and CROATIA,
mainly high import duties and burdensome import formalities:

CROATIA applies import duties of 15% and a VAT of 18%. In FYROM, import duties
reach 20%; while VAT is 18%. Import duties and VAT applied in Albania are also
qualified as trade barriers (import duties: 20% and VAT 22%).

Bulgaria

Greek companies also complained about import duties in Bulgaria. However,
Customs‟ duty for chipboard plywood is only 4%.

Canada

Some European companies have complained that Canada is implementing similar
grading rules to those applied in the US and does not recognise the European
grading. This obliges EU companies to perform an additional certification.

Some companies also have complained about handling fee and Customs‟ clearance
fee applicable to their products.

Syria

Finnish companies have experienced difficulties with the Syrian requirements for
legalisation on the invoice. The legalised invoice is needed for Customs‟ clearance.
The European companies are obliged to pay 0,5% of the contract value in order to
legalise their invoice. It has been reported that since 1st January 2002, this
legalisation fee has been increased to 3% of the contract value. The information has
been confirmed by the Syrian authorities.

The EU exporters have also experienced some additional difficulties in Syria linked to
technical certification (the certification should be performed by Syrian inspectors in
the country of origin) and phytosanitary inspections (non-recognition of the EU
sanitary certificates).

Bangladesh

According to the EU companies Bangladesh is implementing marking requirements
for wood. This marking should be permanent and should be done by hand in the
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                                                                                  184
processed wood itself, which is considered as very costly for the European
companies. The EU companies prefer to mark the products with metal disks.

Saudi Arabia

Some problems have also been identified regarding import measures applied in
Saudi Arabia. For example, the transport in wooden containers is forbidden. The
minimum quantity for a conventional vessel is 500 m3, which is alleged to be a too
high volume for our exporters, and therefore hampers our sales to this market.




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                                    §3. LEGAL ANALYSIS


In this part the consultant will perform a legal analysis of the barriers considered as the
most restrictive by the EU industry. The legality of these barriers will be analysed under
the obligations existing within the scope of GATT agreement and additional WTO
agreements. The main difficulties underlined by the EU exporters are related to tariff
barriers, additional taxes, excessive Customs formalities, sanitary and phytosanitary
regulations and technical regulations.


3.1. TARIFFS


Legally, it is not possible to contest the existing tariffs as long as they remain under
the bound tariff levels. These tariffs may move up and down, as long as they do not
exceed these levels.

The application of tariffs must also respect other principles of the GATT. This means
that it must, among other things, not create excessive Customs‟ formalities (art. VIII).
It must also respect the most favoured nation clause (art. II). There cannot be, in
principle, discrimination between various trade partners in the application of tariffs,
which must be predictable (art. X).

According to article X-1 of the GATT "laws, regulations, judicial decisions and
administrative rulings of general application, made effective by any contracting party
related to the rates of duty shall be published in order to enable governments and
traders to become acquainted of them".

A double system of calculation of Customs‟ duties is not prohibited under GATT, but
its application should be transparent for importers. Even if the rates of Customs‟
duties are public, if their implementation according to the value or the weight of the
goods is not published and depends very much of the appreciation of the Customs‟
officials, the administrative practice related to the calculation method may not be
transparent and may create insecurity during import.

Surcharges can be defined as a temporary addition of a uniform specific or ad
valorem tariff charge on all imports, or at least on a major portion of them. In theory,
this practice is not legal, as it concerns products that are covered by a tariff binding.

Nevertheless, there are some exceptions in the text of the GATT, which allow
contracting parties to increase tariffs up to bound rates in exceptional circumstances.
This is the case when the country faces balance of payments problems (article XII
GATT) or when its market is confronted with sudden increases in the import of some
products (article XIX). Those tariff measures have always been preferred to
quantitative restrictions, because they are less discriminatory for third countries. They
are however subject to strict requirements. They imply renegotiations with the
affected partners. According to the GATT general principle of reciprocity, an increase
in tariffs must be compensated by tariff lowering on products interesting to the main
trade partners concerned. They must also respect the requirements on the
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                                                                                       186
agreement on safeguards concluded after the Uruguay Round (maximal duration,
periodical revision...).

The complaints of the companies are mostly concentrated on the fact that the countries
are assuring tariff protection for the most sensitive products for their industry. For the
other products taxes are lower and do not constitute a trade barriers. However, the
majority of the taxes considered as burdensome are not bound or are bound to very
high levels. Further negotiation on tariff reduction during the next WTO round or the
conclusion of the free trade agreements will favour the decrease of Customs‟ duties on
woodworking products into those countries to which the EU exports.


3.2. ADDITIONAL TAXES


Of course, some Members often try to compensate for the reduction in tariffs by the
introduction of new taxes on imports (or sometimes exports). Consequently, the
GATT 1994 specifies that all fees and charges (other than tariffs and other taxes
conforming to the national standard) must be limited to the approximate cost of
services rendered, and must not have fiscal purposes (GATT 1994, Art. VIII). Several
countries among the countries under review have introduced additional taxes, which
are calculated on the CIF value of the product rather than on cost of the services
rendered. Some countries implement even several taxes, which are collected during
the Customs‟ clearance process and are calculated on the CIF value of the products.
The application of such taxes has already been subject to several interpretation by
the Dispute Settlement Body of the WTO. The panel on the Customs User Fee in the
US74 has concluded that the provisions of the article VIII was identical in meaning
with that in Article II-2(c) which requires that the cost of services be “commensurate
with the costs of the services rendered”. The panel defines which government
activities could be considered as “services”. The panel has decided that the ad-
valorem tax such as that adopted by the US is in contradiction with the obligations
expressed in article II and article VIII. The panel has decided that rule should receive
a very strict interpretation in order not to encourage the countries to exceed their
bound tariffs by establishing other taxes. In 1997, the panel on Argentina 75
condemned an ad valorem “statistical tax” that had no ceiling. The interpretation of
the article II and article VIII means that the ad valorem taxes are not prohibited “per
se” but should contain a ceiling if the cost of the service cannot be estimated exactly.

At another level, it is interesting to note that the GATT 1994 has reduced the ability of
Member States to establish new duties and charges on products covered by a
binding after 1994. These duties and charges cannot be increased76.




74
   Report of the panel – US customs user fee BISD 35S/245 (1989)
75
   Report of panel on Argentina –measures affecting imports of footwear, textile, apparels and other
items –WT/DS56/R
76
   Understanding on the interpretation of Art. II:1(b) of the GATT 1994.
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3.3. INTERNAL TAXES


The GATT imposes a few general obligations on its Members in the field of taxation,
considered here as standard legislation that may have implications on trade. A
Member must publish all legislation and international agreements that concern
taxation. These regulations cannot be enforced before publication. Each Member
must administer its tax legislation in an impartial and reasonable manner (GATT, Art.
X).

It must also be underlined that a national taxation regime can be criticised before the
WTO, even it is does not in itself violate the provisions of the WTO agreements. It is
enough that this regime prevents a Member from benefiting from the concessions
granted by another Member (GATT, Art. XXIII(1) b and c).

Under these general principles, a few specific prohibitions exist. They principally
relate to taxes which play a role similar to tariffs, internal taxes with a protectionist
effect, and taxes linked to subsidies.

3.3.1. The distinction between import duty and internal tax

The distinction between import duties and internal taxes is important. The regime
concerning import duties is clearly more rigid. In the preparatory work of the General
Agreement, two criteria were underlined. An import duty is collected at the time of,
and as a condition for, the entry of the goods. It must also be applied exclusively to
imported products without being related in any way to similar charges collected
internally on like domestic products.

However, it must be noted that Customs‟ duties and other charges are allowed
unless they exceed tariff bindings. Discriminatory internal taxes are prohibited,
whether or not the items concerned are bound. It is also interesting to note that the
prohibition does not refer to trade effects. This condition is not required. For example,
the 1987 Panel Report concerning Japanese taxes on imported wines and alcoholic
beverages, « did not consider it necessary to examine the quantitative trade
effects ». The reason was that « it has been recognised in GATT practice that Article
III:2 protects expectations on the competitive relationship between imported and
domestic products rather than expectations on trade volumes ».

3.3.2. The principles relating to internal taxes

The impact of taxes on international trade was considered as essential already in
1947. Consequently, Article III of the GATT established important restrictions on the
Member States‟ sovereignty in that field.

«The products of the territory of any contracting party imported into the territory of
any other contracting party shall not be subject, directly or indirectly, to internal taxes
or other internal charges of any kind in excess of those applied, directly or indirectly,
to like domestic products. Moreover, no contracting party shall otherwise apply
internal taxes or internal charges to imported products or domestic products in a
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manner contrary to the principles set forth in paragraph 1.» (article III § 2). From this
text, a few principles can be inferred.

Firstly, the GATT establishes a general prohibition on internal discriminatory taxes on
imported products. This rule concerns all products, and not only products covered by
a tariff binding. Secondly, the GATT prohibits in some circumstances taxes having a
protectionist effect, even when they are not clearly discriminatory. This relates to the
famous distinction on dissimilar taxation of « like » products. It must nevertheless be
said that this prohibition does not extend to taxes bearing on goods that are almost
always imported.

The notion of discrimination must be carefully approached. The General Agreement
does not prohibit the application of different taxation rules to domestic and imported
products. This can be justified by the fact that domestic products have to bear
specific taxes. Nevertheless, at the end of the process, the taxation regime applied to
imported products cannot be less favourable.

However, all aspects of the tax must be taken into consideration. In 1987, the Panel
Report concerning Japan‟s measures applied to imported wines and alcoholic
beverages took account not only of the rate of the internal tax, but also of the taxation
method (e.g. different kinds of internal taxes, direct taxation on the finished product or
indirect taxation by taxing the raw materials used at the various stages of the goods
production)77.

The application of VAT on the value of the product after the calculation of Customs‟
duties can be criticised under article III GATT. The application of VAT on the value
of the products after the addition of import duties is discriminatory because imported
products become much more expensive and not competitive, especially when VAT
is applied on CIF value for the national production.

Discrimination concerning VAT refunds also goes against the national treatment
principle established by article III of the GATT.


3.3.3. The tax subsidies

Some taxes have also a strong relation with subsidies: this concerns the concept of
tax subsidy. The tax subsidy can be defined as a government revenue that is
normally due, but is foregone or not collected. Fiscal incentives such as tax credits
provide a good example. Consequently, the prohibition of subsidies impinges on
direct taxation through the proscription of direct taxes levied on exportation lower that
the tax borne by domestic earnings.

For example, a tax subsidy depending upon an export performance or upon the use
of domestic over imported goods is prohibited78. On a larger scale, a tax subsidy that
has an adverse effect on the interests of other Members is an actionable subsidy.
That means that the subsidising Member must either withdraw the subsidy or at least
remove its adverse effects.

77
 BISD 34 S / 83, § 5.8 and 5.9.
78
 Subsidies agreement, Art. 3.
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In 1981 the Panel Report on United States Domestic International Sales Corporation
(DISC) legislation, ruled that when legislation has been found to constitute an export
subsidy, which has led to an increase in imports, it is covered by the notification
obligation in Article XVI §1.

No specific complaints have been expressed by the woodworking exporters
concerning internal taxation in the country under review. An important concern of the
EU industry was the existence of subsidies to the national woodworking industries in
Malaysia and Indonesia, which increase the export possibilities of these countries
and gives them a competitive advantage in the world trade.


3.4. THE CUSTOMS FORMALITIES


Many Customs problems are dealt with in the World Customs Organisation.
Nevertheless, there are rules in the GATT and in some specific agreements. In any
case, it must be underlined that the most favoured nation treatment is required by
article I of the GATT in the application of Customs‟ fees and formalities.

An excessive number and complexity of the import documents required for Customs‟
clearance can be criticised under article VIII:1c) of GATT. In accordance with this
text, the contracting parties recognise the needs for minimising the import and
exports formalities and documentation. However, the number of documents needed
for import and export is constantly increasing and the new requirements are not
immediately published. Customs‟ declaration is usually very long and detailed.

The non-publication of some requirements can also represent a breach of article X:1
of GATT. When customs authorities have wide powers of interpretation of the
regulations, they can require additional documents and fix time-limits for their
presentation. This practice is a source of insecurity and is not consistent with the
GATT requirements

The obligation to mention specific characteristics of a product on the invoice could be
considered in contradiction with article VIII of GATT. According to this article, "the
contracting parties recognise the need (...) for decreasing and simplifying import and
export documentation requirements".

The obligation to present special invoices cannot be easily justified by the general
exceptions of GATT and it seems that they represent an unnecessary barrier to
international trade. Nevertheless, the wording of this GATT provision is not very
constraining.

3.4.1. The certificate of origin


The development of preferential trade relations has led to the adoption of much
legislation requiring some origin certificates. In some cases, this is meant to insure
that preferential treatment is reserved to products originating really from preferential
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countries. In other cases, this provides a good opportunity to make the import system
more complex.

There was a strong interest of the GATT for this problem during the 1950s. A
recommendation was adopted in 1953. It invites the Member States to avoid, when
possible, the use of such requirement, and to prevent it in any case from becoming
an obstacle to trade. This recommendation was slightly modified in 1957. It is still
valid today. According to this recommendation, certificates should only be required
when “strictly indispensable” (i.e. when the importer requests a preferential
treatment). It remains a recommendation. Nevertheless a second interpretative note
to article VIII, added in 1955, expresses the same rule and provides certainly a better
legal basis.

More recently, this problem has been taken into consideration by the World Customs
Organisation. Annex D2 of the Kyoto Convention gives a model form. It also presents
standards and recommended practices concerning the issue and use of such
certificates.
Article VIII.1(c) GATT, states: “The contracting parties also recognise the need for
minimising the incidence and complexity of import and export formalities and for
decreasing and simplifying import and export documentation requirements”.
This paragraph should also be read in the light of the note to Article VIII, stating that it
would be consistent with such Article to require certificates of origin only when strictly
indispensable. On the basis of these provisions, it is arguable that the need for the
use of origin certificates should be justified by reference to objective criteria.
Moreover, the procedures relating thereto should not be unnecessarily complex and
the information required should relate to the objective pursued.
If the purpose of a certificate of origin is to confirm the origin declared by the importer
with the intervention of an institution authorised to do so, in cases when the origin of
the goods has to be determined without doubt, to comply with Article VIII.1(c) the
formalities involved should be limited to those necessary to ascertain the origin and
to link the information contained in the certificate of origin with the other
documentation accompanying the goods, i.e. to make sure that it refers to the goods
that are actually being imported.

Some of the requirements of the origin certificates (such as these related to the
address of the importer, the number of the invoice and the authority in charge of the
certification) can be considered as being excessive. Article VIII §1 (C) of the GATT
states that “the contracting parties recognise the need to minimise the incidence and
complexity of import and export formalities, and for decreasing and simplifying import
and export documentation requirements”. In 1957, the Contracting Parties of the
GATT made a recommendation urging members to prevent the use of certificates of
origin becoming an obstruction to the free flow of trade.

The lack of transparency of the price of the consular visa violates article X § 1 of the
GATT. This article states that “Laws, regulations (...) made effective by any
contracting party, pertaining to (...) rates of duty, taxes or other charges (...) shall be
published promptly in such a manner as to enable governments and traders to
become acquainted with them (...). ”

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The exporters of woodworking products have not mentioned general difficulty related
to the certificate of origin. In the majority of the cases, the problems related to the
certificates of origin have been encountered in countries with which the Community
has preferential agreements and the legality of these measures should also be
analysed within the scope of these agreements.

3.4.2. The customs valuation

In some countries difficulties have been experienced with the Customs‟ valuation.
The value of the products is challenged and arbitrarily increased. In other countries
minimum import prices are implemented.

The principles about Customs‟ valuation are defined by Article VII. These principles
are developed in the WTO Customs‟ valuation agreement of 1994 and the agreement
prevails in the case of a conflict with article VII.

According to Article VII:2(a), the Customs‟ value of imported products must be based
on their actual value. It must not be based on the value of merchandises of national
origin, or on arbitrary or fictitious value. The actual value is “the price at which, at a
time and place determined by the legislation of the country of importation, such or like
merchandise is sold or offered for sale in the ordinary course of trade”.

The agreement considers the transaction value as the basis for valuation. The
transaction value is defined as “the price actually paid or payable for the goods when
sold for export to the country of importation” (agreement, art. 1). The agreement
defines five different valuation methods. They must be applied in turn until one is
considered to be operable. They include the transaction value of the goods, the
transaction value of identical goods, the transaction value of similar goods, the
deductive value or the computed value. If none of them is operable, any reasonable
means may be used.

The application of secret minimum import prices goes against Article VII of GATT and
the Agreement on Customs‟ valuation. According to these provisions, value of
product for Customs‟ purposes should not be based on the value of merchandises of
national origin but should be determined in accordance with the rules provided in
article VII of GATT or the Agreement of Customs‟ valuation. The value of the
products for customs clearance cannot be based on arbitrary or fictitious values.
Rules and practices used by Customs to ascertain value of the products for Customs
proposes should be given sufficient publicity to enable traders to estimate this value.

According to Article VII:1, each party recognises the validity of general principles of
valuation. According to article VII:2, the value for Customs‟ purposes of the imported
merchandise should be based on the actual value of the imported merchandise on
which duty or of a like merchandise and should not be based on the value of the
merchandise of national origin or on arbitrary or fictitious values.

This article and the WTO Agreement on Customs‟ valuation provide methods for
determination of actual Customs‟ value. However, the main principle (according to
article VII:5 and article X:1) is that bases, methods and administrative practices for
determining the value of products subject to duties shall be stable and should be
given sufficient publicity.
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3.4.3. The import licences


In some countries import licences for woodworking products are implemented. In the
majority of cases, these are automatic import licences, implemented mainly for
statistical purposes or in order to ensure the respect of some technical requirements.

Rules about the administration of licenses can be found in the GATT agreement itself
(art. XIII:3) and in the agreement on import licensing procedures, concluded in the
Uruguay Round. The GATT provision concerns only the administration of quotas. The
scope of the agreement is broader. It covers all kinds of licenses. It also covers
automatic licensing procedures. According to a 1979 panel report, these procedures
are not covered by articles XI:1 and XIII:3 of the GATT.

Under a system of automatic licenses, all licences are automatically granted. Such a
system is used for objectives other than limiting imports (often the collection of import
data). There is no control on the motivation of such a system. The agreement only
controls its procedural aspects (art. 2).


3.5. THE PRINCIPLE OF NON-DISCRIMINATION


In some cases, the woodworking products could be discriminated against vis-à-vis
national domestic products or against the products of other importing countries.
These discriminations in some cases might be analysed according to the GATT
obligations.

3.5.1. The national treatment clause


According to Article III-4 “the products of the territory of any contracting party
imported into the territory of any other contracting party shall be accorded treatment
no less favourable than that accorded to like products of national origin in respect of
all laws, regulations and requirements affecting their internal sale, offering for sale,
purchase, transportation, distribution or use”.

This means that the imported woodworking products should be subject to the same
regulations for sale and distribution than the domestic products. Two panels have
taken the view that the exposure of a particular imported product to a risk of
discrimination constitutes by itself, a form of discrimination79. In addition, the
infringements of Article III can be established without proof of injury. The mandatory
legislation discriminating against imported products falls within the scope of Article III,
whether or not effectively applied to these products.

On the other side, it is important to note that not only the regulations should be the
same for imported and domestic products but also their application should not be
79
  Report of panel on the EU- payments and subsidies paid to processors and producers of oilseeds
and related animal-feed proteins, BISD 37S/86 ; Report of panel on the US –measures affecting the
importation, internal sale and use of tobacco, DS44/R.
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rendered more difficult for the imported products than for domestic products. Article X
on transparency and implementation on trade regulations should be applied in case
the importers do not have access to the relevant national legislation or the application
of these regulations is rendered more difficult for them.


3.5.2. MFN (Most Favorite Nation) clause


According to the MFN clause, every advantage granted to the products originating
from one State has to be applied to similar products originating from all the Member
States of the WTO.


3.6. THE EXCEPTION FORESEEN IN GATT ARTICLE XX


In case the measures are found not consistent with the GATT requirements, they still
can be justified by the provisions of article XX. Article XX of the GATT allows
contracting parties to derogate from the provisions of the GATT, e.g. to protect
human, animal, plant life and health, prevention of deceptive practices, etc (article XX
b). However, these measures could not constitute a means of arbitrary or
unjustifiable discrimination between countries or disguised restriction to trade.


3.7. SANITARY AND PHYTOSANITARY REQUIREMENTS


The woodworking products and sometimes furniture are submitted to sanitary and
phytosanitary requirements. In some cases, phytosanitary certificates are required
from the country of origin. In other cases, the importers should apply for a certificate
to the competent authority in the country of destination. Some of the countries under
review have implemented as well phytosanitary inspections, which must be
performed before the clearance procedure.

The main provisions on the sanitary and phytosanitary requirements a contained in
the WTO Agreement on Sanitary and Phytosanitary Measures (SPS). According to
the agreement the members have the right to take sanitary and phytosanitary
measures necessary for the protection of human, animal and plant life and health,
provided that such measures are not inconsistent with the provisions of the
agreement.

The Agreement on SPS requires that “the members shall ensure that any sanitary
and phytosanitary measures is applied only to extent necessary to protect the human
animal and plant life of health, is based on scientific principles and is not maintained
without scientific evidence”. The only exception to the scientific evidence is the
precaution principle established in article 5.7. The precaution principle permits in
cases where the scientific evidence is insufficient a member to adopt a provisional
sanitary and phytosanitary measures on the basis of available pertinent information.
In these cases the members must follow the development of the relevant information
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about the measure and to modify their measure accordingly when sufficient evidence
is available.

The sanitary and phytosanitary measures are defined by the agreement as the
measures applied “to protect plant life or health within the territory of the Member
from risks arising from the entry, establishment or spread of pest, disease, disease
carrying organisms or disease causing organisms”. The sanitary and phytosanitary
measures include all relevant laws, decrees, requirements and procedures including
for example product criteria, inspection, certification and approval procedures,
quarantine treatments, sampling procedures and marking and labelling requirements.

The Agreement recalls the most favoured nation treatment and the national
treatment, which is compulsory in the field of the application of the sanitary and
phytosanitary measures. In addition, the agreement foresees that these requirements
shall not be applied in a manner, which constitutes a disguised restriction on
international trade.

Some exceptions of the obligation of the agreement are permitted in case to allow
members to establish an appropriate level of sanitary and phytosanitary protection.
However, these measures cannot be more trade restrictive than required to achieve
their appropriate level of sanitary and phytosanitary protection, taking into account
the technical and economic feasibility.

The SPS agreement contains also provisions on harmonisation, the members are
required to base their sanitary and phytosanitary measures on international
standards, guides and recommendations where they exist (Article 3-1). In the
“hormone case” panel, the Appellate Body80 denied that the obligation to base
national measures on international standards has the same meaning as “conform” to
the international standards. A measure, which conforms to international standards, is
also based on them, but the converse is not true. A measure that adopts some
elements of the standard is based on it. The measures which conform to the
international standards on all their elements is presumed necessary to protect
human, plant and animal health and conform to the GATT obligations. The WTO
members can introduce measures that result in a higher level of protection if there is
a scientific justification for doing so. The member countries are required to notify their
trade restriction measures and to establish enquiry points.

The woodworking products and especially these that have not undergone a
substantial transformation might be submitted in some cases to phytosanitary
certificate. However, some more protectionist countries have submitted all the
woodworking products and even furniture to phytosanitary certificates. Others do not
recognise the European certificates or perform a phytosnaitary inspections on all the
imported woodworking products. These requirements could be assessed under the
SPS agreement in order to determine if they are not more restrictive than necessary
for the international trade. The requirements could also in some cases being
analysed under the requirements of the GATT article III-4 in case a discrimination
exist between imported products and like domestic products.



80
 WT/DS26/AB/R
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3.8. THE TECHNICAL REGULATIONS


The exporters of woodworking products face increasing difficulties with technical
regulations. These measures are related to compulsory or voluntary standards and
conformity assessment for woodworking products and furniture or to labelling and
marking requirements. These requirements must be assessed in the light of the
Agreement on Technical Barriers to Trade (TBT).

The objective of the TBT Agreement consists in eliminating all unnecessary obstacles
to international trade, which may result from Member States‟ use of technical
regulations and standards. Consequently, the Agreement does not cover only the
preparation, adoption and application of technical regulations, but also the obstacles,
which are provoked simply by the existence of various national standards, even if the
procedures mentioned above, do not create any problem. In this perspective, the
Agreement tries to promote, as strongly as possible, the use of international
standards.

The countries have different approaches in dealing with the technical requirements,
standards and conformity assessment. However, this could create significant
obstacles for the international trade. The exporter, who wants to export his products
to third markets, could be obliged to follow a multiplicity of different standards, which
are in some cases contradictory. The different countries are also applying
compulsory certification and assessment for different products. The TBT agreement
tries to address these issues in order to facilitate international trade.


3.8.1. The general obligations included in the agreement


The agreement establishes a proportionality test between the trade-restrictive effect
of the technical measure and the legitimate objective pursued by this measure. The
proportionality test required in the TBT agreement is much more strict than that of the
General Agreement. According to Article 2.2. “the technical measure should be not
more restrictive than necessary to fulfil a legitimate objective, taking into account the
risks non-fulfilment would create”. The legitimate objectives considered in the
agreement are national security requirements, prevention of deceptive practices,
protection of human health and safety, animal or plant life and health or the
environment. This list is not considered as exhaustive, other legitimate objectives can
be included by the case law. The contracting parties should find the equilibrium
between the protection of the legitimate objective and the trade effect of the
measure. If the trade effect is more restrictive than required to fulfil the legitimate
objective, the measure should be modified. In addition, the agreement requires in
Article 2.3. that the measures should be modified or eliminated “if the circumstances
giving rise to their adoption no longer exist or if changed objectives or circumstances
or objectives can be addressed in a less trade-restrictive manner”.




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The agreement aims at three objectives. It defines rules for the adoption of technical
regulations by central government bodies or local bodies, and for the assessment of
the conformity of standards.

The concept of “unnecessary obstacle” is of course essential for the implementation
of the Agreement. As far as the standards are concerned it should be determined
whether establishing of national standards different form the internationally accepted
ones could be justified by a legitimate objective and if the measure adopted is
proportional to the fulfilment of this objective. For example it must be assessed to
what extent the tests already performed in the country of origin are taken into account
for the conformity assessment of the imported product; what is the maximum time
limit to perform the conformity assessment of imported products. The national
standards must not be adopted with the objective to establish an indirect protection
for the local industry.


3.8.2. The scope of the agreement


The TBT agreement applies to the compulsory and voluntary technical requirements.
The compulsory requirements could constitute a real obstacle to the international
trade and they are regulated more in detail in the Agreement. As far as the non-
compulsory standards are concerned, the agreement requires governmental bodies
to ensure that their standardising bodies are complying with the code of good
practices. The non-compulsory standards might be very important for the
woodworking industry, especially for the products used in the construction business.
The exporters prefer to obtain a certificate for their products in the country of
destination in order to be competitive on the construction market.

If Member States do not use an available international standard or if no proper
international standard exists, they are bound by procedural obligations. They must
publish their intention to introduce a national technical regulation, and they must
notify the WTO secretariat. Moreover, they must provide other details to other
Member States if asked and they must also allow for comments, discussion and
amendments (Art. 2 § 2). It must be underlined that this obligation is stricter than the
general notification requirement established by the Ministerial decision concerning
notification procedures. It is wide, and covers all technical information linked to the
procedure. It also implies a limited translation obligation. Some restrictions have been
introduced in the case of an emergency. The TBT includes also provisions on the
information, which should be supplied by the enquiry points, established in all the
contracting parties.

The Agreement often refers to trade regulation having “significant effect” on trade.
The notion of “significant effect” was also part of the “standards code” and the
committee supervising the code issued a recommendation suggesting some of the
factors to be taken into account in accessing the significance of the effect of the
regulations. The Committee said that consideration should be given to such elements
as the value or other importance of imports in respect of other importing or exporting
countries concerned, the potential growth of these imports and the difficulties for
producers in other countries to comply with the proposed technical regulations. This
means that a technical measure could be considered as significant for international
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trade if it concerns an important volume of the international trade, or if the importers
could experience difficulties to comply with this measure.

The new approach of the TBT agreement is that it not only concerns the
governmental bodies, but also the local governments and the non-governmental
bodies. It is obvious that the obligations imposed on the local and non-governmental
bodies are less strict than those imposed on the central governments. However,
Article 3 requires members to take such “reasonable measures as may be available
to them” to ensure the compliance of the local and non-governmental bodies with the
provisions of Article 2. The extension of the scope of the TBT agreement means that
not only the governmental regulatory measures, but also the measures taken by
independent bodies or on local level could be challenged under the agreement.

The procedures should also be in conformity with the provisions of the TBT
agreement governing the preparation, application and adoption of standards and the
provisions governing the conformity assessment.

The main problem experienced by the European exporter is that the national
standards are different from the internationally accepted ones and in addition they
require making changes in the product. In this case, it should be verified if the
national requirements are in compliance with the international requirements and they
are more prescriptive than required for the achievement of the legitimate objectives.
In addition, Articles 4 and 5 establish some additional provisions. According to Article
4, where appropriate the standards are to be based on product requirements in terms
of performance rather than design or descriptive characteristics. According to Article
5, the importers are granted several rights in the procedure of the conformity
assessment: they have to benefit from the same procedures as the national
companies including the right to mark their products with the conformity mark, the
conformity assessment procedures should be completed as expeditiously as possible
and with the obligation to apply the most favoured nation treatment and the national
treatment clause, etc. In case, the importers rights are not respected a procedure
might be brought under the scope of the TBT agreement.




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                          §4.COSTS – BENEFITS ANALYSIS


This research has been conducted on the measures hampering the EU exports and
investment of woodworking products in 22 non-EU markets. The study presents a
comprehensive picture of the various trade and investment barriers experienced by
EU companies in these markets. It also indicates the most important complaints of
EU companies and their customers, and the impact of these requirements, in terms
of costs, or barriers to trade. Finally, it enumerates the legal provisions which could
be invoked in this context.

The report aims to point out the cost of the difficulties experienced by the European
companies (4.1.) and the benefits of further trade liberalisation in the woodworking
sector (4.2).


4.1. MAIN TRADE                    BARRIERS             EXPERIENCED            BY   THE   EU
COMPANIES

On the basis of the interviews conducted with EU exporters, importers of EU
products, industry associations and third country authorities, the trade and
investment barriers affecting the EU woodworking sector can be summarised in
several categories:

    –    import taxes,
    –    customs formalities,
    –    technical rules,
    –    phytosanitary rules
    –    investment barriers.

These barriers have implications – additional costs, time delays or losses of market
share. A general overview of the trade and investment obstacles will be presented
before analysing the benefits of further trade liberalisation.

4.1.1. Tariff barriers (customs duties and other taxes)

Despite of the sharp reduction in applied tariffs after the Uruguay Round, the
European woodworking products still face high applied duties in some countries.
Their level can reach 20% for some products (e.g. Argentina, Brazil, Uruguay,
Indonesia and Malaysia) and even 40% in Egypt. The Indian tariffs remain the
highest applied duties to these products (about 50%).

Habitually, Third countries establish higher tariffs for goods domestically produced in
order to protect their internal market. Tariffs represent a significant obstacle for the
European products, given the fact that they increase additionally their market price
and render them less competitive in some markets.

Additional taxes applied in the countries under review (customs clearance fee, sales
taxes and other internal taxes) were not reported to constitute a significant problem

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for the EU companies, except when they are applicable in a discriminatory way to
domestic and imported products ( e.g. India).


4.1.2. Customs formalities


Customs formalities are reported to be burdensome, costly or time consuming in
some countries. They are a strong disincentive for small and medium size EU
companies, which lack from sufficient resources to get the relevant information on
customs procedure and the documents required for customs clearance. In some
countries, the length and the complexity of customs procedure discourage EU
exporters (e.g. Egypt, Indonesia, Poland, Brazil, Australia). The companies are often
required to present documents issued in the country of origin (e.g. phyto-sanitary
documents). While the shipments arte not accompanied with the required documents,
the goods are rejected, resent or subject to strict inspections by the customs or
phytosanitary authorities.

The small and medium companies consider, in some cases, the costs to comply with
the third countries customs requirements unbearable and therefore prefer not to
export to these markets.


4.1.3. Technical rules


The technical rules are among the most important trade barriers for the EU
companies. In order to protect their internal market, some countries have elaborated
strict standards and other technical requirements. These are often inconsistent with
the international standards used in the woodworking sector and with the European
standards. Therefore, the European companies support additional costs in adapting
their production process to the third countries standards requirements.

The majority of these standards are compulsory and the European companies must
respect them to access to the third country market (e.g. Russia, Turkey, Slovakia,
Poland). In some countries, voluntary standards exist in the woodworking sector.
However, in practice the respect of these standards is rendered compulsory by the
national industry association or by the requirements of the construction sector (e.g.
USA, Japan, Australia).

The costs for the European companies consist in the obligation to undergo several
certification procedures. In some cases, they are obliged to submit their production
plant to in-situ inspection by the third countries certification authorities. This
procedure is often costly and time consuming. In addition, in some cases, the
European products cannot match the third countries‟ standards without changes in
the production process or the product quality, which is sometimes impossible or very
costly.




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4.1.4. Phytosanitary rules


The woodworking products are subject to various phytosanitary rules aiming at
avoiding the spread of diseases. However, in some cases, the third countries
elaborate extremely strict phytosanitary requirements in order to protect their
domestic industry, or simply to hinder the imports of foreign products.

In various cases, the third country phytosanitary authorities require only a
phytosanitary certificate from the country of origin. In other cases, national
phytosanitary authorities are entitled to conduct phytosanitary inspections on
imported products. These requirements create difficulties for the European products
in various countries under review (Poland, Australia, Egypt, Brazil, Indonesia).

 As far as the phytosanitary certificates are concerned, the European exporters
should be aware of the information required by the third countries sanitary authorities.
If the certificate does not correspond to the third country requirements, it can be
rejected and the goods are subject to additional controls or are resent in the country
of origin. In some cases, the third country authorities perform compulsory
phytosanitary inspection during customs clearance. If the phytosanitary inspection is
not satisfactory, the goods are either treated, either destroyed or resent in the country
of origin.

The cost of the phytosanitary certificates and inspections can represent a strong
hindrance for the European companies exporting to the third countries. In addition,
the duration of the procedures can also be prohibitive.


4.1.5. Investment barriers


The European companies do not encounter significant investment barriers in the third
countries under review. Majority of them encourage the foreign investments in the
woodworking sector.

The investment of the woodworking European companies in these countries is likely
to increase in the near future, given the fact that the EU lacks of sufficient forest
resources. The high costs of certain EU products (furniture) for some markets are
also an element to be taken into account. It has driven some direct investments,
while EU products were, or had become, non competitive to be exported.

Problems identified in this research are related mainly to the lack of information on
the possibilities offered by the third countries woodworking sectors and the need for
financial assistance for small and medium companies‟ investment. The EU
companies experience also some difficulties with the third countries regulatory
environments and with the need to find reliable partners for the creation of new
investments.




Market Access study in the Woodworking sector –Final report, 15 August 2002_

                                                                                     201
§4.2. THE BENEFITS OF FURTHER TRADE LIBERALISATION


Further trade liberalisation will be beneficial for the EU companies because they will
have better access to the third countries markets and increasing investment
possibilities. The third countries processed products are often not competitive on the
European market, due to their low quality and to the EU consumer behaviour.

However, the bilateral and unilateral trade framework should be improved in order to
grant to the EU producers and exporters full advantage of the trade liberalisation.


4.2.1. Improved application of the WTO rules


a)        stricter application of the TBT and SPS agreement


The EU must call for a stricter application of the TBT and SPS Agreements. The two
Agreements require that the national measures could not be more trade restrictive as
necessary for the fulfillment of the legitimate objectives enumerated in the
Agreement. In addition, the national standards and phytosanitary requirements must
be in compliance with the international adopted rules. The EU should therefore seek
out the commitment of its trade partners toward a stricter application of the TBT and
the SPS agreements and the elimination of restrictive rules.

The trade partners should also work on further development of international
standards and phytosanitary rules for woodworking products. These rules could
represent the basis for the national rules for woodworking products and significantly
facilitate trade at the international level.


b)      the trade facilitation


The trade facilitation commitments envisaged by some Members of the WTO would
complete the obligations created by the basic rules. They are consequently not a
substitute for a required revision of the agreements themselves.

Such commitments would be useful for customs control procedures. This concerns
the customs procedures and inspection of woodworking products during customs
clearance.

Additional commitments could also be proposed regarding the implementation of the
WTO agreements and some provisions of the GATT 1947 (articles VIII, IX and X). A
balance should nevertheless be established between the advantages and the
inconveniencies of such an approach, which can become piecemeal, compared with
a pure and simple revision of those provisions.

Market Access study in the Woodworking sector –Final report, 15 August 2002_

                                                                                  202
4.2.2. Improvement of the bilateral agreements


The bilateral agreements should be used to improve the competitiveness of the
European products on the third countries‟ markets.

Tariff reduction should be negotiated for the products considered as essential for the
European industries. The provisions on customs co-operation and the recognition of
the technical and phytosanitary requirements should be more strictly implemented.

The bilateral and regional agreements should contain provisions on cooperation and
implementation of investment projects. These provisions could facilitate the
investment of EU companies in third countries and the elaboration of specific projects
for technical co-operation with the third countries woodworking sectors.

Improved application of the WTO rules and of the bilateral agreements could grant
significant advantages to the European companies by eliminating the cost of the
currently experienced trade barriers. However, attention should be paid to the fact
that further trade liberalisation could to certain extent increase the competitiveness of
the EU trade partners. Therefore, this liberalisation could not be foreseen without
active participation of the EU industry.




Market Access study in the Woodworking sector –Final report, 15 August 2002_

                                                                                     203
                                             ANNEXES


Annex 1:                                          Questionnaire to the EU Industry




Market Access study in the Woodworking sector –Final report, 15 August 2002_

                                                                                     204
                   ANNEX I : QUESTIONNAIRE TO THE EU INDUSTRY




Market Access study in the Woodworking sector –Final report, 15 August 2002_

                                                                               205
                  MARKET ACCESS STUDY IN
          THE WOODWORKING AND RELATED SECTORS
            - QUESTIONNAIRE TO THE EU INDUSTRY -


What is the market access study?
The study seeks to map out trade and investment obstacles met by EU operators in
non EU third countries hampering EU exports of woodworking and related products.
It is aiming to fulfil specific objectives:

-     Identify trade and investment barriers existing in these countries
-     Evaluate the impact such identified barriers have on the EU trade and
      investment (how the restrictions limit actual market penetration).
-     Assess the legality of identified restrictions under the terms of international or
      bilateral rules. This will help the Commission and the Industry in consecutive
      action aiming at removing identified trade barriers. It is therefore crucial to
      answer the questions in detail.

What is its origin?
The European Commission has developed a strategy to improve market access in
third countries for EU operators. Studies carried out in other sectors have identified a
number of trade barriers. These studies have helped the industry submit complaints
against illegal practices implemented in third countries. In other cases, the
Commission initiated bilateral consultations with third countries.

Why is the industry's contribution essential?
Your contribution is essential. The industry has a strong interest in the identification
of barriers affecting its trade and investment. It has a legitimate interest in the
Commission requesting the removal of trade barriers implemented by third countries.
Operators‟ contributions are particularly crucial in the identification of barriers.

 In this questionnaire, you are requested to identify any damaging measures for your
export and the countries where you have/are encountering difficulties. Thank you for
indicating with the greatest possible accuracy any problems you are encountering
(situations, circumstances).

The information you supply will remain confidential
No name of operator or enterprise will be quoted in the study, or passed to
competitors or any National Authority.


             In case of problem or for further information,
    you may contact Katelyne Ghémar, at Brussels (32 2 230 09 31) or
           by e-mail : katelyneghemar@compuserve.com .


-CEEI Market access study for the woodworking sector                                206
1.       In which countries are you encountering problems?


         Very important problems: 1

         Important problems:              2

         No problems                  3

USA                       Slovakia              Chile

Japan                     Romania               India

South Africa              Turkey                Pakistan

Egypt                     Mexico                Thailand

Australia                 Argentina             Malaysia

Russia                    Brazil                Indonesia

Poland                    Uruguay               Korea

Czech Republic            Paraguay




Did you experience difficulties in other countries? / Which countries?


……………………………………………………………………………………………………

…………………………………………………………………………………………………..

…..………………………………………………………………………………………………

…………………………………………………………………………………………………..




-CEEI Market access study for the woodworking sector                     207
2.   In which countries are applied import duties a serious
obstacle?

(customs duties, additional import taxes, fees for customs clearance, additional fees, internal taxes
perceived during clearance - VAT, additional VAT, other internal taxes)

Country                 Product code Measure                           Description
USA

Japan

South Africa

Egypt

Australia

Russia

Poland

Romania

Slovakia

Czech Republic

Turkey

Mexico

Argentina

Brazil

Uruguay

Paraguay

Chile

India

Pakistan

Thailand

Malaysia

Indonesia

Korea

Other countries




-CEEI Market access study for the woodworking sector                                            208
3.        Do customs formalities constitute an obstacle?

a)Visas and customs documents: visas and documents: expensive, long or difficult to obtain.
b)Clearance duration: clearance duration is abnormally long.
c)Customs valuation: increase significantly the total amount of import duties
d)Customs classification: an incorrect classification of your products restricts your access.
e)Rules of origin: rules defining the national origin of your products (an obstacle in certain countries).

Country                  Product code     Measure                             Problem encountered
USA

Japan

South Africa

Egypt

Australia

Russia

Romania

Poland

Slovakia

Czech Republic

Turkey

Mexico

Argentina

Brazil

Uruguay

Paraguay

Chile

India

Pakistan

Thailand

Malaysia

Indonesia

Korea

Other countries




-CEEI Market access study for the woodworking sector                                                  209
4.        Do specific import restrictions constitute an obstacle?

a) Quotas: your products can only be imported in the quantities available of a quantitative contingent
and must be accompanied by an import document (license).
b) Tariff quotas: your products are only imported at a reduced tariff up to a certain quota.
c) Credit restrictions: restrictions on access to credit, credit deposit or terms of payment
d) Obligation of re-export: imposed to the enterprises established in the third country. Prevents them
         from selling part or the totality of their production on the local market.

Country                 Product code    Measure                           Problem encountered
USA

Japan

South Africa

Egypt

Australia

Russia

Romania

Poland

Slovakia

Czech Republic

Turkey

Mexico

Argentina

Brazil

Uruguay

Paraguay

Chile

India

Pakistan

Thailand

Malaysia

Indonesia

Korea

Other countries




-CEEI Market access study for the woodworking sector                                             210
5.        Do technical measures constitute an obstacle?

a) Testing and certification regulations: a specific standard hampers the export of your products
(for example, testing requirements and product certification regarding fire-reaction for plywood).
b) Phytosanitary rules: impede or hamper your exports (e.g. a phytosanitary certificate is requested
for the import of parquet in some countries).
c) Labelling and packaging rules: are costly or impossible to satisfy. Additional costs.

Country                       Product code    Measure                        Problem encountered
USA

Japan

South Africa

Egypt

Australia

Russia

Poland

Romania

Slovakia

Czech Republic

Turkey

Mexico

Argentina

Brazil

Uruguay

Paraguay

Chile

India

Pakistan

Thailand

Malaysia

Indonesia

Korea

Other countries


5.1.      Did you come across other technical barriers?
5.2.      In which cases were your exports seriously hindered or impeded?
-CEEI Market access study for the woodworking sector                                           211
         Please indicate precisely in each case which was the regulation invoked by
         the third country and the products affected by the measure.
5.3.     Please indicate precisely in each case if the measure applied only to imported
         products and if the products of local manufacturers were treated on an equal
         footing.
5.4.     Which were the additional costs generated by technical barriers?

Country           Product      Measure                     Problem encountered
                  code
USA

Japan

South Africa

Egypt

Australia

Russia

Poland

Romania

Slovakia

Czech Republic
Turkey

Mexico

Argentina

Brazil

Uruguay

Paraguay

Chile

India

Pakistan

Thailand

Malaysia

Indonesia

Korea

Other countries




-CEEI Market access study for the woodworking sector                               212
    6. Which are the barriers hampering your investment?

a) Obstacles to investment: Any measure aiming at hampering the investment of an EU
       company.
b) Local ownership requirements: The third country regulation imposes a majority third
       country public ownership
c) Benefits dependent upon export performance or the use of local production inputs:
       The third country establishes a compulsory export performance level or requires a
       minimum use of local production inputs
d) Restrictions for repatriation of capital and profits: hamper EU investment.
e) Limitation concerning work permits, visa etc…
Country              Product code   Measure                      Problem encountered
USA

Japan

South Africa

Egypt

Australia

Russia

Poland

Romania

Slovakia

Czech Republic

Turkey

Mexico

Argentina

Brazil

Uruguay

Paraguay

Chile

India

Pakistan

Thailand

Malaysia

Indonesia

Korea

Other countries


-CEEI Market access study for the woodworking sector                                   213
   7. Do you have additional comments?



Did you come across other difficulties?


…………………………………………………………………………………………………….

…………………………………………………………………………………………………..

…..………………………………………………………………………………………………

…………………………………………………………………………………………………..




-CEEI Market access study for the woodworking sector   214

				
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