FOREIGN TRADE BARRIERS

2023 National Trade Estimate Report on

FOREIGN TRADE

BARRIERS

UNITED STATES TRADE REPRESENTATIVE

ACKNOWLEDGEMENTS

The Office of the United States Trade Representative (USTR) is responsible for the preparation of this

report. U.S. Trade Representative Katherine C. Tai gratefully acknowledges the contributions of all USTR

staff to the writing and production of this report and notes, in particular, the contributions of Laura Buffo,

Teresa Howes, Daniel Leibowitz, Amy Morris, and Andrew O’Neil.

Thanks are extended to partner Executive Branch members of the Trade Policy Staff Committee (TPSC).

The TPSC is composed of the following Executive Branch entities: the Departments of Agriculture, State,

Commerce, Defense, Energy, Health and Human Services, Homeland Security, Interior, Justice,

Transportation, and Treasury; the Environmental Protection Agency; the Office of Management and

Budget; the Council of Economic Advisers; the Council on Environmental Quality; the U.S. Agency for

International Development; the Small Business Administration; the National Economic Council; the

National Security Council; and, the Office of the United States Trade Representative; as well as non-voting

member the U.S. International Trade Commission. In preparing the report, substantial information was

solicited from U.S. Embassies.

Office of the United States Trade Representative

Ambassador Katherine C. Tai

LIST OF FREQUENTLY USED ACRONYMS

APHIS .......................................................................... Animal and Plant Health Inspection Service,

U.S. Department of Agriculture

CVA ............................................................................. WTO Customs Valuation Agreement

DOL ............................................................................. U.S. Department of Labor

............................................................................... European Union

FDA ............................................................................. Food and Drug Administration, U.S. Department of

Health and Human Services

FTA .............................................................................. Free Trade Agreement

GATT ........................................................................... General Agreement on Tariffs and Trade

GATS ........................................................................... WTO General Agreement on Trade in Services

GI ................................................................................. Geographical Indication

GPA ............................................................................. WTO Agreement on Government Procurement

G20 ............................................................................... Group of Twenty

HS ................................................................................ Harmonized System

HTS .............................................................................. Harmonized Tariff Schedule

ICT ............................................................................... Information and Communication Technology

IP .................................................................................. Intellectual Property

MFN ............................................................................. Most-Favored-Nation

MOU ............................................................................ Memorandum of Understanding

MRL ............................................................................. Maximum Residue Limit

OECD ........................................................................... Organization for Economic Cooperation and

Development

SBA .............................................................................. U.S. Small Business Administration

SME ............................................................................. Small and Medium-Sized Enterprise

SPS ............................................................................... Sanitary and Phytosanitary

TBT .............................................................................. Technical Barriers to Trade

TFA .............................................................................. WTO Trade Facilitation Agreement

TIFA ............................................................................. Trade and Investment Framework Agreement

TRQ ............................................................................. Tariff-Rate Quota

USAID ......................................................................... U.S. Agency for International Development

USDA ........................................................................... U.S. Department of Agriculture

USTR ........................................................................... United States Trade Representative

VAT ............................................................................. Value-Added Tax

WTO ............................................................................ World Trade Organization

Unless specified otherwise, all references to the European Union refer to the EU-27.

 
TABLE OF CONTENTS 
FOREWORD ................................................................................................................................................ 1 
ALGERIA ..................................................................................................................................................... 5 
ANGOLA ...................................................................................................................................................... 9 
ARAB LEAGUE ........................................................................................................................................ 13 
ARGENTINA ............................................................................................................................................. 19 
AUSTRALIA .............................................................................................................................................. 25 
BAHRAIN .................................................................................................................................................. 29 
BANGLADESH ......................................................................................................................................... 33 
BOLIVIA .................................................................................................................................................... 39 
BRAZIL ...................................................................................................................................................... 43 
BRUNEI DARUSSALAM ......................................................................................................................... 49 
CAMBODIA ............................................................................................................................................... 53 
CANADA ................................................................................................................................................... 57 
CHILE ......................................................................................................................................................... 63 
CHINA ........................................................................................................................................................ 65 
COLOMBIA ............................................................................................................................................. 107 
COSTA RICA ........................................................................................................................................... 111 
COTE D’IVOIRE ..................................................................................................................................... 115 
DOMINICAN REPUBLIC ....................................................................................................................... 121 
ECUADOR ............................................................................................................................................... 125 
EGYPT ...................................................................................................................................................... 131 
EL SALVADOR ....................................................................................................................................... 137 
ETHIOPIA ................................................................................................................................................ 141 
EUROPEAN UNION ............................................................................................................................... 147 
GHANA .................................................................................................................................................... 179 
GUATEMALA ......................................................................................................................................... 187 
HONDURAS ............................................................................................................................................ 191 
HONG KONG .......................................................................................................................................... 195 
INDIA ....................................................................................................................................................... 197 
INDONESIA ............................................................................................................................................. 211 
ISRAEL .................................................................................................................................................... 229 
JAPAN ...................................................................................................................................................... 231 
JORDAN ................................................................................................................................................... 245 
KENYA .................................................................................................................................................... 249 

 
KOREA ..................................................................................................................................................... 257 
KUWAIT .................................................................................................................................................. 265 
LAOS ........................................................................................................................................................ 269 
MALAYSIA ............................................................................................................................................. 273 
MEXICO ................................................................................................................................................... 279 
MOROCCO .............................................................................................................................................. 285 
NEW ZEALAND ...................................................................................................................................... 289 
NICARAGUA........................................................................................................................................... 291 
NIGERIA .................................................................................................................................................. 295 
NORWAY................................................................................................................................................. 303 
OMAN ...................................................................................................................................................... 307 
PAKISTAN ............................................................................................................................................... 311 
PANAMA ................................................................................................................................................. 319 
PARAGUAY ............................................................................................................................................ 323 
PERU ........................................................................................................................................................ 325 
THE PHILIPPINES .................................................................................................................................. 329 
QATAR ..................................................................................................................................................... 339 
RUSSIA .................................................................................................................................................... 345 
SAUDI ARABIA ...................................................................................................................................... 359 
SINGAPORE ............................................................................................................................................ 367 
SOUTH AFRICA...................................................................................................................................... 369 
SWITZERLAND ...................................................................................................................................... 375 
TAIWAN .................................................................................................................................................. 379 
THAILAND .............................................................................................................................................. 385 
TUNISIA .................................................................................................................................................. 395 
TURKEY .................................................................................................................................................. 399 
UKRAINE................................................................................................................................................. 409 
UNITED ARAB EMIRATES ................................................................................................................... 415 
UNITED KINGDOM ............................................................................................................................... 423 
URUGUAY............................................................................................................................................... 429 
VIETNAM ................................................................................................................................................ 431 
APPENDIX I ............................................................................................................................................ 443 
APPENDIX II ........................................................................................................................................... 447 
 
 

FOREIGN TRADE BARRIERS | 1

FOREWORD

SCOPE AND COVERAGE

The 2023 National Trade Estimate Report on Foreign Trade Barriers (NTE) is the 38th report in an annual

series that highlights significant foreign barriers to U.S. exports, U.S. foreign direct investment, and U.S.

electronic commerce. This document is a companion piece to the President’s 2023 Trade Policy Agenda

and 2022 Annual Report, published by the Office of the United States Trade Representative (USTR) on

March 1, 2023.

In accordance with section 181 of the Trade Act of 1974, as amended by section 303 of the Trade and Tariff

Act of 1984 and amended by section 1304 of the Omnibus Trade and Competitiveness Act of 1988, section

311 of the Uruguay Round Trade Agreements Act, and section 1202 of the Internet Tax Freedom Act,

USTR is required to submit to the President, the Senate Finance Committee, and appropriate committees

in the House of Representatives, an annual report on significant foreign trade barriers. The statute requires

an inventory from the previous calendar year of the most important foreign barriers affecting U.S. exports

of goods and services, including agricultural commodities and U.S. intellectual property; foreign direct

investment by U.S. persons, especially if such investment has implications for trade in goods or services;

and U.S. electronic commerce. Such an inventory enhances awareness of these trade restrictions, facilitates

U.S. negotiations aimed at reducing or eliminating these barriers, and is a valuable tool in enforcing U.S.

trade laws and strengthening the rules-based system.

The NTE Report is based upon information compiled within USTR, the Departments of Commerce and

Agriculture, and other U.S. Government agencies, as well as U.S. Embassies and supplemented with

information provided in response to a notice published in the Federal Register, and by the trade advisory

committees.

This Report discusses key export markets for the United States, covering 60 countries; the European Union;

Taiwan; Hong Kong, China; and, the Arab League. As always, omission of particular countries and barriers

does not imply that they are not of concern to the United States.

The NTE Report covers significant barriers, whether they are consistent or inconsistent with international

trading rules. Tariffs, for example, are an accepted method of protection under the General Agreement on

Tariffs and Trade 1994. Even a very high tariff does not violate international rules unless a country has

made a commitment not to exceed a specified rate, i.e., a tariff binding. Nonetheless, it would be a

significant barrier to U.S. exports, and therefore covered in the NTE Report. Measures not consistent with

international trade agreements, in addition to serving as barriers to trade and causes of concern for policy,

are actionable under U.S. trade law as well as through the World Trade Organization and free trade

agreements. Since early 2020, there were significant trade disruptions as a result of temporary trade

measures taken directly as a result of the COVID-19 pandemic.

Trade barriers elude fixed definitions, but may be broadly defined as government laws and regulations or

government-imposed measures, policies, and practices that restrict, prevent, or impede the international

exchange of goods and services; protect domestic goods and services from foreign competition; artificially

stimulate exports of particular domestic goods and services; fail to provide adequate and effective

protection of intellectual property rights; unduly hamper U.S. foreign direct investment or U.S. electronic

commerce; or impose barriers to cross-border data flows. The recent proliferation of data localization and

other such restrictive technology requirements is of particular concern to the United States.

2 | FOREIGN TRADE BARRIERS

The NTE Report classifies foreign trade barriers in 14 categories, as follows:

• Import policies (e.g., tariffs and other import charges, quantitative restrictions, import

licensing, pre-shipment inspection, customs barriers and shortcomings in trade facilitation or

in valuation practices, and other market access barriers);

• Technical barriers to trade (e.g., unnecessarily trade restrictive or discriminatory standards,

conformity assessment procedures, labeling, or technical regulations, including unnecessary or

discriminatory technical regulations or standards for telecommunications products);

• Sanitary and phytosanitary measures (e.g., measures relating to food safety, or animal and plant

life or health that are unnecessarily trade restrictive, discriminatory, or not based on scientific

evidence);

• Government procurement (e.g., closed bidding and bidding processes that lack transparency);

• Intellectual property protection (e.g., inadequate patent, copyright, and trademark regimes;

trade secret theft; and inadequate enforcement of intellectual property rights);

• Services (e.g., prohibitions or restrictions on foreign participation in the market, discriminatory

licensing requirements or standards, local-presence requirements, and unreasonable restrictions

on what services may be offered);

• Digital trade and electronic commerce (e.g., barriers to cross-border data flows, including data

localization requirements, discriminatory practices affecting trade in digital products,

restrictions on the supply of Internet-enabled services, and other restrictive technology

requirements);

• Investment (e.g., limitations on foreign equity participation and on access to foreign

government-funded research and development programs, local content requirements,

technology transfer requirements and export performance requirements, and restrictions on

repatriation of earnings, capital, fees and royalties);

• Subsidies, especially export subsidies (e.g., subsidies contingent upon export performance, and

agricultural export subsidies that displace U.S. exports in third country markets) and local

content subsidies (e.g., subsidies contingent on the purchase or use of domestic rather than

imported goods);

• Competition (e.g., government-tolerated anticompetitive conduct of state-owned or private

firms that restricts the sale or purchase of U.S. goods or services in the foreign country’s

markets or abuse of competition laws to inhibit trade; and fairness and due process concerns

by companies involved in competition investigatory and enforcement proceedings in the

country);

• State-owned enterprises (e.g., actions by SOEs and by governments with respect to SOEs

involved in the manufacture or production of non-agricultural goods or in the supply of services

that constitute significant barriers to, or distortions of, U.S. exports of goods and services, U.S.

investments, or U.S. electronic commerce, which may negatively affect U.S. firms and

workers. These actions include subsidies and non-commercial advantages provided to and

from SOEs; and practices with respect to SOEs that discriminate against U.S. goods or services,

FOREIGN TRADE BARRIERS | 3

or actions by SOEs that are inconsistent with commercial considerations in the purchase and

sale of goods and services);

• Labor (e.g., concerns with failures by a government to protect internationally recognized

worker rights

or to eliminate discrimination in respect of employment or occupation, in cases

where these failures influence trade flows or investment decisions in ways that constitute

significant barriers to, or distortions of, U.S. exports of goods and services, U.S. investment,

or U.S. electronic commerce, which may negatively affect U.S. firms and workers);

• Environment (e.g., concerns with a government’s levels of environmental protection,

unsustainable stewardship of natural resources, and harmful environmental practices that

constitute significant barriers to, or distortions of, U.S. exports of goods and services, U.S.

investment, or U.S. electronic commerce, which may negatively affect U.S. firms or workers);

and,

• Other barriers (e.g., barriers or distortions that are not covered in any other category above or

that encompass more than one category, such as bribery and corruption, or that affect a single

sector).

The prevalence of corruption is a consistent complaint from U.S. firms that trade with or invest in other

economies. Corruption takes many forms and affects trade and development in different ways. In many

countries and economies, it affects customs practices, licensing decisions, and the award of government

procurement contracts. If left unchecked, bribery and corruption can negate market access gained through

trade negotiations, frustrate broader reforms and economic stabilization programs, and undermine the

foundations of the international trading system. Corruption also hinders development and contributes to

the cycle of poverty. The Foreign Corrupt Practices Act prohibits U.S. companies from bribing foreign

public officials, and numerous other domestic laws discipline corruption of public officials at the State and

Federal levels. The United States continues to play a leading role in addressing bribery and corruption in

international business transactions and has made real progress over the past quarter century building

international coalitions to fight bribery and corruption.

Pursuant to Section 1377 of the Omnibus Trade and Competitiveness Act of 1988, USTR annually reviews

the operation and effectiveness of U.S. telecommunications trade agreements to make a determination on

whether any foreign government that is a party to one of those agreements is failing to comply with that

government’s obligations or is otherwise denying, within the context of a relevant agreement, “mutually

advantageous market opportunities” to U.S. telecommunication products or services suppliers. The NTE

Report highlights both ongoing and emerging barriers to U.S. telecommunication services and goods

exports from the annual review called for in Section 1377.

TRADE IMPACT OF FOREIGN BARRIERS

Trade barriers or other trade distorting practices affect U.S. exports to a foreign market by effectively

imposing costs on such exports that are not imposed on goods produced in the importing market. Estimating

the impact of a foreign trade measure on U.S. exports of goods requires knowledge of the additional cost

the measure imposes on them, as well as knowledge of market conditions in the United States, in the foreign

Internationally recognized worker rights include the right of association, the right to organize and bargain collectively, a

prohibition on the use of any form of forced or compulsory labor, a minimum age for the employment of children, and a

prohibition on the worst forms of child labor, and acceptable conditions of work with respect to minimum wages, hours of work,

and occupational safety and health.

4 | FOREIGN TRADE BARRIERS

market imposing the measure, and in third country markets. In practice, such information often is not

available.

In theory, where sufficient data exist, an approximate impact of tariffs on U.S. exports could be derived by

obtaining estimates of supply and demand price elasticities in the importing market and in the United States.

Typically, the U.S. share of imports would be assumed constant. When no calculated price elasticities are

available, reasonable postulated values would be used. The resulting estimate of lost U.S. exports would

be approximate, depend on the assumed elasticities, and would not necessarily reflect changes in trade

patterns with third country markets. Similar procedures might be followed to estimate the impact of

subsidies that displace U.S. exports in third country markets.

The estimation of the impact of non-tariff measures on U.S. exports is far more difficult, since no readily

available estimate exists of the additional cost these restrictions impose. Quantitative restrictions or import

licenses limit (or discourage) imports and thus are likely to raise domestic prices, much as a tariff does.

However, without detailed information on price differences between markets and on relevant supply and

demand conditions, it would be difficult to derive the estimated effects of these measures on U.S. exports.

Similarly, it would be difficult to quantify the impact on U.S. exports (or commerce) of other foreign

practices, such as government procurement policies, nontransparent standards, or inadequate intellectual

property rights protection.

The same limitations apply to estimates of the impact of foreign barriers to U.S. services exports.

Furthermore, the trade data on services exports are extremely limited in detail. For these reasons, estimates

of the impact of foreign barriers on trade in services also would be difficult to compute. With respect to

investment barriers, no accepted techniques for estimating the impact of such barriers on U.S. investment

flows exist. The same caution applies to the impact of restrictions on electronic commerce.

To the extent possible, the NTE Report endeavors to present estimates of the impact on U.S. exports, U.S.

foreign direct investment, or U.S. electronic commerce of specific foreign trade barriers and other trade

distorting practices. In some cases, stakeholder valuations estimating the effects of barriers may be

contained in the NTE Report. The methods for computing these valuations are sometimes uncertain.

Hence, their inclusion in the NTE Report should not be construed as a U.S. Government endorsement of

the estimates they reflect. Where government-to-government consultations related to specific foreign

practices were proceeding at the time of this NTE Report’s publication, estimates were excluded, in order

to avoid prejudice to these consultations.

March 2023

FOREIGN TRADE BARRIERS | 5

ALGERIA

TRADE AGREEMENTS

The United States–Algeria Trade and Investment Framework Agreement

The United States and Algeria signed a Trade and Investment Framework Agreement (TIFA) on July 13,

2001. This Agreement is the primary mechanism for discussions of trade and investment issues between

the United States and Algeria.

IMPORT POLICIES

Tariffs and Taxes

In May 2020, Algeria issued a decree to exempt from customs duties and value-added taxes (VAT) medical

devices, pharmaceutical products, and testing equipment imported to combat the COVID-19 pandemic.

Tariffs

Algeria is not a Member of the World Trade Organization (WTO), but is a WTO Observer. Goods imported

into Algeria face a range of tariffs, from zero percent to 200 percent. Algeria’s average Most-Favored-

Nation (MFN) applied tariff rate was 19 percent in 2021 (latest data available). Algeria’s average MFN

applied tariff rate was 23.6 percent for agricultural products and 18.2 percent for non-agricultural products

in 2021 (latest data available).

Goods facing the highest rates are those for which equivalents are manufactured in Algeria. Citing the need

to encourage local production and ease pressure on the country’s foreign exchange reserves, Algeria

adopted in January 2019 and implemented in April 2019 temporary additional safeguard duties (DAPs) of

30 percent to 200 percent on a list of more than 1,000 manufactured and agricultural goods, with the 200

percent rate applied to ten tariff lines covering cement products under the Harmonized System heading

25.23. The items in Algeria’s customs code that remain duty free are generally European Union (EU)-

origin goods that are used in manufacturing and are exempt from tariffs under the 2006 EU–Algeria

Association Agreement.

Non-Tariff Barriers

Import Bans and Import Restrictions

Since January 2009, Algeria’s Ministry of Health has restricted the import of a number of generic

pharmaceutical products and medical devices. In 2015, the Ministry of Health published a list of 357

generic pharmaceutical products banned from importation. The list became invalidated when authority

over pharmaceutical imports transferred from the Ministry of Health to the Ministry of Pharmaceutical

Industry in 2022. Since 2007, Algeria has banned the importation of used medical equipment unless the

government grants a special exception. Algeria has applied the regulation broadly to block the re-

importation of machinery sent abroad for maintenance under warranty, even for equipment owned by state-

run hospitals.

Algeria bans most types of used machinery from entry, except for refurbished assembly line equipment

used in domestic industries.

6 | FOREIGN TRADE BARRIERS

In February 2021, the Ministry of Commerce issued a schedule establishing a seasonal ban for individual

agricultural products. The schedule adjusted a year-round restriction on almond imports to a seasonal ban

covering June through August. In September 2021, Algeria restricted the import of animal products such

as tuna, yogurt, ice cream, liquid egg yolks, lambswool, camel hair, corned beef, live bait for fishing, and

non-food products such as baseball bats. In October 2021, Algeria restricted the import of additional

products for which there is minimal demand and for agricultural products not elsewhere specified or

indicated in Algeria’s tariff schedule. At the time, Algeria did not specify whether the restrictions on these

products are seasonal, and whether they extend beyond 2023, as is the case for import restrictions on

almonds. Algeria justified these decisions as necessary to reduce the country’s import bill and to combat

fraud.

In August 2021, the Ministry of Finance instructed banks to suspend the processing of accounts for

importers of products intended for resale starting at the end of October 2021 unless importers complied

with a March 2021 decree requiring them to update their import registration to include only one category

of product per company. The Ministry of Finance subsequently communicated implementation instructions

to the Ministry of Commerce’s National Center of Commerce Registry (CNRC) but not to importers

themselves. Importers must approach the CNRC individually to seek guidance regarding their particular

situation rather than rely on publicly available information.

Quantitative Restrictions

In August 2020, Algeria released a new Book of Specifications concerning the automotive industry. The

Book of Specifications covers automobiles, buses, trucks, construction equipment, and motorcycles. It

establishes an import quota of up to 200,000 vehicles per year, with an annual cap of $2 billion. Due to

customs duties, the VAT, and other taxes, vehicles cost more than double the market rates when purchased

by individuals overseas and imported into Algeria. While the import quota on kits for assembly of

passenger vehicles is set at zero, the regulation indicated that Algeria would set a new quota for automotive

companies that receive authorization to engage in local assembly or manufacturing. As of December 2022,

Algeria had not granted authorizations to import under the 2020 regime, and no new cars for sale in

dealerships have been imported since the regime was announced. A provision in the October 2022

Complementary Finance Law permits those residing in Algeria to import used cars which are three years

old or less, however purchasers are required to use their own foreign currency to do so.

In 2020, Algeria established a maximum annual import volume benchmark of four million metric tons of

bread (common) wheat. The Algerian President announced in August 2021 that the state grains agency

(OAIC) would be the country’s exclusive wheat importer to counteract alleged “illicit practices” by private

importers. In practice, the OAIC was already the sole buyer of wheat, reselling the commodity on the

domestic market at subsidized prices. In 2022, the Algerian President announced that the OAIC will have

the exclusive right to import pulses as well. However, Algeria has not codified the OAIC’s role as the sole

buyer of wheat and pulses.

Customs Barriers and Trade Facilitation

Clearing goods through Algerian Customs continues to be a problem facing some companies. Delays can

take weeks or months, in many cases without explanation. In addition to a certificate of origin, Algeria

requires all importers to provide certificates of conformity and quality from an independent third party.

Algerian Customs requires shipping documents be stamped with a “Visa Fraud” note from the Ministry of

Commerce, indicating that the goods have passed a fraud inspection before the goods are cleared. Many

importations also require authorizations from multiple ministries, which frequently causes additional

delays, especially when the regulations do not clearly specify which ministry’s authority is being exercised.

FOREIGN TRADE BARRIERS | 7

Storage fees at Algerian ports of entry are high, and the fees double if goods are stored for longer than 10

days.

Regulations introduced in October 2017 require importers to deposit with a bank a financial guarantee equal

to 120 percent of the cost of the import 30 days in advance. This requirement burdens small and medium-

sized importers that often lack sufficient cash flow.

Local Content Requirements

The 2020 Book of Specifications for the automotive industry increased domestic content requirements in

vehicle production. Minimum domestic content integration rates for domestic assembly plants will be 35

percent in 2023, 40 percent in 2024, and 50 percent thereafter. Additionally, the Book of Specifications

mandates that automotive importers be 100 percent Algerian-owned.

SANITARY AND PHYTOSANITARY BARRIERS

Algeria bans the production, importation, distribution, or sale of seeds that are the products of

biotechnology. There is an exception for biotechnology seeds imported for research purposes.

Algeria maintains strict animal health certificates for animals and animal products, dairy and dairy products,

as well as processed products of animal origin. In 2021, the U.S. Department of Agriculture (USDA) Food

Safety and Inspection Service (FSIS) submitted a letter requesting that Algeria accept the USDA 9060-5

export certificate for U.S. meat and poultry products. The USDA has not received a response. As of

December 2022, U.S. and Algerian veterinary authorities were continuing to negotiate export certificates

to allow importation of U.S. bovine semen, beef cattle, dairy breeding cattle, and beef and poultry meat and

meat products.

GOVERNMENT PROCUREMENT

Since August 2015, all ministries and state-owned enterprises (SOEs) are required to purchase domestically

manufactured products whenever available. Procurement of foreign goods are permitted only with special

ministerial authorization and if a locally made product cannot be identified. Algeria requires approval from

the Council of Ministers for expenditures in foreign currency that exceed DZD 10 billion (approximately

$72 million).

As Algeria is not a Member of the WTO, it is neither a Party to the WTO Agreement on Government

Procurement nor an observer to the WTO Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Algeria remained on the Watch List in the 2022 Special 301 Report. Algeria has taken some positive steps

to improve intellectual property (IP) protection and enforcement, including increasing coordination on IP

enforcement and engaging in capacity building and training efforts. However, concerns remain, including

the lack of an effective mechanism for the early resolution of potential pharmaceutical patent disputes,

inadequate judicial remedies in cases of patent infringement, the lack of administrative opposition in

Algeria’s trademark system, and the need to increase enforcement efforts against counterfeiting and piracy.

In addition, Algeria does not provide an effective system for protecting against the unfair commercial use

or unauthorized disclosure of undisclosed test or other data generated to obtain marketing approval for

pharmaceutical products.

8 | FOREIGN TRADE BARRIERS

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Since 2018, Algeria requires electronic commerce platforms conducting business in Algeria to register with

the government and to host their websites from a data center located in Algeria. Such localization

requirements impose unnecessary costs on service suppliers and disproportionately burden small firms by

requiring redundant storage systems.

Algeria imposes a maximum value per transaction of DZD 100,000 (approximately $720) on citizens’

purchases of goods from outside the country using international credit cards. In addition, Algerian foreign

exchange regulations prohibit the use of certain online payment processors to transfer money from one

account to another.

INVESTMENT BARRIERS

In 2020, Algeria lifted its longstanding requirement that Algerian individuals or entities own at least 51

percent of all projects involving foreign investments (known as the 51/49 rule). However, the 2021 Finance

Law re-imposed the 51 percent requirement, with retroactive application to foreign companies already

established in Algeria and owning more than 49 percent of operations in strategic sectors such as energy,

mining, defense, transportation and infrastructure, and pharmaceuticals, as well as for activities involving

raw materials and importers of goods for resale in Algeria. In July 2022, the Algerian Government enacted

an investment law that called for the creation of Invest Algeria, a one-stop shop for prospective investors

to register in-country.

STATE-OWNED ENTERPRISES

SOEs comprise about two-thirds of the Algerian economy by market value. The national oil and gas

company, Sonatrach, is the most prominent SOE, but SOEs are present in all sectors of the economy. SOEs

leverage their position in the market to gain advantage over privately owned competitors. For example,

state-owned telecommunications provider Algerie Telecom holds a monopoly over all undersea data cable

traffic in and out of Algeria, offering services at a considerable advantage over private companies operating

in the telecommunications sector.

FOREIGN TRADE BARRIERS | 9

ANGOLA

TRADE AGREEMENTS

The United States–Angola Trade and Investment Framework Agreement

The United States and Angola signed a Trade and Investment Framework Agreement (TIFA) on May 19,

2009. This Agreement is the primary mechanism for discussions of trade and investment issues between

the United States and Angola.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Angola’s average Most-Favored-Nation (MFN) applied tariff rate for all products was 10.9 percent in 2021

(latest data available). Angola’s average MFN applied tariff rate was 21.6 percent for agricultural products

and 9.1 percent for non-agricultural products in 2021 (latest data available). Angola has bound 100 percent

of its tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 59.1

percent and average bound rates of 52.7 percent for agricultural products and 60.1 percent for non-

agricultural products.

In response to the COVID-19 pandemic, as of March 27, 2020, the General Tax Administration of Angola

allows all medicines and biosafety material to be imported duty free.

Taxes

The 2022 State Budget reduced the Industrial/Withholding Tax rate, which is levied on incidental services,

from 15 percent to 6.5 percent. The reduction is only applicable for 2022 and subject to review for 2023.

It also reduced the value-added tax (VAT) from a standard rate of 14 percent to 7 percent for certain food

products, goods, and services, such as hotels.

Non-Tariff Barriers

Import Restrictions

Presidential Decree No. 23/19 of January 2019 appears aimed to restrict the importation of certain products

unless the importer can demonstrate that the product is not available domestically. The Decree currently

includes more than 54 products, mainly agricultural goods, and applies to any imports that compete with

goods produced in the Luanda-Bengo special economic zone. Impacted products include poultry, maize

flour, and diapers. As of December 31, 2022, importers had observed minimal enforcement of the Decree

and had not reported restrictions on obtaining import licenses; however, importers remain concerned that

the Decree, if fully implemented, would have negative impacts on trade. In 2022, the United States

continued to raise concerns about the Decree with Angola bilaterally and in the WTO Council for Trade in

Goods, the WTO Committee on Market Access, and the WTO Committee on Agriculture.

10 | FOREIGN TRADE BARRIERS

SANITARY AND PHYTOSANITARY BARRIERS

Angola has not introduced a risk management program for veterinary and sanitary control purposes.

Therefore, consignments of imports classified in Chapters 2 to 23 of the Harmonized System (including

animal and vegetable products and foodstuffs) must be laboratory tested prior to entry into Angola and

accompanied by a health certificate.

Agricultural Biotechnology

Angola does not allow the use of agricultural biotechnology in production, and imports containing

genetically engineered (GE) components are limited to food aid and scientific research. Angola also

prohibits the importation of viable GE grain or seed. The Ministry of Agriculture and Forestry requires

importers to present documentation certifying that their goods do not include biotechnology products.

Importation of GE food is permitted when it is provided as food aid, but the product must be milled before

it arrives in Angola. The Ministry of Agriculture and Forestry allows biotechnology imports for scientific

research, subject to regulation and controls.

GOVERNMENT PROCUREMENT

Despite revisions to increase transparency in the Public Procurement Law that entered into force on January

22, 2021, stronger implementation of the law to make government procurement more transparent remains

important. Angolan civil society and business leaders note the government’s continued regular use of direct

public contract awards through tenders by pre-qualification, closed bidding or simplified contracting for a

regular and select few companies without the observation of public tenders in various sectors.

Companies that have participated in recent public tenders described the processes as fair and transparent

for bidders. In some instances, companies have had difficulty responding to all requirements described in

tenders that were “unclear.” In other instances, companies have complained of direct awards occurring

after a tender was announced, particularly in the health sector.

Angola is neither a Party to the WTO Agreement on Government Procurement nor an observer to the WTO

Committee on Government Procurement.

OTHER BARRIERS

Bribery and Corruption

While levels of corruption and bribery have declined, corruption remains prevalent in Angola for reasons

including an inadequately trained civil service, a highly centralized bureaucracy, a lack of funding to

improve capacity, and a lack of uniform implementation of anticorruption laws.

The Criminal Law and Criminal Procedure Codes (Law No. 38/20 and Law No. 39/20) entered into force

on February 9, 2021. Notable changes include corporate criminal liability, harsh penalties for corruption

of public officials, criminalization of private corruption, and provisions for seizure of proceeds of a crime,

among others. The law also contains provisions that criminalize bribery of national and foreign public

officials; seek an appropriate balance between immunities and the ability to effectively investigate,

prosecute, and adjudicate offences; enhance cooperation within local law enforcement authorities; and,

designate a central anticorruption authority.

Enforcement of anticorruption laws remains poor. The United States and the international community have

engaged in anticorruption initiatives to help Angola attain its anticorruption objectives. For instance, the

FOREIGN TRADE BARRIERS | 11

U.S. Department of State is funding the Financial Services Volunteer Corps (FSVC), a project that supports

Angolan civil society and independent media to increase public awareness and support for anticorruption

and transparency reform. FSVC is also implementing a U.S. Agency for International Development

(USAID) regional program that provides technical assistance, training, and mentoring at key government

institutions to improve public financial management, enhance oversight, and reduce fraud, waste, and abuse

of state resources.

Export Taxes

In December 2019, a revised customs tariff code entered into force, which, among other things, eliminated

the five percent export tax on crude ores.

Foreign Exchange

Angola’s dependence on oil and gas production means that activity in the sector heavily influences the

availability of foreign exchange. Foreign exchange availability has recently improved in major economic

sectors but remains inadequate for individuals and small businesses.

Business Licensing

In October 2021, the National Assembly approved Law No. 26/21, which revoked the Law of Commercial

Activities No. 1/07 of May 2007. Under Law No. 26/21, the authority to license business activity, which

previously rested with the Ministry of Commerce and, since July 2021, with provincial governments and

municipal administrations, was transferred to the Angolan President. The law also expands business

licensing eligibility. Commercial stakeholders have expressed concern that the transfer of authority could

create dependence on higher governmental powers to authorize commercial activity.

FOREIGN TRADE BARRIERS | 13

ARAB LEAGUE

The 22 Arab League members are the Palestinian Authority and the following countries: Algeria, Bahrain,

Comoros, Djibouti, Egypt, Iraq, Kuwait, Jordan, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar,

Saudi Arabia, Somalia, Sudan, Syria, Tunisia, the United Arab Emirates, and Yemen. The effect of the

Arab League’s boycott of Israeli companies and Israeli-made goods (originally implemented in 1948) on

U.S. trade and investment in the Middle East and North Africa varies from country to country. On occasion,

the boycott can pose a barrier (because of potential legal restrictions) for individual U.S. companies and

their subsidiaries doing business in certain parts of the region. However, for many years, efforts by various

Arab League members to enforce the boycott have had an extremely limited practical effect overall on U.S.

trade and investment ties with many key Arab League countries. About half of the Arab League members

are also Members of the World Trade Organization (WTO), and are thus obligated to apply WTO

commitments to all current WTO Members, including Israel. To date, no Arab League member, upon

joining the WTO, has invoked the right of non-application of WTO rights and obligations with respect to

Israel.

In 2020, the United Arab Emirates, Bahrain, Morocco, and Sudan announced normalization agreements

with Israel as part of the Abraham Accords initiative. The normalization agreements include an intent to

expand formal trade and investment ties, among other economic operations, between these Arab League

countries and Israel. Egypt and Jordan, having earlier signed peace treaties with Israel, have long engaged

in formal bilateral trade with Israel and published official statistics regarding that trade. Currently, such

statistics from other Arab League members either are not published at all or are not regularly updated.

The United States has long opposed the Arab League boycott, and U.S. Government officials from a variety

of agencies frequently have urged Arab League member governments to end it. The U.S. Department of

State and U.S. embassies in relevant Arab League host capitals take the lead in raising U.S. concerns related

to the boycott with political leaders and other officials. The U.S. Departments of Commerce and Treasury

and the Office of the United States Trade Representative (USTR) monitor boycott policies and practices of

Arab League members, and, aided by U.S. embassies, lend advocacy support to firms facing boycott-related

pressures.

The Arab League boycott of Israel was the impetus for the creation of U.S. antiboycott authorities during

the 1970s. U.S. antiboycott laws (the 1976 Tax Reform Act (TRA) and the Anti-boycott Act of 2018, Part

II of the Export Control Reform Act of 2018, 50 U.S.C. Sections 4801-4852 (ECRA)), prohibit U.S. firms

from taking certain actions with the intent to comply with foreign boycotts that the United States does not

sanction. As a practical matter, foreign countries’ boycotts of Israel, as reflected in government directives,

laws, and regulations, continue to be the principal boycotts with which U.S. companies are concerned. The

ECRA’s antiboycott provisions are implemented by Part 760 of the Export Administration Regulations, 15

CFR Parts 770-774 (EAR). The Department of Commerce’s Office of Antiboycott Compliance (OAC)

oversees enforcement of Part 760, which prohibits certain types of conduct by U.S. persons (including

businesses) undertaken in support of any unsanctioned foreign boycott maintained by a country against a

country friendly to the United States. Prohibited activities include, inter alia, agreements by U.S.

companies to refuse to do business with a boycotted country, furnishment by U.S. companies of information

about business relationships with a boycotted country, and implementation by U.S. companies of letters of

credit that include boycott terms. The TRA’s antiboycott provisions, administered by the Department of

Treasury and the Internal Revenue Service, deny certain foreign tax benefits to companies that agree to

requests from boycotting countries to participate in certain types of boycotts.

The U.S. Government’s efforts to oppose the Arab League boycott include alerting appropriate officials in

the boycotting countries to the presence of prohibited boycott requests and the adverse impact of those

14 | FOREIGN TRADE BARRIERS

requests on U.S. firms and on Arab League members’ ability to expand trade and investment ties with the

United States. In this regard, OAC officials periodically visit Arab League members to consult with

appropriate counterparts on antiboycott compliance issues. These consultations provide technical

assistance to those counterparts to identify language in commercial documents that may constitute or be

related to prohibited and/or reportable boycott requests under Part 760 of the EAR.

Boycott activity can be classified according to three categories. The primary boycott prohibits the

importation of goods and services from Israel into the territory of Arab League members. This prohibition

may conflict with the obligation of Arab League members that are also Members of the WTO to treat

products of Israel on a Most-Favored-Nation basis. The secondary boycott prohibits individuals, companies

(both private and public sector), and organizations in Arab League members from engaging in business

with U.S. firms and firms from other countries that contribute to Israel’s military or economic development.

Such foreign firms may be placed on a boycott list maintained by the Central Boycott Office (CBO), a

specialized bureau of the Arab League. In the past, the CBO has often provided this list to Arab League

member governments for their use in implementing national boycotts. The tertiary boycott prohibits

business dealings with U.S. and other firms that do business with companies on the boycott list.

Individual Arab League member governments decide whether, or to what extent, to implement boycotts

against Israel through national laws or regulations. Enforcement of such boycotts varies widely among

them. Some Arab League member governments, in particular Syria and Lebanon, have consistently

maintained that only the Arab League as a whole can entirely revoke the boycott it called for. Other member

governments support the view that adherence to a boycott of Israel is a matter of national discretion; thus,

a number of governments have taken steps to dismantle various aspects of their national boycotts. The U.S.

Government has on numerous occasions indicated to Arab League member governments that their officials’

attendance at periodic CBO meetings is not conducive to improving trade and investment ties with the

United States and within the region. Attendance of Arab League member government officials at CBO

meetings varies; a number of governments have responded to U.S. officials that they only send

representatives to CBO meetings in an observer capacity or to push for additional discretion in national

enforcement of the CBO-drafted company boycott list.

The current situation in individual Arab League members is as follows:

ALGERIA: Algeria does not maintain diplomatic, cultural, or direct trade relations with Israel, although

indirect trade reportedly takes place. The country has legislation in place that in general supports the Arab

League boycott, but there are no specific provisions relating to the boycott and government enforcement of

the primary aspect of the boycott is reportedly sporadic. Algeria appears not to enforce any element of the

secondary or tertiary aspects of the boycott. However, regulations issued by individual government

agencies have at times banned contact with Israeli companies and entities, effectively barring the entry of

Israeli products.

COMOROS, DJIBOUTI, AND SOMALIA: None of these countries have taken steps to effectively

enforce a boycott against Israel.

EGYPT: Egypt has not enforced any aspect of the boycott since 1980, pursuant to its peace treaty with

Israel. In past years, Egypt has included boycott language drafted by the Arab League in documentation

related to tenders funded by the Islamic Development Bank.

IRAQ: As a matter of policy, Iraq does not adhere to the Arab League boycott. Most Iraqi ministries and

state-owned enterprises have agreed not to comply with or have rescinded regulations enforcing the boycott,

following a 2009 Council of Ministers decision to cease boycott-related implementation practices.

However, individual Iraqi Government officials and ministries continue to violate that policy. The Ministry

FOREIGN TRADE BARRIERS | 15

of Health’s procurement arm (Kimadia) was among the government entities that still issued boycott-related

requests.

Officials from the Departments of State and Commerce, and USTR continue to engage with their respective

interlocutors to ensure Iraqi officials are committed to investigating instances of boycott-related language

in contracts and tenders.

JORDAN: Jordan formally ended its enforcement of any aspect of the boycott when it signed the

Jordanian-Israeli peace treaty in 1994. Jordan signed a trade agreement with Israel in 1995 and later an

expanded trade agreement in 2004. While some elements of Jordanian society continue to oppose

improving political and commercial ties with Israel as a matter of principle, government policy has sought

to enhance bilateral commercial ties.

LEBANON: Since June 1955, Lebanese law has prohibited all individuals, companies, and organizations

from directly or indirectly contracting with Israeli companies and individuals, or buying, selling, or

acquiring in any way products produced in Israel. This prohibition is by all accounts widely adhered to in

Lebanon. Ministry of Economy officials have reaffirmed the importance of the boycott in preventing Israeli

economic penetration of Lebanese markets.

LIBYA: Prior to its 2011 revolution, Libya did not maintain diplomatic relations with Israel and had a law

in place mandating adherence to the Arab League boycott. The Qadhafi regime enforced the boycott and

routinely inserted boycott-related language in contracts with foreign companies and maintained other

restrictions on trade with Israel. The Libyan Government of National Unity has not articulated a stance on

the Arab League boycott, and the status of pre-2011 revolution laws requiring local firms to comply with

the boycott is unclear.

The United States will continue to monitor Libya’s treatment of boycott-related issues.

MAURITANIA: Mauritania does not enforce any aspect of the boycott despite freezing diplomatic

relations with Israel in March 2009 in response to Israeli military engagement in Gaza.

MOROCCO: Morocco agreed to normalize relations with Israel in August 2020. Morocco and Israel

signed a Joint Declaration re-establishing diplomatic relations on December 22, 2020. In January 2021,

Morocco and Israel agreed to establish joint working groups to promote cooperation in a variety of areas,

including investments, transportation, environment, energy, and tourism. Prior to the normalization

agreement, Morocco did not enforce the boycott consistently. Moroccan law contained no specific

references to the Arab League boycott and the government did not enforce any aspect of it. In recent years,

Morocco reportedly has been Israel’s third largest trading partner in the Arab world, after Jordan and Egypt.

Moroccan officials have reported that they are exploring new areas of economic cooperation with Israeli

officials. U.S. firms have not reported boycott-related obstacles to doing business in Morocco. Moroccan

officials do not appear to attend CBO meetings.

PALESTINIAN AUTHORITY: All foreign trade involving Palestinian producers and importers must be

managed through Israeli authorities. The Palestinian Authority agreed not to enforce the Arab League

boycott in a 1995 letter to the U.S. Government, and the Palestinian Authority has adhered to this

commitment. Various groups that advocate for Palestinian interests in different countries continue to call

for boycotts and other actions aimed at restricting trade in goods produced in Israeli West Bank settlements.

SUDAN: Sudan and Israel announced a normalization agreement in October 2020 that would include

Sudan renouncing the boycott. In 2021, Sudan repealed the boycott, publishing the repeal in the Sudan

Registry. This move ends Sudan’s official adherence to the boycott.

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SYRIA: Traditionally, Syria was diligent in implementing laws to enforce the Arab League boycott. The

country maintained its own boycott-related list of firms, separate from the CBO list. Syria’s boycott

practices have not had a substantive impact on U.S. businesses due to U.S. economic sanctions imposed on

the country since 2004. The ongoing and serious political unrest within the country since 2011 has further

reduced U.S. commercial interaction with Syria.

TUNISIA: Upon the establishment of limited diplomatic relations with Israel, Tunisia terminated its

observance of the Arab League boycott. Since the 2011 Tunisian revolution, there has been no indication

that Tunisian Government policy has changed with respect to the boycott.

YEMEN: Although Yemen renounced observance of the secondary and tertiary aspects of the boycott in

1995, in the years since, Yemen has continued to enforce the primary boycott and certain aspects of the

secondary and tertiary boycotts. Ongoing political turmoil in the country has made it impossible to ascertain

current official Yemeni attitudes toward the boycott.

GULF COOPERATION COUNCIL: In September 1994, the Gulf Cooperation Council (GCC) member

countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates) announced that

they would no longer adhere to what they consider to be the secondary and tertiary aspects of the boycott,

eliminating a significant trade barrier to U.S. firms. In December 1996, the GCC countries recognized the

total dismantling of the boycott as a necessary step to advance peace and promote regional cooperation in

the Middle East and North Africa. Despite this commitment to dismantle the boycott, commercial

documentation containing boycott-related language continues on occasion to surface in certain GCC

member countries and to impact business transactions.

The situation in individual GCC member countries is as follows:

Bahrain: As part of its 2020 normalization agreement with Israel, Bahrain agreed to expand already robust

bilateral economic ties, including through establishment of direct flights between the two countries.

Bahrain participated in the September 15, 2020, commemoration in Washington, D.C. of the Abraham

Accords, and signed the Abraham Accords Declaration with the United States and the UAE. Unlike the

UAE, Bahrain did not formally rescind the 1963 Israeli Products Boycott Law, which remains listed in

Bahrain’s Official Gazette. Responding to U.S. and international banks seeking legal certainty, the Central

Bank of Bahrain issued a circular on August 30, 2021, assuring banks that no legal restrictions prevent

economic engagement with Israeli entities. Initial reactions to the circular, which has not been publicized

in the Official Gazette, from banking sector and other business community contacts were positive, with

most expressing optimism that the new guidance addressed the concerns of legal ambiguity and clarified

the removal of all Israeli Boycott Law restrictions. Since the official start of normalization in October 2020,

Bahrain and Israel signed a joint communique and several sectoral memoranda of understanding, which

were subsequently ratified by both governments’ legislative bodies. In February 2022, the Israeli prime

minister became the first Israeli official at that level to visit Bahrain.

Kuwait: Kuwait continues to recognize the 1994 GCC decision and no longer adheres to what they consider

to be the secondary or tertiary aspects of the boycott. Kuwait claims to have eliminated all direct references

to the boycott in procurement documentation as of 2000. Kuwait has a three-person boycott office, which

is part of the General Administration for Customs. Although Kuwaiti officials reportedly regularly attend

CBO meetings, since 2016, Kuwait has refrained from establishing barriers to trade, investment, or

commerce that are directed against U.S. persons operating or doing business in Israel, with Israeli entities,

or in any territory controlled by Israel.

FOREIGN TRADE BARRIERS | 17

Oman: Boycott-related language rarely appears in tender documents, reflecting Omani Government

officials’ professed commitment to ensuring that such language not be included. Officials have removed

boycott-related language when the language is brought to their attention. Omani customs processes Israeli-

origin shipments entering with Israeli customs documentation, although Omani firms typically avoid

marketing consumer products that can be identified as originating from Israel. Oman’s Ministry of Foreign

Affairs prohibits its diplomatic missions from taking part in Arab League boycott meetings.

Qatar: Qatar has a boycott law, but the extent to which the government enforces it is unclear. Although

Qatar renounced implementation of the boycott of U.S. firms that do business in Israel (the secondary and

tertiary boycott) in 1994, U.S. firms and their subsidiaries continue to report receiving boycott-related

requests from public Qatari companies. In those instances, U.S. companies have made efforts to substitute

alternative language. An Israeli trade office opened in Qatar in May 1996, but Qatar ordered the closure of

that office in January 2009 in protest against Israeli military action in Gaza. Despite this closure, Qatar

continues to allow trade with Israel and allows Israelis to visit the country. Qatar permits the entry of Israeli

business travelers who obtain a visa in advance.

Saudi Arabia: Saudi Arabia, in recognition of the 1994 GCC decision, renounced enforcement of the

secondary and tertiary boycott. Senior Saudi Government officials from relevant ministries have requested

that U.S. officials keep them informed of any allegations that Saudi entities are seeking to enforce these

aspects of the boycott. Saudi entities have expressed a willingness to substitute non-boycott-related

language in commercial documents. In the years since 2018, Saudi Arabia has permitted direct flights from

foreign countries to Israel to transit Saudi airspace.

The United Arab Emirates: As part of its August 2020 normalization agreement with Israel, the UAE issued

a decree ending the UAE’s adherence to the Arab League boycott. Since that announcement, the two

countries have rapidly established commercial connections, opening direct trade, phone, mail, banking, and

passenger flight connections. The UAE has clarified to the U.S. Department of Treasury that the August

2020 Decree confirms that there is no Emirati law or legislation that stipulates any boycott of Israel, its

nationals, or its companies, and no Emirati law or legislation that requires a boycott of companies or

individuals that do business with Israel, or imposes restrictions on other trading partners’ companies or

individuals that do business with Israel. Prior to the normalization agreement, the UAE had been one of

the leading sources of prohibited boycott requests. The Department of State and interagency partners have

engaged UAE officials in detail on the boycott repeal, with UAE officials unequivocally confirming that

UAE participation in the boycott has been terminated. U.S. Government officials will continue to engage

the UAE on the issue.

FOREIGN TRADE BARRIERS | 19

ARGENTINA

TRADE AGREEMENTS

The United States–Argentina Trade and Investment Framework Agreement

The United States and Argentina signed a Trade and Investment Framework Agreement (TIFA) on March

23, 2016. This Agreement is the primary mechanism for discussions of trade and investment issues between

the United States and Argentina.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Argentina’s average Most-Favored-Nation (MFN) applied tariff rate was 13.4 percent in 2020 (latest data

available). Argentina’s average MFN applied tariff rate was 10.3 percent for agricultural products and 13.9

percent for non-agricultural products in 2020 (latest data available). Argentina has bound 100 percent of

its tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 31.8

percent.

Argentina is a founding member of the Southern Common Market (MERCOSUR), formed in 1991, which

also comprises Brazil, Paraguay, and Uruguay. MERCOSUR’s Common External Tariff (CET) ranges

from zero percent to 35.0 percent ad valorem and averages 12.5 percent. In July 2022, MERCOSUR

countries agreed to a 10 percent reduction of the CET for over 80 percent of product lines. Any good

imported into Argentina (not including free trade zones) is subject to the payment of the CET to Argentina’s

customs authority. If the product is then re-exported to another MERCOSUR country, the CET must be

paid again to the second country. MERCOSUR approved a Common Customs Code (CCC) in 2010 and

launched a plan to eliminate the double application of the CET within MERCOSUR in 2021. However,

only Argentina has ratified the CCC, and it has not taken effect.

Taxes

Argentina maintains a variety of taxes on, and tax exemptions for, imported goods. On December 23, 2019,

the Argentine Congress passed Public Emergency Law 27541, raising to 3 percent the rate of the statistical

tax, a fee charged on goods imported for consumption. Temporary imports, inputs used to produce goods

for export, and imported goods for scientific and technological research are exempted from this tax.

Pursuant to Decree 901/2021, the 3 percent statistical tax rate was extended until December 31, 2024.

Argentina’s tax collection processes burden imports by effectively requiring advance payment of income

taxes. When goods are imported, Argentina collects a percentage of the value of imports as income tax

withholding to be applied to the importer’s income taxes. The advance value-added tax (VAT), ranging

from 10 percent to 20 percent, is paid by the importer, unless the goods are for personal use. In addition,

the importer is responsible for an income tax withholding of 6 percent to 11 percent of the value of the

imported goods. Further, there is an additional advance VAT rate of 20 percent for imports of consumer

goods and 10 percent for imports of capital goods. Although some of these taxes on importation are

reconciled after importation, in practice that takes a significant amount of time. In Argentina’s inflationary

environment this advance payment system disproportionately burdens imports.

20 | FOREIGN TRADE BARRIERS

Argentina also uses its tax system to incentivize local production and use of local inputs. For example,

Resolution 599-E/2016, pursuant to Law 27263, provides tax credits to automotive manufacturers for the

purchase of locally-produced automotive parts and accessories incorporated into specific types of vehicles.

The tax credits range from 4 percent to 15 percent of the value of the purchased parts. In another example,

imports of used capital goods are subject to higher taxes if there is local production of those inputs.

Non-Tariff Barriers

Import Bans

Argentina prohibits the importation of many used capital goods. Under the Argentina–Brazil Bilateral

Automobile Pact, Argentina bans the importation of used self-propelled agricultural machinery unless it is

imported to be rebuilt in-country. Argentina also prohibits the importation and sale of used or retreaded

tires (but in some cases allows remolded tires); used or refurbished medical equipment, including imaging

equipment; and, used automotive parts.

Argentina generally restricts or prohibits the importation of any remanufactured good, such as

remanufactured automotive parts, earthmoving equipment, medical equipment, and information and

communication technology products. In the case of remanufactured medical goods, imports are further

restricted by the requirement that the importer of record must be the end user, such as a hospital, doctor, or

clinic. These parties are generally not accustomed to importing and are not typically registered as importers.

Import Restrictions

Domestic legislation requires compliance with strict conditions on the entry of those used capital goods that

are not prohibited from being imported, as follows: (1) used capital goods can only be imported directly

by the end user; (2) overseas reconditioning of goods is allowed only if performed by the original

manufacturer and third-party technical appraisals are not permitted; (3) local reconditioning of the good is

subject to technical appraisal to be performed only by the state-run Institute of Industrial Technology,

except for aircraft-related items; (4) imported used capital good cannot be transferred (sold or donated) for

a period of four years; and, (5) except for a short list of products exempted by Decree 406/2019, and

regardless of where the reconditioning takes place, the Argentine Customs Authority requires the

presentation of a “Certificate of Import of Used Capital Goods” at the time of importation.

Resolution 909/1994 places restrictions on the importation of certain used goods for consumption, such as

parts and components that are not used in the manufacture of other products. The current list imposes

import tariffs or other restrictions on goods including electronic and recording equipment; railroad vehicles

and other railroad parts; optic, photography, and filming equipment; tractors; buses; aircraft; and, ships.

Under the “Por una Argentina Inclusiva y Solidaria - PAIS” tax, goods and services billed in foreign

currency or that involve international transportation by air, land (except to countries that border Argentina),

or water, and sold in Argentina (through a physical or online point of sale) are subject to a 30 percent tax.

This affects services supplied by travel and tourism agencies for international travel, as well as the

importation of products from online retailers. Decree 99/2019 also sets a lower rate of eight percent for

certain imported digital services that are already subject to the VAT. As of October 13, 2022, pursuant to

General Resolution 5272/2022, some purchases also are subject to a personal asset tax equal to 25 percent

of the price of the good or service. These taxes are cumulative, which means consumers in Argentina, in

many cases, may pay at least 100 percent in taxes when purchasing foreign goods and services or any

international travel service.

FOREIGN TRADE BARRIERS | 21

Import Licensing

Imports are subject to automatic or non-automatic licenses, and the non-automatic licenses require

importers to submit detailed information electronically about the imported goods. Products deemed import-

sensitive by the Argentine Government, including goods such as automobiles, paper and cardboard, iron

and steel, nuclear reactors, electrical and construction materials and parts, toys, textiles and apparel,

footwear, computers, cellular phones, printers, optical fiber, and luxury items such as yachts and golf clubs

are subject to the non-automatic import licensing regime.

Since 2020, Argentina has increased the list of products subject to non-automatic licenses, applying to

approximately 46 percent of total imported products, and reduced the period of validity for these licenses

to just 90 days after approval. On October 17, 2022, Argentina launched a new import licensing and

tracking system, the Sistema de Importaciones de la República Argentina (SIRA). The new system is

intended to create a single electronic system where importers can follow each step of the import license

approval process by the different agencies involved: the Trade Secretariat of the Ministry of Economy, Tax

Revenue Agency (AFIP), the Customs Agency, and the Central Bank. Importers have between 60 to 365

days, depending on the product, to access the foreign exchange market to pay for imports after the imported

merchandise arrives at an Argentine port. Importers report delays and rejections as the SIRA system is not

fully in place, while restrictions to access the foreign exchange market constitute a substantial impediment.

The United States has raised concerns with Argentina about non-automatic licensing and at the WTO

Committee on Import Licensing in light of the WTO Agreement on Import Licensing Procedure’s

commitments, and will continue to monitor import licensing.

Customs Barriers and Trade Facilitation

Argentina continues to use reference prices for goods that originate in, or are imported from, specified

countries for customs valuation purposes. If a good is imported and the invoice price is lower than the

reference price, Argentina requires importers to obtain an authenticated invoice, without a basis under the

Customs Valuation Agreement. Argentina publishes a list of reference prices and covered countries.

Consularization

Argentina imposes costly and time-consuming consularization requirements on import documentation, a

practice at odds with the trend in customs practice. Shipments to Argentina require commercial invoices

and packing lists to be legalized by the Argentine Consulate in the country of export. Consulates will only

legalize a commercial document after it has been signed by a Chamber of Commerce that is recognized by

the Consulate in its region. Further, Argentina requires certificates of origin that must be authenticated by

an Argentine Embassy or Consulate or carry a U.S. Chamber of Commerce seal.

SANITARY AND PHYTOSANITARY BARRIERS

Live Cattle

Argentina banned imports of U.S. cattle and beef products in 2002 due to purported concerns regarding

bovine spongiform encephalopathy. Although the market reopened to U.S. beef in 2018, it remains closed

to U.S. live cattle, pending continued technical level engagement between the United States and Argentina

on a mutually agreeable sanitary certificate.

22 | FOREIGN TRADE BARRIERS

Poultry

Argentina does not allow imports of fresh, frozen, or chilled poultry, due to purported concerns over Highly

Pathogenic Avian Influenza (HPAI) and virulent Newcastle Disease, and because Argentina does not

recognize the U.S. sanitary inspection system as equivalent to Argentina’s system. The United States

continues to encourage Argentina to regionalize restrictions related to HPAI in the event of future

outbreaks, as recommended by the World Organisation for Animal Health.

INTELLECTUAL PROPERTY PROTECTION

Argentina remained on the Priority Watch List in the 2022 Special 301 Report. The situation for innovators

in the pharmaceutical and agrochemical sectors presents significant challenges. First, the scope of

patentable subject matter remains significantly restricted under Argentine law. Second, there is inadequate

protection against unfair commercial use and unauthorized disclosure of undisclosed test and other data

submitted to the Argentine Government in conjunction with its lengthy marketing approval process. The

United States urges Argentina to ensure transparency and procedural fairness in the protection of

geographical indications (GIs) and to ensure that the grant of GI protection does not deprive interested

parties of the ability to use common names, particularly as Argentina proceeds with the European Union

(EU)–Mercosur Trade Agreement. In addition, the backlog continues for patent applications for

pharmaceuticals and biosimilar products, resulting in unreasonable delays for these products.

Enforcing IP rights in Argentina continues to prove challenging, as counterfeit and pirated goods remain

widely available. For example, the physical markets of La Salada in Buenos Aires, one of the largest black

markets for counterfeit and pirated goods in Argentina, resumed operation after being closed due to the

COVID-19 pandemic, with police failing to take effective ex officio actions. Additionally, La Salada

market started selling counterfeit products online during the pandemic, a practice which continues.

Furthermore, the existing legislative regime and weak enforcement hinder the ability of rights holders, law

enforcement, and prosecutors to halt, through legal action, the growth of illegal markets, both online and

physical.

SERVICES BARRIERS

Similar to goods imports, services are subject to restrictions on their ability to access the foreign exchange

market and are subject to approvals from the Secretary of Trade (within the Ministry of Economy) and

AFIP prior to receiving authorization to import.

Audiovisual Services

Argentina’s Media Law requires companies to produce advertising and publicity materials locally or to

include 60 percent local content. The Media Law also establishes a 70 percent local production content

requirement for companies with radio licenses. Additionally, the Media Law requires that 50 percent of

the news and 30 percent of the music that is broadcast on the radio be of Argentine origin. In the case of

private television operators, at least 60 percent of broadcast content must be of Argentine origin. Of that

60 percent, 30 percent must be local news, and 10 percent to 30 percent must be local, independent content.

Express Delivery

Pursuant to Decree 221/2019, consumers are subject to annual limits on the tax-free allowance on imports.

Consumers can purchase imported goods valued at up to $50 per month tax free, with an annual tax-free

limit of $600. If the monthly purchase total exceeds $50, the consumer must pay a 50 percent tax on the

value above the $50 threshold. The decree limits non-commercial courier shipments annually to a

FOREIGN TRADE BARRIERS | 23

cumulative value of $1,000 and a cumulative weight not greater than 50 kilograms, and no more than five

shipments per person. Shipments within these limits are exempt from import licensing and other import

requirements, subject to certain conditions.

Insurance Services

Local insurance companies may place up to 75 percent of the ceded premium with foreign reinsurance

companies, unless they have prior authorization from the insurance oversight agency to place more.

Argentina requires that all investments and cash equivalents held by locally-registered insurance companies

be located in Argentina.

Telecommunications Services

In 2020, Argentina froze prices for a number of information and communication technology (ICT) services,

including fixed and mobile telephone services, Internet access services, and pay television services. On

August 21, 2020, Argentina amended the Information and Communications Technologies Law to classify

these services as “essential and strategic public services” and therefore subject to additional regulation by

the National Communications Agency (ENACOM), including rate regulation. ENACOM raised the

regulated rate limit for these ICT services several times during 2022, but the rates established by ENACOM

are still well below inflation, undermining competition and discouraging additional investment in this sector

in Argentina.

INVESTMENT BARRIERS

Foreign Exchange and Capital Controls

Traders doing business in Argentina are subject to a series of decrees and norms regulating access to foreign

exchange markets in order to mitigate its persistent macroeconomic challenges, including government debt

obligations and high inflation. These restrictions make it difficult for U.S. exporters and investors to realize

payments for their sales.

FOREIGN TRADE BARRIERS | 25

AUSTRALIA

TRADE AGREEMENTS

The United States–Australia Free Trade Agreement

The United States–Australia Free Trade Agreement (FTA) entered into force on January 1, 2005. Under

this agreement, as of January 1, 2015, Australia provides duty-free access to all U.S. exports. The United

States and Australia meet periodically to review the implementation and functioning of the Agreement and

to address outstanding issues.

SANITARY AND PHYTOSANITARY BARRIERS

Animal Health

Beef and Beef Products

Australia requires completion of a complex approval process before it will permit the importation of bovine

products from a country that has reported any indigenous cases of bovine spongiform encephalopathy

(BSE). In 2003, Australia closed its market to U.S. beef after the detection of BSE in the United States. In

2017, Food Standards Australia New Zealand conducted an individual country risk analysis and determined

that U.S. beef imports are safe for human consumption. The findings also confirmed that U.S. beef meets

the negligible BSE risk requirements of the World Organisation for Animal Health (WOAH). As a result,

in May 2018, Australia lifted its ban on heat-treated, shelf-stable beef products from the United States.

However, Australia’s market remains closed to fresh U.S. beef and beef products. In August 2019,

Australia completed an on-site audit of the U.S. fresh meat processing sector. The United States continues

to press the Australian Government to align its import requirements for U.S. fresh beef and beef product

exports with WOAH guidelines for countries with a negligible risk for BSE.

Pork

Pork and pork products are the third-leading U.S. agricultural export to Australia, valued at approximately

$131.3 million in 2022. However, due to Australia’s stated concerns about porcine reproductive and

respiratory syndrome (PRRS) and post-weaning multi-systemic wasting syndrome (PMWS), imports of

fresh/chilled pork and bone-in products from the United States are not permitted. The United States has

requested that Australia remove all PRRS and PMWS-related restrictions and has provided scientific

evidence to document the safety of U.S. pork products. Although the WOAH approved a new chapter

outlining guidelines for PRRS in May 2017, Australia formally voted against the chapter and has requested

additional scientific information on PRRS from the United States. In December 2017, the U.S. Department

of Agriculture Animal and Plant Health Inspection Service sent a scientific review paper on PRRS to the

Australian Government. The United States and Australia continue to discuss this issue, including during

an FTA Sanitary and Phytosanitary (SPS) Committee Meeting in 2022, but this issue remains unresolved.

Access to the Australian market for fresh/chilled/frozen pork, bone-in pork, and pork products remains a

high priority for the United States.

Poultry

Australia prohibits imports of uncooked poultry meat from all countries except New Zealand. While

cooked poultry meat products may be imported, current import requirements (as set out in an import risk

analysis) mandate that imported poultry meat products be cooked to a minimum core temperature of 74°C

26 | FOREIGN TRADE BARRIERS

for 165 minutes or the equivalent. Given this temperature requirement, Australia does not permit

importation of cooked poultry product that would be suitable for sale in restaurants or delicatessens.

In 2012, Australia initiated an evaluation of whether it would grant access for U.S. cooked turkey meat to

the Australian market under amended import conditions. Since then, the United States and Australia have

exchanged technical information on this issue. The United States has identified this issue as a high priority

and will continue to work with Australia to gain meaningful commercial market access for cooked turkey

meat.

Plant Health

Apples and Pears

Australia prohibits the importation of apples and pears from the United States based on concerns regarding

several pests. In October 2009, Australia published a pest risk analysis for apples from the United States

and identified three additional fungal pathogens of concern to Australian regulatory authorities. In

December 2014, the United States provided information to Australia to support the U.S. systems approach

to address pest risk issues. The Australian Government requested additional information. In November

2018, Australia announced it was commencing a new risk analysis for fresh apples from U.S. Pacific

Northwest states. In October 2020, Australia published the draft risk analysis for a 90-day comment period.

The United States provided comments in response to Australia’s draft risk analysis for U.S. apples on

January 13, 2021. On October 31, 2022, Australia published the final risk analysis for U.S. Pacific

Northwest apples. Australia prohibits the importation of pears from the United States for phytosanitary

issues, including restrictions due to fire blight.

INTELLECTUAL PROPERTY PROTECTION

Australia generally provides strong intellectual property protection and enforcement through legislation

that, among other things, criminalizes copyright piracy and trademark counterfeiting.

Under the FTA, Australia must notify a pharmaceutical product patent owner of a request for marketing

approval by a third party for a product claimed by that patent owner. Australia must also provide measures

in its marketing approval process to prevent persons other than the patent owner from marketing a patented

product during the patent term. U.S. and Australian pharmaceutical companies have expressed concerns

about delays in this notification process. In October 2020, the Australian Government announced planned

reforms to the notification procedures for pharmaceutical products that are under evaluation. These

reforms, if fully implemented, could increase transparency and promote the early resolution of potential

pharmaceutical patent disputes. These reforms require legislation to be passed and implemented. However,

no legislation has been introduced in the Australian Parliament. In May 2022, Australia’s parliament was

dissolved for a federal election and a new Labor government assumed control. It is unclear if the Labor

government will move forward with introducing these reforms. The United States has also raised concerns

about certain provisions in Australian law regarding potential civil damages in cases where a patent owner

seeks a preliminary injunction. The United States will continue to monitor these issues.

SERVICES BARRIERS

Audiovisual Services

Australia is considering imposing local content obligations on streaming video services. In November

2020, the Australian Government issued the Media Reform Green Paper to raise and consult on options to

implement such requirements. Following this consultation process, the government released a Streaming

FOREIGN TRADE BARRIERS | 27

Services Reporting and Investment Scheme discussion paper that outlined a proposed regulatory scheme in

which streaming services would be expected to invest at least five percent of their Australian revenues in

commissioning new Australian content. This proposal was not enacted ahead of the May 2022 federal

election. The new Labor government discontinued the Media Reform Green Paper process, and instead

began consulting on a new National Cultural Policy to address local content requirements for streaming

services. On January 30, 2023, the Government of Australia published the National Cultural Policy. The

Policy recommends that the Australian Government introduce “requirements for Australian screen content

on streaming platforms to ensure continued access to local stories.” According to the Policy

recommendation, these new requirements should be introduced by the third quarter of 2023 and be

implemented no later than July 2024. The United States will continue to monitor this issue to ensure

Australia’s compliance with Australia’s FTA obligations, which discipline measures that discriminate in

favor of domestic content.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Internet Services

Mandatory Bargaining Code of Conduct

On July 31, 2020, the Australian Competition and Consumer Commission (ACCC) released the Treasury

Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2020 (Bargaining

Code) for consultations. Then, on December 10, 2020, the Australian Government introduced an updated

draft Bargaining Code for parliamentary consideration. On February 25, 2021, the Australian Parliament

passed an amended version of the legislation. The amended legislation addressed several concerns

identified by U.S. stakeholders.

Under the Bargaining Code, designated platform services companies are required to engage in negotiations

with registered Australian news media businesses to pay the news businesses for content accessed via

certain services offered on the companies’ digital platforms. The Bargaining Code specifies that the

Australian Treasurer is responsible for designating platforms. When designating platforms, the Treasurer

must consider whether the platform holds a significant bargaining power imbalance with Australian news

media businesses. The Treasurer must also consider whether the platform has made a significant

contribution to the sustainability of the Australian news industry. If negotiations break down, or an

agreement is not reached within three months, the bargaining parties will be subject to compulsory

mediation. If mediation is unsuccessful, the bargaining parties will proceed with arbitration, with arbitrators

seeking to determine a fair exchange of value between the platforms and the news businesses. In addition

to the negotiation and arbitration requirements, the Bargaining Code imposes information sharing

requirements, including a requirement that platforms provide advance notice of forthcoming changes to

algorithms if the change is likely to have a significant effect on the referral traffic for covered news content.

No companies have been designated under the Code to date. The United States will continue to monitor

this issue.

Online Content

On February 10, 2022, the Australian Government introduced the Social Media (Anti-Trolling) Bill 2022

to enable defamation cases to be prosecuted where defamatory material was posted anonymously on online

platforms. The proposed legislation would have required foreign social media services with at least 250,000

Australian account-holders (or services specified in the legislative rules) to “nominate” an “entity” in

Australia to be an agent of the provider and help with facilitating access to end-user information. The

legislation would also require digital platforms and/or the nominated entity to enable the identification of

28 | FOREIGN TRADE BARRIERS

posters on their services where the posts originate in Australia. The legislation was reviewed by the Senate

Legal and Constitutional Affairs Committee, which recommended that the parliament pass the legislation

with three proposed revisions. The legislation lapsed with the dissolution of Australia’s parliament for the

May 2022 federal election and the new Labor government has not introduced new legislation covering this

issue.

INVESTMENT BARRIERS

In 2014, the New South Wales (NSW) government canceled a company’s license for an existing mining

project, and passed legislation denying the investors in the project the opportunity to seek judicial review

because of alleged corruption involving the original acquirer of the license. The U.S. Government has

raised concerns that the NSW government denied U.S. investors the right to meaningful judicial review of

their claims. In October 2019, the NSW parliamentary legislative committee acknowledged that,

irrespective of the alleged corruption, there are some innocent shareholders who acquired shares in good

faith and without knowledge of the controversy and recommended the NSW government address the issue

of compensation, where appropriate.

FOREIGN TRADE BARRIERS | 29

BAHRAIN

TRADE AGREEMENTS

The United States–Bahrain Free Trade Agreement

The United States–Bahrain Free Trade Agreement (FTA) entered into force on August 1, 2006. Under the

FTA, as of January 1, 2015, Bahrain provides duty-free access to all U.S. exports. Officials from the United

States and Bahrain meet regularly to review implementation and functioning of the FTA and to address

outstanding issues.

IMPORT POLICIES

Taxes

In 2016, the Gulf Cooperation Council (GCC) Member States agreed to introduce common GCC excise

taxes on carbonated drinks (50 percent), energy drinks (100 percent), and tobacco and electronic smoking

products (100 percent). U.S. beverage producers report that the current excise tax structure for carbonated

drinks, which also applies to sugar-free carbonated beverages but exempts sugary juices––many of which

are manufactured domestically within GCC countries––disadvantages U.S. products and fails to address

public health concerns.

Import Bans

On January 1, 2019, Bahrain introduced a ban on the importation of plastic waste.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Automobiles

U.S. automakers have raised concerns over growing regulatory fragmentation in the GCC. While the Gulf

Standardization Organization (GSO) is supposed to set standards for the entire GCC market, individual

GCC Member States have instituted unique standards for automobiles that deviate from GCC automobile

standards. Though Bahrain has not taken such steps, the United States will be monitoring this issue across

GCC Member States going forward.

Restrictions on Hazardous Substances – Electrical Goods

In March 2018, GCC Member States notified the World Trade Organization (WTO) of a draft GSO

technical regulation that would require pre-market testing by accredited labs for certain hazardous

substances in electrical goods. The measure would also require each type of good to be registered annually

and require sample products to be submitted prior to receiving approval for use in the GCC. The United

States has raised concerns that the proposed regulatory requirements would have a significant negative

impact on the imports of U.S. electrical and electronic equipment, especially as the third-party certification

requirements differ from international best practices.

30 | FOREIGN TRADE BARRIERS

Degradable Plastics

In September 2018, Bahrain notified to the WTO the Technical Regulation on Degradable Plastics Products.

The regulation phased out single-use plastic bags and banned the import of non-biodegradable plastic bags

beginning in July 2019. In July 2020, the regulation banned polyethylene and polypropylene sheets.

Plastic Water Bottles

In July 2021, Bahrain’s Ministry of Industry, Commerce and Tourism issued Resolution No. 7 banning the

manufacture, import or circulation of plastic water bottles with volumes less than 200 milliliters. Water

bottles manufactured for export are excluded. The resolution took effect on January 9, 2022.

Energy Drinks

In September 2021, Bahrain began to implement Executive Regulations for the Public Health Law on

Energy Drinks. These regulations: (1) prohibit the sale of energy drinks to individuals under the age of 18

and require all locations selling such products to display a prominent notice of this prohibition; (2) prohibit

the sale of such products in restaurants, cafeterias, educational facilities and health facilities; (3) require

prior licensing in order to advertise such products through any form of media; and, (4) ban free samples of

such products. In addition, manufacturers are required to include a warning label on energy drinks noting

that the product is not suitable for: pregnant and nursing women; individuals allergic to caffeine or other

ingredients contained in the product; individuals suffering from heart problems, high blood pressure or

diabetes; athletes engaged in exercise; or, individuals under 18 years of age.

The United States has submitted comments and held bilateral discussions with Bahrain regarding questions

and concerns over the regulations, including the timetable for implementation and the criteria and rationale

for some of the requirements. The United States has also raised concerns that Bahrain had accelerated the

implementation of the final measure without providing the necessary comment period and without notifying

the final measure to the WTO, as required by the WTO Agreement on Technical Barriers to Trade. Bahrain

has signaled that it will replace these current regulations with the GCC Member State measure once that

measure is finalized.

In January 2016, GCC Member States notified to the WTO a draft GSO technical regulation for energy

drinks, which was revised in March 2022. The U.S. Government and private sector stakeholders raised

concerns through bilateral and multilateral fora regarding the draft regulation. These concerns include the

proposed marketing-based definition for energy drinks, and labeling requirements regarding recommended

consumption. Industry stakeholders still report that caffeine-content limitations unduly target energy drinks

in GCC Member States. In many cases, such limitations do not apply to other drink products that contain

similar or even higher levels of caffeine, such as tea, brewed coffee and other ready-to-drink coffee

products.

Sanitary and Phytosanitary Barriers

Food Additives

U.S. industry stakeholders have noted concerns that the 2021 GCC Technical Regulations applied to

Additives Permitted for Use in Foodstuffs are not aligned with relevant standards for food additives from

the Codex Alimentarius Commission (Codex), particularly with respect to additives such as curcumins and

annatto that are widely used in cheese production, and may potentially disrupt trade in food products.

FOREIGN TRADE BARRIERS | 31

Titanium Dioxide

In September 2020, GCC Member States notified to the WTO a draft GSO technical regulation that would

remove titanium dioxide from the list of approved food additives, in line with EU food additive regulations.

Titanium dioxide is an adopted food additive that is included in the Codex General Standard for Food

Additives (GSFA). As such, it may be used in specified foods under the conditions of good manufacturing

practices as outlined in the Codex GSFA. The U.S. Department of Health and Human Services Food and

Drug Administration continues to allow for the safe use of titanium dioxide as a color additive in foods,

subject to certain restrictions, including that the quantity of titanium dioxide does not exceed one percent

in weight of the food. The EU banned the use of titanium dioxide as a food additive on August 7, 2022,

based on a risk classification that the European Court of Justice later ruled to be based on faulty scientific

analysis. The EU is determining how to respond in light of the court's ruling. Following the EU move to

ban the use of titanium dioxide in animal feed, in 2021 the Codex Committee on Food Additives agreed

that titanium dioxide should be re-evaluated by the Joint FAO/WHO Expert Committee on Food Additives

(JECFA). JECFA is set to meet and provide its findings in June 2023. The United States has requested

that GCC Member States wait until this review has been completed before considering changes to their

existing regulatory approval, given the lack of data demonstrating negative health effects from allowed uses

of this food additive.

GOVERNMENT PROCUREMENT

The United States–Bahrain FTA requires covered entities in Bahrain to conduct procurements covered by

the agreement in a fair, transparent, and nondiscriminatory manner. Some U.S. companies report that they

have faced prolonged issues with the tendering process related to GCC-funded projects.

Bahrain is not a Party to the WTO Agreement on Government Procurement, but has been an observer to

the WTO Committee on Government Procurement since December 2008. However, the FTA contains

disciplines on government procurement.

INTELLECTUAL PROPERTY PROTECTION

As part of its FTA obligations, Bahrain continues to enact laws to improve protection and enforcement of

copyrights, trademarks, patents, and plant varieties. However, Bahrain has yet to accede to the International

Convention for the Protection of New Varieties of Plants (UPOV 1991), a requirement under the FTA.

Bahrain’s record on intellectual property (IP) enforcement is mixed. Over the past several years, Bahrain

has launched several campaigns to block illegal broadcast signals and to prohibit the sale of decoding

devices in order to combat piracy of cable and satellite television, and has launched several public

awareness campaigns regarding copyright piracy. However, many counterfeit consumer goods continue to

be sold openly.

LABOR

The United States and Bahrain have been engaged in labor consultations under Article 15.6 of the FTA

since 2013, regarding Bahrain's obligations under Article 15.1. The United States formally requested

consultations after the U.S. Department of Labor released a report in response to a submission from the

public. The consultations concern employment discrimination and repression of workers’ right to organize.

OTHER BARRIERS

As a result of a 2015 ban on network marketing schemes, direct selling and multi-level marketing

organizations are not allowed to operate in Bahrain.

FOREIGN TRADE BARRIERS | 33

BANGLADESH

TRADE AGREEMENTS

The United States–Bangladesh Trade and Investment Framework Agreement

The United States and Bangladesh signed a Trade and Investment Cooperation Forum Agreement on

November 25, 2013. This Agreement is the primary mechanism for discussions of trade and investment

issues between the United States and Bangladesh.

IMPORT POLICIES

Bangladesh’s import policies are outlined in the Import Policy Order (IPO) 2015-18 issued by the Ministry

of Commerce. The IPO has two lists, the “List of Controlled Goods” and the “List of Prohibited Goods.”

The Bangladesh Ministry of Commerce issued the IPO for 2021-24 on April 26, 2022. It is valid until June

30, 2024.

Tariffs and Taxes

Tariffs

Bangladesh’s average Most-Favored-Nation (MFN) applied tariff rate was 14 percent in 2021 (latest data

available). Bangladesh’s average MFN applied tariff rate was 17.6 percent for agricultural products and

13.4 percent for non-agricultural products in 2021 (latest data available). Bangladesh has bound 17.9

percent of its tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate

of 156.3 percent.

Taxes

Other charges applicable to imports are an advance income tax of 5 percent, a value-added tax (VAT)

ranging from zero percent to 15 percent, with exemptions for certain input materials, and a supplementary

duty of zero percent to 500 percent, which applies to new vehicles with large engines. A VAT and

supplementary duties are also charged on certain domestically produced goods. On July 1, 2019,

Bangladesh implemented a new VAT law to simplify VAT rates to four possible rates (5.0 percent, 7.5

percent, 10.0 percent, and 15.0 percent).

Bangladesh has abolished excise duties on all locally produced goods and services with certain exceptions.

For example, services rendered by banks or financial institutions are subject to a tax on each savings,

current, loan, or other account with balances above defined levels, and certain taxes apply to airline tickets.

Excise duties remain on similar imported goods and services.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

Bangladesh has not notified its customs valuation legislation to the WTO and has not yet responded to the

Checklist of Issues describing how the WTO Customs Valuation Agreement is being implemented.

34 | FOREIGN TRADE BARRIERS

SANITARY AND PHYTOSANITARY BARRIERS

Fumigation of U.S. Origin Cotton

Bangladesh requires fumigation of imported U.S. cotton at the port of entry, allegedly to protect locally

grown cotton from possible boll weevil infestation. U.S. cotton exporters and Bangladeshi cotton importers

assert that this requirement is unnecessary because of mitigation measures taken prior to export to eliminate

any presence of the pest in larval or adult form. These measures include ginning, cleaning, and bale

compression. This fumigation is also unnecessary because the United States has eradicated boll weevil

from all cotton-producing areas of the United States, with the exception of three counties in southern Texas

along the border with Mexico (less than 0.5 percent of the U.S. cotton acreage). This requirement hinders

demand for U.S. cotton because it adds significant costs and delays entry.

Technical experts from the U.S. Department of Agriculture Animal and Plant Health Inspection Service

(APHIS) and the U.S. Cotton Council have been consistently engaging with the Bangladeshi Ministry of

Agriculture to remove the fumigation requirement for U.S. baled cotton. The issue was also raised at the

High-Level Economic Dialogue in June 2022 and the meeting of the United States–Bangladesh Trade and

Investment Cooperation Forum Agreement Council in December 2022. The United States continues to

press Bangladesh to eliminate the unnecessary fumigation requirement for U.S. cotton. In 2022,

Bangladesh was the seventh largest export market for U.S. cotton, with exports valued at approximately

$477 million.

GOVERNMENT PROCUREMENT

Government procurement is primarily undertaken through public tenders under the Public Procurement Act

of 2006 and conducted by the Central Procurement Technical Unit. Bangladesh publicly subscribes to

principles of international competitive bidding; however, charges of corruption are very common.

Bangladesh launched a national electronic government procurement portal, but U.S. companies have raised

concerns about the use of outdated technical specifications, the structuring of specifications to favor

preferred bidders, and a lack of overall transparency in public tenders. Several U.S. companies have

claimed that their foreign competitors often use their local partners to influence the procurement process

and to block awards to otherwise competitive U.S. company bids. U.S. companies have reported instances

of alleged bid rigging in government tenders in Bangladesh. U.S. companies have also alleged the use of

bribery, anticompetitive practices, and a lack of transparency in the bidding process, all of which is a

disadvantage to U.S. companies bidding on government tenders.

Bangladesh is neither a Party to the WTO Agreement on Government Procurement nor an observer to the

WTO Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Bangladesh continues to face many challenges with respect to adequate and effective intellectual property

(IP) protection and enforcement. Bangladesh has undertaken several legislative reforms related to IP in

recent years, including a new patent law passed in April 2022, for which Bangladesh is currently drafting

implementing rules. However, it remains to be seen whether these changes will result in concrete benefits

for innovators and creators.

IP protection and enforcement are not robust, and counterfeit and pirated goods are readily available. A

number of U.S. firms, including in the pharmaceutical, consumer goods, apparel, and software industries,

have reported violations of their IP in Bangladesh. Stakeholders also report a growing trend of Bangladesh

serving as a source country for counterfeits distributed globally and note that police are unlikely to initiate

FOREIGN TRADE BARRIERS | 35

independent investigations of counterfeit goods distributors. In addition, right holders have raised concerns

about the fairness of court decisions in IP cases.

Better coordination among enforcement authorities and other government institutions, such as Customs, the

Office of the Attorney General, the Copyright Office, the Bangladesh Investment Development Authority,

and the Department of Patents, Designs, and Trademarks, is needed to strengthen Bangladesh’s IP regime.

The U.S. Department of Commerce Patent and Trademark Office and other U.S. Government agencies

continue to provide technical assistance to Bangladesh to address these challenges and help improve the

country’s IP regime.

SERVICES BARRIERS

Insurance Services

U.S. companies have raised concerns that Bangladesh Bank is not permitting the marketing and signing of

life insurance products via commercial banks. In 2020, Bangladesh Bank formed a committee to assess the

implementation of new rules to allow insurance distribution. In May 2022, Bangladesh Bank finalized

implementation guidelines which, among other things, do not allow banks to sign agreements with more

than three life insurance and three non-life assurance companies at the same time and require banks to

establish a separate, dedicated department or wing to procure insurance business. The guidelines were

submitted to the Ministry of Finance for approval. However, the insurance regulator, the Insurance

Development & Regulatory Authority (IRDA), reportedly still needs to formulate and approve

implementation procedures enabling insurers to sell insurance products through banking channels. The

IRDA continues to work with the Financial Institution Division of the Finance Ministry on this

implementation.

BARRIERS TO DIGITAL TRADE

The Information and Communication Technology Act of 2006, amended in 2013, authorizes the Government

of Bangladesh to access any computer system for the purpose of obtaining any information or data, and to

intercept information transmitted through any computer resource. Under this law, Bangladesh may also

prohibit the transmission of any data or voice call and censor online communications. The Bangladesh

Telecommunications Regulatory Commission (BTRC) ordered mobile operators to limit data transmissions

for political reasons on several occasions in 2019 and in 2020 ahead of politically sensitive events, including

local and national-level elections. The BTRC ordered mobile operators to block all services except for

voice calls in the Rohingya refugee camps in Cox’s Bazar from September 2019 until August 2020.

The Bangladesh Road Transport Authority’s Ride-Sharing Service Guidelines have included requirements

that app-based transportation service providers maintain data servers within Bangladesh since March 2018.

The Department of Information and Communication Technology released, in July 2022, the revised draft

Data Protection Act, 2022 (DPA). In particular, the draft law applies to the collection, processing, using,

and sharing of data, or otherwise processed data of Bangladeshi citizens. The DPA imposes criminal

liability and applies to Bangladeshi citizens residing outside of Bangladesh, raising the potential of conflict

of law situations and may restrict trusted cross border data flows. In addition, stakeholders, as well as the

U.S. Government, have raised concerns over the DPA because it is overly broad in scope and application.

In February 2022, the Bangladesh Telecommunication Regulatory Commission published the Regulation

for Digital, Social Media and Over the Top (OTT) Platforms, 2021. The regulations were presented in their

final form to a subdivision of the Supreme Court of Bangladesh on October 19, 2022. The regulations are

a content governance framework for digital, social media and media platforms operating in the country. It

36 | FOREIGN TRADE BARRIERS

seeks to introduce traceability within end-to-end encrypted services. Industry and civil society stakeholders

have expressed concerns that the regulations will grant the government broad-sweeping powers to dictate

online content with the threat of criminal liability for firms and employees deemed noncompliant.

SUBSIDIES

Bangladesh maintains a range of agricultural subsidies but has not submitted an agricultural subsidies

notification to the WTO Committee on Agriculture since 2011. These subsidies are provided as export cash

incentives for a variety of agricultural products including vegetables, fruits, and processed agricultural

products. Processed agricultural products include: potatoes, rice, tea, and jute products; halal meat

products; coconut coir; seeds of horticultural products; live crabs; frozen shrimp; prawns; and, fish

products. Subsidies are also given to keep the price of production inputs within the purchasing capacity of

producers. Bangladesh provides non-product-specific support through subsidized fertilizers, diesel,

electricity, and agricultural machinery. The subsidized fertilizer is distributed through a controlled channel,

which keeps prices reasonably stable.

Bangladesh has never submitted a subsidies notification to the WTO Committee on Subsidies and

Countervailing Measures. According to publicly available information from the Bangladesh Investment

and Development Authority, industries exporting more than 80 percent of their goods, regardless of their

locations (i.e., within or outside of an export processing zone), can be exempted from income tax for 50

percent of their export earnings (provided that the industry is not already paying income tax at a reduced

rate). Furthermore, exporters in certain sectors may be eligible for additional benefits in the form of a

subsidy or cash incentive based on certain conditions. Other publicly available information indicates that

42 sectors receive cash incentives for exporting ranging from 1 percent to 20 percent of the export value on

the condition that the product exported contains at least 30 percent domestic value added.

INVESTMENT BARRIERS

Repatriation of profits and external payments are allowed, but U.S. and other international investors have

raised concerns that the procedures and requirements for outbound transfers from Bangladesh remain

cumbersome, lack transparency, and include significant delays for applications to repatriate profits,

dividends, and other capital. Despite recent Bangladesh Bank efforts intended to ease requirements for

outbound transfers, U.S. companies report that agency-level regulators continue to present significant

obstacles to securing required approvals for remittances in a timely manner, which are required before

companies can seek central bank clearance.

LABOR

In 2013, the United States suspended all of Bangladesh’s tariff benefits under the Generalized System of

Preferences (GSP) program due to Bangladesh’s failure to meet statutory eligibility requirements related to

worker rights, particularly with regard to acceptable conditions of work in the ready-made garment sector,

including fire and building safety, and freedom of association. As of December 2022, Bangladesh remained

ineligible for duty-free treatment under GSP.

OTHER BARRIERS

Corruption

Corruption is a pervasive and longstanding problem in Bangladesh, and anticorruption legislation is

inadequately enforced. The Code of Criminal Procedure, the Prevention of Corruption Act, the Penal Code,

and the Money Laundering Prevention Act criminalize attempted corruption, extortion, active and passive

FOREIGN TRADE BARRIERS | 37

bribery, bribery of foreign public officials, money laundering, and using public resources or confidential

state information for private gain. However, bribery and extortion in commercial dealings are common

features of business despite the illegality of facilitation payments and gifts. U.S. companies have

complained about long delays in obtaining approval of licenses and bids as Bangladeshi Government

officials seek bribes.

There have been continuous efforts to water down government procurement rules and proposals to curb the

independence of the Anti-Corruption Commission (ACC), the main institutional anticorruption watchdog.

The Sarkari Chakori Ain Bill (Government Job Act), enacted in October 2018, requires the ACC to seek

permission of the authorities concerned before arresting any government official and limits the ability of

the ACC in investigating corruption allegations against government officials. While the ACC has increased

pursuit of cases against lower-level government officials and some higher-level officials, there remains a

large backlog of cases.

FOREIGN TRADE BARRIERS | 39

BOLIVIA

IMPORT POLICIES

Tariffs

Bolivia’s average Most-Favored-Nation (MFN) applied tariff rate was 11.8 percent in 2021 (latest data

available). Bolivia’s average MFN applied tariff rate for agricultural products was 13.2 percent and 11.6

percent for non-agricultural products in 2021 (latest data available). Bolivia has bound 100 percent of its

tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 40 percent.

Bolivia’s MFN tariff structure consists of seven rates ranging from zero percent to 40 percent. The rates in

principle apply according to the category of the product: zero percent for certain capital goods (machinery

and equipment) and meat and grain products; 5 percent for other capital goods and inputs; 10 percent for

various products including production inputs, food items, and equipment; 15 percent for fruit, vegetables,

fish, and raw materials for manufacturing plastics; 20 percent for other manufactured and value-added

products; 30 percent for cigarettes, wooden doors, and windows; and, 40 percent for clothing and

accessories, alcoholic beverages, wooden furniture, and footwear. Bolivian law allows the government to

raise tariffs if necessary to protect domestic industry or, alternatively, to lower tariffs if supplies run short.

Non-Tariff Barriers

Import Bans

In 2022, import prohibitions applied to 33 tariff lines. Prohibited items included: radioactive residues;

halogenated derivatives of hydrocarbons; arms, ammunition, and explosives; used clothing; and, some

types of vehicles and motor vehicles (in particular, vehicles using liquefied gas, used motor vehicles more

than one year old, motor vehicles more than three years old used for the transport of more than ten persons,

and special-purpose motor vehicles more than five years old).

Customs Barriers and Trade Facilitation

Bolivia ratified the WTO Trade Facilitation Agreement in January 2018. Bolivia has not yet submitted

transparency notifications related to: (1) import, export, and transit regulations; (2) the use of customs

brokers; and, (3) customs contact points for the exchange of information. Those notifications were due to

the WTO on February 17, 2017, according to Bolivia’s self-designated implementation schedule.

SANITARY AND PHYTOSANITARY BARRIERS

The National Agricultural Health and Food Safety Service (SENASAG) is responsible for certifying the

health safety status of products for domestic consumption, including imports, and for issuing sanitary and

phytosanitary import permits. Importers have voiced concerns regarding SENASAG’s transparency, and

with the inconsistent application of agricultural health and food safety standards and regulations.

There is great discretion and varied criteria used by SENASAG inspectors when evaluating food health and

safety standards and reviewing supporting importation documents. A lack of transparency in the institution

increases the uncertainty about whether products entering Bolivia will be examined using consistent and

uniform criteria. Bolivia’s facility registration requirements for animal products (beef, pork, poultry, dairy,

genetic material, and animal by-products) are onerous and SENASAG applies these requirements in an

40 | FOREIGN TRADE BARRIERS

inconsistent and discretionary manner. These practices have limited the ability for several U.S. agricultural

exporters to gain market access to Bolivia, despite demand for these products.

GOVERNMENT PROCUREMENT

The Buy Bolivian (Compro Boliviano) program supports domestic production by giving preference margins

to domestic producers or suppliers in government procurement. The United States is monitoring the

tendering process.

Importers of foreign products can participate in procurements valued between $142,000 and $5.7 million

only where locally manufactured products and local service providers are unavailable or where the Bolivian

Government does not initially select a domestic supplier. There is a requirement that foreign companies

submitting a tender for government consultancy contracts do so in association with a Bolivian company,

but the Bolivian Government occasionally makes exceptions in strategic sectors. For national and

international tenders, there are preference margins from 10 percent to 25 percent for Bolivian inputs.

As a general matter, the tendering process is nontransparent and acts as a barrier to investment. Government

requirements and the details of the tender are not always defined, and procurement notices are not always

made public. For example, none of the government-owned strategic sector companies, including the state-

owned oil and gas company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB); the state-owned

electricity company, Empresa Nacional de Electricidad (ENDE); and, the state lithium company,

Yacimientos de Litio Bolivianos (YLB), are required to publish tenders through the official procurement

website, Sistema de Contrataciones Estatales (SICOES). U.S. stakeholders have raised concerns that these

state-owned companies are not required to follow the procedures established in the national procurement

law. One U.S. company noted a Bolivian Government tender was prepared in such a way that only one

specific company would be able to compete.

Bolivia is neither a Party to the WTO Agreement on Government Procurement, nor an observer to the WTO

Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Bolivia remained on the Watch List in the 2022 Special 301 Report. The report noted that significant

challenges continue with respect to adequate and effective intellectual property (IP) protection and

enforcement. While certain Bolivian laws provide for the protection of copyrights, patents, and trademarks,

significant concerns remain about trade secret protection. Significant challenges also persist with respect

to widespread piracy and counterfeiting. The Special 301 Report again encouraged Bolivia to improve its

weak protection and enforcement of IP. Bolivia’s IP agency, Servicio Nacional de Propiedad Intelectual

(SENAPI), signed a memorandum of understanding (MOU) with the United States Patent and Trademark

Office in 2020 to help address Bolivia’s challenges. However, the Bolivian administration that took office

at the end of 2020 does not recognize the MOU.

STATE-OWNED ENTERPRISES

In an effort to control key sectors of the economy, the Bolivian Government obtained (through legally

required contract renegotiations) majority ownership in a number of companies in the hydrocarbons,

electricity, mining, and telecommunications sectors. Bolivia has also created dozens of new public

companies in “strategic” sectors such as food production, industrialization of natural resources, air travel,

banking, and mining. U.S. stakeholders have expressed concern that these state-owned enterprises engage

in unfair subsidized competition that constitutes a significant barrier to investment.

FOREIGN TRADE BARRIERS | 41

In August 2022, the Bolivian Government created the state-owned Bolivian Industry for Ecological Oils to

promote the production of biodiesel and pharmaceuticals with the aim of reducing fuel imports. The

government owns the second-largest bank in Bolivia, Union Bank, which is competitive with U.S. banking

providers. Other state-owned companies include: the Sugar Cane Company of San Buena Aventura;

Bolivia’s Industrialization Company of Gas and Oil; computer technology company QUIPUS; dairy

processing company Lácteosbol; recycled paper company PAPELBOL; Brazil nut export company

Empresa Boliviana de Alimentos; Bolivian national airline Boliviana de Aviación, the main operator in

Bolivia; oil and gas company YPFB; electricity company ENDE; and, lithium company YLB. The United

States is monitoring these companies for possible impacts on U.S. exports of goods and services.

The Bolivian Government grants ownership rights and controls the exploitation, exploration, and

industrialization of natural resources through joint ventures between government entities and government-

owned companies with public companies, communities, and private companies. No concessions or

contracts may transfer ownership of hydrocarbon deposits to private or other interests.

FOREIGN TRADE BARRIERS | 43

BRAZIL

TRADE AGREEMENTS

The United States–Brazil Agreement on Trade and Economic Cooperation

The United States and Brazil signed the Agreement on Trade and Economic Cooperation (ATEC) on March

19, 2011. This agreement is the primary mechanism for discussions of trade and investment issues between

the United States and Brazil.

On November 17, 2021, the Brazilian Congress ratified the 2020 U.S.–Brazil Protocol Regarding Trade

Rules and Transparency, and it entered into force on February 2, 2022. The Protocol updated the ATEC

with state-of-the-art provisions on anti-corruption, good regulatory practices, and trade facilitation and

customs administration. Implementation of the Protocol will foster a more equitable and transparent

economic environment, reduce red tape, and improve regulatory processes, as well as serve as a foundation

for future bilateral engagement.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Brazil’s average Most-Favored-Nation (MFN) applied tariff rate was 13.3 percent in 2021 (latest data

available). Brazil’s average MFN applied tariff rate was 10.1 percent for agricultural products and 13.8

percent for non-agricultural products in 2021 (latest data available). Brazil has bound 100 percent of its

tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 31.4 percent.

Brazil’s maximum bound tariff rate for non-agricultural products is 35 percent, while its maximum bound

tariff rate for most agricultural products is 55 percent.

Brazil is a founding member of the Southern Common Market (MERCOSUR), formed in 1991, which also

includes Argentina, Paraguay, and Uruguay. MERCOSUR’s Common External Tariff (CET) ranges from

zero percent to 35.0 percent ad valorem and averages 12.5 percent. In July 2022, MERCOSUR countries

agreed to a 10 percent reduction of the CET for over 80 percent of product lines. Brazil implemented an

additional 10 percent tariff reduction in March 2022, which is set to expire in December 2023.

Any good imported into Brazil (not including from free trade zones) is subject to payment of the CET to

Brazil’s customs authority. If the product is then re-exported to another MERCOSUR country, the CET

must be paid again to the second country. MERCOSUR approved a Common Customs Code (CCC) in

2010 and launched a plan to eliminate the double application of the CET within MERCOSUR in 2021.

However, only Argentina has ratified the CCC and it has not taken effect. Although the Brazilian Congress

approved the agreement in 2018, it has not been promulgated by the executive branch, which is necessary

for ratification.

Brazil imposes relatively high tariffs on imports across a wide range of sectors, including automobiles,

automotive parts, information technology and electronics, chemicals, plastics, industrial machinery, steel,

and textiles and apparel. In addition, Brazil’s bound rates are often much higher than its applied rates, and

U.S. exporters face significant uncertainty in the Brazilian market because the government frequently

increases and decreases tariffs within the flexibilities of MERCOSUR. The lack of predictability with

regard to tariff rates makes it difficult for U.S. exporters to forecast the costs of doing business in Brazil.

44 | FOREIGN TRADE BARRIERS

Ethanol Tariff-Rate Quota

Between 2011 and 2017, bilateral trade of ethanol between the United States and Brazil, the world’s two

largest producers and consumers of ethanol, was virtually duty free. Ethanol imports into the United States

enter at the MFN rate of 1.9 percent or 2.5 percent, depending on the Harmonized System code, while

imports into Brazil entered duty free. However, between September 2017 and January 2022, Brazil

imposed first a tariff-rate quota (TRQ) and then the MERCOSUR common external tariff of 20 percent on

all imports of ethanol, the vast majority of which is supplied by the United States. Although the tariff was

below Brazil’s WTO bound tariff rate of 35 percent, the TRQ and common external tariff have drastically

reduced previously robust bilateral trade of ethanol. Brazil temporarily suspended the tariff effective March

23, 2022, but that suspension expired on January 31, 2023, when the tariff rose to 16 percent. The tariff

will return to 18 percent in 2024. On average, ethanol makes up just under one third of U.S. agricultural

exports to Brazil, and Brazil historically represents the second largest market for U.S. ethanol.

Taxes

Brazil imposes a 25 percent ad valorem Industrial Product Tax (IPI) on cachaça, a domestic distinctive

product produced from sugarcane, while imposing a 30 percent ad valorem IPI on other alcoholic

beverages, including imports of Tennessee whiskey, bourbon, gin, and vodka from the United States.

Non-Tariff Barriers

Import Bans

Brazil restricts the entry of certain types of remanufactured goods (e.g., earthmoving equipment, automotive

parts, and medical equipment). Brazil only allows the importation of such goods if an importer can provide

evidence that the goods are not or cannot be produced domestically, or if they meet certain other limited

exceptions.

With some exceptions, Brazil generally prohibits imports of used consumer goods, including automobiles,

clothing, tires, medical equipment, and information and communication technology (ICT) products.

Import Licensing

Brazil has both automatic and non-automatic import licensing requirements. Brazil’s non-automatic import

licensing system covers imports of products that require authorization from specific ministries or agencies,

such as agricultural commodities and beverages (Ministry of Agriculture, Livestock, and Supply – MAPA),

pharmaceuticals (National Sanitary Regulatory Agency), and arms and munitions (Ministry of National

Defense). A list of products subject to non-automatic import licensing procedures is available on the

Secretariat of Foreign Trade’s computerized documentation system, but specific information related to non-

automatic import licensing requirements and explanations for rejections of non-automatic import license

applications are lacking. The lack of transparency surrounding these procedures creates additional burdens

for U.S. exporters. U.S. exporters of footwear and apparel and in the automotive sector have expressed

concerns about these non-automatic licensing requirements. For automobiles, delays in issuing non-

automatic import licenses negatively affect exports of U.S. automobile and automotive parts to Brazil.

FOREIGN TRADE BARRIERS | 45

Customs Barriers and Trade Facilitation

U.S. companies continue to complain of burdensome and inconsistent documentation requirements for the

importation of certain types of goods, such as heavy equipment, that apply even if imports are on a

temporary basis and are destined for use in other countries.

In April 2022, the Brazilian Government reduced the merchant marine tax on ocean freight from 25 percent

to 8 percent. Despite this reduction, the taxation plus port handling charges at Brazilian ports put U.S.

products at a competitive disadvantage vis-à-vis MERCOSUR products.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Wine Regulations

Brazil requires duplicative documentation for imports of wine. Technical Regulation No. 75 of December

31, 2019, requires both a certificate of analysis and an import inspection pre-certification report generated

by a Brazilian lab upon importation. The United States has raised these issues with Brazil on the margins

of WTO Committee on Technical Barriers to Trade meetings and during bilateral engagements.

Telecommunications Products

Brazil’s telecommunications agency (ANATEL) issued a normative act in July 2021 (No. 4521/2021)

establishing approval requirements as a prerequisite for importing telecommunications products for usage

and sale, with exceptions for products entering the country for demonstration, self-use, scientific purposes,

or manufacturing of exports. Approval must be obtained prior to the product’s entry into the country. This

requirement entered into force in December 2021.

Cell Phone Charging Regulation

In July 2022, Brazil proposed an update to its technical requirements for cell phone charging, which

prescribe that all new mobile phones must be equipped with USB type-C charging cables and ports as of

July 1, 2024. This is instead of selecting a design-based approach, which would allow flexibility and

provide space for innovations and the development of international standards that can improve energy

efficiency for charging devices. The United States raised this issue in a bilateral meeting during the

November 2022 WTO TBT Committee.

Sanitary and Phytosanitary Barriers

Pork

In a Joint Statement issued by the White House on March 19, 2019, the United States and Brazil agreed to

establish risk and science-based conditions to allow for the importation of U.S. pork into Brazil. However,

U.S. fresh, frozen, and further processed pork products remain ineligible due to issues related to

regionalization of the control of certain animal diseases. Discussions between the U.S. Department of

Agriculture Animal and Plant Health Inspection Service and MAPA are ongoing but have yet to establish

access for U.S. pork exports to Brazil.

46 | FOREIGN TRADE BARRIERS

GOVERNMENT PROCUREMENT

Although Brazil has taken steps to make its procurement market more transparent and is seeking to accede

to the WTO Government Procurement Agreement (GPA), restrictions remain. For example, Brazilian state

enterprises may only subcontract services to a foreign firm if domestic expertise is unavailable, and foreign

firms may only bid to provide technical services if there are no qualified Brazilian firms. Brazil also grants

procurement preference based on meeting economic stimulus requirements, such as generating employment

or contributing to technological development, and maintains local content requirements for some sectors

(e.g., oil and gas).

Brazil is not a Party to the WTO Government Procurement Agreement, but has been an observer to the

WTO Committee on Government Procurement since October 2017. On May 18, 2020, Brazil applied for

accession to the GPA.

INTELLECTUAL PROPERTY PROTECTION

Brazil remained on the Watch List in the 2022 Special 301 Report. Despite improvements in recent years,

as outlined in that report, enforcement challenges continue, including the absence of deterrent-level

penalties and high levels of counterfeiting and piracy online and in physical markets. The United States

identified the Rua 25 de Março area in São Paulo in the 2022 Review of Notorious Markets for

Counterfeiting and Piracy (Notorious Markets List) for selling counterfeit and pirated goods. Deterrent-

level penalties and increased emphasis on enforcement at the tri-border region between Argentina, Brazil,

and Paraguay are critical to make sustained progress on these intellectual property concerns. Other

concerns include the pendency of patent applications and the impact on the effective patent term. Also,

while Brazilian law and regulations provide for protection against unfair commercial use of undisclosed

test results and other data generated to obtain marketing approval for veterinary and agricultural chemical

products, similar protection is not provided for pharmaceutical products for human use. The United States

urges Brazil to ensure transparency and procedural fairness in the protection of geographical indications

(GIs) and to ensure that the grant of GI protection does not deprive interested parties of the ability to use

common names, particularly as Brazil proceeds with the European Union (EU)–Mercosur Trade

Agreement.

SERVICES BARRIERS

Audiovisual Services

In audiovisual services, Brazil imposes several taxes on foreign products that it does not apply equally to

domestic products, and it also applies local content requirements.

Brazil imposes a fixed tax on each foreign film released in theaters, foreign home entertainment products,

foreign programming for broadcast television, and foreign content and foreign advertising released on cable

and satellite channels. The taxes are significantly higher than the corresponding taxes levied on Brazilian

products. In addition, 80 percent of the programming aired on “open broadcast” (non-cable) television

channels must be Brazilian, and foreign ownership in print media and “open broadcast” television is limited

to 30 percent.

Remittances to foreign producers of audiovisual works are subject to a 25 percent income withholding tax.

As an alternative to paying the full tax, producers can elect to invest 70 percent of the tax value in local

independent productions. In addition, local distributors of foreign films are subject to a tax equal to 11

percent of remittances to the foreign producer or, alternatively, the distributor may invest an amount equal

FOREIGN TRADE BARRIERS | 47

to 3 percent of the total remittances in local independent productions. This levy is also assessed on foreign-

produced video and audio advertising.

Law 12.485 of 2011 imposes local content quotas on subscription television services by requiring every

channel (both satellite and cable) to air at least three and a half hours per week of Brazilian programming

during prime time, and by requiring that one-third of all channels included in any television package be

Brazilian. In addition, the law delegates significant programming and advertising regulatory authority to

the national film industry development agency, which raises concerns about the impartiality of regulatory

decisions.

Brazil also maintains domestic film quotas for theatrical screening and home video distribution.

Brazil’s pay TV law bans cross-ownership between distributors and content producers in Brazil’s paid-

television sector. The law’s restrictions, which have been subject to litigation, exclude firms from providing

both services to the Brazilian market.

Express Delivery

U.S. express delivery services face significant limitations in Brazil. The Brazilian Government charges a

flat 60 percent duty for all express shipments imported through the Simplified Customs Clearance process.

The Simplified Customs Clearance process limits commercial shipments to $100,000 per importer per year.

Moreover, Brazilian Customs has established express delivery maximum per-shipment value limits of

$10,000 for exports and $3,000 for imports.

Financial Services

Brazil maintains reciprocity requirements for foreign banks and insurers to establish operations in Brazil.

Foreign banks may establish subsidiaries, but Brazilian residents must be directly responsible for the

administration of the financial institution. Since 1995, entry into the banking sector through the

establishment of branches has not been permitted. Branches of foreign banks established in Brazil before

1995 must meet the same capital requirements as subsidiaries.

Telecommunications Services

Satellites

Brazil permits Brazilian-owned entities to acquire the exclusive right to operate a satellite and its associated

frequencies from specific positions. However, foreign-licensed satellite operators may obtain only a non-

exclusive right (a landing right) to provide service in Brazilian territory. ANATEL grants these landing

rights for a fixed term of no longer than 15 years, after which the operator must reacquire the landing rights

in order to continue providing services. Foreign operators are also required to pay higher annual landing

fees than Brazilian firms.

Roaming

In 2012, ANATEL ruled that “value-added services” may only be provided by locally licensed carriers

using local subscriber identity module cards (SIMs). This ANATEL interpretation restricts permanent

roaming options for value-added services such as international machine-to-machine (M2M) and Internet of

Things (IoT) providers, thus requiring development of devices solely for the Brazilian market, and requiring

service infrastructure in Brazil.

48 | FOREIGN TRADE BARRIERS

BARRIERS TO DIGITAL TRADE

Data Localization Requirements

Brazil’s General Law for the Protection of Personal Data (LGPD) took effect on September 18, 2020. The

LGPD includes provisions concerning restrictions on the transfer of personal data outside of Brazil that will

be implemented after promulgation of regulations required for international transfers of personal data.

Restrictions on the flow of data have a significant effect on the conditions for the cross-border supply of

numerous services and for enabling the functionality embedded in smart devices. The United States has

encouraged Brazil to work closely with companies and organizations affected by the LGPD to resolve

implementation and enforcement issues in a reasonable and consistent manner.

FOREIGN TRADE BARRIERS | 49

BRUNEI DARUSSALAM

TRADE AGREEMENTS

The United States–Brunei Trade and Investment Framework Agreement

The United States and Brunei signed a Trade and Investment Framework Agreement (TIFA) on December

16, 2002. This Agreement is the primary mechanism for discussions of trade and investment issues between

the United States and Brunei.

IMPORT POLICIES

Tariffs

Brunei’s average Most-Favored-Nation (MFN) applied tariff rate was 0.3 percent in 2021 (latest data

available). Brunei’s average MFN applied tariff rate was zero percent for agricultural products and 0.3

percent for non-agricultural products in 2021 (latest data available). Brunei has bound 95.5 percent of its

tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 25.4 percent.

Brunei’s highest WTO bound tariff rate for non-tobacco products is 50 percent.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

Brunei imposes restrictions or prohibitions on the import of certain goods for religious reasons, including

tobacco, alcoholic beverages, and products containing alcohol (e.g., food products, such as chocolate, with

alcohol as an ingredient).

Brunei ratified the World Trade Organization Trade Facilitation Agreement (TFA) in December 2015, and

the TFA entered into force in February 2017. Brunei is overdue in submitting four transparency

notifications related to: (1) import, export, and transit regulations; (2) the operation of the single window;

(3) the use of customs brokers; and, (4) customs contact points for the exchange of information. These

notifications were due to the WTO in February 2017, according to Brunei’s self-designated TFA

implementation schedule. Brunei’s online publication of the details of its advance ruling system is not clear

or easily accessible, making it difficult for traders to understand Brunei’s system and how to apply for a

ruling.

TECHNICAL BARRIERS TO TRADE

Halal Standards

Most food sold in Brunei must be certified as halal. However, there is a small market for non-halal foods,

which must be sold in designated rooms in grocery stores separated at all times from other products or at

restaurants that are specified as non-halal. The Halal Certificate and Halal Label Order Amendment,

enacted in May 2017, require all businesses that produce, import, distribute, or serve food and beverages to

obtain a halal certificate from the Islamic Religious Council of Brunei (MUIB), renewed annually. MUIB

administers Brunei’s halal standards, which are among the most stringent in the world.

Under Brunei’s Halal Meat Act, halal meat (including beef, mutton, lamb, and chicken) can be imported

only by a person holding a halal import permit issued by MUIB, and an export permit issued by the

50 | FOREIGN TRADE BARRIERS

exporting country. Prior to export, Bruneian government inspectors must travel to slaughter facilities in

the home country of the exporter to inspect the slaughter and processing operations. The Bruneian

Government maintains a list of the foreign and local slaughtering centers (abattoirs) that have been

inspected and declared fit for supplying meat that can be certified as halal. None of the 40 foreign

slaughterhouses currently approved by MUIB is located in the United States.

GOVERNMENT PROCUREMENT

Under current Brunei regulations, government procurement is conducted by individual ministries and

departments, which must comply with financial regulations and procurement guidelines issued by the State

Tender Board of the Ministry of Finance and Economy. Tender awards above BND $500,000

(approximately $373,000) must be approved by the Sultan in his capacity as Minister of Finance and

Economy, based on the recommendation of the State Tender Board.

Most invitations for tenders or quotations are published in a bi-weekly government newspaper, but these

invitations are often also selectively tendered only to locally registered companies. Some ministries and

departments publish tenders on their individual websites. Foreign firms may participate in the tenders

individually but are advised by the government to form a joint venture with a local company.

Brunei is neither a Party to the WTO Agreement on Government Procurement nor an observer to the WTO

Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Brunei has made improvements in its intellectual property (IP) environment, including by joining the World

Intellectual Property Organization (WIPO) Copyright Treaty, the WIPO Performances and Phonograms

Treaty, and the Protocol Relating to the Madrid Agreement Concerning the International Registration of

Marks. However, more work remains to enforce existing IP regulations, including by improving training

standards for police and customs officials tasked with IP enforcement.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Although Brunei enjoys among the highest Internet penetration in Southeast Asia, the digital trade and

electronic commerce industry is still in its early development stage, and the Bruneian Government has only

started to develop relevant policies.

There is no data protection law in Brunei. However, the Authority for Info-communications Technology

Industry of Brunei Darussalam (AITI), which is functioning as an interim office that focuses on data issues,

drafted a law for the protection of individuals’ personal data, which will apply to the private sector in

Brunei, covering both commercial and non-commercial organizations. As of December 2022, this personal

data protection law was awaiting approval by relevant government authorities, and is expected to come into

force in 2023.

Electronic commerce payment solutions are limited to credit cards or online inter-bank transfers.

International payment gateways are not available. The Brunei Government is working to establish a digital

payment gateway within Brunei to ease digital payments domestically and facilitate international

transactions.

FOREIGN TRADE BARRIERS | 51

OTHER BARRIERS

Localization Requirements

Brunei’s Local Business Development Framework (Framework) seeks to increase the use of local goods

and services, train a domestic workforce, and develop Bruneian businesses by placing requirements on all

companies operating in the oil and gas industry in Brunei to meet local hiring and contracting targets. These

requirements also apply to information and communication technology firms that work on government

projects. The Framework sets local content and local hiring targets based on the difficulty of the project

and the value of the contract, with more flexible local content and local hiring requirements for projects

requiring highly specialized technologies or with a high contract value.

Land Ownership Restrictions

Brunei’s Land Code restricts non-citizens, including foreign businesses and long-term permanent residents,

from freehold land ownership. The Land Code also places restrictions on the sale and transfer of land by

non-citizens. The government is heavily involved in all land deals and may grant long-term leases of state

land to foreign firms for large investments.

Residency Requirement

Under the Companies Act, Bruneian companies can be 100 percent foreign-owned if at least one of two

directors of a locally incorporated company is a resident of Brunei. If a 100 percent foreign-owned

company has more than two directors, then at least two must be residents of Brunei. The government may

grant an exemption from this requirement, although it has granted none to date.

Transparency

Transparency is lacking in many areas of Brunei’s economy, particularly in state-owned enterprises that

manage key sectors of the economy such as oil and gas, telecommunications, transportation, and energy

generation and distribution.

FOREIGN TRADE BARRIERS | 53

CAMBODIA

TRADE AGREEMENTS

The United States–Cambodia Trade and Investment Framework Agreement

The United States and Cambodia signed a Trade and Investment Framework Agreement (TIFA) on July

14, 2006. This Agreement is the primary mechanism for discussions of trade and investment issues between

the United States and Cambodia.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Cambodia’s average Most-Favored-Nation (MFN) applied tariff rate was 10.2 percent in 2021 (latest data

available). Cambodia’s average MFN applied tariff rate was 12.6 percent for agricultural products and 9.8

percent for non-agricultural products in 2021 (latest data available). Cambodia has bound 100 percent of

its tariff lines in the World Trade Organization (WTO) with an average WTO bound tariff rate of 19.3

percent. Cambodia’s highest applied tariff rate is 35 percent, which is imposed on several product

categories, including a wide variety of prepared food products, bottled and canned beverages, cigars, table

salt, paints and varnishes, cosmetic and skin care products, glass and glassware, electrical appliances, cars,

furniture, video games, and gambling equipment.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

As of February 2019, the General Department of Customs and Excise (GDCE) is the only institution

authorized to carry out the inspection of goods at Cambodia’s entry points.

Both local and foreign businesses have raised concerns that the GDCE engages in practices that are

nontransparent and that appear arbitrary. Importers frequently cite problems with undue processing delays,

burdensome paperwork, and unnecessary formalities. Some importers have noted that duties imposed on

the same products, shipped in the same quantity, but at different times of the year, can vary for unknown

reasons. Importers have also cited customs delays for goods entering Cambodia’s lone deep-water port in

Sihanoukville, and have reported being asked to pay “unofficial” fees to expedite shipments into and out of

the port.

GOVERNMENT PROCUREMENT

Government procurement is often not transparent, and the Cambodian Government frequently provides

short response times to public announcements of tenders, which are posted on the Ministry of Economy

and Finance’s website. For construction projects, only bidders registered with the Ministry are permitted

to participate in tenders.

Irregularities in the government procurement process are common despite a strict legal requirement for

audits and inspections. Despite allegations of malfeasance at several ministries, the Cambodian

Government has taken little action to investigate irregularities. In February 2018, the government issued a

54 | FOREIGN TRADE BARRIERS

new regulation on procedures to resolve complaints about irregularities in government procurement. The

regulation covers all procurement conflicts except those already being addressed through arbitration, those

involving military secrets, and concession projects that are regulated separately. In November 2021, a new

Law on Public and Private Partnerships was enacted to replace the 2007 Law on Concessions, aiming to

enhance the management and implementation of public infrastructure projects in Cambodia. U.S.

stakeholders have not observed any noticeable changes to government procurement processes.

Cambodia is neither a Party to the WTO Agreement on Government Procurement nor an observer to the

WTO Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Despite efforts to raise intellectual property (IP) awareness, the sale of counterfeit and pirated goods

remains commonplace in Cambodian markets. Tuol Tompoung (Russian) Market in Phnom Penh is

included in the 2022 Review of Notorious Markets for Counterfeiting and Piracy (Notorious Markets List).

The rates of signal and cable piracy also remain high and online sites purveying pirated music, films,

electronic books, software, and television shows remain popular. In addition, sales of legitimate films have

been negatively affected due to the popularity of illegal cinemas that show pirated material.

Various Cambodian authorities work on IP-related issues, including the Ministry of the Interior’s Economic

Crime Police unit, the GDCE, the Cambodia Import-Export Inspection and Fraud Repression Directorate

General, the National Committee for Intellectual Property Rights, the Institute of Standards of Cambodia,

the Ministry of Culture and Fine Arts, and the Ministry of Commerce. Some of these disparate institutions

have overlapping responsibilities with respect to IP-related issues. To combat counterfeiting, the Cambodia

Counter Counterfeit Committee, which is under the Ministry of the Interior, serves as an umbrella agency

for 14 government entities. Draft legislation that would address the protection of trade secrets has been

under review at the Ministry of Commerce, but has not been passed.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Cambodia passed an electronic commerce law in November 2019, which was fully implemented in May

2020. The law governs the conduct of electronic commerce within Cambodia and from overseas.

Cambodia’s National Assembly passed a sub-decree in February 2021 to establish a National Internet

Gateway that would require internet providers to route all online traffic through a single node regulated by

a government-appointed operator. Cambodia’s implementation of the National Internet Gateway has been

delayed but not cancelled. Both the private sector and human rights organizations continue to express

concerns over the effect the National Internet Gateway will have on internet freedom in Cambodia.

Separate laws governing cybersecurity, cybercrime, and data privacy are in draft form.

INVESTMENT BARRIERS

Cambodia’s constitution restricts foreign ownership of land. A 2010 law allows foreign ownership of

property above the ground floor of a structure, but stipulates that no more than 70 percent of a building can

be foreign-owned, and that foreigners cannot own property within 30 kilometers of the national border. For

land owned by foreign investors, the land title must be held by one or more Cambodian citizens or entities.

While Cambodia has made significant progress in formalizing its tax regime and increasing tax revenues,

reports suggest that the General Department of Taxation’s (GDT) methods can hit some companies with

unexplained tax bills and lack of due process given that the GDT freezes assets for failure to pay purported

back taxes. Additional concerns range from surprise tax audits to a lack of industry consultation when

implementing new tax codes.

FOREIGN TRADE BARRIERS | 55

OTHER BARRIERS

Bribery and Corruption

Both foreign and local businesses have identified corruption in Cambodia as a major obstacle to business

and a deterrent to investment, with Cambodia’s judiciary viewed as one of the country’s most corrupt

institutions. In 2010, Cambodia adopted anticorruption legislation and established a national Anti-

Corruption Unit (ACU) to undertake investigations, implement law enforcement measures, and conduct

public outreach. Enforcement, however, remains inconsistent. The Chair and Vice Chair are chosen by

the Prime Minister, and the remaining officials are appointed by various government entities, which raises

possible concerns about the independence of the ACU.

Cambodia began publishing official fees for public services at the end of 2012 in an effort to combat

“facilitation payments,” but this exercise has yet to be completed. Public service fees of some Ministries

are not yet available on their official websites. In September 2021, Cambodia rolled out the second phase

of an online business registration platform via a single portal aimed to eliminate the need for cash payments

and reduce overall fees. However, the portal does not include all Ministries, and the integration of more

agencies is planned for the upcoming third phase. As of December 31, 2022, no date or list of agencies had

been specified for the third phase. U.S. businesses have noted that signing an anticorruption memorandum

of understanding with the ACU has helped them avoid paying “facilitation payments.” However, they have

noted that obtaining licenses and permits may entail red tape.

FOREIGN TRADE BARRIERS | 57

CANADA

TRADE AGREEMENTS

The United States–Mexico–Canada Agreement

The United States–Mexico–Canada Agreement (USMCA) entered into force on July 1, 2020. The USMCA

maintains the zero tariffs that were in place among the three countries under the North American Free Trade

Agreement (NAFTA), while also modernizing the agreement to include: strong, enforceable labor and

environmental obligations, ground-breaking provisions to combat non-market practices, and provisions

covering digital trade and small and medium-sized enterprises (SMEs).

IMPORT POLICIES

Non-Tariff Barriers

Agricultural Supply Management

Canada uses supply-management systems to regulate its dairy, chicken, turkey, and egg industries.

Canada’s supply-management regime involves production quotas, producer-marketing boards to regulate

price and supply, and tariff-rate quotas (TRQs) for imports. Canada’s supply-management regime severely

limits the ability of U.S. producers to increase exports to Canada above TRQ levels, and inflates the prices

that Canadians pay for dairy and poultry products. Under the current system, U.S. imports above quota

levels are subject to prohibitively high tariffs (e.g., 245 percent for cheese and 298 percent for butter).

The USMCA expands market access opportunities for dairy products through new TRQs exclusively for

U.S. products. Canada has also opened new TRQs for U.S. chicken and U.S. eggs and egg products. In

addition, Canada expanded access for U.S. turkey. Canada and the United States also agreed to strong rules

to ensure TRQs are administered fairly and transparently to help ensure exporters benefit from the full

market access negotiated in the USMCA.

On May 25, 2021, the United States requested and established a dispute settlement panel under the USMCA

to review Canada’s dairy TRQ allocation measures that undermined the value of the TRQs by setting aside

and reserving access to in-quota quantities exclusively for processors. The final panel report was released

to the public on January 4, 2022. The Panel agreed with the United States that Canada’s allocation of dairy

TRQs, specifically the set-aside of a percentage of each dairy TRQ exclusively for Canadian processors, is

inconsistent with Canada’s commitment in Article 3.A.2.11(b) of the USMCA not to “limit access to an

allocation to processors.”

The United States rejects the changes Canada has made as a basis to resolve the dispute because Canada

remains out of compliance with its USMCA obligations. On May 25, 2022, the United States, for the

second time, requested dispute settlement consultations with Canada under the USMCA to address

Canadian allocation measures that: impose new conditions on the allocation and use of the TRQs; and

prohibit eligible applicants, including retailers, food service operators, and other types of importers, from

accessing TRQ allocations. On December 20, 2022, the United States requested new dispute settlement

consultations, expanding its challenge of Canada’s dairy TRQ allocation measures to include: Canada’s

use of a market-share approach for determining TRQ allocations, which applies different criteria for

different segments of applicants; and, Canada’s failure to allow importers the opportunity to fully utilize

TRQ quantities.

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The United States also remains concerned about potential Canadian actions that would further limit U.S.

exports to the Canadian dairy market, and continues to monitor closely any tariff reclassifications of dairy

products to ensure that U.S. market access is not negatively affected.

Milk Classes

Canada establishes discounted prices for milk components provided to domestic manufacturers of dairy

products used in processed food products under the Special Milk Class Permit Program (SMCPP). These

prices are “discounted,” being lower than regular Canadian milk class prices for manufacturers of dairy

products and pegged to U.S. prices or world prices. The SMCPP is designed to help Canadian

manufacturers of processed food products compete against processed food imports into Canada and in

foreign markets. An agreement reached between Canadian dairy farmers and processors in 2016 introduced

a new national milk class (Class 7), with discount pricing for a wide range of Canadian dairy ingredients

used in dairy products, to decrease imports of U.S. milk protein substances into Canada and increase

Canadian exports of skim milk powder into third country markets. Provincial milk marketing boards

(agencies of Canada’s provincial governments) began implementing Class 7 in 2017.

Under the USMCA, Canada was obligated to eliminate Class 7 within six months of entry into force. In

addition, Canada is obligated to ensure that the price for non-fat solids used to manufacture skim milk

powder, milk protein concentrates, and infant formula will be no lower than a level based on the U.S.

Department of Agriculture price for nonfat dry milk. Transparency provisions obligate Canada to provide

information necessary to monitor compliance with these commitments. Canada is obligated to apply

charges to exports of skim milk powder, milk protein concentrates, and infant formula in excess of

thresholds specified in the USMCA.

Ministerial Exemptions

Canada prohibits bulk imports of fresh fruits and vegetables in packages exceeding certain sizes (typically

50 kilograms) unless Canada grants a ministerial exemption. To obtain an exemption, importers must

demonstrate that there is an insufficient supply of a product in the domestic market. The import restrictions

apply to all fresh produce in bulk containers if there are grade names established in the respective

regulations. For those horticultural products without prescribed grade names, there is no restriction on bulk

imports. In addition, Canadian regulations on fresh fruit and vegetable imports prohibit consignment sales

of fresh fruit and vegetables in the absence of a pre-arranged buyer.

The 2007 Technical Arrangement Concerning Trade in Potatoes between the United States and Canada is

designed to provide U.S. potato producers with predictable access to Canadian ministerial exemptions. The

United States will continue to engage with U.S. potato growers on any concerns that Canada’s procedures

for granting ministerial exemptions are not providing access to Canada’s market as agreed.

Personal Duty Exemption

Canada’s personal duty exemption for residents who bring back goods from trips outside of its borders is

considerably more limited than the U.S. personal duty exemption. U.S. residents returning from abroad are

entitled to an $800 duty-free exemption after 48 hours abroad and $200 for trips under 48 hours. Canadians

who spend more than 24 hours outside of Canada can bring back C$200 (approximately $160) worth of

goods duty free, or C$800 (approximately $640) for trips over 48 hours. U.S. retailers have raised concerns

about the effect of this policy on purchases by Canadians on short trips to the United States.

FOREIGN TRADE BARRIERS | 59

Wine, Beer, and Spirits

Most Canadian provinces restrict the sale of wine, beer, and spirits through province-run liquor control

boards, which are the sole authorized sellers of wine, beer, and spirits in those provinces. Market access

barriers imposed by the provincial liquor control boards greatly hamper exports of U.S. wine, beer, and

spirits to Canada. These barriers include cost-of-service mark-ups, restrictions on listings (products that

the liquor board will carry), reference prices (either the maximum prices the liquor board is willing to pay,

or the prices below which imported products may not be sold), label requirements, discounting policies

(requirements that suppliers must offer rebates or reduce their prices to meet sales targets), and distribution

policies.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Compositional Standards for Cheese

Canada’s regulations on compositional standards for cheese limit the amount of dry milk protein

concentrate (MPC) that can be used in cheese making, reducing the demand for U.S. dry MPCs. The United

States continues to monitor these regulations for any changes that could have a further adverse impact on

U.S. dairy product exports.

Sanitary and Phytosanitary Barriers

Restrictions on U.S. Seeds Exports

For many major field crops, Canada’s Seeds Act generally prohibits the sale or advertising for sale in

Canada, or import into Canada, of any variety of seed that is not registered with Canada’s Food Inspection

Agency (CFIA). Canada’s variety registration gives CFIA an oversight role in maintaining and improving

quality standards for grains in Canada. The registration is designed to facilitate and support seed

certification and the international trade of seed; verify claims made, which contributes to a fair and accurate

representation of varieties in the marketplace; and, facilitate varietal identity, trait identity, and traceability

in the marketplace to ensure standards are met. The United States is concerned, however, that the variety

registration system is slow and cumbersome, and disadvantages U.S. seed and grain exports to Canada.

Under the Canada Grain Act, only grain of varieties produced from seed of varieties registered under the

Seeds Act may receive a grade higher than the lowest grade allowable in each class. The USMCA includes

a commitment to discuss issues related to seed regulatory systems. In January 2021, CFIA announced that

it was beginning seed regulatory modernization efforts. The United States will continue to discuss with

Canada steps to modernize and streamline Canada’s variety registration system.

INTELLECTUAL PROPERTY PROTECTION

Canada remained on the Watch List in the 2022 Special 301 Report. Canada’s commitments under the

USMCA are designed to significantly improve Canada’s intellectual property (IP) environment, addressing

areas of longstanding concern, including enforcement against counterfeits, inspection of goods in-transit,

transparency with respect to new geographical indications (GIs), and application of full national treatment

for copyright. With respect to GIs, the United States remains highly concerned about countries negotiating

product-specific IP outcomes as a condition of market access from the European Union, and reiterates the

importance of each individual IP right being independently evaluated on its individual merits. Because

shortfalls in protection and enforcement of IP constitute a barrier to exports and investment, these issues

are a continuing priority in bilateral trade relations with Canada. Poor enforcement with respect to

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counterfeit or pirated goods at the border and within Canada remains a concern. The United States

identified Pacific Mall in Toronto in the 2022 Review of Notorious Markets for Counterfeiting and Piracy

(Notorious Markets List) for selling pirated and counterfeit goods.

SERVICES BARRIERS

Audiovisual Services

For cable television and direct-to-home broadcast services, more than 50 percent of the channels received

by subscribers must be Canadian channels. Non-Canadian channels must be pre-approved (“listed”) by the

Canadian Radio-television and Telecommunications Commission (CRTC). Alternatively, non-Canadian

channels can become Canadian by ceding majority equity control to a Canadian partner, as some U.S.

channels have done. Foreign channels are prohibited from owning video distribution infrastructure in

Canada.

The United States continues to raise concerns with Canada about its implementation of USMCA

commitments to allow for the cross-border supply of U.S. home-shopping programming.

The CRTC also requires that 35 percent of popular musical selections broadcast on the radio qualify as

“Canadian” under a Canadian Government-determined point system.

Canada permits Canadian cable and satellite suppliers to pick up the signals of U.S. stations near the border

and redistribute them throughout Canada without the U.S. broadcasters’ consent. Content owners can apply

for compensation for the use of such content in Canada from a statutorily mandated fund into which

Canadian cable and satellite suppliers pay. However, U.S. broadcasters consider this compensation, which

was recently reduced, to be insufficient, and have sought the right to negotiate the carriage of their signals

on commercially set rates and terms, as can be done in the United States. The United States will continue

to explore avenues to address these concerns.

Digital Media

Canada continues to consider legislative proposals that appear to target U.S. online information and

streaming platforms for revenue generation and that would compel such platforms to adjust the user

experience in order to promote content owned by Canadian entities. The United States will closely monitor

the USMCA implications of new measures.

BARRIERS TO DIGITAL TRADE

Data Localization

The Province of Quebec adopted a law in September 2021 that amends its data protection regime. Under

the new law, the transfer of personal data outside of Quebec is limited to jurisdictions with data protection

regimes deemed “adequate” by the Quebec Government. The law brought into force new provisions to

protect personal information in September 2022. Several other provisions, including those pertaining to

data transfer, are scheduled to come into force over the next two years. The United States will monitor the

implementation of this provincial law and any other proposed measures on the cross-border transfer of data.

Digital Services Taxation

On December 14, 2021, the Canadian Government published draft legislation for a digital services tax

(DST). Canada’s proposed DST would be effective January 1, 2024 and retroactive to January 1, 2022.

FOREIGN TRADE BARRIERS | 61

The Canadian Government reemphasized its plans to advance this measure in its Fall Economic Statement

on November 3, 2022. Canada has taken these steps despite joining the October 8, 2021, OECD/G20

Inclusive Framework on Base Erosion and Profit Shifting Statement on a Two-Pillar Solution to Address

the Tax Challenges Arising from the Digitalization of the Economy, which called for all Parties to commit

not to introduce DSTs in the future. As the United States noted in comments to Canada, most DSTs have

been designed in ways that discriminate against U.S. companies, as they single out U.S. firms for taxation

while effectively excluding national firms engaged in similar lines of business. Further, Canada’s proposed

DST would create the possibility of significant retroactive tax liabilities with immediate consequences for

U.S. companies. The United States has expressed serious concerns that Canada continues to pursue a

unilateral DST.

FOREIGN TRADE BARRIERS | 63

CHILE

TRADE AGREEMENTS

The United States–Chile Free Trade Agreement

The United States–Chile Free Trade Agreement (FTA) entered into force on January 1, 2004. Under this

Agreement, as of January 1, 2015, Chile provides duty-free access to all U.S. exports. However, the United

States continues to have significant concerns with Chile’s failure to implement fully some FTA

commitments on protection and enforcement of intellectual property (IP) rights. The United States and

Chile meet regularly to review the implementation and functioning of the Agreement and to address

outstanding issues.

IMPORT POLICIES

Non-Tariff Barriers

Companies are required to contract a customs broker when importing goods valued at more than $3,000

Free On Board (FOB) or exporting goods valued at over $2,000 FOB. Companies established in any of

Chile’s free trade zones are exempt from the obligation to use a customs broker when importing or exporting

goods. Noncommercial shipments, which include product samples, product replacements, or shipments

from individuals, require the use of a customs broker for shipments valued at over $500.

SANITARY AND PHYTOSANITARY BARRIERS

Sanitary and Phytosanitary Barriers

Import Bans – Salmonid Products

Since July 2010, Chile’s Ministry of Fisheries has suspended imports of salmonid species, including

salmonid eggs, from all countries, pursuant to Chile’s revised import regulations for aquatic animals. The

United States continues to work with Chile to develop a protocol to allow for imports of safe U.S. salmonid

eggs.

Market Expansion for U.S. Blueberries

The United States has long pursued access for fresh U.S. blueberries to the Chilean market. In 2021, Chile

granted market access for blueberries from the states of California, Oregon, and Washington. U.S. officials

continues to press Chilean officials to expand market access for the remaining states, particularly given the

potential of the market during the counter-season.

INTELLECTUAL PROPERTY PROTECTION

Chile remained on the Priority Watch List in the 2022 Special 301 Report. The United States remains

concerned about the adequacy and effectiveness of the protection and enforcement of intellectual property

(IP) rights in Chile and about the implementation of certain IP obligations under the FTA. Longstanding

concerns remain about the lack of effective remedies to address the unlawful circumvention of

technological protection measures, failure to ratify the 1991 Act of the International Convention for the

Protection of New Varieties of Plants (UPOV 1991), and an ineffective Internet service provider liability

regime that has failed to promote effective and expeditious action against online piracy. The United States

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also continues to urge Chile to address certain aspects of its FTA commitments on satellite piracy. In

addition, pharmaceutical stakeholders continue to raise concerns over the efficacy of Chile’s system for

resolving patent issues expeditiously in connection with applications to market pharmaceutical products

and over the provision of adequate protection against unfair commercial use, as well as unauthorized

disclosure of undisclosed test or other data generated to obtain marketing approval. The United States also

encourages Chile to provide transparency and procedural fairness to all interested parties in connection with

potential recognition or protection of geographical indications, including in connection with trade

agreement negotiations.

SERVICES BARRIERS

The United States continues to closely monitor ongoing developments relating to possible reform of the

Chilean pension system. U.S. stakeholders continue to seek to engage with relevant Chilean Government

officials on potential recommendations that could facilitate Chile’s efforts in the area of pension reform.

As Chile considers pension reform, the United States encourages Chile to consult with all relevant

stakeholders and to ensure that any changes are consistent with Chile’s trade commitments.

Since July 2020, the Chilean Congress has approved three pension withdrawals and one advanced annuity

withdrawal. U.S. pension companies are concerned about the effect of these withdrawals, particularly

advanced annuity withdrawals.

FOREIGN TRADE BARRIERS | 65

CHINA

TRADE AGREEMENTS

In January 2020, the United States and China signed an economic and trade agreement, commonly referred

to as the “Phase One Agreement.” This agreement included commitments from China to improve market

access for the agriculture and financial services sectors, along with commitments relating to intellectual

property and technology transfer, and a commitment by China to increase its purchases of U.S. goods and

services.

On agriculture trade, the Phase One Agreement addresses many non-tariff barriers and has expanded market

access for a variety of U.S. food, agriculture and seafood product exports. This includes the implementation

of significant reforms in some agricultural sub-sectors, such as meat and poultry products and facility

registration. However, there has been a notable lack of meaningful action in other areas, including some

of the more significant commitments on agricultural biotechnology and a required risk assessment for the

use of ractopamine in the production of beef and pork.

Many of the commitments in the Phase One Agreement reflected changes that China had already been

planning or pursuing for its own benefit or that otherwise served China’s interests, such as the changes

involving intellectual property protection and the opening up of more financial services sectors. Other

commitments to which China agreed reflected a calculation, as it saw them as appeasing U.S. priorities of

the prior Administration, as evidenced by the attention paid to the agriculture sector in the Phase One

Agreement and the novel commitments relating to China’s purchases of U.S. goods and services ostensibly

as a means to reduce the bilateral trade deficit.

While China followed through in implementing some provisions of the Phase One Agreement, it has not

yet implemented some of the more significant commitments and fell far short of implementing its

commitments to purchase U.S. goods and services in 2020 and 2021. It is clear that this Agreement has not

led to fundamental changes to China’s state-led, non-market trade regime and their harmful impact on the

U.S. economy and U.S. farmers, ranchers, workers and businesses.

STATE-LED, NON-MARKET TRADE REGIME

Industrial Plans

China continues to pursue a wide array of industrial plans and related policies that seek to limit market

access for imported goods, foreign manufacturers and foreign services suppliers, while offering substantial

government guidance, resources and regulatory support to Chinese companies. The beneficiaries of these

constantly evolving policies are not only state-owned enterprises but also other domestic Chinese

companies.

One of the more far-reaching and harmful industrial plans is Made in China 2025. China’s State Council

released this industrial plan in May 2015. It is a 10-year plan targeting 10 strategic sectors, including

advanced information technology, automated machine tools and robotics, aviation and spaceflight

equipment, maritime engineering equipment and high-tech vessels, advanced rail transit equipment, new

energy vehicles (NEVs), power equipment, farm machinery, new materials, biopharmaceuticals and

advanced medical device products. While ostensibly intended simply to raise industrial productivity

through more advanced and flexible manufacturing techniques, Made in China 2025 is emblematic of

China’s evolving and increasingly sophisticated approach to “indigenous innovation,” which is evident in

numerous supporting and related industrial plans. Under China’s harmful and anticompetitive approach to

66 | FOREIGN TRADE BARRIERS

indigenous innovation, the common, overriding aim is to replace foreign technologies, products and

services with Chinese technologies, products and services in the China market through any means possible

so as to enable Chinese companies to dominate international markets.

Made in China 2025, which represents the first 10 years of a 30-year strategy known as the “Strong

Manufacturing Nation Strategy,” seeks to build up Chinese companies in the 10 targeted, strategic sectors

at the expense of, and to the detriment of, foreign companies and their technologies, products and services

through a multi-step process over 10 years. The initial goal of Made in China 2025 is to ensure, through

various means, that Chinese companies develop, extract or acquire their own technology, intellectual

property and know-how and their own brands. The next goal of Made in China 2025 is to substitute

domestic technologies, products and services for foreign technologies, products and services in the China

market. The final goal of Made in China 2025 is to capture much larger worldwide market shares in the 10

targeted, strategic sectors.

In pursuit of these goals, subsequently released documents set specific targets for capacity and production

levels and market shares for the dozens of industries that comprise the 10 broad sectors targeted in Made

in China 2025. In October 2015, China’s National Manufacturing Strategic Advisory Committee published

the Made in China 2025 Key Area Technology Roadmap, and since then it has published two updated

editions of this document. The first update took place in February 2018, with the issuance of the Made in

China 2025 Key Area Technology and Innovation Greenbook – Technology Roadmap (2017). Like its

predecessor, the updated document sets explicit market share and other targets to be attained by Chinese

companies in dozens of high-technology industries, often both in the China market and globally. For

example, it calls for “indigenous new energy vehicle annual production” to have a “supplying capacity that

can satisfy more than 80 percent of the market” in China by 2020, up from a 70 percent target set in the

2015 document. In November 2020, the 2017 document was updated with the issuance of the Made in

China Key Area Technology Innovation Greenbook – Technology Roadmap (2019).

Many of the policy tools being used by the Chinese Government to achieve the goals of Made in China

2025 raise serious concerns. Several of these tools are unprecedented and include a wide array of state

intervention and support designed to promote the development of Chinese industry in large part by

restricting, taking advantage of, discriminating against or otherwise creating disadvantages for foreign

enterprises and their technologies, products and services. Indeed, even facially neutral measures can be

applied in favor of domestic enterprises, as past experience has shown, especially at sub-central levels of

government.

Made in China 2025 also differs from industry support pursued by other World Trade Organization (WTO)

Members in its level of ambition and, perhaps more importantly, in the scale of resources the government

is investing in the pursuit of its industrial policy goals. Indeed, by some estimates, the Chinese Government

is making available more than $500 billion of financial support to the Made in China 2025 sectors, often

using large government guidance funds, which China attempts to shield from scrutiny by claiming that they

are wholly private. Even if China fails to fully achieve the industrial policy goals set forth in Made in China

2025, it is still likely to create or exacerbate market distortions and create severe excess capacity in many

of the targeted sectors. It is also likely to do long-lasting damage to U.S. interests, as well as the interests

of the United States’ allies and partners, as China-backed companies increase their market share at the

expense of foreign companies operating in these sectors.

While public references to Made in China 2025 subsided after June 2018, reportedly in response to an order

from the central government, it is clear that China remains committed to achieving the underlying goals of

Made in China 2025 and continues to seek dominance for Chinese firms in the sectors that it views as

strategic, both in China’s market and globally. For example, in September 2020, the central government

issued a guiding opinion encouraging investment in “strategic emerging industries,” a term used to describe

FOREIGN TRADE BARRIERS | 67

an earlier initiative from which Made in China 2025 evolved. Among other things, the guiding opinion

called for the support and creation of industrial clusters for strategic emerging industries, along with the

use of various types of government support and funding. The guiding opinion specifically encouraged

provincial and local governments to support industries such as advanced information technology, NEVs

and biopharmaceuticals.

In March 2021, the National People’s Congress passed the 14th Five-Year Plan (2021-2025) for National

Economic and Social Development (the 14th Five-Year Plan), together with a document titled Long-Range

Objectives Through Year 2035. The 14th Five-Year Plan and subsequently issued sector-specific five-year

plans, along with five-year plans issued by sub-central governments, make clear that China will continue

to pursue its industrial policy objectives. While industrial plans like Made in China 2025 were not named

in the 14th Five-Year Plan, there continues to be overlap between the industries identified in China’s five-

year plans with both Made in China 2025 industries and strategic emerging industries. In addition, other

longer-ranging industrial plans, such as the New Energy Vehicle Industry Development Plan (2021-2035)

and China Standards 2035, continue to demonstrate China’s commitment to a state-led, non-market

approach to the economy and trade.

Technology Transfer

For years, longstanding and serious U.S. concerns regarding technology transfer remained unresolved,

despite repeated, high-level bilateral commitments by China to remove or no longer pursue problematic

policies and practices. In August 2017, the Office of the U.S. Trade Representative (USTR) sought to

address these concerns by initiating an investigation under Section 301 focused on policies and practices of

the Government of China related to technology transfer, intellectual property and innovation. Specifically,

in its initiation notice, USTR identified four categories of reported Chinese Government conduct that would

be the subject of its inquiry: (1) the use of a variety of tools to require or pressure the transfer of

technologies and intellectual property to Chinese companies; (2) depriving U.S. companies of the ability to

set market-based terms in technology licensing negotiations with Chinese companies; (3) intervention in

markets by directing or unfairly facilitating the acquisition of U.S. companies and assets by Chinese

companies to obtain cutting-edge technologies and intellectual property; and, (4) conducting or supporting

cyber-enabled theft and unauthorized intrusions into U.S. commercial computer networks for commercial

gains. In March 2018, USTR issued a report supporting findings that the four categories of acts, policies

and practices covered in the investigation are unreasonable or discriminatory and burden and/or restrict

U.S. commerce. In November 2018, USTR issued an updated report that found that China had not taken

any steps to change its problematic policies and practices. Based on the findings in USTR’s Section 301

investigation, the United States took a range of responsive actions, including the pursuit of a successful

WTO case challenging certain discriminatory technology licensing measures maintained by China in

addition to the imposition of additional tariffs on Chinese imports.

The Phase One Agreement, signed in January 2020, addresses certain aspects of the unfair trade practices

of China that were identified in USTR’s Section 301 report. In the agreement, China committed to end its

longstanding practice of forcing or pressuring foreign companies to transfer their technology to Chinese

companies as a condition for obtaining market access, securing administrative approvals or receiving

advantages from the Chinese Government. China also committed to provide transparency, fairness and due

process in administrative proceedings and to ensure that technology transfer and licensing take place on

market terms that are voluntary and reflect mutual agreement. Separately, China committed to refrain from

directing or supporting outbound investments aimed at acquiring foreign technology pursuant to its

distortive industrial plans.

Since the entry into force of the Phase One Agreement in February 2020, the United States has continually

engaged with the U.S. business community, which has expressed concern about China’s informal, unwritten

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actions that force or pressure U.S. companies to transfer their technology to Chinese entities, including as

a condition for obtaining market access. The United States has engaged China as issues arise and will

continue to monitor developments closely.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

China’s average Most-Favored-Nation (MFN) applied tariff rate was 7.5 percent in 2021 (latest data

available). China’s average MFN applied tariff rate was 13.8 percent for agricultural products and 6.5

percent for non-agricultural products in 2021 (latest data available). China has bound 100 percent of its

tariff lines in the WTO, with a simple average WTO bound tariff rate of 10.0 percent.

In April 2018, China imposed tariffs ranging from 15 percent to 25 percent on a range of agricultural, steel,

and aluminum products imported from the United States in retaliation against the U.S. decision to adjust

U.S. imports of steel and aluminum articles under Section 232 of the Trade Expansion Act of 1962, as

amended. The U.S. decision was based on a determination that the quantity and circumstances of U.S.

imports of steel and aluminum products‒‒including the circumstances of severe excess capacity and

resulting overproduction emanating from China‒‒threaten to impair U.S. national security. In July 2018,

the United States launched a dispute settlement proceeding against China in the WTO pertaining to China’s

retaliatory tariffs. A WTO panel is expected to issue its decision in the middle of 2023. The United States

will continue to take all necessary action to protect U.S. interests in the face of this type of retaliation.

In 2018 and 2019, China imposed a series of retaliatory tariffs on U.S. products following U.S. actions

under Section 301 of the Trade Act of 1974 (Section 301) addressing unfair Chinese acts, policies, and

practices relating to technology transfer, intellectual property, and innovation. These tariffs remain in place.

Tariff-Rate Quota Administration for Agricultural Commodities

Market access promised through the tariff-rate quota (TRQ) system set up pursuant to China’s WTO

accession agreement has yet to be fully realized as of December 2022. Due to China’s poorly defined

criteria for applicants, unclear procedures for distributing TRQ allocations and failure to announce quota

allocation and reallocation results, traders are unsure of available import opportunities and producers

worldwide have reduced market access opportunities. As a result, China’s TRQs for wheat, corn and rice

seldom fill even when they are oversubscribed. For example, from 2020 to 2022, China’s corn imports

significantly exceeded TRQ levels, but the TRQ issuance, application and allocation processes lacked

transparency, and large state-owned enterprises in China appear to have been the only beneficiaries of the

increased imports.

In December 2016, the United States launched a WTO case challenging China’s administration of TRQs

for wheat, corn and rice. Consultations took place in February 2017. A WTO panel was established to hear

the case at the United States’ request in September 2017, and 17 other WTO Members joined as third

parties. The panel issued its decision in April 2019, ruling that China’s administration of tariff-rate quotas

for wheat, corn and rice was WTO-inconsistent. In July 2021, the United States submitted a request for

authorization to suspend concessions and other obligations pursuant to Article 22 of the Understanding on

Rules and Procedures Governing the Settlement of Disputes (DSU) on the ground that China had failed to

bring its measures into compliance with its WTO obligations. After China objected to this request, the

matter was referred to arbitration in accordance with Article 22 of the DSU. The arbitration is currently

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suspended, and the United States continues to closely monitor China’s ongoing administration of the tariff-

rate quotas for wheat, corn and rice.

As part of the Phase One Agreement, China agreed that, from December 31, 2019, its administration of

TRQs for wheat, corn and rice would conform to its WTO obligations. In addition, China agreed to make

specific improvements to its administration of the wheat, corn and rice TRQs, including with regard to the

allocation methodology, and to the treatment of non-state trading quota applicants. China also committed

to greater transparency. To date, however, China has not demonstrated full implementation of these

commitments.

Taxes

The Chinese Government attempted to manage imports of primary agricultural commodities by raising or

lowering the value-added tax (VAT) rebate to manage domestic supplies. China sometimes reinforces its

domestic objectives by imposing or retracting VATs. These practices have caused tremendous distortion

and uncertainty in the global markets for wheat, corn and soybeans, as well as intermediate processed

products of these commodities.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Food Safety Law

China’s ongoing implementation of its 2015 Food Safety Law has led to the introduction of myriad new

measures. These measures include exporter facility and product registration requirements for almost all

food and agricultural products. Overall, China’s notification of these measures to the WTO Committee on

Technical Barriers to Trade (TBT Committee) and the WTO Committee on Sanitary and Phytosanitary

Measures (SPS Committee) has been uneven.

Despite facing strong international opposition and agreeing to a two-year implementation delay of an

official certification requirement for all food products, China’s regulatory authorities issued draft measures

for public comment in November 2019 that would require the registration of all foreign food manufacturers

on a product category basis, including the submission of manufacturing documentation. The United States

submitted comprehensive written comments on the draft measures to China’s regulatory authorities. The

United States also raised concerns about them before the WTO TBT Committee and the WTO SPS

Committee. More than 15 WTO Members supported the concerns raised by the United States.

In April 2021, China’s regulatory authorities issued final versions of these measures, now known as Decrees

248 and 249, with an implementation date of January 1, 2022. In correspondence delivered to foreign

missions in Beijing in September 2021, China’s regulatory authorities laid out a non-transparent, multi-tier

system where producers of certain products are required to be registered by foreign regulatory authorities,

while producers of other products are eligible to self-register. Decrees 248 and 249 also established new

labeling and conformity assessment requirements.

These Decrees and similar prior measures continue to place excessive strain on food producers, traders and

exporting countries’ regulatory authorities, with no apparent added benefit to food safety. They instead

provide China with a tool to control food imports, as decided by China’s state planners, and to retaliate

against food producers from countries whose governments challenge Chinese Government policies or

practices in non-trade areas.

According to China’s customs authorities, by July 1, 2023, certain foreign food producers will be required

to upload additional detailed manufacturing information to China’s online facility registration portal, and

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foreign regulatory authorities will be required to review and certify the uploaded information. These tasks

are fundamentally beyond the traditional roles of regulatory authorities. If implemented, these new

requirements will impose even greater burdens on food manufacturers and food safety regulatory authorities

in exporting countries and will therefore pose a new threat to food trade with China.

In the Phase One Agreement, China committed that it would not implement food safety regulations that are

not science- or risk-based and that it would only apply food safety regulations to the extent necessary to

protect human life or health. China also agreed to certain procedures for registering U.S. facilities that

produce various food and agricultural products. Despite repeated U.S. requests, China has not clarified the

relationship between the facility registration procedures set forth in the Phase One Agreement and the

requirements of Decrees 248 and 249.

Technical Barriers to Trade

Standards

The Chinese Government continues to pursue improvements in its standards system, including by moving

from a government-led system to one that incorporates both government guidance and “bottom up” input

from the marketplace. At the same time, the Chinese Government also continues to limit foreign

participation in standards setting and, at times, pursue unique national standards for strategic reasons.

In January 2018, China’s revised Standardization Law entered into force. Since then, China has issued

numerous implementing measures, some of which contain positive references to the ability of foreign-

invested enterprises to participate in China’s standardization activities and purport to recognize the value

of international standards. Unfortunately, many of these implementing measures cause concern for U.S.

industry as they appear to focus on the development of Chinese standards without sufficient consideration

being given to existing, internationally-developed standards. In addition, they do not explicitly provide that

all foreign stakeholders may participate on equal terms with domestic competitors in all aspects of the

standardization process, and they fall short of explicitly endorsing internationally accepted best practices.

As these implementing measures have been issued, China’s existing technical committees have continued

to develop standards. U.S. and other foreign companies have reported that they are often not permitted to

participate in these domestic standards-setting processes, and even in technical committees where

participation has been possible for some foreign stakeholders, it has typically been on terms less favorable

than those applicable to their domestic competitors. For example, the technical committee for cybersecurity

standards (known as TC-260) allows foreign companies to participate in standards development and setting,

with several U.S. and other foreign companies being allowed to participate in some of the TC-260 working

groups. However, foreign companies are not universally allowed to participate as voting members, and

they report challenges to participating in key aspects of the standardization process, such as drafting. They

also remain prohibited from participating in certain TC-260 working groups, such as the working group on

encryption standards.

Over the years, U.S. stakeholders have also reported that, in some cases, Chinese Government officials

have pressured foreign companies seeking to participate in the standards-setting process to license their

technology or intellectual property on unfavorable terms. In addition, China has continued to pursue unique

national standards in a number of high technology areas where international standards already exist. The

United States continues to press China to address these specific concerns, but to date this bilateral

engagement has yielded minimal progress.

Notably, U.S. concerns about China’s standards regime are not limited to the implications for U.S.

companies’ access to China’s market. China’s ongoing efforts to develop unique national standards aims

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eventually to serve the interests of Chinese companies seeking to compete globally, as the Chinese

Government’s vision is to use the power of its large domestic market to influence the development of

international standards. The United States remains very concerned about China’s policies with regard to

standards and has expressed, and will continue to express, concerns to China bilaterally and multilaterally

as China continues to develop and issue implementing measures for its revised Standardization Law.

In October 2021, the Central Committee of the Chinese Communist Party and the State Council issued the

Outline for the Development of National Standardization, which set targets for China’s standardization

system. It reiterates the desire for China’s standardization system to be both guided by the government and

driven by the market. It also calls for China’s standardization system to refocus from quantity to quality

and to shift from a domestic focus to an equal domestic and international focus. In addition, it calls for

standards to support not just a particular industry, but also the economy and society as a whole.

The October 2021 Outline for the Development of National Standardization is partly based on an initiative

that China announced in 2019, known as China Standards 2035. A lack of transparency with regard to the

initiative’s findings is troubling, particularly given longstanding global concerns about inadequate foreign

participation in China’s standards-setting processes, China’s use of standards that differ from international

standards without basis, and certain licensing practices in China’s standards-setting processes.

Cosmetics

Over the past several years, the United States and U.S. industry have engaged with China’s Food and Drug

Administration (CFDA) and its successor, the National Medical Products Administration (NMPA), to

highlight serious concerns with China’s regulation of cosmetics. Currently, the regulation of cosmetics in

China is governed by the Cosmetics Supervision and Administration Regulation (CSAR), which was issued

in June 2020 and entered into effect in January 2021. The United States has repeatedly raised serious

concerns with the CSAR and its numerous implementing measures, both bilaterally and in meetings of the

WTO TBT Committee and the Council for Trade in Goods, as have several other WTO Members.

The CSAR implementing measures contain provisions that would require companies to disclose full product

formulations, ingredient suppliers, manufacturing methods, claims and safety data to both NMPA and local

agents in China when products are registered or notified. In addition, these measures require companies to

publish claims abstracts that may contain trade secrets and confidential business information on NMPA’s

website. The United States has expressed concern to China that its regulators are applying the same

approach to general and special cosmetics as is used with drugs and medical devices, despite the generally

lower risk in cosmetics. China’s filing and registration requirements for cosmetics also significantly

diverge from those in other major markets and do not align with international standards, making compliance

very burdensome for importers.

The United States is particularly concerned that the CSAR implementing measures do not provide adequate

assurances as to how undisclosed information, trade secrets and confidential business information will be

protected from unauthorized disclosure. China also has not addressed requests from the United States and

cosmetics right holders that NMPA provide a legally enforceable mechanism to monitor and protect the

trade secrets and confidential business information typically identified by companies in their cosmetics

filings.

In addition, China continues to require duplicative in-country testing to assess many product and ingredient

safety and performance claims, without considering the applicability of international data or other means

of establishing conformity. In response to U.S. concerns, China indicated that it would allow foreign

laboratories with facilities in China to conduct its required testing. However, this change does not address

the burden of China’s requirement, which does not consider the applicability of testing conducted via

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internationally recognized laboratories outside of China, as well as other means used by foreign regulators

and industries to assess the conformity of product and ingredient safety and performance claims.

The United States also questions China’s assertion that its cosmetics good manufacturing practices (GMP)

requirements provide equal treatment for imported and domestic general and special cosmetics. If the

government of a cosmetics importer does not issue GMP or manufacturing export certificates, the only

means that China provides to establish conformity with China’s GMP for general cosmetics is animal

testing. The United States and other WTO Members have made repeated requests that China consider the

many alternative means available to establish GMP conformity, including utilizing second party or third-

party certificates based upon the ISO 22716 Cosmetics GMP Guidelines. China also provides no means

for exemptions regarding GMP for imported special cosmetics.

In sum, after years of the United States engaging with China bilaterally as well as in the WTO and other

fora to share views and expertise regarding the regulation of cosmetics, China has not yet addressed key

U.S. concerns, including the use of international standards and good regulatory practices to facilitate

cosmetics conformity assessment and avoid discriminatory treatment, nor has it provided confidence that

U.S. intellectual property will be protected. Until China addresses these concerns, many U.S. companies

will be impeded in accessing, or simply unable to access, the China market.

Sanitary and Phytosanitary Barriers

China remains a difficult and unpredictable market for U.S. agricultural exporters, largely because of

inconsistent enforcement of regulations and selective intervention in the market by China’s regulatory

authorities. China’s apparent unwillingness to consider science-based international standards and

guidelines and to apply regulatory enforcement in a transparent and rules-based manner further complicates

and impedes agricultural trade.

Agricultural Biotechnology Approvals

The Chinese regulatory approval process for agricultural biotechnology products creates significant

uncertainty among developers and traders, slowing commercialization of products and creating adverse

trade impacts, particularly for U.S. exports of corn, soy and alfalfa. It continues to be inordinately lengthy,

causing uncertainty among traders and limiting trade, particularly for U.S. exports of corn and alfalfa. In

addition, the asynchrony between China’s biotechnology product approvals and the product approvals made

by other countries has widened considerably in recent years.

For many years, biotechnology product approvals by China’s regulatory authorities mainly materialized

only after high-level political intervention. In the Phase One Agreement, the United States was able to

secure China’s commitment to implement a transparent, predictable, efficient and science- and risk-based

system for the review of products of agricultural biotechnology. The agreement also called for China to

improve its regulatory authorization process for agricultural biotechnology products, including by

completing reviews of products for use as animal feed or further processing within an average of no more

than 24 months and by improving the transparency of its review process. China also agreed to work with

importers and the U.S. Government to address situations involving low-level presence of genetically

engineered (GE) materials in shipments. In addition, China agreed to establish a regulatory approval

process for all food ingredients derived from genetically modified microorganisms (GMMs), rather than

continue to restrict market access to GMM-derived enzymes only.

In 2021, China held two meetings of the National Biosafety Committee (NBC), the body responsible for

biosafety approval of GE products. In total, China issued new biosafety certificates for only two GE

products for import, both of which were cotton products. China also renewed existing biosafety certificates

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that were due to expire for 32 GE products for import. In 2022, China held an NBC meeting in March that

led only to one new biosafety certificate for a product for import, a soybean product, while renewing

existing certificates for 10 GE products for import. The NBC also held a meeting in December resulting in

the issuance of new biosafety certificates for eight products for import: three cotton products, two alfalfa

products, two sugarcane products, and one canola product. All of the applications had been pending for

well over 24 months, including three for more than 10 years and two others for more than five years.

Meanwhile, since 2021, China has issued numerous approvals and renewals for Chinese developers. China

has issued approximately 165 new biosafety certificates for products intended for domestic cultivation,

including 126 new GE cotton products, eight new GE corn products and two new GE soybean product.

China’s approach to agricultural biotechnology remains among the most significant commitments under

the Phase One Agreement for which China has not demonstrated full implementation. There remains a

significant lack of transparency regarding the procedures for convening meetings of the NBC, including

regarding dates and agenda items for these meetings, and the process for notifying applicants of outcomes

and for soliciting additional information to support product applications. While the NBC is required to

meet at least two times each year, the meetings are not held pursuant to a regular schedule, and information

about the meetings is not widely shared with the public in a transparent and predictable manner. In addition,

in conducting its approval process, China continues to ask for information that is not relevant to a product’s

intended use or information that applicants have previously provided. For this and other reasons, China

has not reduced the average time for its approval process for agricultural biotechnology products for feed

or further processing to no more than 24 months, as it had committed to do, even when taking into account

the approvals issued following the December 2022 NBC meeting.

Poultry

Starting in February 2022, the United States notified China of detections of high pathogenicity avian

influenza (HPAI) in multiple U.S. states. In the ensuing months, several states recovered from these

detections consistent with World Organisation for Animal Health (WOAH) guidelines, and they were

deemed HPAI-free by the United States. The United States submitted reports to China for these states and

requested approval to resume exporting poultry from these states to China. China has yet to confirm the

restoration of market access.

In the Phase One Agreement, China agreed to maintain measures consistent with the WOAH guidelines for

future outbreaks of avian influenza. China also agreed to sign a regionalization protocol within 30 days of

entry into force of the agreement, which it did, to help avoid unwarranted nationwide animal disease

restrictions in the future. This protocol requires that China resume acceptance of poultry imports from

states with HPAI detections within five days of receiving a U.S. report that the states are HPAI-free.

Beef

In May 2017, China committed to allow the resumption of U.S. beef shipments into its market consistent

with international food safety and animal health standards. However, China back-tracked one month later

and insisted that it would retain certain conditions relating to veterinary drugs, growth promotants and

animal health that were inconsistent with international food safety and animal health standards. For

example, China insisted on maintaining a zero-tolerance ban on the use of beta-agonists and synthetic

hormones commonly used by global cattle producers under strict veterinary controls and following Codex

Alimentarius Commission (Codex) guidelines. Beef from only about three percent of U.S. cattle qualified

for importation into China under these conditions.

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In the Phase One Agreement, China agreed to expand the scope of U.S. beef products allowed to be

imported, to eliminate age restrictions on cattle slaughtered for export to China and to recognize the U.S.

beef and beef products’ traceability system. China also agreed to establish maximum residue limits (MRLs)

for three synthetic hormones legally used for decades in the United States consistent with Codex standards

and guidelines. Where Codex standards and guidelines do not yet exist, China agreed to use MRLs

established by other countries that have performed science-based risk assessments.

While China confirmed to the United States that it had adopted Codex-consistent MRLs for use of the three

synthetic hormones in beef, China still has not published the MRLs. The lack of publication contributes to

regulatory ambiguity for U.S. beef producers and traders, who remain uncertain regarding which products

will be allowed for import into China. China’s failure to publish the MRLs is another example of China’s

inadequate implementation of the Phase One Agreement.

Pork

China maintains an approach to U.S. pork that is inconsistent with international standards, limiting the

potential of an important export market given China’s growing meat consumption and its ongoing struggle

to control African swine fever. Specifically, China bans the use of certain veterinary drugs and growth

promotants instead of accepting the MRLs set by Codex.

As part of the Phase One Agreement, China agreed to broaden the list of pork products that are eligible for

importation, including processed products such as ham and certain types of offal that are inspected by the

U.S. Department of Agriculture Food Safety and Inspection Service for both domestic and international

trade. China also agreed to conduct a risk assessment for ractopamine in swine and cattle as soon as possible

and to establish a joint working group with the United States to discuss next steps based on the risk

assessment. To date, China has not completed the risk assessment and therefore has not yet made any

progress on next steps based on the risk assessment, which will need to include the establishment of MRLs

or import tolerances.

GOVERNMENT PROCUREMENT

In its WTO accession agreement, China made a commitment to accede to the WTO Agreement on

Government Procurement (GPA) and to open up its vast government procurement market to the United

States and other GPA Parties. More than two decades later, this commitment remains unfulfilled, while

China’s government procurement has continued to grow exponentially. Indeed, government procurement

at the central level of government alone now exceeds $500 billion, even without considering procurement

by state-owned enterprises.

The United States, the EU and other GPA Parties have viewed China’s GPA offers over the years as highly

disappointing in scope and coverage. China submitted its sixth revised offer in October 2019. This offer

showed progress in a number of areas, including thresholds, coverage at the sub-central level of

government, entity coverage and services coverage. Nonetheless, it fell short of U.S. expectations and

remains far from acceptable to the United States and other GPA Parties as significant deficiencies remain

in a number of critical areas, including thresholds, entity coverage, services coverage and exclusions.

Although China has since stated that it will “speed up the process of joining” the GPA, it has not submitted

a new offer since October 2019. China’s most recent submission, made in June 2021, was only an update

of its checklist of issues, which informs GPA Parties of changes to China’s existing government

procurement regime since its last update.

China’s current government procurement regime is governed by two important laws. The Government

Procurement Law, administered by the Ministry of Finance, governs purchasing activities conducted with

FOREIGN TRADE BARRIERS | 75

fiscal funds by state organs and other organizations at all levels of government in China, but does not apply

to procurements by state-owned enterprises. The Tendering and Bidding Law falls under the jurisdiction

of National Development and Reform Commission (NDRC) and imposes uniform tendering and bidding

procedures for certain classes of procurement projects in China, notably construction and works projects,

without regard for the type of entity (e.g., a government agency or a state-owned enterprise) that conducts

the procurement. Both laws cover important procurements that GPA Parties would consider to be

government procurement eligible for coverage under the GPA.

China’s Foreign Investment Law, which entered into force in January 2020, and a related October 2021

Ministry of Finance measure state that China will provide equal treatment to foreign companies invested in

China and to domestic Chinese companies with regard to government procurement opportunities. However,

it is not yet clear how these measures may be impacting government procurement in China.

Under both its government procurement regime and its tendering and bidding regime, China continues to

implement policies favoring products, services and technologies made or developed by Chinese-owned and

Chinese-controlled companies through explicit and implicit requirements that hamper foreign companies

from fairly competing in China. For example, notwithstanding China’s commitment to equal treatment,

foreign companies continue to report cases in which “domestic brands” and “indigenous designs” are

required in tendering documents. China also has proposed but has not yet adopted clear rules on what

constitutes a domestic product. As a result, there are no specific metrics, such as a percentage of value-

added within China, for foreign products to qualify for many procurements and tenders, which often works

to the disadvantage of foreign companies.

INTELLECTUAL PROPERTY PROTECTION

Overview

After its accession to the WTO, China undertook a wide-ranging revision of its framework of laws and

regulations aimed at protecting the intellectual property rights of domestic and foreign right holders, as

required by the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS

Agreement). Despite various plans and directives issued by the State Council, inadequacies in China’s

intellectual property protection and enforcement regime continue to present serious barriers to U.S. exports

and investment. As a result, China was again placed on the Priority Watch List in USTR’s 2022 Special

301 Report. In addition, in February 2023, USTR announced the results of its 2022 Review of Notorious

Markets for Counterfeiting and Piracy (Notorious Markets List), which identifies online and physical

markets that exemplify key challenges in the global struggle against piracy and counterfeiting and explains

the harm not only to U.S. businesses, but also to U.S. workers. Several markets in China were among those

named as notorious markets.

The Phase One Agreement addresses numerous longstanding U.S. concerns relating to China’s inadequate

intellectual property protection and enforcement. Specifically, the agreement requires China to revise its

legal and regulatory regimes in a number of ways in the areas of trade secrets, pharmaceutical-related

intellectual property, patents, trademarks and geographical indications. In addition, the agreement requires

China to make numerous changes to its judicial procedures and to establish deterrent-level penalties. China

must also take a number of steps to strengthen enforcement against pirated and counterfeit goods, including

in the online environment, at physical markets and at the border.

China has published a number of draft measures for comment and issued some final measures relating to

implementation of the intellectual property chapter of the Phase One Agreement. Notably, China amended

the Patent Law, the Copyright Law, and the Criminal Law. China has also reported increased enforcement

actions against counterfeit medicines and increased customs actions against pirated and counterfeit goods.

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At the same time, China has outstanding work to finalize the draft measures that it has published and to

publish other draft measures in accordance with the Intellectual Property Action Plan that it released in

April 2020, such as certain patent, geographical indications and trade secret measures. In addition, China

has yet to demonstrate that it has published data on enforcement actions online on a regular basis, increased

enforcement actions against counterfeits with health and safety risks and at physical markets, increased

training of customs personnel or ensured the use of only licensed software in government agencies and

state-owned enterprises. The United States continues to monitor China’s implementation of the intellectual

property chapter of the Phase One Agreement, including the impact of the final measures that have been

issued.

Trade Secrets

Serious inadequacies in the protection and enforcement of trade secrets in China have been the subject of

high-profile engagement between the United States and China in recent years. Several instances of trade

secret theft for the benefit of Chinese companies have occurred both within China and outside of China.

Offenders in many cases continue to operate with impunity. Particularly troubling are reports that actors

affiliated with the Chinese Government and the Chinese military have infiltrated the computer systems of

U.S. companies, stealing terabytes of data, including the companies’ proprietary information and

intellectual property, for the purpose of providing commercial advantages to Chinese enterprises.

In high-level bilateral dialogues with the United States over the years, China has committed to issue judicial

guidance to strengthen its trade secrets regime. China has also committed not to condone state-sponsored

misappropriation of trade secrets for commercial use. In addition, the United States has urged China to

make certain key amendments to its trade secrets-related laws and regulations, particularly with regard to a

draft revision of the Anti-unfair Competition Law. The United States has also urged China to take actions

to address inadequacies across the range of state-sponsored actors and to promote public awareness of trade

secrets disciplines.

At the November 2016 Joint Commission on Commerce and Trade (JCCT) meeting, China claimed that it

was strengthening its trade secrets regime and bolstering several areas of importance, including the

availability of evidence preservation orders and damages based on market value as well as the issuance of

a judicial interpretation on preliminary injunctions and other matters. In 2016 and 2017, China circulated

proposed revisions to the Anti-unfair Competition Law for public comment. China issued the revised law

in November 2017, effective January 2018. Despite improvements in the protection of trade secrets relative

to prior law, the final measure reflects a number of missed opportunities for the promotion of effective trade

secrets protection. China subsequently amended the Anti-unfair Competition Law, the Foreign Investment

Law and the Administrative Licensing Law, but the amendments still do not fully address critical

shortcomings in the scope of protections and obstacles to enforcement. In 2022, China published additional

draft amendments to the Anti-Unfair Competition Law, but they contain few changes to the law’s trade

secrets provisions.

The Phase One Agreement significantly strengthens protections for trade secrets and enforcement against

trade secret theft in China. In particular, the chapter on intellectual property requires China to expand the

scope of civil liability for misappropriation beyond entities directly involved in the manufacture or sale of

goods and services, to cover acts such as electronic intrusions as prohibited acts of trade secret theft and to

shift the burden of proof in civil cases to the defendants when there is a reasonable indication of trade secret

theft. It also requires China to make it easier to obtain preliminary injunctions to prevent the use of stolen

trade secrets, to allow for initiation of criminal investigations without the need to show actual losses, to

ensure that criminal enforcement is available for willful trade secret misappropriation and to prohibit

government personnel and third party experts and advisors from engaging in the unauthorized disclosure

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of undisclosed information, trade secrets and confidential business information submitted to the

government.

In 2020, China published various measures relating to civil, criminal and administrative enforcement of

trade secrets. In September 2020, the Supreme People’s Court issued the Provisions on Several Issues

Concerning the Application of Law in Civil Cases of Trade Secret Infringement and the Interpretation III

on Several Issues Concerning the Application of Law in Handling Criminal Cases of Infringement of

Intellectual Property Rights. In September 2020, the Supreme People’s Procuratorate (SPP) and the

Ministry of Public Security (MPS) also issued the Decision on Amendment of Docketing for Prosecution

of Criminal Trade Secrets Infringement Cases Standards. These measures relate to issues such as the scope

of liability for trade secret misappropriation, prohibited acts of trade secret theft, preliminary injunctions

and thresholds for initiations of criminal investigations for trade secret theft. In December 2020, the

National People’s Congress passed amendments to the Criminal Law that included changes to the

thresholds for criminal investigation and prosecution and the scope of criminal acts of trade secret theft.

The Criminal Law amendments require revisions to certain previously issued judicial interpretations and

prosecution standards. However, two years after the passage of the Criminal Law amendments, these other

measures remain unchanged, and implementation of the Criminal Law amendments therefore remains

incomplete. The United States will continue to monitor the effectiveness of all of these measures.

Bad Faith Trademark Registration

The continuing registration of trademarks in bad faith in China remains a significant concern. For example,

so-called “trademark squatters” have attempted to take advantage of the fact that a genuine trademark owner

has not yet registered its trademark in China by registering that trademark and then trying to sell it to the

genuine trademark owner. Bad faith trademark registration also occurs when trademarks intending to

deceive or confuse consumers are registered.

At the November 2016 JCCT meeting, China publicly noted the harm that can be caused by bad faith

trademarks and asserted that it was taking further steps to combat bad faith trademark filings. Amendments

to the Trademark Law made in 2019 and subsequent implementing measures require the disallowance of

bad faith trademark applications. However, implementation by China to date suggests that right holders

remain insufficiently protected, as bad faith trademarks remain widespread and problems persist with the

large number of inconsistent decisions and low rate of success for oppositions. As a result of these

deficiencies, U.S. companies across industry sectors continue to face Chinese applicants registering their

marks and “holding them for ransom” or seeking to establish a business building off of U.S. companies’

global reputations. The Phase One Agreement requires China to address longstanding U.S. concerns

regarding bad-faith trademark registration, such as by invalidating or refusing bad faith trademark

applications. The United States will continue to monitor developments in this area of long-standing concern

closely.

Online Infringement

Online piracy continues on a large scale in China, affecting a wide range of industries, including those

involved in distributing legitimate music, motion pictures, books and journals, software and video games.

While increased enforcement activities have helped stem the flow of online sales of some pirated offerings,

much more sustained action and attention is needed to make a meaningful difference for content creators

and right holders, particularly small and medium-sized enterprises. In response to the COVID-19

pandemic, reports indicate that many infringers have moved online to distribute their pirated and counterfeit

goods, which further increases the need for targeted and sustained enforcement measures in the online

environment.

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The United States has urged China to consider ways to create a broader policy environment to help foster

the growth of healthy markets for licensed and legitimate content. The United States has also urged China

to revise existing rules that have proven to be counterproductive.

At the November 2016 JCCT meeting, China agreed to actively promote electronic commerce-related

legislation, strengthen supervision over online infringement and counterfeiting, and work with the United

States to explore the use of new approaches to enhance online enforcement capacity. In December 2016

and November 2017, China published drafts of a new E-Commerce Law for public comment. In written

comments, the United States stressed that the final version of this law should not undermine the existing

notice-and-takedown system and should promote effective cooperation in deterring online infringement. In

August 2018, China adopted its new E-Commerce Law, which entered into force in January 2019. This

law was an opportunity for China to institute strong provisions on intellectual property protection and

enforcement for its electronic commerce market, which is now the largest in the world. However, as

finalized, the law instead introduced provisions that weaken the ability of right holders to protect their rights

online and that alleviate the liability of China-based electronic commerce platforms for selling counterfeit

and other infringing goods.

The Phase One Agreement requires China to provide effective and expeditious action against infringement

in the online environment, including by requiring expeditious takedowns and by ensuring the validity of

notices and counter-notifications. It also requires China to take effective action against electronic

commerce platforms that fail to take necessary measures against infringement.

In May 2020, the National People’s Congress issued the Civil Code, which included updated notice-and-

takedown provisions. In September 2020, the SPC issued Guiding Opinions on Hearing Intellectual

Property Disputes Involving E-Commerce Platform and the Official Reply on the Application of Law in

Network-Related Intellectual Property Infringement Disputes. These measures relate to issues such as

expeditious takedowns and the validity of notices and counter-notifications, but have only recently taken

effect. In November 2020, the National People’s Congress adopted long-pending amendments to the

rights of public performance and broadcasting for producers of sound recordings, and protections against

circumvention of technological protection measures. Right holders have welcomed these developments but

have noted the need for effective implementation as well as new measures to address online piracy. The

United States will closely monitor the impact of these measures going forward.

More recently, in August 2021, the State Administration for Market Regulation (SAMR) issued draft

amendments to the E-Commerce Law for public comment. These draft amendments further attempt to

address concerns that have been raised about procedures and penalties under China’s notice-and-takedown

system.

Counterfeit Goods

Counterfeiting in China remains widespread and affects a wide range of goods. In April 2019, China

amended its Trademark Law, effective November 2019, to require civil courts to order the destruction of

counterfeit goods, but these amendments still do not provide the full scope of civil remedies for right

holders. One of many areas of particular U.S. concern involves medications. Despite years of sustained

engagement by the United States, China still needs to improve its regulation of the manufacture of active

pharmaceutical ingredients to prevent their use in counterfeit and substandard medications. At the July

2014 United States–China Strategic and Economic Dialogue (S&ED) meeting, China committed to develop

and seriously consider amendments to the Drug Administration Law that will require regulatory control of

the manufacturers of bulk chemicals that can be used as active pharmaceutical ingredients. At the June

2015 S&ED meeting, China further committed to publish revisions to the Drug Administration Law in draft

FOREIGN TRADE BARRIERS | 79

form for public comment and to consider the views of the United States and other relevant stakeholders. In

October 2017, China published limited draft revisions to the Drug Administration Law and stated that future

proposed revisions to the remainder of this law would be forthcoming. Although the final Drug

Administration Law, issued in August 2019, requires pharmaceuticals products and active pharmaceutical

ingredients to meet manufacturing standards, it remains unclear how these requirements will be

implemented or enforced.

The Phase One Agreement requires China to take effective enforcement action against counterfeit

pharmaceuticals and related products, including active pharmaceutical ingredients, and to significantly

increase actions to stop the manufacture and distribution of counterfeits with significant health or safety

risks. The agreement also requires China to provide that its judicial authorities shall order the forfeiture

and destruction of pirated and counterfeit goods, along with the materials and implements predominantly

used in their manufacture. In addition, the agreement requires China to significantly increase the number

of enforcement actions at physical markets in China and against goods that are exported or in transit. It

further requires China to ensure, through third party audits, that government agencies and state-owned

enterprises only use licensed software.

In August 2020, SAMR issued the Opinions on Strengthening the Destruction of Infringing and Counterfeit

Goods, and the State Council amended the Provisions on the Transfer of Suspected Criminal Cases by

Administrative Organs for Law Enforcement, which relate to the transfer of intellectual property cases from

administrative authorities to criminal authorities. China has reported increased enforcement actions against

counterfeit medicines and increased customs actions against pirated and counterfeit goods, but it also needs

to show that it has increased enforcement actions against counterfeits with health and safety risks and at

physical markets, increased training of customs personnel and ensured the use of only licensed software in

government agencies and state-owned enterprises.

Indigenous Innovation

Policies aimed at promoting China’s so-called “indigenous innovation” continue to represent an important

component of China’s industrialization efforts. Through intensive, high-level bilateral engagement with

China since 2009, the United States has attempted to address these policies, which provide various

preferences when intellectual property is owned or developed in China, both broadly across sectors of

China’s economy and specifically in the government procurement context.

For example, at the May 2012 S&ED meeting, China committed to treat intellectual property owned or

developed in other countries the same as intellectual property owned or developed in China. The United

States also used the U.S.–China JCCT process in 2012 and subsequent discussions to press China to revise

or eliminate specific measures that appeared to be inconsistent with this commitment. At the December

2014 JCCT meeting, China clarified and underscored that it will treat intellectual property owned or

developed in other countries in the same manner as domestically owned or developed intellectual property.

Once again, however, these commitments were not fulfilled. China continues to pursue myriad policies

that require or favor the ownership or development of intellectual property in China.

The United States secured a series of similar commitments from China in the government procurement

context, where China agreed to de-link indigenous innovation policies at all levels of the Chinese

government from government procurement preferences, including through the issuance of a State Council

measure mandating that provincial and local governments eliminate any remaining linkages by December

2011. Many years later, however, this promise had not been fulfilled. At the November 2016 JCCT

meeting, in response to U.S. concerns regarding the continued issuance of scores of inconsistent measures,

China announced that its State Council had issued a document requiring all agencies and all sub-central

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governments to “further clean up related measures linking indigenous innovation policy to the provision of

government procurement preference.”

Over the years, the underlying thrust of China’s indigenous innovation policies has remained unchanged,

as China’s leadership has continued to emphasize the necessity of advancing indigenous innovation

capabilities. Through plans such as the 14th Five-Year Plan for the Protection and Utilization of National

Intellectual Property Rights, China has continued to implement discriminatory policies encouraging

“indigenous intellectual property rights” and “core technologies” that are owned or developed in China.

Accordingly, USTR has been using mechanisms like a Section 301 investigation to seek to address, among

other things, China’s use of indigenous innovation policies to force or pressure foreigners to own or develop

their intellectual property in China.

SERVICES BARRIERS

Overview

The prospects for U.S. service suppliers in China should be promising, given the size of China’s market.

Nevertheless, the U.S. share of China’s services market remains well below the U.S. share of the global

services market, and the Organization for Economic Cooperation and Development continues to rate

China’s services regime as one of the most restrictive among the world’s major economies.

In 2022, numerous challenges persisted in a number of services sectors. As in past years, Chinese regulators

continued to use discriminatory regulatory processes, informal bans on entry and expansion, case-by-case

approvals in some services sectors, overly burdensome licensing and operating requirements, and other

means to frustrate the efforts of U.S. suppliers of services to achieve their full market potential in China.

These policies and practices affect U.S. service suppliers across a wide range of sectors, including cloud

computing, telecommunications, film production and distribution, online video and entertainment services,

express delivery and legal services. In addition, China’s Cybersecurity Law and related implementing

measures include mandates to purchase domestic information and communication technology (ICT)

products and services, while China’s Cybersecurity Law, Data Security Law and Personal Information

Protection Law and related implementing measures include excessive restrictions on cross-border data

flows, and requirements to store and process data locally. These types of data measures undermine U.S.

services suppliers’ ability to take advantage of market access opportunities in China by prohibiting or

severely restricting cross-border transfers of information that are routine in the ordinary course of business

and are fundamental to any business activity. China also has failed to fully address U.S. concerns in areas

that have been the subject of WTO dispute settlement, including electronic payment services and theatrical

film importation and distribution.

The Phase One Agreement, signed in January 2020, addresses a number of longstanding trade and

investment barriers to U.S. providers of a wide range of financial services, including banking, insurance,

securities, asset management, credit rating and electronic payment services, among others. The barriers

addressed in the agreement include joint venture requirements, foreign equity limitations and various

discriminatory regulatory requirements. Removal of these barriers should allow U.S. financial service

providers to compete on a more level playing field and expand their services export offerings in the China

market. Nevertheless, China’s excessive restrictions on cross-border data flows could continue to create

significant challenges for U.S. financial service providers in China.

Banking Services

Although China has opened its banking sector to foreign competition in the form of wholly foreign-owned

banks, China has maintained restrictions on market access in other ways that have kept foreign banks from

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establishing, expanding and obtaining significant market share in China. Recently, however, China has

taken some steps to ease or remove market access restrictions.

For example, China has removed a number of long-standing barriers for foreign banks, including the $10

billion minimum asset requirement for establishing a foreign bank in China and the $20 billion minimum

asset requirement for setting up a Chinese branch of a foreign bank. China has also removed the cap on the

equity interest that a single foreign investor can hold in a Chinese-owned bank.

In the Phase One Agreement, China committed to remove some of these barriers and to expand

opportunities for U.S. financial institutions, including bank branches, to supply securities investment fund

custody services by considering their global assets when they seek licenses. China also agreed to review

and approve qualified applications by U.S. financial institutions for securities investment fund custody

licenses on an expeditious basis. One U.S. bank was approved for this license in 2021. In addition, China

committed to consider the international qualifications of U.S. financial institutions when evaluating license

applications for Type-A lead underwriting services for all types of non-financial debt instruments in China.

Securities, Asset Management, and Futures Services

In the Phase One Agreement, China committed to remove the foreign equity caps in the securities, asset

management and futures sectors by no later than April 1, 2020. It also committed to ensure that U.S.

suppliers of securities, asset management and futures services are able to access China’s market on a non-

discriminatory basis, including with regard to the review and approval of license applications.

Consistent with its commitments in the Phase One Agreement, China announced that it would allow wholly

foreign-owned companies for the securities and asset (i.e., fund) management sectors as of April 1, 2020,

and that it would allow wholly foreign-owned companies for the futures sector as of January 1, 2020. Prior

to these announcements, China had maintained a foreign equity cap of 51 percent for these sectors. Over

the past three years, some U.S. financial institutions have applied for and received licenses to operate as

wholly foreign-owned enterprises in these sectors. The United States is monitoring these and other

developments as U.S. companies continue to seek to obtain licenses and undertake operations in these

sectors.

Insurance Services

In the Phase One Agreement, China committed to accelerate the removal of the foreign equity caps for life,

pension and health insurance so that they are removed no later than April 1, 2020. In addition, it confirmed

the removal of the 30-year operating requirement, known as a “seasoning” requirement, which had been

applied to foreign insurers seeking to establish operations in China in all insurance sectors. China also

committed to remove all other discriminatory regulatory requirements and processes and to expeditiously

review and approve license applications.

Consistent with China’s commitments in the Phase One Agreement, the China Banking and Insurance

Regulatory Commission (CBIRC) announced that China would allow wholly foreign-owned companies for

the life, pension and health insurance sectors as of January 1, 2020. Prior to this announcement, China had

maintained foreign equity caps and only permitted foreign companies to establish as Chinese-foreign joint

ventures in these sectors. In December 2020, CBIRC issued a measure that provided further transparency

regarding its intention to allow foreign-invested companies to take advantage of this opening.

In other insurance sectors, the United States continues to encourage China to establish more transparent

procedures so as to better enable foreign participation in China’s market. Sectors in need of more

transparency include export credit insurance and political risk insurance.

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Finally, some U.S. insurance companies established in China have encountered difficulties in getting the

CBIRC to issue timely approvals of their requests to open up new internal branches to expand their

operations. The United States continues to urge CBIRC to issue timely approvals when U.S. insurance

companies seek to expand their branch networks in China.

Electronic Payment Services

In a WTO case that it launched in 2010, the United States challenged China’s restrictions on foreign

companies, including major U.S. credit and debit card processing companies, which had been seeking to

supply electronic payment services to banks and other businesses that issue or accept credit and debit cards

in China. The United States argued that China had committed in its WTO accession agreement to open up

this sector in 2006, and a WTO panel agreed with the United States in a decision issued in 2012. China

subsequently agreed to comply with the WTO panel’s rulings in 2013, but China did not allow foreign

suppliers to apply for licenses until June 2017, when China’s regulator, the People’s Bank of China (PBOC),

finalized the establishment of a two-step licensing process in which a supplier must first complete one year

of preparatory work before being able to apply for a license.

As of January 2020, when the United States and China entered into the Phase One Agreement, no foreign

supplier of electronic payment services had been able to secure the license needed to operate in China’s

market due largely to delays caused by PBOC. At times, PBOC had refused even to accept applications to

begin preparatory work from U.S. suppliers, the first of two required steps in the licensing process.

Meanwhile, throughout the years that China actively delayed opening up its market to foreign suppliers,

China’s national champion, China Union Pay, has used its exclusive access to domestic currency

transactions in the China market, and the revenues that come with it, to support its efforts to build out its

electronic payment services network abroad, including in the United States. In other words, China

consciously decided to maintain market-distorting practices that benefit its own companies, even in the face

of adverse rulings at the WTO.

In the Phase One Agreement, China committed to ensure that PBOC operates an improved and timely

licensing process for U.S. suppliers of electronic payment services so as to facilitate their access to China’s

market.

In June 2020, four months after the entry into force of the Phase One Agreement, American Express became

the first foreign supplier of electronic payment services to secure a license to operate in China’s market.

Meanwhile, the United States continues to closely monitor developments as applications from two other

U.S. suppliers, Visa and MasterCard, are progressing slowly through PBOC’s licensing process.

Internet-Enabled Payment Services

PBOC first issued regulations for non-bank suppliers of online payment services in 2010, and it

subsequently began processing applications for licensees. Regulations were further strengthened in 2015,

with additional provisions aimed at increasing security and traceability of transactions. According to a U.S.

industry report, of more than 200 licenses issued as of June 2014, only two had been issued to foreign-

invested suppliers, and those two were for very limited services. This report provided clear evidence

supporting stakeholder concerns about the difficulties they faced entering China’s market and the slow

process foreign firms face in getting licensed. In 2018, PBOC announced that it would allow foreign

suppliers, on a nondiscriminatory basis, to supply Internet-enabled payment services. At the same time,

as in many other sectors, PBOC requires suppliers to localize their data and facilities in China. In January

2021, PayPal became the first foreign company to obtain full ownership of a payment platform in China,

FOREIGN TRADE BARRIERS | 83

along with a license to supply payment services. The United States will continue to closely monitor

developments in this area.

Telecommunications Services

China’s restrictions on basic telecommunications services, such as informal bans on new entry, a 49-percent

foreign equity cap, a requirement that foreign suppliers can only enter into joint ventures with state-owned

enterprises and exceedingly high capital requirements, have blocked foreign suppliers from accessing

China’s basic telecommunications services market. Since China acceded to the WTO almost two decades

ago, not a single foreign firm has succeeded in establishing a new joint venture to enter this sector.

Restrictions maintained by China on less highly regulated value-added telecommunications services also

have created serious barriers to market entry for foreign suppliers seeking to enter this sector. These

restrictions include opaque and arbitrary licensing procedures, foreign equity caps and periodic, unjustified

moratoria on the issuance of new licenses. As a result, only a few dozen foreign-invested suppliers have

secured licenses to provide value-added telecommunications services, while there are thousands of licensed

domestic suppliers.

Internet Regulatory Regime

China’s Internet regulatory regime is restrictive and non-transparent, affecting a broad range of commercial

services activities conducted via the Internet, and is overseen by multiple agencies without clear lines of

jurisdiction. China’s Internet economy has boomed over the past decade and is second in size only to that

of the United States. Growth in China has been marked in service sectors similar to those found in the

United States, including retail websites, search engines, vocational and adult online education, travel,

advertising, audio-visual and computer gaming services, electronic mail and text, online job searches,

Internet consulting, mapping services, applications, web domain registration and electronic trading.

However, in the China market, Chinese companies dominate due in large part to restrictions imposed on

foreign companies by the Chinese Government. At the same time, foreign companies continue to encounter

major difficulties in attempting to offer these and other Internet-based services on a cross-border basis.

China continues to engage in extensive blocking of legitimate websites, imposing significant costs on both

suppliers and users of web-based services and products. According to the latest data, China currently blocks

most of the largest global sites, and U.S. industry research has calculated that more than 10,000 sites are

blocked, affecting billions of dollars in business, including communications, networking, app stores, news

and other sites. Even when sites are not permanently blocked, the often arbitrary implementation of

blocking, and the performance-degrading effect of filtering all traffic into and outside of China,

significantly impair the supply of many cross-border services, often to the point of making them unviable.

Voice over Internet Protocol Services

While computer-to-computer Voice over Internet Protocol (VOIP) services are permitted in China, China’s

regulatory authorities have restricted the ability to offer VOIP services interconnected to the public

switched telecommunications network (i.e., to call a traditional phone number) to basic telecommunications

service licensees. There is no obvious rationale for such a restriction, which deprives consumers of a useful

communication option, and the United States continues to advocate for eliminating it.

Cloud Computing Services

Especially troubling is China’s treatment of foreign companies seeking to participate in the development

of cloud computing services, including computer data processing and storage services and software

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application services provided over the Internet. China prohibits foreign companies established in China

from directly providing any of these services. Given the difficulty in providing these services on a cross-

border basis (largely due to restrictive Chinese policies), the only option that a foreign company has to

access the China market is to establish a contractual partnership with a Chinese company, which is the

holder of the necessary Internet data center license, and turn over its valuable technology, intellectual

property, know-how and branding as part of this arrangement. While the foreign service supplier earns a

licensing fee from the arrangement, it has no direct relationship with customers in China and no ability to

independently develop its business. It has essentially handed over its business to a Chinese company that

may well become a global competitor. This treatment has generated serious concerns in the United States

and among other WTO Members as well as U.S. and other foreign companies.

In major markets, including China, cloud computing services are typically offered through commercial

presence in one of two ways. They are offered as an integrated service in which the owner and operator of

a telecommunication network also offers computing services, including data storage and processing

function, over that network, or they are offered as a stand-alone computer service, with connectivity to the

computing service site provided separately by a telecommunications service supplier. Although China’s

commitments under the WTO General Agreement on Trade in Services (GATS) include services relevant

to both of these approaches, neither one is currently open to foreign-invested companies in China.

Audio-Visual and Related Services

China prohibits foreign companies from providing film production and distribution services in China. In

addition, China’s restrictions in the area of theater services have wholly discouraged investment by foreign

companies in cinemas in China.

China’s restrictions on services associated with television and radio greatly limit participation by foreign

suppliers. For example, China prohibits retransmission of foreign TV channels, foreign investment in TV

production and foreign investment in TV stations and channels. China also imposes quotas on the amount

of foreign programming that can be shown on a Chinese TV channel each day. In addition, in September

2018, the National Radio and Television Administration (NRTA) issued a problematic draft measure that

would impose new restrictions in China’s already highly restricted market for foreign creative content. It

would require that spending on foreign content account for no more than 30 percent of available total

programs in each of several categories, including foreign movies, TV shows, cartoons, documentaries and

other foreign TV programs, made available for display via broadcasting institutions and online audio-visual

content platforms. It also would prohibit foreign TV shows in prime time. Although this measure has not

yet been issued in final form, it continues to raise serious concerns, as it appears that, as a matter of practice,

it is already being implemented in China, including by online audio-visual content platforms.

Theatrical Films

In February 2012, the United States and China reached an alternative resolution with regard to certain

rulings relating to the importation and distribution of theatrical films in a WTO case that the United States

had won. The two sides signed a memorandum of understanding (MOU) providing for substantial increases

in the number of foreign films imported and distributed in China each year, along with substantial additional

revenue for U.S. film producers. However, China has not yet fully implemented its MOU commitments,

including with regard to critical commitments to open up film distribution opportunities for imported films.

As a result, the United States has been pressing China for full implementation of the MOU.

In 2017, in accordance with the terms of the MOU, the two sides began discussions regarding the provision

of further meaningful compensation to the United States in an updated MOU. These discussions continued

until March 2018, before stalling when China embarked on a major government reorganization that

FOREIGN TRADE BARRIERS | 85

involved significant changes for China’s Film Bureau. Discussions resumed in 2019 as part of the broader

U.S.–China trade negotiations that began following a meeting between the two countries’ Presidents on the

margins of the Group of 20 Heads of State and Government Summit in Buenos Aires in December 2018.

To date, no agreement has been reached on the further meaningful compensation that China owes to the

United States. The United States will continue pressing China to fulfill its obligations.

Online Video and Entertainment Services

China restricts the online supply of foreign video and entertainment services through measures affecting

both content and distribution platforms. China requires foreign companies to license their content to

Chinese companies and also imposes burdensome restrictions on content, which are implemented through

exhaustive content review requirements that are based on vague and otherwise non-transparent criteria.

With respect to distribution platforms, NRTA has required Chinese online platform suppliers to spend no

more than 30 percent of their acquisition budget on foreign content. NRTA has also instituted numerous

measures that prevent foreign suppliers from qualifying for a license, such as requirements that video

platforms all be Chinese-owned. NRTA and other Chinese regulatory authorities have also taken actions

to prevent the cross-border supply of online video services, which may implicate China’s GATS

commitments relating to video distribution.

Legal Services

China restricts the types of legal services that can be provided by foreign law firms, including through a

prohibition on foreign law firms hiring lawyers qualified to practice Chinese law. It also restricts the ability

of foreign law firms to represent their clients before Chinese Government agencies and imposes lengthy

delays on foreign law firms seeking to establish new offices. In addition, beginning with the version of

China’s Foreign Investment Negative List that entered into force in July 2020, China has added an explicit

prohibition on the ability of a foreign lawyer to become a partner in a domestic law firm. Reportedly, China

is also considering draft regulatory measures that would even further restrict the ability of foreign law firms

to operate in China.

Express Delivery Services

The United States continues to have concerns regarding China’s implementation of the 2009 Postal Law

and related regulations through which China prevents foreign service suppliers from participating in the

document segment of its domestic express delivery market. In the package segment, China applies overly

burdensome and inconsistent regulatory approaches, including with regard to security inspections, and

reportedly has provided more favorable treatment to Chinese service suppliers when awarding business

permits.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Data Restrictions

In 2022, China continued to build out its expansive regulation of the collection, storage, processing and

sharing of data. China’s Data Security Law entered into force in September 2021, and China’s Personal

Information Protection Law entered into force in November 2021. These laws operate together with the

Cybersecurity Law, which took effect in June 2017, the National Security Law, which has been in effect

since 2015, and various implementing measures, including the Security Assessment Measures for Outbound

Transfers of Data, which took effect in September 2022, to prohibit or severely restrict cross-border

transfers of “important data,” a broadly and vaguely defined term, and, in certain cases, personal

information collected by companies through their operations in China. These laws and implementing

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measures also impose local data storage and processing requirements on companies operating in China that

collect “important data” and, in certain cases, personal information. Cross-border transfers of data are

routine in the ordinary course of business and are fundamental to any business activity. Given the wide

range of businesses and business activities that are dependent on cross-border transfers of data and flexible

access to global computing facilities, these developments continue to generate serious concerns in the

United States and many other countries.

Secure and Controllable Information and Communications Technology Policies

Implementing measures for China’s Cybersecurity Law remain a continued source of serious concern for

U.S. companies since the law’s enactment in 2016. Of particular concern are the Measures for

Cybersecurity Review, first issued in 2016 and later updated in 2020 and 2021. This measure implements

one element of the cybersecurity regime created by the Cybersecurity Law. Specifically, the measure puts

in place a review process to regulate the purchase of ICT products and services by critical information

infrastructure operators and online platform operators in China. The review process is to consider, among

other things, potential national security risks related to interruption of service, data leakage and reliability

of supply chains. In addition, in September 2022, China published a draft revision of the Cybersecurity

Law with a 15-day public comment period. The draft revision would introduce penalties on operators of

critical information infrastructure who use products or services that have not undergone the required

security review, and it would also raise fines for certain violations of the Cybersecurity Law.

As demonstrated in implementing measures for the Cybersecurity Law, China’s approach is to impose

severe restrictions on a wide range of U.S. and other foreign ICT products and services with an apparent

goal of supporting China’s technology localization policies by encouraging the replacement of foreign ICT

products and services with domestic ones. U.S. and other foreign stakeholders and governments around

the world expressed serious concerns about requirements that ICT equipment and other ICT products and

services in critical sectors be “secure and controllable,” as these requirements are used by the Chinese

government to disadvantage non-Chinese firms.

In addition to the Cybersecurity Law, China has referenced its “secure and controllable” requirements in a

variety of measures dating back to 2013. Through these measures, China has mandated that Chinese

information technology users purchase Chinese products and favor Chinese service suppliers, imposed local

content requirements, imposed domestic research and development (R&D) requirements, considered the

location of R&D as a cybersecurity risk factor and required the transfer or disclosure of source code or

other intellectual property. In the 2019 update of the Measures for Cybersecurity Review, China added

political, diplomatic and other “non-market” developments as potential risk factors to be considered.

In addition, in 2015, China enacted a National Security Law and a Counterterrorism Law, which include

provisions citing not only national security and counterterrorism objectives but also economic and industrial

policies. The State Council also published a plan in 2015 that sets a timetable for adopting “secure and

controllable” products and services in critical government ministries by 2020.

Meanwhile, sector-specific policies under this broad framework continue to be proposed and deployed

across China’s economy. A high-profile example from December 2014 was a proposed measure drafted

by the China Banking Regulatory Commission that called for 75 percent of ICT products used in the

banking system to be “secure and controllable” by 2019 and that would have imposed a series of criteria

that would shut out foreign ICT providers from China’s banking sector. Not long afterwards, a similar

measure was proposed for the insurance sector.

In 2015, the United States, in concert with other governments and stakeholders around the world, raised

serious concerns about China’s “secure and controllable” regime at the highest levels of government within

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China. During a state visit in September 2015 in Washington, D.C., the U.S. and Chinese Presidents

committed to a set of principles for trade in information technologies. The issue also was raised in

connection with the June 2015 S&ED meeting and the November 2015 JCCT meeting, with China making

a series of additional important commitments with regard to technology policy. China reiterated many of

these commitments at the November 2016 JCCT meeting, where it affirmed that its “secure and

controllable” policies are not to unnecessarily limit or prevent commercial sales opportunities for foreign

ICT suppliers or unnecessarily impose nationality-based conditions and restrictions on commercial ICT

purchases, sales or uses. China also agreed that it would notify relevant technical regulations to the WTO

TBT Committee.

Again, however, China has not honored its promises. The numerous draft and final implementation

measures issued by China from 2017 through 2022 in the area of cybersecurity raise serious questions about

China’s approach to cybersecurity regulation. China’s measures do not appear to be in line with the non-

discriminatory, non-trade restrictive approach to which China has committed, and global stakeholders have

grown even more concerned about the implications of China’s ICT security measures across the many

economic sectors that employ digital technologies. Accordingly, throughout the past year, the United States

conveyed its serious concerns about China’s approach to cybersecurity regulation through bilateral

engagement and multilateral engagement, including at WTO committee and council meetings, in an effort

to persuade China to revise its policies in this area in light of its WTO obligations and bilateral

commitments. These efforts are currently ongoing.

Encryption

Use of ICT products and services is increasingly dependent on robust encryption, an essential functionality

for protecting privacy and safeguarding sensitive commercial information. Onerous requirements on the

use of encryption, including intrusive approval processes and, in many cases, mandatory use of indigenous

encryption algorithms (e.g., for wireless and fourth generation cellular products), continue to be cited by

stakeholders as a significant trade barrier.

In October 2019, China adopted a Cryptography Law that includes restrictive requirements for commercial

encryption products that “involve national security, the national economy and people’s lives, and public

interest,” which must undergo a security assessment. This broad definition of commercial encryption

products that must undergo a security assessment raises concerns that the new Cryptography Law will lead

to unnecessary restrictions on foreign ICT products and services. In August 2020, the State Cryptography

Administration issued the draft Commercial Cryptography Administrative Regulations to implement the

Cryptography Law. This draft measure did not address the concerns that the United States and numerous

other stakeholders had raised regarding the Cryptography Law.

Going forward, the United States will continue to monitor implementation of the Cryptography Law and

related measures. The United States will remain vigilant toward the introduction of any new requirements

hindering technologically neutral use of robust, internationally standardized encryption.

INVESTMENT BARRIERS

China seeks to protect many domestic industries through a restrictive investment regime. Many aspects of

China’s current investment regime continue to cause serious concerns for foreign investors. For example,

China’s Foreign Investment Law and implementing regulations, both of which entered into force in January

2020, perpetuate separate regimes for domestic investors and investments and foreign investors and

investments and invite opportunities for discriminatory treatment.

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There has also been a lack of substantial liberalization of China’s investment regime, evidenced by the

continued application of prohibitions, foreign equity caps and joint venture requirements and other

restrictions in certain sectors. China’s most recent version of its Foreign Investment Negative List, which

entered into force in January 2022, leaves in place significant investment restrictions in a number of areas

important to foreign investors, such as key services sectors, agriculture, certain extractive industries and

certain manufacturing industries. With regard to services sectors in particular, China maintains prohibitions

or restrictions in key sectors such as cloud computing services and other Internet-related services,

telecommunications services, film production and film distribution services, and video and entertainment

software services.

China’s Foreign Investment Law, implementing regulations and other related measures suggest that China

is pursuing the objective of replacing its case-by-case administrative approval system for a broad range of

investments with a system that would only be applied to “restricted” sectors. However, it currently remains

unclear whether China is fully achieving that objective in practice. Moreover, even for sectors that have

been liberalized, the potential for discriminatory licensing requirements or the discriminatory application

of licensing processes could make it difficult to achieve meaningful market access. In addition, the potential

for a new and overly broad national security review mechanism, and the increasingly adverse impact of

China’s Cybersecurity Law, Data Security Law and Personal Information Protection Law and related

implementing measures, including ones that unduly restrict cross-border data flows and impose data

localization requirements, have serious negative implications for foreign investors and investments.

Foreign companies also continue to report that Chinese Government officials may condition investment

approval on a requirement that a foreign company transfer technology, conduct R&D in China, satisfy

performance requirements relating to exportation or the use of local content or make valuable, deal-specific

commercial concessions.

Over the years, the United States has repeatedly raised concerns with China about its restrictive investment

regime. Given that China’s investment restrictions place pressure on U.S. companies to transfer technology

to Chinese companies, they were a focus of USTR’s Section 301 investigation. The responsive actions

taken by the United States in that investigation are intended in part to address this concern.

SUBSIDIES

Industrial Subsidies

China continues to provide massive subsidies to its domestic industries, which have caused injury to U.S.

industries. Some of these subsidies also appear to be prohibited under WTO rules. To the extent possible,

the United States has sought to address these subsidies through countervailing duty proceedings conducted

by the Commerce Department and dispute settlement cases at the WTO.

The United States and other WTO Members also have continued to press China to notify all of its subsidies

to the WTO in accordance with its WTO obligations while also submitting counter notifications listing

hundreds of subsidy programs that China has failed to notify. China’s WTO subsidy notifications have

marginally improved over the years in terms of timeliness and completeness. Nevertheless, since joining

the WTO more than 20 years ago, China has not yet submitted to the WTO a complete notification of

subsidies maintained by the central government, and it did not notify a single sub-central government

subsidy until July 2016, when it provided information largely only on sub-central government subsidies

that the United States had challenged as prohibited subsidies in a WTO case.

The United States began working with the EU and Japan in 2018 to identify further effective action and

potential rules that could address problematic subsidies practices not currently covered by existing

obligations. In January 2020, the trade ministers of the United States, the EU, and Japan issued a statement

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agreeing to strengthen the WTO subsidy rules by: (1) prohibiting certain egregious types of subsidies; (2)

requiring the subsidizing country to demonstrate for other distortive subsidy types that the subsidy provided

did not cause adverse effects; (3) building upon the existing “serious prejudice” rules; (4) putting some

teeth into the notification rules; and, (5) developing a new definition of what constitutes a “public body.”

In November 2021, the trade ministers of the United States, the EU and Japan renewed their commitment

to work together, including with regard to the identification of areas where further work is needed to develop

new tools and other measures to address non-market policies and practices. Since then, the United States,

the EU, and Japan have also been working together at the staff level to uncover China’s subsidies practices

in specific sectors, such as the semiconductors sector.

Agricultural Domestic Support

For several years, China has been significantly increasing domestic subsidies and other support measures

for its agricultural sector. China maintains direct payment programs, minimum support prices for basic

commodities and input subsidies. China has implemented a cotton reserve system, based on minimum

purchase prices, and cotton target price programs. In 2016, China established subsidies for starch and

ethanol producers to incentivize the purchase of domestic corn, resulting in higher volumes of exports of

processed corn products from China in 2017 and 2018. In addition, in 2022, China began encouraging

soybean production through various support programs, such as through increased subsidies for crop

rotations, awards to counties with high oilseed production, incentives to promote the intercropping of corn

and soybeans, and subsidies for “demonstration farming” of soybeans on alkali and saline-affected soil.

China submitted a notification concerning domestic support measures to the WTO in May 2015, but it only

provided information up to 2010. In December 2018, China notified domestic support measures for the

period 2011-2016. This notification showed that China had exceeded its de minimis level of domestic

support for soybeans (in 2012, 2014 and 2015), cotton (from 2011 to 2016), corn (from 2013 to 2016),

rapeseed (from 2011 to 2013) and sugar (2012). The situation was likely even worse, as the methodologies

used by China to calculate domestic support levels result in underestimates. Moreover, the support

programs notified by China seemingly failed to account for support given at the sub-national level by

provincial and local governments and, possibly, support administered through state-owned enterprises.

Most recently, on December 14, 2022, China notified domestic support levels for 2017 through 2020 and

agricultural export subsidy measures for 2020 and 2021. These notifications continue to generate concerns

about China’s support measures.

In September 2016, the United States launched a WTO case challenging China’s government support for

the production of wheat, corn and rice as being in excess of China’s commitments. Like other WTO

Members, China committed to limit its support for producers of agricultural commodities. China’s market

price support programs for wheat, corn and rice appear to provide support far exceeding the agreed-upon

levels. This excessive support creates price distortions in global markets and skews the playing field against

U.S. farmers. In October 2016, consultations took place. In January 2017, a WTO panel was established

to hear the case. Hearings before the panel took place in January and April 2018, and the panel issued its

decision in February 2019, ruling that China’s domestic support for wheat and rice was WTO-inconsistent.

China originally agreed to come into compliance with the panel’s recommendations by March 31, 2020.

The United States subsequently agreed to extend this deadline to June 30, 2020. In July 2020, the United

States submitted a request for authorization to suspend concessions and other obligations pursuant to Article

22 of the DSU on the ground that China had failed to bring its measures into compliance with its WTO

obligations. After China objected to this request, the matter was referred to arbitration in accordance with

Article 22 of the DSU. The arbitration is currently suspended, and the United States continues to closely

monitor the operation of China’s market price support programs for wheat and rice.

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Fisheries Subsidies

It is estimated that China is the world’s largest provider of harmful fisheries subsidies, with support

exceeding $4 billion annually. These subsidies contribute to overfishing and overcapacity that threatens

global fish stocks. Indeed, China is the world’s largest producer of marine capture fisheries and, in the

years since its WTO accession, has continued to support its fishing fleet through subsidies and other market-

distorting means. China’s annual fisheries harvest is nearly double that of the next largest producer in the

world in terms of marine capture and triple that of other top producers, like the United States, India and

Japan. At the same time, reports continue to emerge about Chinese-flagged fishing vessels engaging in

illegal, unreported and unregulated (IUU) fishing in distant waters, including in areas under the jurisdiction

of other WTO Members. While China has made some progress in reducing subsidies to domestic fisheries,

it continues to shift its overcapacity to international fisheries by providing a much higher rate of subsidy

support to Chinese distant water fishery enterprises.

For several years, the United States has been raising its long-standing concerns over China’s fisheries

subsidies programs. In 2015, the United States submitted a written request for information pursuant to

Article 25.8 of the WTO Agreement on Subsidies and Countervailing Measures (Subsidies Agreement).

This submission addressed fisheries subsidies provided by China at central and sub-central levels of

government. The subsidies at issue were set forth in nearly 40 measures and included a wide range of

subsidies, including fishing vessel acquisition and renovation grants, grants for new fishing equipment,

subsidies for insurance, subsidized loans for processing facilities, fuel subsidies and the preferential

provision of water, electricity and land. When China did not respond to this request, the United States

submitted an Article 25.10 counter notification covering these same measures. More recent subsidy

notifications by China have been more fulsome, but still incomplete.

In addition, the United States has long been an active and constructive participant in the WTO fisheries

subsidies negotiations, pressing for a meaningful outcome to prohibit the most harmful types of fisheries

subsidies. The United States and various like-minded WTO Members have put forward several proposals

designed to achieve an ambitious outcome for those negotiations. Notably, in June 2022, WTO Members

adopted the text of the WTO Agreement on Fisheries Subsidies, which includes several important

disciplines, including prohibitions on subsidies to vessels or operators engaged in IUU fishing, subsidies to

fishing regarding stocks that are overfished and subsidies to fishing on the unregulated high seas. This

agreement also contains robust transparency provisions to strengthen WTO Members’ subsidy notifications

and to enable effective monitoring of WTO Members’ implementation of their obligations. The agreement

will enter into force when it has been accepted by two-thirds of WTO Members.

Going forward, the United States will continue to investigate the full extent of China’s fisheries subsidies

and will continue to press China to fully comply with its relevant WTO subsidy obligations. The United

States also will urge WTO Members to support additional, ambitious disciplines on harmful fisheries

subsidies as part of the further WTO negotiations on fisheries subsidies.

Excess Capacity

Because of its state-led approach to the economy, China is the world’s leading offender in creating non-

market capacity, as evidenced by the severe and persistent excess capacity situations in several industries.

China is also well on its way to creating severe excess capacity in other industries through its pursuit of

industrial plans such as Made in China 2025, pursuant to which the Chinese Government is doling out

hundreds of billions of dollars to support Chinese companies and requiring them to achieve preset targets

for domestic market share––at the expense of imports––and global market share in each of 10 advanced

manufacturing industries.

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In manufacturing industries such as steel and aluminum, China’s economic planners have contributed to

massive excess capacity in China through various government support measures. For steel, the resulting

over-production has distorted global markets, harming U.S. workers and manufacturers in both the U.S.

market and third country markets, where U.S. exports of steel products compete with exports from China.

This over-production has similarly harmed the workers and manufacturers of many of the United States’

allies and partners. While China has publicly acknowledged excess capacity in these industries, among

others, it has yet to take meaningful steps to address the root causes of this problem in a sustainable way.

From 2000 to 2021, China accounted for 71 percent of global steelmaking capacity growth, an increase

well in excess of the increase in global and Chinese demand over the same period. Currently, China’s

capacity represents about one-half of global capacity and more than twice the combined steelmaking

capacity of the EU, Japan, the United States and Brazil.

At the same time, China’s steel production is continually reaching new highs, eclipsing demand. In 2020,

China’s steel production climbed above one billion metric tons for the first time, reaching 1,065 million

metric tons, a seven percent increase from 2019, and remained high at 1,033 million metric tons in 2021,

despite a significant contraction in domestic steel demand. This sustained ballooning of greenhouse gas

(GHG) emissions-intensive steel production, combined with weakening economic growth and a slowdown

in the Chinese construction sector, has flooded the global market with excess steel supply at a time when

the steel sector outside of China is still recovering from the severe demand shock brought on by the COVID-

19 pandemic and the ongoing effects of Russia’s war of aggression against Ukraine. In 2021, China

exported more steel than the world’s second and third largest steel producers, India and Japan, combined.

Today, China remains by far the world’s largest exporter of steel.

Similarly, primary aluminum production capacity in China increased by more than 1,400 percent between

2000 and 2021, with China accounting for more than 80 percent of global capacity growth during that

period. Much of this capacity addition has been built with government support, has taken place during

periods of decline in global aluminum prices and relies on GHG emissions-intensive sources of electricity.

China’s primary aluminum capacity now accounts for more than 57 percent of global capacity and is more

than double the capacity of the next ten aluminum-producing countries combined. As in the steel sector,

China’s aluminum production has also ballooned in recent years, as China’s aluminum production has

continued to increase despite global demand shocks. China’s capacity and production continue to

contribute to major imbalances and price distortions in global markets, harming U.S. aluminum producers

and workers.

Excess capacity in China hurts various U.S. workers and industries not only through direct exports from

China to the United States, but also through its impact on global prices and supply, which makes it difficult

for competitive manufacturers throughout the world to remain viable. Indeed, domestic industries in many

of China’s trading partners continue to petition their governments to impose trade measures to respond to

the trade-distortive effects of China’s excess capacity. In addition, the United States has acted under Section

232 of the Trade Expansion Act of 1962 (19 U.S.C. §1862) to increase import duties on steel and aluminum

products after finding that excessive imports are a threat to U.S. national security.

ANTICOMPETITIVE PRACTICES

In March 2018, as part of a major government reorganization, China announced the creation of the SAMR,

a new agency that incorporated the former anti-monopoly enforcement authorities from the NDRC,

Ministry of Commerce (MOFCOM) and the State Administration of Industry and Commerce (SAIC) into

one of its bureaus. It had been hoped that more centralized anti-monopoly enforcement would lead to policy

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adjustments that address the serious concerns raised by the United States and other WTO Members in this

area, but to date it does not appear to have led to significant policy adjustments.

In November 2021, China elevated the status of SAMR’s anti-monopoly bureau, by designating a vice

minister as its official-in-charge and re-naming it the National Anti-monopoly Bureau. It remains to be

seen how this elevated status will impact anti-monopoly policy enforcement in China.

In June 2022, the National People’s Congress Standing Committee passed amendments to the Anti-

Monopoly Law. These amendments gave SAMR expanded authority to evaluate and investigate potential

anti-competitive behavior, as well as the authority to impose higher fines, up to 50 percent of an alleged

violator’s annual sales, in order to punish actions determined to be anti-competitive.

As previously reported, China’s implementation of the Anti-monopoly Law has generated various concerns.

A key concern is the extent to which the Anti-monopoly Law is applied to foreign companies as opposed

to state-owned enterprises. While Chinese regulatory authorities have clarified that the Anti-monopoly

Law does apply to state-owned enterprises, to date they have brought enforcement actions primarily against

provincial government-level state-owned enterprises, rather than central government-level state-owned

enterprises under the supervision of the State-owned Asset Supervision and Administration Commission

(SASAC). In addition, provisions in the Anti-monopoly Law protect the lawful operations of state-owned

enterprises and government monopolies in industries deemed nationally important. Many U.S. companies

have cited selective enforcement of the Anti-monopoly Law against foreign companies seeking to do

business in China as a major concern, and they have highlighted the comparatively limited enforcement of

this law against state-owned enterprises.

Another concern expressed by U.S. industry is that remedies imposed on U.S. and other foreign-owned

companies in merger cases do not always appear to be aimed at restoring competition. Instead, these

remedies seem to be designed to further China’s industrial policy goals, such as when the regulatory

authorities seek to require the transfer of technology or a reduction in licensing fees for intellectual property.

U.S. industry has also expressed concern about insufficient predictability, procedural fairness and

transparency in Anti-monopoly Law investigative processes of foreign companies. For example, U.S.

industry reports that, through the threat of steep fines and other penalties, China’s regulatory authorities

have pressured foreign companies to “cooperate” in the face of unspecified allegations and have

discouraged or prevented foreign companies from bringing counsel to meetings. In addition, U.S.

companies continue to report that the Chinese regulatory authorities sometimes make “informal”

suggestions regarding appropriate company behavior, including how a company is to behave outside China,

strongly suggesting that a failure to comply may result in investigations and possible punishment. More

recently, high-level policy statements suggest increased Anti-monopoly Law enforcement where

technology owned or controlled by foreign companies allegedly implicates national security concerns or

implicates technology being prioritized for indigenous innovation in China.

In 2021, a local intermediate court in China issued a decision finding that certain intellectual property

developed by a foreign company was an “essential facility” and that the foreign company’s failure to license

this intellectual property to particular Chinese companies, the plaintiffs in a series of related cases,

constituted an abuse of dominance exposing the foreign company to civil liability and mandatory licensing

requirements, notwithstanding the foreign company’s existing licenses to other Chinese companies. This

legal decision, currently on appeal to China’s Supreme People’s Court, raises concerns that China’s

regulatory authorities may target foreign patent holders for Anti-monopoly Law enforcement, especially in

areas of technology being prioritized for indigenous innovation in China.

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State-directed mergers of state-owned enterprises are also a concern. SAMR does not provide sufficient

information about decisions made regarding these “administrative mergers,” so it is not clear how SAMR

evaluates them. It is possible for these transactions to provide the merged company with excessive market

power that can be used anti-competitively in China and in markets around the world.

Given the state-led nature of China’s economy, the need for careful scrutiny of anti-competitive government

restraints and regulation is high. The Anti-monopoly Law’s provisions on the abuse of administrative (i.e.,

government) power are potentially important instruments for reducing the government’s interference in

markets and for promoting the establishment and maintenance of increasingly competitive markets in

China. The State Council’s adoption of the Opinions on Establishing a Fair Competition Review System

in 2016 reflects a useful widening of oversight by China’s anti-monopoly enforcement agencies over undue

government restraints on competition and anti-competitive regulation of competition. However,

implementing measures contain a broad list of exemptions, including for national economic security,

cultural security, national defense construction, poverty alleviation, disaster relief and general “public

interest” considerations. It appears unlikely that the Fair Competition Review System established by the

Opinions on Establishing a Fair Competition Review System will be able to achieve its stated goals, given

China’s continuing efforts to ensure a strong role for the state in China’s economy.

STATE-OWNED ENTERPRISES

While many provisions in China’s WTO accession agreement indirectly discipline the activities of state-

owned and state-invested enterprises, China also agreed to some specific disciplines. In particular, it agreed

that laws, regulations and other measures relating to the purchase of goods or services for commercial sale

by state-owned and state-invested enterprises, or relating to the production of goods or supply of services

for commercial sale or for non-governmental purposes by state-owned and state-invested enterprises, would

be subject to WTO rules. China also affirmatively agreed that state-owned and state-invested enterprises

would have to make purchases and sales based solely on commercial considerations, such as price, quality,

marketability and availability, and that the government would not directly or indirectly influence the

commercial decisions of state-owned and state-invested enterprises.

In subsequent bilateral dialogues with the United States, China made further commitments. In particular,

China committed to develop a market environment of fair competition for enterprises of all kinds of

ownership and to provide them with non-discriminatory treatment in terms of credit provision, taxation

incentives and regulatory policies.

However, instead of adopting measures giving effect to its commitments, China instead took steps intended

to strengthen the role of state-owned and state-invested enterprises in the economy and to protect them

against foreign competition. China established the SASAC and adopted the Law on State-owned Assets of

Enterprises in addition to numerous other measures that mandate state ownership and control of many

important industrial sectors. The CCP also ensured itself a decisive role in state-owned and state-invested

enterprises’ major business decisions, personnel changes, project arrangements and movement of funds.

The fundamental premise of these measures was to enable the government and the Party to intervene in the

business strategies, management and investments of these enterprises in order to ensure that they play a

dominant role in the national economy in line with the overall objective of developing China’s “socialist

market economy” and China’s industrial plans. Over the past few years, Party leadership in state-owned

and state-invested enterprises has been strengthened through practices such as appointing a person as both

the chairman of the board and the Party secretary for a state-owned enterprise.

Separately, the Chinese Government also has issued a number of measures that restrict the ability of state-

owned and state-invested enterprises to accept foreign investment, particularly in key sectors. Some of

these measures are discussed below in the Investment section.

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In its 2013 Third Plenum Decision, China endorsed a number of far-reaching economic reform

pronouncements, which called for making the market “decisive” in allocating resources, reducing Chinese

Government intervention in the economy, accelerating China’s opening up to foreign goods and services

and improving transparency and the rule of law to allow fair competition in China’s market. It also called

for “reforming” China’s state-owned and state-invested enterprises.

However, rather than actually embrace the role of the market, China sought to strengthen the role of the

state in the economy. Statements by China’s President also made clear that China continues to view the

role of the state very differently from the United States and other democratic market economies. In October

2016, he called for strengthening the role of the CCP in state-owned enterprises and emphasized that state-

owned enterprises should be “important forces” to implement national strategies and enhance national

power. In February 2019, in an article in a CCP journal, he further called for the strengthening of the

Party’s “leadership over the rule of law,” and he vowed that China “must never copy the models or practices

of other countries” and “we must never follow the path of Western ‘constitutionalism,’ ‘separation of

powers’ or ‘judicial independence.’”

With regard to the reform of China’s state-owned enterprises, one example of China’s efforts included an

announcement that China would classify these enterprises into commercial, strategic or public interest

categories and require commercial state-owned and state-invested enterprises to garner reasonable returns

on capital. However, this plan also allowed for divergence from commercially driven results to meet

broadly construed national security interests, including energy and resource interests and cyber and

information security interests. Similarly, in recent years, China has pursued reforms through efforts to

realize “mixed ownership.” These efforts included pressuring private companies to invest in, or merge

with, state-owned and state-invested enterprises as a way to inject innovative practices into and create new

opportunities for inefficient state-owned and state-invested enterprises.

China has also previously indicated that it would consider adopting the principle of “competitive neutrality”

for state-owned enterprises. However, China has continued to pursue policies that further enshrine the

dominant role of the state and its industrial plans when it comes to the operation of state-owned and state-

invested enterprises. For example, China has adopted rules ensuring that the government continues to have

full authority over how state-owned and state-invested enterprises use allocations of state capital and over

the projects that state-owned enterprises pursue.

Overall, while China’s efforts at times have appeared to signal a high-level determination to accelerate

needed economic reforms, those reforms have not materialized. Indeed, the Chinese state’s role in the

economy has increased rather than decreased. It also seems clear that China’s past policy initiatives were

not designed to reduce the presence of state-owned and state-invested enterprises in China’s economy or to

force them to compete on the same terms as private commercial operators. Rather, the reform objectives

were to strengthen state-owned and state-invested enterprises and to place them on a more competitive

footing, both in China and globally, through consolidation, increased access to state capital, preferential

access to goods and services and the use of other policies and practices designed to give these enterprises

artificial advantages over their private competitors.

This unfair situation is made worse for foreign companies. Like China’s state-owned and state-invested

enterprises, China’s private companies also benefit from a wide array of state intervention and support

designed to promote the development of China’s domestic industries in accordance with China’s industrial

plans. These interventions and support are deployed in concert with other policies and practices that restrict,

take advantage of, discriminate against or otherwise create disadvantages for foreign companies and their

technologies, products and services.

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LABOR

The Chinese Government represses internationally recognized labor rights and does not adequately enforce

existing prohibitions on forced labor. China has been the subject of international attention for its forced

labor practices, especially in the Xinjiang Uyghur Autonomous Region (Xinjiang), where China has

arbitrarily detained more than one million Uyghurs and other mostly Muslim minorities. Victims, news

media and think tanks report that factories, including factories producing cotton and tomato products,

frequently engage in coercive recruitment, limit workers’ freedom of movement and communication and

subject workers to constant surveillance, retribution for religious beliefs, exclusion from community and

social life, and isolation. It is currently estimated that hundreds of thousands of Uyghurs, ethnic Kazakhs

and members of other Muslim minority groups are being subjected to forced labor in China following

detention. Based on the U.S. Government’s independent analysis of these sources, the U.S. Government

has taken several actions to address forced labor and other human rights abuses in Xinjiang.

The U.S. Department of Homeland Security Customs and Border Protection has issued several withhold

release orders (WROs) pursuant to section 307 of the Tariff Act of 1930 based on information that

reasonably indicates the use of detainee or prison labor and situations of forced labor in Xinjiang, including

a region-wide WRO on cotton and tomato products from Xinjiang issued in January 2021. The scope of

this WRO includes cotton and tomatoes and downstream products that incorporate these products as inputs.

In July 2021, the United States issued an updated Xinjiang Supply Chain Business Advisory for U.S.

businesses whose supply chains run through Xinjiang, China. The advisory calls urgent attention to U.S.

businesses’ supply chain risks and identifies serious investing and sourcing considerations for businesses

and individuals with exposure to entities engaged in forced labor and other human rights abuses linked to

Xinjiang. The advisory also describes U.S. Government actions taken to date to counter the use of forced

labor in Xinjiang and to prohibit the importation of goods produced in whole or in part with forced labor or

convict labor.

In December 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act (UFLPA),

which, among other things, establishes a rebuttable presumption that the importation of goods from

Xinjiang is prohibited under section 307 of the Tariff Act of 1930. This rebuttable presumption took effect

in June 2022.

In advance of the rebuttable presumption taking effect, several U.S. agencies hosted a public hearing on the

use of forced labor in China. Witnesses, included private individuals, industry associations, consultancy

and risk-management companies, civil society organizations, non-governmental organizations (NGOs),

labor unions and others who shared their views on potential measures to prevent the importation of goods

mined, produced or manufactured wholly or in part with forced labor in China into the United States. The

UFLPA’s Strategy, which was published in June 2022, takes this witness testimony into account. The main

components of the Enforcement Strategy include: (1) an assessment of the risk of importing goods made

with forced labor in China; (2) the development of the UFLPA Entity List and descriptions of forced-labor

schemes; (3) the consideration of efforts, initiatives and tools to identify and trace the origin of goods; (4)

a description of relevant legal authorities and tools to prevent entry of violative goods; (5) a description of

resources; (6) the development of importer guidance; and, (7) the development of a coordination plan with

NGOs and the private sector.

In June 2022, President Biden issued the Memorandum on Combating Illegal, Unreported, and Unregulated

Fishing and Associated Labor Abuses. The Memorandum notes that, if left unchecked, IUU fishing and

associated labor abuses threaten the livelihoods and human rights of fishers around the world and will

undermine U.S. economic competitiveness, national security and fishery sustainability. It also notes that

this behavior will exacerbate the environmental and socioeconomic effects of climate change. In December

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2022, the Treasury Department sanctioned individuals associated with China’s distant water fishing vessels

for serious human rights abuse, including forced labor, of workers aboard these vessels.

It also remains concerning that China does not adhere to certain other internationally recognized labor

standards, including the freedom of association and effective recognition of the right to collective

bargaining. Chinese law provides for the right to associate and form a union, but does not allow workers

to form or join an independent union of their own choosing. Unions must affiliate with the official All-

China Federation of Trade Unions (ACFTU), which is under the direction of the CCP. Workers at

enterprises in China are required to accept the ACFTU as their representative. They cannot instead select

another union or decide not to have any union representation. Only collective bargaining through the

ACFTU is permitted, and there is no legal obligation for an employer to bargain in good faith. Striking is

also prohibited.

ENVIRONMENT

Import Ban on Scrap Materials

Currently, China restricts almost all imports of unprocessed scrap materials. China only allows imports of

certain processed scrap materials, including “recycled raw materials” such as copper, steel, aluminum and

brass that meet purity standards, pelletized scrap plastic and pulped scrap paper.

Since 2017, China has issued numerous measures that limit or ban imports of most scrap and recovered

materials, such as certain types of plastic, paper and metals. China has also employed import licensing and

inspection measures to restrict imports of scrap materials contrary to international standards and practices.

Notably, China does not universally apply similar restrictions to domestic processers of domestically

sourced scrap and recovered materials.

In 2020, China amended the Law on the Prevention and Control of Environmental Pollution by Solid Waste.

This amended law is designed to “basically realize zero imports of solid waste.”

U.S. exports to China of the unprocessed scrap and recovered materials covered by China’s restrictive

measures totaled $479 million in 2016, the year before China started to pursue its more restrictive policies.

U.S. exports of these materials to China have been significantly reduced.

In addition to impacting the global market for scrap and recovered materials, the tightened restrictions have

raised the costs of recycling in the United States, leading some communities to end recycling programs.

While markets for U.S. scrap and recovered materials have shifted, taking up some of the lost exports to

China, significant amounts of U.S. scrap materials have not found new buyers, leading to increased

landfilling and incineration and increased demand for virgin materials globally.

Import Ban on Remanufactured Products

China prohibits the importation of remanufactured products, which it typically classifies as used goods.

China also maintains restrictions that prevent remanufacturing process inputs (known as cores) from being

imported into China’s customs territory, except special economic zones. These import prohibitions and

restrictions undermine the development of industries in many sectors in China, including mining,

agriculture, healthcare, transportation and communications, because companies in these industries are

unable to purchase high-quality, lower-cost remanufactured products produced outside of China.

Nevertheless, China is apparently prepared to pay this price in order to limit imports of remanufactured

goods.

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OTHER BARRIERS

Export Restraints

Over the years, China has deployed a combination of export restraints, including export quotas, export

licensing, minimum export prices, export duties and other restrictions, on a number of raw material inputs

where it holds the leverage of being among the world’s leading producers. In many instances, through

these export restraints, it appears that China has been able to provide substantial economic advantages to a

wide range of downstream producers in China at the expense of foreign downstream producers, while

creating pressure on foreign downstream producers to move their operations, technologies and jobs to

China.

In 2013, China removed its export quotas and duties on several raw material inputs of key interest to the

U.S. steel, aluminum and chemicals industries after the United States won a dispute settlement case against

China at the WTO. In 2014, the United States won a second WTO case, focusing on China’s export

restraints on rare earths, tungsten and molybdenum, which are key inputs for a multitude of U.S.-made

products, including hybrid automobile batteries, wind turbines, energy-efficient lighting, steel, advanced

electronics, automobiles, petroleum and chemicals. China removed those export restraints in 2015. In

2016, the United States launched a third WTO case challenging export restraints maintained by China. The

challenged export restraints include export quotas and export duties maintained by China on various forms

of 11 raw materials, including antimony, chromium, cobalt, copper, graphite, indium, lead, magnesia, talc,

tantalum and tin. These raw materials are key inputs in important U.S. manufacturing industries, including

aerospace, automotive, construction and electronics. While China appears to have removed the challenged

export restraints, the United States continues to monitor the situation. In the United States’ view, it is

deeply concerning that the United States was forced to bring multiple cases to address the same obvious

WTO compliance issues.

A more recent concern involves China’s potential regulation of rare earth exports under its export controls

regime. In this regard, the Ministry of Industry and Information Technology issued the draft Regulations

on the Administration of Rare Earths for public comment in January 2021, and one of the provisions in the

draft measure provides that rare earth exporters need to abide by laws and regulations in the area of export

controls.

In September 2021, China announced an export ban on certain fertilizers. Despite repeated requests from

its trading partners to lift this export ban and help address growing international concern over food

insecurity linked to rising commodity prices and disrupted global supply chains, China continues to impose

this export ban.

Meanwhile, U.S. companies report that China has also instituted export restrictions on corn starch. To date,

however, the Chinese Government still has not published an official notice, while exporters report the

export restrictions remain in place.

Value-Added Tax Rebates and Related Policies

As in prior years, in 2021, the Chinese Government attempted to manage the export of many primary,

intermediate and downstream products by raising or lowering the VAT rebate available upon export. China

sometimes reinforces its objectives by imposing or retracting export duties. These practices have caused

tremendous disruption, uncertainty and unfairness in the global markets for some products, particularly

downstream products for which China is a leading world producer or exporter, such as products made by

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the steel, aluminum and soda ash industries. These practices, together with other policies, such as excessive

government subsidization, have also contributed to severe excess capacity in these same industries.

An apparently positive development took place at the July 2014 S&ED meeting, when China committed to

improve its VAT rebate system, including by actively studying international best practices, and to deepen

communication with the United States on this matter, including regarding its impact on trade. Once more,

however, this promise remains unfulfilled. To date, China has not made any movement toward the adoption

of international best practices.

Trade Remedies

As of December 2022, China had in place 118 antidumping measures, affecting imports from 17 countries

or regions. China also had in place seven countervailing duty measures, affecting imports from four

countries or regions. The greatest systemic shortcomings in China’s antidumping and countervailing duty

practice continue to be in the areas of transparency and procedural fairness. Over the years, China has often

utilized antidumping and countervailing duty investigations as more of a retaliatory tool than as a

mechanism to nullify the effects of dumping or unfair subsidization within its domestic market. In response,

the United States has pressed China bilaterally, in WTO meetings and through written comments submitted

in connection with pending antidumping and countervailing duty proceedings to adhere strictly to WTO

rules in the conduct of its trade remedy investigations.

The conduct of antidumping investigations by China’s MOFCOM continues to fall short of full

commitment to the fundamental tenets of transparency and procedural fairness embodied in the WTO

Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994,

commonly known as the Antidumping Agreement. The United States and other WTO Members

accordingly have expressed concerns about key lapses in transparency and procedural fairness in China’s

conduct of antidumping investigations. The principal areas of concern include: MOFCOM’s inadequate

disclosure of key documents placed on the record by domestic Chinese producers; insufficient disclosures

of the essential facts underlying MOFCOM decisions, such as dumping margin calculations and evidence

supporting injury and dumping conclusions; MOFCOM’s failure to issue supplemental questionnaires in

instances where MOFCOM identifies information deficiencies; the improper rejection of U.S. respondents’

reported cost and sales data; the unjustified use of facts available; and, MOFCOM’s failure to adequately

address critical arguments or evidence put forward by interested parties. These aspects of China’s

antidumping practice have been raised with MOFCOM in numerous proceedings over the past several

years.

A review of China’s conduct of countervailing duty investigations makes clear that, as in the antidumping

area, China needs to improve its transparency and procedural fairness when conducting these investigations.

In addition, the United States has noted procedural concerns specific to China’s conduct of countervailing

duty investigations. For example, China initiated investigations of alleged subsidies that raised concerns,

given the requirements regarding “sufficient evidence” in Article 11.2 of the Subsidies Agreement. The

United States is also concerned about China’s application of facts available under Article 12.7 of the

Subsidies Agreement.

On several occasions in the past, the United States has expressed serious concerns about China’s pursuit of

antidumping and countervailing duty remedies that appear to be retaliatory and intended to discourage the

United States and other trading partners from the legitimate exercise of their rights under WTO antidumping

and countervailing duty rules and the trade remedy provisions of China’s accession agreement. More

recently, it also appears that China has used arbitrary economic and trade measures, including antidumping

and countervailing duty investigations, as a form of economic coercion designed to achieve China’s

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political goals. Obvious examples include MOFCOM’s antidumping and countervailing duty

investigations of imports of Australian barley and Australian wine.

In certain recent investigations of U.S. imports, China has determined―without legal or factual

support―that costs and prices in certain U.S. markets are distorted, and therefore unusable, because of so-

called “non-market situations.” For example, in four final antidumping determinations on imports of n-

propanol, polyphenylene sulfide, ethylene propylene diene monomer and polyvinyl chloride from the

United States in 2020 and 2021, China found a “non-market situation” in certain energy sectors in the

United States. However, these findings were made without defining the term “non-market situation” or

identifying any legal basis in China’s law to make these findings. Separately, in the final countervailing

duty determination on imports of n-propanol from the United States, China also found that alleged subsidies

to the U.S. oil and gas sector automatically passed through to petrochemical products without providing the

analysis required by the Subsidies Agreement, generating a concern that has arisen in prior cases as well.

Pharmaceuticals

For several years, the United States has pressed China on a range of pharmaceuticals issues. These issues

have related to matters such as overly restrictive patent application examination practices, regulatory

approvals that are delayed or linked to extraneous criteria, weak protections against the unfair commercial

use and unauthorized disclosure of regulatory data, issues with the implementation of an efficient

mechanism to resolve patent infringement disputes, and restrictions on receiving patent term extensions for

unreasonable marketing approval delays. In particular, China’s narrow definition of “new drug” as a drug

that has not been marketed anywhere else before it is launched in China continues to have negative

implications for China’s provision of patent term extensions for unreasonable marketing approval delays

and China’s potential implementation of regulatory data protection, and it may cause foreign companies to

bring their products to China first regardless of patient demand or other important factors. While China

has implemented some helpful reforms, the United States still has many of the same concerns with China’s

pharmaceutical market, especially as it pertains to treatment of foreign companies.

CFDA also issued several draft notices in 2017 setting out a conceptual framework to protect against the

unfair commercial use and unauthorized disclosure of undisclosed test or other data generated to obtain

marketing approval for pharmaceutical products. In addition, this proposed framework sought to promote

the efficient resolution of patent disputes between right holders and the producers of generic

pharmaceuticals. However, in 2018, CFDA’s successor agency, NMPA, issued draft Drug Registration

Regulations and draft implementing measures on drug trial data that would preclude or condition the

duration of regulatory data protection on whether clinical trials and first marketing approval occur in China.

Subsequently, China issued a revised Drug Administration Law in 2019, followed by NMPA’s revised draft

Drug Registration Regulations in 2020 and NMPA’s revised draft Drug Administration Law Implementing

Regulations in 2021. Despite the opportunities that these revised draft measures afforded China’s

regulatory authorities, the concerning limitations on regulatory data protection have not been removed.

Since 2018, volume-based procurement has presented a new market access complication for foreign

suppliers of pharmaceuticals, largely because of the opaque and unpredictable nature of the bidding

processes. In November 2018, a National Drug Centralized Procurement Pilot Scheme was launched.

Then, in January 2019, the State Council issued a Pilot Plan for National Centralized Drug Procurement

and Use. In December 2021, the National Healthcare Security Administration published the 2021 edition

of its annual National Reimbursement Drug List, which became effective on January 1, 2022. U.S. industry

also cites the need for increased transparency and greater harmony between national and provincial bidding

processes as well as a greater emphasis on a competitive approach to evaluating relevant bids.

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As part of the Phase One Agreement, the two sides agreed that China would establish a nationwide

mechanism for the early resolution of potential pharmaceutical patent disputes that covers both small

molecule drugs and biologics, including a cause of action to allow a patent holder to seek expeditious

remedies before the marketing of an allegedly infringing product. The United States has been working

closely with U.S. industry to monitor developments and to ensure that China’s new system works as

contemplated. Separately, the agreement also provides for patent term extensions to compensate for

unreasonable patent and marketing approval delays that cut into the effective patent term as well as for the

use of supplemental data to meet relevant patentability criteria for pharmaceutical patent applications. The

United States and China agreed to address data protection for pharmaceuticals in future negotiations.

In October 2020, China amended the Patent Law to provide for patent term extensions for unreasonable

patent and marketing approval delays, and it also added a mechanism for the early resolution of potential

patent disputes, known as patent linkage. Implementing measures for the patent linkage mechanism were

issued in July 2021, as NMPA and CNIPA jointly issued the Trial Implementation Measures for the

Mechanism for Early Resolution of Drug Patent Disputes and the Supreme People’s Court issued the

Regulations on Several Issues Concerning the Application of Law in the Trial of Civil Patent Disputes

Related to Drug Registration Application. In 2021 and 2022, CNIPA issued draft implementing rules for

the amended Patent Law and drafts of amendments to the Patent Examination Guidelines. Among other

things, U.S. right holders have expressed concern about China’s implementation of patent term extensions

for unreasonable marketing approval delays, including China’s use of unfair localization requirements and

limits on the type of protection provided. Going forward, the United States will continue to monitor closely

China’s progress in implementing its commitments, with regard to both patent term extensions for

unreasonable patent and marketing approval delays and the patent linkage mechanism.

Medical Devices

For many years, working closely with U.S. industry, the United States has raised concerns about China’s

pricing and tendering procedures for medical devices and its discriminatory treatment of imported medical

devices. At the November 2015 JCCT meeting, China did commit that, in terms of accessing the market,

it will give imported medical devices the same treatment as medical devices manufactured or developed

domestically. Unfortunately, this promise has not been fulfilled. China continues to pursue a wide range

of policies that direct China’s purchasing authorities to prioritize the procurement of domestic medical

device manufacturers over imported medical device manufacturers.

In recent years, the United States has continued to press China’s regulatory authorities to develop sound

payment systems that are transparent, predictable and competitive. The United States has also urged China

to adequately recognize quality, safety and the costs of R&D in its approach to procurement policy.

In 2019, China’s State Council launched a volume-based procurement (VBP) approach for medical devices

in a few provinces and municipalities in an attempt to cut healthcare costs. Since then, the VBP approach

has become further engrained in China’s system, with the formation of multi-province and municipal

alliances to conduct joint procurements under VBP. In 2020, China implemented its first national VBP

tender, which has been followed by additional national tenders in 2021 and 2022. In practice,

implementation of China’s VBP prioritizes cost over the product’s value or quality. With China perceiving

the resulting price cuts as successes, U.S. industry expects that China will continue to expand the categories

of medical devices subject to VBP in the future.

According to U.S. industry, if China continues to pursue VBP without significant changes, it could lead to

the creation of a low-cost, low-quality medical devices sector and low-quality monopolies in China, which

would operate to the disadvantage of innovative medical device companies, many of which are foreign

companies, and the patients who rely on advanced medical technologies. Currently, medical device

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companies that are successful at winning bids often have very thin profit margins or even lose money.

Reportedly, some medical device companies are reducing training to healthcare providers in order to offer

the expected price cuts. In addition, given the size of China’s medical device market, low-quality

monopolies from China could expand and then prioritize exports of their medical devices to third countries.

With the choice between a higher cost but more effective product or a lower cost, lower quality product,

countries with greater budget constraints, and greater vulnerability to Chinese influence, may be more

inclined to procure China’s offerings. Overall, China’s VBP approach poses a risk to the medical device

sector and the provision of high-quality medical treatment worldwide.

In July 2022, China’s Ministry of Finance issued a revised Government Procurement Law. While China

has a history of distributing unofficial, non-public guidance to give preference to domestic over foreign

medical devices companies, China’s revisions to the Government Procurement Law also officially expands

the coverage of products for which domestic alternatives should be given preference.

Meanwhile, the Made in China 2025 industrial plan announced by the State Council in 2015 seeks to prop

up China’s domestic medical device sector through a series of support policies, including targeted funds

and procurement policies. The goal of these policies is to significantly increase the market share of

domestically owned and domestically manufactured medical devices, and correspondingly decrease market

share of foreign medical devices, by 2025. At the same time, some provincial governments directly

subsidize the purchase of domestically manufactured medical devices. In addition, some provincial

governments have issued guidelines urging medical institutions to prioritize the procurement of local

medical equipment over imported equipment. In at least one province, the guidelines suggest that only

imported medical devices for which there is not a domestic replacement will be eligible for procurement.

Going forward, the United States will continue to urge China to provide foreign medical devices with fair

and equal access to China’s market.

U.S. industry also reports that while sub-central governments in China have always provided some financial

support to domestic medical devices companies, their support appears to have increased between 2020 and

2022. U.S. industry notes that this trend could be attributed to either the COVID-19 pandemic or China’s

five-year industrial plan for medical equipment covering the years 2021 to 2025, or perhaps both. The

United States will monitor this situation closely and will encourage China to be transparent in its approach.

Corporate Social Credit System

Since 2014, China has been working to implement a national “social credit” system for both individuals

and companies. The implementation of this system is at a more advanced stage for companies versus

individuals, as “unified social credit codes” are assigned to every domestic and foreign company in China.

These 18-digit codes will provide a way for the Chinese Government to track a company’s record of

administrative and regulatory compliance and generate public credit information. Over the past year, China

has been increasingly focused on making the social credit system fully functional. Indeed, in his report to

the 20th National Party Congress in October 2022, Xi Jinping in his capacity as the General Secretary of

the Chinese Communist Party emphasized the need to refine the social credit system.

Under the corporate social credit system, government records and market-generated corporate compliance

data are collected on every legal entity in China. The collected information contains regulatory and

administrative records contributed by at least 44 state agencies and their branch offices across every

province in China. Previously disparate information relating to a company’s financial records, regulatory

compliance, inspection results and other administrative enforcement activities is being consolidated under

a company’s unified social credit code. All of this data will be aggregated and shared between regulatory

agencies via the National Credit Information Sharing Platform. Reportedly, approximately 75 percent of

the records collected on companies is intended to be designated as “open to the public,” while the remaining

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25 percent that is intended to be withheld will include potentially sensitive information, such as approval

records related to national development projects and details of any criminal cases.

Nationwide data collection under the corporate social credit system provides mechanisms to penalize

companies with poor corporate and legal compliance records by, among other things, subjecting them to

public censure via what China calls “blacklists,” while rewarding compliant companies with positive

incentives via so-called “redlists.” Negative ratings or placement on a government agency’s censure list

can lead to various restrictions on a company’s business activities. A company could face increased

inspections, reduced access to loans and tax incentives, restrictions on government procurement, reduced

land-use rights, monetary fines or permit denials, among other possible penalties.

However, currently, there is no fully integrated national system for assigning comprehensive social credit

scores for companies, and the social credit system remains highly fragmented. Certain central government

agencies and sub-central government agencies maintain their own rating systems, with each agency making

its own decisions about the types of transgressions that warrant negative ratings or placing a company on a

censure list.

In November 2022, NDRC and PBOC jointly published a draft law that would give the social credit system

a legal basis, further embedding it into China’s regulatory network. The draft law seeks to establish NDRC

and PBOC as the main government agencies for construction of the social credit system. Their

responsibilities would include overall coordination, supervision and guidance of the construction of the

social credit system and taking the lead in organizing the formulation and implementation of relevant

policies and standards. The draft law also seeks to provide formal legal definitions for certain terms used

in implementing the social credit system, such as “untrustworthy,” “credit supervision” and “credit

information.” In addition, the draft law seeks to codify the protection of certain rights, as it calls for the

establishment of a social credit system that maintains the security of social credit information and strictly

protects state secrets, business secrets and personal privacy, while also protecting the lawful rights and

interests of natural persons, legal persons and unincorporated organizations.

Earlier in 2022, prior to the publication of the draft law, NDRC issued a draft update of the 2021 National

Basic Catalogue of Public Credit Information and a draft update of the 2021 National Basic List of

Disciplinary Measures against Dishonest Acts. The draft Catalogue compiles the scope and types of credit

information that can be collected by government agencies. It also stipulates that certain categories of

information are exempt from collection, including state secrets and trade secrets. The draft List includes a

range of punitive actions that may be applied to violators of trust, such as duties, fees, restrictions on market

activity, prohibitions or limitations on occupations and bans from government procurement bidding.

The corporate social credit system has been tied to larger policy objectives as well. For example, the

General Office of the State Council and the General Office of the Chinese Communist Party issued a joint

opinion on promoting a high-quality credit system in order to further China’s “dual circulation” objectives.

In addition, in November 2022, the Ministry of Science and Technology (MOST) announced a new pilot

project for evaluating STEM talent. Under MOST’s new pilot project, evaluation of scientists’ performance

is to incorporate metrics related to their moral character, which includes their social credit record, in order

to ensure that scientific researchers have no history of plagiarism or academic fraud. This pilot project

appears to reflect China’s struggle to improve the quality of its scientific research talent.

Foreign companies are concerned that the corporate social credit system will be used by the Chinese

Government to pressure them to act in furtherance of China’s industrial policies or other state priorities or

otherwise to make investments or conduct their business operations in ways that run counter to market

principles or their own business strategies. Foreign companies are also concerned that the Chinese

Government will use the corporate social credit system as another tool to ensure that they do not cross

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political redlines on sensitive matters like human rights. In addition, foreign companies are concerned

about the opaque nature of the corporate social credit system. Currently, for example, a company

sometimes only learns about its negative ratings when, for example, it requests a permit and receives a

denial, even though the Measures for Administration of the List of Serious Violators of Trust and Law

includes a requirement that companies be informed of their being censured in advance. Other times, a

company learns for the first time that it has been censured when a Chinese Government agency posts its

name on the agency’s website, even though the censuring of a company can cause severe harm to the

company’s reputation and adversely impact its efforts to attract customers, secure needed financing or make

new investments. When Chinese Government agencies begin to pursue joint punishment in the way that

NDRC envisions, it will mean that an infraction in one regulatory context could have wider consequences

across the company’s entire business operations.

Another key concern regarding the corporate social credit system involves its links to individual social

credit. In addition, the Chinese Government could also potentially use corporate social credit in the future

to exert extraterritorial influence by threatening the social credit standing of foreign multinationals or

citizens for behavior or speech outside of China.

To date, the corporate social credit system does not appear to explicitly disadvantage U.S. or other foreign

companies or provide favorable treatment to domestic companies. Nevertheless, concerns remain regarding

how this system will be applied in practice, and the need to comply with an increasingly complex and

expansive social credit system may impose barriers to entry into China’s market for foreign companies that

are unfamiliar with the legal and regulatory requirements associated with corporate social credit compliance

and reporting.

Administrative Licensing

U.S. companies continue to encounter significant problems with a variety of administrative licensing

processes in China, including processes to secure product approvals, investment approvals, business

expansion approvals, business license renewals and even approvals for routine business activities. While

there has been an overall reduction in license approval requirements and a focus on decentralizing licensing

approval processes, U.S. companies continue to report that one of their key concerns involves China’s

problematic licensing approval processes.

Transparency

One of the core principles reflected throughout China’s WTO accession agreement is transparency.

Unfortunately, after more than 20 years of WTO membership, China still has a poor record when it comes

to adherence to its transparency obligations.

Publication of Trade-Related Measures

In its WTO accession agreement, China committed to adopt a single official journal for the publication of

all trade-related laws, regulations and other measures. China adopted a single official journal, to be

administered by MOFCOM, in 2006. However, it appears that China only publishes trade-related measures

from some, but not all, central-government entities in this journal. It also appears that China does not

publish any trade-related measures from sub-central governments in the journal.

At the central government level, moreover, China tends to take a narrow view of the types of trade-related

measures that need to be published in the official journal. For those government entities whose trade-

related measures are published in the official journal, China more commonly (but still not regularly)

publishes trade-related administrative regulations and departmental rules in the journal, but it is rare for

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China to publish other measures such as opinions, circulars, orders, directives and notices, which are known

as “normative documents” in China’s legal system. Normative documents are regulatory documents that

do not fall into the category of administrative regulations or departmental rules, but still impose binding

obligations on enterprises and individuals. Although the State Council introduced a definition for

“administrative normative documents” in 2014, this definition is narrow and does not appear to encompass

all normative documents, nor has it resulted in their regular publication as required by China’s WTO

commitments.

Meanwhile, China rarely publishes certain types of trade-related measures from either the central level or

the sub-central level of government in the official journal. As discussed above in the Industrial Subsidies

section, an important example involves subsidy measures.

Notice-and-Comment Procedures

In its WTO accession agreement, China committed to provide a reasonable period for public comment

before implementing new trade-related laws, regulations and other measures. While little progress has been

made in implementing this commitment at the sub-central government level, the National People’s

Congress instituted notice-and-comment procedures for draft laws in 2008, and shortly thereafter China

indicated that it would also publish proposed trade- and economic-related administrative regulations and

departmental rules for public comment. Subsequently, the National People’s Congress began regularly

publishing draft laws for public comment. China’s State Council often (but not regularly) published draft

administrative regulations for public comment, but many of China’s ministries were not consistent in

publishing draft departmental rules or normative documents for public comment.

At the May 2011 S&ED meeting, China committed to issue a measure implementing the requirement to

publish all proposed trade- and economic-related administrative regulations and departmental rules on the

website of the State Council’s Legislative Affairs Office (SCLAO) for a public comment period of not less

than 30 days. In April 2012, the SCLAO issued two measures that appear to address this requirement.

Currently, the process for issuing new regulatory measures in China can be opaque and unpredictable and

implemented without adequate notice. China still needs to improve its practices relating to the publication

of administrative regulations and departmental rules for public comment. China also needs to formalize its

use of notice-and-comment procedures for all normative documents.

In the Phase One Agreement, China committed to provide no less than 45 days for public comment on all

proposed laws, regulations and other measures implementing the Phase One Agreement. Since the entry

into force of this commitment in February 2020, China has generally been providing the required 45-day

public comment period and working constructively with the United States whenever it has raised questions

or concerns regarding provisions in proposed implementing measures.

Translations

In its WTO accession agreement, China committed to make available translations of all of its trade-related

laws, regulations and other measures at all levels of government in one or more of the WTO languages, i.e.,

English, French, and Spanish. Prior to 2014, China had only compiled translations of trade-related laws

and administrative regulations (into English), but not other types of measures, such as departmental rules,

normative documents and sub-central government measures. Even for trade-related laws and administrative

regulations, China was years behind in publishing these translations. At the July 2014 S&ED meeting,

China committed that it would extend its translation efforts to include not only trade-related laws and

administrative regulations but also trade-related departmental rules. Subsequently, in March 2015, China

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issued a measure requiring trade-related departmental rules to be translated into English. This measure also

provides that the translation of a departmental rule normally must be published before implementation.

Notably, however, even if China were to fully implement its existing measures requiring translations, they

would not be sufficient to bring China into full WTO compliance in this area. China does not consistently

publish translations of trade-related laws, administrative regulations and departmental rules in a timely

manner (i.e., before implementation), nor does it publish any translations of trade-related normative

documents or trade-related measures issued by sub-central governments.

Inquiry Point

In its WTO accession agreement, China committed to establish an inquiry point that would respond to

requests for information relating to legal measures required to be published in its official journal. At times,

however, China has refused to provide copies of legal measures in response to legitimate requests directed

to its inquiry point.

In April 2020, for example, the United States submitted a request concerning five Chinese legal measures

covering semiconductors and fisheries subsidy programs that had not been published in China’s official

journal and were not otherwise available online, nor had they been notified to the WTO. Despite the

obligation in its WTO accession agreement to either provide the documents or respond in writing within 45

days, China did not meet this deadline. The United States made repeated follow-up requests, to no avail.

Five months after the United States submitted its request to China’s inquiry point, MOFCOM orally

informed the U.S. Embassy in Beijing that it would not be providing any of the requested legal measures

because two of the measures would soon be replaced and the other three measures, in China’s view, were

not relevant to China’s WTO obligations. USTR promptly responded to MOFCOM in writing, countering

its assertions and urging it to provide the requested documents. Since then, China has continued to refuse

to provide a written response to the United States’ request or to provide any of the requested legal measures,

even though the United States and other WTO Members have repeatedly raised this matter before the WTO

Subsidies Committee and Council for Trade in Goods.

Other Non-Tariff Measures

A number of other non-tariff measures can adversely affect the ability of U.S. industry to access or invest

in China’s market. Key areas of concern include laws governing land use in China, commercial dispute

resolution and the treatment of non-governmental organizations. Corruption among Chinese government

officials, enabled in part by China’s incomplete adoption of the rule of law, is also a key area of concern.

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COLOMBIA

TRADE AGREEMENTS

The United States–Colombia Trade Promotion Agreement

The United States–Colombia Trade Promotion Agreement (the Agreement) entered into force on May 15,

2012. The United States and Colombia work closely to review the implementation and functioning of the

Agreement and to address outstanding issues.

IMPORT POLICIES

Tariffs

U.S. consumer and industrial products are duty free under the Agreement as of January 1, 2021. Duties on

some remaining U.S. agricultural goods were phased out on January 1, 2023. Tariffs on the most sensitive

products for Colombia will be phased out between January 1, 2026, and January 1, 2030. U.S. agricultural

exporters also currently benefit from duty-free access under tariff-rate quotas for some sensitive products.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

Colombia ratified the WTO Trade Facilitation Agreement (TFA) on August 6, 2020. Colombia has not yet

implemented customs reforms that would allow traders to submit electronic copies of invoices instead of

physical copies, as encouraged by the TFA. Slow customs clearance in Colombia hampers both imports

and exports, and the ability to submit electronic copies of documents would help accelerate customs

clearances. The Colombian Government reports that its digital system is under development, and the United

States will continue to follow the development of the system.

Ethanol-Related Measures

Since March 2021, Colombia’s Ministries of Mines and Energy, Agriculture and Rural Development, and

Environment and Sustainable Development have imposed a series of emergency measures that decreased

the mandated rate of blending ethanol into gasoline from 10 percent to 4 percent, with the stated aim of

compensating for local ethanol supply shortages and higher prices. In October 2022, a new draft measure

was issued to decrease the ethanol blend mandate to two percent in 2023. The United States continues to

raise concerns with Colombia about its ethanol blend mandate policies and will continue to monitor

developments.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Front-of-Package Labeling

On December 14, 2022, the Ministry of Health enacted a Front-of-Package Labeling (FOPL) regulation,

Resolution 2492 of 2022, which amended Decree 810 of June 2021, in accordance with the directives of

Law 2120. The FOPL regulation, which enters into force on June 14, 2023, requires stop-sign-shaped

warning FOPL labels for salt/sodium, added sugar, saturated fats, trans fats, and sweeteners. The regulation

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continues to require a supplier’s product conformity certificate. Colombia had allowed 18 months of

flexibility during the implementation phase of Decree 810, including allowing the use of stickers, and

offered communication channels for addressing questions from stakeholders to facilitate compliance with

the new regulation. However, Resolution 2492 leaves unclear the length of time companies have to deplete

old labels. The United States commented on different iterations of the draft regulation since June 2021,

and has been actively engaging Colombia via bilateral meetings, including the October 2021 meeting of the

Committee on Technical Barriers to Trade (TBT) under the Agreement, and three bilateral meetings on the

margins of the WTO TBT Committee meetings in March, June, and November 2022.

Maximum Sodium Limits

In November 2020, the Ministry of Health issued Resolution 2013 to reduce sodium intake in Colombia by

setting mandatory maximum sodium content limits for 59 processed food categories. The measure, which

applies to domestic and imported products, sets out compulsory reduction goals for an initial set of products

in November 2022, and for the remaining products in November 2024. A supplier’s declaration of

conformity will be permitted until July 2023, after which third-party certification will be required for all

products. U.S. industry has raised concerns with the third-party certification requirement, along with how

the Ministry of Health will enforce this regulation through local inspectors. The Agreement lists supplier

declarations on the indicative list of conformity assessment procedures.

Automobile Conformity Assessment

Colombia requires third-party safety certification for several components of imported vehicles. Colombia’s

regulations on several automobile components require companies to provide third-party compliance reports

on those components, though U.S. manufacturers already test their products for compliance with U.S.

Federal Motor Vehicle Safety Standards. After consultation processes and the receipt of U.S. Government

and other stakeholder comments, Colombia amended its regulations to state that U.S. manufacturers can

satisfy the legal requirement for third-party certification by providing documentation issued by the U.S.

National Highway Traffic Safety Administration. Stakeholders remain concerned with this approach, given

the volume of motor vehicles exported to Colombia from the United States and the challenges of securing

so much documentation. Colombia also is considering imposing similar requirements on author automobile

components. The U.S. Government will continue working with the Colombian Government and

stakeholders to seek workable alternatives.

Sanitary and Phytosanitary Barriers

Lactic Acid Limits and Bulk Dried Milk Sales Restrictions

In August 2020, INVIMA (Colombia’s regulatory authority equivalent to the U.S. Department of Health

and Human Services’ Food and Drug Administration) informed the United States that all U.S. shipments

of milk powder to Colombia must meet the physical and chemical properties requirements in Decree 616

of 2006, including minimum lactic acid content requirements. Decree 616 was notified to the WTO

Committee on Sanitary and Phytosanitary Measures (SPS Committee) in 2005 and again in 2012. The basis

and rationale for the regulation remains unclear. The Codex Alimentarius Commission standards for food

additives only establish a maximum limit for lactic acid and do not set a minimum limit. The Ministry of

Health is updating Decree 616. The draft of the regulation includes mandatory minimum lactic acid

requirements for milk powder and would introduce changes to the regulation, such as restrictions on the

sale of bulk powdered milk. The United States participated in Colombia’s domestic consultation process

for the draft regulation, which ended on August 12, 2022. The draft regulation is pending notification to

the WTO SPS Committee.

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INTELLECTUAL PROPERTY PROTECTION

Colombia remained on the Watch List in the 2022 Special 301 Report. Colombia has not yet implemented

the provisions of the Agreement regarding enforcement against online copyright infringement, and has not

yet acceded to the 1991 Act of the International Convention for the Protection of New Varieties of Plants

(UPOV 1991). During 2022, the United States continued to engage with Colombia on these outstanding

Agreement commitments.

Article 72 of Colombia’s National Development Plan added criteria to pharmaceutical marketing approvals

that are not related to a product’s safety or efficacy. Colombia issued Decree 433 in March 2018, as

amended by Decree 710 of April 2018, to clarify that Colombia would not condition approvals on factors

other than the safety and efficacy of the underlying compound. However, due to an action challenging

these decrees, the Council of State provisionally suspended them in September 2019. As of December 31,

2022, Colombia was still considering how it would resolve this issue.

Colombia continues to face a large number of pirated and counterfeit goods crossing the border or sold at

markets, on the street, and at other distribution hubs around the country. High levels of digital piracy persist

year after year, and Colombia has not curtailed the number of free-to-air devices, community antennas, and

unlicensed Internet Protocol Television (IPTV) services that permit the retransmission of otherwise-

licensed content to a large number of non-subscribers.

SERVICES BARRIERS

Distribution Services

A section of Colombia’s commercial code provides protections for agents that can make it difficult and

costly for companies to terminate a commercial agent (sales representative) contract. The United States

has been working with Colombia to implement its commitments under the Agreement that address this

issue.

LABOR

The United States and Colombia continue to engage in consultations through their contact points under

Article 17.5.5 of the Agreement. This engagement includes discussing Colombia’s progress on

implementing specific recommendations contained in a U.S. Department of Labor (DOL) report. The DOL

report, published in 2017, raised significant concerns regarding labor law enforcement throughout

Colombia, especially with respect to the right to freedom of association, the right to organize and bargain

collectively, violence against unionists, and impunity for the perpetrators of the violence.

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COSTA RICA

TRADE AGREEMENTS

Dominican Republic–Central America–United States Free Trade Agreement

The Dominican Republic–Central America–United States Free Trade Agreement (CAFTA–DR) entered

into force for the United States, El Salvador, Guatemala, Honduras, and Nicaragua in 2006; for the

Dominican Republic in 2007; and, for Costa Rica in 2009. The United States and the other CAFTA–DR

countries meet regularly to review the implementation and functioning of the Agreement and to address

outstanding issues.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

As a member of the Central American Common Market, Costa Rica applies a harmonized external tariff on

most items at a maximum of 15 percent, with some exceptions. However, under the CAFTA–DR, as of

January 1, 2015, U.S. originating consumer and industrial goods enter Costa Rica duty free.

In addition, nearly all U.S. agricultural exports enter Costa Rica duty free under the CAFTA–DR. Costa

Rica will eliminate its remaining tariffs on certain rice and dairy products by 2025. On August 12, 2022,

Costa Rica unilaterally reduced tariffs on imported rice irrespective of origin. For certain agricultural

products, tariff-rate quotas (TRQs) permit duty-free access for specified quantities during the tariff phase-

out period, with the duty-free quantities expanding during that period. Costa Rica will liberalize trade in

fresh potatoes and onions through continual expansion of a TRQ, rather than the reduction of the out-of-

quota tariff. Costa Rica is required under the CAFTA–DR to make TRQs available on January 1 of each

year. Costa Rica monitors its TRQs through an import licensing system, which the United States carefully

tracks to ensure the timely issuance of these import licensing permits.

Taxes

Costa Rica currently assesses a specific excise tax on distilled spirits calculated as a percentage of alcohol

per liter, based on three specific rates (Law 7972). The highest rate applies to spirits bottled at a rate above

30 percent alcohol-by-volume (abv). While locally produced spirits (produced in the largest volume by the

state-owned alcohol company) are bottled at 30 percent abv, the vast majority of internationally traded

spirits are bottled at 40 percent abv. As a result, most imported spirits are taxed at a higher rate than most

spirits produced domestically. Furthermore, domestic producers may pay the tax within the first 15 days

of each month on sales made during the prior month, while importers must pay the tax prior to release of

their product from customs. On August 1, 2022, the Finance Ministry increased spirits taxes by three

percent for domestic and international producers.

Non-Tariff Barriers

Dietary Supplements

Since 2014, U.S. producers have expressed concerns regarding Costa Rican product registration and

technical regulations related to nutritional and dietary supplements. Because the United States does not

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regulate dietary supplements as pharmaceuticals, U.S. manufacturers of these products generally do not

have the certification and product analysis that is required for products to be sold in Costa Rica under the

Central American Technical Regulation for Natural Medicines.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Product Registration

Costa Rica requires product registration for food products (e.g., dairy products), additives, raw materials,

animal feed and pet food. Importers are required to submit documents to the Ministry of Health and receive

approval before products are sold into the market. One such document is a Certificate of Free Sale, which

is required to have an apostille. U.S. industry has raised concerns that the process is burdensome and can

delay introduction of products into the market by several months.

Telecommunications

Costa Rica’s telecommunications regulator (SUTEL) imposes a requirement that can result in the frequent

retesting and recertification of telecommunications hardware or software following some categories of

updates. Costa Rica does not follow international procedures for testing and certification of mobile

handsets and other information and communication technology (ICT) products. These country-specific

requirements can lead to redundant testing, particularly when products are required to undergo testing in

both exporting and importing countries.

Sanitary and Phytosanitary Barriers

The Costa Rican Ministry of Agriculture occasionally delays the issuance of phytosanitary import permits

for sensitive products, such as onions, during specific periods, such as harvest time (usually from April to

June for onions), creating difficulties for U.S. exporters of those products. In addition, repeated U.S.

requests to re-open the market for table stock potatoes (closed since 2013) have gone unanswered,

restricting the CAFTA–DR potato TRQ to lower-value chipping potatoes. The table stock market is

currently closed pending completion of a pest risk assessment. In 2021 and 2022, the United States exported

approximately $1.9 million and $1.7 million, respectively, of chipping potatoes to Costa Rica; however,

industry estimates that exports could increase to over $5 million if phytosanitary issues are addressed and

the table stock market is reopened. The U.S. Department of Agriculture Animal and Plant Health Inspection

Service and the Costa Rican Ministry of Agriculture conduct frequent bilateral meetings to discuss

regulatory procedures for the import and export of new products, promoting market access for new U.S.

products.

Costa Rica has a 2016 regulation requiring extensive questionnaires for certain animal product facilities

that export products to Costa Rica, including dairy, seafood, lamb and egg product facilities. Most U.S.

exporting facilities find this process overly burdensome and have complained that the questionnaire

requests irrelevant and business proprietary information. As a result, U.S. exports of these products face

delays of several months or longer when introducing new products to the Costa Rican market.

GOVERNMENT PROCUREMENT

U.S. companies have indicated that the private sector is sometimes disadvantaged in public bids when

competing against Costa Rican state-owned enterprises in both the ICT and insurance sectors. Article 2 of

the Public Contracting Law allows for the non-competitive awarding of contracts to public entities if

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officials of the awarding entity certify the award to be an efficient use of public funds. The United States

has engaged with Costa Rica on these issues.

Costa Rica is not a Party to the WTO Agreement on Government Procurement, but has been an observer to

the WTO Committee on Government Procurement since June 2015. Additionally, the CAFTA–DR

contains disciplines on government procurement.

INTELLECTUAL PROPERTY PROTECTION

Costa Rica was removed from the Watch List in the 2020 Special 301 Report due to the concrete steps it

took to improve its intellectual property (IP) regime, including initiating new programs within the

government to track licenses to address unlicensed software use in the central government, and to

implement an online recordation system to improve border enforcement. While the United States

recognizes the progress Costa Rica has made, and the potential of these positive developments, their

effectiveness remains to be demonstrated through enforcement and outcomes on the ground. The United

States held bilateral discussions with Costa Rica on this issue in 2022, and while the IP Registry was

supposed to issue its first report on government usage of unlicensed software in early 2021, the report had

not been issued as of December 31, 2022. The United States also continues to urge Costa Rica to bolster

IP enforcement to curb online piracy, address cumbersome border measure processes to deter counterfeit

and pirated goods, and effectively utilize ex officio authority for border enforcement against counterfeit and

pirated goods. The United States continues to encourage Costa Rica to build on initial positive steps to

protect and enforce IP, and to continue bilateral discussions of these issues.

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COTE D’IVOIRE

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Cote d’Ivoire’s average Most-Favored-Nation (MFN) applied tariff rate was 12.1 percent in 2021 (latest

data available). Cote d’Ivoire’s average MFN applied tariff rate remained 15.8 percent for agricultural

products and 11.5 percent for non-agricultural products in 2021 (latest data available). Cote d’Ivoire has

bound 33.3 percent of its tariff lines in the World Trade Organization (WTO), with an average WTO bound

tariff rate of 11.2 percent.

Consistent with the Economic Community of West African States (ECOWAS) common external tariff

(CET), Cote d’Ivoire applies: (1) zero percent duty on essential social goods (e.g., medicine); (2) 5 percent

duty on essential commodities, raw materials, and capital goods; (3) 10 percent duty on intermediate goods;

(4) 20 percent duty on consumer goods; and, (5) 35 percent duty on certain goods that the Ivoirian

Government elected to afford greater protection. The CET was slated to be fully harmonized by 2020, but,

in practice, some ECOWAS Member States have maintained deviations from the CET beyond the January

1, 2020 deadline.

Since 2021, the tariff rate was reduced to 9 percent for milk (except yogurt and other dairy products), infant

milk, homogenized and composite preparation foods for infants, imported rice, meat imported from outside

ECOWAS, pasta products containing 100 percent durum wheat semolina, and equipment designed for solar

energy. The Ivoirian Government applies a tariff of CFA 1,000 (approximately $1.75) per kilogram to

imports of frozen meats.

Taxes

Imports from countries that are not members of the West African Economic and Monetary Union

(WAEMU) are subject to an additional 2.5 percent tax on the cost, insurance, and freight (CIF) value of

imports, which consists of the solidarity tax (0.8 percent), African Union import tax (0.2 percent),

community levy (0.5 percent), and statistical charge (1.0 percent), all of which are used for financing

WAEMU commissions and assisting landlocked WAEMU members Niger, Burkina Faso, and Mali. Like

all ECOWAS countries, Cote d’Ivoire imposes a one percent ECOWAS levy on all goods originating from

non-ECOWAS countries to finance the activities of the ECOWAS Commission and Community

institutions. Cote d’Ivoire levies an additional one percent charge on the CIF value of imports, except those

destined for re-export, transit, or donations for humanitarian purposes under international agreements.

An import tax of 15 percent is applied on imports of electrical transformers from 16 kilovolt-ampere (kVA)

to 500 kVA.

Excise duties apply to cigarette imports, alcoholic or non-alcoholic beverages, and oil products. Excise

duties on tobacco were extended by the 2022 Financial Law and apply to electronic cigarettes, pipes and

pipe parts, and products and materials for shisha and electronic cigarettes. The tax rate on tobacco products

increased to 40 percent (from 39 percent). Tobacco products include cigars, cigarillos, cigarettes, smoking

tobacco, electronic cigars, and pipes. The tax on cosmetic products containing hydroquinone decreased

from 50 percent to 15 percent.

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The 2019 Financial Law extended excise duties of 10 percent to tourism vehicles with at least 13 fiscal

horsepower, and 10 percent on marble. Under the 2021 Financial Law, excise duties of 10 percent to 50

percent are applied to perfume and cosmetic products. The 50 percent maximum excise rate was reduced

to 15 percent under the 2022 tax schedule.

A special tax is paid by all taxpayers for the purpose of the equipment of the government. The tax is

calculated on 0.1 percent of total turnover and paid monthly. This tax, originally scheduled to end on

December 31, 2019, is now a permanent tax under the 2020 Financial Law. A cumulative tax of 10 percent

is levied on bank services rendered. Tax on banking operations charged by banks to companies is fully

deductible from output value-added tax (VAT). The 2019 Financial Law has extended the application of

this tax to money transfer companies via mobile networks.

Companies operating in the telecommunications, information technology, and communications sector must

also invest 20 percent of the dividends transferred abroad in bonds of the public Treasury or any borrowing

instrument issued by the Government of Cote d'Ivoire. Moreover, the Directorate General of Taxes

extended the scope of the VAT to operators of digital online market platforms as of January 4, 2022. The

VAT is 18 percent on commissions.

Non-Tariff Barriers

A number of items are subject to import prohibitions, restrictions, or prior authorization, including: certain

petroleum products, animal products, flour, live plants, seeds, arms and munitions, plastic bags, distilling

equipment, saccharin, and analog televisions. Textile imports are subject to some authorization

requirements by the External Trade Promotion Office.

Import Bans

Cote d’Ivoire has prohibited wheat flour imports since 2008. In January 2020, Cote d’Ivoire banned the

importation of sugar for five years. By doing so, Cote d’Ivoire ensures the consumption of the national

production of sugar and protects a well-known national company in this sector. An authorized local

company can import sugar in case of a national shortage. Ivory and certain types of wood cannot be

imported.

Import Licensing

Imports of cotton and products consisting of 100 percent cotton, such as the “Wax and Resin” textile cloth

most often used in traditional African clothing, require an import license from the External Trade Promotion

Office. Imports of petroleum products and their derivatives require an import license, without any quota

limits. Imports of alcoholic beverages are also subject to import license requirements from the External

Trade Promotion Office, with special labeling that states: “For Sale in Cote d’Ivoire.” The importer must

provide yearly statistics to the External Trade Promotion Office.

Import Restrictions

A regulation in force since July 2018 limits the age of imported used vehicles to a maximum of five years.

Customs Procedures and Trade Facilitation

All goods imported into Cote d’Ivoire must first be examined by a pre-shipment inspection company for

compliance with relevant requirements. U.S. exporters find the process often increases the time and cost

to export without providing assurance of a more streamlined clearance process at the border. Four European

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companies, BIVAC (affiliated with the French group Bureau Veritas), Swiss-based firms COTECNA and

SGS, and British company Intertek, are contracted to carry out pre-shipment inspections of goods exported

to Cote d’Ivoire with a value exceeding 1 million CFA (approximately $1,750). A certificate of compliance

from one of these firms is required to clear customs.

Cote d’Ivoire notified the latest update to its customs valuation legislation to the WTO in June 2002, but it

has not yet responded to the WTO Checklist of Issues that describes how the Customs Valuation Agreement

is being implemented.

Minimum Import Prices

The Ivoirian Government imposes minimum import prices on cooking oil, cigarettes, sugar, used clothing,

concentrated tomato paste, broken rice, matches, notebooks, tissues, polypropylene sacks, alcohol, and

milk; it does so for some tariff lines under a WTO waiver that expired in 2001.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Cote d’Ivoire has not consistently notified its draft technical regulations to the WTO Committee on

Technical Barriers to Trade since becoming a WTO Member on January 1, 1995. Transparency of the

regulatory system in Cote d’Ivoire is a concern, as companies complain that regulations are issued only as

final measures without a clear process or a period for public comment on draft regulations.

Sanitary and Phytosanitary Barriers

The Border Inspection and Veterinary Sanitary Control Department is responsible for ensuring that sanitary

and quality control standards for imported live animals, animal products, and fish products are upheld. This

agency also provides the necessary sanitary certifications for them to be sold.

The Veterinary Services Department is responsible for maintaining animal health and public hygiene where

animal products are kept. This includes inspecting the facilities used for storing, distributing, and selling

meat and fish products to ensure they comply with health and hygiene standards. The Department also tests

veterinary medications and products, in collaboration with the Ministry of Health and Public Hygiene.

These agencies monitor processing facilities for animal and fish products in conjunction with the Ministry

of Industry. The Ministry of Agriculture is responsible for plant variety protection.

In 2015, Cote d'Ivoire established the Sanitary and Phytosanitary / Technical Barriers to Trade Sub-

Committee as part of the National Institutional Advisory Committee on WTO Agreements (Article 6 of

Decree No. 2015-115 of February 25, 2015).

GOVERNMENT PROCUREMENT

The government publishes tender notices in the local press and sometimes publishes tenders in international

magazines and newspapers. On occasion, there is a charge for the bidding documents. Cote d’Ivoire has a

generally decentralized government procurement system, with most ministries undertaking their own

procurements. The National Bureau of Technical and Development Studies, the government’s technical

and investment planning agency and think tank, occasionally serves as an executing agency in major

projects to be financed by international institutions.

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The Public Procurement Department is a centralized office of public tenders in the Ministry of Finance to

help ensure compliance with international bidding practices. Cote d’Ivoire’s update to its public

procurement code in 2019 introduced some positive changes, including electronic procurement bidding,

provisions on sustainable public procurement, and promotion of socially responsible vendors as a bidding

qualification. While the public procurement process is open by law, in practice it is often opaque and

government contracts are occasionally awarded outside of public tenders. Some foreign companies appear

to secure contracts as a result of longstanding relationships with government officials or aided by

partnerships with Ivoirian commercial entities that have close connections to the government. During

negotiations on a tender, the Ivoirian Government at times imposes local content requirements on foreign

companies. In other instances, although there are specific regulations governing the use of sole source

procurements, the government has awarded sole source bids without tenders, citing the high technical

capacity of a firm or a declared emergency.

Many firms continue to cite corruption as an obstacle to a transparent understanding of procurement

decisions.

Cote d’Ivoire is not a Party to the WTO Agreement on Government Procurement, but has been an observer

to the WTO Committee on Government Procurement since July 2020.

INTELLECTUAL PROPERTY PROTECTION

Inadequate enforcement of intellectual property (IP) rights remains a serious concern. The Ivoirian

literary, and artistic works. BURIDA has also facilitated stakeholder engagement to promote IP, and its

police unit still conducts some raids to confiscate pirated CDs and DVDs; however, due to recent streaming

alternatives, CDs and DVDs are less and less circulated in the market. IP enforcement, nevertheless, suffers

in Cote d’Ivoire because of limited resources and a lack of customs checks at the country’s porous borders.

SERVICES BARRIERS

Cote d’Ivoire distinguishes between providing legal advice and practicing law in court. In order to practice

law in a courtroom, one must be accredited by the Ivoirian bar association, which requires Ivoirian

nationality. Those solely providing legal advice are not subject to this restriction.

Cote d’Ivoire has restrictions on the registration of foreign nationals by the chartered accountants’

association (which also requires Ivoirian nationality). The restrictions do not apply to foreign nationals

who have already been practicing in Cote d’Ivoire for several years under the license of an Ivoirian

practitioner.

INVESTMENT BARRIERS

Cote d’Ivoire has restrictions on, and requires prior approval for, foreign investment in the health sector,

law and accounting firms, and travel agencies. In negotiating the terms of an investment, the government

will often require the use of local content. Majority foreign ownership of companies in these sectors is not

permitted and foreign companies currently operate in all these sectors in partnership with local firms and

with government permission.

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SUBSIDIES

The Cote d’Ivoire Government granted cotton producers a subsidy of 29 billion CFA (approximately $45

million) to offset significant increases in the cost of fertilizer (e.g., an increase of 84 percent for nitrogen,

phosphorus, and potassium, and 114 percent for urea) and other inputs.

STATE-OWNED ENTERPRISES

To improve governance and due to several non-payments by state-owned enterprises (SOEs) on private

procurements, the managers of SOEs are required, as of July 27, 2022, to transmit financial updates to the

government quarterly.

OTHER BARRIERS

Bribery and Corruption

Bribery and corruption remain a significant concern. Stakeholders report that bribes are sometimes solicited

to speed up the slow bureaucratic process or to secure public tenders. The government established the High

Authority of Good Governance (HABG) in 2013. The HABG is an independent administrative authority

that is nominally under the Office of the President. It is responsible for executing the national plan to fight

corruption and investigating allegations of corruption. In 2021, the HABG undertook an audit of Ivoirian

parastatal companies in key sectors. Several parastatals’ managers have been suspended from their

positions. In addition, 14 entities (11 public companies and 3 private companies) in the health sector were

charged with corruption. Corruption, opaque business practices, and capacity constraints on the judiciary

and in law enforcement have resulted in poor enforcement of the law. This situation has been particularly

acute with regard to the protection of private property rights, particularly when the subject of the judicial

proceeding or law enforcement action is a foreigner and the plaintiff is Ivoirian or a long-established foreign

resident. These situations are further complicated by conflicting modern and traditional concepts of land

tenure, the latter including communal ownership. On July 11, 2022, the government launched “Spacia,” a

platform for monitoring and preventing acts of corruption and similar offenses.

Export Policies

Cote d’Ivoire’s 2021-2025 National Development Plan prioritizes agro-industrial development. As a result,

the government provides incentives and supports funds to investors expanding agro-industrial processing

of locally grown cashew, cocoa, and other commodities for export. The government also incentivizes

domestic processing of agricultural commodities such as cocoa, rubber, palm oil, and coffee, by imposing

a higher export tax on unprocessed commodities. The government prohibits the export of raw ivory, certain

tropical hardwood logs, and iron products. Exports of metallic ores, gems, and precious metals require

prior authorization from both the Ministry of Mining and Geology and the Ministry of Economy and

Finance.

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DOMINICAN REPUBLIC

TRADE AGREEMENTS

Dominican Republic–Central America–United States Free Trade Agreement

The Dominican Republic–Central America–United States Free Trade Agreement (CAFTA–DR) entered

into force for the United States, El Salvador, Guatemala, Honduras, and Nicaragua in 2006; for the

Dominican Republic in 2007; and for Costa Rica in 2009. The United States and the other CAFTA–DR

countries meet regularly to review the implementation and functioning of the Agreement and to address

outstanding issues.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Under the CAFTA–DR, as of January 1, 2015, U.S. originating consumer and industrial goods have entered

the Dominican Republic duty free. In addition, nearly all U.S. agricultural exports enter the Dominican

Republic duty free under the CAFTA–DR. The Dominican Republic will eliminate its remaining tariffs on

rice, chicken leg quarters, and some dairy products by 2025. For certain agricultural products, tariff-rate

quotas (TRQs) permit duty-free access for specified quantities during the tariff phase-out period. The

Dominican Republic is required under the CAFTA–DR to make TRQs available on January 1 of each year.

Taxes

U.S. ethanol imported into the Dominican Republic is subject to an internal 10 percent ad valorem tax and

an excise tax of approximately $11 per liter, and these taxes disincentivize importation of U.S. ethanol.

Imported ethanol is also subject to the internal Tax on Transfer of Industrial Goods and Services (ITBIS)

at a rate of 18 percent. This practice disadvantages U.S. exports as locally produced ethanol is not subject

to these internal taxes.

Cheese importers face unequal treatment with regard to taxation; imported cheese is subject to the ITBIS

of 18 percent, while locally produced cheese is not. This puts U.S exports of these products at a competitive

disadvantage. In meetings conducted in 2020 and 2021, the Dominican Republic Government advised that

the General Directorate of Internal Taxes (DGII) had discussed implementing the ITBIS on local cheese

producers through a schedule. The DGII has not made any progress on this proposed implementation. The

U.S. Government will continue to work with the DGII to seek a resolution of this issue.

Non-Tariff Barriers

Import Licensing

The Dominican Republic’s Ministry of Agriculture continues to administer import licenses as a means to

manage trade in sensitive commodities such as rice, beans, dairy, sugar, poultry, beef, pork, onions, and

garlic, and intermittently with respect to other products. In August 2004, a side letter was signed under the

CAFTA–DR by the United States and the Dominican Republic affirming that the Dominican Republic

would not grant or deny import licenses based on unjustified sanitary or phytosanitary concerns, domestic

purchasing requirements, or discretionary criteria. However, the need to obtain an import license from the

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Ministry of Agriculture and the way in which the licensing process is handled can lead to inconsistent

application of the law and uneven treatment. In 2022, the Dominican Republic proposed a new system to

issue import licenses for agricultural products, led by the Ministry of Agriculture. In April 2022, the United

States submitted comments on the new regulations. The Dominican Government had not responded to the

U.S. comments or implemented the new system as of December 31, 2022. The United States will continue

to work with the Ministry of Agriculture to ensure that this new system responds to U.S. concerns.

Importers of U.S.-made used vehicles less than five years old have reported that the Dominican customs

authority frequently has challenged the eligibility of those vehicles for preferential tariff treatment under

the CAFTA–DR, citing technical difficulties in demonstrating compliance with the rules of origin. The

United States continues to engage with the Dominican Republic to address these complaints.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Regulation of Steel Rebar

Multiple U.S. exporters of steel rebar used for construction have complained that a Dominican technical

regulation (RTD 458) constitutes a barrier to trade. Dominican authorities have required imported U.S.

rebar to be sampled and tested by third-party laboratories, which is not required of domestic production.

Because no suitable third-party laboratories are present in the Dominican Republic, samples have been sent

back to the United States for testing. These conformity assessment procedures appear to present

unnecessary obstacles to international trade, deviate from international standards, lack transparency in their

application, and have unduly increased the cost and time required for commercialization of rebar in the

Dominican Republic.

The United States has continued to engage with U.S. companies and Dominican authorities on this issue.

While Dominican authorities have worked with certain individual companies in the U.S. steel industry to

accept test results and certify rebar before export so that products may clear customs and enter commerce

in the Dominican Republic without delay, the Dominican Republic has yet to reform the regulations and

practices to ensure that imported rebar is treated no less favorably than domestically manufactured rebar.

Traceability System for Alcoholic Beverages and Cigars

On September 29, 2021, the DGII issued Regulation 07-21, implementing the Fiscal Control and

Traceability System for Alcoholic Beverages and Cigars (TRAFICO) to tackle illicit trade and tax evasion

in the alcoholic beverage and cigarette sectors. The United States, the European Union, the United

Kingdom and other foreign governments have expressed concerns over this system. Exporters, including

from the United States, may incur additional costs in complying with the regulation, and their exports may

also decrease due to logistical challenges associated with the requirements of a relatively small market. In

2021, the United States shared its concerns on the measure but the Dominican Republic implemented the

final regulation without fully addressing U.S. concerns. On March 9, 2022, U.S. representatives met with

the DGII and obtained their agreement to: (1) extend the implementation date for importers to June 22,

2023; and, (2) exclude beer from the regulation.

Sanitary and Phytosanitary Barriers

Delays in the process for obtaining sanitary registrations from the Dominican Republic for foods,

medicines, and health products have resulted in higher operating costs and delays moving products to

market, according to industry representatives. Since April 2018, the General Directorate of Medicines,

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Food, and Health Products (DIGEMAPS), which oversees the registration process, has requested

declarations of product additives, which are not required under Dominican Republic health law.

Improvements have been made in expediting new registrations and renewals through the implementation

of a simplified procedure, including accepting a sworn statement on why confidential additives are not

provided. However, the practice of requiring business confidential information, such as exact product

formulas, continues to make registration difficult for many products. The functioning of the sanitary

registration process remains inconsistent, with certain products taking up to a year to be registered by

DIGEMAPS, often resulting in importers choosing not to import the product.

INTELLECTUAL PROPERTY PROTECTION

The Dominican Republic remained on the Watch List in the 2022 Special 301 Report. The Dominican

Republic made some progress on intellectual property (IP) protection and enforcement, including by taking

steps to create the National Advisory Board for Intellectual Property to improve coordination on IP

enforcement, but concerns remain. The United States continues to urge the Dominican Republic to address

long-standing IP issues, particularly against online and signal piracy, including the continued

deprioritization of IP prosecutions and investigations by the Special Office of the Attorney General for

High-Tech Crimes and the National Copyright Office. The United States also continues to urge the

Dominican Republic to improve coordination among enforcement agencies and to ensure that such agencies

are adequately funded and staffed.

GOVERNMENT PROCUREMENT

U.S. suppliers have complained that Dominican Republic Government procurement is not conducted in a

transparent manner and that corruption is a problem. The U.S. Government has engaged with the

Dominican Government on this issue and transparency has increased in its procurement system over the

last few years. In a Memorandum of Understanding signed by the United States and the Dominican

Republic in October 2020, the Dominican Government expressed its intent to prioritize passage of new

legislation on public procurement and implement it in a manner that is timely, transparent, and consistent

with international best practices. In March 2022, the Dominican Republic issued a draft law on government

procurement establishing a legal regime for all stages of the procurement process. The draft law excludes

“international treaties, trade or integration agreements…when so determined by the treaties, agreements, or

conventions” from the scope of the law, but it does not offer guidance as to how procuring entities are to

implement the law in accordance with the Dominican Republic’s CAFTA–DR commitments. The U.S.

Government also engaged the Dominican Government on this matter and will continue to monitor the

Dominican Republic’s procurement practices for consistency with CAFTA–DR’s disciplines.

The Dominican Republic is neither a Party to the WTO Agreement on Government Procurement nor an

observer to the WTO Committee on Government Procurement. However, the CAFTA–DR contains

disciplines on government procurement.

LABOR

A review of the Dominican Republic’s progress on implementing specific recommendations from the

United States to improve worker rights practices in the Dominican sugar sector has been ongoing since the

issuance of a U.S. Department of Labor (DOL) report in 2013. The DOL report, published in response to

a submission from the public under the CAFTA–DR, raised concerns regarding labor law enforcement in

the sugar sector related to acceptable conditions of work, the minimum age for work and the worst forms

of child labor, and forced labor. In its seventh report of review, published in September 2022, the DOL

detailed ongoing concerns and challenges in the Dominican Republic’s sugar industry. Although the

country’s Ministry of Labor and sugar companies have made progress in some areas, the country still faces

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challenges related to labor law enforcement, and concerns remain about dangerous working conditions,

verification of pay and hours, unsuitable living conditions, workers’ precarious legal status, and other

potential labor rights abuses. The United States has also established a bilateral technical working group

with the Dominican Republic under the CAFTA–DR to help improve labor law enforcement in the

Dominican sugar sector.

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ECUADOR

TRADE AGREEMENTS

The United States–Ecuador Trade and Investment Council Agreement

The United States and Ecuador signed a Trade and Investment Council Agreement (TIC) in 1990. This

Agreement is the primary mechanism for discussions of trade and investment issues between the United

States and Ecuador.

On December 8, 2020, the United States and Ecuador signed a Protocol on Trade Rules and Transparency

(the Protocol), which entered into force August 15, 2021. The Protocol is an update to the TIC and is an

integral part of that Agreement, containing provisions that establish high standards for increased trade

facilitation, transparency in regulatory development, anticorruption policies, and cooperation and

information sharing to benefit small and medium-sized enterprises. The Protocol establishes high-level

trade rules that will improve opportunities for bilateral trade and investment in all sectors. The United

States will continue to work with Ecuador to monitor the full implementation of the Protocol.

IMPORT POLICIES

Tariffs

Ecuador’s average Most-Favored-Nation (MFN) applied tariff rate was 11.2 percent in 2021 (latest data

available). Ecuador’s average MFN applied tariff rate was 17.4 percent for agricultural products and 10.2

percent for non-agricultural products in 2021 (latest data available). Ecuador has bound 100 percent of its

tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 21.9 percent.

When Ecuador joined the WTO in January 1996, it bound most of its tariff rates at or below 30 percent ad

valorem; most products bound at higher rates are agricultural products covered by the Andean Price Band

System (APBS). Ecuador agreed to phase out its participation in the APBS when it joined the WTO;

however, as of December 31, 2022, Ecuador has taken no steps to phase out use of the APBS. As a member

of the Andean Community of Nations (CAN), Ecuador grants and receives exemptions from tariffs (i.e.,

reduced ad valorem tariffs and no application of the APBS) for products from the other CAN countries.

Foreign Trade Committee (Comex) Resolution 009-2021, which took effect in October 2021, provides for

permanent tariff reductions on 667 items; 590 products became duty free, while the rest are subject to

reduced rates of between 5 percent and 25 percent.

Ecuador still imposes a mixed tariff (composed of an ad valorem tariff and a specific tariff) on

approximately 360 products, including textiles and shoes. In some cases, the mixed tariff appears to result

in a 40 percent tariff rate.

Agricultural Products

Ecuador’s continued use of the APBS affects many U.S. agricultural exports by subjecting them to a

variable levy or surcharge (on top of an ad valorem tariff) that increases as world prices decrease. Comex

Resolution 009-2021 provided for tariff reductions on 43 agricultural products. Of those, the resolution

reduced tariffs on 17 products to zero percent, and reduced tariffs on the other products by 2 percentage to

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15 percentage points. The two principal U.S. exports benefitting from this tariff reduction are soybean meal

and wheat. They are subject to a zero percent tariff, and the APBS will not be applied.

Information and Communication Technology Products

Comex Resolution 009-2021 eliminated tariffs for computers, switching devices for automatic telephony

or telegraphy, satellite dishes, fiber optic cables, cordless headset phones with microphones, keyboards,

memory units, and automatic machine units for data treatment or processing. Comex Resolution 009-2021

also reduced tariffs to five percent for television cameras, digital cameras, camcorders, routers, modems,

and wireless equipment.

Raw Materials and Industrial Capital

Comex Resolution 007-2021, which took effect in June 2021, eliminated tariffs on 128 subheadings that

include raw materials and inputs and capital goods for the agricultural, fishing, and aquaculture sectors.

Additionally, Comex Resolution 009-2021 provided tariff reductions on 328 items that correspond to

machinery and equipment used in the agricultural industry.

Non-Tariff Barriers

Import Licensing

Comex and the Ecuadorian Ministry of Agriculture (MAG) impose a mandatory, cumbersome process for

allocating import licenses for 55 agricultural tariff lines, including dairy, potatoes (including frozen french

fries), beef, pork, chicken, turkey, soybean meal, beans, sorghum, and corn. After consulting with the

domestic private sector consultative committees, MAG allocates single import licenses on a per-shipment

basis.

Due to the difficulty of obtaining import permits, the licensing policy incentivizes domestic sourcing of

products at the expense of imported products. For these products, an importer’s total annual import

allowance cannot surpass an amount determined by MAG. For most products subject to the licensing

system, MAG also requires that interested parties provide sales and consumption forecasts before it will

authorize imports. In the case of wheat, corn, soybean meal, and pork, MAG requires proof of local

purchases to assign amounts for import licenses.

While Ecuador subjects all food and agricultural imports to the import licensing regime, beef, pork, and

dairy imports face further impediments because an importer’s total allowance for these products cannot

surpass a volume pre-determined by MAG, in some cases in consultation with domestic producers of the

same commodities. The review process for import licensing applications is often lengthy and lacks

transparency. In cases where import licenses are not approved, the Ecuadorian government does not

typically notify companies or provide a formal explanation for the denial. Permits are limited to a single

shipment, meaning that importers are required to repeat a lengthy and arduous application process each

time they seek to import these products in a given year.

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TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Medical Devices

In June 2021, Ecuador implemented a technical regulation that establishes a Unique Traceability Code

(CUT) for medical devices. The CUT differs from the globally harmonized Unique Device Identification

guidance documents developed by the International Medical Device Regulators Forum. Ecuador made

several notifications to the WTO regarding this measure beginning in January 2021. U.S. industry provided

technical comments to Ecuador through the domestic consultation process, and through the U.S. Enquiry

Point in September 2021. The U.S. Government held bilateral meetings with Ecuador in the last quarter of

2021 to encourage the use of the international standard. The regulation provides for a 42-month grace

period for implementation, until November 2024.

Pre-Shipment Controls and Prohibited Imports

Comex Resolution 009-2022, which became effective on October 1, 2022, established three annexes: a

revised list of products that require pre-shipment control documentation, a list of prohibited imports, and a

list of subheadings subject to prior control documentation for products imported under quota within the

framework of current trade agreements. The resolution also eliminated pre-shipment control documents

for 601 tariff lines.

Prohibited imports include hazardous waste; used clothing or footwear; ozone depleting substances; used

spare parts for vehicles; baby bottles with bisphenol A (BPA) component; used tires; bottles made of

polyethylene, terephthalate, and other types of polymers; equipment containing CFCs using R-12 or R-502

refrigerants; worked ivory and its byproducts; used vehicles; and, motorcycles.

As of October 1, 2022, Comex Resolution 014-2022 prohibits imports of Free-to-Air (FTA) satellite

decoders and receivers classified in Harmonized Tariff System subheading 8528.71.00.21 through the

Ecuadorian post office, courier, or travelers entering through airports. The resolution does not apply to

internet-based satellite devices. Imports of FTA satellite decoders by other means require an import license

issued by Ecuador’s telecommunications regulator, the Agency of Telecommunications Regulation and

Control.

Processed Foods Facility GMP Registration Requirements

In September 2020, Ecuador’s National Agency for Sanitary Regulation, Control, and Observation

(ARCSA) notified to the WTO Committee on Technical Barriers to Trade (TBT Committee) a technical

regulation that would establish new registration requirements on processing plants for food products

intended for retail sale. Concerns relating to this technical regulation include the requirement for

duplicative certificates, the validation of certifying documents by U.S. state governments, and the approval

of Good Manufacturing Practices certifiers by Ecuadorian authorities. The United States submitted

comments regarding this measure to Ecuador in December 2020. These concerns were raised on the

margins of the February 2021 meeting of the TBT Committee and formally in the June 2021 meeting of the

TBT Committee. Ecuador has not notified the final regulation to the WTO.

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Sanitary and Phytosanitary Barriers

Processed Foods–Quality Compliance and Prior Authorization Requirements

Processed food products of animal origin must acquire prior authorization from three separate government

authorities within MAG, including the Agency of Sanitary and Phytosanitary Regulation and Control

(AGROCALIDAD), the Undersecretary of Commercialization, and the Undersecretary of Agriculture

Development. ARCSA authorizes imports of consumer-oriented products. For meats and dairy products,

the Undersecretary of Commercialization and the Undersecretary of Livestock Development conduct a

market assessment resulting in unnecessary redundancy and delay. The United States is working with

Ecuadorian authorities to explore more efficient and streamlined alternatives.

Establishment of Registration Requirements

In January 2021, AGROCALIDAD began requiring the registration of foreign establishments that export

animals or animal products and products that are fed or applied to animals. Discussions with

AGROCALIDAD and MAG resulted in some clarifications in the requirements for U.S. importers. For

instance, companies need to provide a list of ingredients for the products in question, but not specific

formulas or percentages. The United States continues to engage with AGROCALIDAD and MAG to

facilitate registration of U.S. establishments.

In December 2022, Ecuador completed its review of information submitted by U.S. regulatory agencies as

required for pork and poultry establishments. Ecuador is expected to complete its review of the information

submitted for beef establishments by the end of the third quarter in 2023. Individual U.S. pork, poultry,

and beef establishments are also required to submit establishment information in order to be eligible to

export to Ecuador.

INTELLECTUAL PROPERTY PROTECTION

Ecuador remained on the Watch List in the 2022 Special 301 Report. Among other issues, enforcement of

intellectual property (IP) rights against widespread counterfeiting and piracy remains weak.

In addition, the 2016 Code of the Social Economy of Knowledge, Creativity, and Innovation (COESCCI),

also known as the Ingenuity Code, contains legislation covering multiple IP matters. In December 2020,

Ecuador published the final regulations implementing the COESCCI. Ecuador’s National Intellectual

Property Service continues to consider amendments to the COESCCI and to review feedback from

stakeholders, though has not communicated a timeframe for revisions.

The United States continues to engage with Ecuador on IP issues, including with respect to revisions to the

COESCCI and its implementing regulations, through the Special 301 process and the TIC.

SERVICES BARRIERS

Telecommunications Services

Article 34 of Ecuador’s Organic Telecommunications Law (LOT) required telecommunications service

suppliers with a market share of at least 30.0 percent to pay 0.5 percent of their gross revenue to the

government, and an additional 1.0 percent of their gross revenue for each additional 5.0 percent market

share they hold above 30.0 percent. National Telecommunications Corporation (CNT), which is owned by

the Ecuador Government and is the dominant provider of fixed telecommunications services, is not included

in the calculation of market share for Article 34 and is exempt from the fees. In November 2021, the Law

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on Economic Development and Fiscal Sustainability After the Covid-19 Pandemic eliminated Article 34 of

the LOT effective January 2023.

Advertising

With limited exceptions, the 2013 Organic Law of Communication prohibits advertisements produced

abroad.

BARRIERS TO DIGITAL TRADE

Data Localization Requirements

The 2021 Organic Law on the Protection of Personal Data will take effect in May 2023. The law allows

cross-border transfers of personal data only to countries or organizations that have been determined to

provide an adequate level of protection. The law creates an autonomous Data Protection Superintendence

which has the authority to determine which countries have adequate levels of protection, and to implement

and enforce the law. Regulations implementing the data privacy law are still in draft form and are expected

to be published in early 2023, followed by the appointment of a Data Superintendent and Data

Superintendence later in the year. Restrictions on the flow of data can have a significant effect on the

functionality embedded in smart devices. The United States encourages Ecuador to work closely with

companies and organizations, both in and outside Ecuador, that are affected by the law to resolve

implementation and enforcement issues in a reasonable and consistent manner.

INVESTMENT BARRIERS

In May 2017, Ecuador’s National Assembly voted to terminate 12 of the country’s Bilateral Investment

Treaties (BITs), including the United States–Ecuador BIT. The United States–Ecuador BIT was terminated

on May 18, 2018, but the sunset provisions of the Agreement protect U.S. investments predating May 18,

2018, for 10 years following the date of termination.

Capital Exit Tax

The Ecuadorian Government levies a capital exit tax (ISD) on any form of currency outflow in cash, debit

and credit cards, checks, and internet payment methods. In 2021, the Ecuadorian Government committed

to the gradual phaseout of the five percent ISD over four years. The President issued Executive Decree 182

in August 2021, eliminating the ISD for the aviation industry as a first step. As of October 2022, the

government has gradually reduced the ISD tax from five percent to four percent.

Other Investment Barriers

Ecuador’s Energy and Mines Ministry (MEM) has identified illegal mining as a significant deterrent to

foreign investment. The Ecuadorian Government is undertaking efforts to combat illegal mining, but lacks

adequate resources. The U.S. Government has ongoing initiatives to train Ecuadoran authorities to identify

and deter illegal mining.

Since 2018, Ecuador’s mining cadastre (registry of mining concessions) has been closed, creating a barrier

for large-scale mining investments. MEM is updating its mining tender process and model agreements,

together with U.S. Government technical assistance, to meet international standards of transparency and

bankability. In June 2022, MEM announced plans to reopen the mining cadastre in December 2022, but as

of December 31, 2022, Ecuador has not done so.

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EGYPT

TRADE AGREEMENTS

The United States–Egypt Trade and Investment Framework Agreement

The United States and Egypt signed a Trade and Investment Framework Agreement (TIFA) on July 1, 1999.

This Agreement is the primary mechanism for discussions of trade and investment issues between the

United States and Egypt.

IMPORT POLICIES

Tariffs

Egypt’s average Most-Favored-Nation (MFN) applied tariff rate was 19.0 percent in 2022. Egypt’s average

MFN applied tariff rate was 65.0 percent for agricultural products and 11.6 percent for non-agricultural

products in 2022. Egypt has bound 99 percent of its tariff lines in the World Trade Organization (WTO),

with an average WTO bound tariff rate of 36.6 percent.

On June 9, 2022, Egypt lowered tariffs under Decree No. 218/2022 on over 150 categories of imported

products including a few consumer products, such as pharmaceuticals and natural gas-powered

automobiles, with most reductions targeting capital goods and inputs for agriculture and industry. Tariffs

on agricultural equipment, fertilizer, and seeds have dropped from five percent to two percent. Tariffs on

industrial vehicles, such as aircraft, tractors, railcars, and ships, have fallen from 40 percent to 2 percent,

and the duty on natural gas-powered automobiles has fallen from 30 percent to 2 percent.

Egypt’s tariff on passenger cars with engines of 1,600 cubic centimeters (cc) or less is 40 percent, and its

tariff on cars with engines of more than 1,600 cc is 135 percent. Tariffs on a number of processed and high-

value food products, including poultry, meat, apples, pears, cherries, and almonds, range from 20 percent

to 30 percent. There is a 300 percent tariff on alcoholic beverages for use in the tourism sector plus a 40

percent sales tax. The tariffs on alcoholic beverages for use outside the tourism sector range from 1,200

percent on beer and 1,800 percent on wine to 3,000 percent on sparkling wine and spirits, effectively

ensuring that these beverages comprise foreign unrefined inputs that are reconstituted and bottled in Egypt.

Foreign films are subject to tariffs amounting to 46 percent.

Non-Tariff Barriers

Import Licensing

The National Food Safety Authority (NFSA) must register and approve all nutritional supplements,

specialty foods, and dietary foods according to NFSA Decision No. 1/2018 on the Rules Governing the

Registration and Handling of Foods for Special Dietary Uses. Importers must apply for a license to import

specialty food products and renew the license every five years. License renewals can cost up to $1,000 per

renewal, depending on the product. In December 2021, the NFSA issued Decree No. 11/2021, which more

than doubled the cost of conducting an inspection of imported food.

Import Bans/Restrictions

In 2003, Egypt imposed restrictions on poultry, limiting imports to only whole and frozen poultry. The

executive regulations to Egypt’s Import and Export Law (Ministry of Trade and Industry Decree 770/2005)

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suspended the importation of chicken limbs and offal, which acted as a de facto ban on U.S. chicken leg

quarter exports to Egypt. In 2022, Egypt began allowing shipments of chicken leg quarters from the United

States on a limited basis. The United States pushed to expand access for poultry at the December 2022

TIFA meeting in Cairo.

The Egyptian Drug Authority (EDA), an independent agency under the Prime Minister’s Office, is

responsible for the registration, licensing, and implementation of import procedures for pharmaceutical

products, medical devices, and cosmetics. The approval process for the importation of new, used, and

refurbished medical equipment and supplies consists of a number of steps, which some importers have

found burdensome. Importers must present a form requesting the EDA’s approval to import; provide a

safety certificate issued by health authorities in the country of origin, such as the U.S. Department of Health

and Human Services Food and Drug Administration (FDA); and, submit a certificate of approval from the

U.S. FDA or the European Bureau of Standards. The importer also must present an original certificate from

the manufacturer indicating the production year of the equipment and, if applicable, certifying that the

equipment is new. The importer must prove it has a service center to provide after-sales support for the

imported medical equipment, including spare parts and technical maintenance.

Customs Barriers and Trade Facilitation

Egypt’s National Single Window for Foreign Trade Facilitation (Nafeza) requires foreign exporters to

which is a blockchain provider, to facilitate the release of goods from ports in Egypt. U.S. businesses raised

concerns about the lack of transparency and implementation guidance on CargoX procedures. Industry also

raised concerns about the ACI filing fee increase from $50 to $150 between October 1, 2021 and October

14, 2021.

Egypt’s Customs Authority continues to employ reference pricing when assessing duties. Egypt’s Customs

Valuation Committee engages in lengthy deliberations without coming to a final decision on customs

valuation appeals filed by U.S. businesses. The U.S. Government has raised and will continue to raise U.S.

business concerns through the TIFA dialogue and in other bilateral and multilateral fora.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Vehicles

U.S. vehicle and automotive parts exports face significant barriers in Egypt. In 2012, Egypt became a

Contracting Party to the 1958 U.N. Economic Commission for Europe (UNECE) Agreement Concerning

the Adoption of Uniform Technical Prescriptions for Wheeled Vehicles, Equipment and Parts. As of June

2014, Egypt has applied EU regional emissions and UNECE safety standards for vehicles and automotive

parts, thereby blocking imports of U.S. vehicles which meet comparable regulatory emissions and safety

standards. Egyptian law also prohibits the importation of used vehicles for commercial purposes, pursuant

to Ministerial Decree No. 580/1998 and Annex 2 to Ministerial Decree No. 770/2005.

Egypt does not recognize U.S. Federal Motor Vehicle Safety Standards (FMVSS), even though U.S.

standards achieve comparable regulatory goals, and exports of these goods have declined significantly

since 2015. The failure to recognize these standards has a negative impact on U.S. exports to Egypt. The

United States has raised this issue in TIFA Council meetings. The U.S. Agency for International

Development (USAID), in collaboration with the U.S. Department of Commerce, conducted a regulatory

environmental assessment in June 2022 and is communicating with U.S and Egyptian stakeholders to

come up with a recommended

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approach to address these issues that could be accepted by both the United States and Egypt. At the most

recent TIFA Council meeting in December 2022, Egypt indicated its willingness to consider recognition of

FMVSS. The United States and Egypt intend to hold technical consultations and discussions in early 2023

to assist Egypt in working through its standards concerns.

Foreign Manufacturers Registration

Egyptian Ministerial Decree No. 43/2016 requires foreign entities that export finished consumer products

to Egypt (e.g., dairy products, furniture, fruits, textiles, confectioneries, and home appliances) to register

their brand names and their manufacturing facilities with Egypt’s General Organization for Exports and

Imports Control (GOEIC). Egypt does not allow imports of goods from nonregistered entities. Throughout

2022, the registration could take several months, adding costs and uncertainty to the export process. The

United States has raised these concerns with Egypt multiple times, including at the most recent TIFA

Council meeting in December 2022. At the TIFA meeting, GOEIC indicated that the two decrees had been

amended and consolidated into new Decree 195, which establishes a deadline for completing the

registration process within 40 days and establishes a dedicated grievance committee for companies to report

delays. GOEIC notified the decree to the WTO on November 28, 2022.

Halal Import Requirements

In August 2021, NFSA announced that it would extend the scope of its halal certification requirements to

include dairy and other agricultural products in addition to the already existing requirement for imports of

poultry and meat products. In December 2021, Egypt notified this measure to the WTO Committee on

Technical Barriers to Trade (TBT Committee) with an implementation date of January 29, 2022; however,

following U.S. requests, Egypt postponed implementation of this measure several times. The United States

requested these implementation delays due to a lack of procedural details that would permit U.S. producers

and exporters to understand, adjust their procedures to, and comply with the measure. Egypt also specified

that only one entity would be authorized to provide the halal certification.

The announcement of the new measures and the lack of clarity on halal certification has resulted in a

disruption of U.S. dairy exports to Egypt. Although the United States exported $106 million in dairy

products to Egypt in 2021, U.S. dairy exports to Egypt fell 34 percent in the first nine months of 2022. The

United States’ biggest export, non-fat dried milk, decreased during the same period by 77 percent ($60

million to $13.6 million) in 2021. The United States pressed Egypt to provide procedural details to support

compliance with this measure and to allow additional halal certifiers to certify products, during the

December 2022 TIFA Council meeting and multiple interventions in the WTO throughout the year,

including by raising the issue in the WTO TBT Committee first in November 2021 and subsequently in the

March, July, and November meetings in 2022. The United States will continue to actively engage with

Egypt regarding these matters, including through the TIFA dialogue and in other bilateral and multilateral

fora.

Sanitary and Phytosanitary Barriers

Seed Potatoes

The United States remains unable to export seed potatoes to Egypt because the Ministry of Agriculture’s

Central Administration for Plant Quarantine (CAPQ) and the U.S. Department of Agriculture Animal and

Plant Health Inspection Services (APHIS) have not been able to come to agreement on the results and

mitigation measures of a pest risk assessment completed by CAPQ. According to APHIS, several of the

proposed mitigation measures are not scientifically justified. Despite several rounds of bilateral technical

meetings in 2019 and 2020, U.S. seed potatoes remain barred from Egypt. However, Egypt has been

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importing in vitro micro tubers from the United States, signaling a growing demand for U.S. seed potato

varieties.

GOVERNMENT PROCUREMENT

In July 2018, the Egyptian Parliament passed Law No. 182/ 2018 on government procurement, which

requires procurement decisions be made in a competitive and transparent manner and consider not only

technical requirements and price, but also sustainable development goals. As with the prior procurement

law, Egyptian small and medium-sized enterprises are given the right to obtain at least 20 percent of

available government contracts annually.

Egypt is neither a party to the WTO Agreement on Government Procurement nor an observer to the WTO

Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Egypt remained on the Watch List in the 2022 Special 301 Report. Although Egypt has made some efforts

to strengthen intellectual property (IP) protection and enforcement, including reducing patent backlogs and

improving enforcement against piracy and counterfeiting, concerns remain. The 2022 Review of Notorious

Markets for Counterfeiting and Piracy (Notorious Markets List) includes egy.best, which reportedly

operates out of Egypt and is one of the oldest and largest piracy websites in the Middle East and North

Africa regions. Egypt continues to lack deterrent-level penalties for IP violations and ex officio authority

for customs officials to seize counterfeit and pirated goods at the border. Continuing to strengthen efforts

to address the number of unlicensed satellite channels offering pirated broadcasts of U.S. works and the

unlawful decryption of encrypted signals would also improve Egypt’s IP enforcement regime. Egypt’s lack

of up-to-date, publicly available general patent and trademark examination guides online remains an

obstacle for the growth of U.S. IP exports to Egypt. Stakeholders have raised concerns regarding the lack

of an effective mechanism for the early resolution of potential patent disputes. Additionally, Egypt is not

currently a member of the World Intellectual Property Organization (WIPO) Performances and Phonograms

Treaty and WIPO Copyright Treaty.

SERVICES BARRIERS

Express Delivery Services

The Egyptian National Post Organization (ENPO) must grant special authorization to foreign-owned

private courier and express delivery service suppliers seeking to operate in Egypt. Although express

delivery services constitute a separate, for-profit, premium delivery market, ENPO requires private express

delivery operators to pay a postal agency fee of 10 percent of annual revenue on shipments of less than 20

kilograms (approximately 44 lbs.). ENPO imposes an additional fee of 5 Egyptian Pounds (approximately

$0.21) on private couriers and express delivery services for all shipments under 5 kilograms (approximately

11 lbs.). Civil Aviation Decree 607/2015 requires all courier and express delivery services to have at least

51 percent Egyptian ownership.

Financial Services

There are no legal barriers prohibiting foreign banks from establishing branches in Egypt. However, in

practice, the Central Bank of Egypt (CBE) has not issued new commercial banking licenses to foreign banks

since 1979. In January 2022, the CBE issued London-based Standard Chartered Bank preliminary approval

for a license to establish a branch in Egypt, under the Central Bank and Banking Act (Law 194/2020). Final

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approval is still pending. Three state-owned banks (Banque Misr, Banque du Caire, and the National Bank

of Egypt) control approximately 57 percent of the banking sector’s total assets.

BARRIERS TO DIGITAL TRADE

Egypt’s Law No. 180/2018 Regulating the Press, Media, and the Supreme Council for Media Regulation

(SCMR) requires media outlets to pay a fee of 50,000 Egyptian Pounds (approximately $1,636) to obtain a

license from the SCMR and gain legal status. The law defines “media outlet” very broadly to include any

social media account with at least 5,000 subscribers. The Egyptian Government has used this and other

laws as grounds to limit cross-border services. This website blocking undermines the value of Internet-

based services to the companies, including U.S. firms, that provide them and to their customers, and

imposes costs on local firms that depend on these services for their business.

As of July 2020, Egypt’s Personal Data Protection Act (Law No. 151/2020) requires licenses for cross-

border data transfers. The United States is monitoring the implementation of this law.

INVESTMENT BARRIERS

Egypt implemented investment Law No. 72/2017 in 2017 to address longstanding complaints of foreign

investors. While the law allows foreign investors to operate sole proprietorships and partnerships, it

continues to limit the number of non-nationals working at any business to 10 percent of the workforce, or

up to 20 percent of the workforce if it is not possible to find Egyptian citizens with the necessary

qualifications. Foreigners may act as importers for their own businesses, albeit with certain limitations on

the items that may be imported by the business. Egypt restricts foreign equity in construction and transport

services to 49 percent. A prohibition on the acquisition of land by foreigners for commercial purposes was

amended in 2022 to allow such acquisition under certain circumstances.

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EL SALVADOR

TRADE AGREEMENTS

Dominican Republic–Central America–United States Free Trade Agreement

The Dominican Republic–Central America–United States Free Trade Agreement (CAFTA–DR) entered

into force for the United States, El Salvador, Guatemala, Honduras, and Nicaragua in 2006; for the

Dominican Republic in 2007; and for Costa Rica in 2009. The United States and the other CAFTA–DR

countries meet regularly to review the implementation and functioning of the Agreement and to address

outstanding issues.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

As a member of the Central American Common Market, El Salvador applies a harmonized external tariff

on most items at a maximum of 15 percent, with some exceptions. However, under the CAFTA–DR, as of

January 1, 2015, U.S. originating consumer and industrial goods enter El Salvador duty free.

In addition, nearly all of U.S. agricultural exports enter El Salvador duty-free under the CAFTA–DR. El

Salvador eliminated its remaining tariffs on rice, yellow corn, and chicken leg quarters on January 1, 2023,

and is scheduled to eliminate remaining tariffs on dairy products by 2025. For certain agricultural products,

tariff-rate quotas (TRQs) will permit duty-free access for specified quantities during the tariff phase-out

period, with the duty-free quantities expanding during that period. El Salvador is required under the

CAFTA–DR to make TRQs available on January 1 of each year. El Salvador monitors its TRQs through

an import licensing system, which the United States carefully tracks to ensure the timely issuance of these

permits.

Taxes

El Salvador, under its general alcoholic beverage law, assesses a specific excise tax on distilled spirits that

is applied on a per-liter of alcohol basis, with four specific rates ($0.0325, $0.05, $0.09, and $0.16 per liter).

The lowest rate applies only to aguardientes, a locally bottled spirit made from cane sugar. Whiskey, which

is exclusively imported, is assessed at the highest rate. Distinctions between types of distilled spirit may

result in lower tax rates on domestically produced spirits compared to imported products.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

U.S. companies frequently express concerns regarding the inconsistent and discretionary application of

customs regulations and procedures, resulting in unpredictable delays and administrative fines. For

example, exporting from the duty-free zone is unduly cumbersome, with a requirement that a representative

of the receiving company and the shipping company be physically present for the exchange of documents

and release of materials. Additionally, U.S. companies indicate that El Salvador’s procedures for applying

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for an advance ruling are difficult to find online, making it hard to get advance assurance of how Salvadoran

customs will treat a good upon importation.

The United States continues to monitor customs practices and offer technical assistance.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

El Salvador requires a Certificate of Free Sale to register food products. The Ministry of Health agreed in

2019 to accept the U.S. Department of Agriculture Food Safety Inspection Service (FSIS) 9060-5 health

certificate for meat and meat products in lieu of the Certificate of Free-Sale. However, the Ministry of

Agriculture (MAG) requires an original FSIS 9060-5 certificate. Obtaining the original health certificate

for the purpose of food product registration is problematic as this document only accompanies actual

shipments of meat or processed meat products. These shipments cannot occur until the food product is

registered. Additionally, under the CAFTA–DR, El Salvador granted equivalence to the U.S. sanitary

inspection system for beef, pork, and poultry and poultry products, which may make the health certificate

requirement unnecessary or duplicative for U.S. exports. Unnecessary and duplicative import requirements

contribute to higher consumer prices while providing no discernable food safety benefits, and also can make

U.S. products less competitive in the local marketplace. In 2022, U.S. beef, pork, and poultry and poultry

products exports to El Salvador decreased 3.8 percent in value to $72 million.

Sanitary and Phytosanitary Barriers

Animal product exporting facilities are subject to MAG inspection and certification every three years. As

the CAFTA–DR provides equivalence for the U.S. beef, pork, and poultry inspection systems, the

inspection and certification requirements only apply to U.S. animal products not covered by the equivalence

agreement, such as pet food and pet food additives or probiotics. Since 2018, MAG has accepted the U.S.

Department of Commerce National Oceanic and Atmospheric Administration Seafood Inspection Program

certificates for U.S. grown and U.S. raised seafood. Foreign sourced materials without further U.S.

processing are excluded from certification. The United States is working with MAG to allow imports of

all U.S. products based on broader recognition of U.S. inspection programs.

Extensive laboratory tests are mandatory for all new imported food products, including samples, even for

those low-risk products that are permitted into other markets without testing. To register product samples,

the Ministry of Health requires large quantities of the product for testing, including samples of each

available flavor of the same product. The Ministry of Health, in consultation with U.S. officials, is

reviewing laboratory testing requirements to determine to what extent additional flexibility would be

permissible under the existing health code.

The Salvadoran Government requires that grain shipments be fumigated at importers’ expense unless they

are accompanied by a U.S. Department of Agriculture Animal Plant and Health Inspection Service (APHIS)

certificate stating that the grain is free of weed seeds, including Tilletia Barclayana (a rice fungus).

However, as there is no chemical treatment that is both practical and effective against this plant pathogen,

APHIS cannot issue these certificates. El Salvador has not notified the World Trade Organization (WTO)

of this requirement.

Since 2019, U.S. food and beverage exporters have periodically faced requirements for Certificates of Free

Sale. Article 88 of the Salvadoran Health Code requires that imported food and beverage products be

authorized by the corresponding health authority of the origin country. On March 8, 2022, El Salvador

approved a technical regulation that recognizes U.S. Export Certificates and Sanitary Certificates as

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equivalent to Certificates of Free Sale. This regulation not only facilitates registration, but also resolves a

long-standing trade barrier.

GOVERNMENT PROCUREMENT

U.S. companies have expressed concerns about Salvadoran Government agencies not providing sufficient

advance notice, as required under the CAFTA–DR, to foster wide participation in bidding procedures,

particularly complex infrastructure works or public-private partnership projects.

In August 2020, the Salvadoran Government passed an executive order allowing the submission of bids for

contractual services via email and eliminating bidders’ obligation to register online with the public

procurement system (Comprasal), in addition to lifting the responsibility of procurement officers to keep a

record of companies and individuals who receive tender documents. Transparency advocates and legal

experts contend that the order would decrease potential bidders’ ability to assess and compete fairly for

government tenders. The order is pending review in the Salvadoran Supreme Court of Justice but without

injunctive effect.

In March 2022, the Legislative Assembly approved a State of Emergency due to a spike in homicides and

other criminal activities perpetrated by gangs. Initially intended to be in effect for 30 days, the State of

Emergency has been extended six times since April. Under the State of Emergency, the Executive branch

can enter negotiations and make direct purchases of goods and services without adhering to the Public

Procurement Law. Legal experts and business have expressed concerns that excluding purchases from

bidding procedures for as long as the State of Emergency is in place will discourage competition for

government procurement and further undermine transparency. The United States has engaged with El

Salvador on these issues.

El Salvador is neither a Party to the WTO Agreement on Government Procurement nor an observer to the

WTO Committee on Government Procurement. However, the CAFTA–DR contains disciplines on

government procurement.

INTELLECTUAL PROPERTY PROTECTION

To implement its CAFTA–DR obligations, El Salvador undertook legislative reforms providing for stronger

intellectual property (IP) protection and enforcement. However, several concerns remain, including

trafficking in counterfeit products, music and video piracy, and the unlicensed use of software. The United

States remains concerned about the adequacy of implementing regulations to protect against the unfair

commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain

marketing approval for pharmaceutical products. The effectiveness of the IP system to address patent issues

expeditiously in connection with applications to market pharmaceutical products is unclear. The United

States continues to engage El Salvador to ensure protections for geographic indications do not negatively

impact the existing rights and market access of U.S. stakeholders. The United States will continue to

monitor El Salvador’s implementation of its IP obligations under the CAFTA–DR.

SERVICES BARRIERS

Financial Services

On August 17, 2021, the Legislative Assembly passed amendments to the Credit History Law. The

amendments introduce data localization requirements mandating credit bureaus and economic agents that

report on credit history to store data and its backup exclusively in El Salvador and grant unrestricted access

to the Central Bank and the Superintendence of the Financial System. U.S. stakeholders have expressed

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concerns that these new requirements could compromise consumer data privacy and protection. The United

States continues to engage El Salvador on the negative impact of forced data localization.

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ETHIOPIA

IMPORT POLICIES

Tariffs and Taxes

In September 2021, the Government of Ethiopia lifted taxes and tariffs on the importation of wheat, rice,

sugar, and edible oil to address rising inflation.

Tariffs

Ethiopia’s average Most-Favored-Nation (MFN) applied tariff rate was 15.17 percent in 2021 (latest data

available). Ethiopia’s MFN applied tariff rate averaged 22.5 percent for agricultural products and 16.1

percent for non-agricultural products in 2021 (latest data available). Ethiopia implemented tariff reductions

for certain raw materials, intermediate goods, and capital goods to promote the growth of the manufacturing

sector in 2021. Ethiopia is not a member of the World Trade Organization (WTO) and so has no bound

tariff rates.

Taxes

Imports into Ethiopia are subject to an excise tax, surtaxes, and a 15 percent value-added tax (VAT). Excise

taxes are levied on selected domestically produced and imported goods and range from 10 percent for

textiles and most other goods to as much as 100 percent for alcoholic beverages. A VAT is imposed on

most imported items, but some products and services are exempted from the VAT. These exempted sectors

include financial services, educational services, healthcare, and transportation services. All goods imported

into the country are subject to a 10 percent surtax, with exceptions for fertilizer, petroleum, investment

goods, raw materials, and some medicines.

Non-Tariff Barriers

Import Bans and Import Restrictions

Ethiopia prohibits imports of used clothing and used or refurbished medical equipment intended for resale.

Imports of goods intended for resale/commercial purposes are permitted, provided payment transactions

are carried out through Ethiopian banks. On October 14, 2022, the Ministry of Finance indefinitely

restricted the use of foreign currency for the importation of 38 selected “luxury items,” including

automobiles, furniture, packed foods, cosmetics, and alcohol, which effectively bans the importation of

these items.

Import Licensing

In July 2022, the Government of Ethiopia decentralized the import licensing process and delegated the

authority to issue import licenses to regional state trade bureaus. Most regions have operationalized the

new online import licensing process, although the new process remains unavailable in some regions due to

structural issues such as poor Internet access. In addition to obtaining an import business license, importers

must obtain an import registration number before bringing products into the country. Imports of food or

drug items must receive additional certification from the Ethiopian Food and Drug Administration without

regard to the risk of the food or drug product. Trading companies must submit a proposal to the Ministry

of Trade and Regional Integration (MOTRI) or regional authorities to obtain a currency exchange permit

certificate, which includes obtaining a letter of credit for the total value of an import transaction and

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applying for an import permit, before placing an order. The new online process typically takes about 30

minutes after all required paperwork is provided. However, even with a letter of credit, import permits are

not always granted, and there are often delays of several months or even over a year before an importer is

allocated foreign exchange.

Customs Barriers and Trade Facilitation

Logistics backlogs occur regularly, in part because the customs process remains inefficient. Further,

monopolistic market conditions in multimodal transport operations and inadequate infrastructure inhibit

private sector logistics companies. Logistics costs comprise approximately 22 percent to 27 percent of final

costs for many products. Shipping and freight costs are approximately 60 percent higher than in

neighboring countries. Customs and administrative challenges are exacerbated by the fact that Ethiopia is

land-locked and upwards of 90 percent of its foreign trade passes through a single port in neighboring

Djibouti, which has inadequate infrastructure and inefficient customs procedures. Under the framework of

a comprehensive logistics strategy, the Government of Ethiopia has slated the logistics sector for

liberalization, and Ethiopian Railways officials report the border crossing process between Ethiopia and

Djibouti via train has been streamlined.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Imports of processed food products made from genetically engineered (GE) ingredients are subject to

mandatory labeling requirements; items subject to these requirements include soybean oil, corn oil, and

breakfast cereals. Ethiopia’s regulations require that GE foods carry a label with one of the following

phrases: “genetically modified,” “genetically modified organism,” or another comparable description.

Food aid shipments that contain GE ingredients are exempted from this labeling requirement.

Sanitary and Phytosanitary Barriers

The Government of Ethiopia has taken steps to enhance its sanitary and phytosanitary (SPS) regulatory

environment. In 2020, Ethiopia implemented a five-year national SPS strategy aimed at ensuring public

health and enhancing access to international markets. With the support of development partners, the

Government of Ethiopia is building capacity to improve food safety and animal and plant health regulatory

systems.

In preparation for the African Continental Free Trade Agreement, the Government of Ethiopia is also

exerting considerable effort to harmonize its national SPS standards with standards used in African

Regional Economic Communities, such as the Common Market for Eastern and Southern Africa and the

Intergovernmental Authority on Development. When a national standard is not available for a specific

product, Ethiopia defers to the Codex Alimentarius Commission standards. Further, Ethiopia is investing

in the expansion of national and regional labs, quarantine stations, and standards for quality assurance.

SPS-related barriers that impede international trade in Ethiopia are associated with cumbersome

requirements for registration and approval of imported products, such as processed foods, planting seeds,

and plant protection products.

In September 2022, the Ethiopian Environmental Protection Authority issued an environmental clearance

for genetically modified maize, which is a drought-tolerant and insect-resistant variety of maize. If

approved for commercial cultivation, the maize would be the first genetically modified food crop in

Ethiopia. Stakeholders report that the approval process for commercial imports of GE grains and oilseeds

for food and feed remains overly burdensome.

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GOVERNMENT PROCUREMENT

Some Ethiopian Government tenders are open to foreign participation and tender announcements are

usually public, but many major procurements do not go through a transparent tendering process. Obstacles

to foreign participation in government procurement tenders include complicated and inadequately

established procedures, repeated cancellation of published requests for proposals, capacity gaps on the part

of procurement agencies, delays in decision-making, lack of public information, and the need for personal

connections to compete effectively. Another obstacle is the frequent requirement for potential suppliers to

appear in person to collect solicitation packages, which business associations complain creates an advantage

for state-owned enterprises (SOEs) in Ethiopia. U.S. firms have expressed concern about the failure of

procurement agencies to respect tender terms. However, at least one U.S. firm has successfully utilized the

government appeals process to reverse an unfair tendering decision. Further, since 2018, several dozen

government procurement officials across a variety of Ethiopian Government agencies have been arrested

for corruption as part of a broader reform effort. On February 16, 2022, four Ethiopian federal institutions

started to process their procurement electronically––the first step by Ethiopia to institute electronic

government procurement aimed at increased transparency.

As Ethiopia is not a WTO Member, it is neither a Party to the WTO Agreement on Government

Procurement nor an observer to the WTO Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Inadequate intellectual property (IP) protection and enforcement remain a serious concern in Ethiopia.

Ethiopia is a member of the World Intellectual Property Organization (WIPO) and has demonstrated an

interest in strengthening its IP regime. Ethiopia is not a member of major international IP treaties, including

the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Trademark

infringement, especially in the hospitality and retail sectors, continues to be an issue. Given the lack of

enforcement capacity and coordination among Ethiopian Government agencies, IP enforcement is

inconsistent. In November 2021, the Government of Ethiopia restructured the Ethiopian Intellectual

Property Office as the Ethiopian Intellectual Property Authority (EIPA) to strengthen its enforcement

capacity. This included granting the EIPA a mandate to establish an Intellectual Property Tribunal to

arbitrate intellectual property disputes and appeals, which previously could be decided only in courts. The

EIPA is responsible for the administration and arbitration of IP cases, but actions to combat the sale of

pirated goods remain inadequate. Ethiopia does not publicly track seizures of counterfeit goods, so no

statistics are available.

SERVICES BARRIERS

Financial Services

Ethiopia prohibits foreign investment in the financial services industry, including banking and insurance,

with an exception for foreign nationals of Ethiopian origin. Few international banks maintain representative

offices, and all trade financing is required by law to go through an Ethiopian bank. This creates significant

challenges for foreign investors with offshore accounts. On September 3, 2022, the Ethiopian Government

approved a policy framework to open the banking sector fully or partially to foreign investment. The

National Bank of Ethiopia (NBE, Ethiopia’s central bank) is drafting proposed amendments to the 2008

Banking Business Proclamation, which it will submit to the legislature for approval, and preparing

directives that will regulate the expected opening. The NBE expects the first foreign banks to enter the

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market during the first half of 2024. In July 2021, the NBE launched a digital payment strategy aimed at

providing online access to financial services.

Ethiopia allows reinsurance to be offered on a cross-border basis. A proportion of each reinsurance policy

and of treaty reinsurance contracts must be ceded to local reinsurance companies.

Telecommunications Services

The 2019 Communication Service Law established an independent telecommunications regulator, the

Ethiopian Communications Authority, and opened the sector to private investment. In May 2021, the

Government of Ethiopia awarded a 15-year full-service telecommunications spectrum license to Safaricom

Telecommunication Ethiopia, which started service on October 6, 2022. The Ethiopian Government aimed

to issue a second telecommunications license in 2021 to a private operator and sell a 40 percent stake in

state-owned operator Ethio Telecom but ended both initiatives following muted interest. Generally poor

telecommunications service in Ethiopia impedes business operations across a range of other sectors.

For companies and organizations whose operations are Internet-dependent or located in remote areas of the

country, the Ethiopian Government allows the use of Very Small Aperture Terminals (VSATs), which can

facilitate satellite-based Internet access in rural or remote regions. Ethiopia does not allow the general

public to use VSATs.

INVESTMENT BARRIERS

Many formal and informal barriers impede foreign investment in Ethiopia. The 2020 Investment Law

allows foreign investors to invest in any area except those that are clearly reserved for domestic investors.

The law reserves banking, insurance, microfinance, electricity transmission and distribution, and retail and

wholesale trade to domestic investors. Foreign investors can jointly invest as minority stakeholders with

domestic investors in areas such as freight forwarding and shipping, domestic air transportation services,

cross country public transport services, advertisement and promotion, and accounting and auditing services.

Investment in the defense industry, electricity imports and exports, international air transportation services,

and postal services is permitted only in partnership with the Government of Ethiopia. For joint ventures

with SOEs, some investors report informal requirements of up to 30 percent domestic content in goods or

technology, or both.

There is no private land ownership in Ethiopia. Land may be leased from local and regional authorities for

up to 99 years. However, current land-lease regulations place limits on the duration of construction projects,

allow for revaluation of leases at a government-set benchmark rate, place previously owned land under

leasehold, and restrict the transfer of leasehold rights. Land disputes with regional administrations are

common.

STATE-OWNED ENTERPRISES

While the Government of Ethiopia has launched processes to fully or partially privatize some SOEs, most

notably under the Homegrown Economic Reform Plan, SOEs continue to dominate major sectors of the

economy. These include the telecommunications, power, banking, insurance, air transport, certain

agricultural processing, industrial parks, and shipping industries. Many SOEs maintain a monopoly over

their respective sectors, which allows the Government of Ethiopia to dictate prevailing rates for many goods

and services. U.S. investors complain of the lack of a level playing field when it comes to SOEs. Although

the Government of Ethiopia passed a law in 2019 prohibiting SOEs from accessing new loans and

instructing them to focus on completing outstanding projects, SOEs have considerable advantages over

private firms, such as expedited customs clearance processing, priority access to financing and foreign

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currency from the Commercial Bank of Ethiopia, preferences in government tenders and land acquisition,

and marketing assistance. In December 2021, the Government of Ethiopia established Ethiopian

Investment Holdings, a sovereign wealth fund, to prepare over 40 SOEs for full or partial privatization.

The Government of Ethiopia has offered to sell eight state-owned sugar enterprises and a 40 percent stake

in Ethio Telecom.

OTHER BARRIERS

Bribery and Corruption

Ethiopian and foreign businesses routinely encounter corruption in tax collection, customs clearance, and

land administration. Some U.S. businesses operating in Ethiopia reported that they were frequently

solicited for bribes to secure business contracts. Tax administration in Ethiopia is corrupt and inefficient,

and the Ethiopian Government supplements revenues by levying higher taxes on foreign investors and

businesses and limiting their ability to appeal tax levies. U.S. and other foreign companies complain they

are unfairly targeted for tax collection compared with local companies and are presented with spurious tax

bills. The Government of Ethiopia has acknowledged that perception of corruption is one of the main

obstacles to doing business. From June 2021 to February 2022, the Ministry of Justice Anti-Corruption

Directorate prosecuted over 1,500 corruption cases.

Commercial Code Enforcement

In 2021, Ethiopia reformed its Commercial Code for the first time in 62 years, aiming to bring its

commercial law in line with international best practices and address business community concerns.

Implementation of the new code across ministries is ongoing, which is expected to lessen the difficulty of

doing business in Ethiopia by facilitating trade license registration and renewal, providing registration

exemptions for some companies, and allowing new and different types of businesses to form and operate

in Ethiopia. Some members of the business community have expressed concern about consistent

enforcement of the new code.

Foreign Currency Controls

The NBE administers a strict foreign currency control regime. However, Ethiopia’s foreign currency

shortage and the extreme difficulty of obtaining foreign currency from legal sources hampers the ability of

manufacturers to import raw materials and semi-finished goods and restricts the repatriation of profits,

despite laws allowing foreign investors to remit profits and dividends. All imports, exports, and outgoing

foreign payments require a foreign exchange permit.

Difficulty obtaining foreign currency for inputs and repatriating profits has been cited by U.S. companies

as a major impediment to foreign investment. Larger private firms, SOEs, businesses that import goods

prioritized by the Ethiopian Government’s development plan, manufacturers in prioritized export sectors,

and importers of emergency food generally have priority access to foreign currency. Investors in non-

priority sectors and politically less well-connected importers, particularly smaller new-to-market firms, can

face long delays in arranging trade-related payments and, on occasion, may be denied foreign currency.

Due to a critical shortage of foreign currency, on April 8, 2022, the Government of Ethiopia issued a

directive allowing Franco Valuta imports, a scheme that facilitates the importation of essential food

commodities––wheat, rice, sugar, edible oils and instant baby milk––by permitting the use of foreign

currency from non-official sources including personal foreign currency supplies and foreign accounts

without due checks on the sources of the foreign currency by the country’s central bank.

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Commercial Disputes

Companies that operate businesses in Ethiopia assert that the judicial system remains underdeveloped and

inadequately staffed, particularly with respect to commercial disputes. While property and contractual

rights are recognized, and there are commercial and bankruptcy laws, judges often lack an understanding

of commercial matters and cases often face extended delays. Contract enforcement remains weak, although

Ethiopian courts will at times reject spurious litigation aimed at contesting legitimate tenders. In December

2021, the Federal Supreme Court established a court-led mediation process, which could provide a more

streamlined, quicker, and less contentious process for private-sector commercial dispute resolution. On

October 9, 2022, the Federal First Instance Court of Ethiopia established a Commercial and Investment

Bench, which will specialize in commercial matters, including banking and investment.

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EUROPEAN UNION

OVERVIEW

The United States and the Member States of the European Union (EU) share the largest economic

relationship in the world. Trade and investment flows between the United States and the EU are a key pillar

of prosperity on both sides of the Atlantic and generate substantial economic opportunities.

Goods and services produced by the United States nonetheless face persistent barriers entering and

maintaining access to certain sectors of the EU market, which limits the opportunity of U.S. workers and

businesses to benefit from transatlantic trade. This chapter of the NTE Report highlights the most

significant of these barriers, some of which have persisted despite repeated efforts at resolution through

bilateral consultations, World Trade Organization (WTO) committee meetings, or WTO dispute settlement.

Certain barriers have been highlighted in the annual NTE Report for many years.

IMPORT POLICIES

Tariffs

The EU’s average Most-Favored-Nation (MFN) applied tariff rate was 5.2 percent in 2021 (latest data

available). The EU’s average MFN applied tariff rate was 11.7 percent for agricultural products and 4.1

percent for non-agricultural products in 2021 (latest data available). The EU has bound 100 percent of its

tariff lines in the WTO, with an average WTO bound tariff rate of 5.3 percent.

Although the EU’s tariffs are generally low for non-agricultural goods, some EU tariffs are high, such as

rates of up to 26 percent for fish and seafood, 22 percent for trucks, 14 percent for bicycles, 10 percent for

passenger vehicles, 12 percent for processed wood products, and 6.5 percent for fertilizers and plastics.

Non-Tariff Barriers

Pharmaceutical Products

The United States is monitoring potential developments related to the Commission proposal on the EU

general pharmaceutical legislation, which is expected to be released early 2023. As part of the EU

Pharmaceutical Strategy for Europe, the consultation called on stakeholders and members of the public to

share their views on matters such as unmet medical needs, incentives for innovation, affordability of

medicines, and other issues. The Commission is evaluating two pieces of EU general pharmaceutical

legislation relating to medicinal products for human use and to Community procedures for the authorization

and supervision of medicinal products for human and veterinary use.

Member State Measures: Pharmaceutical Products

U.S. pharmaceutical stakeholders have expressed concerns about several EU Member State policies

affecting market access for pharmaceutical products, including non-transparent procedures and a lack of

meaningful stakeholder input into policies related to pricing and reimbursement. These policies have been

identified in several Member States as described below. Stakeholders have also expressed concerns over

inconsistent and lengthy time limits for pricing and reimbursement decisions. U.S. industry stakeholder

have grown increasingly concerned about policies that are being made with little opportunity for

engagement. Moreover, changes to European Medicines Agency (EMA) policy regarding disclosures of

clinical trial data, including potential disclosure of confidential commercial information submitted to EMA

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by pharmaceutical firms seeking marketing authorization, are also of concern to stakeholders. The United

States continues to engage with the EU and individual Member States on these matters.

Austria: U.S. pharmaceutical companies continue to express concern about non-transparent reimbursement

pricing decisions by the statutory insurance providers association that are not preceded by a meaningful

opportunity for stakeholder engagement.

Belgium: U.S. industry stakeholders report that domestically manufactured medicines are permitted a price

premium of up to 10 percent on the manufacturing cost component when calculating their manufacturer’s

selling price. Imported products are only eligible for up to a five percent price premium. Meanwhile,

initiatives intended to lead to faster market access for new innovative drugs have been slowly, and

incompletely, implemented.

Czech Republic: Although the Czech Republic’s system for determining pharmaceutical pricing and

reimbursement for innovation remains challenging for U.S. companies, many report the situation has

improved after new legislation came into effect in early 2022. Still, U.S. companies continue to express

concerns regarding non-transparent and lengthy reimbursement processes.

France: U.S. stakeholders have expressed concern that the process of gaining market access for drugs in

France is slower than elsewhere in Europe, resulting from delays in reimbursement approvals of as much

as 19 months after marketing authorization, compared to no more than 16 months, as required by EU law.

A drug is effectively not on the market until it receives reimbursement approval.

Greece: U.S. pharmaceutical industry stakeholders have raised concerns about the lack of transparency or

opportunities for meaningful stakeholder input into the application of policies. Stakeholders have also

raised concerns about lengthy reimbursement timelines and inconsistent application of pricing and

reimbursement processes.

Hungary: U.S. pharmaceutical industry stakeholders express concern that the Hungarian Government’s

pricing and reimbursement policies, delays in decision-making and reimbursement, and lengthy processes

for making changes to the list of drugs approved for reimbursement, cause considerable unpredictability in

the Hungarian market. U.S. pharmaceutical industry stakeholders note the lack of opportunity to provide

input into these pricing and reimbursement processes.

Italy: U.S. healthcare industry stakeholders face an unpredictable business environment in Italy, which

includes highly variable implementation of complex pricing and reimbursement policies. U.S. stakeholders

have raised concerns regarding reimbursement delays for pharmaceutical products and delayed payments

for medical devices. Moreover, the average time Italian public hospitals take to pay medical device

suppliers continues to exceed the maximum period permitted by EU law. U.S. industry stakeholders

continue to request that the Italian Government address these issues.

Ireland: U.S. pharmaceutical industry stakeholders expressed concerns over the Irish Government’s delays

in reimbursement decisions. Access to new drugs and medicines may be subject to a lengthy decision

process.

Poland: U.S. stakeholders have expressed concern over the lack of opportunity for meaningful stakeholder

input into Poland’s rulemaking and tendering processes, as well as the transparency of reimbursement rules

for pharmaceutical products. U.S. industry stakeholders report that Poland’s pricing and reimbursement

system is backlogged, taking more than 844 days on average from regulatory approval to patient access.

The United States will continue to urge Poland to engage meaningfully with stakeholders with respect to

their concerns.

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Romania: Innovative pharmaceutical producers have identified several significant challenges resulting

from the Romanian Government’s failure to update, despite repeated requests, the lists of innovative

pharmaceuticals that are eligible for reimbursement under the national health system, with numerous

applications pending. In addition, both innovative and generic pharmaceutical companies have withdrawn

drugs from the Romanian market, as the low official prices set in Romania can fall below production costs.

Spain: U.S. pharmaceutical industry stakeholders continue to note concerns as to cost containment

measures affecting the industry, including lack of clarity around criteria for reimbursement, substantial

delays in reimbursement processes, and uneven patient access across autonomous regions.

Slovakia: In the past, U.S. stakeholders reported that processes for marketing and reimbursement approvals

of new pharmaceutical products in Slovakia have lacked transparency and predictability, and deadlines

have sometimes been missed. In June 2022, the Slovak parliament passed legislation aimed at streamlining

and accelerating the approval and reimbursement of innovative medicines. U.S. pharmaceutical industry

stakeholders welcomed the adoption of this new legislation, but raised concerns about meaningful

opportunities to engage with Slovakia on its implementation.

Sweden: U.S. pharmaceutical industry stakeholders have raised concerns about Sweden’s increasingly

challenging and nontransparent environment with regard to pricing and reimbursement.

Agriculture

Bananas

Following years of disputes, beginning under the General Agreement on Tariffs and Trade (GATT) and

later involving litigation under WTO dispute settlement proceedings, the United States and other countries

in 2010 reached agreements with the EU to resolve complaints about successive EU banana import regimes.

Beginning in 2013, a U.S. stakeholder expressed concerns to the U.S. Government about actions taken since

2010 by Italian customs authorities to collect retroactive payment of customs duties due to the authorities’

unilateral re-interpretation of the validity of certain EU banana import licenses under pre-2006 EU

regulations. In 2013, the Italian Supreme Court, on jurisdictional grounds, ruled against the Italian

Government and ordered authorities to repay the collected duties to the U.S. stakeholder. However, as of

December 31, 2022, the duties had not been completely repaid, and Italian customs authorities, claiming to

have resolved the jurisdictional issues cited by the Italian Supreme Court, continue to re-issue some of the

previous retroactive duty assessments against the stakeholder.

Meursing Table Tariff Codes

Many processed food products, such as confectionary products, baked goods, and miscellaneous food

preparations, are subject to a special tariff code system in the EU. Under this system, often referred to as

the Meursing table, the EU charges a tariff on each imported product based on the product’s content of milk

protein, milk fat, starch, and sugar. As a result, products that the United States and other countries might

consider equivalent for tariff classification purposes sometimes receive different rates of duty in the EU

depending on the particular mix of ingredients in each product. The difficulty of calculating Meursing

duties imposes an unnecessary administrative burden on, and creates uncertainty for, exporters, especially

those seeking to ship new products to the EU.

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Subsidies for Fruit and Vegetables

The EU Common Market Organization (CMO) provides a framework for market measures under the EU’s

Common Agricultural Policy, including for measures related to the promotion of fruit and vegetables.

Implementing rules covering fresh and processed products are designed to encourage the development of

producer organizations (POs) as the main vehicle for crisis management and market promotion. The CMO

makes payments to POs for dozens of products, including peaches, citrus fruits, and olives. In 2015, a new

basic payment scheme and greening payments were introduced, replacing the single payment scheme.

Direct payments also are paid to support certain processing sectors, including, for example, peaches for

juicing in Greece. The general lack of transparency around the distribution of EU subsidies at the Member

State level in the fruit and vegetable industry raises questions about whether the payments are decoupled

from production, and U.S. producers remain concerned about potential hidden subsidies. The United States

continues to monitor and review EU assistance in this sector, evaluating potential trade-distorting effects.

Tax on Sugar-Sweetened Beverages

Poland: On January 1, 2021, a sugar tax on beverages entered into force in Poland. The purported goal

of the new tax is to promote healthy beverage choices among consumers. The tax ranges from $0.14 to

$0.31 per liter and applies to sweetened beverages (drinks containing added sugar, sweeteners, caffeine, or

taurine) and alcohol in small bottles. The tax applies to both imported and domestically manufactured

products, but in practice it primarily impacts imported products as certain sugar-containing beverages, such

as fruit juices and dairy-based drinks, which are produced primarily by Polish companies, have been

exempted. Dietary supplements and infant formula are also exempted.

Customs Barriers and Trade Facilitation

Notwithstanding the existence of customs legislation that governs all Member States, the EU does not

administer its laws through a single customs administration. Rather, there are separate agencies responsible

for the administration of EU customs law in each Member State. It is thus difficult for the EU to ensure

that its rules and decisions on classification, valuation, origin, and customs procedures are applied

uniformly throughout the Member States.

The Binding Tariff Information program provided for by EU-level law, but administered at the Member

State level, does provide for advance rulings on tariff classification and country of origin. However, EU

rules do not require the customs agency in one Member State to follow the decisions of the customs agency

in another Member State with respect to materially identical issues. In some cases where the customs

agency of a Member State administers EU law differently from, or disagrees with the Binding Tariff

Information issued by, another Member State, the matter may be referred to the Customs Code Committee

(CCC). The CCC consists of Member State representatives and is chaired by a Commission representative.

Although a stated goal for the CCC is to help reconcile differences among Member States and thereby help

to achieve uniformity of administration, in practice its success in this regard has been limited. The CCC

and other EU-level institutions do not provide transparency in decision-making or opportunities for

participation by traders, which might make them more effective tools for achieving the uniform

administration and application of EU customs law.

In addition, the EU lacks tribunals or procedures for the prompt review and EU-wide correction of

administrative actions relating to customs matters. Instead, review is provided in the tribunals of each

Member State, and the rules regarding these reviews vary from Member State to Member State. A trader

encountering differing treatment in multiple Member States must bring a separate appeal in each Member

State whose agency rendered an adverse decision.

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Ultimately, a question of interpretation of EU law may be referred to the Court of Justice of the European

Union (CJEU). Although the judgments of the CJEU apply throughout the EU, referral of a question to the

CJEU is generally discretionary, may take many years, and may not afford sufficient redress. Thus,

obtaining corrections with EU-wide effect for administrative actions relating to customs matters is

frequently cumbersome and time-consuming. The United States has raised concerns regarding the uniform

administration of EU customs law with the EU in various forums, including in the WTO Dispute Settlement

Body (DSB).

The Commission has sought to modernize and simplify customs rules and processes. The Union Customs

Code (UCC), adopted by the Commission in 2013, entered into force in 2016. While the UCC contains a

number of procedural changes, the key element of a harmonized information technology infrastructure has

yet to be completed. Member States continue to use different data templates. In 2019, the expected

completion date for full implementation of harmonized customs data systems was extended from the end

of 2020 to the end of 2025.

The United States will continue to monitor the UCC implementation process, focusing on its impact on the

consistency of customs treatment under EU customs law.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Transparency and Notification

U.S. exporters face a proliferation of technical barriers to trade (TBT) in the EU, attributable in part to

aspects of the EU’s regulatory processes, which prescribe conditions for the consideration and adoption of

regulations and related decisions without adequate public notification or the opportunity to incorporate

meaningful public comments. The United States regularly raises concerns, both in bilateral engagement

and in the WTO Committee on Technical Barriers to Trade (TBT Committee), that EU notifications often

take place at a procedural stage when it is too late to revise the measure to take into consideration any

substantive concerns raised by other WTO Members. Furthermore, notifications of proposed measures

often lack specificity, or incorporate by reference the publication of future, European-unique standards that

do not yet exist, so that non-European producers do not have a meaningful opportunity to engage or offer

informed comments.

For example, under the EU’s regulatory processes for Registration, Evaluation, Authorization, and

Restriction of Chemicals (REACH) and Classification, Labeling, and Packaging (CLP), proposed

restrictions are typically notified to the WTO only after scientific review regulatory impact committees

have convened and the Commission’s domestic consultations are concluded. These domestic consultations

are not always transparent to non-EU stakeholders, which can limit their ability to provide comment and

for those comments to be taken into consideration. In other cases, measures undergo significant change

during the negotiations between the European Council, Commission, and Parliament, leading to significant

changes without stakeholder consultations, such as under the expansion in scope of the Radio Equipment

Directive 2014/53/EU, also known as “Common Charger.” Finally, failure to notify measures with

adequate comment periods are also observed at the Member State level, including in the case of recent

French recycling labeling regulations. Improvement and greater consistency in EU and Member State

notification of measures could have a significant effect on trade contributing to a more predictable market

environment.

The United States is concerned that further transparency and notification issues may arise regarding various

initiatives under the European Green Deal, announced in December 2019, including the use of prescriptive

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labeling and certification measures. During 2022, the United States continued to monitor these proposals

and to engage with the EU to ensure regulatory requirements support the stated environmental objectives

without unnecessarily discriminating against foreign trade. (Sanitary and phytosanitary (SPS) concerns

with the European Green Deal are discussed in the SPS Barrier section of this NTE Report chapter.)

European Standardization and Conformity Assessment Procedures

The EU’s exclusionary approach to standards-related measures, including its conformity assessment

framework, and its efforts to encourage governments around the world to adopt this restrictive approach,

imposes significant burdens on U.S. workers, producers, and exporters. In particular, the EU’s approach

impedes market access for products that do not conform to European regional standards (called European

harmonized standards or European harmonized norms (ENs)), including international standards that are not

harmonized with ENs, even though these international standards may meet or exceed the EU regulatory

requirements. Products regulated by the EU must conform to these EU-specific regional standards in order

to benefit from a presumption of conformity with the EU’s essential regulatory requirements. U.S. workers,

producers, and exporters thus face additional burdens in accessing the EU market not faced by domestic

producers in the EU and often not faced by EU exporters when accessing the U.S. market.

Harmonized ENs can only be developed through three European Standards Organizations (ESOs), as

directed by the Commission through a standardization request. The three ESOs are the European

Committee for Standardization (CEN), the European Committee for Electrotechnical Standardization

(CENELEC), and the European Telecommunications Standards Institute (ETSI). Within these designated

ESOs, the CEN and CENELEC technical committees draft harmonized ENs. Both generally exclude non-

EU nationals from participating in their standard-drafting process. In the limited instances where non-EU

nationals do participate, they are not allowed to vote.

On February 2, 2022, the EU published the European Standardization Strategy, which, inter alia, amends

Regulation 1025/2012 on European Standardization Organizations to require that the ESOs restrict the

involvement of non-EU interests in the development of harmonized EN standards. The change primarily

affects the development of standards at the ETSI, which specializes in information and communications

technologies and had been the only ESO to provide for direct participation by foreign firms. In addition,

new policies implemented by the Commission, such as a refusal to reference underlying standards

developed outside of Europe and new restrictions imposed on participation in expert advisory groups

(including the newly created High Level Forum on European Standardization), suggest a sustained effort

to exclude foreign participants, undermine the acceptance of international standards developed in the United

States, and project European regional standards abroad. The United States is concerned that the European

Standardization Strategy and other exclusionary steps indicate that the EU is moving further from

cooperation with trading partners in standardization, and barriers in the transatlantic market will thus be

exacerbated, rather than ameliorated. The United States has relayed its concerns to the EU through the

United States–European Union Trade and Technology Council.

As part of its free trade agreements, the EU seeks commitments affirming that only a standard issued by a

subset of specific standards-developing organizations, none of which are domiciled in the United States, be

considered an international standard (e.g., the EU–Japan Economic Partnership Agreement, Article 7.6).

This practice accords preferential treatment to organizations in which the EU carries an outsized influence

(e.g., the World Forum for Harmonisation of Vehicle Regulations within the framework of the United

Nations Economic Commission for Europe’s 1958 Agreement) or with which the ESOs have existing

cooperation agreements (e.g., the International Organization for Standardization and the International

Electrotechnical Commission). This approach is narrower than what is provided for under the WTO TBT

Agreement. It is also contrary to relevant decisions of the TBT Committee, which recognizes that any

standards developed in accordance with relevant WTO principles can qualify.

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The United States also has serious concerns regarding the EU’s conformity assessment framework, set out

in Regulation (EC) 765/2008 and Decision 768/2008. Regulation 765/2008 requires each Member State to

appoint a single national accreditation body that can accredit conformity assessment bodies and prohibits

competition among Member States’ national accreditation bodies. Furthermore, the EU’s interpretation of

Decision 768/2008 sets out that conformity assessment bodies must be established in the EU in order to test

to EU regulations. This interpretation denies U.S.-domiciled conformity assessment bodies the opportunity

to certify products for the EU market outside of existing mutual recognition agreements. It also raises

significant market access concerns for U.S. producers whose products have been tested or certified by

conformity assessment bodies located outside the EU. Without any associated improvement in quality or

safety, the EU conformity assessment approach increases time to market, increases costs for manufacturers,

and requires U.S. testing and certification bodies to establish operations in the EU to remain competitive.

Regulation of Emerging Technology

The EU is seeking to establish broad regulations of emerging technology, which will have significant

implications for industry’s marketing of products and services in the EU. The United States is closely

monitoring progress on legislation such as the proposed Machinery Regulation, which is a revision of the

Machinery Directive, and the EU Artificial Intelligence (AI) Act (both notified to the WTO in November

2021), as well as the development of standards under the finalized Cybersecurity Act (Regulation

2019/881), seeking to ensure that the EU applies a consistent approach to regulation so that foreign products

are treated no less favorably than products of national origin. The United States also has concerns with

conformity assessment procedures and the inability of non-EU conformity assessment bodies to test to EU

regulations, which could hinder participation of smaller companies in the transatlantic technology

marketplace. Finally, the United States also seeks to ensure that there is clarity across various pieces of

legislation, particularly in areas such as artificial intelligence. The United States raised concerns on the

proposed Machinery Regulation and the AI Act bilaterally throughout 2022. The United States has

responded with comments to both WTO notifications. (Digital trade concerns with the AI Act are discussed

in the Barriers to Digital Trade and Electronic Commerce section of this NTE Report chapter.)

Chemicals

The EU regulation concerning the production, marketing, and use of chemicals as substances, mixtures,

articles, and products, known as REACH, entered into force on June 1, 2007. U.S. stakeholders have raised

concerns that as part of the registration process under REACH, they must provide data that is not relevant

to the specific hazards and proposed uses of a registered substance. The United States agrees that it is

important to regulate chemicals to ensure environmental and health safety. However, the United States is

concerned that REACH relies on an unduly restrictive hazard-based approach instead of a scientific

assessment of the actual risks of exposure to a chemical in a specific use.

Additionally, Member States’ application of REACH appears to be inconsistent and lacks transparency,

which can result in requirements that are more onerous for U.S. exporters than they are for EU businesses

and products that are already in the EU Single Market. The United States and many other WTO Members

continue to raise concerns regarding various aspects of REACH at the WTO TBT Committee, particularly

in light of the impact of REACH on small businesses. WTO Members remain committed to gaining greater

transparency in the development and implementation of REACH requirements and frequently cite the need

for further information and clarification, in addition to citing the problems producers have in understanding

and complying with REACH’s registration, and labeling requirements. In 2022, the United States discussed

with the EU the risk assessment and management processes in measures proposed by the European

Chemicals Agency (ECHA) to the Commission for a REACH Annex XV Restriction for “intentionally-

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added microplastics”, later updated as REACH Annex XVII Restriction for “synthetic polymer

microparticles”.

The CLP implements “hazard classes” based on the United Nations Economic Commission for Europe

Globally Harmonized System for the Classification and Labeling of Chemicals (UNECE GHS). All

chemical manufacturers, importers, and downstream users of REACH and CLP-regulated substances and

mixtures are required to adhere to CLP requirements to classify, label, and package their substances and

mixtures. U.S. stakeholders note that the process to determine CLP harmonized classifications often seems

arbitrary, since the EU only provides six weeks for public comment on its classifications, even when the

classification proposed by the EU and the resulting restrictions will differ significantly from the

classifications used by industry in their REACH registrations and approved uses.

On October 14, 2020, the Commission released its Chemical Strategy for Sustainability (CSS), which is

intended to reform the EU’s chemical legislation over the coming years in an effort to strengthen the EU’s

ability to more consistently implement REACH and CLP’s approach to chemical registrations, while

incentivizing industry to develop and scale the use of safer, more sustainable chemicals. The CSS will

entail revisions to both the REACH and CLP regulations, as well as immediate changes to the CLP through

a legislative process called “delegated acts,” which allows the Commission to amend technical aspects of a

legislation. On December 19, 2022, the Commission adopted a delegated act that introduced new hazard

classes for the classification and labeling of substances (e.g., for endocrine disruptors as well as for

persistent, mobile, and bio-accumulative substances). These proposed new hazard classes and criteria were

not set at the UNECE GHS level, which means that their application in the EU will cause the EU to deviate

from the UNECE GHS. Barring objections from the Parliament or the Council, the Commission’s delegated

act is expected to enter into force in March 2023, with compliance required within two to five years. Given

the novelty of the new hazard classes, U.S. industry stakeholders have raised concerns that the EU: (1) will

not sufficiently consult with stakeholders, including the UNECE GHS Working Group and the OECD, on

the development of guidance as to the science and procedures to identify some of these new hazards; and,

(2) implement the guidance, before the new hazard classes take effect.

Finally, the Commission published proposed revisions to the CLP regulation on December 19, 2022. The

proposed revisions introduce new formatting rules for chemical labelling that are not aligned with the

UNECE GHS. The Commission has not yet responded to a U.S. request that the draft proposal be notified

to the WTO.

Pesticide Maximum Residue Limits

On July 6, 2022, the EU notified to the WTO a draft regulation to reduce EU maximum residue limits

(MRLs) for clothianidin and thiamethoxam to the limit of determination in an effort to protect pollinators,

particularly bees in countries outside of the EU. The United States shares the EU’s concerns about

pollinator health and is actively working to protect bees and other pollinators in the United States. However,

to date, the global scientific and regulatory community has found that complex interactions among multiple

factors affect pollinator health, including the health of bees. In addition, pesticide MRLs are intended to

manage the food safety risk of treated imported food products on arrival into a market; they are not intended

to be an environmental safety management tool. Their use for this latter purpose may have unintended

consequences that could undermine the development and use of international standards for food safety.

Given the critical importance of the pesticides identified in the draft regulation, the proposed measure

appears to pose a significant obstacle to international trade and production of agricultural products. In

2022, the United States raised this issue with the EU at the TBT Committee. The United States continues

to encourage the EU to pursue a collaborative approach to protecting pollinators.

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Member State Circular Economy Measures

Packaging and Packing Waste Regulation: On November 30, 2022, the Commission published its proposal

for a Packaging and Packaging Waste Regulation (P&PWR) to replace the existing directive in an effort to

harmonize Member State packaging and packaging waste regulations. The update is a part of the EU’s

Circular Economy Action Plan announced in 2020 and is intended to reduce overpackaging, promote the

reusability and recyclability of packaging, and reduce the complexity of packaging materials. The proposal

contains binding targets for packaging reusability as well as mandatory recycled content requirements for

different types of plastic packaging. In addition, the proposal sets out to harmonize certain aspects of

packaging and labeling rules to address the growing fragmentation of packaging rules among Member

States and to prevent market distortions and obstacles to free movement within the single market have

threatened to disrupt the free movement of goods within the single market. There is no established timeline

for passage of the legislation under the ordinary legislative procedure. The process may take over a year

given the complexity of the proposed regulation.

Until the proposed P&PWR is final, regulations published by individual Member States remain a concern.

Divergent measures in Bulgaria, France, Italy, the Netherlands, Portugal, Slovenia, and Spain remain in

effect. In particular, France has passed the new Circular Economy and Fight Against Waste Law, with the

goal of banning all plastic packaging by 2040. Implementing decrees subsequently published by France

have set a timeline for specific objectives, but lack important details about implementation and

enforcement, leading U.S. stakeholders to raise concerns about the feasibility of compliance. The United

States has raised questions and concerns about the differences among these Member State measures, both

in bilateral engagements with the Member States and with the Commission at the WTO TBT Committee.

The Netherlands: In March 2015, the Netherlands amended the regulation governing sustainability

requirements for solid biomass. The regulation includes a requirement for sustainability certification at the

forest level, effectively precluding reliance on the U.S. risk-based approach to sustainable forest

management.

Renewable Fuels: Renewable Energy Directive

The EU Renewable Energy Directive (RED) requires that biofuels and biofuel feedstocks obtain a “Proof

of Sustainability” certification to qualify for tax incentives and national use targets. To that end, RED also

establishes a methodology and accounting system by which Member States may record and calculate

required greenhouse gas emission savings as compared to a baseline for fossil fuels.

In 2018, the Commission adopted a new directive (RED II) for the period 2021 to 2030. RED II entered

into force on January 1, 2021. RED II and its pending revisions introduce sustainability requirements for

forestry biomass (wood pellets). In 2022, as part of the ‘Fit for 55’ package, the Commission began

revisions to RED II that would increase renewable energy targets and may decrease the share of biomass

that can be counted toward European renewable energy targets. Revisions to RED II were expected to be

finalized in early 2023. U.S. stakeholders have raised concerns that these changes may deviate from good

forest management practice and would severely hinder U.S. wood pellet exports to the EU. The United

States exported approximately $287 million in wood pellets to the EU in 2021 (latest data available). The

United States continues to actively monitor revisions to RED II.

Glyphosate

The EU requires that the approval of the active substance of a pesticide (i.e., the substance that works

against pests or plant diseases) be periodically renewed. Glyphosate, the herbicide used in certain plant

protection products, had been approved by the EU as an active substance until December 15, 2022. As the

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normal EU renewal process for approval takes about three years to complete, the Glyphosate Renewal

Group, a group of private sector stakeholders, submitted an application to renew the approval of glyphosate

in December 2019.

The Commission established the Assessment Group on Glyphosate (AGG) in May 2019 to assess the next

application for renewal of the approval of glyphosate. The AGG is comprised of France, Hungary, the

Netherlands, and Sweden. The AGG completed its Renewal Assessment Report (RAR) on June 15, 2021

(updated on August 10, 2021). On May 30, 2022, ECHA announced the conclusion of its review for the

classification of glyphosate. However, the scientific assessment for the renewal of glyphosate by the

European Food Safety Authority (EFSA) has been delayed and the Commission put forward a proposal

seeking the extension of the approval for glyphosate for one year in line with EU legal requirements.

On October 14, 2022, the Standing Committee on Plants, Animals, Food and Feed voted on the

Commission’s proposal for a one-year extension, but did not reach the qualified majority required to

approve or reject it. The Commission submitted the proposal to the Appeals Committee on November 15,

2022, but the Appeals Committee also did not deliver an opinion, so this matter passes to the College of

Commissioners for its decision. In the meantime, on December 2, 2022, the Commission adopted an

implementing regulation extending the approval of glyphosate until December 15, 2023.

Following approval of an active substance in the EU, Member States control the authorization of formulated

products containing that substance. Member States have various regulations limiting the use of products

containing glyphosate and some have banned glyphosate partially or entirely, including Austria, Belgium,

France, Germany, Luxembourg, Italy, and the Netherlands. Member State bans affect the use of the

substance in that country but do not affect any glyphosate MRLs, as all pesticide MRLs are determined at

the EU level.

Austria: The Austrian Parliament adopted a partial ban of glyphosate, which entered into force on June 5,

2021. This amendment to the Austrian Pesticide Law bans the use of glyphosate in areas considered

sensitive, which include publicly accessible areas like playgrounds, parks, and areas designated for

vulnerable groups of people like healthcare facilities and retirement communities. The law also prohibits

the use in home and community gardens and for private or non-professional use. Professional use, including

application in agriculture, continues to be allowed.

France: In October 2020, the French Government announced plans to reduce the use of

phytopharmaceutical products by 50 percent by 2025 and to phase out most uses of glyphosate, “as long as

a replacement is available.” Beginning in 2017, local governments were barred from using glyphosate in

public green areas (parks, forests, streets, etc.). As of July 2022, this ban extends to all places, private or

public. In March 2022, the French Government extended the “phase out of glyphosate programme” through

2023. This program provides tax credits of up to €2,500 (approximately $3,030) for farmers who declare

that they no longer use glyphosate. France is also encouraging a phase-out of glyphosate at the EU level.

Germany: The German Parliament adopted a partial ban of glyphosate, which entered into force on

September 8, 2021. This amendment to the German Pesticide Law Application Ordinance is a part of the

insect protection package and generally bans the use of glyphosate-containing herbicides, but allows for

limited exceptions for professional use under defined circumstances. Exceptions are not possible in areas

under nature conservation or protection. Glyphosate is completely prohibited for use in home and

community gardens and for private or non-professional use. Germany plans to phase out the use of

Glyphosate by January 1, 2024.

Luxembourg: In December 2020, Luxembourg became the first Member State to ban glyphosate.

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Medical Devices and In-Vitro Diagnostics

The United States continues to be concerned about the implementation timeline for both the Medical Device

Regulation (MDR) and the In-Vitro Medical Device Regulation (IVDR), especially the shortage of notified

bodies available to assess medical devices and in-vitro medical devices. The shortage of notified bodies is

particularly problematic for manufacturers of medical devices seeking compliance to ensure they can serve

the EU market and limits the availability of lifesaving devices.

The United States engaged the EU in 2022 through the TBT Committee and bilateral discussions around

those meetings to seek updates on the implementation of the MDR and IVDR, including the number of

qualified notified bodies to perform conformity assessment requirements. On January 6, 2023, the

Commission published a proposal to amend the MDR and allow for staggered and conditional extension of

a transition period to the new rules until 2027/2028, according to the risk class of the devices. In addition,

the proposal will extend validity of certificates and cancel the “sell-off” date, which will allow devices

placed on the market before or during the transition period to continue to be made available absent time

limitations. The Commission also adopted the European Medical Device Nomenclature (EMDN). EMDN

is based on the Italian “Classificazione nazionale e internazionali,” which is not harmonized with the well-

established Global Medical Device Nomenclature (GMDN). GMDN was developed with the support of

the ISO and the International Medical Device Regulators Forum. It is widely adopted by the medical device

industry and is used by over 100 national medical device regulators. The United States remains highly

concerned that the EU’s adoption of the EMDN is undermining the interoperability of unique device

identification systems, which helps to identify medical devices from the time of manufacturing through to

when it reaches the patient user. The EMDN will pose several significant obstacles to the medical device

and healthcare community.

Wine Traditional Terms

The EU continues to restrict the use of “traditional terms,” such as “tawny,” “ruby,” and “chateau,” on

labels on imported wine. This impedes U.S. wine exports to the EU, including U.S. wines that include

these traditional terms within their trademarks. U.S. wines sold under a trademark that includes one of the

traditional terms can only be marketed in the EU if the trademark was registered before May 2002.

The EU has not taken any visible steps to address U.S. concerns and has consistently refused to provide a

timeline for review of the applications for the use of terms submitted by U.S. industry stakeholders.

Sanitary and Phytosanitary Barriers

The United States remains concerned about a number of measures the EU maintains ostensibly for the

purposes of food safety and protecting human, animal, or plant life or health. Specifically, the United States

is concerned that these measures unnecessarily restrict trade without furthering safety objectives because

they are not based on science, are maintained without sufficient scientific evidence, or are applied beyond

the extent necessary.

As part of the European Green Deal, described in the Technical Barriers to Trade (TBT) section of this

NTE Chapter, the Commission published its Farm to Fork (F2F) Strategy in May 2020 that included targets

and policy proposals for enhancing food and agricultural sustainability by 2030. Among other things, these

targets aim to reduce pesticide and fertilizer use by farmers and antimicrobial use in livestock, and to change

land use in agriculture by transitioning farmland into organic production or taking other farmland out of

production.

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The EU has stated it will seek to “obtain ambitious commitments from third countries in key areas,” and

the EU is increasingly attempting to expand the reach of this policy beyond the EU. The targets must be

converted into legislative proposals, and the European Parliament and Member States will shape and amend

these proposals as part of the EU legislative process between 2021 and 2024. The EU Ministers of

Agriculture adopted conclusions on the F2F Strategy in October 2020, endorsing goals while registering a

request that farming models other than organics be considered and that any new legislation be based on

“scientifically-sound ex-ante impact assessments.” The EU is also scheduled to release several proposals

in 2023, notably a proposal on the “Sustainable EU Food System Initiative.”

The United States shares the EU’s goals for more sustainable food systems and recognizes the importance

of considering the economic, social, and environmental dimensions of sustainability. However, it remains

to be seen how the EU will implement the broader objectives of the F2F through these interrelated

initiatives, which appear to blend SPS issues with potential TBT requirements like labeling or certification

schemes. U.S. stakeholders are concerned that EU implementing regulations may focus on promoting EU

production practices that are not appropriate, effective, or efficient in other parts of the world and, if

required, could unnecessarily restrict trade or require farmers in the United States and other countries

outside the EU to produce crops in less sustainable ways than they otherwise would have, as a precondition

for gaining access to the EU market.

Hormones and Beta Agonists

The EU maintains various measures that impose bans and restrictions on meat produced using hormones,

beta agonists, and other growth promotants, despite scientific evidence that such meat is safe for consumers.

U.S. producers cannot export meat or meat products to the EU unless they participate in a costly and

burdensome verification program to ensure that hormones, beta agonists, or other growth promotants have

not been used in their production.

For example, the EU continues to ban the use of the beta agonist ractopamine, which promotes leanness in

animals raised for meat. The EU maintains this ban even though international standards promulgated by

Codex Alimentarius Commission (Codex) have established a maximum residue limit (MRL) for the safe

trade in products produced with ractopamine. The Codex MRL was established following a scientific study

by the United Nations Food and Agriculture Organization/World Health Organization Joint Expert

Committee on Food Additives that found ractopamine at the specified MRL does not have an adverse

impact on human health.

The EU’s ban on growth promotant hormones in beef is inconsistent with its WTO obligations. In 1996,

the United States brought a WTO dispute settlement proceeding against the European Communities (the

EU predecessor entity) over its ban on beef treated with any of six growth promotant hormones. A WTO

dispute settlement panel concluded—and a subsequent report of the WTO Appellate Body affirmed—that

the ban was maintained in breach of the EU’s obligations under the WTO Agreement on the Application of

Sanitary and Phytosanitary Measures. The EU failed to implement the recommendations of the WTO

Dispute Settlement Body to bring itself into compliance with its WTO obligations, and the United States

was granted authorization by the WTO in 1999 to suspend concessions. Despite a favorable outcome in

the WTO dispute settlement process and the suspension of concessions, the EU’s unscientific ban on meat

and animal products produced using hormones, beta agonists, and other growth promotants remains in place

and unchanged.

In September 2009, the United States and the Commission signed a Memorandum of Understanding that

established a new EU duty-free import quota for grain-fed, high quality beef (HQB) as part of a compromise

solution to the U.S.–EU hormone beef dispute. Since 2009, Argentina, Australia, Canada, New Zealand,

and Uruguay have also begun to ship under the HQB quota. As a result, the market share of U.S. beef in

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the HQB quota has decreased significantly. To remedy the erosion of U.S. beef access to the HQB, the

United States and the EU engaged in negotiations to change the HQB quota after the EU received a mandate

to do so from the European Council in October 2018.

In 2019, the United States and the EU concluded a new agreement, which established a duty-free tariff-rate

quota (TRQ) exclusively for the United States. Under the agreement, American ranchers had an initial

TRQ of 18,500 metric tons annually, valued at approximately $220 million. Over seven years, the TRQ

will grow to 35,000 metric tons annually, valued at approximately $420 million. The agreement went into

effect on January 1, 2020.

Antimicrobial Resistance and the Restrictions on the Use of Veterinary Medicinal Products

In December 2018, the EU published Regulation (EU) 2019/6 on veterinary medicinal products that revised

EU protocols for the approval and use of veterinary medicinal products. A stated goal of the regulation is

to address antimicrobial resistance by more strictly defining the criteria for use of antimicrobial products in

animal medicine, and defining a list of products that will be exclusively reserved for human medicine and

no longer permitted in agricultural production. Article 118 of the regulation also expands these restrictions

to operators in third countries, although it is unclear how the EU intends to provide a scientific justification

for or enforce these restrictions. The official implementation date for (EU) 2019/6 was January 28, 2022,

but the EU is still finalizing the legislation necessary to implement the regulation. U.S. stakeholders are

concerned about the potential impacts of the as-of-yet unfinalized implementing regulations on U.S. exports

of animal products to the EU upon entry into force.

In March 2021, the EU published an amendment to the Official Controls Regulation (EU) 2017/625 that

clarified the legal mechanism for verification of compliance with Article 118. In October 2021, the EU

published Commission Delegated Regulation (EU) 2021/1760 that fixed the criteria used to establish the

list of antibiotics exclusively preserved for human medicine. The Commission adopted the European

Medicines Agency’s (EMA) advice as Commission Implementing Regulation (EU) 2022/1255, which was

published in the EU Official Journal on July 20, 2022. In addition, the Commission is working on a draft

delegated regulation that will formally implement Article 118. The United States continues to engage the

EU regarding management of antimicrobial resistance and encourage science-based approaches.

Agricultural Biotechnology

Decades of data and experience demonstrate the safety of genetically engineered (GE) crops, in addition to

the benefits of their use in reducing carbon emissions, pesticide use, and impact on non-target organisms,

while increasing soil health, crop yields, and farmers’ incomes. Despite these benefits, the lack of

predictability, excessive data requirements, and delays in the EU’s approval process for GE crops have

prevented products from being exported to the EU, even though these products have been approved and

grown safely in the United States for many years.

The United States continues to reiterate concerns with delays in the EU’s biotechnology approval

procedures and to engage the EU in efforts to normalize trade in these products, including through

semiannual consultations in accordance with the 2008 decision by the United States and the EU to suspend

Article 22.6 arbitration proceedings associated with the WTO dispute settlement proceeding against the

European Communities (the EU predecessor entity) regarding the approval of biotechnology products. In

2022, the EU issued 6 approvals and 1 renewal for GE crops, compared to 12 approvals and 6 renewals in

2021. While these new authorizations are welcomed, the EU’s average approval time for new GE crops in

2022 was approximately 6 years. In contrast, the EU’s own legally prescribed approval time for such

products is 12 months (6 months for the review with EFSA and 6 months for the political committee process

known as comitology).

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As of December 31, 2022, the United States was tracking approximately 35 agricultural biotechnology

product applications (including renewals) submitted to the EU, including with respect to corn, soybean,

rapeseed, and cotton. Of those applications, 30 were under scientific review by the EFSA and 5 await

action by the Commission through comitology. Delays in both of these stages contribute to increasingly

lengthy EU approval timelines. For example, EFSA continues to demand unnecessary studies while

conducting risk assessments, which result in unpredictable delays in issuing final opinions. In comitology,

repeated findings of “no opinion” by the relevant Standing Committee on Plants, Animals, Food and Feed

also delay the EU from making decisions on GE approvals, by requiring products to go through an

additional assessment by an Appeal Committee before receiving a final approval. The United States

continues to engage the EU on delays of this nature and urge the EU to address other barriers to trade in

biotechnology products. For example, the EU has yet to establish a practical low-level presence policy and

instead maintains a 0.1 percent limit for unapproved biotechnology traits in feed shipments, which is not

commercially feasible and disrupts trade in products that have otherwise passed U.S. safety assessments.

Acceptance of APHIS Certification for Wheat Products

The EU does not accept the Karnal bunt (KB) fungus certification for wheat products issued by the U.S.

Department of Agriculture (USDA) Animal Plant Health and Inspection Services (APHIS), stating that the

APHIS bunted kernel standard for KB does not provide adequate risk protection. According to U.S. wheat

producers, sampling procedures by many EU Member States, including Italy and Greece, appear to

discriminate against U.S. products and create delay and uncertainty that encourages buyers to source wheat

from other non-U.S. sources, primarily Canada. APHIS and its EU counterpart have repeatedly exchanged

scientific views on this issue, but no progress has been made on securing EU acceptance of the APHIS

certification.

EU Fumigation Requirements for Hardwood Lumber and Logs

The EU previously banned the use of methyl bromide to fumigate logs and wood chips imports. Fumigation

with sulfuryl fluoride is considered an equally effective substitute and is used throughout the EU, including

for EU log exports. However, the EU has not approved its use for U.S. products, which leaves U.S. log

and chip exporters without a commercially viable fumigation option. Heat treatment, which has been

proposed by the EU as a fumigation option, is not scalable in many instances. The United States will

continue to engage with the EU on this issue to identify a path forward.

Member State Measures

Agriculture Biotechnology Cultivation Opt-Out

In March 2015, the EU adopted a directive allowing Member States to ban the cultivation of GE plants in

their respective territories for non-scientific reasons (EU Directive 2015/412). Under the transitional

measures, Member States had until October 2015 to request exemption from the geographical scope of the

authorizations already granted or in the pipeline. Eighteen Member States “opted-out” of GE crop

cultivation for all or part of their territories and none of the five Member States (the Czech Republic,

Portugal, Romania, Slovakia, and Spain) that grew GE corn opted out. However, as of 2021, only Portugal

and Spain were commercially cultivating GE corn.

Seventeen Member States have opted out of cultivation using biotechnology seeds. The 17 Member States

that requested exclusion of their entire territory from the geographical scope of biotechnology applications

are Austria, Bulgaria, Croatia, Cyprus, Denmark, France, Germany, Greece, Hungary, Italy, Latvia,

Lithuania, Luxembourg, Malta, the Netherlands, Poland, and Slovenia. Additionally, one region in

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Belgium, Wallonia, has also opted out of cultivation. All of these Member States and regions have decided

to ban the cultivation of Monsanto 810 corn (MON810) and the seven varieties of corn that were in the

pipeline in 2015, apart from Denmark and Luxembourg, which have only banned MON810 and three of

the seven varieties of corn in the pipeline.

Pathogen Reduction Treatments

The EU maintains measures that prohibit the use of any substance other than water to remove contamination

from animal products unless the substance has been approved by the Commission. These measures

significantly affect U.S. exports of beef, pork, and poultry to the EU because the Commission has failed to

approve several pathogen reduction treatments (PRTs) that have been approved for use in the United States.

PRTs are rinses used to kill microbial pathogens that commonly exist on meat after slaughter. The PRTs

at issue have been approved by USDA, after establishing their safety on the basis of scientific evidence.

In March 2017, the National Pork Producers Council submitted an application to the Commission for the

approval of two organic acids, lactic and acetic, for use on pork. The application was submitted to EFSA

by the Commission in September 2017. EFSA published its evaluation in December 2018, confirming the

safety of the use of acetic acid and lactic acid in pork processing. As of December 2022, the Commission

has taken no action for the approval of pork PRTs.

The United States maintains that the use of PRTs is a critical tool during meat processing that helps further

the safety of products being placed on the market. The United States has engaged the EU to share scientific

data regarding the safe use of PRTs and will continue to engage the EU regarding the approval of PRTs for

beef, pork, and poultry as an effective tool to improve food safety.

Certification Requirements

EU certification requirements may limit U.S. agricultural exports such as fish, meat, dairy, eggs, processed

products, and animal byproducts by requiring exporters to certify an increasing number of public health,

animal health, or animal welfare claims. These certifications are not necessary to protect human or animal

health, and are increasingly adding costs and burden to the movement of exports in Europe. The

certification requirements are enforced irrespective of whether these goods are destined for commercial sale

in the EU, transiting through the EU, or intended for cruise ships located in the EU. The EU’s requirements

often appear to have been established without scientific evidence, a risk assessment, or consideration of

Codex guidance on certifications, the latter of which establish the minimum amount of information

necessary to ensure the safety of the product being traded. Moreover, the EU’s changes to certificates are

increasingly frequent, complex, and instituted through updates to multiple EU implementing or delegated

regulations, making compliance difficult for manufacturers, exporters, and EU importers, as well as U.S.

regulatory agencies. Differences in interpretation of EU legislation by Member State authorities also

creates legal instability and often results in trade disruptions, creating additional burden for U.S. exporters.

In December 2020, the EU updated its animal health certification requirements through implementing

regulation (EU) 2020/2235 for products of animal origin, including dairy, eggs, meat, casings, animal

byproducts, composite products, live animals, and aquatic animals, with an implementation deadline of

April 2021. In August 2021, the EU extended the implementation deadline to March 15, 2022, as long as

certificates for affected products were certified before January 15, 2022. In January 2022, the EU issued

another series of changes to its requirements under (EU) 2020/2235 and extended the deadline for a subset

of products until September 15, 2022, provided that certificates were signed by June 15, 2022. In May

2022, the EU issued a subsequent series of changes to its requirements under (EU) 2020/2235 and extended

the deadline for a subset of products until February 2023, provided that certificates were signed by

November 15, 2022. In July 2022, the EU again issued a series of changes to its requirements under (EU)

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2020/2235 and extended the deadline for a subset of products until April 2023, provided that certificates

were signed by January 15, 2023. While the EU’s extensions have allowed the United States to address

EU requirements through updates to U.S. export verification programs, the EU’s prescriptive requirements

and numerous changes to certificate templates have caused confusion for U.S. exporters and created delays

in implementation by U.S. regulatory authorities. The United States is working to address remaining issues

on certificates for products of animal origin transiting the EU that are destined for third countries, as well

as certificates for composite products with multiple ingredients of animal origin. The United States

continues to engage the EU bilaterally to resolve concerns regarding the EU’s certification requirements.

Ban on Titanium Dioxide in Food

Commission Regulation (EU) 2022/63 banned titanium dioxide (E171) as a food additive in the EU as of

August 7, 2022. The regulation includes a commitment to review the necessity to maintain or delete

titanium dioxide from the EU list of food additives for exclusive use as a color in medicinal products. The

Commission has tasked the EMA with reviewing the situation by April 2024. The regulation calls on the

pharmaceutical industry to accelerate research and development for alternatives to titanium dioxide in both

new and previously authorized products. The EMA has published information for pharmaceutical

companies and is monitoring industry efforts.

In November 2021, the Commission published Commission Implementing Regulation (EU) 2021/2090 in

the Official Journal denying the authorization of titanium dioxide (E171) as a feed additive for all animal

species.

Animal Byproducts, Including Tallow

The EU considers all animal byproducts sourced from animals raised under conditions not essentially

identical to those in the EU to be hazardous materials. Since 2002, the EU has made modifications to its

regulations and implementation practices governing animal byproducts that have resulted in the treatment

of U.S. products being considered hazardous. The current EU interpretation of the animal byproducts

regulations could potentially prevent most exports of U.S. animal byproducts. Several Member State border

inspection posts have already blocked consignments of various technical blood products.

The United States has requested that tallow be allowed entry into the EU for any purpose without

verification other than that the tallow and derivatives made from the tallow contain no more than a

maximum level of insoluble impurities consistent with the internationally recognized standard for trade in

tallow and with World Organisation for Animal Health (WOAH) recommendations.

Live Cattle

Live cattle from the United States are not authorized to be exported to the EU, or transited through the EU

en route to third countries, due to EU certification requirements for several bovine diseases. U.S. exports

remain blocked because the United States and EU have not agreed on the conditions and format for an

export certificate. APHIS continues to work with the EU to resolve the remaining import health conditions

and reach agreement on a mutually acceptable certificate through the U.S.–EU Animal Health Technical

Working Group.

Trade in Raw and Processed Shellfish

In February 2022, the United States and EU concluded negotiations to allow for resumption of bilateral

trade in live, raw bivalve shellfish from Massachusetts and Washington. In April 2022, the United States

sent dossiers for Rhode Island, Connecticut, and Maine seeking to export raw product to the EU. Although

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the EU committed to expedited reviews of U.S. state dossiers, as of December 31, 2022 the EU had not

completed its review. With regard to processed shellfish, the EU requires a determination of equivalence

for processed and raw shellfish, a level of control for a processed product that has is not been supported by

science-based risk assessment.

Specified Risk Materials Certification Requirement

The EU has a different definition of specified risk materials (SRM) from the United States for the animal

tissues most at risk of harboring the transmissible spongiform encephalopathies (BSE). The EU requires

that materials exported to the EU meet the EU’s SRM definition and be derived from carcasses of animals

that can be confirmed as never having been outside of regions that the EU considers to be of negligible risk

for BSE. Although the United States has been recognized by WOAH as having negligible risk, the source

cattle for U.S. ruminant origin animal byproduct exports may not necessarily come from negligible risk

countries. The EU SRM requirement unnecessarily impedes U.S. exports of ruminant origin animal

byproducts considered safe in the United States and would potentially limit the market for ovine/caprine

byproducts were other market impediments removed.

The SRM requirement otherwise has not been an issue for bovine meat for human consumption, because

the special EU-required production controls in the non-hormone-treated cattle program already provide the

necessary verifications regarding the history of the animal. The United States has requested the removal of

the EU’s “born and raised” BSE requirement for all relevant U.S. commodities; the EU’s requirement is

based on its non-recognition of WOAH animal disease status for the United States and is related to animal

health versus the origin of the products. Consistent with the recommendations of WOAH, it is the BSE

status of the country of export that should determine whether SRMs have to be removed. The United States

continues to raise this issue in appropriate fora, including bilateral technical working groups.

Agricultural Chemicals

Hazard-based Cutoff Criteria – Categorization of Compounds as Endocrine Disruptors

Active substances can only be approved for use in crop protection products in the EU if they fulfill the

approval criteria established in Regulation (EC) 1107/2009. Under this regulation, the EU’s determination

includes hazard-based “cutoff” criteria that exclude certain categories of products from consideration for

normal authorization for use in the EU. In instances where an active substance triggers the cut-off criteria,

the EU regulatory process allows for an active substance to remain unapproved, regardless of risk of

exposure. For such products, the EU does not complete a risk assessment. Rather, the EU discontinues

authorization for a particular product at the time of re-approval, as has happened for an increasing number

of substances. The EU has also been taking a “hazard-based approach” to new products, declaring them to

be ineligible for authorization based solely on the intrinsic properties of the product, without taking

important risk factors such as level of exposure or dosage into account. The United States is concerned that

an increasing number of safe and widely-used substances are not being reapproved or having reasonable

import tolerances set for their use, due to these arbitrary cut-off criteria when current registrations expire.

One category of crop protection products subject to this hazard-based approach are substances classified as

endocrine disruptors (EDs). EDs are naturally occurring or man-made substances that may mimic or

interfere with hormone functions. The United States evaluates possible endocrine effects associated with

the use of certain chemicals to ensure protection of public health and the environment, while the EU appears

to be setting up approaches to regulating these compounds that are not based on scientific principles and

evidence, thereby restricting trade without improving public health.

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The scope of trade effects of Regulation (EC) 1107/2009 is broad and overlaps with that of the other hazard

criteria and environmental criteria the EU uses in regulating pesticides. The EU obscures its hazard-based

decisions with onerous data requirements that allow the Commission to claim an inability to measure risk.

The United States continues to monitor this issue and raise concerns in international and bilateral fora.

Pesticide Maximum Residue Limits

MRLs and import tolerances are established under separate legislation, Regulation (EC) 396/2005, which

is risk-based rather than hazard-based. However, for active substances that are not approved due to the

EU’s cut-off criteria under Regulation (EC) 1107/2009, the EU may forgo the risk assessment process

established under Regulation 396/2005, withdraw MRLs, and reduce import tolerances to the default level

of 0.01 mg/kg. The EU conducted an evaluation of existing legislation on plant protection products and

pesticide residues through the Regulatory Fitness and Performance process. At this time, the EU has no

intention to further align Regulation (EC) 396/2005 with the hazard-based principles of Regulation (EC)

1107/2009. As the number of substances ineligible for reauthorization by the EU increases, and as the EU

reduces the corresponding MRLs and import tolerances to the default level, the significant negative effect

on agricultural production and trade is likely to increase.

The EU regulations also establish transitional periods to allow producers to adjust to changes in EU MRLs,

although the transition periods established by the EU are generally not long enough to avoid trade

disruption. For many products, there may be a gap of several years between pesticide application and when

a final product is offered for sale, creating a situation where products that are compliant with EU MRLs at

the time of production do not have time to clear the channels of trade. EU products, on the other hand,

appear to remain available for sale as long as they are produced prior to MRLs changing.

The United States has raised concerns over the EU’s policy approaches for years and continues to engage

on these issues in the WTO SPS Committee. The United States is also monitoring the EU’s actions with

regard to evaluating and establishing import tolerances for active substances, which have the potential to

create further trade disruptions when MRLs are set at levels that are lower than necessary to protect human

health, and that are not viable. According to U.S. industry estimates, U.S. exports valued at over $5 billion

and global trade amounting to $75 billion are at risk of significant harm. Discontinuing the use of critical

substances without a proper science-based risk assessment, and withdrawing or lowering MRLs to levels

that are not commensurate with the findings of risk assessments, would have serious adverse effects on

agricultural productivity and global markets.

GOVERNMENT PROCUREMENT

Government procurement is governed by the EU public procurement directives. The directive on

procurement in the utilities sector covers purchases in the water, transportation, energy, and postal sectors.

This directive requires open and competitive bidding procedures, but it permits Member States to reject

bids with less than 50 percent EU content for tenders that are not covered by an international or reciprocal

bilateral agreement. The EU content requirement applies to foreign suppliers of goods and services in water

(the production, transport, and distribution of drinking water), energy (gas and heat), urban transport (urban

rail, automated systems, trams, buses, etc.), and postal services.

The EU is a Party to the WTO Agreement on Government Procurement (GPA). U.S.-based companies are

allowed to bid on public tenders covered by the GPA.

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International Procurement Instrument

On August 29, 2022, the EU’s new International Procurement Instrument (IPI) entered into force. The IPI

empowers the Commission to limit or exclude, on a case-by-case basis, access to its public procurement

markets by economic operators originating in countries that apply restrictive or discriminatory procurement

measures to EU businesses. The United States understands that procurement from non-market economies

is the principal target of the IPI, but GPA and free trade agreement parties are not exempt from the IPI. As

a consequence, procurement not covered by the GPA to which U.S. suppliers have had access in the past

may be subject to the IPI.

Member State Measures

Lack of transparency in certain Member State public procurement processes continues to be an almost

universally cited barrier to the participation of U.S. firms. U.S. firms have voiced concerns over a lack of

transparency, as well as overly narrow definitions of tenders, language and documentation barriers, and

implicit biases in favor of local vendors and state-owned enterprises. Additional Member State-specific

trade barriers to U.S. participation in public procurement processes are discussed below.

Croatia: U.S. companies have complained about instances in which technical specifications and scoring in

public procurement tenders appear to favor a specific bidder, typically a local or other Member State

company, thus impacting the participation of competitive U.S. firms.

Greece: U.S. firms have complained that Greece often requires suppliers to source services and production

locally or partner with Greek manufacturers as a condition for the awarding of some defense contracts.

Additional complaints center on onerous certification and documentation requirements for U.S. firms.

Hungary: In April 2022, the European Commission launched a budget conditionality mechanism against

Hungary over the “systemic irregularities, deficiencies and weaknesses” in its public procurement

procedures. U.S. companies express serious concerns that public procurements in Hungary are not

transparent and tend to favor either local or other non-EU countries including China.

Lithuania: U.S. firms have raised concerns over the use of “lowest cost” criteria as the primary

determination for awarding contracts. Although Lithuanian law allows for consideration of factors such as

quality, company reputation, and prior experience in the decision-making criteria, “lowest cost” bidding

continues to be a common practice. Additionally, U.S. companies have expressed frustration that large

projects are often broken up into multiple, smaller tenders, favoring local companies and reducing

economies of scale for foreign bidders.

Poland: Defense companies operating in Poland have indicated that the Ministry of Defense sometimes

requests significant offsets and technology transfers primarily associated with large-scale acquisitions.

However, the last few major defense purchases through the U.S. Government’s Foreign Military Sales

process included no offset requirement.

Slovakia: A perceived lack of transparency in procurement, in addition to the excessive length and

complexity of tender verification and appeal procedures, remains an impediment to the widest possible

participation of potential bidders. Lock-in contracts, in which the Slovakian Government commits to

procure a basic service and subsequently expands the contract to include additional services, continue to

hamper the access of U.S. firms to public procurement, especially with regard to information technology

services.

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Slovenia: U.S. firms report instances of tendering documentation that provide unfair advantages to favored

vendors, typically an EU Member State company, and opacity in the bid evaluation process as major

impediments. Slovenia’s quasi-judicial National Revision Commission (NRC), which reviews all disputed

public procurement cases, has received multiple complaints. The NRC has the authority to review, amend,

and cancel tenders, and its decisions are not subject to judicial appeal. In the instances where U.S.

companies alleged improprieties in the procurement process, Slovenian authorities directed them to the

NRC, which is not required to justify its decisions.

Cybersecurity

Proposed EU Cybersecurity Certification Scheme for Cloud Services (EUCS): The EU is considering a

new certification scheme for cloud services. U.S. stakeholder concerns include data localization,

headquarters’ location, and corporate control requirements, all of which aim to make EU data “immune”

from non-EU laws for certain high-risk tenders. Once finalized, we expect the EUCS to be made mandatory

for certain public sector and possibly select private sector cloud services. The EU covers cloud services in

their GPA schedule and is required to offer non-discriminatory access to U.S. and GPA suppliers.

France: France’s national digital security agency, Agence Nationale de la Securite des Systemes

d’Information (ANSSI), maintains a security certification scheme for cloud services, commonly referred to

as SecNumCloud. In May 2021, the French Government issued a strategy for the use of cloud computing

by the state (Trusted Cloud strategy), requiring that government agencies and commercial entities

considered “critical” must select only cloud services vendors with a SecNumCloud certification to handle

their highly sensitive data. As part of this strategy, ANSSI published in March 2022 a revision to the

SecNumCloud certification requirements. This revision requires, in part, that any cloud provider that

handles “highly sensitive” data (a category to be defined by a circular still to be released) must be at least

61 percent European-owned and “immune” from non-EU laws. U.S. companies have expressed concern

that U.S. cloud services suppliers will be precluded from providing these services to French public

authorities. There are also concerns that in the future the French private sector would adopt a SecNumCloud

certification requirement, which could further hamper U.S. cloud service providers from providing services

in the French market.

INTELLECTUAL PROPERTY PROTECTION

As part of the Commission’s Digital Single Market (DSM) Strategy, the Directive on Copyright in the

Digital Single Market (Copyright Directive) went into effect in June 2019, with the stated goal of addressing

legal uncertainty for both rights holders and users with regard to certain uses of copyright-protected works

and other subject matter in the digital environment. Member States were required to transpose it by June

7, 2021. As of December 2022, the following countries still had not transposed the Copyright Directive in

full: Bulgaria, Denmark, Finland, Latvia, Poland, and Portugal. The United States continues to follow

transposition of the Copyright Directive into national laws, and will continue to engage with various EU

entities as appropriate to address U.S. stakeholder equities.

The Digital Services Act (DSA) went into effect in November 2022 and is intended to regulate certain

online services, including through rules for how content is shared online. U.S. stakeholders expressed

concern that the DSA’s adoption of a framework for limitations of liability included modifications to the

eligibility threshold and conditions that had been set in the E-Commerce Directive, which may adversely

impact their intellectual property (IP) rights, in particular for copyright and trademarks.

The Commission proposed a Data Act in February 2022 with the goal of maximizing the value of data and

promoting innovation by increasing the transfer of data that is stored within devices and applications. Drafts

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of the Data Act require the disclosure and making available of data that may be protected by the data

holder’s or a third party’s trade secrets, copyright, or other IP.

The Commission proposed an Artificial Intelligence (AI) Act in April 2021 with the aim of providing a

risk-based approach to regulating the development, deployment, and use of AI-driven products, services,

and systems. Drafts of the AI Act require the disclosure of source code without strong, consistent, and

transparent protection schemes for innovative and proprietary information embedded in the source code

that is of particular economic value to small businesses.

In response to the CJEU’s judgment in Recorded Artists Actors Performers (RAPP), the Commission is

exploring the possibility of publishing a draft amendment to the Rental and Lending Directive to require or

permit material reciprocity for equitable remuneration collected for the performance and communication of

sound recordings. The CJEU held that all sound recording producers and performers from contracting

parties to the World Intellectual Property Organization (WIPO) Performances and Phonograms Treaty

(WPPT) are entitled to equitable remuneration. U.S. stakeholders are concerned that such a legislative

change reversing the CJEU holding will result in EU Member States withholding full payment of royalties

to U.S. producers and performers.

The United States remains highly troubled by the EU’s overbroad protection of geographical indications

(GIs), which adversely impacts both protection of U.S. trademarks and market access for U.S. products that

use common names in the EU and third country markets.

Regulation 1151/2012, for example, contains numerous problematic provisions with respect to the

protection and enforcement of Protected Designations of Origin (PDOs) and Protected Geographical

Indications (PGIs). Troubling provisions include those governing the scope of protection of PDOs and

PGIs, including expansive rules about evocation, extension, co-existence, and translation, among others,

which not only adversely affect trademark rights and the ability to use common names, but also undermine

access to the EU market for U.S. rights holders and producers. The EU has granted GI protection to

thousands of terms that limits use in the EU market to only certain EU producers, and the use of any term

that even “evokes” a GI is also blocked. Despite this level of protection afforded to products sold within

the EU, it appears that some producers in Member States continue to produce products featuring terms that

are protected as GIs in other Member States and then export these products outside the EU. The EU has

also granted GI protection to the cheese names danbo and havarti, widely traded cheeses that are covered

by international standards under Codex. Several countries, including the United States, opposed GI

protection of these common names both during the EU’s opposition period and at the WTO, but the

Commission granted the protection over that opposition and without sufficient explanation to interested

parties.

Regulation 1151/2012 also serves as the basis for the EU’s international GI agenda, which includes

requiring EU trading partners to protect and enforce specific EU GIs in their markets, often with only

limited due process requirements to safeguard existing producers, right holders, consumers, importers, and

other interested parties. Regulation 1151/2012 replaced the former GI regulation for food products, Council

Regulation (EC) 510/06, which was adopted in response to WTO DSB findings in a successful challenge

brought by the United States (and a related case brought by Australia) that asserted that the EU GI system

impermissibly discriminated against non-EU products and persons. The DSB findings also agreed with the

United States that the EU could not create broad exceptions to trademark rights guaranteed by the

Agreement on Trade-Related Aspects of International Property Rights (TRIPS). Regulation 1151/2012

sped up the registration procedure for registering GIs, reduced the opposition period from six to three

months, and expanded the types of products capable of being registered as a GI.

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In 2022, the EU adopted Delegated Regulation 2022/891 on procedural rules for GI protection and the use

of GI signs and symbols and Implementing Regulation 2022/892 on agricultural and foodstuff GIs. As to

new GI proposals in 2022, the United States has concerns with the proposed revision of the GI system for

agricultural products, foodstuffs, wines, and spirit drinks, and with the proposed establishment of sui

generis GI protection for craft and industrial products.

The United States continues to have concerns about the EU’s GI regulations and monitors carefully their

implementation and effects on bilateral trade. The United States does not believe that the EU should bargain

for specific GI recognition in its bilateral trade agreements in return for market access, because such IP

rights should be evaluated independently on their merits, based on the unique circumstances of each

jurisdiction. The United States is also concerned by the EU’s attempts to restrict common terms for wine

in third country markets. The United States is carefully monitoring the implementation of each of these

regulations and proposals.

The United States remains extremely concerned by the conduct and outcome of the 2015 WIPO negotiations

to expand the Lisbon Agreement for the Protection of Appellations of Origin and their International

Registration to include GIs. Of particular concern to the United States was the manner of engagement in

these negotiations by the Commission and by several Member States, including the Czech Republic, France,

Greece, Italy, and Portugal, which took precedent-setting steps to deny the United States and the vast

majority of WIPO countries full negotiating rights and depart from longstanding WIPO practice regarding

consensus-based decision-making. Likewise, the resulting text—the Geneva Act of the Lisbon Agreement

on Appellations of Origin and Geographical Indications—raises numerous and serious legal and

commercial concerns, including with respect to the degree of inconsistency with the trademark systems of

many WIPO countries, and could have significant negative commercial consequences for trademark holders

and U.S. exporters that use common terms. The EU became a party to this Agreement in November 2019.

The Agreement entered into force in February 2020.

In addition, the U.S. pharmaceutical industry stakeholders have expressed concerns as to the possible

ramifications of recent export and stockpiling exceptions to its patent term restoration mechanism known

as supplemental protection certificates, particularly the possibility of the diversion of pharmaceuticals either

within the EU or in foreign markets. The United States is closely monitoring this matter as well as

additional legislative developments in this field.

Member State Measures

Although Member States generally maintain high levels of IP protection and enforcement, the United States

remains concerned about the IP practices of several countries. The United States actively engages with the

relevant authorities in these countries and will continue to monitor the adequacy and effectiveness of IP

protection and enforcement, including through the annual Special 301 review process. The United States

is particularly concerned about counterfeit pharmaceuticals and personal protective equipment.

Austria: With regard to trade secrets, U.S. companies reported gaps in criminal liability, insufficient

specialization of judges, low criminal penalties, and procedural obstacles that limit efforts to effectively

combat trade secret theft and misappropriation. The Austrian Government is considering these gaps in

criminal law internally in connection with a reform in corruption law and is expected to develop a draft law

in the coming months.

Bulgaria: Enforcement concerns in Bulgaria include inadequate prosecution efforts, lengthy procedures,

and insufficient criminal penalties, particularly in the area of online piracy. Stakeholders have raised

concerns as to notorious online pirate sites reportedly hosted in Bulgaria. The number of prosecutions

against individuals continues to be low and penalties for IP criminal violations, including in the area of

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online piracy, fail to offer any meaningful deterrent. In addition, Bulgaria still has not adopted the technique

of evidence sampling in connection with criminal investigations involving online infringement. As a result,

USTR announced an Out-of-Cycle Review of Bulgaria in April 2022 as part of the Special 301 process.

Germany: When Germany implemented the Copyright Directive in 2021, it introduced new requirements

for online platforms regarding the filtering of user uploads to prevent the automatic blocking of potentially

concerned that Germany also introduced an overly broad copyright presumption that makes it difficult for

creators to enforce their copyrights in music and videos that are used in the background of short-form

content that is often posted on social media. U.S. stakeholders also voiced concerns that Germany’s legal

framework for technological protection measures remain inadequate and that Germany’s private copy

exception is too broad. The United States will monitor how implementation impacts U.S. stakeholders.

Poland: Stakeholders continue to identify copyright piracy online as a significant concern in Poland and

noted inconsistent enforcement on the part of law enforcement and backlogs in the Polish courts.

Stakeholders also are concerned about illegal camcording.

Romania: Online piracy remains a concern with some notorious online pirate sites reportedly hosted or

registered in Romania. Low penalties for IP violations impede investigations and do not offer any

meaningful deterrent to further IP crimes, so law enforcement choose to bundle significant cases under tax

evasion penal files. Romania lacks an effective and timely mechanism for rights holders to submit

takedown requests against online markets and hosting platforms for infringing material. Adequate

resources, including additional training for law enforcement, are needed to enhance enforcement quality.

However, Romania has made progress on addressing long-standing IP protection and enforcement

concerns, and recently Romania appointed a National IP Coordinator to monitor and evaluate the

effectiveness of IP protection and enforcement strategies.

SERVICES BARRIERS

Telecommunications Services

Electronic Communications Code

The EU Electronic Communications Code (EECC), adopted in 2018, regulates the telecommunications

sector and includes rules on network access, spectrum management, communication services, universal

service, and institutional governance. EU Member States were required to transpose the rules into national

laws by December 2020. Based upon the most recently available public information, all but eight Member

States had fully transposed the EECC into their national laws.

Regulation on Privacy and Electronic Communications

In January 2017, the Commission proposed a new Regulation on Privacy and Electronic Communications,

which would replace the e-Privacy Directive of 2002. The proposed regulation would expand the scope of

the existing directive, which applies to traditional telecommunications services providers, to include over-

the-top Internet-enabled services. U.S. suppliers have expressed concerns that, although the proposed

regulation is supposed to align the specific rules for telecommunications services with the General Data

Protection Regulation (GDPR), it may actually lead to additional and potentially conflicting requirements.

In late 2017, the European Parliament adopted its final amendments to the proposed regulation, and in

February 2021, the European Council announced that it had finalized its version, clearing the way for

trilogue negotiations to begin. Those negotiations have proceeded slowly and are ongoing.

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Audiovisual Media Services Directive

In November 2018, amendments to the 2007 Audiovisual Media Services Directive (AVMSD) were

adopted. Member States were given 21 months to transpose the amendments into national legislation. On

November 23, 2021, the Commission launched proceedings against 23 Member States for failure to

transpose the AVMSD into national law. As of December 31, 2022, proceedings were still ongoing for a

number of member states including the Czech Republic, Ireland, and Slovakia, which have cases before the

CJEU. The Commission also has open proceedings against Slovenia, Croatia, France, and Estonia. The

amendments updated the AVMSD to reflect developments in the audiovisual and video-on-demand

markets.

The original AVMSD established minimum content quotas for broadcasting that had to be enforced by all

Member States. Member State requirements were permitted to exceed this minimum quota for EU content,

and several have done so. However, the original AVMSD did not set any strict content quotas for on-

demand services, although it still required Member States to ensure that on-demand services encourage

production of, and access to, “EU works.”

The 2018 amendments include provisions that impose on Internet-based video-on-demand providers a

minimum 30 percent threshold for EU content in their catalogs and require that they give prominence to

EU content in their offerings. The new AVMSD also provides Member States the option of requiring on-

demand service providers not based in their territory, but whose targeted audience is in their territory, to

contribute financially to EU works, based on revenues generated in that Member State. In addition, the

new rules extend the scope of the AVMSD to video-sharing platforms that tag and organize content, which

has raised concerns among social media platforms.

Member State Measures

A number of Member States maintain measures that affect the free flow of some programming or film

exhibitions. A summary of some of the more significant national practices follows.

France: France continues to apply the AVMSD and other content laws in order to promote local industry.

France’s implementing legislation, approved by the Commission in 1992, requires that 60 percent of

television programming in France be of EU origin, thus exceeding the AVMSD threshold. In addition, 40

percent of the programming devoted to EU origin must include original French-language content. These

quotas apply to both regular and prime-time programming slots, and the definition of prime time differs

from network to network. The French Government issued an order in December 2020, and an additional

six decrees in December 2021, transposing the AVMSD into French law.

Internet, cable, and satellite networks are permitted to broadcast as little as 50 percent EU content (the

AVMSD minimum) and 30 percent to 35 percent French-language content, but channels and services are

required to increase their investment in the production of French-language content. In addition, radio

broadcast quotas require that 35 percent of songs on almost all French private and public radio stations be

in French. The quota for radio stations specializing in cultural or language-based programing is 15 percent.

A July 2016 regulation specifies that the top 10 most commonly played French-language songs on a station

can make up only 50 percent of the station’s quota. France’s Audiovisual and Digital Communication

Regulatory Authority oversees implementation of the quotas.

Beyond broadcasting quotas, cinemas must reserve five weeks per quarter for the exhibition of French

feature films. This requirement is reduced to four weeks per quarter for theaters that include a French short

subject film during six weeks of the preceding quarter. Operators of multiplexes may not screen any one

film in such a way as to account for more than 30 percent of the multiplex’s weekly shows.

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Poland: Television broadcasters must dedicate at least 33 percent of their broadcasting time quarterly to

programs originally produced in the Polish language, except for information services, advertisements,

telemarketing, sports broadcasts, and television game shows. Radio broadcasters are obliged to dedicate

33 percent of their broadcasting time each month and at least 60 percent of broadcasting time between 5:00

a.m. and midnight to programming in Polish. Television broadcasters must dedicate at least 50 percent of

their broadcasting time quarterly to programs of EU origin, except for information services, advertisements,

telemarketing, sports broadcasts, and television game shows. Television broadcasters must devote at least

10 percent of their broadcasting time to programs by EU independent producers, and compliance is

reviewed every three months. On-demand audiovisual media services providers also must promote content

of EU origin, especially content originally produced in Polish, and dedicate at least 20 percent of their

catalog to EU content. In addition, Poland’s Broadcasting Law stipulates that a television broadcasting

company may only receive a license if the voting share of non-European owners does not exceed 49 percent

and if the majority of the members of the management and supervisory boards are Polish citizens and hold

permanent residence in Poland. One private television broadcaster with significant foreign ownership has

faced legal uncertainty and delays in renewing broadcasting licenses for its channels. In April 2022, a

Polish regional court found the excessive delays in renewing licenses for two channels owned by this

broadcaster were a serious infringement of the law.

In December 2022, the Polish Parliament proposed a new Electronic Communications Law that would

include changes to “must carry, must offer” requirements that apply to paid television distributors. The

proposed rules specify that five of the state-funded national broadcaster’s channels are required to be carried

by statute as the first five channels, with the National Broadcasting Council empowered to decide on a list

of up to thirty other channels which must be offered to television subscribers. The law has not yet been

passed and faces opposition by industry, which prefers to keep with the status quo of seven “must carry,

must offer” channels with distributors deciding on the assignment of channel numbers.

Spain: For every three days that a film from a non-EU country is screened, one EU film must be shown.

This ratio is reduced to every four days if the cinema screens a film in an official language of Spain other

than Spanish and keeps showing the film in that language throughout the day. In addition, broadcasters and

providers of other audiovisual media services annually must invest 5 percent of their revenues in the

production of EU and Spanish films and audiovisual programs, and 60 percent of this allocation should be

directed towards productions in any of Spain’s official languages. This also applies to digital terrestrial

television.

In June 2022, the Generalitat de Catalunya published a preliminary draft law on Audiovisual

Communications that would deviate from the AVMSD country-of-origin principle and impose quotas

related to the Catalan language and the Aranese dialect.

In 2015, the Spanish Government awarded six digital terrestrial television broadcasting licenses through a

public tender process. U.S. investors were unable to participate directly in this tender process due to

restrictions on foreign ownership. U.S. companies have complained about lack of reciprocity in their efforts

to purchase portions of Spanish broadcasting companies. The United States continues to engage on these

issues with the Spanish Government.

Legal Services

Austria, Belgium, Bulgaria, Croatia, Cyprus, Greece, Hungary, Latvia, Lithuania, and Malta require EU or

EEA nationality or citizenship for full admission to the bar, which is necessary for the practice of EU and

Member State law. In many cases, non-EU lawyers holding authorization to practice law in one Member

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State face more burdensome procedures to obtain authorization in another Member State than would a

similarly situated lawyer holding EU citizenship.

Accounting and Auditing Services

The Commission has taken the position that its directive on statutory auditing prohibits Member States from

considering professional experience of foreign auditors acquired outside of the EU when considering

whether to grant statutory auditing rights. The United States will continue to advocate for Member States

to take into account the experience of U.S. certified public accountants acquired outside of the EU.

Retailing Services

Member State Measures

EU nationality is required for operation of a pharmacy in Greece and Hungary.

Romania: In July 2016, Romania passed a law requiring large supermarkets to source at least 51 percent

of the total volume of their merchandise in meat, eggs, fruits, vegetables, honey, dairy products, and baked

goods from the local supply chain. This law applies to high-volume supermarkets with more than €2 million

(approximately $2.3 million) in annual sales, affecting all major chains.

BARRIERS TO DIGITAL TRADE

Data Localization Requirements

The GDPR restricts the transfer of the personal data of EU “data subjects” (any natural person whose

personal data is being processed) outside of the EU, except to specific countries that the EU has determined

provide adequate data protection under EU law or when other specific requirements are met, such as the

use of standard contractual clauses or binding corporate rules. Restrictions on the flow of data have a

significant effect on the conditions for enabling the functionality embedded in smart devices. Because of

the EU’s assertion of extraterritorial jurisdiction for the GDPR, as well as the GDPR’s broad impact on

many areas of the economy, U.S. companies have expressed concerns that there remains a need for clear

and consistent guidance in the implementation and enforcement of the GDPR.

In July 2016, the Commission deemed the EUU.S. Privacy Shield Framework adequate to enable data

transfers from the EU to the United States. In July 2020, however, the CJEU issued a judgment in the

Schrems II litigation that invalidated the Commission’s adequacy determination.

On March 25, 2022, the United States and EU announced that they have agreed in principle on a new Data

Privacy Framework, which is designed to provide a new mechanism to comply with EU data protection

requirements for the transfer of personal data from the EU. On October 7, 2022, the U.S. President signed

the Executive Order on Enhancing Safeguards for United States Signals Intelligence Activities, which

directs relevant federal agencies to implement the U.S. commitments under the Data Privacy Framework.

The steps taken by federal agencies under the Order provide the Commission with a basis to adopt a new

adequacy determination for the Data Privacy Framework, which will restore an important, accessible, and

affordable data transfer mechanism under EU law. It will also provide greater legal certainty for companies

using standard contractual clauses and binding corporate rules to transfer EU personal data to the United

States.

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Interactive Computer Services

Digital Services Act

The Digital Services Act (DSA) was published in the Official Journal of the European Union on October

19, 2022, and went into effect on November 16, 2022. The DSA provides the Member States and the

Commission with the authority to impose fines not exceeding six percent of the total annual turnover of an

intermediary service provider. The DSA also provides the Commission with the power to adopt “delegated

acts” for portions of the DSA, granting the Commission expansive authority to adopt additional regulation.

The DSA also provides the Commission with new authority to regulate the business practices of certain

large digital services suppliers. The DSA defines a “Very Large Online Platform” (VLOP) as any online

platform with “average monthly active recipients of the service” in the EU equal to or higher than 45 million

(this number will be adjusted by the EU in the future to ensure it corresponds to 10 percent of the EU

population). Platforms were required to report this information to the Commission by February 17, 2023.

The DSA also requires VLOPs to address “systemic risks” present in their services. It defines systemic

risks as the dissemination of illegal content, any negative effects for the exercise of certain fundamental

rights, and intentional manipulation of the service. The VLOP will have to consider how its content

moderation systems, recommendation systems, and systems for displaying advertisements, influence these

risks and enact mitigation measures for any systemic risks. Once a platform is designated as a VLOP by

the Commission, the platform has four months to come into compliance with its obligations under the DSA.

Other platforms that are not designated as VLOPs have until February 17, 2024, to come into compliance

with the DSA.

Digital Markets Act

The Digital Markets Act (DMA) was published in the Official Journal of the European Union on October

12, 2022, and went into effect on November 1, 2022. The DMA will enter into force on May 2, 2023. The

DMA provides the Commission with new authority to regulate the business practices of certain large digital

services suppliers. The DMA authorizes the Commission to impose fines not exceeding 10 percent of the

total annual turnover of a covered intermediary service provider, and provides the Commission with the

power to adopt “delegated acts” for portions of the DMA, thereby granting the Commission expansive

authority to adopt additional regulation.

The DMA applies to “core platform services,” which includes a broad swath of existing digital services,

including online intermediation services, online search engines, online social networking services, video-

sharing platform services, number-independent interpersonal communications services, operating systems,

cloud computing services, and advertising services (including networks, exchanges, and any other

advertising intermediation services). The DMA provides the Commission with authority to add new

services to the list of “core platform services.” While the Commission has broad authority to determine

that any provider of one or more core platforms services is a “gatekeeper,” and is therefore subject to the

DMA’s requirements, the DMA sets out that the Commission should designate as a “gatekeeper” any

provider that: (1) provides a core platform services in at least three Member States and has an annual EEA

turnover of €6.5 billion (approximately $7.7 billion) or more over the previous three years, or an average

market capitalization of at least €65 billion (approximately $78 million); and, (2) has had, for each of the

last three financial years, 45 million monthly active end users established or located in the EU and more

than 10,000 yearly active business users established in the EU. A company that meets the criteria to be

designated a gatekeeper under the DMA has an additional two-month period in which to notify the

Commission that it believes that it is a gatekeeper. Following that notification, the Commission has 45

working days to decide on the company’s gatekeeper designation.

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Once a provider has been designated as a gatekeeper, the provider will have six months to come into

compliance with a number of obligations set out in Articles 5 and 6 of the proposed DMA. The DMA gives

the Commission broad authority to conduct market investigations to determine whether to designate a

provider as a gatekeeper and whether a gatekeeper is in full compliance with obligations under the DMA.

If the Commission determines that a gatekeeper has “systemically infringed” obligations in Articles 5 and

6 of the proposed DMA and has “further strengthened or extended its gatekeeper position,” the Commission

may impose “any behavioral or structural remedies” that are proportionate to the infringement.

Data Act

The Commission proposed the Data Act on February 23, 2022, which applies to the transfer or “sharing”

of business-to-business, business-to-consumer, and business to-government non-personal data that is stored

within industrial applications (e.g., robots, wind farms) and smart devices (e.g., smart TVs, connected cars).

The Data Act would regulate the rights of users (in many cases meaning the generators of such data, like

the users of smart TVs or drivers of connected cars) to access data that these connected machines or devices

generate. The Data Act would also mandate certain sharing of this data with third parties, including

researchers, public sector bodies, and other private companies.

The United States is following with interest the Commission’s proposed Data Act. As of December 31,

2022, the proposed Act was still working its way through the EU legislative process.

Artificial Intelligence Act

On April 21, 2021, the Commission proposed the EU Artificial Intelligence (AI) Act. The proposed

legislation would employ a risk-based approach to regulating AI systems, and applies differentiated

obligations to various actors, in an effort to include the AI systems’ manufacturers, importers, and users.

The AI Act’s various regulatory requirements may impact AI exports from the United States to the EU.

The AI Act could apply to such services as machine learning programs, translations programs, speech to

text conversion, or forecasting and optimization programs. As of December 31, 2022, the legislation was

still working its way through the EU legislative process. Negotiations between the European Parliament,

the Council, and the Commission to finalize the text of the of the AI Act are expected to begin during the

first half of 2023.

Digital Services Taxation

The United States and EU Member States are among the 137 member jurisdictions to have joined the

October 8, 2021, OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting Statement on a

Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy, which

called for all Parties to commit not to introduce DSTs in the future. On October 21, 2021, the United States,

Austria, France, Italy, Spain, and the United Kingdom (UK) issued a joint statement that describes a

political compromise reached among these countries “on a transitional approach to existing Unilateral

Measures while implementing Pillar 1.” According to the joint statement, digital services tax (DST)

liability that accrues to Austria, France, Italy, Spain, and the UK during a transitional period prior to

implementation of Pillar 1 will be creditable in defined circumstances against future corporate income tax

liability due under Pillar 1. In return, the United States terminated the existing Section 301 trade actions

on goods of Austria, France, Italy, Spain, and the UK and committed not to take further trade actions against

these countries with respect to their existing DSTs, provided that the country follows through on the

agreement described in the joint statement, until the earlier of the date the Pillar 1 multilateral convention

comes into force or December 31, 2023. USTR, in coordination with the U.S. Department of the Treasury,

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is monitoring the implementation of the political agreement on the OECD/G20 Two-Pillar Solution as

pertaining to DSTs, the commitments under the joint statement, and associated measures.

Network Usage Fees

The Commission launched consultations on EU telecommunications infrastructure on February 23, 2023.

On May 2, 2022, the European Telecommunications Network Operators Association (ETNO) released a

report urging the Commission to adopt new regulation that would require large Internet-enabled service

suppliers to pay network usage fees to European telecommunications network operators in order to deliver

traffic to their networks. ETNO contends that new legislation is needed to address the “asymmetric

bargaining power favoring big tech.” Further, the Commission could impose a system of arbitration to

determine the network usage fees to be paid to its members by large Internet services firms.

The European Commission Executive Vice President for a Europe fit for Digital Age and Internal Market

Commissioner have both expressed some support for ETNO’s concerns and have indicated that they want

to examine how content providers could help finance telecommunications infrastructure. However, a

number of other stakeholders, including some EU Member States, have raised concerns with the ETNO

proposal. On October 7, 2002, the Body of European Regulators for Electronic Communications (BEREC)

adopted a report that concluded the ETNO proposal was unnecessary and “could be of significant harm to

the Internet ecosystem.”

INVESTMENT BARRIERS

With few exceptions, EU law generally requires that any company established under the law of one Member

State must receive national treatment in all other Member States, regardless of the company’s ultimate

ownership. Laws and regulations pertaining to the initial entry of foreign investors, however, are largely

still the purview of individual Member States. As discussed below, the policies and practices of Member

States can have a significant impact on U.S. investment.

Member State Measures

Bulgaria: The Offshore Company Act lists 28 activities that are prohibited for companies registered in

offshore jurisdictions with more than 10 percent offshore participation, including government procurement,

natural resource exploitation, national park management, banking, and insurance. The law, however, allows

offshore companies to conduct such activities if the physical owners of the parent company are Bulgarian

citizens and known to the public, if the parent company’s stock is publicly traded, or if the parent company

is a media publisher and has declared its physical owners in a prescribed manner. Some U.S. companies

have reported that non-payment of contractual obligations by the Bulgarian government poses a deterrent

to investment in Bulgaria.

Croatia: While Croatia generally affords foreign investors the same treatment as domestic investors,

Croatian law restricts foreign ownership and control in certain sectors deemed strategic, such as inland

waterways transport, maritime transport, rail transport, air to ground handling, freight-forwarding,

publishing, ski instruction, and primary mandated healthcare.

Cyprus: Cypriot law imposes restrictions on the foreign ownership of real property and construction-related

businesses. Non-EU residents may purchase no more than two independent housing units (apartments or

houses) or one housing unit and a small shop or office. Exceptions are available for projects requiring

larger plots of land, but are difficult to obtain and rarely granted. Only EU citizens have the right to register

as construction contractors in Cyprus, and non-EU investors are not allowed to own a majority stake in a

local construction company.

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Non-EU entities are prohibited from investing in the production, transfer, and provision of electrical energy.

Individual non-EU investors may not own more than 5 percent of a local television or radio station, and

total non-EU ownership of a local TV or radio station is restricted to a maximum of 25 percent. The

provision of healthcare services in Cyprus is also subject to certain investment restrictions, applying equally

to all non-residents. Finally, the Central Bank of Cyprus’s prior approval is necessary before any person

or entity, whether Cypriot or foreign, can acquire more than 9.99 percent of a bank incorporated in Cyprus.

Hungary: In 2020, as part of the measures to offset the adverse economic consequences of the COVID-19

pandemic, the Hungarian Parliament passed a new law requiring the reporting of foreign investments to the

government in strategic sectors, including transportation, healthcare, energy, tourism, defense, finance, and

information technology. The Hungarian Government will grant approvals on the basis of the impact of the

notified investment on the public interest, public safety, or public order, among other factors, but this

process is separate from Hungary’s national security-based investment screening mechanism, which was

established in 2018. This legislation was to expire on December 31, 2022, but was extended in December

2021 without an expiration date.

Italy: U.S. companies have complained that unclear processes and lengthy delays have hindered their

ability to apply for and obtain licenses for energy exploration and satellite services. Once licenses have

been obtained, U.S. companies have faced legal and bureaucratic hurdles that have hindered their ability to

get concessions.

Latvia: U.S. investors have reported that the judicial system in Latvia can present significant challenges,

particularly in regard to insolvency proceedings that often take several years to resolve. There also have

been reports of abuse by both insolvency administrators and bad-faith creditors who have used insolvency

proceedings to seize control of assets and companies and to extract unwarranted settlements and fees. U.S.

stakeholders also continue to voice similar concerns about civil cases.

In 2017, Latvia enacted amendments to its Law on Land Privatization in Rural Areas that, among other

things, prohibit foreigners who do not possess a working knowledge of the Latvian language from

purchasing agricultural land. In June 2020, the CJEU found that the law violated European law. Despite

the CJEU decision, Latvia has taken no action to change the law.

Poland: U.S. investors report that the Polish tax system continues to be a problem because of its

complexity, unpredictability, and generally short time periods between the announcement and entry into

force of legislation.

Polish law limits non-EU citizens to 49 percent ownership of companies operating in air transport, radio

and television broadcasting, and airport and seaport operations. In addition, the Polish Government has

expressed a desire to increase the percentage of domestic ownership in some industries such as retail, which

have large holdings by foreign companies, and has employed sectoral taxes and other measures to advance

this aim.

Portugal: While Portugal generally affords foreign investors the same treatment as domestic investors,

Portuguese law restricts foreign ownership of companies engaged in the production, transmission, and

distribution of electricity; the production of gas; the pipeline transportation of fuels; wholesale services of

electricity; retailing services of electricity and non-bottled gas; and, services incidental to electricity and

natural gas distribution. Concessions in the electricity and gas sectors are assigned only to companies with

their headquarters and effective management in Portugal.

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Slovenia: Slovenia maintains certain limits on foreign ownership or control. Aircraft registration is only

possible for aircraft owned by Slovenian or EU nationals or companies controlled by such entities.

Slovenian law also forbids majority ownership by non-EU residents of a Slovenian-flagged maritime vessel

unless the operator is a Slovenian or other EU national.

SUBSIDIES

Various financial transactions and equity arrangements in the EU raise questions about the role of state

funding in supporting or subsidizing private or quasi-private organizations, including in the manufacture of

civil aircraft.

Government Support for Airbus

In October 2019, after 15 years of litigation, the WTO authorized the United States to take $7.5 billion in

trade countermeasures in the dispute against the EU, France, Germany, Spain, and the United Kingdom

regarding their illegal subsidies for the Airbus consortium.

On June 15, 2021, the United States and the EU announced a cooperative framework to address the large

civil aircraft disputes. The cooperative framework suspended each side’s tariffs related to this dispute for

five years. The United States and the EU also agreed to principles for government support in this sector,

including their shared intent that any financing for the production or development of large civil aircraft be

on market terms. The United States and EU further agreed to collaborate on jointly analyzing and

addressing non-market practices of third countries that may harm our large civil aircraft industries.

Over many years, France, Germany, Spain, and, to a much lesser extent, Belgium, have provided subsidies

to Airbus-affiliated national companies to aid in the development, production, and marketing of Airbus’s

large civil aircraft. These governments have financed from 33 percent to 100 percent of the development

costs (launch aid) for all Airbus aircraft models. They have also provided other forms of support, including

equity infusions, debt forgiveness, debt rollovers, marketing assistance, and research and development

funding, and have applied political and economic pressure on purchasing governments. The cooperative

framework affirms the EU’s intent to provide future funding only on market terms.

In addition to these subsidies, the EU maintains aeronautics research programs that are driven significantly

by a policy intended to enhance the international competitiveness of the EU civil aeronautics industry. EU

Member State governments have spent hundreds of millions of euros to create infrastructure for Airbus

programs.

The United States will monitor any government financing of Airbus closely.

OTHER BARRIERS

EU Imports of Hydrofluorocarbons

The EU Fluorinated Greenhouse Gas Regulation (F-Gas Rule) places restrictions on the sale of certain

refrigeration and air conditioning equipment, foams, and propellants that use fluorinated gases, with a view

to reducing their environmental impact. In particular, the F-Gas Rule limits and, over time, progressively

restricts the quantity of hydrofluorocarbons (HFCs) available for use in the EU using a quota system. The

Commission has proposed an updated F-Gas Rule that is expected to go into force in 2025, presenting the

possibility of additional restrictions relative to current 2030 targets. U.S. stakeholders have expressed

concern that insufficient oversight and enforcement of the F-Gas Rule allows for widespread importation

of HFCs that exceed, and otherwise are not accounted for under, the EU’s quota system. These imports

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negatively affect U.S. exporters of environmentally friendly alternative refrigerants and undermine stated

EU F-Gas Rule environmental objectives. Additionally, U.S. stakeholders have expressed concerns that

regulatory uncertainty resulting from differing approaches between the F-Gas Rule and REACH’s

forthcoming definition of Per- and polyfluoroalkyl substances (PFAS), which may include F-gases, could

hinder important innovations that could help Europe reduce global greenhouse gas emissions and its

dependence on Russian energy imports.

The United States and stakeholders are also concerned that HFCs are trafficked without the knowledge of

customs officials, either hidden or falsely declared on customs forms, or they are imported unaccounted for

when already integrated in equipment containing HFCs.

EU Carbon Border Adjustment Mechanism

The Commission in July 2021 presented a proposal for a Carbon Border Adjustment Mechanism (CBAM)

regulation, which intends to protect EU firms that compete against firms in countries with weaker climate

rules and to prevent the displacement of production or investment to such countries (i.e., “carbon leakage”).

The CBAM imposes a fee on embedded emissions of imports beginning in 2026, with the fee linked to the

carbon price in the EU Emissions Trading System (ETS). Sectors initially covered would include cement,

iron, steel, aluminum, fertilizer, electricity, and hydrogen. The United States is tracking the development

of the EU CBAM proposal and has engaged with the Commission over the course of 2021 and 2022 in an

effort to ensure that the CBAM will consider regulatory and other non-price mechanisms for reducing

carbon emissions. Trilogue meetings begun in July 2022 and a provisional political agreement was reached

between the European Council and Parliament in December 2022, which did not take non-pricing

mechanisms into account. The Council and Parliament will have to formally adopt the final text in 2023.

The CBAM will enter into force on October 1, 2023.

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GHANA

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Ghana’s average Most-Favored-Nation (MFN) applied tariff rate was 12.1 percent in 2021 (latest data

available). Ghana’s average MFN applied tariff rate was 15.8 percent for agricultural products and 11.5

percent for non-agricultural products in 2021 (latest data available). Ghana has bound 15.1 percent of its

tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 92.0 percent.

Ghana has bound all agricultural tariffs in the WTO at an average rate of 96.6 percent, more than six times

the average level of its MFN applied rates on agricultural goods. Nearly 99 percent of Ghana’s tariffs on

industrial goods are unbound at the WTO. Ghana has bound some selected agricultural goods, including

milk and cream, eggs, tea, wheat, and oil cake at 15 percent. However, Ghana collects numerous duties

and charges on imports in addition to the customs tariff.

Consistent with the Economic Community of West African States (ECOWAS) common external tariff

(CET), Ghana applies five tariff bands: (1) zero percent duty on essential social goods (e.g., medicine); (2)

5 percent duty on essential commodities, raw materials, and capital goods; (3) 10 percent duty on

intermediate goods; (4) 20 percent duty on consumer goods; and, (5) 35 percent duty on certain goods that

the Ghanaian Government elected to afford greater protection. The CET was slated to be fully harmonized

by 2020, but, in practice, some ECOWAS Member States have maintained deviations from the CET beyond

the January 1, 2020 deadline. Ghana is currently in the process of adopting the Harmonized Schedule 2022

changes to the CET tariff schedule.

Taxes

Imports are subject to a variety of fees and charges in addition to tariffs. Ghana’s standard value-added tax

(VAT) rate of 15 percent is applied to imports. Ghana is not currently imposing its 15 percent VAT on

domestically assembled automobiles, although it is applying it to imports of automobiles. The Ghana

Revenue Authority announced in April 2022 that, effective immediately, it will begin collecting the 15

percent VAT from non-resident companies or persons that conduct business transactions in Ghana via the

electronic transmission of data over communications networks like the Internet. It will also apply a series

of other charges to those transactions, with an effective tax rate of more than 22 percent. Like all ECOWAS

countries, Ghana imposes a one percent ECOWAS levy on all goods originating from non-ECOWAS

countries to finance the activities of the ECOWAS Commission and Community institutions. Ghana also

imposes a 0.2 percent levy on imports from outside African Union (AU) Member States to fund its

contribution to the AU.

Other duties and charges have proliferated in recent years. These taxes and charges can add significant

costs for traders. Further, under the Ghana Export-Import Bank Act, 2017, Ghana imposes a 0.75 percent

levy on all non-petroleum products imported in commercial quantities. Effective through 2024, Ghana

imposes a special levy of two percent on all imports, except for machinery and equipment listed under

Chapters 84 and 85 of the Harmonized Tariff System and some petroleum products and fertilizers.

Ghana imposes taxes on certain imported items such as rice, poultry, printed materials, and electricity––a

15 percent value-added tax, a 2.5 percent Ghana Education Trust Fund levy, a 2.5 percent National Health

Insurance levy, and a 1.0 percent COVID-19 Health Recovery levy––but does not impose these taxes on

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the same categories of domestically-produced goods. All four of these charges are imposed on most other

imported items as well as their domestically-produced equivalents.

In April 2020, Ghana amended its customs law. The Customs (Amendment) Act, 2020 (Act 1014) increases

the import duty on vehicles and parts from between 5 percent and 20 percent to 35 percent on some specified

vehicles such as passenger cars, sport utility vehicles (SUVs), and light commercial vehicles. The increased

import duty was scheduled to take effect in November 2020, but was delayed because of opposition by used

vehicle importers. The local used vehicle importers association reportedly indicated in mid-2022 that the

Government intended to implement the tariff increase by the end of 2022. Ghana reportedly is now

proposing to apply the 35 percent tariff rate to vehicles that are under five years old, retaining the current

lower tariffs on older vehicles. As of December 31, 2022, the government had yet to submit legislation to

the Parliament with regard to the implementation, and the tariff increases have not gone into force. Ghana

has not notified this tariff change to the WTO.

Non-Tariff Barriers

Import Restrictions

Ghana requires registration certificates for imports of food, cosmetics, pharmaceuticals, and agricultural

goods. Since 2014, Ghana has banned the importation of tilapia and has limited the issuance of import

permits for corn, poultry, and poultry products, although the government no longer enforces a domestic

purchase requirement as a condition for import.

In 2018, the State Minister of Agriculture halted the issuance and renewal of poultry import permits for

local traders in an effort to improve competitiveness and productivity in the domestic sector. The Ghanaian

Government claims that traders import three to four times Ghana’s annual consumption demand but has not

provided supporting data. In 2019, the Ministry of Agriculture resumed the issuance and renewal of poultry

import permits on an ad hoc basis, but the issuance and renewal application and approval processes lack

transparency, leading to uncertainty for traders.

Under the Customs (Amendment) Act, 2020 (Act 1014), imports of vehicles older than 10 years will be

prohibited. The government was reportedly planning to implement the ban by the end of 2022, but

implementation appears to have been delayed.

Ghana announced a temporary ban on the importation of excavators to regulate their use in illegal mining,

effective May 2019. Import exemptions are granted on an exceptional basis, but the issuance is often

delayed.

Foreign Exchanges Restrictions

On November 17, 2022, the Bank of Ghana announced the temporary withdrawal of foreign exchange

support for the importation of goods classified as “non-critical” or “non-essential.” Affected goods include

rice, poultry, vegetable oils, pasta, and fruit juice as well as ceramic tiles and toothpicks. This restriction

is expected to remain in place until May 2023.

Ghana defends its action as part of efforts to ensure the country’s foreign exchange reserves while

encouraging domestic production and consumption of import substitutes; however, Ghana is far from self-

sufficiency in poultry meat and rice production. This move may have unintended consequences on food

security, especially as Ghanaians grappled with sharp increases in food prices in 2022. U.S. rice exports

decreased from $3.9 million in 2021 to $194 thousand in 2022. U.S. poultry meat exports also decreased

from $92.6 million in 2021 to $60 million in 2022.

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Customs Barriers and Trade Facilitation

Ghanaian customs practices and port infrastructure continue to present major obstacles to trade. Officials

have introduced risk-management approaches; however, the majority of imports are still subject to

inspection on arrival. Anecdotal reports suggest between 60 percent and 80 percent of imports are still

subject to physical inspection or scanning, causing delays. This is well beyond Ghana’s announced goal of

reducing inspections to roughly 10 percent of imports. Importers report erratic application of customs and

other import regulations, lengthy clearance procedures, and corruption. The resulting delays can contribute

to unnecessary demurrage charges and product deterioration, resulting in significant losses for importers of

perishable goods. The short supply of foreign exchange in 2022 is affecting importers’ ability to make

timely payments on imports and clear out their shipments from the ports.

The Customs Division of the Ghana Revenue Authority (GRA) has taken on the inspection and valuation

role once occupied by five licensed destination inspection companies. This has slightly reduced delays,

although the high rate of physical inspections noted above remains an impediment. Ghana has launched

several initiatives since 2017 to support online information and processing of trade transactions, including

the development of a National Single Window. In September 2017, Ghana introduced electronic

(“paperless”) cargo clearance at ports to reduce clearance times. In June 2020, Ghana engaged a single

service provider to replace the three vendors that had previously provided the single window trade

facilitation system. The new Integrated Customs Management Systems (ICUMS) platform processes

documents and payments through a single window that provides an end-to-end trade facilitation and

automated customs operation and management service. The ICUMS fee is 0.75 percent of the Free On

Board (FOB) value of imports. In addition, Ghana applies a one percent customs processing fee on all

duty-free imports.

In September 2020, the GRA announced that using the Cargo Tracking Notes system, an online platform

set up in July 2018 to confirm import authenticity, is no longer a requirement because of the implementation

of ICUMS.

Although Ghana’s Customs Act of 2015 (section 67) indicates that customs valuation should primarily be

based on transaction value or the price actually paid or payable for goods imported into the country, in

practice, the Ghana Revenue Authority reportedly often applies a benchmark to determine customs

valuation for every imported product, or uses the higher of the benchmark or the transaction value. The

Ghana Revenue Authority Customs Technical Services Bureau (CTSB), which was established in 2016,

uses a customs valuation database including data from customs valuation databases of various tax

authorities from other countries, such as India. The GRA CTSB subscribes to these data on an annual basis.

Data from these entities, together with GRA’s own data, are then used to determine the benchmark values.

While there is a concern about under invoicing goods and under collecting duties, a system of risk

management to assess transaction value trends of imported goods can identify real under invoicing, without

imposing potential inaccurate benchmarking on all goods.

Imported vehicles in Ghana are subject to a customs examination fee of one percent. Section 60 of the

Customs Act of 2015 indicates that valuation for purposes of the tariff and other duties and charges should

be based on the first purchase price, then discounted by fixed amount by age. In practice, to establish the

customs value of imported vehicles, the GRA Customs Division uses a system of online vehicle

identification number information and age-based value benchmarking for each vehicle. This system tends

to overvalue used vehicles, in particular. Imported used vehicles more than 10 years old incur an additional

charge ranging from 12.5 percent to 20.0 percent of the cost, insurance, and freight (CIF) value.

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Ghana ratified the WTO Trade Facilitation Agreement (TFA) in January 2017. Ghana has not yet submitted

notifications related to: import, export, and transit regulations. This notification was due to the WTO on

July 22, 2022, according to Ghana’s self-designated TFA implementation schedule.

Ghana has not yet notified its customs valuation legislation to the WTO and has not yet responded to the

Checklist of Issues that describes how the Customs Valuation Agreement is being implemented.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

The Ghana Standards Authority (GSA) develops Ghanaian national standards and adopts international

standards for most products. The GSA has over 3,356 national standards on, inter alia, building materials,

food and agricultural products, household products, electrical goods, and pharmaceuticals. Ghana has

adopted 29 ECOWAS standards. The Ghanaian Food and Drugs Authority (FDA) is responsible for

enforcing standards for food, drugs, cosmetics, and health items.

Ghana classifies some imports as “high risk goods” (HRG) that must be inspected to ensure they meet

Ghanaian or international standards. Since January 2019, the GSA ceded its responsibility of verifying a

certificate of analysis or a certificate of conformance at Ghanaian ports to Bureau Veritas and Intertek.

Under a new process called the EasyPASS Program, either Bureau Veritas or Intertek, after satisfactory

verification, issues an EasyPASS Certificate (certificate of conformity), which is used to facilitate customs

clearance. While exporters pay fees ranging from 0.35 percent to 0.50 percent of FOB to Bureau Veritas

or Intertek, importers in Ghana are required to register with the GSA and pay an annual registration fee,

ranging from $20 to $4,000, depending on the type of products they import. Upon arrival of goods at a port

in Ghana, the GSA checks the validity of the EasyPASS Certificate before releasing a consignment for

clearance.

The GSA classifies these HRGs into 11 broad groups (reduced from 20 in 2019 after ceding the inspection

of food, cosmetics, pharmaceutical and household chemical products to the Ghanaian FDA), such as toys,

sports equipment, electrical appliances, and chemical products. Stakeholders have found this classification

system vague and confusing. According to GSA officials, they classify these imports as high risk because

they pose “potential hazards,” although that phrase remains undefined in law or regulation.

The GSA requires that all food products carry expiration and shelf-life dates. Expiration dates must extend

at least to half the projected shelf life at the time the product reaches Ghana. Goods that do not have half

of their shelf life remaining are seized at the port of entry and destroyed. The United States has questioned

the requirement’s legitimate objective given its inconsistency with the Codex Alimentarius Commission

General Standard for Labeling of Pre-packaged Foods.

In August 2019, Ghana unveiled an Automotive Development Policy aimed at creating a domestic

automotive industry as part of Ghana’s industrialization plans. It is targeted at attracting automotive

assembly manufacturers to invest in Ghana through tax incentives and other facilitation measures such as

import incentives. The automotive policy could have a significant impact on U.S. exports. In 2022, the

United States exported $186 million in new and used automobiles and vehicle parts to Ghana, representing

19.1 percent of U.S. total exports to Ghana.

In December 2019, Ghana also established new compulsory vehicle safety and emissions standards for both

imported and locally produced vehicles. Ghana’s standards were modeled broadly on the United Nations

Regulations developed by the World Forum for Harmonization of Vehicle Regulations (1958 Agreement).

The GSA noted in the issued standards that it would accept and publish other applicable standards not listed

FOREIGN TRADE BARRIERS | 183

as an amendment or revision after the establishment of their equivalence to the Ghana standards. Following

U.S. advocacy with Ghana, the Ministry of Trade and Industry and the GSA incorporated amendments to

include U.S. Federal Motor Vehicle Safety Standards self-certification and documentation from the U.S.

Environmental Protection Agency. Effective January 2021, all vehicle importers are required to register

with the GSA and present a motor vehicle emissions report, a road worthiness test report from an agency

approved by the GSA, and a certificate of conformity. In the spring of 2022, Ghana notified to the WTO a

new set of standards, a required vehicle safety inspection upon arrival, and other requirements specifically

for used vehicles. As of December 31, 2022, Ghana had not published a list of the accredited bodies and

vehicle dealerships for certification to these new requirements. Implementation of these standards has

reportedly been delayed to mid-2023.

Sanitary and Phytosanitary Barriers

Ghana prohibits the importation of meat with a fat content by weight greater than 25 percent for beef, 25

percent for pork, 15 percent for poultry, and 30 percent for mutton. Imported turkeys must have their oil

glands removed. The United States continues to engage with Ghana on these import requirements, and to

urge Ghana to follow science and risk-based approaches to these products.

GOVERNMENT PROCUREMENT

U.S. suppliers of goods and services face difficulties accessing the Ghanaian procurement market. Some

large public procurements are conducted with open tendering and allow the participation of foreign firms.

However, despite recent government statements about reductions in single source procurements, single

source procurements remain common. Guidelines that apply to current tenders open to international

competitive bidding give a margin of preference of 7.5 percent to 20.0 percent to domestic suppliers of

goods and services. In July 2020, the Ghanaian Government issued a directive to public institutions for

preferential procurement of locally assembled vehicles. Notwithstanding the public procurement law,

companies report that locally-funded contracts lack full transparency. Supplier or foreign government-

subsidized financing arrangements appear in some cases to be a crucial factor in the award of government

procurements. Allegations of corruption persist in the tender processes across ministries. The Ghanaian

President fired the Chief Executive Officer (CEO) of Ghana’s Public Procurement Authority in October

2020, following a 14-month investigation by the Commission for Human Rights and Administrative Justice

into the CEO’s conflicts of interest.

Ghana is neither a Party to the WTO Agreement on Government Procurement nor an observer to the WTO

Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Ghana has taken steps to update its intellectual property (IP) laws, including in the area of plant variety

protection, and government officials periodically inspect import shipments and conduct raids on physical

markets for counterfeit and pirated goods. However, concerns remain that IP enforcement activity is weak,

and unreasonable delays in infringement proceedings discourage right holders from filing new claims in

local courts.

SERVICES BARRIERS

Financial Services

The National Insurance Commission (NIC) imposes nationality requirements with respect to the board and

senior management of locally incorporated insurance and reinsurance companies. At least two board

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members must be Ghanaians and either the Chairman of the board of directors or the Chief Executive

Officer (CEO) must be Ghanaian. If the CEO is not Ghanaian, the NIC requires that the Chief Financial

Officer be Ghanaian. The NIC only permits the cross-border supply of reinsurance services after local

options are exhausted.

The Payment Systems and Services Act, 2019 (Act 987) includes several requirements for payment service

companies, including that each company: (1) must have “at least 30 percent equity participation of a

Ghanaian company or person”; (2) must maintain an undefined and nontransparent amount of minimum

capital within Ghana, leaving potential investors subject to uncertain terms; and, (3) must maintain a board

of directors (five-person minimum) with at least three members residing in Ghana.

INVESTMENT BARRIERS

Ghana’s investment code excludes foreign investors from participating in eight economic sectors: petty

trading; operation of taxi and automobile rental services with fleets of fewer than 25 vehicles; lotteries;

operation of beauty salons and barber shops; printing of recharge scratch cards for subscribers to

telecommunications services; production of exercise books and stationery; retail of finished pharmaceutical

products; and, production, supply, and retail of drinking water in sealed pouches. Sectors where foreign

investors are allowed limited market access include telecommunications, banking, fishing, mining,

petroleum, and real estate.

Foreign investors have expressed concerns regarding respect for contract sanctity in Ghana, including

threats to abrogate contracts, unilateral changes to contract terms, and forced contract renegotiations with

the government and its state-owned enterprises. The concerns have undermined confidence in Ghana’s

investment climate.

Mining

Ghana restricts the issuance of mining licenses based on the size of the mining operation. Pursuant to the

Minerals and Mining Act, 2006 (Act 703), foreign investors are restricted from obtaining a small-scale

mining license for mining operations of an area less than or equal to 25 acres (10 hectares). Non-Ghanaians

may apply for a mineral right for industrial minerals only for projects involving an investment of at least

$10 million.

The Minerals and Mining Act mandates compulsory local participation, whereby the government acquires

a 10 percent equity stake in ventures at no cost. In order to qualify for a license, a non-Ghanaian company

must be registered in Ghana, either as a branch office or a subsidiary incorporated under the Companies

Act, 2019 (Act 992) or the Private Partnership Act, 2020 (Act 1039).

Oil and Gas

The oil and gas sector is subject to a variety of state ownership and local content requirements. The 2016

Petroleum (Exploration and Production) Act mandates local participation. All entities seeking petroleum

exploration and development licenses in Ghana must create a consortium in which the state-owned Ghana

National Petroleum Corporation holds a minimum 15 percent participating carried interest, and a local

Ghanaian firm or individual holds a minimum 5 percent interest. The interest of the local Ghanaian firm is

not transferable to the non-indigenous Ghanaian company. The Petroleum Commission issues all licenses,

but Parliament must approve all exploration licenses. Further, local content regulations specify in-country

sourcing requirements with respect to goods, services, hiring, and training associated with petroleum

operations––standards that many international companies describe as unattainable. These regulations also

require mandatory local equity participation for all suppliers and contractors. The Minister of Energy must

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approve all contracts, subcontracts, and purchase orders above $100,000, and notably has the authority to

alter the requirements set by law for any specific contract. The criteria for the Minister’s approval of local

equity partners in commercial transactions remain unclear, which raises concerns of potential corruption

and favoritism in the selection of local equity partners in government-approved concessions or contracts.

Non-compliance with these regulations may result in a criminal penalty, including imprisonment for up to

five years.

The Petroleum Commission applies registration fees and annual renewal fees on foreign oil and gas service

providers, which, depending on a company’s annual revenue, range from $70,000 to $150,000, compared

to fees of from $5,000 to $30,000 for local companies.

Local Content and Participation Requirements

Power Sector

In 2017, Ghana introduced regulations requiring local content and local participation in the power sector.

The Energy Commission (Local Content and Local Participation) (Electricity Supply Industry) Regulations,

2017 (L.I. 2354) specify minimum initial levels of local participation and ownership and 10-year targets.

The regulations also specify minimum and target levels of local content in engineering and procurement,

construction works, post construction works, services, management, operations, and staff. All persons

engaged in or planning to engage in the supply of electricity are required to register with the Electricity

Supply Local Content and Local Participation Committee and satisfy the minimum local content and

participation requirements within five years. Failure to comply with the requirements could result in a fine

or imprisonment.

Mining Sector

There are specific provisions in Ghana’s mining regulations that require mining entities to procure goods

and services from local sources. The Minerals Commission publishes a Local Procurement List, which

identifies items that must be sourced from Ghanaian-owned companies whose directors must all be

Ghanaians. Under the Classification of New Services Under the Minerals and Mining (Support Services)

Regulations, 2012 (L.I. 2174), only Ghanaian companies can provide Class B mining support services

which include catering, camp management, and security services. All mine support services, providers,

license holders, and dealers are expected to comply with this mandate. Non-Ghanaians are not permitted

to enter into new contracts for the provision of such services with other mineral rights holders. Provision

of even basic, occasional services by a foreign entity requires registration and establishment as a domestic

company within Ghana.

Legislative Instrument 2431 (2020) on Minerals and Mining (Local Content and Local Participation)

requires license holders to create a localization program for recruitment and training of Ghanaians and

imposes quota limits on expatriate hires. It also establishes target levels and requirements for the

procurement of local goods such as explosives, electrical cables, cement, and services that support the

mining industry (including R&D, technical and engineering services, insurance, accounting, legal, and

financial services as well as security, transport, fuel provision, etc.). License holders can only subcontract

to surface drilling operators with full ownership and management by Ghanaians and subcontract to

underground drilling operators with at least 30 percent ownership and management by Ghanaians. Finally,

license holders can be required to list at least 20 percent of their equity on the Ghana Stock Exchange.

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OTHER BARRIERS

Export Ban

Since 2013, Ghana’s Ferrous Scrap Metals (Prohibition of Export) Regulations have banned the exportation

of ferrous scrap metals.

In 2021, the government placed a temporary ban on the export of rice, corn and soybean that was expected

to expire on September 30, 2022; however, as of December 31, 2022, no announcement had been made.

Reliable information indicates that, though an extension to the temporary ban will not be announced by the

government because of improved supply of the commodities in the current harvesting season, export

permits will still be used to restrict the volume of exports.

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GUATEMALA

TRADE AGREEMENTS

Dominican Republic–Central America–United States Free Trade Agreement

The Dominican Republic–Central America–United States Free Trade Agreement (CAFTA–DR) entered

into force for the United States, El Salvador, Guatemala, Honduras, and Nicaragua in 2006; for the

Dominican Republic in 2007; and for Costa Rica in 2009. The United States and the other CAFTA–DR

countries meet regularly to review the implementation and functioning of the Agreement and to address

outstanding issues.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

As a member of the Central American Common Market, Guatemala applies a harmonized external tariff on

most items at a maximum of 15 percent, with some exceptions. However, under the CAFTA–DR, as of

January 1, 2015, U.S. originating consumer and industrial goods enter Guatemala duty free.

In addition, nearly all U.S. agricultural exports enter Guatemala duty free under the CAFTA–DR.

Guatemala eliminated its remaining tariffs on rice on January 1, 2023 and is scheduled to eliminate tariffs

on dairy products by 2025. In 2017, Guatemala eliminated its out-of-quota tariff for fresh, frozen, and

chilled chicken leg quarters five years early. For certain agricultural products, tariff-rate quotas (TRQs)

permit duty-free access for specified quantities during the tariff phase-out period, with the duty-free

quantities expanding during that period. Guatemala will liberalize trade in white corn through continual

expansion of a TRQ, rather than the reduction of the out-of-quota tariff. Guatemala is required under the

CAFTA–DR to make TRQs available on January 1 of each year. Guatemala monitors its TRQs through an

import licensing system, which the United States carefully tracks to ensure the timely issuance of these

permits.

Taxes

Guatemalan tax law requires that some companies that purchase goods and services from other companies

withhold 15 percent of the value-added tax (VAT) paid, and seek refunds for the VAT credit that they

cannot offset after two years. This process is onerous, and timely refunds are not guaranteed.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

U.S. companies have raised concerns that Guatemala’s Tax Authority (SAT) uses an inaccurate reference

price database to determine the value of imported goods, erroneously applies database values as minimums

rather than as a reference, and compares imports to dissimilar products in the database. Further, when SAT

performs investigations of declared values, the review process often results in the detention of the imported

product for 20 or more days. Appeals involve a lengthy, opaque process that has lasted up to four years.

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In 2022, the U.S. Government engaged with the Guatemalan Government to help introduce an automated

system to provide more transparency and help clear shipments more quickly on bond.

Guatemala ratified the WTO Trade Facilitation Agreement (TFA) on March 8, 2017. Guatemala is overdue

submitting one transparency notification related to providing contact information regarding enquiry points.

This notification was due to the World Trade Organization on February 1, 2020, according to Guatemala’s

self-designated TFA implementation schedule.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Guatemala requires product registration for food products (e.g., dairy products) from every importer, as

well as for animal feed and pet food. Importers are required to submit necessary documents to the Ministry

of Public Health and Social Assistance (MSPAS) and receive approval before products are sold into the

market, even if another importer has already registered that product. Industry has raised concerns that the

process is burdensome and can delay the importation process by months. In addition, processed meat

products require import permits from both MSPAS and the Ministry of Agriculture, Livestock, and Feed

(MAGA).

Sanitary and Phytosanitary Barriers

In response to a U.S. Government request for more transparent quarantine protocols at ports, in 2021

MAGA published Ministerial Decree 57-2021, which establishes official quarantine protocols for plant and

animal health. In addition, in response to industry complaints that quarantine inspections break the cold

chain, the Intraregional Organization for Plant and Animal Health (OIRSA), to which MAGA delegates

quarantine inspection and fumigation services, now conducts inspections within refrigerated spaces at

Quetzal Port. OIRSA also authorized construction of a cold room within Santo Tomas Port, which is

expected to become operational in 2023. OIRSA’s continued inspection of all imported fresh produce

causes delays and the U.S. Department of Agriculture has asked MAGA to establish a risk-based inspection

system.

GOVERNMENT PROCUREMENT

Government institutions are required to use the online government procurement system,

GUATECOMPRAS, to track Government of Guatemala procurement processes since March 2004. While

GUATECOMPRAS initially improved the efficiency and transparency of government tendering processes,

U.S. and Guatemalan company representatives have expressed reluctance to bid on Guatemalan public

procurement tenders (goods, services, or infrastructure) published on GUATECOMPRAS because they

view Guatemala’s public procurement processes as designed to favor select, local companies with ties to

government officials, municipal authorities, or congressional players. The Guatemalan congress is

currently considering a new government procurement law that would create 24 different procurement

modalities, of which only five modalities would appear to be competitive. The proposed reforms would

also change GUATECOMPRAS to a system that could be used only as a record of historic information on

government procurement. Experts have warned that the proposed reforms would weaken the use of

GUATECOMPRAS as a transparency tool because each institution could arbitrarily decide what

information to publish in the system for the non-competitive procurement modalities. The United States

has engaged with Guatemala on these issues.

Foreign suppliers must appoint a national representative to represent the interest of the company in

Guatemala.

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Guatemala is neither a Party to the WTO Agreement on Government Procurement nor an observer to the

WTO Committee on Government Procurement. However, the CAFTA–DR contains disciplines on

government procurement.

INTELLECTUAL PROPERTY PROTECTION

Guatemala remained on the Watch List in the 2022 Special 301 Report. Although the country generally

has a strong legal framework, and intellectual property (IP) protection appears to have improved slightly in

2022, concerns remain. IP enforcement activities remain limited and appear inadequate in relation to the

scope of the problem due to resource constraints and poor coordination among law enforcement agencies.

The production of counterfeit apparel with little interference or deterrence from law enforcement continues

to be a significant concern. Other concerns include the sale of counterfeit pharmaceuticals and government

use of unlicensed software. Major cable television providers and content distributors agreed in 2018 to not

renew contracts to rebroadcast U.S. network signals due to signal piracy of U.S. broadcasted networks.

However, cable signal piracy remains a problem and online piracy through Internet Protocol Television

services is also a concern. The United States continues to urge Guatemala to ensure that its IP enforcement

agencies receive sufficient resources and to strengthen enforcement, including with respect to criminal

prosecution, administrative and border actions, and intergovernmental coordination to address widespread

engage Guatemala on these and other concerns, including through the Special 301 process, and will

continue to monitor Guatemala’s implementation of its IP obligations under the CAFTA–DR.

SERVICES BARRIERS

Professional Services

Foreign enterprises may provide licensed professional services in Guatemala only through a contract or

other relationship with an enterprise established in Guatemala. Additionally, public notaries must be

Guatemalan nationals.

INVESTMENT BARRIERS

A number of U.S. companies operating in Guatemala complain that complex and unclear laws and

regulations and inconsistent judicial decisions effectively operate as barriers to investment. Resolution of

business and investment disputes through Guatemala’s judicial system is extremely time consuming, and

civil cases can take many years to resolve. In Guatemala, government executive and judicial branch

representatives have taken arbitrary actions and well-connected parties have used judicial authorities

against U.S. investors. For example, a U.S. investor reports it was subject to repeated intimidation and

harassment by law enforcement. In another case, a U.S. company undergoing seven years of criminalized

tax litigation has withheld $200 million in planned investments to expand its presence in Guatemala as a

result, citing the lack of transparency and consistency in the legal system.

SUBSIDIES

Export Subsidies

The Law for the Promotion and Development of Export Activities and Drawback, as amended in 2016 to

replace an earlier tax incentive program, provides tax exemptions with a narrower scope, applying only to

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apparel and textile companies, as well as to information and communication technology service providers,

such as call centers and business process outsourcing operations.

LABOR

The U.S. labor enforcement case brought against Guatemala under Article 16.2.1(a) of the CAFTADR was

formally concluded in 2017 with the issuance of the panel’s final report. Nevertheless, labor concerns––

including with respect to the right of association, the right to organize and bargain collectively, and

acceptable conditions of work––persist in the port, agriculture, apparel, and agricultural processing sectors.

OTHER BARRIERS

Bribery and Corruption

The CAFTA–DR contains public sector anti-bribery commitments and anticorruption measures in

government contracting, designed to ensure that U.S. firms are guaranteed a fair and transparent process to

sell goods and services to a wide range of government entities.

U.S. stakeholders have expressed concerns that corruption in Guatemala constrains successful investment.

The Ministry of Governance in Guatemala, which is responsible for security at ports, airports, and land

borders in Guatemala operates through three police task force units known as DIPAFRONT (Ports,

Airports, and Land Border Division), SGAIA (Anti-narcotics Analysis General Sub direction), and UCC

(Container Control Unit). These units started operations in the middle of the pandemic, independently from

the other operating authorities at ports, such as the MAGA and Guatemala’s Customs authority, which have

memoranda of understanding to carry out joint inspection. In response to a U.S. Coast Guard requirement,

100 percent of Guatemalan exports to the United States need to pass inspection by at least one of the three

units. The Government of Guatemala is also subjecting imports to inspections by these authorities, and

importers complain that inspectors are afforded unchecked discretion about which shipments to inspect and

that inspections are not integrated into existing inspection processes, resulting in additional delays at already

busy ports. As DIPAFRONT, SGAIA, and UCC have their own independent inspection ramps, importers

report corruption at multiple steps to avoid shipments being sent through the secondary ramp.

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HONDURAS

TRADE AGREEMENTS

Dominican Republic–Central America–United States Free Trade Agreement

The Dominican Republic–Central America–United States Free Trade Agreement (CAFTA–DR) entered

into force for the United States, El Salvador, Guatemala, Honduras, and Nicaragua in 2006; for the

Dominican Republic in 2007; and for Costa Rica in 2009. The United States and the other CAFTA–DR

countries meet regularly to review the implementation and functioning of the Agreement and to address

outstanding issues.

IMPORT POLICIES

Tariffs

As a member of the Central American Common Market, Honduras applies a harmonized external tariff on

most items at a maximum of 15 percent, with some exceptions. However, under the CAFTA–DR, as of

January 1, 2015, U.S. consumer and industrial goods enter Honduras duty free.

In addition, nearly all U.S. agricultural exports enter Honduras duty free under the CAFTADR. Honduras

eliminated its remaining tariffs on rice and chicken leg quarters on January 1, 2023, and is scheduled to

eliminate its remaining tariffs on dairy products by 2025. For certain agricultural products, tariff-rate quotas

(TRQs) permit duty-free access for specified quantities during the tariff phase-out period, with the duty-

free quantities expanding during that period. Honduras will liberalize trade in white corn through continual

expansion of a TRQ, rather than by the reduction of the out-of-quota tariff. Honduras is required under the

CAFTA–DR to make TRQs available on January 1 of each year. Honduras monitors its TRQs through an

import licensing system, which the United States carefully tracks to ensure the timely issuance of these

permits.

Non-Tariff Barriers

Discriminatory Tax

Honduran Customs imposes a 15 percent sales tax on pork rib imports when the product description is in

English. However, if the product description is in Spanish, based on Decree 05-2014, the pork ribs are

considered basic necessities and are exempt from sales tax. The U.S. Government has asked the Ministry

of Finance to revise Decree 05-2014 to treat pork cuts labelled in English the same as those labelled in

Spanish.

Local Content Requirements

In June 2018 and June 2019, pork importers were required to purchase a quantity of Honduran live hogs

from local producers at a price established by the Hog Producers Association. The established price per

pound for live hogs was higher than the price of imported pork meat. Importers forced to purchase

Honduran live hogs also faced costs for slaughtering and processing––costs they did not face in connection

with imported pork meat. The quantity of live hogs that each importer had to purchase was based on the

volume of pork that the importer brought into Honduras.

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In 2020, approximately 80 percent of the hog farms in Honduras were lost due to hurricanes Eta and Iota,

and domestic pork production could not meet domestic demand in 2020 or 2021. In 2022, after agreement

between the Honduran producers and pork importers, the mandatory bilateral purchase agreement between

producers and importers was lifted.

SANITARY AND PHYTOSANITARY BARRIERS

Sanitary Authorization for the Import of Raw Materials and Additives for Food and Beverage

Production

On November 3, 2020, the Sanitary Regulation Agency (ARSA) implemented a new import requirement

called the Sanitary Authorization for the Import of Raw Materials and Additives for Food and Beverage

Production. This import requirement is redundant with the existing import permit mandated by the National

Plant, Animal Health and Food Safety Service (SENASA) for cuts of meat that match ARSA’s definition

of raw materials for food consumption. Honduras notified this regulatory requirement to the World Trade

Organization in April 2019. The U.S. Government continues to engage with ARSA to facilitate trade.

INTELLECTUAL PROPERTY PROTECTION

The United States continues to have significant concerns regarding intellectual property (IP) protection and

enforcement in Honduras, including with respect to online and software piracy, cable signal piracy, and the

distribution and sale of counterfeit and pirated goods. The United States will continue to urge Honduras to

fully enforce its IP laws. Additionally, the United States continues to urge Honduras to provide greater

clarity regarding the scope of protection for geographical indications (GIs), particularly ensuring that all

producers are able to use common food names, including any that are elements of a compound GI. The

United States continues to monitor Honduras’s implementation of its IP obligations under the CAFTA–DR.

SERVICES BARRIERS

Distribution Services

U.S. firms have reported challenges working with local distributors of products from the United States.

Citing the 1977 Honduran Law on Agents, Distributors and Representatives of Domestic and Foreign

Companies (Decree Law No. 549), Honduras has required foreign firms to enter into agreements with local

distributors to supply local markets, and allowed distributors to register as the sole distributor of certain

products or brands, which has at times resulted in U.S. exports being barred from import. The application

of certain requirements under Decree Law No. 549 that restricted the ability of U.S. producers to distribute

U.S. products in Honduras had been eliminated with the entry into force of the CAFTADR. However, U.S.

firms raised concerns during 2022, under the CAFTADR, with certain restrictions being applied to U.S.

exports.

INVESTMENT BARRIERS

Honduran law places certain restrictions on foreign ownership of land within 40 kilometers of the country’s

coastlines and national boundaries. However, the law allows foreigners to purchase properties, with some

acreage restrictions, in designated zones established by the Ministry of Tourism in order to construct

permanent or vacation homes. Inadequate land title procedures have led to investment disputes, including

complaints of fraud and official malfeasance, harming U.S. nationals who are landowners in Honduras.

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SUBSIDIES

Honduras currently provides tax exemptions to firms in free trade zones, and employs the following export

incentive programs: Free Trade Zone of Puerto Cortes, Export Processing Zones, and Temporary Import

Regime, providing a competitive advantage to qualifying companies.

LABOR

The United States and Honduras continue to meet through their contact points, under Article 16.4.3 of the

CAFTA–DR. This engagement includes reviewing Honduras’ progress toward implementing specific

recommendations from the United States that resulted from a U.S. Department of Labor (DOL) report and

the United States–Honduras Labor Rights Monitoring and Action Plan. The DOL’s report, published in

2015 in response to a submission from the public under the CAFTA–DR, raised significant concerns

regarding labor law enforcement in Honduras, especially with respect to the right to freedom of association,

the right to organize and bargain collectively, the minimum age for work and the worst forms of child labor,

and acceptable conditions of work in various economic sectors, including apparel, automotive parts, and

agriculture.

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HONG KONG

Hong Kong, China (Hong Kong) is a separate customs territory from mainland China, and the Hong Kong

Basic Law states that Hong Kong can enter into international agreements in commercial, economic, and

certain other matters. Hong Kong is a separate and founding Member of both the World Trade Organization

and the Asia-Pacific Economic Cooperation forum.

On June 30, 2020, the Chinese Government in Beijing imposed a National Security Law (NSL) on Hong

Kong. Among other provisions, Article 31 of the NSL stipulates that an incorporated or unincorporated

body, which may include domestic corporations, international businesses, international non-governmental

organizations, and media outlets, can be prosecuted for violating the NSL.

On July 14, 2020, following imposition of the NSL, as well as other actions taken by Beijing to undermine

Hong Kong’s autonomy, the U.S. President issued Executive Order 13936, reflecting a presidential

determination that Hong Kong is no longer sufficiently autonomous to justify differential treatment in

relation to China under the particular laws set out in the Executive Order, and that the situation with respect

to Hong Kong constitutes an unusual and extraordinary threat to the national security, foreign policy, and

economy of the United States. Accordingly, Executive Order 13936 directed U.S. Government agencies to

suspend or eliminate certain policy exemptions under U.S. law that had given Hong Kong differential

treatment in relation to China.

INTELLECTUAL PROPERTY PROTECTION

Hong Kong generally provides strong intellectual property (IP) protection and enforcement, and for the most

part, has strong IP laws in place. In June 2020, Hong Kong passed a Trade Marks Ordinance that will enable

application of the Protocol Relating to the Madrid Agreement Concerning the International Registration of

Marks in Hong Kong. Implementation of an international trademark registration system is expected in

2023, at the earliest. Hong Kong also has a dedicated and effective enforcement capacity, a judicial system

that supports enforcement efforts with deterrent fines and criminal sentences, and youth education programs

that discourage IP-infringing activities.

Hong Kong’s failure to modernize its copyright system has allowed it to become vulnerable to digital

ramifications for businesses and innovators. In 2011 and 2014, Hong Kong’s Commerce and Economic

Development Bureau (CEDB), the government entity in charge of IP policy, tried but failed to pass updated

public consultation period. Subsequently, Hong Kong published the draft bill in the government gazette in

May 2022 and adopted the final Copyright (Amendment) Ordinance 2022 through publication in the gazette

in December 2022, to come into operation on May 1, 2023. However, right holders are concerned that the

new legislation does not introduce specific provisions to combat illicit streaming devices.

The Customs and Excise Department of Hong Kong investigates IP crimes and routinely seizes IP-infringing

products arriving from mainland China and elsewhere. However, U.S. Government officials and private

sector stakeholders report that counterfeit pharmaceuticals, luxury goods, and other infringing products

continue to enter Hong Kong. These products are typically destined for both the Hong Kong market and

markets outside of Hong Kong.

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INDIA

TRADE AGREEMENTS

The United States–India Trade Policy Forum

The United States and India launched the Trade Policy Forum (TPF) in July 2005 and signed an agreement

in March 2010 that formally established the TPF as the primary mechanism for discussions of trade and

investment issues between the United States and India. The U.S. Trade Representative and the Indian

Minister of Commerce and Industry met in Washington, DC for the thirteenth TPF Ministerial in January

2023.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

India’s average Most-Favored-Nation (MFN) applied tariff rate was 18.3 percent in 2021 (latest data

available), which was the highest of any major world economy, with an average applied tariff rate of 14.9

percent for non-agricultural goods and 39.2 percent for agricultural goods.

India maintains high applied tariffs on a wide range of goods, including vegetable oils (as high as 45

percent); apples, corn, and motorcycles (50 percent); automobiles and flowers (60 percent); natural rubber

(70 percent); coffee, raisins, and walnuts (100 percent); and, alcoholic beverages (150 percent). In addition,

India maintains very high basic customs duties, in some cases exceeding 20 percent, on drug formulations,

including life-saving drugs and finished medicines listed on the World Health Organization’s list of

essential medicines. High tariff rates also present a significant barrier to trade in other agricultural goods

and processed foods (e.g., poultry, potatoes, citrus, almonds, pecans, apples, grapes, canned peaches,

chocolate, cookies, frozen french fries, and other prepared foods used in fast-food restaurants).

India’s bound tariff rates on agricultural products are among the highest in the world, averaging 113.1

percent and ranging as high as 300.0 percent. Given the large disparity between World Trade Organization

(WTO) bound and applied rates, India has considerable flexibility to change tariff rates at any time, creating

tremendous uncertainty for U.S. exporters. The Government of India took advantage of this tariff flexibility

in the 2019/2020 budget by increasing tariffs without any notice or public consultation process on

approximately 70 product categories, including those covering key U.S. exports in the agricultural,

information and communication technology, medical devices, paper products, chemicals, and automotive

parts sectors. In its 2020/2021 budget, India further raised tariffs for 31 product categories, including

cotton, palm oil, and denatured ethanol for select end-use, and raised duties on solar inverters and solar

lanterns. In its 2021/2022 budget, India further raised tariff rates on imported headphones, loudspeakers,

and smart meters used by power distribution companies.

In June 2019, following the U.S. withdrawal of India’s preferential tariff benefits under the Generalized

System of Preferences (GSP) program, India implemented retaliatory tariffs ranging from 1.7 percent to 20

percent on 28 different products imported from the United States, including almonds, apples, walnuts,

chickpeas, lentils, phosphoric acid, boric acid, diagnostic regents, binders for foundry molds, select steel

and aluminum products, and threaded nuts. While the decision to implement these tariffs followed the U.S.

withdrawal of India’s GSP benefits, India had originally announced the intention to adopt the tariffs in June

2018 in retaliation against the U.S. decision to implement tariffs on U.S. imports of steel and aluminum

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products under Section 232 of the Trade Expansion Act of 1962, as amended (19 U.S.C. § 1862). The

United States continues to urge India to address the common problem of excess capacity in the global steel

and aluminum sectors, rather than maintaining the retaliatory tariffs. In July 2019, the United States

launched a WTO dispute settlement proceeding against India challenging the retaliatory tariffs. A WTO

panel was established in October 2019; the panel proceedings are ongoing.

Taxes

Since 2018, India has applied a 10 percent social welfare surcharge on imports, which is assessed on the

value of other duties rather than the customs value of the imported product. Certain products are exempted

from the surcharge pursuant to official customs notifications. India routinely changes the surcharge on a

range of agricultural products. A landing fee of one percent is included in the valuation of all imported

products unless exempted through separate notification.

Non-Tariff Barriers

India maintains various forms of non-tariff barriers on three categories of products: banned or prohibited

items which are denied entry into India (e.g., tallow, fat, and oils of animal origin); restricted items that

require an import license (e.g., certain livestock products and certain chemicals); and, items such as

pharmaceuticals and corn under a tariff-rate quota that are importable only by government trading

monopolies and that are subject to cabinet approval regarding import timing and quantity of imports.

While the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce and Industry

(MOCI) maintains a list of restricted items on its website, India often fails to observe other transparency

requirements, such as publication in the Gazette of India of the timing and quantity of restrictions, and

notification to relevant WTO committees.

Import Restrictions

To manage domestic oversupply, the Indian Government began imposing restrictions on imports of various

pulses in 2017, based on local supply and demand conditions. On February 11, 2022, India issued a

notification to restrict the import of mung beans. With the issuance of MOCI notification no. 63/2015-

2020 on March 29, 2022, imports of pigeon peas and black gram lentils are on India’s unrestricted list until

March 31, 2023, and imports are allowed without any quantitative restrictions.

India applies restrictions on boric acid imports, including arbitrary import quantity approval restrictions

and other requirements that only apply to imports. Long periods of time can pass without the issuance of

any import licenses. In addition, the import application specifies that non-insecticidal boric acid can only

be imported directly by a domestic manufacturer, which prevents independent traders from importing boric

acid for resale purposes. Meanwhile, domestic producers continue to be able to sell boric acid for non-

insecticidal use, subject only to a requirement to maintain records showing they are not selling to end users

who will use the product as an insecticide. India has cited state-level court cases in Kerala and Gujarat

endorsing the legal rationale for applying the restriction on boric acid imports.

Import Licensing

India distinguishes between goods that are new and those that are secondhand, remanufactured, refurbished,

or reconditioned when assessing whether import licenses are required. India allows imports of secondhand

capital goods by end users without an import license provided the goods have a residual life of at least five

years. India requires import licenses for all remanufactured goods because India does not recognize that

remanufactured goods have typically been restored to original working condition and meet the technical

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and safety specifications applied to products made from new materials. Refurbished items must be no more

than seven years old and have a remaining life span of at least five years. In addition, U.S. stakeholders

have reported that obtaining an import license for remanufactured goods is onerous. Stakeholders noted

excessive details are required in the license application, quantity limitations are set for specific parts, and

long delays occur between application submission and the grant of a license. A Chartered Engineer’s

Certificate is also required to import both refurbished goods and used manufactured goods.

Customs Barriers and Trade Facilitation

India’s tariff rates, in addition to being announced with the annual budget, are modified on an ad hoc basis

through notifications in the Gazette of India and are subject to numerous exemptions that vary according to

the product, user, intended use, or specific export promotion program. This renders India’s customs system

complex and open to administrative discretion.

U.S. exporters have raised concerns regarding India’s application of customs valuation criteria to import

transactions. Indian customs officials sometimes reject the declared transaction value of an import,

especially if it is a product for which India maintains benchmark prices, potentially raising the cost of

exports beyond what is expected given India’s applied tariff rates. U.S. walnut exporters have raised

concerns that Indian importers are under-invoicing certain imported products, disadvantaging U.S. trade.

U.S. companies have also faced extensive investigations related to their use of certain valuation

methodologies when importing computer equipment. Companies have reported being subject to excessive

searches and seizures of imports.

India’s customs authority generally requires extensive clearance documentation, which leads to frequent

and lengthy processing delays. India’s complex tariff structure––including the provision of multiple

exemptions that vary according to product, user, or intended use––also creates uncertainty and contributes

to delays in customs approvals.

Medical Device Price Controls

In February 2017, India’s National Pharmaceutical Pricing Authority (NPPA) issued an order to cap prices

of coronary stents. Subsequently, knee implants were brought under price control under paragraph 19 of

the Drugs (Prices Control) Order 2013 (DPCO) in August 2017. In 2019, NPPA moved knee implants to

price monitoring under paragraph 20 of the DPCO, allowing for a 10 percent price increase, but

subsequently reinstated the price ceiling in 2020. U.S. companies have raised concerns noting that price

controls for cardiac stents and knee implants do not differentiate on the basis of the cost of production or

technological innovation, which dissuades U.S. companies from serving the market.

Ethanol Import Restrictions

Despite ambitious targets for blending ethanol with gasoline, India prohibits the importation of ethanol for

fuel use. In addition, in 2018, the DGFT amended Schedule I (Import Policy) of the Indian Trade

Classification (Harmonized System, HS) of Import Items, 2017 through Notification 27/2015-2020, and

restricted biofuel imports (HS 2207.20, HS 2710.20, and HS 3826) for non-fuel use to actual users. As of

May 2019, MOCI Notification 6/2015-2020 requires an import license for importing biofuels (HS 2207.20,

HS 2710.20, and HS 3826). The 2019 regulation also required that Indian importers obtain an import

license from DGFT to import ethanol for non-fuel purposes.

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Agriculture Subsidies

India provides a broad range of assistance to its large agricultural sector, including credit subsidies, debt

waivers, crop insurance, and subsidies for inputs (such as fertilizer, fuel, electricity, and seeds) at both the

central government and state government levels. These subsidies, which are of substantial cost to the

government, lower the cost of production for India’s producers and have the potential to distort the market

in which imported products compete. In addition, producers of 25 agricultural products benefit from the

government’s Minimum Support Price (MSP) program, which helps ensure that farmers receive minimum

prices that are announced before the planting season. Rice and wheat account for the largest share of

products procured by the MSP and are distributed through India’s public distribution system. For example,

in crop year 2020/2021, the Indian Government purchased 1.6 million metric tons (9.19 million 170 kg

bales) of cotton through announced MSP operations at a cost of nearly $3.6 billion. India’s announcement

of MSPs can have the effect of providing a subsidy to the entire crop by distorting market prices and

bolstering planting decisions, resulting in overproduction and limited demand for imports. In addition, in

certain years and for specific products, states have provided additional incentives in the form of “bonuses”

above the MSPs announced by the Government of India.

India also maintains a large and complex series of programs that form the basis of its public food

stockholding program. India maintains stocks of food grains not only for distribution to poor and needy

consumers, but also to stabilize prices through open market sales. In the past, India has used export

subsidies to reduce government-held stocks, and it has permitted exports of certain agricultural

commodities (e.g., wheat) from government public-stockholding reserves at below the government’s costs.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

In addition to discussing technical barriers to trade matters with Indian officials through the TPF, the United

States has discussed such matters at, and on the margins of, meetings of the WTO Committee on Technical

Barriers to Trade (WTO TBT Committee).

Polyethylene – Quality Control Order

In January 2020, India notified the WTO about the Polyethylene Material for Moulding and Extrusion

Quality Control Order (QCO). On April 15, 2021, the Ministry of Chemicals and Fertilizers published an

order establishing an initial implementation date of October 15, 2021. The polyethylene QCO introduced

and mandated labeling requirements based on the Indian Standard IS 7328:2020 for polyethylene material

for molding and extrusion. The QCO requires manufacturers to label the smallest bag or individual unit

package delivered to the customer with a “designation code” identifying a range of information about the

packaged polyethylene product, such as grades, properties, and applications. This type of package labeling

for polyethylene products, if implemented, would be unique to India. In March 2021, the U.S. Government

and U.S. industry raised concerns over the polyethylene QCO at the WTO, highlighting specific concerns

regarding the complexity of the labeling requirements and offered an alternative solution to meet the

requirements. While the date of implementation has been postponed until April 3, 2023, as of December

31, 2022 the Ministry of Chemicals and Fertilizers had not modified the QCO. U.S. industry has expressed

potential difficulties complying with the QCO in its current form.

Food Safety Standards – Alcoholic Beverages

In July 2019, the Food Safety and Standards Authority of India (FSSAI) published its Food Safety Standards

(Alcoholic Beverages) Amendment Regulations, and notified the amendments to the WTO. The

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amendments revised FSSAI’s 2018 mandatory alcoholic beverage standards, which took effect in April

2019. In June 2020, the FSSAI issued a directive to operationalize certain provisions of the standards,

including adding non-alcoholic beer as a separate product category and permitting the use of new colors

and additives in distilled spirits. The FSSAI has not clarified the timeline for enforcement of its amended

regulations. Although the FSSAI addressed several of the issues that the United States raised with India,

some concerns remain, including: (1) the establishment of analytical parameters for a range of naturally-

occurring components in distilled spirits; (2) minimum and maximum requirements for ethyl alcohol; (3)

the lack of explicit protection for Bourbon, American Rye Whiskey, and Tennessee Whiskey as distinctive

products of the United States; and, (4) a lack of clarity on definitions related to brand owners, date markings,

non-retail containers, and multi-unit packs. The United States raised this issue through the TPF and

submitted comments through the WTO TBT Committee.

Foreign Facilities Registration

On October 10, 2022, the FSSAI issued Order F. No. TIC-B02/2/2022-IMPORTS-FSSAI. The order

requires the competent authorities of exporting countries to provide a list of exporters of milk and milk

products; meat and meat products, including poultry and fish; egg powder; infant food; and, nutraceuticals

to India in the mandated FSSAI format. India has not provided a complete list of HS codes for the affected

products. The published FSSAI order appears to include onerous requirements for registration. The

effective implementation date of the published FSSAI order was February 1, 2023. It appears that India

did not take comments into account between WTO notice and the finalization of the measure.

Dairy Products

India imposes onerous requirements on dairy imports. India requires dairy products intended for food be

derived from animals that have never consumed any feeds containing internal organs, blood meal, or tissues

of ruminant origin, and that exporting countries certify to these conditions. India has explained that its

requirement is based on religious and cultural grounds. This requirement, along with the 2022 dairy health

certificate requirements, new facility registration requirements, and high tariff rates continue to hamper

market access for U.S. milk and dairy product exports to India, one of the largest dairy markets in the world.

The United States continues to press the Indian Government, including through the TPF, to provide greater

access to the Indian dairy market.

Mandatory Domestic Testing and Certification Requirements for Equipment

In September 2017, India’s Ministry of Communications, Department of Telecommunications, published

the Indian Telegraph (Amendment) Rules, which require all telegraph equipment to undergo mandatory

testing and certification. Under these rules, in 2019 India implemented the Mandatory Testing and

Certification for Telecom Equipment (MTCTE) procedures, which require local security testing for

telecommunication products. In May 2021, India’s Telecommunication Engineering Center proposed new

implementing procedures for the MTCTE program and then further expanded the scope in September 2021

to require mandatory testing for 175 products. U.S. industry remains concerned with the in-country testing

and certification requirements. The United States, bilaterally through the TPF and multilaterally in the

WTO TBT Committee, has urged India to reconsider its domestic testing and certification requirements; to

accept test results from International Laboratory Accreditation Cooperation accredited labs; and, to adopt

the use of the Common Criteria Recognition Arrangement.

The United States continues to raise concerns that U.S. electronics and information and communication

technology manufacturers have expressed regarding the Ministry of Electronics and Information

Technology’s (MEITY) Compulsory Registration Order (CRO). The policy, which took effect in January

2014, mandates that manufacturers register their products and have them certified by laboratories accredited

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by the Bureau of Indian Standards, even if the products have already been certified by accredited

international laboratories. In October 2021, India increased the coverage of the CRO to 63 product

categories and U.S. industry reports MEITY plans to continue to expand the CRO coverage. U.S. industry

has cited the following as continued issues: lack of government testing capacity; a cumbersome registration

process; canceled registrations due to administrative reasons that are unrelated to safety; and, additional

compliance costs that can exceed tens of millions of dollars, including costs associated with factory-level

and component-level testing.

The United States has recommended that the Indian Government recognize internationally accredited labs,

harmonize labeling requirements with global practices, harmonize the validity period of test reports and

certification, and eliminate retesting requirements. The United States raised this issue bilaterally, including

during technical exchanges through the TPF, and multilaterally in the WTO TBT Committee.

Sanitary and Phytosanitary Barriers

The United States has raised concerns about India’s sanitary and phytosanitary (SPS) related trade

restrictions in bilateral and multilateral fora, including the TPF, the WTO Committee on Sanitary and

Phytosanitary Measures (SPS Committee), and the Codex Alimentarius Commission. The United States

will continue to make use of all available fora with a view to securing the entry of U.S. agricultural products,

including dairy products, alfalfa hay, dried distillers’ grains, fish feed, and pet food, among others, into the

Indian market.

Foods Derived from Biotechnology Crops

Products derived from modern biotechnology must be approved by the Genetic Engineering Appraisal

Committee (GEAC) before importation or domestic cultivation. The Food Safety and Standards Act of

2006 includes specific provisions for regulating food products derived from genetically engineered (GE)

products. India’s biotechnology approval processes are also slow, opaque, and subject to political

influences. The uncertain approval process continues to hamper GE product registrations needed to

facilitate trade in food and feed products.

FSSAI Order on Non-Genetically Modified and Genetically Modified-Free Certificates

In March 2021, the FSSAI implemented an order requiring a non-Genetically Modified (non-GM) origin

and “Genetically Modified free” (GM-free) certificate for 24 listed products. Each consignment of these

products entering India must be accompanied by (1) a non-GM origin and GM-free attestation on the

phytosanitary or health certificate that contains the information specified in FSSAI’s order of August 21,

2020, or (2) a non-GM origin and GM-free certificate issued by a regional (i.e., state level) government

authority of the exporting country. The 24 products include grains, oilseeds, fruits, and vegetable products,

regardless of whether GE varieties of those crops are in commercial production or are being exported to

India. India has not provided any scientific or risk-based justification for the requirement. The United

States and several other countries have pressed India to rescind the requirement in comments submitted to

the WTO TBT and SPS Committees, and continue to engage the Indian Government, including the FSSAI,

on the order.

Health Certificates

On September 26, 2022, the FSSAI issued a clarification notice to its earlier notification F. No. 1829/Health

Certificate/FSSAI/Imports (2021). The notice states that the FSSAI will require a health certificate for the

import of milk and milk products, pork and pork products, and fish and fish products. This certificate must

incorporate all FSSAI-mandated food safety related requirements/attestations necessary for import

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clearance in India. While the original entry into force date was January 1, 2023, it was delayed until further

notice following comments from trading partners, including the United States. The proposed certificate

duplicates a number of attestations already required by the Department of Animal Husbandry, Dairying,

and Fisheries, but also requires new attestations that are not relevant to food safety or based on science.

India has continued to add additional commodities to the list of products that require the new certificate. If

implemented as written, the measure is likely to cause unnecessary duplication, disrupt supply chains,

increase costs for producers, and impede market access for these U.S. commodities.

Distiller’s Dried Grains with Solubles

India’s regulatory requirements on distiller’s dried grains with solubles (DDGS) remain unclear. Since

2015, the GEAC has received at least 11 applications from Indian importers to import U.S. DDGS. Local

feed companies, along with the U.S. Government, continue to advocate that DDGS be exempted from

further regulatory requirements, noting that DDGS are a processed product, and pose no risk to the

environment. In July 2018, the GEAC formed the Sub-Committee on Guidelines for Imports of Animal

Feed to establish procedures for applications related to the imports of animal feeds, including DDGS. The

Sub-Committee submitted recommendations for approval to the GEAC in November 2019. As of February

2023, the GEAC has not officially confirmed that it will not regulate DDGS as living modified organisms.

In addition, unclear jurisdiction for the approval process for animal feed continues to complicate the

process. For example, in December 2019, the FSSAI published Direction 1-95, announcing new

requirements for commercial animal feeds and feed materials that are manufactured, imported, or

distributed in India. Prior to the publication of Direction 1-95, however, the FSSAI had not regulated the

manufacture, import, or distribution of either commercial animal feeds or feed ingredients in India.

Alfalfa Hay

The United States continues to pursue market access for alfalfa hay. The U.S. Department of Agriculture

Animal and Plant Health Inspection Service and India’s Ministry of Agriculture and Farmer’s Welfare held

several rounds of technical discussions to address India’s requirements. In 2021, India and the United

States agreed to a framework for bilateral market access for several agricultural products, including

conventional and GE alfalfa hay from the United States. In August 2022, the GEAC issued a “no objection”

to imports of GE alfalfa hay from the United States, and referred the matter to the FSSAI. In October 2022,

India’s FSSAI raised concerns regarding the approval of GE animal feed imports, impeding additional

progress on this issue.

Poultry

In 2012, the United States commenced WTO dispute settlement proceedings against India’s import

prohibitions on various agricultural products from the United States, including poultry and poultry products,

ostensibly due to concerns regarding avian influenza. The WTO panel and Appellate Body issued reports

in favor of the United States. In 2016, the United States requested authorization from the WTO Dispute

Settlement Body (DSB) to suspend concessions or other obligations on the grounds that India had failed to

comply with the DSB recommendations within the “reasonable period of time” to which the parties agreed.

The U.S. request was referred to arbitration. In April 2017, India requested the establishment of a

compliance panel, asserting that it had enacted a revised avian influenza measure that complied with India’s

WTO obligations. The proceedings have been ongoing since 2018. The United States and India have

requested postponement of the issuance of the arbitrator’s and compliance panel’s decisions while the

parties discuss potential resolution of the dispute. The United States continues to monitor market access

issues related to poultry, such as overly burdensome testing requirements.

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Plant Health Issues

India maintains zero-tolerance standards for certain plant quarantine pests, such as weed seeds and ergot,

that do not appear to be based on risk assessments and that constrain U.S. grain and pulse exports. Bilateral

discussions to resolve these issues, including at the senior official level, have achieved little success.

India requires methyl bromide (MB) fumigation at the port of origin as a condition for the importation of

pulses. This type of fumigation is not permitted in the United States, so the United States requested that

India permit entry of U.S. peas and pulses subject to inspection and fumigation at the port of arrival, to

which India agreed. India has granted a series of extensions allowing MB fumigation on arrival but has

offered no permanent solution. In April 2018, the Indian Government confirmed the extension of the

fumigation-upon-arrival waiver for U.S. peas and pulses, including chickpeas, indefinitely until both parties

come to an agreement on the U.S. systems-based approach. The U.S. walnut industry requested a change

to India’s fumigation protocol to allow sulfuryl fluoride and phosphine in place of MB. However, the

United States is still awaiting official approval of such change through notification in the Indian Gazette.

Similarly, the United States is seeking approval for an alternative treatment to MB fumigation for U.S.-

origin in-shell pecans, recommending either a cold treatment or a hot water bath treatment for in-shell

pecans. The United States is awaiting a response from the Indian Ministry of Agriculture & Farmers

Welfare’s Directorate of Plant Protection, Quarantine and Storage as well as approval through notification

in the Indian Gazette.

GOVERNMENT PROCUREMENT

India lacks an overarching government procurement policy and, as a result, its government procurement

practices and procedures vary among the states, between the states and the central government, and among

different ministries within the central government. India also provides preferences to Indian micro, small

and medium-sized enterprises and to state-owned enterprises. In defense procurements, India’s offset

program requires companies to invest 30 percent or more of the acquisition cost of contracts above the

threshold value in Indian-produced parts, equipment, or services; a requirement that continues to prove

challenging for manufacturers of high-technology equipment to meet given changing rules and limited

opportunities.

In June 2020, the Department of Promotion of Industry and Internal Trade issued the Public Procurement

(Preference to Make in India) Order 2020, a revision to the 2017 procurement order mandating preferences

for domestically manufactured goods. The rule was updated again in September 2020 and took immediate

effect, instructing each ministry or department to draft a follow-on procurement order that favors domestic

suppliers whose products contain 50 percent or more local content, and permitting ministries and

departments to mandate higher local content percentages that could be used to benefit Indian suppliers.

Products that contain less than 20 percent local content are categorized as “non-local suppliers.”

The August 2020 changes to General Financial Rules section 161 state that global tender enquiries may not

be accepted under $31 million and further reductions of the minimum local content requirement cannot be

implemented without permission of an appropriate authority. Furthermore, companies must use a third-

party or internal auditor to certify the amount of local content that will be used if the value is equal to or

greater than 10 crore or 100 million rupees (approximately $1.22 million).

On September 23, 2020, the Ministry of New and Renewable Energy released an order reserving a list of

80 products, including solar cells, modules, wind turbines, and electrical equipment for hydro and biogas

for bidding only by suppliers with 50 percent or more local content, irrespective of the purchase value. The

Ministry of Power also reserved 78 products for local procurement through a similar order published on

June 17, 2021.

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In April 2020, MEITY issued a notification that entities must procure cellular mobile phones only from

local suppliers meeting the local content requirement of 50 percent, irrespective of purchase value. A

September 2020 MEITY notification specified the mechanism for calculation of local content for: (1)

desktop PCs; (2) thin clients; (3) computer monitors; (4) laptop PCs; (5) tablets; (6) dot matrix printers; (7)

contact and contactless smart cards; (8) LED products; (9) biometric access control/authentication devices;

(10) biometric fingerprint sensors; (11) biometric iris sensors; (12) servers; and, (13) cellular mobile

phones.

India is not a party to the WTO Agreement on Government Procurement but has been an observer to the

WTO Committee on Government Procurement since February 2010.

INTELLECTUAL PROPERTY PROTECTION

India remained on the Priority Watch List in the 2022 Special 301 Report due to lack of progress on long-

standing intellectual property (IP) concerns raised in prior Special 301 Reports. The 2022 Review of

Notorious Markets for Counterfeiting and Piracy (Notorious Markets List) includes physical and online

marketplaces located in or connected to India. The United States and India continue to engage on a range

of IP challenges facing U.S. companies in India with the intention of creating stronger IP protection and

enforcement in India.

In the field of copyright, policy uncertainty and ineffective enforcement remain concerns. Copyright

holders continue to report high levels of piracy, particularly online. Court cases and government

memoranda raise concerns that a broad range of published works will not be afforded meaningful copyright

protection. Amending Section 31D of the Indian Copyright Act to permit statutory licensing of interactive

transmissions, as recommended by a Parliamentary committee, would have severe implications for right

holders who make their content available online. A law that criminalizes the illicit camcording of films is

also absent. The granting of licenses under Chapter VI of the Indian Copyright Act and overly broad

exceptions for certain uses have raised concerns regarding the strength of copyright protection in India.

Amendments to the Indian Copyright Act needed to bring India’s domestic legislation into alignment with

international best practices are absent. India’s decision in 2021 to abolish the Intellectual Property

Appellate Board (IPAB) and redirect matters previously handled by the IPAB to courts has created

uncertainty around adjudication of IP cases and copyright royalty rate setting.

In the field of patents, several factors negatively affect stakeholders’ perception of India’s overall IP regime,

investment climate, and innovation goals. Patent applicants continue to face expensive and time consuming

pre- and post-grant oppositions, long waiting periods to receive patent grants, and excessive reporting

requirements. Concerns remain with respect to whether Indian authorities will treat as confidential sensitive

business information that parties are still required to disclose on a revised “Statement of Working of

Patents” (Form 27). The potential threat of patent revocations, lack of presumption of patent validity, and

the narrow patentability criteria under the Indian Patents Act impact companies across different sectors. In

the pharmaceutical sector, the United States continues to monitor the restriction on patent-eligible subject

matter in Section 3(d) of the Indian Patents Act and its impacts. Pharmaceutical stakeholders continue to

raise concerns as to whether India has an effective system for protecting against unfair commercial use and

unauthorized disclosure of undisclosed test or other data generated to obtain marketing approval for

pharmaceutical and agricultural chemical products. Stakeholders also express concerns as to whether India

has an effective mechanism for the early resolution of potential pharmaceutical patent disputes.

India’s overall IP enforcement remains inadequate. U.S. brand owners also continue to report excessive

delays in trademark opposition proceedings and a lack of quality in examination. Finally, U.S. and Indian

companies have identified trade secret protection as a growing concern and expressed interest in eliminating

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gaps in India’s trade secrets regime, such as through the adoption of trade secret legislation that

comprehensively addresses these concerns.

SERVICES BARRIERS

The Indian Government has a strong ownership presence in major services industries such as banking and

insurance. Foreign investment in businesses in certain major services sectors, including financial services

and retail, is subject to limitations on foreign equity, and foreign participation in professional services is

significantly restricted. In addition, barriers to digital trade and electronic commerce, such as those imposed

on electronic payment providers, have knock-on effects on a wide variety of services.

Audiovisual Services

The Telecommunications Regulatory Authority’s regulations on content aggregation and distribution do

not allow bundling of channels or certain types of distribution partnerships. Content aggregation is

commonly used internationally, as it allows niche and foreign content to be bundled and sold by domestic

partners without a large local presence or sales force. These regulations cause difficulties for small and

international content providers because these companies must interact with each of the 60,000 local cable

operators, radio broadcasters, and television broadcasters they seek to target.

There are also several limits on foreign ownership in the audiovisual and media sectors, namely cable

networks (49 percent); FM radio (26 percent); head end in the sky (74 percent); direct-to-home (DTH)

broadcasting (74 percent); teleports (74 percent); news broadcasting (26 percent); and, newspapers (26

percent). In August 2019, the Indian Government allowed foreign direct investment (FDI) of up to 26

percent for digital media firms that upload and stream news and current affairs.

Distribution Services

India imposes certain restrictions on FDI in the retail industry. With respect to single-brand retail, foreign

investments exceeding 51 percent are contingent on, among other things, a requirement to source at least

30 percent of the value of products sold from Indian sources, preferably from small and medium-sized

enterprises. India has modified the requirements in recent years, including by allowing firms to offset the

local sourcing requirement by sourcing products from India for global supply chains.

India caps foreign ownership in the multi-brand retail sector at 51 percent and leaves to each Indian state

the final decision on whether to authorize such FDI in its territory. In addition, where FDI is allowed, it is

subject to conditions, including: (1) a minimum investment of approximately $100 million, at least 50

percent of which must be in “back-end infrastructure” (e.g., processing, distribution, quality control,

packaging, logistics, storage, and warehousing); (2) a requirement to operate only in cities that have been

identified by the relevant state government; and, (3) a requirement to source at least 30 percent of the value

of products sold from “small” Indian enterprises whose total investments in plant and machinery are under

$2 million each. The local sourcing requirements and other conditions on foreign investment diminish the

commercial incentive for multi-brand retailers seeking to invest in India’s retail sector.

India permits 100 percent FDI in business-to-business (or “marketplace-based”) electronic commerce but

prohibits foreign investment in business-to-consumer (or “inventory-based”) electronic commerce. In

February 2019, India implemented regulations that expressly prohibit subsidiaries of foreign-owned

marketplace-based electronic commerce sites from selling products on their parent companies’ sites. The

rules also prohibit exclusivity arrangements by which electronic commerce retailers can offer a product on

an exclusive basis. The only exceptions for FDI in inventory-based electronic commerce are for food-

product retailing and single-brand retailers that meet certain conditions, including the operation of physical

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stores in India. This narrow exception limits the ability of many electronic commerce service suppliers to

serve the Indian market.

In 2016, after extensive advocacy by the U.S. Government and private industry, the Indian Government

approved the Model Direct Selling Guidelines, which establish clear legal definitions for legitimate direct

selling activities. However, in 2021, the Indian Government issued the Customer Protection (Direct

Selling) Rules, which omit the Guidelines’ definition of a “direct selling network.” Industry has raised

concerns that this exclusion creates uncertainty and may open stakeholders up to legal challenges.

Financial Services

Banking Services

Although India allows privately held banks to operate in the country, the banking system is dominated by

state-owned banks, which account for approximately 72 percent of total market share and 84 percent of all

Indian bank branches. Most privately owned banks are Indian owned, with foreign banks constituting less

than 0.5 percent of the total bank branches in India. Under India’s branch authorization policy, foreign

banks are required to submit their internal branch expansion plans on an annual basis and their ability to

expand is hindered by non-transparent limitations established by the Indian Government on branch office

expansion.

Insurance Services

In March 2021, India passed the Insurance (Amendment) Bill, 2021, which removed restrictions on foreign

ownership and control of Indian insurance companies and increased the maximum foreign investment

allowed from 49 percent to 74 percent. While this represented progress, the law instituted new “safeguard”

requirements, such as calling for a majority of board members to be Indian residents, and, if an insurer is

incorporated or domiciled outside of India, requiring that assets be held in an Indian trust with trustees

resident in India, as well as maintaining a higher solvency requirement for foreign-invested insurers. This

also applies to any insurer incorporated in India, in which at least 33 percent of its capital is owned by

investors domiciled outside India or in which 33 percent of the members of the governing body are

domiciled outside India.

In 2015, the Insurance Regulatory and Development Authority of India issued a revision to its regulations

governing the provision of reinsurance services in India. The regulations afford Indian reinsurers a

mandatory first order of preference (or right of first refusal) for reinsurance business in India. Such a

requirement severely restricts the ability of foreign reinsurers to compete in the Indian market and decreases

the interest of foreign reinsurers in establishing branches in India.

Electronic Payment Services

The United States has continued to raise concerns relating to informal and formal policies with respect to

electronic payments services that appear to favor Indian domestic suppliers over foreign suppliers. In

November 2020, the National Payments Corporation of India (NPCI), a state-owned company, announced

a market share limitation of 30 percent (measured by transactions) for foreign electronic payment service

suppliers processing online payments made through India’s United Payment Interface (UPI), which is

owned and operated by NPCI. NPCI stated that the policy would insulate the UPI system against systemic

collapse should one of the market leaders experience a failure. Foreign digital payment companies were

given until January 2023 to ensure their market share met the 30 percent limit. The United States also has

expressed concern over plans to create a National Common Mobility Card (NCMC) that would use a

domestic proprietary QR code standard, which could disadvantage foreign suppliers. India has also not yet

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shared the domestic qSPARC standard, effectively prohibiting firms from participating in the roll-out of

the NCMC.

Professional Services

Legal Services

Membership in the Bar Council of India (BCI), the governing body for the legal profession, is mandatory

to practice law in India and is limited to Indian citizens. Foreign law firms are not allowed to open offices

in India. The Advocates Act, which is administered by BCI, provides for foreign lawyers or law firms to

visit India on a reciprocal basis for temporary periods to advise their clients on foreign and international

legal issues.

Accounting Services

Foreign accounting firms face obstacles to entering the Indian accounting services sector. Only accounting

firms structured as partnerships under Indian law may supply financial auditing services and only Indian-

licensed accountants may be equity partners in an Indian accounting firm.

Telecommunications Services

Satellite Services

India’s Ministry of Information and Broadcasting maintains a preference for Indian satellites to provide

capacity for DTH subscription television services. In practice, DTH licensees have not been permitted to

contract directly with foreign satellite operators and have encountered procedural delays when they have

sought to do so. Rather, DTH licensees must procure satellite capacity through Antrix, the commercial arm

of the Indian Space Research Organization (ISRO), which in turn only permits foreign procurements if it

does not have available capacity on Indian satellites. When ISRO does permit the use of foreign satellite

capacity, the foreign satellite operator must sell the capacity to ISRO, which in turn resells the capacity to

the end-user with a surcharge. As a result, even when limited capacity is available, foreign satellite

operators are prevented from developing direct relationships with DTH licensees, putting U.S. satellite

operators at a competitive disadvantage. The United States continues to encourage India to adopt an “open

skies” satellite policy to allow consumers the flexibility to select the satellite capacity provider that best

suits their business requirements and to promote market access for foreign satellite service providers.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Data Localization

India has proposed and promulgated several data localization requirements that may restrict trusted cross-

border data flows between the United States and India. These requirements, if implemented, would force

the construction or use of local data centers in India. The requirements could be particularly challenging

for smaller firms.

Electronic Payment Services

In 2018, the Reserve Bank of India (RBI) implemented a requirement that all payment service suppliers

store all information related to electronic payments by Indian citizens on servers located in India. RBI

announced this rule without advance notice or input from stakeholders. In 2019, RBI stated the requirement

to store payments data locally also applied to banks operating in India. Foreign firms assert that requiring

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local storage of all payment information is a disadvantage for them, as they are more likely to be dependent

on globally distributed data storage and information security systems. They assert further that a domestic

data storage requirement hampers the ability of service suppliers to detect fraud and ensure the security of

their global networks.

Digital Personal Data Protection Bill 2022

On August 3, 2022, the MEITY requested the Indian Parliament withdraw the Personal Data Protection

Bill, 2019, and announced the government would develop a new bill. On November 18, 2022, India

released a new draft Digital Personal Data Protection Bill, 2022 for public comment. A number of U.S.

concerns with previous versions of the bill have been addressed, but, if the bill is passed in its current form,

there are a number of concerning provisions, such as an unspecified process to approve countries as lawful

destinations for the transfer of data outside of India and unduly limited grounds for the processing of

personal data outside of India.

Internet Services

In February 2021, the Indian Government published new regulations, the Information Technology

(Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (IT Rules), to govern a wide range

of Internet-based service providers, particularly those that operate social media, messaging, and news and

entertainment content in India. The IT Rules require compliance by “significant” social media

intermediaries and platforms with five million registered users or more, which includes several U.S. firms.

The IT Rules impose a number of requirements that U.S. firms have identified as concerning. For example,

the IT Rules impose personal criminal liability on individual employees in cases where a firm is not in

compliance with the rules. The IT Rules also include an obligation to identify the first originator of

information, a requirement to appoint a local compliance officer, and imposition of impractical compliance

deadlines and take-down protocols. In recent years, U.S. firms have been subject to an increasing number

of takedown requests for content and user accounts related to issues, often political, of domestic concern.

Digital Services Taxation

In 2017, India began assessing a six percent “equalization levy,” a withholding tax on foreign online

advertising platforms, with the ostensible goal of “equalizing the playing field” between resident service

suppliers and non-resident service suppliers. However, its provisions do not provide credit for tax paid in

other countries for the service supplied in India. The current structure of the equalization levy represents a

shift from internationally accepted tax principles, which generally hold that mechanisms should be

developed to prevent double taxation. The Fiscal Year 2020-2021 budget included an expansion of the

equalization levy, adding a two percent digital services tax on foreign electronic commerce and digital

services providers. These changes were enacted without prior notification or an opportunity for public

comment. Technology firms raised concerns that the definitions of “electronic-commerce operator” and

“electronic-commerce supply or services” are broad in scope and are likely to cover many digital

transactions, including the sale of data.

In June 2020, the Office of the U.S. Trade Representative (USTR) initiated a Section 301 investigation of

India’s two percent equalization levy or digital services tax (DST). In January 2021, USTR issued findings

that India’s DST, as well as taxes adopted by other countries, discriminated against U.S. companies, were

inconsistent with prevailing principles of international taxation, and burdened or restricted U.S. commerce.

The United States and India, along with 135 other jurisdictions, have joined the October 8, 2021,

OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting Statement on a Two-Pillar Solution

to Address the Tax Challenges Arising from the Digitalization of the Economy, which called for all Parties

to commit not to introduce DSTs in the future. On November 24, 2021, the United States and India issued

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statements reflecting a political agreement on a transitional approach to India’s DST during the

implementation period of Pillar 1 of the Two-Pillar solution. Under this agreement and in defined

circumstances, the liability from India’s DST that American companies accrue in India during the interim

period will be creditable against future taxes accrued under Pillar 1 of the OECD agreement. The period

during which the credit accrues will be from April 1, 2022, until either the implementation of Pillar 1 or

March 31, 2024, whichever is earlier. In return, the United States committed to terminate the Section 301

trade action on goods of India and not to impose further trade actions against India with respect to its

existing DST until the earlier of the date the Pillar 1 multilateral convention comes into force or March 31,

2024. USTR, in coordination with the U.S. Department of the Treasury, is monitoring the implementation

of the political agreement on the OECD/G20 Two-Pillar Solution as pertaining to DSTs.

OTHER BARRIERS

Transparency

Traders continue to be negatively affected by a lack of transparency with respect to new and proposed laws

and regulations and the lack of uniform notice and comment procedures and inconsistent notification of

these measures to the WTO. This, in turn, inhibits the ability of traders and foreign governments to provide

input on new proposals or to adjust to new requirements. U.S. stakeholders continue to report that new

requirements are issued with inadequate public notice and comment periods and/or inadequate consultation

or notification at the WTO. This lack of transparency imparts a lack of predictability to the Indian market,

diminishing the ability of U.S. companies to enter or operate in India. The U.S. Government continues to

raise concerns regarding uniform notice and comment procedures with the Indian Government bilaterally

through the TPF and multilaterally in the WTO and other fora.

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INDONESIA

TRADE AGREEMENTS

The United States–Indonesia Trade and Investment Framework Agreement

The United States and Indonesia signed a Trade and Investment Framework Agreement (TIFA) on July 16,

1996. The TIFA is the primary mechanism for discussions of trade and investment issues between the

United States and Indonesia.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Indonesia’s average Most-Favored-Nation (MFN) applied tariff rate was 8.1 percent in 2021 (latest data

available). Indonesia’s average MFN applied tariff rate was 8.7 percent for agricultural products and 8.0

percent for non-agricultural products in 2021 (latest data available). Indonesia has bound 96.1 percent of

its tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 37.3

percent.

Over the last decade, Indonesia has increased its applied tariff rates for a range of goods that compete with

locally manufactured products, including electronic products, milling machines, chemicals, cosmetics,

medicines, wine and spirits, iron wire and wire nails, and a range of agricultural products. Most Indonesian

tariffs on non-agricultural goods are bound at 35.5 percent, although tariff rates exceed 35.5 percent or

remain unbound on automobiles, iron, steel, and some chemical products. In the agricultural sector, tariffs

on more than 1,300 products have bindings at or above 35.5 percent.

In 2020, Indonesia issued Minister of Finance (MOF) Regulation 199/2019 to lower the price threshold for

import duty exemptions on imported consumer goods (known as “consignment goods”) from $75 to $3.

Certain types of books, bags, garments, and footwear are exempted from the regulation.

U.S. stakeholders have asserted that Indonesia continues to apply tariffs in excess of its WTO bound rates

for certain categories of information and communication technology (ICT) products. Since at least 2020,

Indonesia appears to be applying a 10 percent duty for certain categories of the Harmonized Tariff System

subheading 8517.62, which includes switching and routing equipment.

Taxes

U.S. companies continue to express concerns that the MOF’s Directorate General of Taxes’ tax assessment

process is arbitrary. Such concerns include a discretionary and cumbersome auditing process, heavy fines

for administrative mistakes, lengthy dispute mechanisms, and a lack of legal precedent within the Tax

Court.

In 2018, Indonesia issued MOF Regulation 110/2018, increasing “withholding tax” rates for 1,147 imported

products, including consumer and luxury goods. The stated objective for this policy was to decrease

Indonesia’s current account deficit by reducing imports of these goods.

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Luxury goods, imported or locally produced, may be subject to a luxury tax of up to 200 percent. As of

January 2023, there are no luxury goods subject to the 200 percent rate, and the applied luxury tax rates

generally range from 10 percent to 95 percent. Motorcycles with an engine displacement over 500 cc (a

size which is not produced in Indonesia) are subject to a 95 percent luxury tax. Under MOF Regulation

141/2021, the MOF reformulated the sales tax for luxury motor vehicles based on fuel efficiency and

emissions levels, with the aim of reducing emissions and encouraging the use of energy-efficient and less

polluting motor vehicles. The luxury motor vehicle sales tax varies based on the cylinder capacity of the

motor vehicle (up to three liters; three to four liters), type of motor vehicle (electric and non-electric), fuel

efficiency rate, and emissions level. This luxury tax applies to both locally-produced and imported vehicles.

Although Indonesia has eliminated its luxury tax on imported distilled spirits, the current excise tax regime

imposes higher excise tax rates on imported spirits than on domestic spirits. The excise tax rates for

imported products are 150 percent on spirits and 90 percent on wine.

MOF Regulation No. 41/2022, effective April 1, 2022, increased the number of imported items that are

subject to a prepayment of income tax at the time of import under Income Tax Article 22. The regulation

adds Harmonized System (HS) codes for 716 categories of imported goods subject to income tax at a rate

of 10 percent of the transaction value. The regulation lists 1,188 HS codes subject to income tax of 7.5

percent and seven HS codes with a tax rate of 0.5 percent. Stakeholders have previously raised concerns

that the process of claiming a return of excess pre-paid income tax at the time of import can take multiple

years and considerable effort.

MOF Regulation No. 114/2022, issued on July 11, 2022, extended Article 22 income tax exemptions for

72 business sectors until December 31, 2022.

Non-Tariff Barriers

Import Licensing

Indonesian importers must comply with numerous and overlapping import licensing requirements that

impede market access. The Ministry of Trade (MOT) requires all importers to obtain an import license as

either an importer of goods for further distribution (API-U) or as an importer for their own manufacturing

(API-P), but importers are not permitted to obtain both types of licenses. An API-P import license allows

companies to import finished products for market testing, after sales service purposes, or for “completing

a product line”, as long as the goods are new, consistent with the company’s business license, and meet

import requirements. Under Government Regulation (GR) 29/2021, importers must also obtain a business

identification number (NIB) through the Online Single Submission, a new online processing system

intended to streamline business license issuance. A NIB can also serve as a valid import license.

On April 1, 2021, MOT issued Regulation 20/2021 (amended by MOT Regulation 25/2022), which aims

to synthesize all import-related regulations and serve as an “umbrella” regulation for the management of

Indonesia’s import policies. The regulation also sets forth a requirement that import licenses for certain

commodities be issued based on their “commodity balance”.

On February 21, 2022, Indonesia enacted Presidential Regulation No. 32/2022, which further provides for

a “commodity balance” policy. The commodity balance policy appears to make the issuance of import

licenses subject to an Indonesian Government assessment of supply and demand for a commodity. It was

initially implemented for 2022 import licenses for five commodities (sugar, rice, fish, meat, and salt) at the

end of 2021. The policy was expanded to cover nineteen additional commodities in 2023. Stakeholders

have expressed concern regarding the Coordinating Ministry of Economic Affairs’ (CMEA) lack of

consultation with market participants on this policy and reported that import license requirements for

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printers were subjugated to this policy, such that printer import licenses now require Ministry of Industry

(MOI) approval, in addition to the existing MOT approval.

MOT Regulation 20/2021 on import policy, which was amended by Regulation 25/2022, imposes additional

burdensome import licensing requirements for cell phones, handheld computers, and tablets. (For further

information, see the Services Barriers section.)

Under MOT Regulation 68/2020 and its amendment, Regulation 78/2020, Indonesia requires import

approvals and stringent reporting requirements for footwear, electronic devices, and bicycles (except such

products imported for market testing or after sales service purposes) with the stated goal of reducing the

volume of consumer goods entering Indonesia in favor of local production.

Import Licensing for Agricultural Products

Indonesia continues to maintain unjustified and trade-restrictive licensing regimes for the importation of

horticultural products, animals, and animal products, despite amending its import licensing regimes several

times. In 2013, the United States challenged Indonesia’s restrictions under the WTO’s dispute settlement

procedures because Indonesia repeatedly failed to address U.S. concerns. On December 22, 2016, the WTO

issued the panel report, finding for the United States and co-complainant New Zealand on all 18 claims and

finding that Indonesia is applying import restrictions and prohibitions that are inconsistent with WTO rules.

On November 9, 2017, the WTO Appellate Body rejected Indonesia’s appeal and upheld the panel’s

findings. On August 2, 2018, the United States requested authorization from the WTO to take

countermeasures. On August 14, 2018, Indonesia objected to the U.S. request, referring the matter to

arbitration. Since 2018, the United States has paused the arbitration to give the parties the opportunity to

work towards a solution to the dispute and to increase market access for U.S. agricultural products.

Indonesia has amended its import licensing requirements several times since the Appellate Body ruling.

Through the issuance of Minister of Agriculture (MOA) Regulation 2/2020, imports of horticultural

products from countries with a food safety system recognized by MOA are exempt from the requirement

to provide certain quality and safety certificates. Nevertheless, Indonesia continues to subject imports,

including all horticultural products, to its import licensing regime. This regulation also extends the validity

of horticultural product import licenses for 60 days into the following calendar year.

In 2020, Indonesia enacted the “Job Creation Omnibus” (Law 11/2020), which amends import licensing

provisions contained in the Food Law, Animal Husbandry and Animal Health Law, Farmer Protection and

Empowerment Law, and the Horticulture Law and served as the basis for the commodity balance policy.

Law 11/2020 requires a general business license for imports of horticultural, feed, meat, and dairy products,

and appears to remove the legal basis for requiring MOA import recommendations and MOT import

licenses for horticultural products. A Constitutional Court ruling on November 25, 2021, found that the

passage of the Omnibus Law was unconstitutional due to the opaqueness of the process by which the law

was created, including that proposed revisions were not fully shared with the public. The court ordered

lawmakers and the Jokowi administration to revise the law within two years, specifying that if no revisions

are made by that deadline, the law will become defunct. The ruling stipulates that the Indonesian

Government should not issue new regulations of a strategic nature related to the law until improvements

are made to the current law.

Nonetheless, on May 18, 2022, MOA issued Regulation 5/2022 affirming the requirement for imported

horticultural products to have an import recommendation (RIPH). However, MOT Regulation 25/2022,

provides that the issuance of import licenses does not require RIPH and will instead be issued on the basis

of available supply and demand data if the commodity balance has not been determined.

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In 2023 agricultural products subject to licensing by government-determined commodity balances include

sugar, rice, fish, meat, salt, and corn. Indonesia has not provided a comprehensive list of agricultural

products that will be subject to this policy. Businesses report that they need to adapt constantly to changing,

and often conflicting, implementing regulations from numerous Ministries.

Pharmaceutical Market Access

The pharmaceutical industry has raised concerns regarding the opportunity for meaningful stakeholder

engagement in the Indonesian pricing and reimbursement system. Stakeholders report a lack of clarity

regarding how pharmaceutical products are selected for listing on the Indonesian online public procurement

catalog system, how price caps are determined, and whether and for how long such products will remain

listed. The United States will continue to engage Indonesia on this issue and has requested that the Ministry

of Health (MOH) and the National Public Procurement Agency discuss these issues with U.S. stakeholders.

The United States continues to have concerns about barriers to Indonesia’s market for pharmaceutical

products and medical devices. MOH Regulation 17/2017 mandates that the pharmaceutical and medical

devices industries prioritize the use of domestic raw materials. MOI Regulation 16/2020, which went into

force in June 2020, defines local content values for pharmaceutical products as including manufacturing,

raw ingredients, research and development, and packaging. It also sets out a process for the issuance of

local content certificates and requires priority be given in the national health insurance system to products

with certified local content value when available. Companies are required to self-assess the local content

of their products, further verified by independent assessors appointed by the MOI. Businesses are

concerned that the regulation will prioritize drugs with higher local content over imported versions of

equivalent efficacy and safety.

Additionally, MOH Regulation 1010/2008 requires a foreign pharmaceutical company either to

manufacture locally or to entrust another company that is already registered as a manufacturer in Indonesia

to obtain drug approvals and import permits on its behalf. This regulation also mandates local

manufacturing in Indonesia of all pharmaceutical products that are five years past patent expiration and

contains a technology transfer requirement. A subsequent pair of regulations, MOH Regulation 26/2018

and National Agency of Drug and Food Control (BPOM) Regulation 16/2015, provide additional

information about the application of these local manufacturing requirements.

Presidential Regulation 10/2021 reserves retail pharmaceutical business and class A health equipment for

micro, small, and medium-sized enterprises (MSMEs), while traditional medicine is limited to domestic

ownership only. MOH Regulations 1010/2008 and 1120/2008 state that all foreign pharmaceutical

companies operating in the country must manufacture medicines locally or form a partnership with a local

manufacturer in order to register or trade their own products. MOH Regulations 1010/2008 and 1120/2008

remain significant barriers to market access.

Import Bans and Other Restrictions

Indonesia tightly controls and regulates imports of sugar and other food commodities, including through

annual quantitative import limits based on domestic production and consumption forecasts. Sugar refineries

are permitted to import raw sugar based on annual allocations intended to offset idle refining capacity.

Some food and beverage companies are permitted to import limited volumes directly, but there remains an

expectation to first utilize refined domestic sugar. These import restrictions increase the price of sugar (and

other commodities) across the domestic economy.

Indonesia limits the quantity of imported wines and distilled spirits. Companies must apply to be designated

as registered importers authorized to import alcoholic beverages, with an annual company-specific quota

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set by MOT; that quota has not changed since its enactment in 2009. Currently there are approximately 14

registered importers of alcoholic beverages in Indonesia.

State Trading

Presidential Regulation 66/2021 established Indonesia’s National Food Agency (BAPANAS). BAPANAS

is a minister-level institution that directly reports to the President and has the authority to coordinate all

food and agriculture related ministries and agencies, such as the Ministry of Agriculture, Ministry of Trade,

Ministry of Industry, and the state-owned procurement body, the Bureau of Logistics (BULOG). The main

role of BAPANAS is to coordinate, formulate, and determine food availability policies. BAPANAS is also

tasked with ensuring food price stabilization, food diversification, and overall food security. BAPANAS

bears the responsibility of developing a food information system. On September 27, 2022, BAPANAS

authorized BULOG to procure soybeans in order to stabilize the soybean market by selling them with a

1,000 IDR per kg subsidy. BAPANAS also regulates the minimum buying and selling reference prices for

several commodities. There are currently nine staple commodities under the authority of BAPANAS: rice,

corn, soybean, sugar, onion, eggs, beef, poultry meat, and chilies.

Indonesia imposes restrictions on feed corn imports, limiting the right to import to BULOG. However,

some corn imports intended for starch manufacturing are allowed. As Indonesia’s sole importer of feed

corn, BULOG prioritizes corn distribution to small-holder poultry farmers. The import volume is set based

on the level of domestic feed production. Feed millers other than the small-holders who receive corn from

BULOG are obligated to use locally-produced feed corn. They have expressed concern that they are unable

to obtain feed corn in quantities sufficient to maintain the poultry industry’s growth.

BULOG also maintains exclusive authority to import standard unbroken rice. Indonesia has cited food

security and price management considerations as the principal objectives of this policy. BULOG is not

allowed to import rice before, during, or immediately after the main harvest period. Private firms are only

allowed to import broken rice for processing or specialty rice varieties, such as basmati and jasmine rice,

for retail and food service. Importers of broken and specialty rice must obtain a special MOA importer

identification number. Since 2014, Indonesia has refused to issue import recommendations for japonica

rice to private traders, although permitted under MOT regulations.

In 2016, BULOG was appointed as Indonesia’s sole importer of feed corn, plantation white sugar, and

buffalo meat (carabeef). Additionally, through MOT Regulations 57/2017, 7/2020, and 6/2022, the

Indonesian Government sets farmer-level and consumer-level reference prices for corn, soybeans, sugar,

shallots, beef, chicken, eggs, and cooking oil, respectively. According to these regulations, BULOG and

other state-owned enterprises (SOEs) can intervene in the market when prices are above or below threshold

targets.

Customs Barriers and Trade Facilitation

Indonesia notified its customs valuation legislation to the WTO in 2001 but has not responded to the

Checklist of Issues describing how the WTO Customs Valuation Agreement (CVA) is being implemented.

U.S. firms continue to report that Indonesian customs relies on a schedule of reference prices to assess

duties on some imports rather than using transaction values as the primary basis of valuation as required by

the CVA. Indonesia’s Directorate General of Customs and Excise reportedly makes a valuation assessment

based on the perceived risk status of the importer and the average price of a same or similar product

imported during the previous 90 days.

MOT Regulation 20/2021, which was amended by MOT Regulation 25/2022, requires pre-shipment

verification by designated companies (known in Indonesia as “surveyors”) for a broad range of products

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(including electronics, textiles and footwear, toys, food and beverage products, and cosmetics). The

verifications are conducted at the importer’s expense and impede the entry of imports to designated ports

and airports. As of December 31, 2022, Indonesia had yet to notify these measures to the WTO pursuant

to the WTO Agreement on Pre-shipment Inspection.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Standards and Testing Requirements

MOI Regulation 24/2013 (as amended by MOI Regulations 55/2013 and 29/2018) requires that imported

toys be tested by a laboratory with a mutual recognition agreement with one of Indonesia’s product

certification bodies. The United States is not aware of any existing mutual recognition agreements, leaving

imported toys subject to mandatory testing in Indonesia to obtain certification. U.S. stakeholders have

expressed concern about the discriminatory frequency of testing under these regulations, which is required

on a per-shipment basis for imports, but only every six months for domestically produced products. In

2018, MOI issued Regulation 29/2018, introducing an alternative procedure that allows importers to obtain

a certification through product testing and an audit of production processes. Indonesia notified this measure

to the WTO in November 2018. U.S. manufacturers remain concerned by the lack of clarity on how

products can enter the market under the alternative procedure.

In February 2021, Indonesia issued GR 28/2021. The measure includes requirements governing conformity

assessment to Indonesian national standards (SNI) for a wide variety of consumer goods including toys,

electronics, and home appliances. U.S. stakeholders report that testing laboratories and conformity

assessment bodies have been told to halt certification until MOI issues implementing guidance for GR

28/2021. This standstill has resulted in the halting of imports that use the SNI scheme that requires testing

per shipment. Additionally, GR 28/2021 requires that all steps of product testing be conducted by an

Indonesian national residing in Indonesia, further complicating product sample collection for products that

use a per-shipment testing scheme. Indonesia has not yet notified this measure to the WTO. The United

States will continue to raise its concerns regarding GR 28/2021 with Indonesia.

Halal Certification

Under Law 33/2014 on Halal Product Assurance, halal certification is mandatory for food, beverages,

pharmaceuticals, cosmetics, medical devices, biological products, genetically engineered products,

consumer goods, and chemical products sold in Indonesia. All business processes, including production,

storage, packaging, distribution, and marketing, are required to comply with this law, which also requires

non-halal information to be placed on packaging for non-halal products. In 2017, the Indonesian

Government officially established the Halal Product Assurance Agency (BPJPH) under the Ministry of

Religious Affairs (MORA) to lead the implementation of halal certification.

MORA continues to develop regulations to implement Law 33/2014. U.S. stakeholders are concerned that

Indonesia has finalized many of these regulations without sufficient notice and adequate time to submit

comments as required under the WTO Agreement on Technical Barriers to Trade and as more specifically

recommended by the WTO Committee on Technical Barriers to Trade (WTO TBT Committee). MORA

Regulation 26/2019 initially set out the transition period for halal requirements to go into force. MORA

Decree 748/2021 outlines a broad range of products requiring halal certification. Indonesia notified these

measures to the WTO in October 2019 and July 2021, respectively. In December 2021, MORA issued

Decree 1360/2021, which was notified to the WTO in January 2022. This decree provides an extensive list

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of ingredients or materials that are not required to obtain halal certification. This list is also known as the

halal positive list.

GR 39/2021, a revision of the Implementing Regulations (first published in 2019), maintains the original

timeline for phasing in mandatory halal certification: for food and beverage products by October 2024; for

traditional medicines and food supplements, cosmetics, chemical products, and genetically modified

organisms, wearable clothing items, household appliances, office products, and class A medical devices by

October 2026; for over-the-counter medicines and class B medical devices by October 2029; and, for

prescription medicines and Class C medical devices by October 2034. Vaccines, biological engineering

products, and class D medical devices will be regulated under a future presidential decree.

In accordance with MORA Regulation No. 2/2022 on International Cooperation on Halal Product

Assurance, U.S.-based halal certifying bodies (HCBs) are eligible to apply directly to BPJPH for permanent

recognition, which is required for HCBs to continue issuing halal certificates for U.S. exports. So far, only

one U.S. HCB has been assessed in person by BPJPH, and the other four are waiting for their assessments

to be scheduled. The final step to obtaining recognition is for each HCB to conclude a Mutual Recognition

Agreement with BPJPH.

The United States continues to raise concerns with the implementing regulations for Law 33/2014 at the

WTO TBT Committee and bilaterally.

Product Testing

BPOM sets out requirements for testing of heavy metals in cosmetics in its Regulation 12/2019. This

Regulation revokes previous Regulation 17/2014. A 2016 BPOM Circular Letter provides further guidance

on these requirements, which is fulfilled through a certificate of analysis that is valid for one year. In

practice, Indonesian customs requires each shipment to provide a separate test in addition to the certificate.

This measure appears intended to limit imports. U.S. stakeholders have expressed concern that the pre-

market testing requirement goes against the intent of the Association of Southeast Asian Nations (ASEAN)

Cosmetics Directive, which stipulates that monitoring of heavy metals should be undertaken via post-

market surveillance.

Sanitary and Phytosanitary Barriers

Facility Registration for Animal-Derived Products

Indonesia’s animal health and husbandry law (Law 18/2009, as amended by Law 41/2014) requires

companies that export animal‐derived products, such as meat, dairy and eggs, to Indonesia to complete a

pre‐registration process with MOA. The law allows imports of these products only from facilities that

Indonesian authorities have individually approved. MOA Regulation 15/2021 maintains this requirement

and adds a new provision requiring raw materials used for the manufacturing of animal-derived products to

originate from facilities that have already been approved by Indonesia.

Under GR 35/2016, MOA requires that all animal product establishments seeking to export to Indonesia

undergo inspections to obtain eligibility certificates. As part of this process, MOA charges fees for a desk

audit of application materials, an on-site facility inspection, and a post-audit desk review. Dairy production

facilities are only required to pass desk audits, while other facilities (i.e., meat and rendering) are required

to undergo on-site facility inspections and post-audit desk reviews. Indonesia charges for transportation

and lodging costs for MOA officials that conduct inspections in the United States. In total, companies

seeking to export to Indonesia could pay up to $10,000 for each inspection.

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Fisheries

The Ministry of Marine Affairs and Fisheries (MMAF) Regulation 11/2019 requires the completion of a

health certificate for all fishery products imported into Indonesia after February 1, 2021. The health

certificate must follow MMAF’s guidelines, and a failure to follow them will result in the product’s

detainment. However, the U.S. competent authorities issuing export certification for fisheries products, the

U.S. Department of Commerce National Oceanic and Atmospheric Administration and the U.S. Department

of Agriculture Animal and Plant Health Inspection Service, have reached an agreement with MMAF to

resolve potential issues stemming from this requirement.

GOVERNMENT PROCUREMENT

Indonesia grants special preferences to encourage domestic sourcing and to maximize the use of local

content in government procurement. It also instructs government departments, institutes, and corporations

to utilize domestic goods and services to the maximum extent feasible. Presidential Regulations 54/2010

(as amended by Regulation 16/2018) and 38/2015 both require procuring entities to maximize local content

in procurement, use foreign components only when necessary, and to designate foreign contractors as

subcontractors to local companies. Both regulations provide general minimum requirements for local

content and service provision. Depending on the sector or nature of the project, ministries with authority

over the project may impose additional restrictions or requirements. In addition, the 2020 Job Creation

Omnibus requires the central and local governments to allocate at least 40 percent of government

procurement to local MSMEs, in addition to cooperatives.

Indonesia’s 2012 Defense Law and Presidential Regulation 76/2014 mandate priority for local materials

and components and require defense agencies to use locally produced goods and services whenever

available. In addition, when an Indonesian Government entity procures from a foreign defense supplier

due to lack of availability from an Indonesian supplier, there is a requirement for “trade balancing” offsets,

including by incorporation of local content, production offsets, technology transfer, or a combination

thereof.

In June 2021, the Indonesian Government had suspended imports of 79 medical device product categories

from the government’s electronic-catalog (e-Katalog) with minimal notice and without prior stakeholder

consultation. Since that time, U.S. medical device manufacturers frequently raised concerns about their

products being withheld from public hospital purchase under the e-Katalog and requested the Indonesian

Government to allow a sufficient grace period for the transition to local production to assure patient access

to safe and high-quality medical devices. In response, Indonesia offered limited exceptions to mitigate

possible disruptions, but has not issued guidelines companies can use to request exception.

Presidential decree No. 2/2022, published on March 30, 2022, mandated that the Indonesian Government

use local products to improve the national economy. Subsequently, in August 2022, the National Public

Procurement Agency (LKPP) reported that approximately 13,600 imported products had been suspended

in the “e-Katalog” to encourage purchase of local products.

In August 2022, the LKPP announced plans to draft a bill related to government procurement of goods and

services, as requested by the President. In preparation for the new procurement laws, the President has

asked the Ministry of State-Owned Enterprises (BUMN) to prepare SOEs to produce goods and services

that are currently imported.

Indonesia is not a Party to the WTO Agreement on Government Procurement but has been an observer to

the WTO Committee on Government Procurement since October 2012.

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INTELLECTUAL PROPERTY PROTECTION

Indonesia remains on the Priority Watch List in the 2022 Special 301 Report. Although Indonesia has

recently taken steps to improve intellectual property (IP) protection and enforcement, including establishing

an IP enforcement task force and increasing efforts to address online piracy, significant concerns remain.

Widespread copyright piracy and trademark counterfeiting (including online and in physical markets) are

key concerns. The Mangga Dua Market in Jakarta continues to be listed in the 2022 Review of Notorious

Markets for Counterfeiting and Piracy (Notorious Markets List), along with multiple online Indonesian

marketplaces. Lack of enforcement remains a problem, and the United States urges Indonesia to utilize the

new enforcement task force to increase proactive interagency coordination and to provide deterrent-level

penalties for IP infringement in physical markets and online. The United States also continues to encourage

Indonesia to provide an effective system for protection against the unfair commercial use, in addition to

unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for

pharmaceutical and agricultural chemical products. The United States remains concerned with Indonesia’s

law regarding geographical indications.

Indonesia addressed certain issues related to local manufacturing and use requirements through the 2020

amendments to the 2016 Patent Law. Indonesia is in the process of further amending the Patent Law, and

the United States continues to urge Indonesia to address remaining concerns, including with respect to the

patentability criteria for incremental innovations and disclosure requirements for inventions related to

traditional knowledge and genetic resources.

The United States and Indonesia finalized a bilateral IP work plan in 2018 to improve IP protection and

enforcement in Indonesia, and the United States will continue to work with the Indonesian Government to

address deficiencies in IP protection and enforcement and to promote public education and outreach.

SERVICES BARRIERS

Audiovisual Services

Indonesia’s 2009 Film Law, as amended by the 2020 Omnibus Law, imposes a 60 percent local content

requirement for local exhibitors (movie theaters and TV stations), prohibits local exhibitors from dedicating

more than 50 percent of their total screen time to content from a single film production business, film

distribution business, or film import business over a period of six consecutive months, prohibits the dubbing

of foreign films, and prohibits foreign companies from distributing or exhibiting films. In 2019, the

Minister of Education and Culture issued Regulation 34/2019, which if enforced, would implement these

provisions of the Film Law. However, the regulation is reportedly not being enforced.

Distribution Services

Logistics services generally are subject to a maximum 49 percent foreign ownership, except for freight

forwarding, warehousing and storage services, and distribution, which are capped at 67 percent foreign

ownership.

Express Delivery Services

Indonesia maintains restrictions on the provision of postal services, broadly defined to include courier,

express delivery, and other logistics services. Indonesian law requires that postal service suppliers be

majority-owned by Indonesians and that foreign suppliers limit their activities to provincial capitals with

international airports and seaports. Under Customs Regulation 11/2020, logistic services companies are

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required to include a Tax ID Number (NPWP) or designated identification numbers of Indonesian

consignees or consignors in the manifest of all inwards and outwards shipments to and from Indonesia.

Indonesian customs have since relaxed the requirement by allowing a phone number to be used in lieu of a

NPWP on the manifest. However, as of December 31, 2022, the Customs Directorate had not yet issued a

written regulation for this relaxation of the policy and industry fears the lack of legal certainty will cause

future obstacles for shipping.

Financial Services

Generally, no single investor, foreign or domestic, may own more than 40 percent of an Indonesian bank.

In certain cases, the Indonesian Financial Services Authority (OJK) may grant exceptions to this general

rule. Based on OJK regulation No. 12/POJK.03/2021 issued in August 2021, OJK increased the foreign

equity cap for commercial banks to 99 percent with prior assessment from the banking supervisor unit at

OJK. OJK also raised local and foreign banks’ minimum core capital requirements to IDR 3 trillion

(approximately $0.2 billion), and raised the minimum capital requirement for the establishment of a new

bank to IDR 10 trillion (approximately $0.68 billion), effective on December 31, 2022. Separately,

Indonesia’s central bank, Bank Indonesia (BI), restricts foreign ownership in private credit reporting firms

to 49 percent under BI Circular Letter No. 15/49/DPKL.

OJK Regulation 77/2016 on peer-to-peer (P2P) lending introduces various guidelines, obligations, and

restrictions for P2P lending services, and the organization of P2P lending service providers. This regulation

caps foreign ownership of P2P services at 85 percent and imposes overly broad restrictions on cross-border

data transfers. Nonbank financial service suppliers may do business in Indonesia as a joint venture or be

partially owned by foreign investors but cannot operate in Indonesia as a branch or subsidiary of a foreign

entity. Indonesia issued a moratorium in October 2021 on P2P lending licenses, to combat illegal platforms.

Under OJK Regulation 13/2018, financial technology companies must register with OJK and implement a

regulatory sandbox to test new services and business models.

Under BI Regulation 18/40/PBI/2016 on payment transaction processing operations, BI limits foreign

ownership of payment companies to 20 percent (but exempts existing investments that exceed this foreign

equity limitation) and imposes overly broad restrictions on cross-border data transfers.

BI Regulation 19/08/2017 on the National Payment Gateway (NPG) requires all domestic retail debit and

credit transactions to eventually be processed through NPG switching institutions located in Indonesia and

licensed by BI. The regulation imposes a 20 percent foreign equity limitation on firms that wish to obtain

a switching license to participate in the NPG, preventing wholly foreign-owned companies from supplying

switching services, and prohibiting the cross-border supply of electronic payment services for domestic

retail debit and credit transactions. As of December 31, 2022, BI had not applied this requirement to credit

transactions. BI Regulation 19/10/PADG/2017 mandates that foreign firms form partnership agreements

with licensed Indonesian NPG switches in order to process domestic retail transactions through the NPG.

BI must approve such agreements, and the regulation makes approval contingent on the foreign partner firm

supporting development of the domestic industry, including by technology transfer. The United States

continues to raise concerns with respect to these policies.

Under BI Regulation 21/2019, Indonesia established national standards (termed QRIS, or Quick Response

Code Indonesian Standard) for all payments using QR codes in Indonesia. U.S. companies, including

payment providers and banks, noted concern that during BI’s QR code policymaking process, foreign

companies were neither informed of the nature of the potential changes, nor given an opportunity to explain

their views on such a system, including how it might be designed to interact most seamlessly with existing

payment systems.

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Indonesia issued regulation No. 22/23/PBI/2020, effective July 1, 2021, to implement BI’s 2025 Payment

System Blueprint. The “umbrella” regulation establishes a new risk-based categorization of payment

system activities and a licensing system. The regulation implemented an 85 percent foreign ownership cap

for “non-bank payment service operators”, also known as “front-end” payment companies. However,

foreign investors may only hold 49 percent of voting shares. The foreign ownership cap for “payment

system infrastructure operators”, or “back-end” companies, remains at 20 percent. Existing investors are

grandfathered into the old requirements so they may continue to have higher amounts of foreign equity. BI

Regulations No. 23/6/PBI/2021 for front-end payment companies and No. 23/7/PBI/2021 for back-end

payment companies went into effect July 1, 2021, and continue to apply foreign ownership rules in

accordance with BI regulation No. 22/23/PBI/2020. Stakeholders have expressed concern regarding BI’s

lack of consultation with market participants prior to issuance of regulations.

U.S. payment systems companies have stated that the new regulations could further limit access to

Indonesia’s financial services market. Prior regulations required authorization, clearing, and settlement to

be processed onshore. The new regulations add initiation of a payment as an onshore processing

requirement. The regulations do not specify requirements by product. While the regulations provide for

offshore processing if certain requirements are met, offshore processing is subject to BI approval. The

regulations also give BI greater authority to regulate pricing, including for fees between payment companies

and their client banks and banks’ fees to consumers. U.S. payment companies have expressed concern

about the expanded authority of BI to set prices that could disrupt business decisions and future investment,

particularly for credit card transactions. Concerns persist about BI creating its own set of local standards,

which make it difficult to bring in global products to Indonesia.

Health Services

Presidential Regulation 10/2021 (as amended by Presidential Regulation 49/2021) eliminated caps on

foreign ownership in and location restrictions for general hospitals, private specialist clinics, dental clinics,

and specialized nursing services. Nevertheless, problematic sectoral regulations remain in place, including

regulations that require foreign hospitals to have a minimum number of inpatient beds that is higher than

the minimum number of inpatient beds required for domestic hospitals, and impose restrictions for foreign

doctors who can work in Indonesia. Foreign ownership is prohibited for private maternity hospitals, general

medical clinics, residential healthcare, and basic health services facilities as these sectors are reserved for

domestic micro, small, and medium-sized businesses.

Insurance Services

The 2014 Insurance Law limits foreign investment in domestic insurance companies to the acquisition of

publicly traded shares. Under GR 14/2018 (GR 14), as amended by GR 3/2020, Indonesia limits foreign

equity in insurance companies to 80 percent. GR 14 exempts companies with foreign ownership higher

than 80 percent at the time of the GR 14’s issuance, but limits these companies’ foreign ownership to their

2018 levels. GR 3/2020 strengthened the grandfathering provisions of GR 14 by specifically allowing

foreign investors to inject new capital in growing investments in order to maintain their existing (2018)

capital share, and also by repealing the obligation under GR 14 for a local shareholder to make a

corresponding 20 percent capital injection in the event of such a capital increase.

Previously, OJK Regulation 14/2015 and OJK Circular Letter 31/2015 required insurance companies

operating in Indonesia to cede to domestic reinsurance companies 100 percent of the reinsurance for many

common types of policies, such as life, accident, auto, and health insurance policies, and up to 50 percent

of reinsurance for other lines, such as certain property and casualty policies. However, OJK regulation No.

39/2020 phased out the requirement for domestic reinsurance for simple risks in 2020, and for non-simple

risks in 2022.

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Professional Services

Legal Services

Only Indonesian citizens may be licensed as lawyers in Indonesia. Foreign lawyers may work in Indonesia

as legal consultants with the approval of the Ministry of Law and Human Rights. A foreign law firm

seeking to enter the market must establish a partnership with a local firm.

Audit and Accounting Services

A foreign public accounting firm must be affiliated with a local public accounting firm to conduct business

in Indonesia. A foreign accounting firm must use the name of its local affiliate in addition to the foreign

firm’s name in presentations and disclosures. Indonesia allows a maximum of 10 percent foreign national

staff for each level of management in the affiliated local accounting firm. In affiliated accounting firms,

the ratio of foreign audit signing partners to local signing partners cannot exceed one to four.

Transportation Services

Under Indonesia’s public service obligation (PSO) initiative, SOEs are responsible for transporting

essential goods to less populated areas of Indonesia, limiting transportation investment opportunities to

foreigners. Indonesia Regulation 10/2021 replaced the 2016 Negative Investment List and does not include

freight transportation, warehouse, or port services. Law 17/2008 on shipping requires all vessels operating

in Indonesian waters to be Indonesian-flagged and limits foreign ownership of Indonesian-flagged vessel

to 49 percent. However, the Indonesian shipbuilding industry does not have the capacity to build the variety

of specialty ships its economy requires and is unlikely to have such capacity in the near to medium term.

Full implementation of the law would be particularly problematic for foreign investors in Indonesia’s

energy and telecommunications sector, which would no longer be permitted to bring in the sophisticated

rigs and specialized vessels needed to develop large upstream projects or service undersea cables. The

2020 Job Creation Omnibus appeared to address this problem by permitting foreign ships to operate in

Indonesia for special activities (excluding passenger and goods transport) if there is no Indonesian vessel

available; however, the implementing regulations introduce inconsistencies and legal uncertainty. Minister

of Transportation Regulation 2/2021 details activities that foreign ships are permitted to perform: oil and

gas survey; drilling; offshore construction; offshore operational support; dredging; salvage and underwater

works; electricity activities done by power plant vessels; terminal construction; and, pier development and

construction activities. Foreign ship usage must obtain approval from the Ministry of Transportation, which

is valid for six months. A foreign ship with more than a two-year contract will be required to be

nationalized. However, recently enacted GR 31/2021, which allows foreign entities to establish a ship crew

agency in Indonesia by forming a joint venture with a local shipping company, does not appear to address

utilization of foreign vessels for the above-mentioned activities.

Construction, Architecture, and Engineering Services

Under Construction Services Law 2/2017, as amended by Law 11/2020, foreign construction service

companies must partner with a locally-owned company and their participation is limited to high-risk, high-

tech, and high-value projects. Separately, the National Construction Services Development Board certifies

foreign entities as construction companies, consulting companies, or integrated (engineering, procurement,

and consulting) companies. A foreign entity may have only one of these designations.

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Franchising and Retail Distribution Services

Under MOT Regulation 71/2019 retail companies are required to “prioritize” the use of domestic goods

and services unless domestic products do not meet a franchisor’s “quality standards.” MOT Regulation

23/2021 requires modern shops to set aside “promotion” areas for products produced by MSMEs and

requires business owners with more than 150 stores to franchise their business.

Telecommunication Services

Indonesia has issued a number of measures that make it difficult to import cellular and Wi-Fi equipped

products. To support the Commodity Balance policy, MOT issued Regulation 20/2021 (as amended by

MOT Regulation 25/2022). MOT also revoked several import-related regulations, including MOT

Regulation 82/2012, and incorporated one import policy for all sectors and commodities. Under these two

regulations, all import license requests must be submitted through the national single window system.

These regulations maintain burdensome requirements for imports. Additionally, importers are required to

become a “registered importer” to sell directly to retailers or consumers. To qualify for a MOT import

license, Indonesia requires confirmation that importers are working with at least three distributors, and

requires importers to provide evidence of contributions to the development of the domestic device industry,

or evidence of cooperation with domestic manufacturing, design, or research firms. Companies seeking to

import 4G and beyond technology-enabled devices may only do so under a “producers license” (API-P),

which is generally held by importers of unfinished goods intended for use in the manufacturing process,

limiting the ability of foreign producers to sell these devices in Indonesia. Importers are also required to

submit product identification numbers and a corresponding certificate from the Ministry of

Communications and Information Technology (MCIT). Industry stakeholders claimed that the new policies

have created uncertainty as it takes months to get a decision on license requests.

U.S. companies have reported that, in some cases, MOI is informally limiting import quantities under

existing licenses (issued under MOI Regulation 108/2012) to protect locally-manufactured cell phones,

handheld computers, and tablets. Importers of any type of cell phone, handheld computer, or tablet are also

subject to MOI Regulation 68/2016, which requires importers to obtain a MOI recommendation to establish

themselves as registered importers of such devices. A recommendation is only available for local

manufacturers, importers in a joint venture with a local manufacturer, or importers of “specialized items.”

Altogether, Indonesia’s licensing practices impose significant barriers on the importation of cellphones,

handheld devices, and other electronic devices.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Data Localization Requirements

Under GR 71/2019 (GR 71), private sector electronic system operators (defined as persons, business

entities, or communities that operate an electronic system) are permitted to transfer, process, and store data

outside of Indonesia. GR 71, however, requires data localization for public sector electronic system

operators (defined as state institutions or other institutions appointed by a state institution that operate an

electronic system), requiring such operators to process and store data in Indonesia.

Under GR 71, financial service regulators are permitted to “further regulate” the treatment of financial

sector data in a manner consistent with GR 71. In 2020, OJK issued Regulations 13/2020 and 38/2020,

amended by Regulation 4/2021, which appear to allow some but not all data to be transferred and stored

outside of Indonesia for commercial banks and insurance companies. OJK requires that core banking and

insurance systems must be maintained onshore. The United States continues to expect that all existing

regulations affecting transfer and storage of financial services data will be amended to comply with GR 71,

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such that all financial services data can be transferred and stored outside of Indonesia. OJK Regulation No.

11/2022 requires data center and/or disaster recovery center electronic systems for banks to be located in

Indonesia unless OJK approves their placement outside of Indonesia.

GR 71 also requires private sector electronic system operators (ESOs) to facilitate supervision by

government agencies, including by granting access to electronic systems and data for monitoring and law

enforcement purposes. MCIT issued implementing regulations for GR 71, Regulation 5/2020 and

Regulation 10/2021, which require private sector ESOs, including those providing services on a cross-

border basis, to register with MCIT by July 20, 2022 or be subject to blocking. Failure to comply with

government takedown orders for a potentially broad category of “prohibited electronic information” can

also result in blocking. The industry voiced concerns over the lack of clarity of content classifications that

fall within the scope of prohibited content, lack of an appeal and adjudication mechanism, and limited

turnaround time for ESOs to respond to MCITs takedown request. MCIT intends to impose administrative

sanctions under GR 71, which will be further regulated under the Draft GR on Non-Tax State Revenue

(RPP PNBP).

Indonesia enacted Personal Data Protection Law No. 27 on October 19, 2022, providing for a two-year

transition time. This law imposes requirements for data collection, processing, and transfer, as well as

criminal and administrative penalties for violations, and may restrict cross-border data flows.

A Data Protection Authority (DPA) is estimated to be operational by the end of April 2023. The DPA will

report to the President and will be responsible for drafting the implementing regulations. Recently alleged

data breaches in several ministries and agencies have raised concerns over personal data protection and may

have prompted the acceleration of the enactment of the law.

Digital Products

In 2018, the MOF issued Regulation 17/2018, which established five HS lines at the eight-digit level for

digital products transmitted electronically, including applications, software, and video and audio content.

The regulation sets import duty rates at zero percent. On January 14, 2023, the MOF issued Regulation

No. 190/PMK.04/2022 which requires entities importing digital products covered by the five HS lines to

file a customs declaration within 30 days of receiving payment for the digital products. The customs

declaration requires information including country of origin, sender information, and importer information.

Despite the zero percent duty rate, companies have expressed concern over these new reporting

requirements. Stakeholders have raised concerns that this regulation will apply to a wide range of entities,

including small and medium-sized enterprises (SMEs), that transmit files through the Internet to entities

within Indonesia. Since no other country has taken similar steps to attempt to apply to digital products on

electronic networks the rules and processes for the collection of customs duties on physical goods at the

physical border, there are significant unanswered questions concerning how Indonesia will define the

“border” on electronic networks and what steps Indonesia would take to “inspect” digital products. The

potential answers to these questions raise cybersecurity, privacy, and data protection concerns.

As Indonesia has stated its intention to impose customs duties on digital products in the future, this

regulation also raises concerns that as a next step Indonesia will impose a non-zero tariff on digital products.

In particular, this action would raise serious concerns regarding Indonesia’s longstanding WTO

commitment not to impose duties on electronic transmission, renewed on a multilateral basis in June 2022,

until the next WTO Ministerial Conference.

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Digital Services Taxation

Under Law 2/2020, Indonesia introduced a series of changes to its tax code, including an expansion of the

definition of permanent establishment for purposes of Indonesia’s corporate income tax, and a new

electronic transaction tax (ETT) that targets cross-border transactions where tax treaties prohibit Indonesia

from taxing corporate income from the transaction. The MOF would need to issue additional legal measures

for these new taxes to go into effect.

The United States opposes proposals by any country to single out digital companies. Indonesia has

refrained from implementing an ETT and is among the 137 member jurisdictions, including the United

States, to have joined the October 8, 2021, OECD/G20 Inclusive Framework on Base Erosion and Profit

Shifting Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization

of the Economy, which called for all Parties to commit not to introduce DSTs in the future. As the G20

president in 2022, Indonesia has supported the ongoing work on Pillar 1 of the OECD consensus on

reallocation of taxation rights. The Indonesian Government has called on the OECD/G20 Inclusive

Framework on Base Erosion and Profit Shifting to finalize Pillar 1 and sign a multilateral convention in the

first half of 2023.

Internet Services

Indonesia has issued measures intended to regulate the electronic commerce sector. In 2019, Indonesia

issued GR 80/2019, which applies to a diverse range of domestic and foreign online merchants, electronic

commerce companies, and intermediaries that facilitate electronic transactions between independent

merchants and customers. Companies have expressed concern that GR 80/2019 overlaps with other

regulations in the areas of data privacy and requires companies to utilize a “.id” web address. In 2020,

Indonesia issued MOT Regulation 50/2020 to implement GR 80/2019, which establishes requirements for

electronic commerce business activities. Foreign electronic commerce operators that have 1,000

transactions or 1,000 packages delivered to Indonesia per year are required to appoint a representative in

Indonesia and/or to register for a foreign business license for electronic commerce. Both foreign and local

electronic commerce actors have voiced concerns over the opaque drafting and stakeholder input process

for these regulations.

INVESTMENT BARRIERS

In contrast to previous regulations, Presidential Regulation 10/2021 (as amended by Presidential Regulation

49/2021) establishes that all business sectors are open for investment unless stipulated otherwise. The

regulation establishes conditions or restrictions on foreign investment for two categories of sectors: (1)

sectors reserved for MSMEs and cooperatives or foreign investors that partner with them; and, (2) sectors

that are open with certain requirements (i.e., with caps on foreign ownership or special permit

requirements). Defense-related investment remains under the sole purview of the central government.

SUBSIDIES

In 2019, for the first time in over twenty years, Indonesia filed a subsidy notification under the WTO

Agreement on Subsidies and Countervailing Measures. Indonesia’s notification only covered subsidy

programs in the fisheries sector.

According to the WTO Secretariat Report on the 2020 Trade Policy Review, Indonesia continues to provide

fiscal and non-fiscal incentives for manufacturing and exports in connection with its export processing

zones and special economic zones programs. These include incentives related to corporate income tax,

property tax, import duty, value-added tax, excise and luxury taxes, and local taxes, in addition to assistance

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on land acquisition, licensing, investment, and labor. Non-tax incentives in the form of loans and interest

rate subsidies continue to be available mainly to MSMEs. Additionally, Indonesia provides various forms

of official export financing, insurance, and guarantees through the state-owned Indonesia Exim bank and

Asuransi Ekspor Indonesia. The United States will continue to urge Indonesia to submit a WTO notification

for all of its subsidy programs.

OTHER BARRIERS

Although the Indonesian Government and the Corruption Eradication Commission investigate and

prosecute high-profile corruption cases, many stakeholders continue to view corruption as a significant

barrier to doing business in Indonesia. Other barriers to trade and investment include: poor coordination

within the Indonesian Government; limited access to financing; the slow pace of land acquisition for

infrastructure development projects; poor enforcement of contracts; an uncertain regulatory and legal

framework; arbitrary tax assessments; and, lack of transparency in the development of laws and regulations.

U.S. companies seeking legal relief in contract disputes have reported that they are often forced to litigate

spurious counterclaims and have raised growing concern about the criminalization of contractual disputes.

Export Restrictions

Indonesia’s 2009 Mining Law requires companies to process ore locally before shipping it abroad.

Implementing regulations of this law ban the export of over 200 types of mineral ore, including nickel and

bauxite. Under GR 1/2017, companies with existing work contracts are required to convert to special

mining business licenses, divest 51 percent of their shares to Indonesian parties over a period of 10 years,

and build a domestic smelter by January 2022, in order to obtain a license to export mineral concentrates

(the 2020 Mining Law updates this requirement to build a smelter by 2023). U.S. stakeholders have

expressed serious concern about these measures.

As part of the implementation of the 2009 Mining Law, Indonesia prohibits the export of nickel ore, one of

several recent measures restricting the export of key steelmaking raw materials. The United States has

expressed concern about the impact this measure will have on global nickel supply and prices, in addition

the impact on the production and exportation of stainless steel, which Indonesia is producing in rapidly

increasing volumes well in excess of its domestic consumption. On December 11, 2019, the United States

requested to join consultations initiated by the European Union concerning the consistency of Indonesia’s

export ban with Indonesia’s WTO obligations and participated in the subsequent panel proceedings as a

third party. The panel report in this dispute was circulated on November 30, 2022, in which the panel found

Indonesia’s export ban on nickel ore to be inconsistent with its WTO obligations. Indonesia filed a notice

of appeal on December 12, 2022.

In the oil and gas sector, Ministry of Energy and Mineral Resources Regulation 42/2018 requires all oil and

gas contractors to sell their production to state-owned Pertamina in an attempt to reduce Pertamina’s crude

oil imports. In addition, production-sharing contracts and gross split contracts in Indonesia contain a

standard clause specifying that 25 percent of all production must be sold to domestic refineries for domestic

consumption. The policy, known as the Domestic Market Obligation, also requires companies to sell the

crude oil to domestic refineries at a heavily discounted rate. BI Regulation 13/2011 (as amended by BI

Regulation 14/2012) subjects export earnings to Indonesian banking law and regulations, despite

production-sharing contracts that allow companies to remit such earnings abroad.

Local Content

Indonesia imposes local content requirements across a broad range of sectors, including

telecommunications, mobile technology, energy, agriculture, retail, and franchising. These requirements

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are mandatory, and goods failing to meet those requirements cannot be imported into or sold in Indonesia.

Indonesia has stated its intentions to create new local content requirements and to increase existing

mandated local content levels. The United States continues to press Indonesia to remove these prohibitions.

In the mobile technology sector, MCIT Regulation 13/2021 requires all 4G-LTE and 5G enabled devices

to contain 35 percent local content and all 4G-LTE and 5G base stations to contain 40 percent local content.

MOI Regulation 29/2017 provides a formula for calculating “local content.”

In the telecommunications sector, MCIT Regulations 7/2009 requires that equipment used in certain

wireless broadband services contain local content of at least 30 percent for subscriber stations and 40

percent for base stations, and that all wireless equipment contains 50 percent local content. MCIT

Regulation 4/2019 requires all TV and set-top boxes based on digital video broadcasting-terrestrial second

generation and internet protocol set-top boxes to contain at least 20 percent local content. MCIT

Regulations 9/2019 and 10/2019 require wavelength division multiplexing and internet protocol network

devices to comply with local content requirements. Industry continues to voice concerns over MOI’s

refusal to discuss LCR policies with stakeholders.

In the textile sector, Indonesia enacted local content requirements in 2019, which effectively banned

imports of finished textile products classified in 430 Harmonized System Codes. U.S. carpet tile

manufacturers reported that the sudden implementation of the measures resulted in disrupted contracts with

customers in Indonesia and has hindered their ability to bid on relevant new tenders. In November 2021,

the U.S. textile industry reported that the 2019 local content requirements had been revoked and replaced

with MOT Regulation 20/2021(amended with MOT Regulation 25/2022). According to industry, the new

regulation allows finished textile products to be re-exported to Indonesia, but requires that importers apply

for an import license that is valid for one calendar year. Industry continues to seek further details on MOT

Regulation 20/2021.

Energy and Mining

Over the past decade, the Indonesian Government has introduced regulatory changes, including local

content in the energy and mining sectors. The regulatory changes have raised questions about the sanctity

of contracts already in force between private companies and the Indonesian Government.

In the oil and gas sector, GR 79/2010 (as amended by GR 27/2017) allows the Indonesian Government to

change the terms of certain existing production-sharing contracts, eliminate the tax deductibility of certain

expenses, change the terms and criteria for cost recovery, and place limits on allowable costs for goods,

services, and salaries. Contractors in the upstream oil and gas sector are required to prioritize the use of

domestic services, including energy-related services, in addition to domestic technologies, and engineering

and design capabilities. U.S. companies have noted that these local preference policies severely undermine

their ability to operate in the Indonesian market.

Indonesia’s oil and gas regulator also maintains stringent rules relating to how local content is measured

with respect to oil and gas projects, which are intended to achieve an average of 91 percent local content

by 2025. Goods and services supplied by companies without majority Indonesian shareholding cannot

qualify as local content, which places foreign energy service companies at a disadvantage.

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ISRAEL

TRADE AGREEMENTS

The United States–Israel Free Trade Agreement

The United States–Israel Free Trade Agreement (FTA) entered into force on August 19, 1985. Israel

implemented phased tariff reductions culminating in the complete elimination of duties on all non-

agricultural products by January 1, 1995. While Israel has eliminated tariffs on non-agricultural goods as

agreed, tariff and non-tariff barriers continue to affect a significant number of key U.S. agricultural product

exports.

To address the differing views between the two countries over how the FTA applies to trade in agricultural

products, in 1996, the United States and Israel signed an Agreement on Trade in Agricultural Products

(ATAP), which established a program of gradual and steady market access liberalization for food and

agricultural products effective through December 31, 2001. The United States and Israel completed

negotiation and implementation of a successor ATAP in 2004, which granted improved access for select

U.S. agricultural products. Originally scheduled to last through December 31, 2008, the 2004 ATAP has

been extended 15 times, most recently through December 31, 2023, to allow time for the negotiation of a

successor agreement. The current ATAP provides U.S. food and agricultural products access to the Israeli

market under one of three categories: unlimited duty-free access, duty-free tariff-rate quotas (TRQs), or

preferential tariffs, which are set at least 10 percent below Israel’s Most-Favored-Nation (MFN) rates.

The United States and Israel meet regularly to review the implementation and functioning of the FTA and

to address outstanding issues. The United States–Israel Joint Committee is the central oversight body for

the FTA, and last met on December 2, 2020.

IMPORT POLICIES

Tariffs

Agriculture

U.S. agricultural exports that do not enter duty free under World Trade Organization (WTO), FTA, or

ATAP provisions face barriers, such as high tariffs and a complicated TRQ system. These products include

higher-value goods that are sensitive for the Israeli agricultural sector, such as dairy products, fresh fruits,

fresh vegetables, almonds, wine, juice, and some processed foods. Stakeholders estimate that full market

access in agriculture could result in significant increases in U.S. exports to Israel of a variety of products,

including cheese, processed foods, apples, pears, cherries, frozen vegetables, and stone fruits.

GOVERNMENT PROCUREMENT

Israel has offset requirements that it implements through international cooperation (IC) agreements. Under

IC agreements, foreign companies that have been awarded government contracts are required to offset

foreign goods or services provided under the contracts by agreeing to localization commitments that require

one of the following: (1) investment in local industry; (2) co-development or co-production with local

companies; (3) subcontracting to local companies; or, (4) purchasing from Israeli industry.

Israel is a Party to the WTO Agreement on Government Procurement (GPA).

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Since January 1, 2009, the IC offset percentage for procurements covered by Israel’s GPA obligations has

been 20 percent of the value of the contract; for procurements excluded from GPA coverage, the offset is

35 percent; and, for military procurements, the offset is 50 percent. Under the revised GPA, which entered

into force in 2014, Israel began phasing out offsets in 2020 and will eliminate offsets by 2029.

U.S. suppliers have indicated that they believe that the size and nature of their offset proposals can be a

decisive factor in close tender competitions, despite an Israeli court decision that prohibits the consideration

of offset proposals in determining the award of a contract. Small and medium-sized U.S. exporters often

are reluctant to commit to make purchases in Israel in compliance with the IC agreements, and, as a result,

their participation in Israeli tenders is limited.

In addition, the inclusion of unlimited liability clauses in many government tenders discourages U.S. firms

from competing. When faced with the possibility of significant legal costs for unforeseeable problems

resulting from a government contract, most U.S. firms choose to insure against the risk, which raises their

overall bid price and reduces their competitiveness, as compared to bids from Israeli firms.

The United States–Israel Reciprocal Defense Procurement Memorandum of Understanding (MOU) is

intended to facilitate defense cooperation, in part by allowing companies from both countries to compete

on defense procurements in both countries on as equal a basis as possible, consistent with national laws and

regulations. The MOU, which has benefited Israeli defense industries by opening up the U.S. procurement

market to Israeli products, has not significantly opened the Israeli market for U.S. suppliers interested in

competing for Ministry of Defense procurements. Tenders open to U.S. suppliers require the company to

have a local agent or bank account to be able to transact in New Israeli Shekels (NIS).

INTELLECTUAL PROPERTY PROTECTION

The United States remains concerned with certain issues involving Israel’s protection and enforcement of

intellectual property (IP) rights. On copyright protection, although Israel is a signatory to the World

Intellectual Property Organization (WIPO) Copyright Treaty and the WIPO Performances and Phonograms

Treaty, it has not ratified either. U.S. industry has raised concerns regarding the adequacy of the protection

Israel provides against the unfair commercial use, as well as the unauthorized disclosure, of undisclosed

test or other data generated to obtain marketing approval for pharmaceutical products.

BARRIERS TO DIGITAL TRADE

Data protection in Israel is governed primarily by the Protection of Privacy Law (5741-1981) and the

guidelines of the Israeli regulator, the Privacy Protection Authority. Similar to the European Union General

Data Protection Regulation, Israeli law restricts the cross-border transfer of personal data of Israelis unless

certain specific criteria are met, such as the use of standard contract clauses. The United States remains

committed to working with Israel to ensure continuity in trusted cross-border data flows and privacy

protection.

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JAPAN

TRADE AGREEMENTS

The United States–Japan Trade Agreement (USJTA) and the United States–Japan Digital Trade Agreement

(USJDTA) entered into force on January 1, 2020. Under the USJTA, more than 90 percent of U.S.

agricultural exports to Japan are duty free or receive preferential tariff access. The USJDTA includes high-

standard provisions, including provisions that: prohibit the application of customs duties or other

discriminatory measures to digital products; ensure trusted cross-border transfer of information; and,

address the mandatory use of local computing facilities.

The United States continues to urge Japan to remove a broad range of barriers to U.S. exports, including

barriers at the border as well as other barriers to entering and expanding the presence of U.S. products and

services in the Japanese market.

IMPORT POLICIES

Tariffs

Japan’s average Most-Favored-Nation (MFN) applied tariff rate was 4.2 percent in 2021 (latest data

available). Japan’s average MFN applied tariff rate was 14.9 percent for agricultural products and 2.5

percent for non-agricultural products in 2021 (latest data available). Japan has bound 99.7 percent of its

tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 4.6 percent.

While Japan’s average MFN applied tariffs are relatively low for non-agricultural products, certain high

tariffs have a negative impact on a range of U.S industrial goods exports to Japan, such as chemicals, fish,

wood products, and jewelry.

Japan is the fourth largest single-country market for U.S. agricultural products, with U.S. exports valued at

approximately $14.6 billion in 2022, despite the existence of tariff and substantial non-tariff market access

barriers. While the USJTA removed or reduced tariffs on approximately 90 percent of U.S. food and

agricultural exports, there are several important products for which tariffs remain high and limit U.S. market

access, including rice and rice products, certain dairy products, beverages including mineral waters and

fruit juices, processed foods and pet food, table grapes, frozen blueberries, sugar, chocolate, and sweetened

cocoa powder.

Fish and Seafood

U.S. fish and seafood exports to Japan in 2021 totaled $708 million in 2022. However, tariffs of 3.5 percent

to 10.0 percent on several fish and seafood products, such as pollock, herring, salmon, whiting, cod, and

fish oil, hamper U.S. exports and reduce margins of Japanese importers who rely on U.S. raw product for

their processing operations. Other market access issues include Japan’s import quotas on Alaska pollock,

cod, Pacific whiting, mackerel, sardines, squid, Pacific herring, pollock roe, cod roe, and surimi. While

Japan has reduced tariffs, increased import quota volumes, and eased the administrative burdens associated

with those quotas, the remaining import quotas and tariffs continue to present barriers to U.S. exports, and

U.S. companies report that the process of obtaining quota allocation is expensive and subject to frequent

delays. The United States has urged Japan to take further action to reduce and eliminate obstacles to U.S.

exports of fish and seafood.

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Leather and Footwear

Japan maintains high tariffs on leather, footwear, and travel goods, ranging from 3.5 percent to an ad

valorem equivalent of approximately 130.0 percent on certain footwear imported from the United States.

For example, Japan continues to apply tariff-rate quotas (TRQs) to a limited and tightly controlled volume

of leather footwear imports. The tariffs on out-of-quota imports are either 30 percent or ¥ (yen) 4,300

(approximately $31) per pair, whichever is higher. These tariffs can more than double the cost of imports

and negatively affect market access for U.S.-made footwear. Japan also applies TRQs on some raw hides

and skins. The United States continues to seek improved market access for U.S. exports in this sector.

Non-Tariff Barriers

Rice Import System

Japan’s highly regulated and nontransparent system of importation and distribution for rice limits the ability

of U.S. exporters to have meaningful access to Japan’s consumers. Japan has established a global TRQ of

682,200 metric tons (on a milled basis) for imported rice. The Grain Trade and Operations Division of the

Ministry of Agriculture, Forestry, and Fisheries (MAFF) Crop Production Bureau manages the TRQ

through periodic ordinary minimum access (OMA) tenders and through simultaneous-buy-sell (SBS)

tenders. Imports of U.S. rice under the OMA tenders are destined almost exclusively for government stocks.

MAFF releases these stocks exclusively for non-table rice uses, such as industrial food processing, animal

feed, and re-export as food aid. Under SBS tenders, only a small amount of U.S. rice imported into Japan

actually reaches Japanese consumers while still identifiable as U.S. rice. In recent years, SBS tenders have

not been filled due partly to the non-market-based markup MAFF imposes on TRQ imports.

Although Japan asserts that the markup is set using supply and demand figures and world pricing, it has not

changed the markup since 2018. U.S. rice exports currently make up only about four percent of all rice

consumed in Japan. The United States will continue to monitor Japan’s rice import system in light of

Japan’s WTO import commitments and engage with Japan on its SBS markup for rice.

Wheat Import System

Japan requires food wheat to be imported through the Grain Trade and Operations Division of MAFF’s

Crop Production Bureau to secure the lowest tariff rate. The Crop Production Bureau resells the wheat to

Japanese flour millers at prices substantially above import prices by imposing a markup. The United States

continues to carefully monitor Japan’s operation of its state-trading entity for wheat and its potential to

distort trade.

Pork Import Regime

U.S. pork exports to Japan are subject to a trade-distorting “gate price mechanism” that functions as a

variable levy. To prevent lower-priced imports from competing with Japanese pork, the mechanism levies

progressively higher duties on lower-priced imports. For instance, chilled and frozen pork are subject to a

specific duty of up to ¥125 per kg (approximately $0.89 per kg) based on the difference between the actual

import value and a government-established reference price. This duty is in addition to an ad valorem duty

that is charged on all chilled and frozen pork regardless of import value. With the implementation of the

USJTA, the variable levy under the pork gate price mechanism will be reduced over time for U.S. pork, but

not eliminated.

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Ethanol

On May 23, 2022, Japan pledged to take all available measures to double demand for bioethanol, including

for sustainable aviation fuel and on-road fuel, by 2030. Yet Japan’s annual transport biofuels target of 500

million liters of crude oil equivalent has not changed since 2017 despite Japan’s commitment to reduce

greenhouse gas emissions in the transportation sector. In addition to the static biofuel target, Japan limits

its use of U.S. corn-based ethanol through restrictions on feedstock type. The United States urges Japan to

increase its annual biofuels target and eliminate any cap on corn-derived ethanol.

Customs Barriers and Trade Facilitation

Japan’s de minimis threshold is ¥10,000 (approximately $71). U.S. stakeholders have contended that the

level is too low. Expanding Japan’s advance rulings system to address more customs issues would also

improve transparency and predictability for U.S. exporters. The United States also has certain concerns

about unequal customs treatment between Japan Post Express Mail Service (EMS) and private express

delivery companies. The United States continues to urge Japan to improve the speed of customs processing

and to reduce the complexity of customs and border procedures. (For further information, see the Services

Barriers section.)

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Radio Device Technical Standards Compliance Certification

Imported radio devices must receive “giteki” certification from the Ministry of Internal Affairs and

Communications (MIC), verifying compliance with design and technical standards, in order to be sold

legally in Japan. U.S. companies report that the process to obtain the “technical conformity mark” is

lengthy. U.S. Federal Communications Commission certification is not recognized for giteki purposes, and

some certified testing labs have refused to analyze U.S. applicant products. U.S. companies say information

about the certification process is difficult to obtain and often incomplete, and test methods are not updated.

Sanitary and Phytosanitary Barriers

Food Safety

Proposed Shift in Regulatory Oversight

As part of an overall effort to streamline management of issues relating to health and infectious disease, the

Government of Japan is considering shifting oversight of food safety matters (under the Food Sanitation

Act) from the Ministry of Health, Labour and Welfare (MHLW) to the Consumer Affairs Agency (CAA).

Implementation of any legislation for that purpose that might be passed by the Diet in 2023 is expected as

early as 2024. Currently, three divisions within the MHLW Pharmaceutical Safety and Environmental

Health Bureau, which are staffed with experts experienced in regulating foodstuff imports to meet Japan’s

food security needs, oversee food safety standards, approvals, and enforcement of technical issues such as

food additives, chemical residues, and food products derived from biotechnology. The United States will

monitor deliberation regarding any legislation and implementing regulations to ensure continued science-

based regulatory decision-making and a level playing field for export of food products to Japan.

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Pre- and Post-Harvest Fungicides

Japan classifies fungicides applied pre-harvest as pesticides and classifies fungicides applied post‐harvest

as food additives. These different classifications based on the time of application lack a discernable science-

based rationale. Because post-harvest fungicides are classified as food additives, Japan requires products

treated with them to be labeled at the point of sale with a list of fungicides used. This requirement does not

have a significant impact on domestic producers because Japanese farmers generally apply fungicides prior

to harvest. The requirement may disadvantage U.S. products, however, because it wrongly suggests that

competing Japanese products have not been treated with fungicides.

Maximum Residue Limits

Japan’s procedures for enforcement of maximum residue limits (MRLs) result in uncertainty for shippers,

including those who have never violated Japan’s standards. Japan imposes enhanced surveillance on all

imports from an exporting country following one MRL violation by one producer. If a second violation is

detected during the enhanced surveillance period, Japan will detain and test all shipments of that product

from the exporting country, holding shipments until residue testing proves compliance. A violation by a

single producer from one country is not indicative of violations by other producers from that same country.

The United States continues to urge Japan to adopt a risk-based, violator-specific approach to addressing

MRL violations.

Beef and Beef Products

On May 17, 2019, Japan eliminated age-related restrictions on the cattle from which U.S. beef and beef

product exports to Japan are derived, thereby allowing use of cattle that are 30 months of age and older.

However, Japan maintained the requirement that U.S. exporters must hygienically remove those tissues

Japan defines to be specified risk materials (SRMs). Japan’s definition of SRMs is more restrictive than

the World Organisation for Animal Health (WOAH) guidelines provide for countries with a negligible risk

for bovine spongiform encephalopathy (BSE), as well as the U.S. Department of Agriculture Food Safety

and Inspection Service (FSIS) regulations. Specifically, Japan requires that all parts of the head, other than

tongues, cheek meat (Masseter muscle), and skins, be removed. Notably, this excludes head meat, which

is allowed under WOAH guidelines and FSIS regulations. This restriction has necessitated the retention of

an extra-regulatory third-party verification program, as FSIS does not verify the removal of the additional

tissues. At the time Japan eliminated its age-related restrictions, the United States pressed Japan to align

its SRM definition with WOAH guidelines for countries with a negligible risk for BSE. The United States

continues to seek Japan’s alignment with international guidelines.

Plant Health

Potatoes

U.S. potato exports to Japan are currently limited to chipping potatoes. In March 2020, the United States

submitted an official request to Japan for market access for table-stock potatoes. In September 2020, Japan

provided its preliminary pest lists for table-stock potatoes, which the United States commented on in

February 2021. The United States continues to engage with Japan on this market access request.

Apples

In 2017, the United States submitted an official request to export apples to Japan under a systems approach,

which would provide Japan with the same level of phytosanitary protection and eliminate costly pest-

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mitigation requirements for U.S. exporters. The United States will continue to engage with Japan and

provide capacity building on the requested systems approach.

Stone Fruit

In August 2021, Japan granted market access for U.S.-grown Japanese plum varieties, but Japan continues

to impose costly fumigation requirements even though without them an appropriate level of phytosanitary

protection can be provided to Japan. The United States will continue to engage with Japan on phytosanitary

topics related to U.S. stone fruit, including co-fumigation of U.S. plums and nectarines, and the U.S. market

access request for peaches.

GOVERNMENT PROCUREMENT

Japan is a Party to the WTO Agreement on Government Procurement (GPA).

Japan is obligated to open its government procurement covered under the GPA to goods, services, and

suppliers from the United States and other GPA Parties. U.S. companies in several sectors have expressed

concern that the Japanese Government sometimes uses technical specifications that could exclude U.S.

products and services, and in some cases may exert pressure on various entities to select domestic

companies for procurement opportunities. The United States has expressed these concerns to Japan as they

have arisen and will continue to engage with Japan to address these concerns.

INTELLECTUAL PROPERTY PROTECTION

Japan generally provides strong intellectual property (IP) protection and enforcement, although a number

of concerns remain.

In January 2022, an amendment to Japan’s Copyright Act created a presumption that when a right holder

enters into a license agreement authorizing a broadcast or cablecast (linear broadcast rights) of a

copyrighted work, the agreement will be presumed to also grant so-called “simulcast” rights to the

broadcaster (allowing transmissions of the broadcasted content for one week on other platforms, such as

Internet streaming) unless a contrary intention is clearly indicated at the time the rights are originally

granted to the broadcaster. This presumption is a departure from the typical operation of copyright law,

where express permission for the additional transmission is required from the copyright owner.

Japan’s Agency for Cultural Affairs has drafted a bill on an extended collective licensing (ECL) system

under which a user of a copyrighted product would pay a fee to legally acquire copyrighted material from

a central point. While this system would make it easier for users of copyrighted products, critics contend

it would infringe on IP rights and are advocating for an opt-out option to the ECL system. The Japanese

Government stated it plans to limit the scope of the ECL system to orphan works and non-commercial

works. The Diet is expected to consider the draft ECL bill during the January to June 2023 ordinary Diet

session.

Enforcement

On October 1, 2022, an amendment to Japan’s Trademark Act came into force that addresses concerns over

Japan’s personal use exemption for imported goods, which had been used increasingly to send counterfeit

items to individuals in Japan via postal and courier services. Pursuant to the amendment, items imported

from “overseas vendors” for personal use fall within the scope of the Trademark Act, such that counterfeits

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imported in this manner are subject to seizure. The United States will monitor implementation and

enforcement of the amendment to determine whether it reduces the import of counterfeit goods into Japan.

Geographical Indications

Japanese and foreign products are eligible for geographical indications (GI) protection in Japan. Japan also

has recognized numerous GIs pursuant to international agreements. Exchanges of lists of terms pursuant

to international agreements have resulted in Japan granting certain terms automatic protection as GIs

without sufficient transparency or due process. The United States continues to monitor implementation of

Japan’s GI system, as well as implementation of its recent agreements with the European Union and other

trading partners with respect to GIs.

SERVICES BARRIERS

Japan Post Holdings and Related Companies

Japan Post Holdings (JP Holdings) is a parent company created to replace the former state-owned enterprise

Japan Post. Its subsidiary companies include the new Japan Post Company (Japan Post Co.), which runs

post offices, postal services, and express delivery; Japan Post Insurance (JP Insurance); and, Japan Post

Bank (JP Bank). The Japanese Government still owns a little over one third of JP Holdings, which is the

minimum amount stipulated in Japan’s Postal Privatization Law. As of December 31, 2022, JP Holdings

owned approximately 89.0 percent of JP Bank and approximately 49.9 percent of JP Insurance.

Express Delivery

The United States remains concerned by unequal conditions of competition between Japan Post Co. and

international express delivery suppliers. Private U.S. express carriers are required to declare all shipments

for customs clearance and calculate duties and consumption taxes based on cost. Different procedures

apply to Japan Post Co., as duty assessment is based on EMS shipment rules. Further, companies report

that Japan customs officials may not consistently apply Japan’s de minimis standards to Japan Post Co.

EMS shipments, thereby allowing some EMS packages to avoid inspections and duty tax calculations that

would otherwise be due.

Japan Post Co. is regulated by a single agency, the MIC, whereas private express delivery companies are

subject to rules imposed by various ministries, including the Ministry of Finance; the Ministry of Health,

Labour, and Welfare; the MAFF; and, the Ministry of Land, Infrastructure, Transport, and Tourism. The

United States continues to urge Japan to equalize customs procedures and requirements.

Insurance Services

Japan’s insurance market is the third largest in the world, after those of the United States and China, with

a premium volume of $403.6 billion in 2021 (latest data available). In addition to the offerings of Japanese

and foreign private insurers, insurance cooperatives (kyōsai) and JP Insurance also provide substantial

amounts of insurance to consumers.

Postal Insurance and Banking

The United States has longstanding concerns about JP Insurance’s negative impact on competition in

Japan’s insurance market and continues to closely monitor the implementation of reforms. The United

States has long urged Japan to take steps to address a range of level-playing-field concerns.

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The United States continues to urge Japan not to allow JP Bank and JP Insurance to expand the scope of

their operations before a level playing field is established. Restraints on the scope of JP Insurance

operations, including a cap on the amount of insurance coverage and limits on the types of financial

activities and products JP entities can offer, have helped to limit harm to private insurance companies. In

April 2019, Japan raised the per-customer deposit cap to ¥26 million (approximately $185,700). The United

States continues to monitor these increases, which do not require legislative changes to be enacted.

Insurance Cooperatives

Kyōsai hold a substantial share of the insurance business in Japan. Some kyōsai are regulated by their

respective agencies of jurisdiction (e.g., MAFF or MHLW) instead of by Japan’s Financial Services Agency

(FSA), which regulates all private sector insurance and financial services companies. These separate

regulatory schemes create a nontransparent regulatory environment and afford kyōsai critical business,

regulatory, and other advantages over their private sector competitors. The United States remains

concerned about limited FSA supervisory authority over kyōsai.

Professional Services

Legal Services

Japan imposes cumbersome and time-consuming procedures for the registration of foreign lawyers to

provide international legal services in Japan and prohibits lawyers from establishing branch offices in Japan

without first incorporating in Japan.

Educational Services

Japan does not treat foreign universities’ Japan campuses as equivalent to Japanese higher education

institutions for tax, scholarship, and research grant purposes. This has harmed the ability of degree-granting

campuses to compete for students and faculty and deterred other U.S. universities from launching full four-

year degree programs. Despite extensive consultations with authorities, no U.S. university has been able

to satisfy all the legal requirements to be granted “educational corporation” (gakkō hōjin) status, which

would confer the same tax benefits enjoyed by Japanese universities. The requirement that such

corporations be “independently administered” (i.e., not subject to direct administration by the parent

university in the home country) is a particularly difficult legal hurdle to overcome. Lack of gakkō hōjin

status also means foreign satellite universities are excluded from participation in Japanese Government

grant programs that promote international exchange and provide financial support for study abroad, and

their faculty are excluded from applying for government-funded and other research grants on the same basis

as faculty at other Japanese universities.

Telecommunications Services

Telecommunications Business Act

U.S. and foreign services operators in Japan, including those offering only streaming and cloud-based

services, became subject to regulation under Japan’s Telecommunications Business Act (TBA) in April

2021. Businesses that intermediate communications with users in Japan, including providers of cross-

border services, must register as telecommunications providers with MIC, appoint a representative or agent

physically domiciled in Japan, and comply with regulations imposed on domestic operators under the TBA,

including disclosure and reporting obligations. U.S. stakeholders have noted such requirements could be

particularly burdensome for foreign small and medium-sized enterprises (SMEs).

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Of particular concern is compliance with the TBA’s “secrecy of communications” provision, which, when

extended to digital services, requires user consent to access or transmit communication content and

metadata in any electronic commerce, streaming, search, e-mail, messenger, cloud, or payment service

deemed by the MIC to intermediate two-party communications. The MIC has flagged user consent policies

that require users to relinquish their right to secrecy of communications in order to access the service as

“inappropriate,” even when services are provided free of charge or do not require the actual identity of the

user. The MIC, in the process of drafting implementing ordinances, has signaled that blanket consent and

the exceptions for automated communication are unlikely. Additionally, mandatory reporting of service

outages may be overly burdensome if they are triggered by very low levels of service disruption.

Spectrum Auctions

Unlike most advanced economies, Japan does not use auctions to allocate spectrum for commercial mobile

services. Allocation decisions are at the discretion of the MIC, based on consultation with the Radio

Regulatory Council and consideration of plans submitted by the operators. The factors that the MIC uses

to evaluate applications have raised questions about the fairness of the allocation process. On March 31,

2022, the MIC released an interim report on the use of auctions to allocate spectrum for a limited number

of frequency bands. On November 25, 2022, MIC released a summary of discussions held with an advisory

council, laying out a policy direction introducing a “conditional auction” for allocation of millimeter wave

bands or frequency bands that need to be shared with other wireless systems, in addition to the current

allocation system. The conditional auction would still allow the MIC discretion to account for certain

conditions such as area coverage when allocating spectrums.

Remote Keyless Entry Systems

Japan is the only country that does not use 433.92MHz for remote keyless entry systems for automobiles.

U.S. automakers continue to express concern about Japan’s use of 315 MHz for these systems, which

requires foreign automakers to modify their systems in order to sell automobiles in Japan, posing a

significant non-tariff barrier.

Handset Pricing

In 2019, the Diet passed an amendment to the TBA that: (1) prohibits the bundling of handset purchase and

carrier service contracts; (2) sets a cap on allowable discounts for handset prices; and, (3) specifies criteria

allowing exemptions for retailers to discount “non-performing” inventory. The revisions were part of a

government effort to improve contract transparency and lower prices for consumers by removing operators’

justifications for high subscription charges based on a need to recover handset subsidies.

One exemption related to inventory raises questions about discriminatory treatment of devices. If 24

months have passed since the last procurement of a device, a carrier or reseller may discount any unsold

devices by 50 percent. However, for devices no longer in production, the 50 percent discount is permitted

after only 12 months since the last procurement, and the allowable discount increases to as much as 80

percent after 24 months. These exceptions to the discount restriction reward Japanese companies, who tend

to produce an abundance of cheaper, limited-life devices, and harm foreign companies, including U.S.

companies, who create higher-quality devices that retain their functionality and value over time. The United

States continues to push for rules that will enable a level playing field.

Renewable Energy Services

Renewable energy growth in some regions of Japan has been constrained by lack of grid capacity. Laws

implemented in 2020 require the legal unbundling of the transmission and distribution business from the

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power generation and retail business, but incumbent transmission utility companies still own and operate

most of the transmission and distribution grids in Japan through wholly owned subsidiaries. These utility

companies reportedly overstate actual grid usage and understate available capacity to prevent competition

from new entrants. Many of the utility companies are also holding unused space on the grid for long-idled

nuclear power reactors. Incumbent transmission utilities are required to allow power producers to connect

to their power facilities unless they have a justifiable reason to deny the request. Given real grid capacity

constraints in some regions, utilities have begun offering renewable generation “non-firm” transmission

contracts, which allow generators to connect to the grid and use available grid capacity in exchange for a

higher risk of curtailment during times of congestion. In order to ensure that renewable energy is used to

the fullest extent possible, the Ministry of Economy, Trade, and Industry (METI) is considering changes to

the curtailment order that would favor renewable energy generation.

BARRIERS TO DIGITAL TRADE

In September 2019, a new advisory board, the Digital Market Competition Headquarters (DMCH), was

created under the Cabinet Secretariat to lead the coordination of competition policy in the digital market.

U.S. unions and companies have expressed concern with regard to the enforcement of Japan’s existing

competition laws in digital market and technology sectors in which Japanese companies are significant

participants.

Interactive Computer Services

Specified Digital Platform Providers

In February 2021, the Act on Improving Transparency and Fairness of Digital Platforms (the Transparency

Act) went into effect, which provides the DMCH and METI with the authority to designate certain providers

of digital services with obligations to provide increased transparency, including with regard to the terms

and conditions of use of their service. The Transparency Act’s provisions apply only to digital companies

“larger than a certain size in areas that are particularly important parts of society” and “for which the state

of transactions has been clearly ascertained through surveys.”

In April 2021, METI designated several large providers of online electronic commerce services, including

the Japanese companies Rakuten and Yahoo! Japan, as well as the Japanese subsidiaries of Amazon,

Google, and Apple) as “specified digital platform providers” under the Transparency Act. U.S. companies

have raised concerns about the handling of company information in the monitoring review process. The

U.S. Government has noted with concern a November 11, 2022 public disclosure by a leading Japanese

newspaper of METI administrative actions under the law directed toward specific companies while in the

draft stage (prior to final decision by the ministry).

On April 26, 2022, the DMCH released two interim reports evaluating competition for mobile operating

systems and for voice assistants and wearables, with the eventual goal of possible regulation under the

Transparency Act. U.S. industry flagged several concerns related to the drafting process for these reports,

including a short public comment period that coincided with a major national holiday, and a lack of

opportunities to provide information to the DMCH during the drafting process despite repeated requests.

The United States will continue to monitor the situation to ensure transparency as the DMCH prepares final

reports and potential regulation.

On October 3, 2022, METI designated several digital advertising service providers (including Google,

Meta, and Yahoo! Japan) as “specified digital platform providers” in the digital advertising sector under

the Transparency Act, following an earlier Japan Fair Trade Commission (JFTC) market study report citing

Google’s market position in digital advertising. U.S. industry expressed concern over the same above-

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mentioned issues related to the drafting of the market study. The United States engaged with Japan in 2022

to address these concerns and will continue to monitor the situation to ensure a fair process as the DMCH

prepares final reports and potential regulation.

Digital Platform Guidelines

In December 2019, the JFTC released guidelines on applying the Antimonopoly Act (AMA) to transactions

between digital platform operators and consumers. In these guidelines, the JFTC asserts that platform

companies are in “a superior bargaining position” when customers have no choice but to provide their data

to use the services and platform companies may commit an abuse of that position when use of personal data

is not fully and accurately disclosed or protected. After receiving input from stakeholders concerned about

insufficient guidance, the JFTC provided several examples of practices that would or would not constitute

abuse of superior bargaining position.

The United States will continue to monitor these developments and encourage transparency in the process.

SUBSIDIES

Japan maintains numerous support programs at the national, prefectural, and municipal levels that may

favor domestic logs and wood products over imports. To increase the supply of domestic wood products

from 31 million cubic meters in 2019 to 42 million cubic meters in 2030, Japan allocated ¥49.5 billion

(approximately $350 million) for the Emergency Measures to Strengthen International Competitiveness

and Product Supply Capability of the Wood Industry from the 2021 MAFF supplemental budget.

Furthermore, in 2022 Japan allocated ¥171 billion (approximately $1.2 billion) under the Forest

Management Project to support domestic thinning and selective logging operations. In addition, Japan has

provided funding for local governments to manage unprofitable forestlands. Starting in 2024, Japan will

begin to collect the Forest Environment Tax from each Japanese household to cover the cost of this program

(approximately ¥60 billion, or $425 million, per year). The United States is monitoring the disbursement

of these funds and other support programs.

ANTICOMPETITIVE PRACTICES

Improving Anti-Monopoly Act Compliance and Deterrence

Japan’s AMA provides for both administrative and criminal sanctions against cartels and administrative

sanctions for non-cartel anticompetitive conduct. Criminal prosecutions, which have the strongest deterrent

effect against anticompetitive behavior, have been limited, and penalties against convicted company

officials have been weak, although the JFTC has routinely imposed sizable civil “surcharges” against

cartelists. The United States has continued to urge Japan to take steps to maximize the effectiveness of

enforcement against cartel and bid rigging violations of the AMA to ensure open and competitive markets.

Abuse of Superior Bargaining Position

U.S. stakeholders in Japan continue to express concern regarding JFTC investigations under the “unfair

trade practices” clause of the AMA because ambiguous standards for liability in this area may make good

faith efforts to comply with the AMA difficult. Stakeholders have called for further clarification of each

of the forms of abuse listed in the Abuse of Superior Bargaining Position Platform Guidelines to minimize

the uncertainty for companies and users.

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Limited Attorney-Client Privilege

In 2020, the JFTC introduced protections for certain attorney-client communications, a departure from

Japan’s general absence of such protections. However, the scope of protected confidential attorney-client

communications is extremely limited, protecting only legal advice under the AMA regarding alleged

antitrust cartels, which involve price-fixing, market allocation, and bid rigging. In principle, only an

external lawyer’s advice is protected. An in-house lawyer’s advice might be protected only if the in-house

lawyer is working independently from the enterprise itself. In addition, only legal advice by lawyers

qualified in Japan is protected. Legal advice from foreign lawyers (even if they are registered in Japan as

a Registered Foreign Lawyer) is not protected, as a result of Japanese limitations on the practice of law in

Japan. The rules further protect communications only for documents that are carefully segregated from

other unprotected documents. The United States will continue to monitor developments and advocate for

fuller recognition of attorney-client privilege by the JFTC.

OTHER BARRIERS

Transparency

Advisory Groups

Advisory councils and other government-commissioned study groups enjoy significant power in Japan’s

regulatory process that sometimes goes beyond providing advice and recommendations. The United States

continues to urge Japan to follow good regulatory practice to ensure transparency with respect to the

formation and operation of advisory councils and other groups convened by Japan by adopting new

requirements to ensure ample and meaningful opportunities for those not on advisory councils and study

groups to participate in, and directly provide input to the regulatory process.

Public Comment Procedure

The United States remains concerned about inadequate implementation of public comment procedures by

Japanese ministries and agencies. In 2022, stakeholders flagged several instances where comment periods

for regulations or guidelines were non-existent, unnecessarily short, or occurred at the same time as major

national holidays. In other cases, comments did not appear to have been adequately considered given the

brief time between the end of the comment period and the issuance of a final rule or policy. The United

States has stressed the need for Japan to improve the system, such as by lengthening the standard public

comment period for rulemaking.

Automotive

The United States has expressed strong concerns with the overall lack of access to Japan’s automotive

market for U.S. automotive companies. A variety of non-tariff barriers impede access to Japan’s

automotive market, and overall sales of U.S.-made vehicles and automotive parts in Japan remain low.

Non-tariff barriers include the non-acceptance of U.S. Federal Motor Vehicle Safety Standards certification

as providing an equivalent level of protection as the Japanese vehicle safety standards; unique standards

and testing protocols; unique spectrum allocation for short-range vehicle communications systems; a lack

of opportunities for input by interested persons throughout the process of developing regulations; and,

hindrances to the development of distribution and service networks.

Japan aims to transition to 100 percent clean energy vehicles, including electric vehicles, hybrid vehicles,

and fuel cell electric vehicles (FCVs), sold in Japan by 2035. Japan provides a purchase subsidy of up to

¥850,000 (approximately $6,071) for traditional battery electric vehicles (BEVs). However, FCVs, which

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are primarily produced by Japanese companies, receive a much higher subsidy than BEVs, of up to ¥2.55

million (approximately $18,214), depending on the size of the vehicle. Until May 2022, Toyota had a 100

percent market share in Japan for FCVs, making this subsidy almost entirely directed toward one Japanese

company.

Japan provides another incentive of up to ¥250,000 (approximately $1,786) for vehicles equipped with

power feeding technology that allows vehicles to send stored power back into a home in the event of power

outages. This subsidy was implemented on March 31, 2022 with little lead time, but few non-Japanese

companies produce vehicles equipped with this specific technology, giving a competitive advantage to

Japanese automotive manufacturers.

Medical Devices and Pharmaceuticals

Over a decade ago, the Japanese Government started streamlining regulatory approval timelines and

improving the predictability of the reimbursement pricing system. However, in recent years, Japan has

frequently introduced reimbursement adjustments in ways that stakeholders argue is non-transparent,

increasing the unpredictability of the system’s operation.

Japan’s Price Maintenance Premium (PMP) system, introduced in 2010, adds price premiums to innovative

new drugs and protects this price throughout the patent life of a medicine. In the 2018 pricing cycle, Japan

made several changes to its PMP rules that have significantly reduced the number of innovative products

and companies that receive the full benefit of the PMP. Several criteria introduced in 2018 for use in PMP

calculations appear to make it easier for Japanese companies to qualify for top premiums and are unrelated

to the degree of innovation of the individual product under consideration. Reimbursement outcomes

suggest that U.S. companies, especially SMEs, are at a disadvantage compared to Japanese companies.

Although Japan made minor changes during the 2020 and 2022 pricing cycles, U.S. industry asserts that

the eligibility criteria were not adequately revised.

U.S. industry has also raised serious concerns regarding the lack of transparency and predictability in

government decision-making. For example, the scope of the pharmaceutical annual price cut policy

implemented in 2021 went far beyond any options put forward by the MHLW, and there was no opportunity

for public comment prior to its formal announcement. In addition, in recent years, the MHLW has been

consolidating medical device product functional categories for price determination with little explanation

and little time for key stakeholders to respond. U.S. industry is concerned about the lack of more frequent

and meaningful opportunities to provide input regarding Japan’s reimbursement rules, as well as other

policies of critical importance to the biopharmaceutical and medical device industries.

The United States continues to urge Japan to solicit and consider the input of all stakeholders, including

U.S. stakeholders, when developing any measures related to reimbursement policies, and to follow

transparent processes in the present and future development of any new policies and measures. The United

States also continues to urge Japan to take into account international standards in the development of its

regulations in clinical development, multiregional clinical trials, and risk management.

Nutritional Supplements

Japan regulates nutritional supplements as a part of a loosely defined “health food” subcategory of

foodstuffs, unlike in the United States, where “dietary supplements” are regulated by the U.S. Department

of Health and Human Services Food and Drug Administration (FDA) under different regulations than

“conventional” foods. Japan has taken steps to streamline import procedures and to improve access in this

market. However, significant market access barriers related to Japan’s health claim system remain.

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Japan’s CAA establishes three categories for both domestic and imported products under the Food with

Health Claims system: Food with Function Claims (FFC); Foods for Specified Health Uses (FOSHU); and,

Foods with Nutrient Function Claims (FNFC). Most U.S. nutritional supplement products are unable to

obtain either FOSHU approval or FNFC designation due to FNFC’s standards and specifications, which

limit the range of nutritional ingredients such as vitamins and minerals that can qualify as FNFC. Vitamin

and mineral products designated under the FNFC system are excluded from the FFC system.

Quasi-Drugs

Japan has not adopted a monograph system, intended to expedite the registration of products known as

quasi-drugs under Japan’s Pharmaceutical and Medical Devices Act. As a result, products that contain

active ingredients that are already approved for specific uses in Japan, such as in anti-dandruff shampoos

and skin care, may still require six months to receive approval for market placement. The MHLW has

committed to work with industry stakeholders and local prefectural governments to develop a monograph

system, known as “Quasi-Drug Additives Spec Codex”, which lists the approved uses for previously

reviewed ingredients and claims. Such a Codex would speed up approval times and bring consistency to

the reviews of products by the MHLW and local governments.

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JORDAN

TRADE AGREEMENTS

The United States–Jordan Free Trade Agreement

The United States–Jordan Free Trade Agreement (FTA) entered into force on December 17, 2001. Under

the FTA, as of January 1, 2010, Jordan provides duty-free access to nearly all U.S. exports, with exceptions

for a few product lines, such as alcoholic beverages. The United States and Jordan meet regularly to review

the implementation and functioning of the Agreement and to address outstanding issues.

IMPORT POLICIES

Taxes

Jordan’s General Sales Tax law allows the government to impose a special tax at the time of importation in

addition to the general sales tax. For example, Jordan currently imposes a 15 percent special tax on

carbonated drinks. Jordan also imposes a special tax on imported vehicles that varies according to the type

of engine. Cars with conventional fuel engines are taxed within a range of 67 percent to 94 percent, electric-

powered cars are taxed within a range of 10 percent to 15 percent, and hybrid vehicles are taxed at 50

percent. The United States continues to work with Jordan to promote transparency and predictability.

Non-Tariff Barriers

Import Licensing

Import licenses are required for specific food products by the Ministry of Health and for raw agricultural

goods by the Ministry of Agriculture. The approval process can be time-consuming and, at times, lacks

transparency. U.S. exporters have raised concerns about the difficulty of obtaining import licenses from

the Ministry of Agriculture for U.S.-origin chicken leg quarters and live dairy cattle. The United States has

worked with Jordan’s Ministry of Agriculture and Ministry of Industry, Trade and Supply (MOITS) and

has an agreement in principle with the Minister of MOITS to eliminate import licensing. The United States

continues to engage with Jordanian authorities to address this issue.

Jordan requires that importers of commercial goods be registered traders or commercial entities. The

MOITS occasionally issues directives requiring import licenses for certain goods or categories of goods

and products in newly emerging or protected sectors. Jordan requires a special import license prior to the

importation of telecommunications and security equipment.

Customs Barriers and Trade Facilitation

Jordan ratified the WTO Trade Facilitation Agreement (TFA) in February 2017. Jordan is overdue in

submitting four transparency notifications related to: (1) import, export, and transit regulations; (2) the use

of customs brokers; (3) customs contact points for the exchange of information; and, (4) details on the

operation of the single window. Three notifications were due on February 22, 2017 and notification for

details on the operation of the single window was due on December 31, 2022, according to Jordan’s self-

designated implementation schedule.

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TECHNICAL BARRIERS TO TRADE

Corn Import Sampling Procedures

Jordan’s Ministry of Agriculture does not comply with the sampling technique guidance for grain issued

by the Jordan Standards and Metrology Organization, and Jordan’s poor sampling techniques have resulted

in the rejection of shipments of U.S.-origin corn, according to U.S. stakeholders. The United States has

worked with Jordan to improve sampling and inspection procedures, but problems persist. U.S. exports of

corn to Jordan have essentially stopped as a result. U.S. corn exports to Jordan were valued at

approximately $59 thousand in 2022. The United States has worked with Jordan’s Ministry of Agriculture

and the MOITS and concluded an agreement in principle with those Ministries to accept certificates of

inspection from the U.S. Department of Agriculture Grain Inspection Service as to the quality of corn

shipped from the United States. The United States continues to work with Jordan to resolve this issue.

GOVERNMENT PROCUREMENT

Jordan is not a Party to the WTO Agreement on Government Procurement (GPA), but has been an observer

to the WTO Committee on Government Procurement since March 2000. In 2002, Jordan commenced the

process of acceding to the GPA with the submission of its initial offer. Jordan subsequently submitted

several revised offers in response to requests by the United States and other GPA Parties for improvements

to market access. Negotiations on Jordan’s accession have been inactive since 2014.

On September 8, 2022, the Jordanian Cabinet adopted Government Procurement Bylaw No. 8, which grants

priority to a domestic bid over a foreign bid if the bids are equivalent in terms of requirements,

specifications, and price. Additionally, Jordan offers domestic companies a preferential rate of 15 percent

in all government tenders based on a 2013 cabinet decision, which has been renewed annually.

INTELLECTUAL PROPERTY PROTECTION

Jordan continues to take steps to provide more comprehensive protection of intellectual property (IP) rights.

However, challenges regarding IP protection and enforcement persist. As seen throughout the region,

online and physical copyright infringement is widespread. For example, the Spider company is listed in

the 2022 Review of Notorious Markets for Counterfeiting and Piracy (Notorious Markets List) for

supplying Spider-branded piracy devices through online and physical stores across Europe, the Middle East,

and North Africa. The National Library, the primary IP authority in Jordan, has noted that challenges to

combatting this type of piracy include a lack of adequate resources and a lack of initiative from IP rights

holders. Despite past efforts by law enforcement officials to crack down on pirated and counterfeit

products, enforcement efforts need to be strengthened, particularly with respect to utilizing ex officio

authority to pursue criminal investigations. The U.S. Government continues to engage with the

Government of Jordan on these issues.

BARRIERS TO DIGITAL TRADE

Information and communication technology firms operating in Jordan are, in many cases, required to

maintain a local presence and to contract with local service suppliers. Local presence requirements can

hamper the ability of firms to supply services on a cross-border basis.

SUBSIDIES

On January 4, 2022, Jordan launched the National Industries Support and Development Fund, which

provides financial support in the form of grants to industrial companies that meet requirements related to

FOREIGN TRADE BARRIERS | 247

performance, outputs, and operation. The MOITS estimates that 230 small, medium, and large companies

will benefit from the support and that the program will provide needed job opportunities. Jordan intends

the Fund to be a WTO-compliant alternative to its non-compliant subsidy and incentive scheme abolished

in December 2021.

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KENYA

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Kenya’s average Most-Favored-Nation (MFN) applied tariff rate was 13.2 percent in 2021 (latest data

available). Kenya’s average MFN applied tariff rate was 20.4 percent for agricultural products and 12.1

percent for non-agricultural products in 2021 (latest data available). Kenya has bound 16.3 percent of its

tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 93.8 percent.

Kenya applies the East African Community (EAC) Customs Union’s Common External Tariff (CET),

which the EAC expanded in July 2022 to four tariff bands: (1) zero percent duty for raw materials and

inputs; (2) 10 percent duty for processed or manufactured inputs; (3) 25 percent duty for finished products;

and, (4) the new 35 percent band that went into effect in July 2022 for a list of products the EAC concluded

would promote regional integration and domestic industrial sectors. Among the imports that are impacted

by the new 35 percent fourth tariff band are U.S. exports of second-hand clothing and improved clean

cooking products. In addition to CET duties, for products and commodities deemed sensitive, Kenya

continues to apply ad valorem rates above 35 percent. This includes rates of 60 percent for most milk

products, 50 percent for corn and corn flour, 75 percent for rice, 60 percent for wheat flour, 100 percent for

sugar, and 50 percent for textiles.

When deemed necessary, the Kenyan Government has temporarily waived agricultural tariffs to stabilize

prices when domestic agricultural prices exceeded certain levels. When the Kenyan Government has taken

such action, the EAC has granted an exception from the CET.

Under its Exemptions Regime, the EAC had exempted all solar and wind energy products from import

duties. In June 2016, the EAC amended its Exemptions Regime to only include products related to the

development and generation of solar and wind energy. The duties were subsequently imposed on spare

parts and accessories to solar equipment. Kenya has not uniformly applied the duties, and some

stakeholders have voiced concern that this amendment does not adequately define the term “spare parts and

accessories.”

Taxes

The 2013 Value Added Tax (VAT) Act reduced the number of VAT-exempt items from 400 to 27, to

simplify tax administration, enhance tax compliance, and eradicate a backlog of refunds. The 2013 Act

went into effect with few specific guidelines, resulting in uncertainty surrounding the application of VAT

rules. Amendments to Kenya’s VAT Act adopted between 2013 and 2016 clarified some items that are

VAT-exempt, including: aircraft engines and aircraft parts, plastic bag biogas digesters, parts for the

assembly of primary school laptop tablets, and goods for use by the Kenya Film Commission or in the

construction of industrial and recreational parks subject to specified conditions. These amendments also

made clear that VAT refund claims must be submitted within 12 months of purchase. VAT Regulations

issued in 2017 further clarified the implementation of the 2013 VAT Act, reducing the number of VAT

refund claims. VAT-exempt companies, including importers, still experience lengthy wait times in

receiving their VAT refunds.

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Since 2018, the Kenya Revenue Authority (KRA) has imposed the VAT on raw materials for the

manufacture of garments and leather imported to Export Processing Zones to protect local livestock keepers

and producers of raw materials used in tanneries. In 2020, the KRA rescinded VAT exemptions on

helicopters and certain aircraft parts, as well as the hiring, leasing, and chartering of helicopters. At least

one U.S. company in Kenya that sells small planes, helicopters, and parts has been negatively impacted by

the removal of this exemption.

Non-Tariff Barriers

In 2017, the EAC approved the EAC Elimination of Non-Tariff Barriers Act, which aims to prohibit

Member States from engaging in discriminatory trade practices. However, citing Member States’ slow

implementation and weak enforcement of the Act, companies have complained that non-tariff barriers

remain a significant barrier to intra-regional trade.

Quantitative Restrictions

In instances where domestic agricultural production exceeded projections, the Ministry of Agriculture has

imposed quotas to limit imports and stabilize domestic prices.

Customs Barriers and Trade Facilitation

Kenya ratified the WTO Trade Facilitation Agreement in December 2015. In June 2021, Kenya presented

its notification on arrangements for the provision of technical assistance support. In January 2022, Kenya

also submitted its transparency notification on: (1) the operation of its single window; (2) the use of customs

brokers; and, (3) customs cooperation.

U.S. companies have raised concerns about the length of time required for Kenyan Customs to release

shipments, as well as the use of excessive formalities. Many U.S. companies have commented that Kenya’s

one stop customs clearance system does not operate as intended, and that pre-arrival processing of

electronic documents is ineffective. Other U.S. companies have raised concerns about the inconsistent

application of classification and valuation decisions, as well as unnecessary transit inspections.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Verification of Conformity to Standards Procedures

In 2019, Kenya issued the Standards (Verification of Conformity to Standards and Other Applicable

Regulations of Imports) Regulations, which subjects all imports to the Pre-Export Verification of

Conformity (PVoC) program, except those meeting certain exemption criteria. The PVoC program requires

pre-shipment inspection of most imports, in their country of origin, to ensure compliance with applicable

Kenyan standards and regulations. Under the PVoC program, an importer must obtain a Certificate of

Conformity (CoC) from a PVoC inspection agent designated by the Kenya Bureau of Standards (KEBS).

The PVoC inspection agent assesses what, if any, testing is required to meet Kenyan standards and

regulations. Kenya asserts that the program is necessary to address health, environmental, and security

concerns, but U.S. industry has raised concerns that the program’s testing, certification, and labeling

requirements deviate from international standards without providing an additional measure of safety.

Certain products, such as human and veterinary pharmaceutical products, aircraft, marine craft, pesticides,

plants, seeds and planting materials, and live animals, are exempt from the PVoC program.

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Goods arriving at the port of entry without having undergone an inspection through the PVoC program to

obtain a CoC are subject to inspection by KEBS. The cost of this inspection is five percent of the customs

value of the shipment, and the goods may be rejected. After obtaining a CoC or undergoing inspection at

the port of entry, the importer must also purchase from KEBS an Import Standardization Mark label that

must be affixed to each imported article or its retail packaging.

Sanitary and Phytosanitary Barriers

Agricultural Biotechnology

On October 3, 2022, Kenya lifted a 10-year ban on the import and commercialization of genetically

engineered (GE) products, opening a path to cultivation and import of GE food and feed. However, the

lifting of the ban is on hold pending the outcome of domestic legal challenges.

Animal Genetics

In January 2020, Kenya’s Office of the Director of Veterinary Services (DVS) and the U.S. Department of

Agriculture Animal and Plant Health Inspection Service agreed on veterinary requirements and certificate

attestations for the importation of bovine embryos from the United States. However, in May 2020, DVS

proposed additional requirements that went beyond those previously agreed by the two agencies. Kenya

imposes standards that are overly restrictive for bovine semen imports, precluding actual market access for

most U.S. bovine semen for dairy cattle, leaving the largest share of the market to the domestic producers

who do not meet the same criteria. Technical work is ongoing.

Import Permits

Kenya maintains complex, non-transparent, and costly requirements for the importation of all meat, dairy,

and poultry products, including a “Letter of No Objection to Import Permit” (no-objection letter) from DVS

under the Ministry of Agriculture, Livestock, and Fisheries. Before issuing a no-objection letter, which

requires several attestations including animal and public health statements, DVS requires an importer to

explain the reason for importation through a “Letter of Application to Import” and to specifically address

the market need the import would meet. DVS issues the no-objection letter for meat, dairy, and poultry

products at its discretion on a case-by-case basis. Importers have reported that DVS has at times provided

them with non-sanitary-related grounds for denying permits, such as the local availability of a similar

product. DVS does not provide written justification for not issuing the letter.

Plants and Plant Products

Kenya subjects imported and domestically produced corn to a total aflatoxin limit of 10 parts per billion

(ppb) and a 13.5 percent maximum moisture content. As a result, most U.S. exports are denied permits for

importation. Under special circumstances, such as food shortages, Kenya has allowed higher moisture

content for imported corn, which must then be dried and milled immediately upon arrival to reduce the risk

of aflatoxin contamination. For U.S. corn exports that are permitted under special circumstances, the costs

associated with the additional processing requirements make U.S. corn exports largely uncompetitive.

GOVERNMENT PROCUREMENT

Since May 2015, an initiative dubbed “Buy Kenyan Build Kenya” has required Kenyan state ministries,

departments, and agencies to procure at least 40 percent of their supplies locally. For example, government

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entities are required to give an exclusive procurement preference to motor vehicles and motorcycles

produced by companies that have assembly plants in Kenya.

The 2016 Public Procurement and Asset Disposal Act (PPADA) reserves procurement preferences for

Kenyan-owned firms and goods manufactured or mined in Kenya. For tenders funded entirely by the

government with a value of less than KES 50 million (approximately $416,000), the preference for Kenyan

firms and goods is exclusive. Where the procuring entity seeks to contract with non-Kenyan firms or

procure foreign goods, the PPADA requires a report detailing evidence of an inability to procure locally.

In April 2020, the National Treasury issued implementing regulations for the PPADA, which mandate that

tender proposals include skills and knowledge transfer to Kenyan citizens, a 75 percent set-aside of

employment opportunities for Kenyans, and a local content plan.

U.S. firms have had very limited success bidding on Kenyan Government tenders. There are widespread

reports that corruption often influences the outcome of public tenders, and many of these tenders are

challenged in the courts. Foreign firms, some without proven track records, have won government contracts

when partnered with well-connected Kenyan firms or individuals. As of January 2019, all tenders and

procurements are required to be undertaken through the Kenyan Government’s electronic procurement

system, the Integrated Financial Management Information System (IFMIS). U.S. companies have

expressed concerns about IFMIS due to insufficient connectivity and technical capacity in county

government offices, apathy from county government officials, central control shutdowns, and security gaps

that render the system vulnerable to manipulation and hacking.

In 2021, Kenya joined the U.S. Trade and Development Agency’s Global Procurement Initiative (GPI),

becoming the 14th partner to enter the program that will train its procurement officials virtually on

international best practices and the integration of best value methodologies in public procurement.

Kenya is neither a Party to the WTO Agreement on Government Procurement nor an observer to the WTO

Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Kenya’s introduction of a new, complex customs recordation system has raised concerns about the ability

of U.S. importers to bring products containing intellectual property into Kenya. Widespread availability of

counterfeit and pirated goods remains an issue. Stakeholders also have raised concerns regarding

distribution of copyright infringing content online and the need for Kenya to join the World Intellectual

Property Organization (WIPO) Internet Treaties, which deal particularly with copyright and related rights

in the digital environment.

SERVICES BARRIERS

Insurance Services

Kenya requires that a minimum of one-third of the equity of an insurance company be held by Kenyan

persons or citizens of another EAC Member State. In addition, Kenya requires that local insurers offer at

least 20 percent of their treaty reinsurance contracts to the state-owned Kenya Reinsurance Corporation

(Kenya Re). Although regulatory approval can be sought, Kenya generally prohibits cross-border

Difference-in-Conditions and Difference-in-Limits insurance, which is an important type of insurance for

facilitating U.S. investment in countries such as Kenya because it covers unique risks faced by U.S. firms.

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Telecommunications Services

Licensed telecommunications service providers are required to maintain 30 percent ownership and control

by Kenyan persons within three years from the issuance of a license. Additionally, participants in the

telecommunications services market report long delays in the licensing process, creating an unpredictable

regulatory environment for foreign investors.

BARRIERS TO DIGITAL TRADE

Data Localization Requirements

Kenya’s 2019 Data Protection Act (DPA) includes unclear provisions governing the cross-border transfer

of personal information. The DPA requires that data controllers provide proof that personal data will be

secure as a condition for transferring the data outside Kenya but does not describe what would constitute

proof. The DPA also requires consent of the data subject as a condition for the cross-border transfer of any

“sensitive personal data,” a broad category of information. Additionally, the Act empowers the Data

Commissioner to prohibit the cross-border transfer of certain categories of data, creating uncertainty for

businesses operating in Kenya that depend on cross-border data flows. The 2021 Data Protection (General)

Regulations require the processing of personal data “for the purposes of actualizing a public good” to be

processed through a server and data center located in Kenya, or that at least one copy of the personal data

be stored in a data center located in Kenya.

Internet Services

In August 2020, Kenya published the November 2019 National Information, Communications, and

Technology (ICT) Policy, which updated a 2006 policy. This ICT Policy is intended to facilitate universal

access to ICT infrastructure and services. The provisions include a local equity requirement that mandates

that firms licensed to provide ICT services must have at least 30 percent Kenyan ownership as well as

preferences and incentives for Kenyan-owned ICT manufacturers.

Digital Services Taxation

In accordance with the 2021 Finance Act, Kenya applies a 1.5 percent digital services tax (DST) to non-

resident businesses. The DST taxes gross revenue accrued through any “digital marketplace,” defined as

“an online platform which enables users to sell or provide services, goods, or other property to other users.”

Kenya has engaged in discussions with the Organization for Economic Cooperation and Development

(OECD) and other partners on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting,

but has not endorsed or adopted it and continues to apply its unilateral DST.

INVESTMENT BARRIERS

Limitations on Foreign Equity Participation

Kenya imposes foreign ownership limitations in several sectors, often in combination with local content

requirements. For example, the Communications Authority, Kenya’s telecommunications regulator,

requires 30 percent Kenyan shareholding within three years of receiving a license. The 2016 Private

Security Regulation Act restricts foreign participation in the private security sector by requiring that

Kenyans hold at least 25 percent of shares in private security firms. Additionally, since 2015, Kenya has

imposed regulations requiring that Kenyans own at least 15 percent of the share capital of derivatives

exchanges.

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The 2016 Mining Act imposes a variety of restrictions on foreign participation in the mining sector. Among

other restrictions, the Mining Act reserves acquisition of mineral rights for Kenyan companies; requires 60

percent Kenyan ownership of both mineral dealerships and artisanal mining companies; and, requires large-

scale mining operations to offer 20 percent equity on the Nairobi Securities Exchange within three years of

commencing operations, while also offering 10 percent “free-carried interest” (free equity stake in capital

operations) to the Kenyan Government.

Local Content Requirements

When making initial investments, foreign investors with foreign staff are required to submit plans for the

gradual phase out of non-Kenyan employees. In considering an application for investment, the Kenya

Investment Authority reviews the extent to which such investment or activity will contribute to employment

creation, acquisition of new skills or technology, and government revenue.

In the construction sector, foreign contractors (defined as companies incorporated outside Kenya or with

more than 50 percent ownership by non-Kenyan citizens) are subject to local content restrictions. Foreign

contractors are required to enter into subcontracts or joint ventures to ensure that at least 30 percent of the

contract work is done by local firms. Foreign contractors are also required to hire from the local labor

market unless the National Construction Authority determines that the necessary technical skills are

unavailable locally.

Real Estate Restrictions

The 2010 Kenyan Constitution prohibits foreigners from holding freehold land title anywhere in the

country, permitting only leasehold titles of up to 99 years. While the process for leasing developed land

and property is clear and established, the process for obtaining clear title of undeveloped land is opaque

and unreliable.

For undeveloped land, investors risk receiving fake title deeds or leasing a plot with multiple titles and

unauthorized sales.

The 2019 Land Value (Amendment) Act guides compensation for eminent domain land acquisitions. The

value of compensation is based on market rates and tax returns for the land in question, however, that data

is often non-existent for community land.

STATE-OWNED ENTERPRISES

The Kenyan Government wholly owns the National Oil Corporation and the Kenya Pipeline Corporation,

and limits competition with these companies. Other state-owned enterprises (SOEs), including Kenya

Electricity Generating Company, Kenya Electricity Transmission Company, Kenya Power (formerly Kenya

Power and Lighting Company), and the Geothermal Development Company dominate the electricity

generation, transmission, and distribution segments of the energy sector. Kenya Power’s internal

procurement rules require that 80 percent of supplies be sourced from Kenyan-registered companies to

encourage foreign suppliers to establish manufacturing facilities in the country.

Certain SOEs have enjoyed preferential access to markets. Examples include Kenya Re, which enjoys a

guaranteed re-insurance market share; Kenya Seed Company, which has fewer marketing barriers than its

U.S. competitors; and, the National Oil Corporation, which benefits from retail market outlets developed

with government funds. Some SOEs have also benefited from easier access to government loan guarantees,

subsidies, and credit at favorable interest rates.

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OTHER BARRIERS

Disputes over tariffs and taxation are resolved through the judicial system, which is subject to delays and

uncertainty. Since June 2015, the KRA has offered an alternative dispute resolution mechanism to help

taxpayers resolve some tax disputes more quickly. U.S. companies have expressed concerns with the delay

experienced in tax dispute resolutions through this established mechanism.

Bribery and Corruption

Corruption remains a substantial barrier to doing business in Kenya. U.S. firms continue to report

challenges competing against foreign firms that are willing to ignore legal standards or engage in bribery

and other forms of corruption. Corruption is widely reported to affect government procurements at the

national and county levels. Kenya has not effectively implemented its anticorruption laws. U.S. firms

routinely report direct requests for bribes from all levels of the Kenyan Government.

Despite efforts to increase efficiency and public confidence in the judiciary, the backlog of cases and

continued corruption undermine the judicial system’s credibility and effectiveness. While judicial reforms

are moving forward, bribes, extortion, and political considerations continue to influence court cases. As

such, foreign and local investors risk lengthy and costly legal procedures.

Export Barriers

The 2013 Agriculture, Fisheries and Food Authority Act prohibits exports of raw agricultural produce such

as macadamia nuts, Bixa orellana, cashew nuts, and pyrethrum without authorization from the Kenyan

Cabinet Secretary for Industry, Trade, and Cooperatives.

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KOREA

TRADE AGREEMENTS

United States–Korea Free Trade Agreement

The United States–Korea Free Trade Agreement (KORUS) entered into force on March 15, 2012. Korea

immediately eliminated duties on nearly 80 percent of bilateral trade in industrial and consumer goods.

Duties on most other such goods were phased out in stages over 10 years and have been eliminated as of

January 1, 2021. The United States and Korea reached agreement in 2018 to modifications and amendments

to KORUS and a related letter exchange. The United States and Korea meet regularly to review the

implementation and operation of KORUS and to address outstanding issues.

IMPORT POLICIES

Tariffs

Under KORUS, Korea has eliminated tariffs on nearly all U.S. industrial goods exports. Tariffs continue

to be phased out for certain seafood products, which are scheduled to be eliminated in 2026. Korea has

eliminated tariffs on the majority of U.S. agricultural products, while maintaining tariff-rate quotas (TRQs)

on a handful of U.S. agricultural exports.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Chemicals

Four laws and their respective implementing regulations form the basis of Korea’s chemical management

system: the Act on the Registration and Evaluation of Chemicals (last revised in April 2021); the

Occupational Safety and Health Act (last revised in August 2021); the Consumer Chemical Products and

Biocides Safety Control Act (last revised in May 2021); and, the Chemical Substances Control Act (last

revised in August 2021). U.S. chemical exporters regularly raise concerns with aspects of all of these laws

and their implementing regulations, focused on lack of guidance from the regulators on how to implement

the regulations, insufficient protection for confidential business information, and inadequate transparency

regarding the selection of chemicals to be tested and the testing methodology. The United States has

discussed these concerns with Korea in the KORUS Technical Barriers to Trade (TBT) Committee and the

WTO TBT Committee.

Packaging Materials and Labeling Regulations

U.S. firms remain concerned about the lack of clarity relating to the calculation method for packaging space

ratios used by Korean Government authorities under the Act on the Promotion of Saving and Recycling of

Resources (Recycling Act). While not yet passed, proposed amendments to the Recycling Act in August

2020 and November 2020 would mandate pre-launch testing of packaging materials and labeling of small

electronic products to ensure compliance with specified packaging requirements. Stakeholders have raised

concerns that the amendments would delay product releases, particularly when not provided with sufficient

time to find alternative solutions to adapt to new requirements.

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Sanitary and Phytosanitary Barriers

Agricultural Biotechnology

Korea’s regulatory system for agricultural biotechnology continues to present challenges to U.S.

agricultural exports. The approval process for new biotechnology products is onerous and protracted due

to inefficiencies, which include redundant reviews and excessive data requests. The regulatory approval is

managed across five different agencies, each with its own process and data submission requirements. While

there is no clear mechanism to address the inefficiencies of Korea's regulatory process, Korea has indicated

a willingness to continue discussing potential reforms to its regulatory process. The United States and

industry stakeholders have provided ideas on how to improve the process and developed pilot projects to

test a streamlined process for biotechnology product reviews. These initiatives have had little impact,

however, because Korea’s Living Modified Organisms (LMO) Act mandates participation by the five

agencies, limiting the potential for streamlining the system without legislative changes. The United States

had multiple discussions with the Ministry of Trade, Industry, and Energy (MOTIE) and other relevant

agencies throughout 2022 and will continue to engage with Korea on improving its approval process for

agricultural biotechnology products.

In 2022, MOTIE proposed a draft revision of the LMO Act to include a policy on products of innovative

biotechnologies (e.g., genome editing). Korea proposed to classify genome-edited products as LMOs, but

also introduced a pre-review system to exempt certain products from a full risk assessment under certain

conditions. Once the LMO Act revision is finalized, Korea will develop regulations to implement the pre-

review system and establish approval procedures for products that are not exempted. The United States has

engaged extensively with MOTIE on its proposed amendments to the LMO Act, and will continue to work

with Korea to develop science-based processes that facilitate access to these technologies and products

developed with them.

Beef and Beef Products

Prior to 2008, Korea restricted the importation of U.S. beef and beef products, citing concerns related to

bovine spongiform encephalopathy (BSE). In 2008, the United States and Korea reached a bilateral

agreement to fully reopen Korea’s market to U.S. beef and beef products. However, as a transitional

measure, U.S. beef and beef products imported into Korea had to be derived from animals less than 30

months of age. This “transitional measure” has remained in place for fifteen years. In addition, imports of

processed beef products, including ground beef patties, beef jerky, and sausage are still prohibited. Despite

these barriers, the United States exported approximately $2.7 billion in beef to Korea in 2022, making

Korea the largest export market for U.S. beef by value and second largest by volume in 2022.

Market Access for Pet Food Containing Ruminant Ingredients

In May 2018, the United States sent a formal request to Korea’s Ministry of Agriculture, Food, and Rural

Affairs (MAFRA) for market access for pet food containing U.S.-origin ruminant ingredients, as well as

any ruminant ingredients imported from countries like the United States, that are deemed by the World

Organisation for Animal Health as having a negligible risk for BSE. In July 2018, MAFRA indicated that

it was drafting import health requirements for pet food. There were no further updates from MAFRA until

September 2019, when MAFRA sent a letter to the U.S. Department of Agriculture Animal and Plant Health

Inspection Service (APHIS) indicating that a risk assessment was required and underway by MAFRA

Animal and Plant Quarantine Agency (APQA) and that they were planning to establish pet food import

health requirements based on the risk assessment. In 2020 and 2021, APHIS received follow-up questions

from APQA and provided responses. While APQA indicated that the COVID-19 pandemic has delayed

the process, there had been no further updates or progress on this issue as of December 2022, despite U.S.

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engagement with Korea on this issue in the annual meeting of the KORUS Committee on Sanitary and

Phytosanitary Measures (SPS Committee) in February 2022.

Horticultural Products

Several U.S. market access requests remain pending with the MAFRA APQA. Among these are expanded

access for blueberries from U.S. states other than Oregon; improvement in the cherry import program; and,

access for apples, pears, Texas grapefruit, and California stone fruits. The United States requested that

APQA expedite the approval process for these products. The United States and Korea continued efforts to

establish access for U.S. exports and discussed these issues during the annual meeting of the KORUS SPS

Committee in February 2022 and at a bilateral plant health technical meeting in October 2022. The United

States will continue to press Korea to expedite the various U.S. market access requests.

Maximum Residue Limits

Korea’s Positive List System (PLS) requires the establishment of new import tolerances for agrochemical

residues that were previously permitted but not officially registered for use in Korea, as well as for new

substances that do not have any maximum residue limits (MRLs) in Korea. As of January 2022, U.S.

agricultural exports are required to comply with Korea’s domestic MRLs, import tolerance, or a default of

0.01 parts per million (ppm).

Korea plans to introduce a PLS for meat, poultry, and other animal products. Like the PLS for agrochemical

residues, Korea began a phased implementation of the PLS for veterinary drugs. Starting in January 2022,

Korea lowered the default limit for antimicrobial residues from 0.03 ppm to 0.01 ppm, in the absence of

Korean or Codex Alimentarius Commission MRLs. Under the second phase beginning in January 2024,

in the absence of a Korean MRL or import tolerance, Korea will apply a default of 0.01 ppm for veterinary

drugs in six major product categories, including beef, pork, chicken, milk, eggs, and fishery products. The

United States will work with Korea to ensure a smooth implementation of the PLS for these products.

GOVERNMENT PROCUREMENT

Korea is Party to the WTO Agreement on Government Procurement (GPA). Korea has made commitments

to open its government procurement to U.S. suppliers under the revised GPA and under the KORUS.

KORUS provides U.S. suppliers significantly expanded access to central government procurements through

a substantially lower threshold for eligible central government procurement contracts of goods and services

than exists in the WTO GPA ($100,000 versus the current GPA threshold of $182,000). While KORUS

does not cover procurement by Korean sub-central government entities and government enterprises, the

GPA provides U.S. businesses with access to procurement conducted by most Korean provinces, cities, and

government enterprises.

The Korean Government has instituted a number of policies intended to promote domestic small and

medium-sized enterprises (SMEs). Korea does not cover set-asides for SMEs under the WTO GPA or

KORUS. The Act on Facilitation of Purchase of Small and Medium Enterprise Manufactured Products and

Support for Development of Their Markets categorizes companies by size, with multinationals frequently

categorized as “large” (regardless of their actual size) simply because the company is foreign-based or

multinational, while local companies are categorized as “small” or “medium.” As such, “large” foreign

companies are only able to bid on projects valued more than $220,000, while most local companies can bid

on the majority of projects. Similarly, the Software Industry Promotion Act restricts bids for certain

government contracts for software services to “small and medium-sized” enterprises, again leaving foreign-

based and multinational firms out of the government procurement process.

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In November 2020, MOTIE announced a “Localized Gas Turbine Competitiveness Plan,” which included

a proposal to procure locally-developed technology without competitive bidding procedures. The United

States has raised concerns with how this proposal would be implemented and will continue to engage with

Korea to ensure that implementation is consistent with Korea’s international procurement obligations.

Encryption and Security Requirements for Public Procurement of Information and Communication

Technology Equipment

Korea and the United States are both members of the Common Criteria Recognition Arrangement (CCRA),

under which products certified at any CCRA-accredited laboratory in any member country should be

accepted as meeting the certification requirements in any other member country. Korea’s National

Intelligence Service (NIS), however, has imposed additional domestic cybersecurity certification

requirements through its Security Evaluation Scheme (SES) since October 2014. Korea has broadly

imposed the SES for internationally common criteria (CC)-certified information technology products to be

sold to the public sector. In October 2022, NIS introduced a three-tiered scheme dividing all public

institutions into three sensitivity tiers. Although NIS now allows institutions in the middle and lower tiers,

such as universities and public schools, to use internationally CC-certified information and communication

technology products without additional domestic security verification, the SES still applies to most major

public institutions, which account for over 90 percent of the public sector market, including all central

administrative institutions such as ministries and metropolitan local governments. The United States has

urged Korea to abide by its obligations as a CCRA member.

Korea requires network equipment procured by public sector agencies (i.e., government agencies and quasi-

government agencies) to incorporate encryption functionality certified by NIS. NIS only certifies

encryption modules based on the Korean-developed ARIA and SEED encryption algorithms (which,

although recognized as ISO standards, are in practice primarily used in Korea), rather than the

internationally standardized Advanced Encryption Standard (AES) algorithm in widespread use worldwide.

This restriction has de facto significantly limited U.S. suppliers’ access to this market as it requires the

development of a Korea-specific product line, which may not be commercially viable. The United States

has urged Korea to ensure that equipment based on widely used international standards has full access to

Korea’s public sector market.

Cloud Security Certification for Public Sector Cloud Service Procurement

The Cloud Security Assurance Program (CSAP) was created by the Korea Internet and Security Agency in

2016 and elevated from administrative guidance to a legal requirement through a March 2022 revision to

the Cloud Computing Promotion Act. The CSAP, which applies to Korea’s entire central, provincial, and

local public sector with very limited exceptions, creates significant barriers to U.S. cloud service providers

(CSPs) seeking to sell to Korea’s public sector, as U.S. firms are unable to meet some components of the

certification program without creating a separate Korea-unique product, including the need to create

physically-segregated facilities for exclusive use for government-owned customers, requirements for data

localization of cloud systems, backup systems and data, requirements for operations and management

personnel of cloud service providers to be located within the territory of Korea to obtain the low-tier

certification, and using only NIS-certified encryption algorithms (ARIA or SEED).

The potential market from which U.S. providers are being excluded is large and growing. In July 2021, the

Ministry of the Interior and Safety announced all Korean Government data will be migrated to the cloud by

2025, but only those CSPs that have CSAP certification can participate in the government’s digital

transformation initiative. In August 2022, Korea began a review of the CSAP with a view to reform it in a

way that would open market access possibilities for foreign service providers, indicating it would

benchmark the U.S. Federal Risk and Authorization Management Program (FedRAMP). The United States

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raised this issue in August and October 2022 and will continue to engage with Korea to align its cloud

security certification requirements with other internationally accepted standards.

INTELLECTUAL PROPERTY PROTECTION

In general, Korea has a strong regime of intellectual property (IP) protection and enforcement. Under

KORUS, Korea agreed to strong enforcement provisions for various types of IP rights and agreed to join

key multilateral IP agreements. Moreover, the Korean Government prioritizes IP protection, as Korea is a

significant creator of IP. Nevertheless, some IP-related concerns remain, including with respect to: the

transshipment of counterfeit goods, especially via small express-shipped parcels; geographical indications;

and, a lack of civil and criminal penalties sufficient to deter IP violations. The United States continues to

work with Korea to improve these areas.

In January 2021, certain Korean National Assembly lawmakers proposed a complete revision to the

of collective licensing; a lack of clarity concerning the scope and application of and possible extensions to

the digital audio transmission right; the introduction of portrait rights into the Copyright Act; and, possible

restrictions on the freedom to contract. In addition, in the second half of 2022, several lawmakers

introduced amendments to the Copyright Act seeking to increase compensation for directors and

scriptwriters of successful shows featured in online content platforms through a systematic payment

program. Stakeholders have expressed concerns over the amendment’s lack of both a detailed payment

scheme and an “opt-out” clause for content creators preferring alternative compensation packages. The

United States will continue to monitor these amendments.

SERVICES BARRIERS

Audiovisual Services

Korea’s international success in film, video, and music entertainment has coincided with the significant

lowering of domestic content quotas as part of KORUS. Notwithstanding this success and KORUS

commitments to not impose new restrictions, multiple Korean Government agencies and the National

Assembly have been discussing ways to incorporate online media streaming platforms into the existing

restrictive regulatory framework for legacy media, including potential local content requirements for U.S.

over-the-top platforms.

Financial Services and Insurance Services

Cross-Border Data Transfer by Reinsurance Institutions

The U.S. Government continues to raise significant concerns that reinsurance firms are not able to transfer

information outside Korea as required in their ordinary course of business and as they should be able to do

under Korea’s KORUS obligations. Korea’s Financial Services Commission informed the U.S.

Government in 2021 and in 2022 that it changed its interpretation of relevant rules under the User Protection

and Credit Information Act such that U.S. reinsurance companies can send personal information of primary

insurance policy holders outside Korea for purposes of data processing, risk management, and underwriting.

However, U.S. reinsurance companies reported in 2022 that they have not seen such a change in practice,

and, absent sufficient legal certainty, they have not been able to send information cross-border. The U.S.

Government raised this issue on several occasions in 2022. In October 2022, progress was made in

clarifying important outstanding questions, including the allowable purposes for such information transfers,

the locations to which information may be sent, and the interaction of the User Protection and Credit

Information Act and the Insurance Business Act, both of which regulate the insurance industry. These

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clarifications indicated that the transfer of such information by reinsurance companies would be allowed in

most cases; however, there is no public written documentation of this upon which industry could rely for

legal certainty. The U.S. Government will continue to seek further progress on this issue and will continue

to monitor Korea’s overall implementation of its KORUS commitments in financial services, including

with respect to the transfer of information.

Facilities Localization

The FSC Regulation on Supervision of Electronic Finance and Data Protection Standards for Cloud

Computing Services regulates usage of cloud services by the financial sector. This measure favors local

cloud service providers by requiring cloud service providers to serve financial institutions only using

servers located in Korea, preventing U.S. cloud service suppliers and data processing firms from offering

such services on a cross-border basis and reducing the flexibility of foreign financial services companies.

The United States will continue to engage with Korea on these issues.

Professional Services

Since 2013, Korea has taken steps to open its legal services market, as outlined in KORUS. The amended

Foreign Legal Consultants Act now allows foreign law firms to open foreign legal consultant offices in

Korea and enter into “cooperative agreements” with Korean firms to handle cases jointly where domestic

and foreign legal issues are mixed. Foreign licensed lawyers and firms have been able to establish joint

ventures and hire Korean-licensed lawyers since 2017, but several requirements that are unique to Korea

discourage U.S. companies from doing so. The Act limits a foreign law firm’s ownership of the joint

venture to 49 percent and requires that the firms composing the joint venture have been in operation for at

least three years. The Act also requires foreign and Korean law firms participating in a joint venture to

establish a new separate legal entity under Korean law. In addition, the Act limits the scope of practice of

joint ventures. These provisions undermine the legislation’s purpose of facilitating trade in legal services

between the two countries. The United States continues to urge Korea to review its overall approach to

opening the legal services market.

BARRIERS TO DIGITAL TRADE

Interactive Computer Services

Several bills introduced in the National Assembly in 2021 and 2022 would mandate that foreign content

providers pay network usage fees to Korean Internet service providers (ISPs). Because some Korean ISPs

are also themselves content providers, fees paid by U.S. content providers could benefit a Korean

competitor. Such a network usage fee requirement could raise concerns under KORUS. Furthermore, such

a mandate could be anti-competitive by further strengthening Korea’s ISP oligopoly of three major

providers to the detriment of the content industry. The United States raised this issue with Korea on several

occasions throughout 2022.

Data Localization Requirements

Korea’s restrictions on the export of location-based data have led to a competitive disadvantage for

international suppliers seeking to incorporate such data into services offered from outside Korea. For

example, foreign-based suppliers of interactive services incorporating location-based functions, such as

traffic updates and navigation directions, cannot fully compete against their Korean rivals because locally-

based competitors typically are not dependent on foreign data processing centers and do not need to export

location-based data. Korea is the only significant market in the world that maintains such restrictions on

the export of location-based data. While there is no general legal prohibition on exporting location-based

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data, exporting such data requires a license. As of December 2022, Korea had never approved a license to

export cartographic or other location-based data, despite receiving numerous applications from foreign

suppliers.

INVESTMENT BARRIERS

Foreign investment is not permitted in terrestrial broadcast TV operations. For both cable and satellite

broadcasting services, foreign participation is limited to 49 percent of a company. Since March 2015, Korea

has permitted U.S. investors to hold up to 100 percent of the equity interest in a program provider not

engaged in news reporting, multi-genre programming, or home shopping, but foreign cable/satellite

retransmission channels are limited to 20 percent of the total number of operating channels.

In addition to the restrictions in telecommunications and key services sectors, Korea maintains other

restrictions on foreign investment, including a prohibition on foreign investment in rice and barley farming

and a 50 percent foreign equity limitation for enterprises engaged in meat wholesaling. Firms that generate,

distribute, and sell electric power, as well as those that publish periodicals other than newspapers, are also

restricted. Electric power generation and enterprises publishing daily newspapers are subject to a 30 percent

foreign equity limitation. News agencies are subject to a 25 percent foreign equity limitation.

SUBSIDIES

Industrial Subsidy Policy

Established under the Korea Development Bank Act of 1953, the Korea Development Bank (KDB) has

been one of the government’s main sources of policy-directed lending to favored local industries. Although

the Government of Korea began privatizing the KDB in 2009 as part of its reform of the financial sector, it

subsequently decided that the KDB should be a policy lender to support SMEs and strategic industries. In

2015, the government restored the KDB’s role of providing public policy financial support to Korea’s

industries and companies.

ANTICOMPETITIVE PRACTICES

The Korea Fair Trade Commission (KFTC) has a broad mandate that includes promoting competition,

strengthening consumer rights, creating a competitive environment for SMEs, and restraining the

concentration of economic power. In addition to its authority to conduct investigations, including authority

over corporate and financial restructuring, the KFTC can levy sizeable administrative fines for legal

violations and for failure to cooperate with investigators. Decisions by the KFTC are appealable in the

Korean court system. As part of KORUS implementation, the KFTC instituted a consent decree process in

2014, which it continues to refine.

A number of U.S. firms have raised concerns that the KFTC has targeted foreign companies with

disproportionate enforcement efforts (e.g., remedies with geographic scope that go beyond the harm to

competition in Korea). U.S. firms have also expressed concerns under KORUS about KFTC procedures

and practices that inhibit the ability of companies to adequately defend themselves during investigatory

proceedings and hearings. The United States has had extensive discussions with the KFTC regarding the

right of companies to reasonably access and rebut evidence used to determine if companies have violated

Korea’s competition laws. In 2019, the United States requested and held formal consultations with Korea

under the Competition Chapter of KORUS to discuss these concerns.

Revisions to the Monopoly Regulation and Fair Trade Act (MRFTA) entered into force in December 2021.

The revisions (among other changes) expand the rights of affected parties to view or copy data related to

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KFTC administrative decisions. The changes also provide a right to view confidential business information

by independent legal counsel of the parties involved, with restrictive conditions designed to prevent

improper disclosure. The United States will monitor the implementation of the revised MRFTA.

OTHER BARRIERS

Motor Vehicles

Increased access to Korea’s automotive market for U.S. automakers remains a key priority for the United

States.

The U.S. Government has raised concerns about Korea’s emission-related components (ERC) regulations

under Korea’s Clean Air Conservation Act. Vehicle manufacturers and importers are required to obtain

either a modification certification (for a substantial modification of ERCs) or prepare modification reports

for insignificant changes. However, the automobile industry has expressed concern about lack of clarity

over what types of modifications fall under which category. Automakers also have noted that violations

with respect to imports could be subject to criminal prosecution by Korea’s customs authorities, which lack

authority to investigate domestically manufactured vehicles. In the October 2022 meeting of the KORUS

Automotive Working Group, Korea indicated that it would pursue a revision of the law in 2023 which

would clarify certain aspects and reduce certain penalties for insignificant infractions.

In August 2022, U.S. automotive industry stakeholders raised concerns around the Ministry of

Environment’s verification test procedure conducted by the National Institute of Environment Research on

randomly selected new models imported to Korea. These tests have caused delays in manufacturers’

product launches. The U.S. Government raised this issue with Korea in October 2022.

The U.S. Government will follow these and other issues closely to ensure further increased access of U.S.

vehicles to Korea’s automobile market.

Pharmaceuticals and Medical Devices

The U.S. pharmaceutical and medical device industries continue to report concerns regarding a lack of

transparency in Korea’s pricing and reimbursement policies. The United States continues to urge Korea to

improve its engagement with this sector in terms of transparency and meaningful opportunities for

stakeholder input.

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KUWAIT

TRADE AGREEMENTS

The United States–Kuwait Trade and Investment Framework Agreement

The United States and Kuwait signed a Trade and Investment Framework Agreement (TIFA) in 2004. This

Agreement is the primary mechanism for discussions of trade and investment issues between the United

States and Kuwait.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

As a member of the Gulf Cooperation Council (GCC), Kuwait applies the GCC common external ad

valorem tariff of five percent on the value of most imported products, with several commodity-specific

exceptions. Kuwait’s exceptions include 417 basic foodstuffs, agricultural, medical, and pharmaceutical

items that are exempt from customs duties.

Taxes

In 2016, GCC Member States agreed to introduce common GCC excise taxes on carbonated drinks (50

percent), energy drinks (100 percent), and tobacco and electronic smoking products (100 percent). U.S.

beverage producers report that the current excise tax structure for carbonated drinks, which also applies to

sugar-free carbonated beverages but exempts sugary juices––many of which are manufactured domestically

within GCC countries––disadvantages U.S. products and fails to address public health concerns. Kuwait

introduced legislation to implement the excise taxes in the National Assembly in 2018. It remains under

debate.

Non-Tariff Barriers

Import Bans

Kuwait prohibits the importation of alcohol; pork products; used medical equipment; automobiles more

than five years old; books, periodicals or movies that insult religion or public morals; and, all materials that

promote political ideology.

Import Licensing

Kuwait maintains an import licensing regime for a wide variety of products, ranging from plant products

to products of the chemical and allied industries, in order to ensure that imports are compliant with various

laws and regulations. Importers of products subject to import licensing must be citizens of Kuwait or be

Kuwaiti-based brokers, and are required to register with the Ministry of Commerce and Industry.

Import Certificates

All imported agricultural and food products require a health certificate issued by government authority at

the country of export. This includes long-shelf-life products that are certified by the U.S. Department of

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Health and Human Services Food and Drug Administration (FDA), the U.S. Department of Agriculture, or

by a state agriculture or health department (e.g., Free Sale Certificate or FDA certificate for Food for Human

Consumption). For these long-shelf-life products, U.S. suppliers are required to link these certificates to

the shipment to avoid rejection by local authorities by including information such as container number, bill

of lading number, invoice number, production and expiration dates, lot number, and any other pertinent

information.

Any food product that contains meat ingredients requires a halal certificate issued by an approved Islamic

center in that country, which must be included in Kuwait’s approved list of halal certifiers. Meat products

are routinely tested upon importation into Kuwait.

Cosmetics and pharmaceuticals often require a health certificate from the country of origin, which is

certified by the Public Authority for Food and Nutrition or Ministry of Health. Some customs officials

have refused to accept certificates of free sale from U.S. state governments. This has created an additional

cost to U.S. exporters and can increase delays in document approval.

Customs Barriers and Trade Facilitation

Kuwait notified its customs valuation legislation to the World Trade Organization (WTO) in December

2017 but has not yet responded to the WTO Checklist of Issues describing how the Customs Valuation

Agreement is being implemented.

Kuwait ratified the WTO Trade Facilitation Agreement in April 2018. Kuwait was to self-designate the

implementation date of each commitment and any technical assistance required by August 2019, but has

not done so.

Kuwait does not use a risk management system for clearing food shipments for import, instead requiring

customs to inspect every food shipment into Kuwait before it is cleared for entry. This process can add

several days to the delivery time, reduce the longevity of the food, and increase costs.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Automobiles

U.S. automakers have raised concerns over growing regulatory fragmentation in the GCC. While the Gulf

Standardization Organization (GSO) is supposed to set standards for the entire GCC market, individual

GCC Member States have instituted unique standards for automobiles that deviate from GCC automobile

standards. Though Kuwait has not taken such steps, the United States will be monitoring this issue across

GCC Member States going forward.

Restrictions on Hazardous Substances – Electrical Goods

In March 2018, GCC Member States notified the WTO of a draft GSO technical regulation that would

require pre-market testing by accredited labs for certain hazardous substances in electrical goods. The

measure would also require each type of good to be registered annually and require sample products to be

submitted prior to receiving approval for use in the GCC. The United States has raised concerns that the

proposed regulatory requirements would have a significant negative impact on the imports of U.S. electrical

and electronic equipment, especially as the third-party certification requirements differ from international

best practices.

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Energy Drinks

In January 2016, GCC Member States notified to the WTO a draft GSO technical regulation for energy

drinks, which was revised in March 2022. The U.S. Government and private sector stakeholders have

raised concerns through bilateral and multilateral fora regarding the draft regulation. These concerns

include the proposed marketing-based definition for energy drinks and labeling requirements regarding

recommended consumption. Industry stakeholders still report that caffeine-content limitations unduly

target energy drinks in GCC Member States. In many cases, such limitations do not apply to other drink

products that contain similar or even higher levels of caffeine, such as tea, brewed coffee, and other ready-

to-drink coffee products.