2022 National Trade Estimate Report on Foreign Trade Barriers

UNITED STATES TRADE REPRESENTATIVE

2022 National Trade Estimate Report on

FOREIGN TRADE

BARRIERS

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 Mitchell

Ginsburg, David Oliver, Russell Smith, and Spencer Smith.

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

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

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

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

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

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

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

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

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

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

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

TFA .............................................................................. 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 ........................................................................................................................................ 15

ARGENTINA ............................................................................................................................................. 21

AUSTRALIA .............................................................................................................................................. 35

BAHRAIN .................................................................................................................................................. 39

BANGLADESH ......................................................................................................................................... 43

BOLIVIA .................................................................................................................................................... 53

BRAZIL ...................................................................................................................................................... 57

BRUNEI DARUSSALAM ......................................................................................................................... 69

CAMBODIA ............................................................................................................................................... 73

CANADA ................................................................................................................................................... 77

CHILE ......................................................................................................................................................... 85

CHINA ........................................................................................................................................................ 89

COLOMBIA ............................................................................................................................................. 129

COSTA RICA ........................................................................................................................................... 135

COTE D’IVOIRE ..................................................................................................................................... 141

DOMINICAN REPUBLIC ....................................................................................................................... 147

ECUADOR ............................................................................................................................................... 151

EGYPT ...................................................................................................................................................... 161

EL SALVADOR ....................................................................................................................................... 167

ETHIOPIA ................................................................................................................................................ 173

EUROPEAN UNION ............................................................................................................................... 179

GHANA .................................................................................................................................................... 227

GUATEMALA ......................................................................................................................................... 235

HONDURAS ............................................................................................................................................ 239

HONG KONG .......................................................................................................................................... 243

INDIA ....................................................................................................................................................... 245

INDONESIA ............................................................................................................................................. 267

ISRAEL .................................................................................................................................................... 285

JAPAN ...................................................................................................................................................... 287

JORDAN ................................................................................................................................................... 305

KENYA .................................................................................................................................................... 309

KOREA ..................................................................................................................................................... 317

KUWAIT .................................................................................................................................................. 329

LAOS ........................................................................................................................................................ 333

MALAYSIA ............................................................................................................................................. 337

MEXICO ................................................................................................................................................... 345

MOROCCO .............................................................................................................................................. 357

NEW ZEALAND ...................................................................................................................................... 361

NICARAGUA........................................................................................................................................... 363

NIGERIA .................................................................................................................................................. 371

NORWAY................................................................................................................................................. 379

OMAN ...................................................................................................................................................... 383

PAKISTAN ............................................................................................................................................... 387

PANAMA ................................................................................................................................................. 395

PARAGUAY ............................................................................................................................................ 399

PERU ........................................................................................................................................................ 403

THE PHILIPPINES .................................................................................................................................. 407

QATAR ..................................................................................................................................................... 417

RUSSIA .................................................................................................................................................... 421

SAUDI ARABIA ...................................................................................................................................... 443

SINGAPORE ............................................................................................................................................ 451

SOUTH AFRICA...................................................................................................................................... 455

SWITZERLAND ...................................................................................................................................... 463

TAIWAN .................................................................................................................................................. 467

THAILAND .............................................................................................................................................. 477

TUNISIA .................................................................................................................................................. 487

TURKEY .................................................................................................................................................. 491

UNITED ARAB EMIRATES ................................................................................................................... 501

UKRAINE................................................................................................................................................. 509

UNITED KINGDOM ............................................................................................................................... 517

URUGUAY............................................................................................................................................... 525

VIETNAM ................................................................................................................................................ 527

APPENDIX I: REPORT ON PROGRESS IN REDUCING TRADE-RELATED BARRIERS TO THE

EXPORT OF GREENHOUSE GAS INTENSITY REDUCING TECHNOLOGIES

APPENDIX II: U.S. TRADE DATA FOR SELECT TRADE PARTNERS IN RANK ORDER OF U.S.

EXPORTS, 2020-2021

FOREIGN TRADE BARRIERS | 1

FOREWORD

SCOPE AND COVERAGE

The 2022 National Trade Estimate Report on Foreign Trade Barriers (NTE) is the 37th 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 2022 Trade Policy Agenda

and 2021 Annual Report, published by the Office of the United States Trade Representative (USTR) on

March 1, 2022.

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 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, other U.S. Government agencies, and U.S. Embassies, as well as information provided by the

public in response to a notice published in the Federal Register

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.

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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 applied to protect 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 barriers (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 provision of Internet-enabled services, and other restrictive technology

requirements);

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

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

technology transfer requirements, 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; fairness and due process concerns by

companies involved in competition investigatory and enforcement proceedings in the country);

• State-owned enterprises (e.g., subsidies to and from industrial state-owned enterprises involved

in the manufacture or production of non-agricultural goods or in the provision of services, as

well as industrial state-owned enterprises that could contribute to overcapacity, or

discriminating against foreign goods or services, acting inconsistently with commercial

considerations in the purchase and sale of goods and services);

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

worker rights, including through failure to eliminate forced labor, or failures to eliminate

discrimination in respect of employment or occupation);

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

unsustainable stewardship of natural resources, and harmful environmental practices); and

• Other barriers (e.g., barriers 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

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

4 | FOREIGN TRADE BARRIERS

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 2022

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

Tariffs

Algeria is not a Member of the World Trade Organization (WTO). Goods imported into Algeria currently

face a range of tariffs, from zero percent to 200 percent.

Algeria’s average Most-Favored-Nation (MFN) applied tariff rate was 18.9 percent in 2019 (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 2019 (latest data available). Nearly all finished manufactured

products, dried distillers grains, and corn gluten feed entering Algeria are subject to a 30 percent tariff rate,

but some limited categories are subject to a 15 percent rate. Goods facing the highest rates are those for

which equivalents are currently manufactured in Algeria. In January 2019, citing the need to encourage

local production and ease pressure on the country’s foreign exchange reserves, Algeria implemented new

temporary additional safeguard duties (DAPs) of 30 percent to 200 percent (the higher rate applies only to

ten cement tariff lines under the Harmonized System heading 25.23) on a list of more than 1,000

manufactured and agricultural goods. The few items 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. The original DAP list was revised in April 2019 to exempt a number of food- and

agriculture-related products including tree nuts, peanuts, butter, dried fruits, and fresh or chilled beef. That

list remains in effect, though the government announced in January 2022 that it would double it (details to

be released separately), while still describing it as ‘temporary.’

Taxes

Most imported goods are subject to the 19.0 percent value-added tax (VAT), and an additional 0.3 percent

tax is levied on a good if the applicable customs value exceeds Algerian dinars (DZD) 20,000

(approximately $148).

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 the most recent

list of 357 generic pharmaceutical products whose importation is prohibited. Since 2007, the Algerian

Government has banned the import of used medical equipment without a special exception. Algeria has

applied the regulation broadly to block the re-importation of machinery sent abroad for maintenance under

6 | FOREIGN TRADE BARRIERS

warranty, even for equipment owned by state-run hospitals. In May 2020, Algeria issued a decree to exempt

customs duties and VAT for medical devices, pharmaceutical products, and testing equipment imported to

combat the COVID-19 pandemic. Algeria renewed the decree in May 2021.

Beyond medical devices, Algeria bans most types of used machinery from entry, except for refurbished

assembly line equipment used in domestic industries.

In February 2021, the Ministry of Commerce issued a new schedule for 2021 that established a separate

seasonal ban for each agricultural product. The new schedule adjusted a year-round restriction on almond

imports to a seasonal ban from June to August 2021. In September 2021, the Algerian Government

restricted the import of animal products such as tuna, yogurt, ice cream, liquid egg yolks, lamb’s wool and

camel hair, corned beef, live bait for fishing, and non-food products such as baseball bats. In October 2021,

Algeria restricted the import of products falling under the tariff heading of “other,” which includes products

that are not classified within a certain category and products for which there is minimal demand. Algeria

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

The Ministry of Finance instructed banks, in August 2021, 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 subsequently communicated implementation instructions to the

Ministry of Commerce’s National Center of Commerce Registry (CNRC), but not to importers themselves.

Importers must approach individually to seek guidance regarding their particular situation, rather than rely

on publicly available information. The stated goal of this process is to reduce the number of importers from

15,000 to 9,000, according to the Minister of Commerce in October 2021.

Quantitative Restrictions

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

replacing the previous automotive regulatory regime established in 2017. As of March 2022, the Algerian

Government has not granted any company authorization to import under the new regime. The new Book

of Specifications covers automobiles, buses, trucks, and construction equipment, and establishes an import

quota of up to 200,000 vehicles per year, with an annual cap of $2 billion. Due to customs, VAT, and other

taxes, vehicles cost more than double the market rates when purchased by individuals overseas and

imported. While the import quota on automobile kits for assembly of passenger vehicles is currently set at

zero, the new regulation indicated that the Algerian Government would set a new quota for automotive

companies that receive authorization to engage in local assembly or manufacturing. No new cars for sale

in dealerships have been imported into Algeria since the 2020 regime was announced. A provision in the

June 2021 Complementary Finance Law permits Algerians to import used cars which are three years old or

less, though purchasers will be required to use their own foreign currency.

Algeria has established a maximum import volume of four million metric tons of bread (common) wheat,

accounting for nearly two-thirds of annual average imports. The Algerian President announced in August

2021 that moving forward, the state grains agency (OAIC) will be the country’s exclusive wheat importer,

so as to counteract alleged “illicit practices” by private importers. However, the Algerian Government had

not implemented this policy as of March 2022.

Customs Barriers and Trade Facilitation

Clearing goods through Algerian Customs is the most frequently reported problem facing companies.

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

the Algerian Government requires all importers to provide certificates of conformity and quality from an

FOREIGN TRADE BARRIERS | 7

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 bureaucratic delays, especially when the regulations do not clearly specify

which ministry’s authority is being exercised. Storage fees at Algerian ports of entry are high and the fees

double when 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, which especially burdens small and medium-

sized importers that often lack sufficient cash flow.

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.

In 2020, U.S. and Algerian authorities finalized export certificates for chicken-hatching eggs, day-old

chicks, and bovine embryos. U.S. and Algerian veterinary authorities continue to engage in negotiations

on export certificates to allow for the importation of U.S. bovine semen, beef cattle, dairy breeding cattle,

and beef and poultry meat and meat products.

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

as well as processed products of animal origin.

GOVERNMENT PROCUREMENT

Algeria announced in August 2015 that all ministries and state-owned enterprises would be required to

purchase domestically manufactured products whenever available. It further announced that the

procurement of foreign goods would be permitted only with special authorization at the ministerial level

and if a locally made product could not be identified. Algeria requires approval from the Council of

Ministers for expenditures in foreign currency that exceed DZD 10 billion (approximately $74 million).

In 2017, this requirement delayed payments to at least one U.S. company.

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 was moved from the Priority Watch List to the Watch List in the 2021 Special 301 Report

. Algeria

has taken some positive steps to improve intellectual property (IP) protection and enforcement, including

by increasing coordination on IP enforcement and engaging in capacity building and training efforts.

However, concerns remain, including regarding 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, as well as 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

In May 2018, Algeria enacted a law requiring 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 by requiring redundant

storage systems. Such requirements are disproportionately burdensome for small firms.

Algeria permits citizens to purchase goods from outside the country using international credit cards, with a

maximum value per transaction of DZD100,000 (approximately $740). Algerian foreign exchange

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

another.

INVESTMENT BARRIERS

Prior to 2020, Algeria’s investment law required Algerian ownership of at least 51 percent in all projects

involving foreign investments (known as the 51/49 rule). This restriction was lifted in 2020. 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––on activities

involving raw materials; products and goods imported for resale in the same condition (subsequently these

products have been exempted from the requirement); as well as for companies in the strategic sectors of

mining, upstream energy activities, industries related to the military, transportation infrastructure, and

pharmaceutical production. As there is no single process for registering foreign investments, prospective

investors must work with the ministry or ministries relevant to a particular project to negotiate, register,

and set up their businesses. U.S. businesses have commented that the process is subject to political

influence and that a lack of transparency in the decision-making process makes it difficult to determine the

reasons for any delays.

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

production. Minimum domestic content integration rates for domestic assembly plants are now 30 percent

in the first year, 35 percent after three years, 40 percent after four years, and 50 percent after five years.

Additionally, the Book of Specifications mandates that automotive importers be 100 percent Algerian-

owned, and retroactively excludes foreign companies from holding ownership stakes in importation

companies and dealerships.

STATE-OWNED ENTERPRISES

State-owned enterprises (SOEs) comprise about two-thirds (by market value) of the Algerian economy.

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 10.2 percent in 2019

(latest data available). Angola’s average MFN applied tariff rate was 19.3 percent for agricultural products

and 8.7 percent for non-agricultural products in 2019 (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.

Revised customs measures entered into force in August 2018. These measures exempt imports of

household products, medicines, and hospital equipment from tariffs. They assign minimum tax and customs

duty rates for the import of essential goods and other goods not locally manufactured. Medicines,

educational materials (i.e., schoolbooks), and automotive parts imported by automotive assembly investors

in Angola remain exempted from customs duties under this regime.

In response to the COVID-19 pandemic, Angola has allowed all medicines and biosafety material to be

imported duty free.

Taxes

In October 2019, Angola introduced a 14 percent value-added tax (VAT) and revoked a 10 percent

consumer tax previously imposed on all products, domestic and imported, albeit with numerous product

and service exemptions. In August 2020, the Government of Angola decreased the VAT for certain

agricultural products.

Law No. 42/20, approving the 2021 State Budget, entered into force January 1, 2021. The law introduced

a new VAT – the Simplified VAT Regime – which applies to taxpayers whose annual turnover and import

operations for the previous 12 months was approximately $580,000 or less.

The law also increased the taxable basis of some imported goods, especially luxury products, by specifying

that the VAT will be charged based on an amount that includes duties, taxes, and ancillary expenses, among

others. Separately, the law reduced from 14 percent to 5 percent the VAT applied to the import and supply

of certain goods, including food stuffs, detergents, and agricultural seeds and raw materials, the latter two

to boost local agricultural production.

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On October 28, 2021, Angola approved the reduction of VAT from 14 percent to 7 percent for additional

items of the basic food basket not covered in Law 42/20. The measure was intended to lower the cost of

28 regularly consumed items that comprise the basic food basket, as well as the cost of industrial and

agricultural production equipment and small- to medium-sized fishing boats, with the goal of boosting

agricultural and fisheries production.

Non-Tariff Barriers

Import Licensing

The importation of certain goods requires authorization from specific government ministries, which can

result in delays and extra costs. Importers must be registered with the Ministry of Commerce for the

category of product they are importing. Only registered companies can apply for an import license, which

is required for imports of sensitive products such as food, medical devices, pharmaceuticals, and

agricultural inputs.

Importers who possess a valid general import license issued by the Ministry of Commerce and a specific

import license issued by the Ministry of Health may import pharmaceuticals products.

Import Restrictions

Presidential Decree No. 23/19, which entered into force in January 2019, appears aimed to restrict the

importation of certain products unless the importer can demonstrate 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. The United States continues to raise concerns about this

decree with Angola bilaterally and at the WTO Council for Trade in Goods, the WTO Committee on Market

Access, and the WTO Committee on Agriculture.

In 2020, Angola announced that it would stop providing treasury funds for the import of products of high

domestic consumption which Angola has the capacity to produce. However, as of March 2022, the measure

has not been put into effect. The Ministry of Industry and Trade stated this measure, part of the Program

to Support Production, Diversification of Exports and Import Substitution, aims to protect national

production and promote local economic development. The measure focuses on 11 products: sorghum,

millet, beans, peanuts, carrots, garlic, onions, tomatoes, sweet potatoes, bottled water, and dishwashing

soap. Importers may import these items provided they have access to their own sources of foreign

exchange. (For further information see Foreign Exchange section.)

Customs Barriers and Trade Facilitation

Administration of Angola’s customs service has improved in the last few years but remains a barrier to

accessing the market. Importers still express concerns regarding the turnaround time between customs

clearance and market delivery, which averages 38 days. Traders often contract voluntarily for pre-shipment

inspection services from private inspection agencies.

Angola has not yet notified its customs valuation legislation to the WTO, nor has it responded to the

Checklist of Issues that describes how the Customs Valuation Agreement is being implemented.

FOREIGN TRADE BARRIERS | 11

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

In January 2021, Angola announced that it will start requiring imports of basic food basket products in bulk

rather than pre-packaged purportedly to save foreign exchange and support the local packaging industry.

On March 17, 2021, Angola published Executive Decree No. 63/21 and it took effect on June 17, 2021.

The decree requires that imports of 15 agricultural and food products be imported in containers of 25-50 kg

and the packaging into retail denominations must be performed in Angola. The decree applies to sugar,

rice, wheat and corn flour, beans, powdered milk, cooking oil, animal feed, coarse and refined salt, wheat

semolina, pork and beef, margarine, and soap, with some exceptions. Industry stakeholders have raised

concerns over the lack of advance consultation with importers or notification to the WTO and have

expressed concern the measure may lead to monopolies in packaging and labeling as well as shortages. The

United States requested Angola to notify the decree to the WTO via the Angola TBT Enquiry Point to allow

for stakeholder comments. However, Angola did not notify the decree, and it went into effect on June 17,

2021. The United States will continue to monitor the implementation of the decree.

Sanitary and Phytosanitary Barriers

Angola has not introduced a risk management scheme 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 Fisheries 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 Fisheries allows, subject to regulations and controls,

biotechnology imports for scientific research.

GOVERNMENT PROCUREMENT

According to investors, the bidding process for government procurement remains deficient in terms of

transparency and objectivity, and information about government projects and tenders is often not readily

available from authorities. In February 2021, an international port services company filed an appeal at the

Supreme Court of Angola challenging a 20-year multipurpose terminal service contract awarded to a

different company in January 2021. The complainant cited irregularities and changes to the tender

conditions throughout the bidding process.

In an effort to address investor concerns, on December 23, 2020, the Angolan National Assembly approved

Law No. 41/20, revising its Public Procurement Law (PPL) and revoking Law 9/16 of June 2016. The

revised PPL entered into force on January 22, 2021. The revised law seeks to increase transparency in

public resources utilization and to simplify procedures in public works and public services procurement, in

addition to the acquisition of goods by public entities. The most important changes in the law include

encouraging administrative concessions regarding the granting of rights, land or property related to public

works, public services, and exploration of the public domain. The law calls for such contracts to be carried

out though public-private-partnerships. The law also provides that public procurement contract values in

12 | FOREIGN TRADE BARRIERS

the amount of at least 500 million Kwanzas (approximately $770,000) or more be approved by the President

of the Republic and submitted to the Tribunal de Contas (Supreme Audit Institution) for oversight.

The law introduced two new procurement procedures. The first is the Dynamic Electronic Procedure, which

provides for the public acquisition of standard goods and services using an electronic platform. Any

interested party that is properly registered may participate. The second spells out the procedure for

emergency procurement, such as those required during a state of calamity or during a pandemic. A punitive

clause for the most serious breaches of contract by an individual or corporation party to such contracts

contains fines ranging from $1,650 to $3,300 for individuals, and $6,600 to $15,300 for corporations.

Through the revised and simplified PPL, Angola seeks to expand local investment and attract more foreign

direct investment. Angola also expects that the PPL will reduce corruption, nepotism, and fraud, while

increasing competitiveness and improving the Angolan business environment. The United States will

monitor implementation and enforcement of the law in light of the continued weak state of institutions and

the lack of necessary technical capacity to implement and enforce laws.

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

Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Although the Angolan National Assembly continues to work to strengthen existing intellectual property

(IP) legislation, the protection and enforcement of IP remains weak. Trade in counterfeit and pirated goods

is widespread. The Ministry of Commerce tracks and monitors the seizures of counterfeit and pirated goods,

but publishes these statistics only on an ad hoc basis. Stakeholders continue to have concerns regarding

delays in the processing of patent applications.

INVESTMENT BARRIERS

The Angolan Government enacted a private investment law in 2018 aimed at facilitating investment. The

law removed the previous requirement that foreign investors identify a local partner with a 35 percent stake

prior to investing in priority sectors, thereby allowing foreign investors to own investments in their entirety.

The law also eliminated minimum levels of foreign direct investment and established firm sunset clauses

for tax incentives. In addition to changes to the legal framework for investment, the government created

the Agency for Private Investment and Exports Promotion, a state-run agency with the goal of facilitating

investment and export processes.

The law, however, does not apply to investment in the petroleum, diamond, and financial sectors, which

remain governed by sector-specific legislation, including requirements to form joint venture partnerships

with local companies and to use Angola-domiciled banks for many services.

Reforms around improving the investment climate for investors are encouraging; however, investors report

that the regulatory and judicial framework of enforcement institutions remains challenging. Reports

indicate that a lack of local judicial capacity to resolve investment disputes is a challenge for foreign

investors.

FOREIGN TRADE BARRIERS | 13

OTHER BARRIERS

Bribery and Corruption

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 implement action of

anticorruption laws. “Gratuities” and other facilitation fees often are requested to secure quicker service

and approval. It is common for government officials to have substantial private business interests that are

not publicly disclosed. Likewise, it is difficult to determine the ownership of some Angolan companies

and the ownership structures of banks. Access to investment opportunities and public financing continues

to favor those connected to the government and the ruling party. Laws and regulations regarding conflicts

of interest, though now codified, are yet to be widely implemented or enforced. Some investors report

pressure to form joint ventures with specific Angolan companies believed to have connections to political

figures.

While levels of corruption and bribery have declined, they still exist. The new Criminal Law and Criminal

Procedure Codes (Law No. 38/20 and Law No. 39/20) entered into force in February 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, on

February 16, 2021, the U.S. Department of State opened a competition for a project that supports Angolan

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

transparency reform.

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

For many years, a leading business challenge in Angola has been the scarcity of foreign exchange, and the

resulting difficulty of foreign investors to repatriate profits and Angolan companies to pay foreign suppliers.

International and domestic companies operating in Angola face significant delays in securing foreign

exchange approval for remittances to cover key operational expenses, including to import goods and

expatriate salaries. Profit and dividend remittances are even more problematic for most companies.

However, since January 2020, oil companies with Angolan exploration and production rights have been

permitted to sell foreign exchange directly to Angolan commercial banks. The decision ended a five-year

policy that ensured that the international oil companies sold $240 million in foreign exchange monthly to

the BNA, which in turn resold to commercial banks in monthly and eventually daily auctions.

In addition, in August 2020, the National Bank of Angola (BNA) issued Notice 17/20, which implemented

new rules and procedures governing foreign exchange transactions applicable to individuals. Among other

amendments, as of September 2020, foreign employees working in Angola must open a local bank account

into which income from their employer will be deposited in local currency; employers may no longer

transfer remunerations to foreign employees’ accounts abroad. However, a foreign employee may purchase

14 | FOREIGN TRADE BARRIERS

foreign currency upon presentation of a valid employment agreement and work permit. Under the notice,

Angolan banking institutions should also verify that the employee’s income was transferred by a tax

compliant employer.

In 2021, the BNA issued two notices intended to regulate foreign exchange transactions and procedures.

Notice 4/21 took effect on April 14, 2021, and provides that: (i) import operations are no longer subject to

licensing by the BNA regardless of the relevant settlement period; (ii) the maximum period allowed for

advance payments in import operations is 90 days (reduced from 180 days); and (iii) regardless of the

method of payment, commercial banks will only debit the relevant amount in the importer’s bank account

when the funds are ready to be transferred abroad. The new notice provides greater flexibility in export

operations, and may allow exporters to dispose more freely of revenues from their export operations. This

contrasts with the previous regime, which contained burdensome requirements on the sale and disposition

of foreign currency.

Notice 5/21 took effect on May 14, 2021, and introduces generally more restrictive rules and procedures

for individuals carrying out foreign exchange transactions, with the goal of combating money-laundering

and terrorist financing. Under this notice, foreign exchange transactions may only be carried out: (1) at

the request of customers who have properly opened accounts; (2) if the financial capacity of the originator

is confirmed, to ensure the legitimacy of the possession of the funds used to purchase the foreign currency;

and (3) if the total amount of the requested transaction and the transactions already carried out in the

calendar year are compatible with the originator’s financial capacity. The notice also more than doubles

the cumulative annual limit on foreign exchange transactions carried out by residents, from $120,000 to

$250,000. The BNA may approve exceptions to this limit on a case-by-case basis. Several types of

transactions are not subject to the annual $250,000 limit, including payments for health care, education,

accommodation, transport, and legal services, and certain transfers of funds of foreign exchange residents.

Foreign workers who are not residents are required to deposit their income into an account at a financial

institution registered in Angola. However, the notice establishes an exception for foreign workers in the

oil sector, who may have their remunerations transferred abroad by their employers.

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 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 | 15

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, efforts to enforce the boycott have

for many years 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. 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

publish 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, furnishing 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

the 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

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

16 | FOREIGN TRADE BARRIERS

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. As a result

of U.S. Government engagement with the Iraqi Government, the overall number of boycott-related requests,

FOREIGN TRADE BARRIERS | 17

of which the U.S. Government is aware, issued by Iraqi entities declined slightly from 47 in 2019 to 37 in

2020; in 2021, the number rose slightly to 39. The Ministry of Health’s procurement arm (Kimadia) was

among the government entities that still issued boycott-related requests.

Officials from the State Department, Commerce Department, 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 Accord 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.

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 boycott in a 1995

letter to the U.S. Government, and the Palestinian Authority has adhered to this commitment. Various

groups in different countries that advocate for Palestinian interests 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.

18 | FOREIGN TRADE BARRIERS

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: In 2020, Bahrain agreed to normalize relations with Israel and expand already robust economic

ties including establishing 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. The Israeli prime minister became the first Israeli official at that level to visit Bahrain

in February 2022.

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, Kuwait since 2016 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 | 19

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

officials’ professed commitment to ensuring that such language is not included in new tender documents.

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. The chief executive of Qatar’s successful 2022 World Cup

bid has indicated that Israeli citizens would be welcome to attend the 2022 World Cup events.

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 2018, Saudi Arabia permitted Air India to establish a direct flight

from New Delhi to Tel Aviv that flies through Saudi airspace; this policy subsequently was extended to

flights from all countries other than Saudi Arabia.

The United Arab Emirates: In August 2020, the United Arab Emirates signed a normalization agreement

with Israel. As part of its agreement, the Emirati Government 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. Treasury Department 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. In

2021, there were 18 prohibited requests, down from 79 in 2019. 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 | 21

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 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 that

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

from zero percent to 35 percent ad valorem and averages 12.5 percent.

MERCOSUR provisions allow its members to maintain a limited number of national and sectoral list

exceptions to the CET for an established period. Argentina is permitted to maintain a list of 100 exceptions

to the CET, subject to renewal by MERCOSUR members. Modifications to MERCOSUR tariff rates are

made through resolutions and are published on the MERCOSUR website.

According to MERCOSUR procedures, any good imported into any member country (not including free

trade zones) is subject to the payment of the CET to that country’s customs authorities. If the product is

then re-exported to another MERCOSUR country, the CET must be paid again to the second country.

In 2010, MERCOSUR took a step toward the establishment of a customs union by approving a Common

Customs Code (CCC) and launching a plan to eliminate the double application of the CET within

MERCOSUR. All MERCOSUR members must ratify the CCC for it to take effect. Only Argentina has

done so; it ratified the CCC in November 2012.

MERCOSUR members are also allowed to set import tariffs independently for some types of goods,

including computer and telecommunications equipment, sugar, and some capital goods. Argentina imposes

a 14 percent tariff on imports of capital goods that are also produced domestically. Imports of certain other

capital goods that are not produced domestically are subject to a reduced tariff of two percent.

Argentina has bilateral agreements with Brazil and Uruguay to provide preferential treatment for

automobiles and automotive parts. In October 2019, Argentina and Brazil submitted to the Latin American

Integration Association a revised bilateral agreement to extend the time period to implement bilateral free

trade in automobiles and automotive parts from June 20, 2020 to July 1, 2029. Argentina also has a separate

bilateral trade agreement with Mexico regarding quotas for automobiles and automotive parts. In March

22 | FOREIGN TRADE BARRIERS

2019, Argentina and Mexico agreed to retain quotas for three final years before implementing bilateral free

trade in these goods.

On November 15, 2016, Argentina issued Decree No. 1174/2016, which reduces by 25 percent import

tariffs on used capital goods that are needed as part of investment projects. Complementary used capital

and intermediate industrial goods – not more than 20 years old and for use in domestic production lines –

are also eligible for the 25 percent import tariff reduction.

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 27,541, 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 is extended until December 31, 2024.

Decree 332/2019 established caps for taxes on imported goods. Decree 99/2019 raised the caps by 20

percent as follows: imports with a value of less than $10,000 have a maximum tax of $180; imports between

$10,000 and $100,000 have a maximum tax of $3,000; imports between $100,000 and $1,000,000 have a

maximum tax of $30,000; and imports greater than $1,000,000 have a maximum tax of $150,000. Decree

1057/2020 extended these caps through December 31, 2021. Pursuant to Decree 548/2019, in the case of

capital goods imported exclusively for renewable energy projects included in the RenovAr Program, the

maximum tax is set at $500.

In August 2012, the Argentine Tax Authority (AFIP) issued Resolution 3373, which raised the rate of

certain taxes charged after import duties are levied, thereby increasing the tax burden for importers. 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. Resolution 3373 established an income tax withholding rate of

six percent of the value of the imported goods for imports of all goods, except goods intended for the

importer’s consumption or use. For those goods, an income tax withholding rate of 11 percent applies.

Resolution 3373 also established an advance value-added tax (VAT) rate of 20 percent for imports of

consumer goods and 10 percent for imports of capital goods. The advance VAT regime was most recently

modified by General Resolution 4461 issued April 2019, which reestablished an advance VAT rate on

imports for consumption and imports destined for production. The advance VAT is paid by the importer,

unless the goods are for personal use. If the products are sold in Argentina, the normal VAT rate, which is

21 percent for most consumer and capital goods, is levied after subtracting any advance VAT previously

paid.

In 2016, the Ministry of Production and the Ministry of Energy and Mining issued Joint Resolutions 123

and 313, providing tax exemptions for imports of capital and intermediate goods that are not locally

produced for use in solar or wind energy investment projects that incorporate at least 60 percent local

content in their electromechanical installations. In 2017, the Ministry of Production and the Ministry of

Energy and Mining issued Joint Resolution 1-E/2017 updating the list of goods that are not locally

produced. The list can be found in Annex I and II to the Joint Resolution.

In 2016, Argentina passed Law 27263, implemented by Resolution 599-E/2016, which 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 2018, Argentina issued Resolution 28/2018, simplifying the procedure for

obtaining the tax credits. The resolution also establishes that if the national content of the automobile drops

below the minimum required by the resolution because of relative price changes due to exchange rate

FOREIGN TRADE BARRIERS | 23

fluctuations, automotive manufacturers will not be considered non-compliant with the regime. However,

the resolution sets forth that tax benefits will be suspended for the quarter when the drop was registered.

Pursuant to Decree 2646/2012, used capital goods imports are subject to a 28 percent tax if local production

of the good exists, a 14 percent tax in the absence of existing local production, and a 6 percent tax if the

used capital good is for the aircraft industry. There are exceptions for used capital goods employed in

certain industries (e.g., printing, textiles, mining, and, in some cases, aviation), which permit imports of the

goods at a zero percent import tax.

Argentina provides full or partial tax refunds (including VAT) to exporters of consumer goods, agricultural

goods, industrial goods, and processed foods.

In 2016, through Decree 1341, Argentina established an additional 0.5 percent VAT refund to exporters of

products that are certified with geographic or origin indications; are certified as organic; or that meet quality

and innovation standards that qualify the good to be labeled “Argentine Food a Natural Choice.” These

certifications and labels are granted by the Secretariat of Agroindustry, which maintains a list of qualifying

agricultural products. In 2017, through Resolution 90-E, the Ministry of Agroindustry amended the scheme

to prevent exporters from claiming multiple additional 0.5 percent VAT refunds when a product meets more

than one of the criteria listed above. Argentina last updated the list of goods eligible for the refund scheme

and their associated refund percentages in 2018, through Decree 767/2018.

Non-Tariff Barriers

Import Bans

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

Automobile Pact, Argentina bans the import 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 communications technology products. In the case of remanufactured

medical goods, imports are further restricted by the requirement (described below) 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.

Pursuant to Decree 509/2007, Annex 6, Argentina prohibits imports of used clothing.

Import Restrictions

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

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

imported directly by the end user; (2) overseas reconditioning of the 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) the imported used capital good cannot be transferred (sold

or donated) for a period of four years; (5) 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. This certificate is issued by the Secretariat of Foreign Trade following approval by the

Secretariat of Industry. Pursuant to Joint Resolutions 12/2014 and 4/2014 of January 2014, the import

certificate for used capital goods has a duration of 60 working days from the issue date. Through Decree

24 | FOREIGN TRADE BARRIERS

406/2019, issued June 6, 2019, the Argentine Government exempted a list of products from the requirement

to obtain the import certificate.

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. Decree 1205, issued

November 29, 2016, modified the list of restricted items and established import tariffs ranging from 6

percent to 28 percent for some of these restricted items. The list includes electronic and recording

equipment; railroad vehicles and other railroad parts; optic, photography, and filming equipment; tractors;

buses; aircraft; and ships.

Resolution 253/2020 restricts imports of books to 500 units per month for a one-year period beginning

September 15, 2020. That policy was extended through Resolution 868/2021, issued August 2021 and in

effect indefinitely. Resolution 868/2021 also expanded these import restrictions to children’s picture books,

drawing or coloring books, information brochures, and booklets.

Under the “Por una Argentina Inclusiva y Solidaria” tax, all imported services purchased through travel

and tourism agencies and all international transportation tickets for travel by air, land (except to countries

that border Argentina), or water sold in Argentina (through a physical or online point of sale) are subject to

a 30 percent tax, pursuant to Public Emergency Law 27,541, issued on December 23, 2019, and Decree 99

issued on December 28, 2019. Under Resolution 4815, as of September 16, 2020, when international

transportation tickets and international tourism services are sold in Argentina, an amount equal to 35 percent

of the price of the ticket or service is collected as income tax withholding. Through Decree 99/2019, the

government also established an 8 percent tax for some imported digital services that are already subject to

the VAT.

Import Licensing

Argentina subjects imports to automatic or non-automatic licenses that are managed through the

Comprehensive Import Monitoring System (SIMI), established in December 2015 by AFIP through

Resolutions 5/2015 and 3823/2015. The SIMI system requires importers to submit detailed information

electronically about goods to be imported into Argentina, including whether the products are subject to

automatic or non-automatic import licenses. Once the information is submitted, relevant Argentine

Government agencies review the application through a “Single Window System for Foreign Trade”.

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, and footwear, are subject to the non-automatic import licensing regime. On January

9, 2020, through Resolution 1/2020, Argentina moved 300 tariff lines from the automatic import licensing

system to the non-automatic import licensing system. Since 2020, a total of 1,446 tariff lines are subject to

non-automatic licenses. Through Resolution 1/2020, Argentina reduced the validity period for a non-

automatic import license from 180 days to 90 days after approval. Firms in a variety of sectors report

extensive delays and rejections in the import license application process, making it difficult to supply

manufacturing facilities and reach Argentine consumers. Firms have also reported a lack of transparency

in information required to apply for import licenses and in the reasons for rejection, further increasing the

unpredictability of doing business in Argentina.

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

FOREIGN TRADE BARRIERS | 25

reference price, Argentina requires importers to obtain an authenticated invoice. Argentina publishes a list

of reference prices and covered countries.

AFIP requires importers of apparel to obtain and apply special government-issued labels, in addition to

standard garment labeling, in order to receive customs clearance, a process that results in additional costs

and delays in release of goods.

Certificates of Origin

Certificates of origin have been a key element in Argentine import procedures to enforce trade remedy

measures, reference prices, and certain geographical restrictions. Argentina requires certificates of origin

for certain categories of products, including certain organic chemicals, tires, bicycle parts, flat-rolled iron

and steel, certain iron and steel tubes, air conditioning equipment, wood fiberboard, most fabrics (e.g., wool,

cotton, other vegetable), carpets, most textiles (e.g., knitted, crocheted), apparel, footwear, metal screws

and bolts, furniture, toys and games, brooms, and brushes. To receive the MFN tariff rate, a U.S. product’s

certificate of origin must be authenticated by an Argentine embassy or consulate, or carry a U.S. Chamber

of Commerce seal. For products with many internal components, such as machinery, each individual part

is often required to have a certificate notarized in its country of origin, which can be very burdensome. For

goods subject to antidumping or safeguard measures, instead of requiring a certificate of origin, Resolution

60/2018 of the Ministry of Production and Labor requires a certification (a sworn declaration of non-

preferential origin) that can be submitted online. The resolution also simplifies the process required to

obtain a certificate of origin for most categories of products, with the exception of textiles and footwear.

Consularization

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 their region. The consulate

assesses a $200 fee per document for these consularization services.

Ports of Entry

Argentina restricts entry points for several classes of goods, including sensitive goods classified in 20

Harmonized Tariff Schedule chapters (e.g., textiles; shoes; electrical machinery; iron, steel, metal, and other

manufactured goods; and watches), through specialized customs procedures for these goods.

Consumption Incentives

The “Ahora 12” program, launched in October 2013, allows individuals to finance the purchase of certain

domestically manufactured goods, ranging from clothing to toys to home appliances, in addition to domestic

tourism, in monthly installments (originally 12 months) with certain credit cards without interest. On July

29, 2019, the government expanded the program by adding small appliances, cosmetics, and self-care

products, and increased the price limit for purchases of eyeglasses and motorcycles. The Argentine

Government further extended the programs – which now include Ahora 12, Ahora 18, and Ahora 3 y 6 –

through March 31, 2021, through resolution 730/2020. The new resolution removed cellphones from the

list and included some medical equipment (such as defibrillators and sterilization equipment), prescription

medicine, and some domestic services such as educational services (language and drama courses, among

other, excluding educational services offered in schools and universities), personal care services

(hairdressers, barber shops, and beauty salon services), and automobile and motorbike repair services. On

July 30, 2021, the government extended the programs through January 31, 2022 through resolution

753/2021, and created the Ahora 24 and Ahora 30 programs, which allow individuals to finance the

26 | FOREIGN TRADE BARRIERS

purchase of home appliances and construction materials. In January 2022, the government issued

Resolution 34/2022 to extend these programs, except for Ahora 30, until June 30, 2022..

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. In 2018, the market reopened to U.S. beef. However, the market for

U.S. cattle remains closed pending an audit of the U.S. animal health system by Argentina and negotiation

of a sanitary certificate.

Poultry

Argentina does not allow imports of fresh, frozen, or chilled poultry, nor day-old chicks or hatching eggs

from the United States 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 the Argentine system. Over the past several years, the United States has provided Argentina

with updates on the status of HPAI in the United States and on the success of the U.S. Government’s

mitigation and eradication efforts. Most recently, the United States requested market access for day-old

chicks and hatching eggs. The U.S. Department of Agriculture’s (USDA) Animal and Plant Health

Inspection Service (APHIS) continues to negotiate the sanitary requirements with Argentina.

In addition, the United States requested that Argentina regionalize its restrictions related to HPAI in the

event of future outbreaks, as recommended by the World Organization for Animal Health. The United

States continues to engage with Argentina to resolve the market access issues for poultry.

Pet Food with Ruminant Ingredients

Market access for exports of U.S. pet food containing ruminant ingredients to Argentina has been pending

for thirteen years. USDA and Argentine authorities engaged in 2021 to resolve outstanding technical issues.

GOVERNMENT PROCUREMENT

Argentine law establishes a national preference for local industry for most government procurement if the

domestic supplier’s tender is no more than five percent to seven percent higher than the foreign tender. The

amount by which the domestic bid may exceed a foreign bid depends on the size of the domestic company

making the bid. In May 2018, Argentina issued Law 27,437 giving additional priority to Argentine small

and medium-sized enterprises and requiring that foreign companies that win a tender must subcontract

domestic companies to cover 20 percent of the value of the work. The preference applies to procurement

by all government agencies, public utilities, and concessionaires. There is similar legislation at the

provincial level. In September 2018, Argentina issued Decree 800/2018, which provides the regulatory

framework for Law 27,437. In November 2016, Argentina passed a law No. 27,328, which regulates public-

private contracts. The law lowered regulatory barriers to foreign investment in public infrastructure projects

with the aim of attracting more foreign direct investment. However, the law contains a “Buy Argentina”

clause that mandates at least 33 percent local content for every public project.

Argentina 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 1997.

FOREIGN TRADE BARRIERS | 27

INTELLECTUAL PROPERTY PROTECTION

Argentina remained on the Priority Watch List in the 2021 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. In

addition, the United States encourages Argentina 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. Finally, a backlog continues for patent

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

products.

In addition, the absence of sustained enforcement efforts – including under criminal laws – sufficient to

have a deterrent effect, coupled with judicial inefficiency and outdated intellectual property (IP) laws,

diminishes the competitiveness of U.S. IP-intensive industries in Argentina. For example, “La Salada”

continues to be one of South America’s largest black markets for counterfeit and pirated goods. 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 online markets. The United States will

continue to monitor these issues and engage Argentina on IP matters at large.

SERVICES BARRIERS

Audiovisual Services

Argentina imposes restrictions on the showing, printing, and dubbing of foreign films in Argentina. The

National Institute of Cinema and Audiovisual Arts taxes foreign films screened in local movie theaters.

Distributors of foreign films in Argentina must pay screening fees that are calculated based on the number

and geographical locations of theaters at which the films will be screened within Argentina. Films screened

in 15 or fewer movie theaters are exempted. According to Resolution 1087/2019, which came into force

July 23, 2019, all movie theaters must project at least one domestically produced film for the entirety of

one week per quarter.

The 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

purchases. Consumers can purchase 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. Non-commercial courier shipments with a value of $1,000 or less and a

weight not greater than 50 kilograms are exempt from import licensing and other import requirements,

subject to certain conditions, including an annual limit of five shipments per person. Due to significant

import-related delays and lack of transparency, such as non-automatic import licenses, the express and

postal channels are essential for electronic commerce.

28 | FOREIGN TRADE BARRIERS

Argentina does not have a centralized platform for, and does not allow the use of, electronically produced

air waybills, which would accelerate customs processing.

Insurance Services

The Argentine insurance regulator (SSN) imposes restrictions on reinsurance supplied by foreign

companies. Resolution 40422-E/2017 allows local insurance companies to place only up to 75 percent of

the ceded premium with foreign reinsurance companies.

The SSN requires that all investments and cash equivalents held by locally registered insurance companies

be located in Argentina. In May 2019, the SSN issued Resolution 515, establishing that each insurance

company must invest a minimum of 5 percent (to a maximum of 20 percent) of its portfolio for financing

of small and medium-sized enterprises.

Telecommunications Services

1n 1998, Argentina and the United States entered into the Agreement Concerning the Provision of Satellite

Facilities and the Transmission and Reception of Signals to and from Satellites for the Provision of Satellite

Services to Users in the United States of America and the Argentine Republic (Bilateral Satellite

Agreement). The Bilateral Satellite Agreement included the Protocol Concerning the Transmission and

Reception of Signals from Satellites for the Provision of Direct-to-Home Satellite Services and Fixed-

Satellite Services in the United States of America and the Argentine Republic, and was accompanied by an

exchange of letters between the United States Federal Communications Commission and the Argentina

Ministry of Communications. In the Bilateral Satellite Agreement, Argentina committed that U.S.-licensed

satellites will be permitted to provide service to, from, and within Argentina and that Argentina will ensure

that any authorization needed for transmission of satellite services within Argentina shall be issued as

efficiently and expeditiously as possible. In the exchange of letters, the Argentina Ministry of

Communications stated the following regarding fixed-satellite services: “Given all the related internal

processes, it usually takes approximately 30 days to issue a license.” U.S. stakeholders are concerned that,

despite the existence of this Agreement, Argentina is not processing authorizations for fixed satellite

services in a timely manner.

As part of a set of measures adopted in 2020 intended to address economic issues created by the COVID-

19 pandemic, the Argentine Government issued Decree 311/2020, which froze prices and prohibited the

suspension of delinquent accounts for a number of information communication technology (ICT) services,

including fixed and mobile telephone services, Internet access services, and pay television services, until

August 31, 2020. On August 21, 2020, the Argentine Government issued Decree 690/2020, which extended

the freeze on the prices for these ICT services until December 31, 2021 and amended the Information and

Communications Technologies Law to change the regulatory status of these ICT services to “essential and

strategic public services” and therefore subject to additional regulation by the National Communications

Agency (ENACOM), including full rate regulation and additional universal service obligations. On July

12, 2021, ENACOM issued Resolution 862/2021, allowing for a five percent price increase for

telecommunications services. The increase is well below the annual inflation rate in Argentina.

Under the Media Law and the Telecommunications Law, Argentina maintains regulations that treat

terrestrial-based providers (e.g., cable providers) differently from satellite-based providers (e.g., direct-to-

home satellite providers) in that only satellite-based providers are prohibited from bundling their services

with other Internet and telecommunications services offered by terrestrial-based providers. Decree

1340/2016 has an exception allowing satellite television suppliers that already held licenses for information

technology services to continue providing such services. However, the inconsistencies in the current legal

framework create uncertainty in the market.

FOREIGN TRADE BARRIERS | 29

INVESTMENT BARRIERS

Foreign Exchange and Capital Controls

Since 2019, the Argentine Government and the Central Bank have issued a series of decrees and norms

regulating access to foreign exchange markets in order to mitigate the financial crisis.

As of September 15, 2020, pursuant to Communication A71067/2020, Argentine nationals and residents

must limit purchases of foreign currency (or of goods and services denominated in foreign currency) to no

more than $200 per month. Individuals must receive Central Bank approval to purchase foreign currency

in excess of the $200 quota.

Purchases of goods or services abroad with credit and debit cards issued by Argentine banks count against

the $200 monthly quota. Although no limit on credit or debit card purchases is imposed, if monthly

expenditures surpass the $200 quota, the card owner will be prevented from purchasing foreign currency in

Argentina for the number of months needed to cover the amount of excess spending. Also, the regulation

prohibits individuals who receive government assistance and high-ranking government officials from

purchasing foreign currency.

Pursuant to Public Emergency Law 27,541, issued December 23, 2019, all purchases denominated in

foreign currency and individual expenses incurred abroad, in person or online, including international

online purchases from Argentina, paid with credit or debit cards issued by Argentine banks, are subject to

a 30 percent tax. AFIP Resolution 4815 imposes an additional 35 percent withholding tax that may be

deducted from an individual’s income or wealth tax obligation.

Non-Argentine residents are required to obtain prior Central Bank approval to purchase more than $100 per

month in foreign currency, except for certain bilateral or international organizations, institutions and

agencies, diplomatic representation, and foreign tribunals.

As of October 2019, Communication A6815 limits cash withdrawals made abroad with local debit cards to

only foreign currency bank accounts owned by the client in Argentina. Pursuant to Communication A6823,

cash advances made abroad from local credit cards are limited to a maximum of $50 per transaction.

Companies and individuals will need to obtain prior clearance from the Central Bank before transferring

funds abroad, including dividend payments or other distributions abroad, or to pay for services rendered to

a company by foreign affiliates. If transfers are made from their own foreign currency accounts in

Argentina to their own accounts abroad, individuals do not need to obtain Central Bank approval. Through

Communication A6869 issued by the Central Bank in January 2020, companies will be able to repatriate

dividends without Central Bank authorization equivalent to a maximum of 30 percent of new FDI made by

the company in the country. To promote FDI, the Central Bank announced in Communication A7123 in

October 2020 that it will allow free access to the official foreign exchange market to repatriate investments,

provided that the capital contribution was transferred and sold in Argentine pesos through the foreign

exchange market as of October 2, 2020 and that the repatriation takes place at least two years after the

transfer and settlement of those funds. On April 6, 2021, the government issued Presidential Decree 234

creating a program to grant the private sector access to foreign exchange to attract new investment in key

export sectors, including mining, hydrocarbons, agriculture, forestry, and manufacturing. To participate in

the program, companies must invest more than $100 million in new projects. Through Communication

A7259 on April 8, 2021, the Central Bank grants companies up to 20 percent of the foreign exchange

generated from an approved export project to service loans, pay dividends, or deposit into dollar-

denominated accounts domestically or abroad. On June 3, 2021, the Central Bank issued Circular A7361

30 | FOREIGN TRADE BARRIERS

to promote exports by allowing companies to access the foreign exchange market for import, dividend and

debt payments. Exporting companies of industrialized and extractive goods can access the foreign

exchange market for a percentage of the increase in exports recorded in 2021 compared to 2020. The

percentages range from 5 to 15 percent, depending on the value added of the exports and the time to settle

the proceeds in the foreign exchange market.

Exporters of goods are required to transfer to Argentina and settle in pesos in the foreign currency market

the proceeds from exports made as of September 2, 2019. Exporters must settle according to the following

terms: exporters with affiliates (irrespective of the type of good exported) and exporters of certain goods

(including certain cereals, seeds, minerals, and precious metals) must convert their foreign currency

proceeds to pesos within 15 days (or 30 days for some products) after the issuance of the permit for

shipment; other exporters have 180 days to settle in pesos. Irrespective of these deadlines, exporters must

comply with the obligation to transfer the funds to Argentina and settle in pesos within five days from the

actual collection.

Pursuant to Decree 661 issued in September 2019, all export tax refunds are subject to liquidation in the

local foreign exchange market. This measure complements Decree 609/2019 that requires all proceeds

from exports to be settled in Argentine pesos.

Payments for imports of goods and services from third parties and from affiliates require Central Bank

approval if the company needs to purchase foreign currency. Pursuant to Communication A7030 from May

2020, the Central Bank requires that importers submit an affidavit stating that the total amount of foreign

currency requested (including the current payment request) does not exceed the amount of the payments

for purchases by that importer and cleared by customs between January 1, 2020, and the day prior to

accessing the foreign exchange market. The total amount of payments for import of goods should also

include the payments for amortizations of lines of credit or commercial guarantees.

Argentine residents are required to transfer to Argentina and settle in pesos the proceeds from services

exports rendered to non-Argentine residents that are paid in foreign currency, either in Argentina or abroad,

within five business days from collection thereof.

In February 2021, the Central Bank issued Communication A7230, extending Circular A7106 and including

debt coming due from April 1, 2021 to December 31, 2021. Circular A7106, originally issued by the

Central Bank in September 2020, limited companies’ ability to purchase foreign currency to repay any

external financial debt (including intercompany debt) and dollar-denominated local securities. Companies

have access to no more than 40 percent of the principal amount coming due from October 15, 2020 to

December 31, 2021 (as amended), and for the remaining 60 percent of the debt, the company must file a

refinancing plan with the Central Bank. Debt from international organizations or their associated agencies

or guaranteed by them and debt to official credit agencies or guaranteed by them are exempt from this

restriction. In addition, the Central Bank, through Communication A701, prohibited access to the foreign

exchange market to pay for external debt, imports, and for saving purposes for individuals and companies

that sold securities with settlements in foreign currency or transfers to foreign depositary entities within the

previous 90 days and may not make additional sales during the following 90 days.

On October 16, 2020, the Central Bank issued Communication A7138 establishing that importers

requesting access to the foreign market in excess of $50,000 must receive prior approval from the Central

Bank. On October 30, 2020, through Communication A7151, the Central Bank also obligated commercial

banks to require importers to submit a sworn declaration of their import request so the request may be cross-

referenced to the Central Bank database of importers, to ensure compliance with the foreign exchange

controls. These measures have increased delays for import operations.

FOREIGN TRADE BARRIERS | 31

Local Content Requirements

Argentina establishes percentages of local content in the production process for manufacturers of mobile

and cellular radio communication equipment operating in Tierra del Fuego province. Resolution 66, issued

July 12, 2018, replaces Resolution 1219/2015 and maintains the local content requirement for products such

as technical manuals, packaging, and labelling. Resolution 66 eliminated the local content requirement

imposed by Resolution 1219 for batteries, screws, and chargers. The percentage of local content required

ranges from 10 percent to 100 percent depending on the process or item. In cases where local supply is

insufficient to meet local content requirements, companies may apply for an exemption that is subject to

review every six months.

SUBSIDIES

Local Content Subsidies

Argentina maintains certain local-sourcing support measures aimed at encouraging domestic production.

Resolutions 123 and 313, issued in 2016, allow companies to obtain tax benefits on purchases of solar or

wind energy equipment for use in investment projects that incorporate at least 60 percent local content in

their electromechanical installations. If local supply is insufficient to reach the 60 percent threshold, the

threshold can be reduced to 30 percent. The updated list of tax-exempt goods under the renewable energy

regime and the technical criteria used to calculate the local content is detailed in Annex I of Joint Resolution

E-1/2017.

OTHER BARRIERS

Export Policies

Argentina maintains export taxes on most exports of goods and services. Decree 37/2019 sets the export

tax rate on goods at 12 percent, with several exceptions. Products listed in Annex II of Decree 37 are

subject to a 9 percent export tax. Products that were listed in Annex II of Decree 793, issued September 4,

2018, but that were not also included in Annex II of Decree 37/2019, are required to pay an export tax of

three Argentine pesos per dollar exported. On October 1, 2020, through Decree 785/2020, the government

established an 8 percent export tax on a set of products including gold, marble, and granite until December

31, 2021.

On December 23, 2019, when Public Emergency Law 27,541 came into effect, Argentina established export

tax ceilings on exports of certain agricultural commodities, industrial products, oil, gas, minerals, and

services. In the case of exports of services, the maximum tax that applies is 5 percent. Micro and small

enterprises exporting less than $600,000 in services per year are exempted from the tax, and those exporting

more than $600,000 are required to pay the export tax on exports above the $600,000 threshold. Goods

produced in and exported from the Special Customs Area (SCA) located in Tierra del Fuego province are

exempt from export taxes.

Argentina maintains additional percentage-based export taxes on a range of products. Annex I of Decree

1126/2017 and its modifications detail the full list of additional export duties applied in Argentina.

Soybeans, soy meal, and soy oil are taxed at 18 percent; leathers at 5 and 10 percent; cork at 10 and 5

percent; paper and cardboard waste for recycling at 20 percent; and alloy steel waste at 5 percent. On May

28, 2018, the Argentine Government issued Decree 486, increasing the export tax on biodiesel from 8

percent to 15 percent as of July 1, 2018. In October 2020, the Argentine Government issued Decrees

789/2020 and 790/2020 reducing export taxes on soybean products for three months to encourage exports.

Export taxes on soybeans were lowered from 33 percent to 30 percent during October 2020, to 31.5 percent

32 | FOREIGN TRADE BARRIERS

during November 2020, and 32 percent during December 2020, returning to 33 percent in January 2021.

Processed soybean products (including soymeal and soybean oil) were taxed at 28 percent instead of 33

percent during October 2020, 29.5 percent during November 2020, and 30 percent during December 2020,

and were set for 33 percent as of January 2021. This differential provides an incentive to export processed

soybean oil and soymeal instead of whole soybeans. On May 8, 2021, the government issued decree

302/2021, modifying Decree 790 to exempt micro- and small and medium-sized enterprises (SMEs) from

paying the export tax if exports do not exceed $500,000 Free On Board (FOB). For exports between

$500,000 and $1 million, SMEs would pay 50 percent of the export duty. Decree 150/2021, published on

March 8, 2021, established the elimination of the export tax for automobiles and automotive parts exports

that surpassed the 2020 exported volume. Automobiles and automotive parts exports below the 2020

exported volume will continue paying a 3 percent to 4.5 percent export tax depending on the product.

Pursuant to decree 1034/2020, issued in December 2020, all information technology service exports from

companies enrolled in the knowledge-based economy promotion regime are exempt from the export tax.

The MERCOSUR CCC, if entered into effect, would restrict future export taxes and transition to a common

export tax policy.

Export Ban

In 2016, pursuant to Decree 823/2016, Argentina implemented a 360-day ban on all exports of scrap of

iron, steel, copper, and aluminum. The Argentine Government consistently extended the ban in subsequent

years, although a current extension is still pending.

In May 2021, the Secretary of Domestic Trade banned meat exports for 30 days due to increasing domestic

meat prices. On June 23, 2021, Decree 408/2021 established a 50 percent export quota on a set of meat

cuts not consumed locally until December 31, 2021. After several amendments to the decree, on October

11, 2021, the government issued Decree 700/2021 ending the 50 percent export quota. Some export

limitations remained on the seven most popular meat cuts consumed locally until December 31, 2021.

Pursuant to Decree 911/2021, the measure was extended through December 31, 2023.

Export Registrations and Permits

Since December 29, 2015, Argentina has required exporters of certain grains, pulses, cotton, oilseeds, and

their derivatives to obtain Affidavits of Foreign Sales (DJVE) and register the exportation with the Office

of Coordination and Evaluation of Subsidies to Domestic Consumption. In October 2019, the Ministry of

Agriculture, Livestock, and Fisheries released resolution 78/2019 that updated regulations for DJVE and

reduced the term of validity for short-term DJVE from 45 to 30 days. Exporters are now required to pay

90 percent of the export tax within five days of registration. For short-term DJVE, exporters must pay the

full export tax immediately upon approval of the DJVE registration, based on the official Free On Board

value on the date of the sale.

Consumer Goods Price Control Program

In January 2014, Argentina launched a consumer goods price control program called “Precios Cuidados.”

Under the voluntary program, participating consumer goods manufacturers and supermarkets agreed to

adhere to price caps on nearly 200 basic consumer goods. Since January 2016, the program has been

extended several times, with prices adjusted for inflation and additional products added to the program. In

September 2018, the Secretary of Domestic Trade issued Disposition 46/2018, including small retail stores

in the program. In January 2020, the government extended the program through January 31, 2021, and

changed the products included in the program, reducing the number of products to 310, subject to a quarterly

review. On October 6, 2020, through Disposition 14/2020, the government increased the number of

products included in the program to a total of 400, with prices adjusting to the level registered in July 2020.

FOREIGN TRADE BARRIERS | 33

On October 20, 2021, the Secretary of Domestic Trade issued resolution, extending the program until

January 7, 2022.

In February 2016, Argentina issued Resolution 12/2016, which established the “Precios Claros” program

to monitor retail prices using an “Electronic System of Advertised Prices” (SEPA), accessible online or via

mobile app. Supermarkets are required to publish their price lists and have enough stock of the products

listed under the program. Consumers can report the absence of products or any difference in price via the

SEPA app, through the website, or by presenting a complaint directly to the National Commission for the

Defense of Competition (CNDC) Office. The CNDC has the authority to apply a fine to companies if it

finds an absence of justification for increases in prices of products listed under the program.

On June 8, 2021, the Secretary of Domestic Trade discontinued the “Precios Máximos” program that had

been in place since 2020 and controlled the prices of 18 categories of products, including food and beverage,

cleaning and hygiene products. On the same date, it was replaced with a new price control program “Super

Cerca.” This program seeks to include small retail stores into a price control program as they are not part

of the Precios Cuidados” program. The new program includes 70 basic necessity items.

Supply Law

In 2014, Argentina amended the 1974 National Supply Law to expand the ability of the government to

regulate private enterprises by setting minimum and maximum prices and profit margins for goods and

services at any stage of economic activity. Private companies may be subject to fines and temporary closure

if the Argentine Government determines they are not complying with the law. Although the U.S.

Government has not received any reports of it being applied since December 2015, in October 2021, the

government publicly stated that it would apply the law if companies do not comply with price freeze

programs.

Pension System

In 2008, the Argentine Congress approved a bill to nationalize Argentina’s private pension system and

transfer pension assets to the government social security agency. Compensation to investors in the

privatized pension system, including to U.S. investors, is still pending and subject to ongoing international

arbitration.

FOREIGN TRADE BARRIERS | 35

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 Organization for Animal Health (OIE). 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 engage the Australian government to reach an agreement on the terms and conditions for U.S. fresh beef

and beef product exports to Australia.

Pork

Pork and pork products are the top U.S. agricultural export to Australia, valued at approximately $196.9

million in 2021. 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 OIE approved an international standard for PRRS

in May 2017, Australia has requested additional scientific information 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 with a request that Australia should re-open the import

risk assessment for U.S. origin fresh/chilled/frozen pork. The United States and Australia discussed this

issue during an FTA Sanitary and Phytosanitary (SPS) Committee Meeting in 2020, 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

36 | 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. Market access for U.S. cooked turkey meat was also

discussed in the FTA SPS Committee Meeting in 2020. Negotiations are ongoing. 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, and 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. Australia also prohibits the importation of pears from the United States for

phytosanitary issues, including 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 had been introduced in the Australian Parliament as of March 2022. . 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 legislation that would impose 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 Services Reporting and Investment Scheme discussion paper. The paper outlines a proposed

FOREIGN TRADE BARRIERS | 37

regulatory scheme in which streaming services would be expected to invest at least five percent of their

Australian revenues in commissioning new Australian content. Companies that do not meet this threshold

could be designated by the Minister of Communications as non-compliant, following which the minister

would have broad powers to impose investment obligations on that company (not necessarily limited to

investing up to the five percent threshold). As an interim measure the Australian government has required

streaming services to report their annual spending on local content. 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. During the consultation

process, the United States identified a number of concerns with the draft Bargaining Code and provided

formal submissions to the ACCC in August 2020 and the Australian Parliament in January 2021. On

February 25, 2021, the Australian Parliament passed an amended version of the legislation. The amended

legislation addressed several of the 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 would be subject to compulsory

mediation. If mediation is unsuccessful, the bargaining parties would 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.

The United States will continue to monitor this issue.

Online Content

Australia enacted an Online Safety Act in June 2021 that places additional responsibilities on digital

platforms and internet service providers (ISPs) to monitor and remove harmful content posted on their

services. Specifically, the Act reduces the time a site owner or ISP has to remove harmful content from 48

hours to 24 hours when served with a removal notice by the eSafety Commissioner. It also provides the

eSafety Commissioner additional information collection powers and the power to require ISPs to disable

access to material depicting violent conduct for a limited period during “crisis situations.” Some U.S.

companies expressed concern about the reduced time to remove harmful material, arguing it may be

infeasible in some situations and that good faith efforts to remove such content were already in place.

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On February 10, 2022, the government has introduced new “anti-trolling” legislation (the Social Media

(Anti-Trolling) Bill 2022) to enable defamation cases to be prosecuted where defamatory material was

posted anonymously on online platforms. The legislation, if passed, would require 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. The legislation would also require digital platforms and/or the

nominated entity to enable the identification of posters on their services where the posts originate in

Australia. The legislation is being reviewed by the Senate Legal and Constitutional Affairs Committee,

which was due to report back to Parliament by March 24.

INVESTMENT BARRIERS

Foreign direct investment into Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975,

as amended, and associated regulations, and is screened by the Foreign Investment Review Board (FIRB).

Generally, foreign investors are required to apply to FIRB for acquisitions of a “substantial interest” in an

Australian business valued above A$281 million (approximately $200 million). Decisions are based on the

“national interest” test, which includes national security concerns and are ultimately made by the Australian

Treasurer based on advice from FIRB. Foreign persons must get approval before acquiring residential land,

regardless of the value. All investments, including greenfield investments, by foreign government investors

must also get approval by FIRB, regardless of the value or industry of the business.

Under the FTA, all U.S. greenfield investments are exempt from having to apply to FIRB. Under the FTA,

non-greenfield U.S. investments above a higher threshold value are required to apply to FIRB, which stands

at A$1.216 billion (approximately $887 million) for non-sensitive businesses and A$281 million

(approximately $200 million) for sensitive businesses. As with other investors, U.S. investors are subject

to a zero-dollar threshold for investments in residential land or vacant commercial land and for any

acquisition providing greater than five percent ownership in any media enterprise. The Australian

Government has generally approved U.S. investments.

Under new legislation that entered into force in January 2021, any foreign acquisition of a “direct interest”

in a “national security business” must be filed with FIRB regardless of its value. National security

businesses include critical infrastructure; businesses that develop, manufacture, or supply critical goods or

critical technology intended for use by the Australian military or intelligence community, or foreign

militaries or intelligence communities; and businesses that provide critical services to Australia’s military

or intelligence community, including the storage of Australian classified information or personal

information of Australian personnel. If such an investment is not otherwise subject to the broader national

interest test, FIRB will apply a narrow national security test. The Treasurer also has the power, for up to

10 years after the investment, to “call in” any foreign investment not filed with FIRB if the Treasurer

considers it may pose a national security concern.

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’s 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 | 39

BAHRAIN

TRADE AGREEMENTS

The United States–Bahrain Free Trade Agreement

The United States–Bahrain Free Trade Agreement (FTA) entered into force on January 11, 2006. Under

the FTA, as of January 1, 2016, 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 Agreement 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 products (100 percent).

U.S. beverage producers report that the current tax structure for carbonated drinks, which also applies to

sugar-free carbonated beverages, fails to address public health concerns and disadvantages U.S. products.

Sugary juices, many of which are manufactured domestically within GCC countries, remain exempt from

the tax.

Import Bans

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

TECHNICAL BARRIERS TO TRADE

Restrictions on Hazardous Substances – Electrical Goods

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

Standardization Organization (GSO) technical regulation that would, among other things, 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 includes a requirement to submit sample

products 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 (such as information and communications technology, medical equipment,

machinery, and smart fabrics), especially as the trade restrictive third party certification requirements differ

from international best practices, which typically permit a supplier’s declaration of conformity, supported

by documentation requirements, such as test results and manufacturing specifications, in conjunction with

integrated enforcement mechanisms, such as regulatory sanctions, liability in tort law, and mechanisms to

monitor or remove nonconforming products from the market.

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, such

as table covers. Bahrain has stated that it will notify future changes in product coverage to the WTO.

40 | FOREIGN TRADE BARRIERS

Plastic Water Bottles

In July 2021, Bahrain’s Ministry of Industry, Commerce and Tourism issued Resolution No. 77, which will

ban 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.

Halal Regulations

In April 2020, GCC Member States notified to the WTO a draft GSO technical regulation establishing halal

requirements and certification for animal feed. The U.S. animal feed, beef, and poultry industries have

expressed concerns that the new technical regulation may place additional requirements on U.S. producers

without offering additional assurance of meeting Member States’ legitimate regulatory objectives. The

United States submitted comments to GCC Member States in July 2020 noting the unprecedented and

potentially trade-restrictive nature of the measure.

Energy Drinks

In September 2021, Bahrain began to implement Executive Regulations for the Public Health Law on

Energy Drinks restricting the sale of such products to individuals under the age of 18. Under these

regulations, all locations selling energy drinks must display a prominent notice indicating that energy drinks

cannot be sold to individuals under the specified age. In addition, manufacturers are required to place a

statement on energy drink labels warning that the product is not suitable for pregnant and nursing women,

those under 18 years of age, those who are allergic to caffeine or other ingredients contained in the product,

individuals with heart problems, those suffering from high blood pressure or diabetes, and athletes engaged

in exercise. The regulations also: (1) prohibit the sale of energy drinks in restaurants, cafeterias,

educational facilities, and health facilities; (2) require prior licensing in order to advertise energy drinks

through any form of media; and, (3) ban free samples of the product.

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 with Bahrain that it had

accelerated the implementation of the final measures without providing the necessary comment period and

without notifying the final measure as required by the WTO Agreement on Technical Barriers to Trade.

In 2016, GCC Member States notified to the WTO a draft GSO technical regulation for energy drinks. The

U.S. Government and private sector stakeholders have raised questions and concerns regarding the draft

regulation, including labeling requirements regarding recommended consumption and container size, in

addition to potential differences in labeling requirements among GCC Member States. In 2019, GCC

Member States notified to the WTO a revision of the draft regulation that failed to resolve many of the

questions and concerns raised by the U.S. Government and private sector stakeholders.

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.

FOREIGN TRADE BARRIERS | 41

INTELLECTUAL PROPERTY RIGHTS PROTECTION

As part of its United States–Bahrain 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 (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 signals and 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.

As GCC Member States explore further harmonization of their IP regimes, the United States will continue

to engage with GCC institutions and the Member States and provide technical cooperation and capacity

building programs on IP best practices, as appropriate and consistent with U.S. resources and objectives.

LABOR

The United States and Bahrain have been engaged in labor consultations under Article 15.6 of the United

States-Bahrain 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 | 43

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 is revising the IPO for 2021-24 but has not released the results.

Tariffs and Taxes

Tariffs

Bangladesh’s average Most-Favored-Nation (MFN) applied tariff rate was 14.0 percent in 2019 (latest data

available). Bangladesh’s average MFN applied tariff rate was 17.5 percent for agricultural products and

13.4 percent for non-agricultural products in 2019 (latest data available). Bangladesh has bound only 17.9

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

of 156.3 percent.

The IPO is the primary legislative tool governing customs tariffs. The collected tariffs are a significant

source of government revenue, which generally complicates efforts to lower tariff rates.

Products and sectors that are generally exempt from tariffs include generators, information technology

equipment, raw cotton, textile machinery, certain types of machinery used in irrigation and agriculture,

animal feed for the poultry industry, certain drugs and medical equipment, and raw materials imported for

use in specific industries. Commercial samples in reasonable quantities can be carried by passengers during

travel and are not subject to tariffs; however, commercial samples are subject to tariffs if sent by courier.

Taxes

Other charges applicable to imports are an advance income tax of five percent, a value-added tax (VAT) of

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. 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 percent, 7.5 percent, 10 percent, and 15 percent).

The National Board of Revenue (NBR) waived duties and VAT on the import of personal protective

equipment and other emergency medical supplies in March 2020 in response to the COVID-19 pandemic.

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.

44 | FOREIGN TRADE BARRIERS

Non-Tariff Barriers

Quantitative Restrictions

Commercial importers and private industrial consumers (with the exception of those located in Export

Processing Zones (EPZs)) must register with the Chief Controller of Imports and Exports in the Ministry

of Commerce. The Chief Controller issues import registration certificates (IRC). An IRC is generally

issued within a working day of receipt of the eligible application. Commercial importers are free to import

any quantity of non-restricted items. For industrial consumers, the IRC specifies the maximum value (the

import entitlement) for each product that the industrial consumer may import each year, including items on

the restricted list for imports. The import entitlement is intended as a means to monitor imports of raw

materials and machinery, most of which enter Bangladesh at concessional duty rates.

Registration

All importers, exporters, and brokers must be members of a recognized chamber of commerce as well as

members of a Bangladeshi organization representing their trade.

All imports, except for capital machinery and raw materials for industrial use, must be supported by a letter

of credit (LC). An LC authorization form and a cash bond, ranging from 10 percent to 100 percent of the

value of the imported good, are required. Effective October 31, 2019, under instruction from the NBR,

Bangladesh Bank (the country’s central bank authority) has directed all dealer banks not to allow importers

to establish an LC if the LC authorization form does not have a 13-digit VAT registration number. Other

documents required for importation include: a bill of lading or airway bill, commercial invoice or packing

list, certificate of origin, insurance policy/cover note, and VAT/BIN certificate. For certain imported goods

or services, additional certifications or import permits related to health, security, or other matters are

required by the relevant government agencies. Goods imported by or for the public sector generally require

less documentation, but the specific amount of documentation required varies from sector to sector.

Bangladesh imposes registration requirements on commercial importers and private industrial consumers.

Commercial importers are defined as those who import goods for sale without further processing. Private

industrial consumers are units registered with one of four sponsoring agencies: the Bangladesh Export

Processing Zones Authority, for industries located in EPZs; the Bangladesh Small and Cottage Industries

Corporation, for small and medium-sized enterprises (SMEs); the Handloom Board, for handloom

industries run by the weaver associations engaged in the preservation of classical Bangladesh weaving

techniques; and the Bangladesh Investment Development Authority (BIDA), for all other private industries.

Registered commercial and industrial importers are classified into six categories based on the maximum

value of annual imports. An importer must apply in writing to the relevant Import Control Authority (ICA)

for registration in any of the six categories, and provide necessary documents, including an original copy

of the “Chalan” (the Treasury payment form) as evidence of payment of the required registration fees. The

ICA makes an endorsement under seal and signature on the IRC for each importer, indicating the maximum

value of annual imports and the renewal fee. Initial registration fees and annual renewal fees vary

depending on the category. An importer may not open an LC in excess of the maximum value of annual

imports.

Indentors (representatives of foreign companies or products compensated on a commission or royalty basis)

and exporters must also pay registration and renewal fees.

Foreign exchange is controlled by the Bangladesh Bank in accordance with foreign exchange regulations

and policies.

FOREIGN TRADE BARRIERS | 45

Customs Barriers and Trade Facilitation

Bangladesh has not yet 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.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

As of March 2022, 55 imported products are subject to mandatory standards certification from the

Bangladesh Standards and Testing Institution (BSTI). Importers must present these certifications before

customs clearance at ports of entry. BSTI draws samples from all consignments of products that require

mandatory standards certification instead of adopting a risk-based testing approach. BSTI’s infrastructural

and capacity constraints often lead to significantly long wait times for testing and certification of imported

products. While the testing and certification of most imported products is generally available within two

weeks, the wait time could be longer for certain products for various reasons, including a lack of capacity

and automation.

The Hazardous Waste (e-waste) Management Rules, authorized under the Bangladesh Environment

Conservation Act, went into effect on June 10, 2021. A scheduled list of products is covered under the

rules, including home appliances, monitoring and control equipment, medical equipment, automatic

machines, and IT and communication equipment. The rules outline obligations for manufacturers, retailers,

transporters, recyclers, and others for registering with the Department of Environment. Manufacturers must

obtain an environmental clearance and establish collection centers for e-waste. Sellers of listed products

must ensure their names, addresses, contact information, and registered collection center are displayed on

product labels. The new rules also establish a list of restricted hazardous substances, setting a threshold

limit for each. Industry has raised concerns related to a lack of guidance regarding registration and disposal

procedures for each party in the e-waste processing chain and the absence of exemptions for substances

critical to electronics manufacturing. Bangladesh had notified to the WTO a summary of the measure in

2020 and provided an updated summary in 2021, but has not responded to a request from the United States

in October 2021 seeking further information on the measure or to requests to notify the full measure made

at meetings of the WTO Committee on Technical Barriers to Trade.

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), along with their Bangladeshi counterparts, visited the Chittagong port in September 2018 to

inspect imported U.S. cotton and demonstrated there was no presence of boll weevil. In September 2020,

APHIS and the U.S. Cotton Council hosted the Bangladeshi Secretary of Agriculture for a virtual tour of

46 | FOREIGN TRADE BARRIERS

U.S. cotton production, ginning, baling, and shipping to address any outstanding concerns related to boll

weevil. As recently as October 2020, the Ministry of Agriculture said Bangladesh would continue to require

fumigation of imported U.S. cotton. The United States continues to press Bangladesh to eliminate the

unnecessary fumigation requirement for U.S. cotton. In 2021, Bangladesh was the sixth largest export

market for U.S. cotton, with exports valued at approximately $311 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 (CPTU). There are no “buy national”

policies. 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 make slow progress towards establishing a comprehensive legal framework to

adequately and effectively protect and enforce intellectual property (IP). While the Patents and Designs

Act of 1911 remains in effect, two new laws to replace it are under consideration: Bangladesh Patents Bill

2021; and Bangladesh Industry-Designs Bill 2021. The Prime Minister’s cabinet has approved these draft

bills, but before becoming law they would need to undergo review by the Law Ministry and final approval

by Parliament. In addition, the Department of Patents, Designs and Trademarks (DPDT) has drafted an

“Innovation & IP Policy Strategy.” However, Bangladesh failed to consult all relevant stakeholders and

the policy lacks wide acceptance or support.

Bangladesh devotes limited resources to IP protection and enforcement. Counterfeit and pirated goods are

readily available. U.S. firms, including pharmaceutical companies, manufacturers of consumer goods,

apparel, and software firms have reported violations of their IP. Investors note police are willing to

investigate counterfeit goods distributors when informed but are unlikely to initiate independent

investigations. In addition, right holders have raised concerns about the fairness of court decisions in IP

cases. In May 2021, at the request of the Bangladesh IP office, the U.S. Patent and Trademark Office

(USPTO) hosted a virtual session to demonstrate how U.S. policies on examination of well-known marks

and handling of bad faith filings are applied to real cases.

Bangladesh took an encouraging step in November 2019 when its National Board of Revenue issued revised

Customs Rules intended to streamline IP enforcement and prevent the importation of counterfeit products.

In September 2020, the USPTO hosted a three-day program for Bangladeshi Customs officials and industry

representatives on U.S. IP enforcement and best practices.

Better coordination among enforcement authorities and other government institutions, such as the DPDT

and Customs, is needed to strengthen Bangladesh’s IP regime. The USPTO and other U.S. Government

agencies continue to provide technical assistance to Bangladesh to improve the country’s IP regime.

FOREIGN TRADE BARRIERS | 47

SERVICES BARRIERS

In many sectors, foreign companies must obtain permission from relevant ministries or authorities before

providing services. New market entrants face significant restrictions to obtaining such permission in most

regulated commercial fields, including telecommunications, banking, and insurance. There have been

reports that licenses are not always awarded in a transparent manner.

Audiovisual Services

According to the Bangladesh Telecommunication Act of 2001, the government must approve licenses for

foreign-originating channels. Foreign television distributors are required to pay a 25 percent supplementary

duty on revenue from licensed channels.

Financial Services

In December 2012, Bangladesh began phasing in a National Payment Switch Bangladesh (NPSB), owned

by Bangladesh Bank, for processing electronic transactions through various channels, including ATMs, point

of sale, mobile devices, and the Internet. According to the Government of Bangladesh, the main objectives

of the NPSB are to create a common electronic platform for payments throughout Bangladesh, facilitate the

expansion of debit and credit card-based payments, and promote electronic commerce. In practice, the NPSB

has limited the ability of global suppliers of electronic payment services to participate in the market.

Bangladesh Bank’s position as both regulator and market participant can create a formidable barrier for

competitors to the NPSB.

All ATM transactions, and many point of sale and internet banking fund transfer transactions, are routed

through the NPSB. Market participants have expressed concerns about the security of NPSB transactions.

The NPSB can only process magnetic strip data and cannot yet process data stored on secure chips, nor can

it provide the level of security and fraud detection of private service suppliers. The United States has urged

Bangladesh Bank to review its policies on the NPSB and hold discussions with all stakeholders to address

their concerns.

Insurance Services

Section 22 of the Insurance Act of 2010 prohibits foreign investors from holding more than 60 percent equity

in a domestically registered insurance company. Although foreign insurance branches are allowed, only one

foreign insurance company currently has the permission to operate in Bangladesh as a branch office. The

process of obtaining permission to carry out insurance business in Bangladesh can be politically influenced.

U.S. companies have raised concerns that Bangladesh Bank is not permitting the marketing and signing of

life insurance products via commercial banks. The United States has continued to press Bangladesh Bank

to reconsider this restriction, and in 2020 Bangladesh Bank formed a committee to assess the

implementation of new rules to allow insurance distribution.

Telecommunications Services

The Bangladesh Telecommunication Regulatory Commission (BTRC) limits foreign equity in the

telecommunications service suppliers to a maximum of 60 percent. According to the National

Telecommunication Policy, foreign investors in the telecommunications sector are encouraged to

demonstrate their commitment to Bangladesh by forming joint ventures with local companies. Frequent

48 | FOREIGN TRADE BARRIERS

changes to regulations and tax policy in the sector increase business uncertainty, thereby decreasing the

incentive to invest.

Bangladesh imposes the highest taxes on mobile telecommunications services of any country in South Asia.

Under the present tax regime, the mobile industry is taxed like a supplier of luxury goods, with taxes imposed

at various levels of operation. Mobile network operators pay 5.5 percent of their revenue to the BTRC as a

spectrum fee, 1 percent of their revenue into a social obligation fund, and BDT 50 million (approximately

$587,700) as an annual licensing fee. A tax of BDT 200 (approximately $2.35) is imposed on the sale of

subscriber identification model (SIM) cards, and a 10 percent supplementary duty is applied to charges for

phone usage. Smartphones are subject to a 25 percent duty while all other handsets are subject to a 10 percent

import duty. The corporate income tax rate for telecommunications companies listed in the Bangladeshi

capital market is 40 percent, while the corporate income tax rate for mobile service providers that are not

publicly listed in the Bangladesh capital market is 45 percent.

In January 2018, the Ministry of Posts, Telecommunications, and Information Technology approved mobile

network tower sharing guidelines. The approved guidelines raised foreign companies’ shareholding limit in

a tower sharing company from the previous limit of 49 percent to 70 percent. The guidelines allow four

companies to manage mobile towers in Bangladesh. However, BTRC issued licenses in November 2018

through a non-transparent process.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

The Digital Security Act of 2018 (DSA) criminalizes a wide range of online activities, creating challenges

for online platforms and digital media firms. The Act criminalizes publication of information online that

hampers the nation, tarnishes the image of the state, spreads rumors, or hurts religious sentiment. The Act

provides for criminal penalties up to $120,000 and up to 14 years in prison for certain infractions. Those

charged with violating the DSA are frequently jailed pending court hearings, which leads to the use of the

DSA as a censorship tool, further restricting the use of online platforms.

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 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 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. In November 2018 the BTRC instructed all international Internet

gateway licensees to temporarily block a U.S. Voice over IP service supplier; the block lasted for one day.

Such interference, even on a temporary basis, undermines the value of Internet-based services, decreasing

the incentive to invest.

The Bangladesh Road Transport Authority’s (BRTA) Ride-Sharing Service Guidelines came into force in

March 2018. These new regulations included requirements that app-based transportation service providers

maintain data servers within Bangladesh.

Effective July 1, 2019, the NBR imposed a 15 percent VAT on foreign satellite television service suppliers

and social media service suppliers and required such firms to open local offices or appoint local

representatives to facilitate tax collection. U.S. and global social media platforms reported paying VAT to

NBR beginning in July 2020.

FOREIGN TRADE BARRIERS | 49

SUBSIDIES

Bangladesh provides export cash incentives to selected export sectors. Bangladesh Bank updates the sectors

and the respective rates every year through its circulars. Such cash incentives are provided only to those

exporters who do not avail themselves of the bonded warehousing facility or the duty drawback facility.

Current incentives include those for ready-made garment exports of new products or to new markets, home

electronics and appliances, and products made in special economic zones or high-technology parks.

In the agricultural sector, incentives are provided for a variety of products including vegetables, fruits, and

processed agricultural products. Processed agricultural products include: potatoes; rice, tea, 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.

INVESTMENT BARRIERS

Bangladesh frequently promotes local industries resulting in some discriminatory policies and regulations.

In practical terms, foreign investors frequently find it necessary to have a local partner even though this

requirement may not be statutorily defined.

Bangladesh’s foreign direct investment as a percentage of GDP in 2020 (latest data available) was only 0.79

percent. Overlapping administrative procedures and a lack of transparency in regulatory and administrative

systems can frustrate investors seeking to undertake projects in the country. Frequent transfers of top- and

mid-level officials in various Bangladeshi ministries, directorates, and departments are disruptive and

prevent timely implementation of both strategic reform initiatives and routine duties.

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 and that applications to repatriate profits or dividends can be held up for additional information

gathering or otherwise delayed. In June 2020, Bangladesh Bank announced that it would ease the

requirements for repatriating the sales proceeds of nonresident equity investment in non-listed public

limited companies and private limited companies. The Central Bank announced in July 2020 that it would

enable local banks to transfer foreign investors’ dividend income into their foreign currency bank accounts,

and relaxed its oversight of remittances of dividends by foreign shareholders, allowing banks and non-bank

financial institutions to extend credit facilities to foreign companies in local currency against foreign

guarantees. However, U.S. insurance companies report that agency-level regulators continue to present

significant obstacles to securing required approvals for remittances, which are required before insurance

companies can seek central bank clearance.

Additionally, foreign entities that have taken equity stakes in non-publicly traded Bangladeshi firms must

receive Bangladesh Bank approval to sell the stakes at any premium over face value, thereby limiting

foreign entities’ ability to take investment profits from the country. While the central bank follows

commonly used valuation methodologies to determine the maximum price at which equity investments can

be sold, some of the numbers used in the valuation process are discretionary. In some instances, Bangladesh

Bank has withheld approval because it considered the valuation to be too high.

International companies, including U.S. companies, have raised concerns the NBR has arbitrarily reopened

decades-old tax cases, particularly targeting cases involving multinational companies. In October 2018,

the NBR established the International Taxpayers’ Unit to handle the income tax files of foreign companies

50 | FOREIGN TRADE BARRIERS

operating in Bangladesh. The unit closely scrutinizes issues related to tax avoidance and capital flight.

U.S. firms have voiced concern over the transparency and predictability of the new unit’s review process.

ANTICOMPETITIVE PRACTICES

The Bangladesh Competition Commission (BCC) is an independent agency under the Ministry of

Commerce. Under the 2012 Competition Act, all proposed mergers are subject to the approval of the BCC,

which considers the market situation and the impact of a planned merger on consumers. Along with the

BCC, the WTO Division of the Ministry of Commerce still handles many competition-related issues.

Despite the work of the BCC since 2011 and significant reforms in the domestic economy, Bangladesh still

possesses a weak competition regime to address anticompetitive conduct. Although the BCC finally came

into full operation in 2016, it has experienced operational delays due to a lack of staff and resources.

Sectors such as railways, telecommunications, and other public utility services have generated monopolies

leading to anticompetitive structures. The Bangladeshi railway system remains a state-owned monopoly

requiring large subsidies because of poor management and lack of fare enforcement.

In some sectors, syndicate leaders are believed to have fixed prices and control the supply chain to maximize

their profits. For example, fertilizer is rarely available in the open market at the government fixed price

because sellers appear to be working together to sell it at a higher price.

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 March 2022, Bangladesh remained

ineligible for duty-free treatment under GSP.

OTHER BARRIERS

Corruption

Corruption is a pervasive and longstanding problem in Bangladesh. Bribery and extortion in commercial

dealings are common features of business. U.S. companies have complained about long delays in obtaining

approval of licenses and bids as bureaucrats seek bribes. While Bangladesh has established legislation to

combat bribery, embezzlement, and other forms of corruption, enforcement is inconsistent. There have

been continuous efforts to water down public procurement rules and proposals to curb the independence of

the Anti-Corruption Commission (ACC), the main institutional anticorruption watchdog. A 2013

amendment to the ACC Law removed the ACC’s authority to sue public servants without prior government

permission. Parliament passed the Sarkari Chakori Ain Bill (Government Job Act) in October 2018. The

Government Job Act made it mandatory for the ACC to seek permission of the authorities concerned before

arresting any government officer. The Government Job Act further limits the efficiency of the ACC in

investigating corruption allegations against government officers. 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. 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

bribery, bribery of foreign public officials, money laundering, and using public resources or confidential

FOREIGN TRADE BARRIERS | 51

state information for private gain. However, anticorruption legislation is inadequately enforced.

Facilitation payments and gifts are illegal, but common in practice.

Export Policies

During 2020, Bangladesh implemented export duties on 18 product categories, including rice bran,

cigarettes, liquefied petroleum gas cylinders (capacity below 5,000 liters), cotton waste, and ceramic bricks.

FOREIGN TRADE BARRIERS | 53

BOLIVIA

IMPORT POLICIES

Bolivia’s constitution, adopted in February 2009, establishes broad guidelines to give priority to local

production. However, as of March 2021, the only legislation enacted with respect to this prioritization is

Law 144 (the Productive Revolution Law), approved on June 26, 2011. The Productive Revolution Law

supports communal groups and unions of small producers in an effort to bolster domestic food production.

It allows the production, importation, and commercialization of genetically engineered (GE) products,

though it requires labeling. Since January 2018, all GE products must include a yellow, triangular shaped-

label. The Mother Earth Law (Ley de Madre Tierra), enacted on October 15, 2012, calls for the phased

elimination of all GE products from the Bolivian marketplace. However, implementing regulations have

not yet been issued, due in part to objections from Bolivian agriculture and other industries, which have

sought the reform of many import policies they consider onerous, including those related to biotechnology.

Tariffs and Taxes

Tariffs

Bolivia’s average Most-Favored-Nation (MFN) applied tariff rate was 11.8 percent in 2019 (latest data

available). Bolivia’s average MFN applied tariff rate was 13.2 percent for agricultural products and 11.6

percent for non-agricultural products in 2019 (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 7 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 manufactures 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.

Taxes

On August 31, 2021, Bolivia implemented law number 1391, Tax Incentive for the Agricultural, Industrial,

Construction, and Mining Sectors, to reactivate the economy in light of the COVID-19 pandemic and

promote local production. This law provides a temporary exemption and zero percent rate of the value-

added tax for capital goods, industrial plants, high-capacity cargo vehicles in volume and tonnage destined

for the agricultural and industrial sectors, and heavy machinery for construction and mining sectors.

Non-Tariff Barriers

Import Licensing

Bolivia maintains a broad import licensing regime for more than 700 10-digit tariff lines identified as

affecting public health or State security. Import licenses are required for the importation of arms and

ammunition, certain articles of clothing and furniture, coins and other monetary instruments, drugs and

controlled substances, gambling games and machines, mineral and chemical products, environmentally

hazardous products, certain books, transportation and communication products, and washing machines.

54 | FOREIGN TRADE BARRIERS

Article 9 of Supreme Decree 24440, adopted on December 13, 1996, establishes the regulations governing

import licensing procedures.

Import Bans

Bolivian law authorizes prohibitions on the import of goods that may affect human and animal life or health,

or are harmful to the protection of plants, morality, the environment, the security of the state, or the nation’s

financial system. In 2021, 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 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

three 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.

GOVERNMENT PROCUREMENT

In 2004, Bolivia enacted the Buy Bolivian (Compro Boliviano) program through Supreme Decree 27328.

This program supports domestic production by giving preference margins to domestic producers or

suppliers in government procurement. Under procurement rules that were modified in 2007 and 2009, the

government must give priority to small and micro-producers and to “campesino” or rural farmer

associations in procurements under $100,000. In addition, the government requires fewer guarantees and

imposes fewer requirements on Bolivian suppliers that qualify as small or micro-producers or as campesino

associations.

Bolivian companies also are given priority in government procurement valued between $142,000 and $5.7

million. Importers of foreign products can participate in these procurements only where locally

manufactured products and local service providers are unavailable or where the Bolivian Government does

not initially select a domestic supplier. In such cases, or if a procurement exceeds $5.7 million, the

government can call for an international tender. 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, as defined by the government.

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. 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

FOREIGN TRADE BARRIERS | 55

Nacional de Electricidad; and the state lithium company, Yacimientos de Litio Bolivianos; are required to

publish tenders through the official procurement website, Sistema de Contrataciones Estatales (SICOES).

Concerns have been raised that these state-owned companies are not required to follow the procedures

established in the national procurement law. Direct procurement of goods and services by the Bolivian

Government continue to grow.

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 2021 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. As stated in years past, 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 which took office at the end of 2020 does not recognize the MOU.

SERVICES BARRIERS

Audiovisual Services

Bolivia’s 2011 Telecommunications Law stipulates that foreign investment in broadcasting companies may

not exceed 25 percent and that broadcasting licenses may not be granted to foreign persons.

INVESTMENT BARRIERS

Bolivia’s constitution calls for a limit on foreign companies’ access to international arbitration in cases of

conflicts with the government. The constitution also states that all bilateral investment treaties must be

renegotiated to adjust to this and other new constitutional provisions. Citing these provisions, in June 2012,

the Bolivian Government terminated its Bilateral Investment Treaty (BIT) with the United States. Existing

U.S. investors in Bolivia at the time of termination continue to be protected by the United States–Bolivia

BIT, though those protections will end in June 2022, i.e., 10 years after the termination of the BIT.

Bolivian labor law limits the number of foreign employees to 15 percent of the work force in foreign firms.

STATE-OWNED ENTERPRISES

Bolivia has emphasized public ownership of strategic enterprises. In an effort to control key sectors of the

economy, the government obtained (through legally required contract renegotiations) majority ownership

in a number of companies in the hydrocarbons, electricity, mining, and telecommunications sectors.

Bolivia has used means other than nationalization to re-establish public sector control over the economy.

In the past few years, the government created dozens of 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 leading

to a state-driven economic system.

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The Bolivian constitution includes requirements for state involvement in natural resource companies. The

constitution states that all natural resources shall be administered by the Bolivian Government. The

government grants ownership rights and controls the exploitation, exploration, and industrialization of

natural resources through public companies, communities, and private companies in joint ventures with

government entities and government-owned companies.

With respect to hydrocarbon resources, Article 359 of the 2009 constitution stipulates that all hydrocarbon

deposits, regardless of their state or form, belong to the Bolivian Government. No concessions or contracts

may transfer ownership of hydrocarbon deposits to private or other interests. The Bolivian Government

exercises its right to explore and exploit hydrocarbon reserves and trade-related products through the state-

owned YPFB. Since 2006, YPFB has benefitted from nationalization laws that required operators to turn

over all production to YPFB and sign new contracts that give the company control over the distribution of

gasoline, diesel fuel, and liquefied petroleum gas. Article 359 of the 2009 constitution has allowed YPFB

to enter into joint venture contracts for limited periods of time with domestic or foreign entities wishing to

exploit or trade hydrocarbons or their derivatives.

With respect to the broader mining sector, Bolivia changed the mining code in 2014, requiring all companies

wishing to operate in the mining sector to enter into joint ventures with the state mining company,

Corporación Minera de Bolivia.

FOREIGN TRADE BARRIERS | 57

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 trade facilitation and customs administration, good regulatory practices,

and anticorruption. Once implemented, the Protocol will reduce red tape in Brazil and improve regulatory

processes, as well as serve as a foundation for future bilateral engagement. The United States will continue

to work with Brazil to monitor the full implementation of the Protocol.

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Brazil’s average Most-Favored-Nation (MFN) applied tariff rate was 13.3 percent in 2020 (latest data

available). Brazil’s average MFN applied tariff rate was 10.1 percent for agricultural products and 13.9

percent for non-agricultural products in 2020 (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, that also

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

zero percent to 35 percent ad valorem and averages 12.5 percent.

MERCOSUR provisions allow its members to maintain a limited number of national and sectoral list

exceptions to the CET for an established period. Brazil is permitted to maintain a list of 100 exceptions to

the CET, subject to renewal by MERCOSUR members. Using these exceptions, Brazil maintains different

tariffs than its MERCOSUR partners on certain goods, including wind turbines, ethanol, certain chemicals,

and pharmaceuticals. In March 2021, Brazil reduced its tariffs for capital and computer goods by 10

percentage points and zeroed out tariffs for products with a CET up to 2 percent. These and the other

existing special provision exceptions to the CET have been renewed by the MERCOSUR members through

2028. Modifications to MERCOSUR tariff rates are made through resolutions and are published on the

MERCOSUR website.

In November 2021, Brazil unilaterally reduced tariffs on 87 percent of tariff lines. The temporary

reductions are set to expire December 31, 2022.

According to MERCOSUR procedures, any good imported into any member country (not including free

trade zones) is subject to the payment of the CET to that country’s customs authorities. If the product is

then re-exported to another MERCOSUR country, the CET must be paid again to the second country.

58 | FOREIGN TRADE BARRIERS

In 2010, MERCOSUR took a step toward the establishment of a customs union by approving a Common

Customs Code (CCC) and launching a plan to eliminate the double application of the CET within

MERCOSUR. All MERCOSUR members must ratify the CCC for it to take effect, but only Argentina has

done so. On September 10, 2018, the Brazilian Congress passed a legislative decree which requires

promulgation by Brazil’s executive branch to complete the process for ratification of the CCC. Brazil has

not yet completed this step.

Given the large disparities between Brazil’s WTO bound and its applied rates, U.S. exporters face

significant uncertainty in the Brazilian market because the government frequently increases and decreases

tariffs, within the flexibilities of MERCOSUR, possibly as a means of protecting domestic industries from

import competition and managing prices and supply. 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.

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. Brazil has bilateral agreements with Argentina and Uruguay to provide

preferential treatment for automobiles and automotive parts. In October 2019, Argentina and Brazil

submitted to the Latin American Integration Association a revised bilateral agreement to extend the time

period to implement bilateral free trade in automobiles and automotive parts from June 20, 2020 to July 1,

2029.

Wheat Tariff-Rate Quota

Brazil’s WTO schedule provides for a 750,000 metric ton (MT) duty-free MFN tariff-rate quota (TRQ) for

wheat imports. In November 2019, Brazil implemented the commitment, first as a temporary one-year

measure and then permanently on December 1, 2020, through Decree 10.557. The TRQ fill-rate only

reached 12 percent in 2021 compared to 100 percent utilization in 2020. Recognizing exchange rate

volatility and supply chain challenges as factors, the United States will monitor administration of the TRQ

to ensure that full utilization is not unduly impeded.

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 Harmonized System code, while imports

into Brazil entered duty-free. However, in September 2017, Brazil implemented a 24-month TRQ on

ethanol imports, whereby imports above 600 million liters per year, distributed evenly each quarter, were

subject to a 20 percent tariff; in-quota imports continued to enter duty free. Although the tariff was below

Brazil’s WTO bound tariff rate of 35 percent, the TRQ limited the otherwise robust bilateral trade of

ethanol. On August 31, 2019, Brazil established a new 12-month TRQ which limited duty-free imports to

750 million liters of ethanol, a 25 percent increase from the 2017 TRQ, while retaining the 20 percent tariff

for out-of-quota imports and imposing seasonal restrictions. The expiration of that TRQ was extended for

90 days, but it expired on December 15, 2020, and has not been renewed. Since then, all imports of ethanol

into Brazil have been subject to the MERCOSUR CET of 20 percent. On average, ethanol makes up half

of U.S. agricultural exports to Brazil, and Brazil represents the second largest market for U.S. ethanol. In

2021, U.S. exports of ethanol to Brazil were $154 million, a 45 percent decrease from 2020. The United

States continues to press Brazil to return to the conditions for the trade of ethanol that existed prior to

implementation of the TRQ in September 2017.

FOREIGN TRADE BARRIERS | 59

Taxes

Brazil applies federal and state taxes and charges to imports that can effectively double the cost of imported

products in Brazil. The complexities of Brazil’s domestic tax system, including multiple cascading taxes

and tax disputes among the various states, pose numerous challenges for all companies operating in and

exporting to Brazil, including U.S. firms.

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 generally prohibits imports of used consumer goods, including automobiles, clothing, tires, medical

equipment, and information and communications technology (ICT) products. However, Secretariat of

Foreign Trade (SECEX) Ordinance 23/2011 establishes an exceptions list of more than 25 categories of

used goods approved for import under certain circumstances.

Brazil also 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. In June 2021, SECEX opened a public consultation requesting input on regulatory

alternatives for remanufactured goods.

Import Licensing

All importers in Brazil must register with SECEX to access SECEX’s computerized documentation system

(SISCOMEX). SISCOMEX registration is onerous and includes a minimum capital requirement.

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 – ANVISA), and arms and munitions (Ministry of

National Defense). A list of products subject to non-automatic import licensing procedures is available on

the SISCOMEX 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.

Brazil’s National Institute of Metrology, Quality, and Technology (INMETRO) is undertaking steps to

address current bottlenecks in the import licensing process, but sustainable reforms in line with international

best practices will be necessary to improve processing and fully automate data exchange. Since 2014,

Brazil has been updating SISCOMEX to implement a single window for import and export of goods, which

includes consolidation of import licensing processing by implementation of a new module on SISCOMEX

called LPCO (Licenses, Permissions, Certificates, and Other Documents), which will eventually replace

individual import licenses. LPCO will centralize all information and documentation necessary for import

licensing, thereby eliminating requirements to register with other ministries for permission to import certain

products. LPCO has been implemented for exports, but currently only certain agricultural commodities

have been included in this new process for imports.

60 | FOREIGN TRADE BARRIERS

In March 2021, the federal government issued a Provisional Measure (MP 1040/2021), known as the

“Doing Business” law. This measure was approved by the Brazilian Congress as Law 14/195/2021 in

August 2021. Under a phased implementation schedule, it requires participation of Brazil’s 22 regulatory

bodies in the SISCOMEX portal and prohibits additional requirements for importers beyond the single

window. In addition, the Doing Business law prohibits the imposition of an import licensing requirement

due to the characteristics of goods, unless a law or other legal measure issued by the competent authority

requires such licensing. Previously, regulatory agencies used licensing to collect information on

importations. The new centralized database (SiscomexData) will provide this information in the future.

The Doing Business law also requires that the government consult with the public before amending

licensing requirements or implementing new licensing requirements.

U.S. footwear and apparel companies have expressed concern about non-automatic import licensing

requirements for footwear, textiles, and apparel from non-MERCOSUR countries, which have negatively

impacted the ability to sell U.S.-made and U.S.-branded footwear, textiles, and apparel in the Brazilian

market.

Brazil imposes non-automatic import licensing requirements on imported automobiles and automotive

parts, including those originating in MERCOSUR countries. Delays in issuing non-automatic import

licenses negatively affect exports of U.S. automobile and automotive parts to Brazil.

Customs Barriers and Trade Facilitation

Brazil ratified the WTO Trade Facilitation Agreement (TFA) on April 3, 2018, and notified that it had

completed implementation in 2019. Additional customs modernization in Brazil, including through

implementation of the Protocol to the ATEC signed in 2020, will significantly improve the movement of

goods.

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. Brazil has made strides in improving its trade

facilitation environment by working towards a mutual recognition agreement with the United States for its

Authorized Economic Operator Program. It also instituted an ATA Carnet program to facilitate the

temporary admission of goods, but halted it on January 1, 2022, due to the lack of an entity willing to fulfill

the role of the National Guaranteeing and Issuing Association.

A 25 percent merchant marine tax on ocean freight plus port handling charges at Brazilian ports puts U.S.

products at a competitive disadvantage vis-à-vis MERCOSUR products.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Telecommunications

Pursuant to Resolution 715 of April 2020, the Brazilian National Telecommunications Agency (ANATEL)

implements testing requirements for telecommunication products and equipment. Resolution 715

eliminates approval fees, allows ANATEL to more easily update technical procedures, including

conformity assessment requirements, and seeks to create a post-market surveillance program. Through

subsequent operational procedures, ANATEL has reduced the frequency of testing requirements, removed

the homologation fee, and introduced conformity assessments based on a risk analysis. ANATEL has also

introduced an option for e-labelling. In addition, ANATEL still requires domestic testing for many

FOREIGN TRADE BARRIERS | 61

products. In January 2021, ANATEL published Act 77 of 2021, which sets out cybersecurity criteria for

telecommunications equipment. Among other requirements, the Act mandates a cybersecurity declaration

during the certification process. U.S. industry noted several concerns with the scope and definitions in Act

77, including on the products affected and lack of reliance on relevant international standards.

Bulletproof Vests Testing Standards

In August 2020, the Brazilian Ministry of Defense published New Regulatory Rules for Products Used by

the Brazilian Army (EB20-N-04.003). The rules include a regulation for the ballistic testing of bulletproof

vests that references an outdated standard, NIJ 0101.04 (NIJ04). The current standard is NIJ 0101.06

(NIJ06), and it is subject to an update to a new standard, NIJ 1010.07. Laboratories in the United States

are no longer approved to test the NIJ04 standard. Other Brazilian government entities at the state and

federal levels, including the Ministry of Justice National Public Security Secretariat, require that bulletproof

vests procured for law enforcement and security officers meet the NIJ06 standard. The United States raised

concerns with Brazil regarding the outdated standard on the margins of meetings of the WTO Committee

on Technical Barriers to Trade (WTO TBT Committee) in 2021.

Wine Regulations

On July 9, 2021, Brazil announced a consultation period for revisions to its draft ordinance No. 346, which

would establish the identity and quality standards and derivatives of grapes and wine. The United States

submitted comments on the draft, including on the lack of scientific justification for many of the

requirements for wine. In addition, the United States sought clarity on several inconsistencies between the

draft ordinance and Technical Regulation No. 75 (Consolidated Regulations for Beverages, Vinegars,

Wines, and Wine and Grape Byproducts), which outlines the specific testing and certification requirements

for wine exports to Brazil. Of particular concern is that Technical Regulation No. 75 requires both a

Certificate of Analysis and an Import Inspection Pre-Certification Report generated by a Brazilian lab upon

importation, which is in addition to the analysis required in the Certificate of Analysis. The United States

has raised these issues with Brazil on the margins of WTO TBT Committee meetings and in bilateral

engagements throughout 2021.

Sanitary and Phytosanitary Barriers

Pork

U.S. fresh, frozen, and further processed pork products are ineligible for export to Brazil due to issues

related to regionalization for the control of certain animal diseases. In a Joint Statement on March 19, 2019,

the United States and Brazil agreed to establish science-based conditions to allow for the exportation of

U.S. pork to Brazil. Discussions between the U.S. Department of Agriculture Animal and Plant Health

Inspection Service and MAPA have yet to establish conditions for U.S. access to the Brazilian market.

GOVERNMENT PROCUREMENT

Since 2017, when Brazil adopted Normative Instruction 10, foreign companies can participate in

government procurement tenders without the establishment of legal representation in Brazil or the

requirement to provide sworn translations of incorporation documents (although these documents are

required if a company is awarded a contract).

In April 2021, Brazil enacted Law N. 14.133/2021, which updated federal procurement regulations, created

new procurement models, standardized the stages of tendering, defined crimes relating to procurement

processes, and defined the roles of federal, state, and municipal governments. Key changes from previous

62 | FOREIGN TRADE BARRIERS

procurement regulations include the creation of guarantee insurance in tenders to mitigate against the

possibility of projects not being completed; creation of a national public procurement portal to centralize

the bidding procedures of federal entities; a new hiring modality called Competitive Dialogue, in which the

government can solicit proposals for new forms of services, especially for technology and innovation; and

the end of “price taking” and “invitation” procurement models. The scope of the law includes all bidding

and contracts made by public agencies in Brazil for procuring projects and services, including advertising,

sales and leases, covering federal, state, and municipal entities. The law does not apply to state-owned or

partly state-owned enterprises.

By statute, a Brazilian state enterprise may subcontract services to a foreign firm only if domestic expertise

is unavailable. Additionally, U.S. and other foreign firms may only bid to provide technical services where

there are no qualified Brazilian firms. U.S. companies without a substantial in-country presence regularly

face significant obstacles to winning government contracts and are, comparatively, more successful in

serving as subcontractors to larger Brazilian firms instead.

Brazil grants procurement preference to firms that produce in Brazil and that fulfill certain economic

stimulus requirements, such as generating employment or contributing to technological development, even

if those firms’ bids are up to 25 percent more expensive than bids submitted by foreign firms not producing

in Brazil. U.S. technology companies have concerns regarding the potentially prohibitive costs of certifying

a system for an individual market.

The Brazilian National Oil and Gas Regulatory Agency (ANP) maintains minimum local content

requirements (LCRs) for all oil companies operating in Brazil’s upstream exploration and production

phases, including procurement for state-controlled companies, such as Petrobras. The LCRs vary by

hydrocarbon resource block (the geographic area that is awarded by the Brazilian Government to companies

for oil and gas exploration), and within each block the LCRs differ for equipment, workforce, and services.

Brazil reformed the LCRs for Brazil’s critical oil and gas sector in 2017. LCRs for deepwater oil and gas

exploration fell to a minimum of 18 percent. LCRs for deepwater production fell to between 25 percent

and 40 percent, depending on the activity, and LCRs for onshore exploration and development decreased

to 50 percent. In January 2020, ANP issued Resolution 809, allowing the certification of imported final

products or services for the oil and gas sector if domestic components or services are incorporated into

production.

Brazil 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 October 2017. On May 18, 2020 Brazil applied

for accession to the GPA. In October 2020, it submitted to the WTO GPA Committee its Replies to the

Checklist of Issues as part of the accession process. Accession negotiations began in February 2021 when

Brazil submitted its initial market access offer. In November 2021 Brazil submitted its first revised offer.

INTELLECTUAL PROPERTY PROTECTION

Brazil remained on the Watch List in the 2021 Special 301 Report. Brazil is an increasingly important

market for intellectual property (IP)-intensive industries; however, administrative and enforcement

challenges continue, including high levels of counterfeiting and piracy online and in physical markets. The

United States identified Rua 25 de Marco in Sao Paulo in the 2021 Notorious Markets List for selling

counterfeit and pirated goods. Increased emphasis on enforcement at the tri-border region between

Argentina, Brazil, and Paraguay, and stronger deterrent penalties, are critical to make sustained progress

on these IP concerns. The National Council on Combating Piracy and Intellectual Property Crimes (CNPC)

recently launched the National Plan to Combat Piracy, which aims to address many of these concerns.

FOREIGN TRADE BARRIERS | 63

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. In

addition, the United States encourages Brazil 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.

The United States will continue to engage Brazil on these and other IP-related issues.

SERVICES BARRIERS

Audiovisual Services

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. This levy, a component of the Contribution to the

Development of a National Film Industry (CONDECINE) tax, is waived if the distributor agrees to invest

an amount equal to three percent of the total remittances in local independent productions. The

CONDECINE levy is also assessed on foreign-produced video and audio advertising. Remittances for

video on demand are no longer subject to CONDECINE after approval of Law 14.173/2021. Brazil also

maintains domestic film quotas for theatrical screening and home video distribution.

Law 12.485 of 2011 covers the subscription television market, including satellite and cable television.

However, the law also imposes local content quotas by requiring every channel 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. The law also makes subscription television

programmers subject to the 11 percent CONDECINE levy on remittances. In addition, the law delegates

significant programming and advertising regulatory authority to the national film industry development

agency (ANCINE), which raises concerns about the objectivity of regulatory decisions.

Brazil’s Pay TV law bans cross-ownership between distributors and content producers in Brazil’s paid-

television sector. The law has been tested by a merger between two foreign entities operating in Brazil.

The merged entity, based in the United States but owning an acquired Brazilian broadcaster, asserts that the

law’s cross-ownership restrictions apply only to producers and programmers based in Brazil and none of

its paid-television production or programming companies are headquartered in Brazil. Brazil’s antitrust

regulator, the Administrative Council for Economic Defense, cleared the merger in 2017 under Brazil’s

antitrust laws, and ANATEL approved the merger in February 2020.

64 | FOREIGN TRADE BARRIERS

Express Delivery

U.S. express delivery service companies face significant challenges in the Brazilian market, including an

automated express delivery clearance system that is only partially functional.

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 services

maximum per-shipment value limits of $10,000 for exports and $3,000 for imports. Express delivery

companies may transport shipments of higher value, but such shipments are subject to the formal entry,

exit, and declaration process.

Financial Services

Brazil maintains reciprocity requirements for foreign banks and insurers to establish 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, but some existing banks were grandfathered. Branches of foreign banks already

established in Brazil must meet the same capital requirements as subsidiaries and are subject to other

burdensome requirements.

Under Complementary Law 126/2007, for a foreign company to qualify as an admitted reinsurer, it must

have a representative office in Brazil, meet the listed requirements, keep an active registration with Brazil’s

insurance regulator (the Superintendent of Private Insurance), and, according to National Council of Private

Insurance (CNSP) Resolution 168, maintain a minimum solvency classification issued by a risk

classification agency equal to Standard & Poor’s or Fitch ratings of at least BBB-. Under CNSP Resolution

No. 322 of 2015, the mandatory cession was gradually decreased to 15 percent as of January 1, 2020.

However, according to CNSP Resolution No. 168, a preferential offer of at least 40 percent of reinsurance

business for each automatic or facultative contract must be offered first to local reinsurers.

The United States is closely monitoring developments with respect to the retail electronic payments market

in Brazil to ensure that Brazil’s Central Bank (BCB) facilitates a level playing field for all market

participants, given BCB’s dual role as a regulator and operator of PIX, a real-time retail payment service.

Telecommunications Services

Under Law 13.879 of October 2019, known as Projecto de Lei de Camara (PLC) 79, service providers were

allowed to purchase government assets used under their previous concession and maintain ownership after

the concession expired. Determining the value of government assets will likely require a lengthy process

among Brazil’s telecommunications regulator, ANATEL, the Federal Accounts Court, and the Office of

the Solicitor General (AGU). In June 2020, ANATEL initiated a public bid to hire a consulting company

to assess the costs of migrating to the authorization model, which is expected to be finalized in 2022.

The Doing Business Law of 2021 amended the General Telecommunications Law to allow greater foreign

investment in the telecommunications sector by removing executive authority to invoke foreign capital

limits on a telecommunications service provider. It also removed the requirement that telecommunications

service providers must locate their headquarters and administrative operations in Brazil.

FOREIGN TRADE BARRIERS | 65

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 FISTEL, a local regulatory tax applied to active subscriber identity module

cards (SIMs) within Brazil, may only be applied to domestic carriers utilizing domestic SIMs with

corresponding local numbering. As foreign-based carriers using foreign SIMs are not subject to FISTEL,

ANATEL concluded that these value-added services may only be provided by locally licensed carriers

using local SIMs. This ANATEL interpretation restricts permanent roaming options for 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. In 2018, ANATEL held a

public consultation to review barriers to M2M and IoT, and despite public comments in support of allowing

permanent roaming, ANATEL held that such arrangements remain illegal in Brazil. This interpretation is

at odds with those of other jurisdictions that have consistently permitted foreign carriers to utilize foreign

SIMs to provide permanent roaming for M2M or IoT services to their respective OEM customers. The

United States continues to encourage Brazil to adopt changes to its law and regulation such that foreign

providers of M2M and IoT services may participate in the market without the current restrictions on the use

of foreign numbering resources.

BARRIERS TO DIGITAL TRADE

Data Localization Requirements

Brazil’s General Law for the Protection of Personal Data (LGPD) took effect on September 18, 2020.

Because of Brazil’s assertion of extraterritorial jurisdiction for the LGPD, as well as its broad impact on

many areas of the economy, U.S. companies have expressed concerns that there remains a need for clear

guidance in its implementation and enforcement. 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 intelligent goods (i.e., 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.

Brazil established a Data Protection Authority (DPA) to administer the LGPD, but it does not have full

independence from the executive branch of the Government of Brazil. The Brazilian Presidency has until

August 2022 to review the current DPA structure, during which time it may convert the DPA into an

independent public authority. The DPA has the authority to impose sanctions of up to R$50 million

(approximately $9 million) per infringement of the LGPD. The United States is monitoring implementation

of the law, including assurances that the DPA will operate independently and enforce the law in a non-trade

restrictive manner.

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INVESTMENT BARRIERS

The National Land Reform and Settlement Institute administers the purchase and lease of Brazilian

agricultural land by foreigners. Under the applicable rules, the area of agricultural land bought or leased

by foreigners cannot account for more than 25 percent of the overall land area in a given municipal district.

Additionally, no more than 10 percent of agricultural land in any given municipal district may be owned or

leased by foreign nationals from the same country. The law also states that prior consent is needed for

purchase of land in areas considered indispensable to national security and for land along the border. The

rules also make it necessary to obtain congressional approval before large plots of agricultural land can be

purchased by foreign nationals, foreign companies, or Brazilian companies with majority foreign

shareholding. Draft Law 4059/2012, which would lift the limits on foreign ownership of agricultural land,

has been awaiting a vote in the Brazilian Congress since 2015.

SUBSIDIES

The Greater Brazil Plan industrial policy, established by Law 12546 in 2011, offers a variety of tax, tariff,

and financing incentives to encourage local firms to produce goods for export. For example, Brazil allows

tax-free purchases of capital goods and inputs to domestic companies that export more than 50 percent of

their output. Similarly, the Reintegra Program exempts exports of goods covered by more than 8,000 tariff

lines from certain taxes, and allows Brazilian exporters to receive up to 0.1 percent of gross receipts from

exports in tax refunds. For the majority of products eligible for Reintegra benefits, the total cost of imported

inputs cannot exceed 40 percent of the export price of the product.

Brazil’s Special Regime for the Information Technology Exportation Platform (REPES) suspends Social

Integration Program (PIS) and Contribution to Social Security Financing (COFINS) taxes on goods

imported and information technology services supplied by companies that commit to export software and

information technology services if those exports account for more than 50 percent of the company’s annual

gross income. The Special Regime for the Acquisition of Capital Goods by Exporting Enterprises suspends

PIS and COFINS taxes on new machines, instruments, and equipment imported by companies that commit

for a period of at least two years to export goods and services that account for at least 50 percent of the

company’s overall gross income for the previous calendar year.

In 2018, Brazil established the Rota 2030 incentive program for the automotive sector. The program

provides tax incentives for manufacturers that improve energy efficiency and automobile safety.

Automobile manufacturers in Brazil may also receive tax reductions if they invest in research and

innovation projects in Brazil. Brazil will grant up to R$1.5 billion (approximately $278 million) in tax

credits per year, if the automobile industry invests at least R$5 billion (approximately $928 million) in

research and development. The program does not apply to automobile importers. The law provides these

benefits for a period of five years, but in September 2021, Receita Federal sent a proposal to the Brazilian

Congress to gradually reduce tax incentives by R$22 billion (approximately $4.1 billion) through 2026.

The bill, PL 3203/21/reduces IPI exemptions for auto parts imports from the current R$667 million

(approximately $124 million) to R$469 million (approximately $83 million).

Brazil provides tax reductions and exemptions on many domestically produced ICT and digital goods that

qualify for status under the Basic Production Process (PPB) through the Law on Computing Technology.

The PPB is product-specific and stipulates which stages of the manufacturing process must be carried out

in Brazil in order for a product to be considered produced in Brazil.

Under the Special Regime for the Development of the Fertilizer Industry, fertilizer producers receive tax

benefits, including an exemption from the IPI tax on imported inputs, provided they comply with minimum

local content requirements and can demonstrate investment in local research and development projects.

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The Special Regime for the Chemical Industry (REIQ), established by Law 12.859/2013 provides an

exemption from PIS/CONFINS on the purchase of first and second generation petrochemical basic raw

materials. In March 2021, the federal government issued Provisional Measure 1034 (ratified as Law

14.183/2021), which will phase out the benefits by 2025.

For the oil and gas industry, Brazil has two special customs and tax regimes for goods related to research

and exploration activities. Repetro-SPED, established by Normative Instruction 1.78/2017, provides tax

and import tariff exemptions to oil and gas operating companies, their contractors and subcontractors, for

purchase of goods related to oil and natural gas exploration and production. REPETRO-Industrialização,

established by Normative Instruction 1.901/2019, provides special tax and import conditions to national

industries that provide final or intermediary goods to the sector. Repetro-Industrialização aims to increase

domestic producers’ competitiveness compared to imported machinery and equipment, which receive

benefits under Repetro-SPED. In July 2021, Receita Federal extended REPETRO-Industrialização beyond

goods to include services for oil and gas operators.

Brazil also provides a broad range of assistance to its agricultural sector in the form of low-interest

financing, price support programs, tax exemptions, and tax credits. Brazil establishes minimum guaranteed

prices for specific commodities through different programs to ensure that the returns to producers do not

fall below the guaranteed level. These programs include the Federal Government Acquisition (AGF)

program, the Acquisition from Public Option Contracts (POC) program, the Premium for Product Outflow

(PEP) program, and the Premium Equalizer Payment to the Producer (PEPRO) program. Under the AGF

and POC programs, the Brazilian Government purchases commodities to maintain prices at or above the

level of the minimum guaranteed price. Under the PEP and PEPRO programs, producers or processors

receive a government payment in return for purchasing commodities that are either shipped to specified

regions in Brazil or exported. The primary difference between these two programs is that the PEP payment

goes to the purchaser of the commodity while PEPRO facilitates payments through an auctioning system

to producers or cooperatives, but the administration of the programs is the same. The amount of the

PEP/PEPRO payment is based on ‘the difference between the minimum price set by the Brazilian

Government and the prevailing market price. Each PEP/PEPRO auction notice specifies the tendered

commodity and the approved destination for that product, including export destinations.

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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 0.2 percent in 2019 (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 2019 (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 WTO 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, supply, and serve food and beverages to obtain a

halal certificate, renewed annually. The Ministry of Religious Affairs administers Brunei’s halal standards,

which are among the most stringent in the world. Brunei has its own halal food certification regime, which

is entirely distinct from other halal certification organizations. This regime requires that Bruneian

Government inspectors travel to production facilities in the home country of the food exporter, at the

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exporter’s expense, to inspect the food production process. This requirement constrains the ability of food

product exporters to enter the Brunei market.

The Codex Alimentarius Commission allows for halal food to be prepared, processed, transported, or stored

using facilities that have been previously used for non-halal foods, provided that Islamic cleaning

procedures have been observed. However, 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 and an export

permit from the exporting country. Additionally, the importers and local suppliers of halal meat must be

Muslim. 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.

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.

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

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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, transport, and energy

generation and distribution.

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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 10.4 percent in 2020 (latest

available). Cambodia’s average MFN applied tariff rate was 12.7 percent for agricultural products and 10.0

percent for non-agricultural products in 2020. 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 across a number of 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) became the only institution

authorized to carry out the inspection of goods at Cambodia’s entry points, following the termination of the

Ministry of Commerce’s Cambodia Import-Export Inspection and Fraud Repression Directorate General

presence at all border checkpoints.

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 coming into Cambodia’s lone deep-water port

in Sihanoukville, and 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. As an additional complication, different prequalification procedures exist at the

provincial level, making some bids particularly complex for prospective contractors.

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Irregularities in the government procurement process are common despite a strict legal requirement for

audits and inspections. Despite allegations of malfeasance at a number of ministries, the Cambodian

Government has taken little action to investigate irregularities. In February 2018, the government issued a

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. A draft Law on Public-

Private Partnerships, pending passage by the National Assembly as of March 2022, aims to enhance the

management and implementation of public infrastructure projects in Cambodia. U.S. stakeholders had 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. Central Market in Phnom Penh continues to be included in

the 2021 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 General Department of Customs and Excise, 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.

The division of responsibility among these disparate institutions is not clearly defined. In an effort to

combat counterfeiting, the Cambodia Counter Counterfeit Committee (CCCC), which is under the Ministry

of the Interior, serves as an umbrella agency for 14 organizations. While the CCCC launched a five-year

strategic plan in 2016 with a focus on targeting counterfeit products that cause a high risk to health and

social safety, it has not yet focused on other counterfeit products.

Draft legislation that would address the protection of trade secrets has been under review at the Ministry of

Commerce but has not been passed into law. In addition, draft legislation on encrypted satellite signals is

under review at the Ministry of Posts and Telecommunications, and draft legislation on semiconductor

layout designs is under review at the Ministry of Industry, Science, Technology, and Innovation (MISTI).

MISTI’s Office of Patents and Industrial Design has indicated that it is planning to join the Budapest Treaty

on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure in

the future, but has not yet committed to a timeline.

Although the United States Patent and Trademark Office and Cambodia’s MISTI signed a Memorandum

of Understanding in October 2020 on patent validation to expedite the process by which U.S. patents are

recognized and registered in Cambodia, official guidance for the patent validation application process is

not yet publicly available, and right holders must go through an IP agent or legal representative to apply for

patent validation in Cambodia.

The United States continues to meet with Cambodia under the TIFA and in other fora to urge Cambodia to

take steps to improve IP protection and enforcement.

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BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Cambodia passed an electronic commerce law in November 2019, which was fully implemented in May

2020. It governs the conduct of electronic commerce within Cambodia and from overseas. Cambodia’s

National Assembly passed a sub-decree in February 2021 that establishes 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 sub-decree is reportedly delayed, but concerns

remain by both the private sector and human rights organizations. The sub-decree failed to incorporate

feedback received from public consultations on an earlier version of the sub-decree. The only notable

change that the National Assembly made in the final version was to include an appeals procedure, but

stakeholders have noted that the procedure lacks third-party independent oversight. Separate laws

governing cybersecurity and cybercrime are in draft form.

In April 2021, Cambodia issued a regulation obligating all electronic commerce businesses, including those

operating from outside of Cambodia, to pay a value-added-tax (VAT) of 10 percent.

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.

Although foreign investors that received approvals in 2010 and 2011 may use land through concessions and

renewable leases, the Cambodian Government in 2012 imposed a moratorium on Economic Land

Concessions (ELCs), which allowed long-term leases of state-owned land. The Cambodian Government

reportedly also has reviewed and revoked previously granted ELCs on the grounds that the recipients had

not complied with the ELC terms and conditions. As of March 2021, there were 229 active ELC projects

covering 1.1 million hectares within the country, though land rights activists have asserted the figure is

much higher. It is estimated that 40 percent of ELCs generate government revenue. In 2019, ELC-

generated revenue topped $3 million, according to Cambodian Government figures.

Cambodia permits 100 percent foreign ownership in most sectors. However, investment in movie

production, rice milling, gemstone mining and processing, publishing and printing, radio and television,

wood and stone carving production, and silk weaving is subject to equity restrictions or authorization.

While Cambodia has made significant progress in formalizing its tax regime and increasing tax revenues,

reports suggest that the General Department of Taxation’s methods can be very burdensome on tax-

compliant companies, hitting some companies with exorbitant, unexplained, or arbitrary tax bills and

freezing assets for failure to pay purported back taxes. Additional concerns range from surprise tax audits

to a lack of industry consultation when implementing the new tax code to a subjective application of taxes

that could favor local industry over U.S. investors.

SUBSIDIES

Cambodia submitted two subsidies notifications to the WTO Committee on Subsidies and Countervailing

Measures (SCM Committee) covering lending programs to small and medium enterprises in May 2021.

The United States submitted questions to Cambodia through the SCM Committee regarding tax and duty

incentives under Cambodia’s Qualified Investment Projects initiative and other incentives available in

special economic zones. Some of these incentives may be contingent on exportation. The United States

will continue to seek clarity on these incentives.

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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 ACU’s participation in investigations

of political opponents of the ruling party has tarnished its reputation as an unbiased enforcer of rules. The

independence of the ACU is difficult to ascertain since the Chair and Vice Chair are chosen by the Prime

Minister, and the remaining officials are appointed by various government entities.

Cambodia began publishing official fees for public services at the end of 2012 in an effort to combat

“facilitation payments,” but this exercise had 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. Businesses have noted that

signing an anticorruption memorandum of understanding with the ACU has helped them avoid paying

“facilitation payments.” However, obtaining licenses and permits may entail red tape and other forms of

corruption.

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CANADA

TRADE AGREEMENTS

The United States–Mexico–Canada Agreement

The United States–Mexico–Canada Agreement (USMCA or Agreement) entered into force on July 1, 2020.

The USMCA maintains the zero tariffs among the three countries that were in place under the North

American Free Trade Agreement (NAFTA), while also modernizing the agreement to include provisions

covering digital trade and small and medium-sized enterprises (SMEs). The Agreement importantly

recognizes that SMEs are a driving force of economic growth and includes new mechanisms to help SMEs

make better use of the Agreement. The USMCA also includes strong, enforceable labor and environmental

obligations in the core text of the Agreement. Finally, the USMCA also includes a number of ground-

breaking provisions to combat non-market practices that have the potential to disadvantage U.S. workers

and businesses, such as currency manipulation and the provision of subsidies to state-owned enterprises.

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. For example, by year six of the USMCA, quota volumes will reach 50,000 metric tons (MT)

for fluid milk, 10,500 MT for cream, 4,500 MT for butter and cream powder, 12,500 MT for cheese, and

7,500 MT for skim milk powder. Under the USMCA, Canada will eliminate tariffs on whey in 10 years

and margarine in 5 years. Canada has opened new TRQs for U.S. chicken (quota volume will reach 57,000

MT by year six of the USMCA) and for U.S. eggs and egg products (quota volume will reach 10 million

dozen eggs equivalent by year six of the USMCA). 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 undermine the value of the TRQs by setting aside

and reserving access to in-quota quantities exclusively for processors. On December 21, 2020, Canada and

the United States held consultations, which did not resolve the matter. On October 25 and 26, a panel

hearing was held in Ottawa. 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.”

While Canada has proposed to stop setting aside and reserving access to in-quota quantities exclusively for

processors, the United States remains concerned with Canada’s proposal to implement the panel’s finding

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and continues to discuss the matter with Canada with the aim of agreeing on a resolution of the dispute.

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 for sales 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 July 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 February 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 USDA

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.

Customs Barriers and Trade Facilitation

The United States chaired the second meeting of the USMCA’s trilateral Committee on Trade Facilitation

on December 15, 2021, where the Parties discussed new customs regulations, changes in certain customs

processes, and other issues under the Agreement.

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

FOREIGN TRADE BARRIERS | 79

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.

Wine, Beer, and Spirits

Canada allows residents to import a limited amount of alcohol free of duty and taxes when returning from

trips that are at least 48 hours in duration. If the amount exceeds the personal exemption, duties and taxes

apply. The taxes vary by province, but generally inhibit Canadians from importing U.S. alcoholic beverages

when returning from shorter visits to the United States.

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 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

Cheese Compositional Standards

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.

Front-of-Package Labeling on Prepackaged Foods

In 2021, the United States continued to monitor Canada’s proposed regulation to implement requirements

for front-of-package (FOP) labeling on prepackaged foods deemed high in sodium, sugars, and saturated

fat, and updating requirements for other FOP information, including certain claims and labeling of

sweeteners. The approach under consideration uses Canada’s nutrient content claim framework to

determine whether a food would be required to carry a FOP symbol, including a nutrient content message.

The United States submitted comprehensive comments on the proposed regulations notified to the WTO in

April 2018. Since then, the United States has regularly consulted with Canada regarding its plans to produce

an updated draft or final regulation. In 2020, U.S. exports of processed foods to Canada were valued at

approximately $14.5 billion.

Proposed Integrated Management Approach to Plastic Products

In June 2019, Canada signaled its intent to reduce plastic waste by banning certain single-use plastics.

Canada then announced in an October 2020 discussion paper, entitled A Proposed Integrated Management

Approach to Plastic Products to Prevent Waste and Pollution, that its proposed ban would include plastic

checkout bags, straws, stir sticks, six-pack rings, cutlery, and food ware made from hard-to-recycle plastics.

Canada’s plan to manage plastics also proposes improvements to recover and recycle plastic and establish

recycled content requirements for products and packaging. The United States commented on the discussion

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paper and the proposed order in December 2020, and requested any implementing measures be notified to

the World Trade Organization (WTO). Canada published the final order adding “plastic manufactured

items” to Schedule 1 (“the Toxic Substances List”) of the Canadian Environmental Protection Act (CEPA)

on May 12, 2021. This designation provides the Canadian Government with the regulatory authority to

manage plastic production, importation, and use. On December 25, 2021, Canada published draft

regulations to prohibit the manufacture, import, and sale of certain single-use plastics in the Canada Gazette,

which started a 70-day public comment period. Canada notified the draft regulations to the WTO on

January 7, 2022. The United States will continue to engage with Canada on these measures and will closely

monitor their impact.

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 to facilitate varietal identity, trait identity, and

traceability in the marketplace to ensure standards are met. However, there are concerns 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.

GOVERNMENT PROCUREMENT

On July 23, 2019, the Government of Canada released the official Request for Proposal (RFP) for its Future

Fighter Capability Project. The official RFP included an Economic Impact Assessment (EIA) as part of its

evaluation criteria. The EIA noted that any bidding company involved in a “trade remedy action” against

a product manufactured in Canada would have its bid subject to the EIA, which may result in a deduction

on the final score of the bid. The move was broadly interpreted as a response to Boeing’s 2017 trade remedy

action against Canada’s Bombardier, and a warning to other companies that might pursue trade remedy

actions against Canadian firms. The United States is concerned about the potential effects the EIA may

have on U.S. companies when they compete in future Canadian defense procurement projects. The United

States continues to engage with Canada on this issue.

Canada is a Party to the WTO Agreement on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Canada remained on the Watch List in the 2021 Special 301 Report

. As noted in the Special 301 Report,

the most significant step forward Canada has made is its agreement to important Intellectual Property (IP)

provisions in the USMCA. Canada’s commitments under the USMCA will significantly improve Canada’s

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

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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. Issues

of concern include deficient copyright protection and poor enforcement with respect to counterfeit or

pirated goods at the border and within Canada. The United States identified Pacific Mall in Toronto in the

2021 Notorious Markets List

for selling pirated and counterfeit goods.

Pharmaceuticals

Regulatory changes to Canada’s Patented Medicine Prices Review Board were announced on August 9,

2019. Canada informed stakeholders of its decision to delay the implementation of these regulations to

July 1, 2022. The United States will monitor carefully the implementation and effects of these regulatory

changes and encourages trading partners to provide appropriate mechanisms for transparency and

opportunities for public engagement.

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). Upon an appeal from a

Canadian licensee, the CRTC may determine that a non-Canadian channel competes with a Canadian pay

or specialty service, in which case the CRTC may either remove the non-Canadian channel from the list

(thereby revoking approval to supply the service) or shift the channel into a less competitive location on

the channel dial. Alternatively, non-Canadian channels can become Canadian by ceding majority equity

control to a Canadian partner, as some U.S. channels have done.

The United States is monitoring Canada’s 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.

The CRTC’s Wholesale Code entered into force in January 2016 and governs certain commercial

arrangements between distributors (e.g., cable companies) and programmers (e.g., channel owners). The

Code is binding for vertically integrated suppliers in Canada (i.e., suppliers that own infrastructure and

programming) and applies as guidelines to foreign programming suppliers (who by definition cannot be

vertically integrated, as foreign suppliers are prohibited from owning video distribution infrastructure in

Canada).

U.S. broadcasters have complained about Canadian cable and satellite suppliers picking up the signals of

U.S. stations near the border and redistributing them throughout Canada without the U.S. broadcasters’

consent. Content owners (including broadcasters who develop their own programming) 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.

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Digital Media

Canada continues to explore legislative proposals that could force Internet companies to compensate

Canadian news publishers for displaying and linking to their content, as well as ensure that certain digital

media suppliers contribute to the creation, production, and distribution of Canadian content. The United

States will closely monitor whether any new obligations on tech companies or foreign streaming providers

are compliant with Canada’s international trade obligations.

Telecommunications Services

Canada maintains a 46.7 percent limit on foreign ownership of certain existing suppliers of facilities-based

telecommunication services, including the cable television industry. In 2012, Canada made a small change

to this regime by allowing foreign investment of more than 46.7 percent in suppliers with less than 10

percent market share. In addition to foreign equity restrictions, Canada requires that Canadian citizens

comprise at least 80 percent of the membership of boards of directors of facilities-based telecommunication

service suppliers.

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 equivalent to Quebec’s. Implementation of the law will be phased in over the next three

years. The United States will monitor the implementation of this provincial law and any other proposed

measures to ensure they do not place restrictions on the cross-border transfer of data in a manner

inconsistent with the obligations set forth in USMCA.

Digital Services Taxation

On December 14, 2021, the Canadian Government published draft legislation for a unilateral digital

services tax (DST). Canada’s proposed DST was open to public comment until February 22, 2022. Canada

has taken these steps despite joining the October 8, 2021 OECD/G20 Statement on a Two-Pillar Solution

to Address the Tax Challenges Arising from the Digitalisation of the Economy which called for all parties

to commit not to introduce DSTs in the future. As noted in U.S. 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.

INVESTMENT BARRIERS

The Investment Canada Act has regulated foreign investment in Canada since 1985. Foreign investors must

notify the Canadian Government when acquiring a controlling interest in an existing Canadian business or

starting a new business. Innovation, Science and Economic Development Canada is the government’s

reviewing authority for most investments, except for those related to cultural industries, which come under

the jurisdiction of the Department of Heritage Canada. Investors with investments below certain thresholds

have the option to delay reporting for up to 30 days after implementation. Generally, investments above

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those thresholds are assessed based on whether they are of “net benefit” to Canada and must wait for

affirmative approval before implementation.

On June 22, 2017, a provision entered into force to increase the threshold for pre-implementation review to

C$1 billion (approximately $800 million) from C$600 million (approximately $480 million) for investors

that are from countries that are Members of the WTO and that are not state-owned enterprises (SOEs).

Subsequently, on September 21, 2017, the threshold for review was increased to C$1.5 billion

(approximately $1.2 billion) for investors that are not SOEs from countries that are party to certain

designated trade agreements with Canada, which now includes the USMCA. These thresholds are adjusted

annually. The thresholds for 2022 are C$454 million (approximately $363.2 million) for SOE WTO

investments, C$1.141 billion (approximately $912.8 million) for private sector WTO investments and

C$1.711 billion (approximately $1.369 billion) for private sector investments under preferential trade

agreements.

Real Estate Tax

Canada’s 2021 budget announced the government’s intent to implement a national, annual one percent tax

on the value of non-resident, non-Canadian owned real estate considered to be vacant or underused.

Legislation to introduce the Underused Housing Tax Act was tabled in the House of Commons on

December 14, 2021. It is proposed that the tax be effective for the 2022 calendar year. The tax’s

differentiation between Canadian and non-Canadian-owned real estate raises questions regarding whether

this tax is compliant with Canada’s international trade obligations.

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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. The liberalization

of the Chilean goods and services markets has supported increased U.S. exports to Chile. 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

Taxes

Importers must pay a 19 percent value-added tax (VAT) calculated based on the cost, insurance, and freight

(CIF) value of the import. The VAT is also applied to nearly all domestically produced goods and services.

Certain products (regardless of origin) are subject to additional taxes. Luxury goods, defined as jewelry

and natural or synthetic precious stones, fine furs, fine carpets or similar articles, mobile home trailers,

caviar conserves and their derivatives, and air or gas arms and their accessories (except for underwater

hunting), are subject to a 15 percent tax. Electric and high-value vehicles are also defined as luxury goods,

but U.S.-made vehicles are exempt from the tax under terms of the FTA. Pyrotechnic articles, such as

fireworks, petards, and similar items (except for industrial, mining, or agricultural use), are subject to a 50

percent tax.

Non-Tariff Barriers

There are virtually no restrictions on the types or amounts of goods that can be imported into Chile, nor are

there any requirements to use the official foreign exchange market. However, importers and exporters must

report their import and export transactions to the Central Bank. Commercial banks may sell foreign

currency to any importer to cover the price of imported goods and related expenses, as well as to pay interest

and other financing expenses that are authorized in the import report.

Chile’s import licensing requirements appear to be used primarily for statistical purposes. Legislation

requires that most import licenses be granted as a routine procedure.

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.

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TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Marketing and Labeling Requirements

In September 2019, Chile notified to the World Trade Organization (WTO) a “Draft Law Establishing

Standards on the Marketing and Labelling of Milk.” The law establishes revised standards for the

manufacturing, naming, and labeling of milk products, or products derived from milk. The United States

has concerns with requirements established by this legislation, including: (1) restrictions on the

circumstances under which products made from reconstituted and recombined milk can be labeled and

marketed, which may potentially be inconsistent with Codex Alimentarius Commission standards and for

which Chile has not provided justification; and (2) requirements that dairy products be labeled with the

name and representative flag of the country of origin of the milk contained therein, which also go beyond

Codex labeling standards, and are particularly restrictive for dairy products exported for further processing.

The United States and several other Members raised concerns at meetings of the WTO Committee on

Technical Barriers to Trade that the measure may not have considered international standards and may be

more trade restrictive than necessary. The United States will monitor implementing regulations on the

marketing and labeling of milk once they are finalized and the final regulations are notified to the WTO.

Sanitary and Phytosanitary Barriers

Import Bans

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.

GOVERNMENT PROCUREMENT

Chile is not a Party to the WTO Agreement on Government Procurement, but has been an observer to the

WTO Committee on Government Procurement since September 1997. However, the FTA contains

disciplines on government procurement.

INTELLECTUAL PROPERTY PROTECTION

Chile remained on the Priority Watch List in the 2021 Special 301 Report.

The United States remains

concerned about the adequacy and effectiveness of the protection and enforcement of 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. In 2018, Chile

made progress in establishing criminal penalties for the importation, commercialization, and distribution of

decoding devices used for the theft of encrypted program-carrying satellite signals, but the United States

continues to urge Chile to clarify the full scope of criminalized activities in the implementation of the law

and to address other remaining 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

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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 will continue to work bilaterally with Chile to address these and other IP issues.

SERVICES BARRIERS

The United States continues to closely monitor ongoing developments relating to possible reform of the

Chilean pension system. U.S. industry, which has significantly invested in the Chilean pension market,

continues 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. As of November 2021, three U.S. companies have requested investor-state

consultations under Article 10.14 of the FTA.

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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. 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 industries. The beneficiaries of these

constantly evolving policies are not only state-owned enterprises but also other domestic companies

attempting to move up the economic value chain.

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. Their common, overriding aim is to replace foreign

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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 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 Strategic Advisory Committee on Building a Powerful

Manufacturing Nation published the Made in China 2025 Key Area Technology Roadmap, and since then

it has updated this document twice. 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),

which updates and replaces the 2015 document. Like its predecessor, the updated document sets explicit

market share and other targets to be attained by Chinese producers, both domestically and globally, in

dozens of high-technology industries. 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” by 2020, up

from a 70 percent target set in the 2015 document. In December 2020, the 2017 document was updated

with the issuance of the Made in China Key Area Technology Innovation Greenbook (2019).

Many of the policy tools being used by the Chinese government to achieve the goals of Made in China 2025

raise serious concerns. These tools are largely 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 WTO Members by its level of

ambition and, perhaps more importantly, by 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 China-backed companies increase

their market share at the expense of U.S. companies operating in these sectors.

The Section 301 investigation that USTR launched in August 2017 and resulting tariff and other actions

seek to address China’s forced technology transfer regime. This regime is one of the instruments through

which China intends to meet its Made in China 2025 targets.

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 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” and, among other things, called for the

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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, 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,

including but not limited to: (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. 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

actions that force or pressure U.S. companies to transfer their technology to Chinese entities. The United

States has engaged China as issues arise and will continue to monitor developments closely.

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IMPORT POLICIES

The United States continues to pursue vigorous engagement to increase the benefits that U.S. businesses,

workers, farmers, ranchers, service providers, and consumers derive from trade and economic ties with

China. At present, China’s trade policies and practices in several specific areas cause particular concern

for the United States and U.S. stakeholders. The key concerns in each of these areas are summarized below.

Tariffs and Taxes

Tariffs

China’s average Most-Favored-Nation (MFN) applied tariff rate was 7.6 percent in 2019 (latest data

available). China’s average MFN applied tariff rate was 13.9 percent for agricultural products and 6.5

percent for non-agricultural products in 2018 (latest data available). China has bound 100 percent of its

tariff lines in the World Trade Organization (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 this proceeding no earlier than the first half of

2022. 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 Products

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 March 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

though they are often oversubscribed.

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. Hearings before the panel took place in July and October 2018, and 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. The United States and China originally agreed that the reasonable period of time for China to

come into compliance with WTO rules would end on December 31, 2019. The United States subsequently

agreed to extend this deadline to June 29, 2021. In July 2021, the United States submitted a request for

authorization to suspend concessions and other obligations pursuant to Article 22 of the DSU on the ground

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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 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.

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 goods such

as dairy, infant formula, seafood, grains, animal feed, pet food and oilseeds. Overall, China’s notification

of these measures to the WTO TBT Committee and the WTO Sanitary and Phytosanitary Committee (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.

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 establish new

labeling and conformity assessment requirements.

These Decrees and similar prior measures continue to place excessive strain on traders and exporting

countries’ regulatory authorities, with no apparent added benefit to food safety. They instead seemingly

provide China with a tool to control the volume of food imports, as decided by China’s state planners, and

to retaliate against food producers in countries whose governments challenge Chinese government policies

or practices in non-trade areas.

In the Phase One Agreement, China specifically 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

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extent necessary to protect human life or health. China also agreed to certain procedures for registering

U.S. facilities that produce various food products. Despite repeated U.S. requests for clarification regarding

the relationship between the facilities registration procedures set forth in the Phase One Agreement and the

requirements of Decrees 248 and 249, China did not provide the requested information.

The United States and several other trading partners also requested an 18-month postponement in the

January 1, 2022, implementation date for Decrees 248 and 249. They explained that much more time was

needed to register facilities and to understand and comply with the new labeling and conformity assessment

requirements if major trade disruptions were to be avoided. China rebuffed these requests.

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 to 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 an inconsistent ability to influence

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

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

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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 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 CFDA and its successor,

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, as have other WTO Members.

While the language in the CSAR suggests that China is seeking to modernize its regulation of cosmetics

and reduce the time required for product and ingredient registration and approval, the implementing

measures contain provisions that would require the disclosure of much more information than was

previously needed to manage product safety and performance claims in China’s cosmetics marketplace.

The United States has expressed concern to China that Chinese 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 new 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 potentially 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 that this requirement is trade-restrictive, 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 internationally recognized laboratories outside of China in addition

to other means used by foreign regulators and industries to assess the conformity of product and ingredient

safety and performance claims.

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The United States also questions China’s assertion that its cosmetics good manufacturing practices (GMP)

requirements provide equal treatment for imported and domestic products. 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 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.

In sum, after years of the United States engaging with China bilaterally and via the International

Cooperation on Cosmetics Regulation, 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. The inability or unwillingness of China’s regulators to routinely follow 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. The number of products pending

Chinese regulatory approval continues to increase, causing uncertainty among traders and resulting in an

adverse trade impact, 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.

In the past, biotechnology product approvals by China’s regulatory authorities mainly materialized only

after high-level political intervention. For example, following a commitment made by China’s President

during an April 2017 summit meeting, the National Biosafety Committee (NBC) met in May and June 2017

and issued two product approvals after each meeting, while taking no action on several other products that

were subject to NBC review. Following a subsequent meeting between the U.S. and Chinese Presidents in

December 2018, the NBC issued five additional product approvals and 23 renewals. One year later, in

December 2019, the NBC issued two additional product approvals and 10 renewals for foreign developers.

In 2020 and 2021, China held NBC meetings twice per year. In June 2020, the NBC issued one additional

product approval and three renewals for foreign developers. In January 2021, China issued one product

approval and two product renewals for foreign developers. In September 2021, China announced the

outcomes of the July 2021 NBC meeting, which included no apparent progress on approvals for foreign

developers. In January 2022, China issued two product approvals and 25 product renewals for foreign

developers. Meanwhile, over the past two years, China has issued numerous approvals and renewals for

Chinese developers.

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In the Phase One Agreement, China committed to implement a transparent, predictable, efficient and

science- and risk-based system for the review of products of agricultural biotechnology. The agreement

also calls 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 by 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 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.

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. Indeed, the NBC still has not

approved one canola event and two alfalfa events whose applications have been pending for approximately

ten years, while at least one corn event and one cotton event have waited over five years for approval.

Poultry

In January 2015, due to an outbreak of high pathogenicity avian influenza (HPAI) in the United States,

China imposed a ban on the import of all U.S. poultry products. Even though the outbreak was resolved in

2017 in accordance with the guidelines of the World Organization for Animal Health (OIE), China did not

take any action to re-open its market to U.S. poultry products until November 2019. At that time, China

reopened its market to U.S. poultry meat, but not to other U.S. poultry products such as shell eggs. Since

then, GACC has completed the updating of a list of hundreds of U.S. establishments eligible to export

poultry meat to China.

In the Phase One Agreement, China agreed to maintain measures consistent with OIE guidelines for future

outbreaks of avian influenza. China also agreed to sign and implement 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. Subsequently, during an avian influenza outbreak in South Carolina in

April 2020, China did not restrict imports of poultry products from other U.S. regions.

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 (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 levels (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 major shortages of

domestic pork due to African swine fever. Specifically, China bans the use of certain veterinary drugs and

growth promotants instead of accepting the MRLs set by Codex.

In the past, China randomly enforced a zero tolerance for the detection of salmonella in imported pork. In

June 2017, a Chinese national standard that laid out the testing requirements for imported raw meat products

was replaced by a new standard that does not include a salmonella test for raw meat products.

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’s 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. To date, however, the United States, the EU and other GPA parties have

viewed China’s offers 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

fiscal funds by state organs and other organizations at all levels of government in China, but does not apply

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to procurements by state-owned enterprises. The Tendering and Bidding Law falls under the jurisdiction

of 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.

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.

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,

as of March 2022 it is not clear how these measures may be impacting government procurement in China.

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). Currently, China is in the midst of establishing an intellectual property appellate court and

revisions to certain laws and regulations. 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 2021 Special 301 Report. In addition, in January 2021, USTR announced the results of its

2021

Review of Notorious Markets, which identifies online and physical markets that exemplify key challenges

in the global struggle against piracy and counterfeiting. 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.

As of March 2022, 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. At the same time, China has work to do to finalize the draft measures that it has

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published and to publish other draft measures in accordance with the Intellectual Property Action Plan that

it released in April 2020. 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 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 corresponding final measure 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. Although China subsequently amended the Anti-unfair Competition Law, the Foreign

Investment Law and the Administrative Licensing Law, these amendments still do not fully address critical

shortcomings in the scope of protections and obstacles to enforcement.

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, to shift

the burden of proof in civil cases to the defendants when there is a reasonable indication of trade secret

theft, 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 of undisclosed

information, trade secrets and confidential business information submitted to the government.

In 2020, China published draft measures relating to civil, criminal and administrative enforcement of trade

secrets, such as SAMR’s draft Provisions on the Protection of Trade Secrets. In September 2020, the

Supreme People’s Court issued the Provisions on Several Issues Concerning the Application of Law in

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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 will require

revisions to the judicial interpretations and prosecution standards issued earlier in the year. The United

States will continue to monitor the effectiveness of these measures.

Bad Faith Trademark Registration

The continuing registration of trademarks in bad faith in China remains a significant concern. 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.

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

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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. A draft tort liability chapter in the Civil Code, published in January 2019,

contained similar problematic provisions that would weaken the existing notice-and-takedown system.

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, 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 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 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, as of

March of 2022, it is 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

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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 “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 U.S.-China Strategic and Economic Dialogue (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 2012 U.S.-China Joint Commission

on Commerce and Trade (JCCT) process 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 the same 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

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.

Accordingly, USTR has been using mechanisms like Section 301 of the Trade Act of 1974 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.

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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 2021, 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 ICT products and services, while China’s Cybersecurity

Law, Data Security Law and Personal Information Protection Law include 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 aforementioned 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

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

FOREIGN TRADE BARRIERS | 105

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 two 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.

China allows wholly foreign-owned companies in the non-life (i.e., property and casualty) insurance sector.

However, the market share of foreign-invested companies in this sector is only about two percent.

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.

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

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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 – 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 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. China has maintained 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 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, in March 2022, the United States is closely monitoring developments as applications

from two other U.S. suppliers, Visa and MasterCard, are progressing through PBOC’s licensing process.

The United States will continue to closely monitor PBOC’s licensing process going forward to ensure

China’s compliance with its commitments in the Phase One Agreement.

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 in a previously unregulated sector. 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 the

Chinese 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, 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.

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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 (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

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.

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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 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, prohibits foreign

investment in TV production, prohibits foreign investment in TV stations and channels in China and

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’s (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

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 the summit meeting between the two countries’

Presidents in Buenos Aires in December 2018. As of March 2022, 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. With respect to content, China requires foreign companies to

FOREIGN TRADE BARRIERS | 109

license their content to Chinese companies. China 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

inconsistent regulatory approaches 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 2021, China continued to build out its expansive regulation of data. A new Data Security Law entered

into force in September 2021, and a new Personal Information Protection Law entered into force in

November 2021. These new 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

to prohibit or severely restrict cross-border transfers of information that are routine in the ordinary course

of business and are fundamental to any business activity. These laws and measures also impose local data

storage and processing requirements on companies that collect “important data,” which is a broad and

vaguely defined term. They also suggest that China intends to apply these restrictions and requirements

not only to companies that are considered to operate in “critical information infrastructure sectors,” another

broad and vaguely defined term, but also to companies operating in other sectors. Given the wide range of

business activities that are dependent on cross-border transfers of information and flexible access to global

computing facilities, these developments have generated serious concerns among foreign governments as

well as among stakeholders in the United States and other countries, including among services suppliers.

Secure and Controllable Information and Communications Technology Policies

In 2021, implementing measures for China’s Cybersecurity Law remained a continued source of serious

concern for U.S. companies since the law’s enactment in 2016. Of particular concern are the Measures for

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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 information and communications technology (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.

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 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 multiple ways.

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 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

China. During the state visit of China’s President in September 2015, 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

Committee on Technical Barriers to Trade (TBT Committee).

Again, however, China has not honored its promises. The numerous draft and final cybersecurity

implementation measures issued by China from 2017 through March 2022 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

FOREIGN TRADE BARRIERS | 111

grown even more concerned about the implications of China’s ICT security measures across the many

economic sectors that employ digital technologies. Accordingly, throughout 2021, the United States

conveyed its serious concerns about China’s approach to cybersecurity regulation through written

comments on draft measures, 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 ongoing as of March 2022.

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 WiFi and 4G 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.

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, 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, as of March 2022,

it 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,

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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 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 research and development

(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 substantial 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 date, the United

States has been able to address some of 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 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 subcentral government subsidies that the United

States had challenged as prohibited subsidies in a WTO case.

The United States began working with the European Union (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 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.

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

FOREIGN TRADE BARRIERS | 113

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.

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.

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 levels.

This excessive support creates price distortions 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

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 suspended, and the United States continues to closely monitor the operation of China’s market

price support programs for wheat and rice.

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 other top producers in terms of

marine capture. 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 was

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compelled to submit an Article 25.10 counter notification covering these same measures. More recent

subsidy notifications by China have been more fulsome, but still incomplete.

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 WTO subsidy notification obligations. The United States also will

seek to prohibit harmful fisheries subsidies as part of ongoing 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-

economic 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.

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. manufacturers and workers in both the U.S.

market and third country markets, where U.S. exports compete with exports from China. 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 2020, China accounted for 69 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, despite a significant contraction in global steel demand

caused by the COVID-19 pandemic. This sustained ballooning of steel production, combined with

weakening economic growth and a slowdown in the Chinese construction sector, threatens to flood 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. Indeed, in 2020, 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 1,500 percent between

2000 and 2020, 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, and many of the capacity

additions have taken place during periods of decline in global aluminum prices. 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. industries and workers 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

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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 to increase duties or impose import quotas 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 State

Administration for Market Regulation (SAMR), a new agency that incorporated the former anti-monopoly

enforcement authorities from the National Development and Reform Commission (NDRC), the Ministry

of Commerce (MOFCOM) and the State Administration of Industry and Commerce (SAIC) into one of its

bureaus. It had been hoped that centralized anti-monopoly enforcement would lead to policy 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 October 2021, the National People’s Congress Standing Committee issued draft revisions to the Anti-

Monopoly Law for public comment. The United States will monitor developments relating to these draft

revisions closely to determine whether the concerns that have persisted are being addressed.

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 is not yet clear

how this elevated status will impact anti-monopoly policy enforcement in China.

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 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 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 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.

Still another concern relates to the procedural fairness of Anti-monopoly Law investigations of foreign

companies. U.S. industry has expressed concern about insufficient predictability, fairness, and transparency

in Anti-monopoly Law investigative processes. For example, U.S. industry reports that, through the threat

of steep fines and other punitive actions, 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 a

greater reliance on Anti-monopoly Law enforcement where technology owned or controlled by foreign

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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.

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

addresses 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 also remains unclear whether the Fair Competition Review System established

by the Opinions on Establishing a Fair Competition Review System is achieving its stated goals in view of

the strength of 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 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 established the

State-owned Asset Supervision and Administration Commission (SASAC) and adopted the Law on State-

owned Assets of Enterprises in addition to numerous other measures mandating state ownership and control

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of many important industrial sectors. The Chinese Communist Party 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 is 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 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 and include restrictions on foreign investment

in state-owned and state-invested enterprises operating not only in the public sector but also in China’s

private sector.

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 enterprises.

However, later statements by China’s President made clear that China continues to view the rule of law

very differently from the United States and other democratic market economies. In February 2019, in an

article in a Chinese Communist Party journal, he 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, resource, 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 consolidate and to strengthen state-owned and state-invested enterprises and to place them on a

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more competitive footing, both in China and globally, through the continued provision of preferential access

to capital, goods, and services and the use of other policies and practices designed to give them artificial

advantages over their private competitors.

This unfair situation is made worse for foreign companies, as China’s state-owned and state-invested

enterprises and China’s private companies also benefit from a wide array of other state intervention and

support designed to promote the development of domestic industries. 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.

LABOR

The Chinese government 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 other Muslim minorities 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.

U.S. Customs and Border Protection 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, on January 13, 2021. The scope of this WRO includes cotton and tomatoes and

downstream products that incorporate these commodities as inputs.

On July 13, 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.

On December 23, 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act, 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.

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, aluminum and brass

that meet purity standards, pelletized scrap plastic, and pulped scrap paper.

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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 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. As of March

2022, U.S. exports of these materials to China are negligible.

In 2021, alongside other WTO Members, the United States continued to raise serious concerns with China.

In WTO committee meetings throughout the year, the United States and other WTO Members urged China

to halt the implementation of its regulatory regime for scrap and recovered materials and to consider the

adoption of policies in line with international standards and practice.

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.

OTHER BARRIERS

A number of other non-tariff measures can adversely affect the ability of U.S. industry to access or invest

in China’s market. The process for issuing new regulatory measures can be opaque and unpredictable and

implemented without adequate notice. Other 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.

Export Restraints

China continues to deploy 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. Through these export restraints, it appears

that China is able to provide substantial economic advantages to a wide range of downstream producers in

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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.

The United States remains deeply concerned that it was forced to bring multiple cases to address the same

obvious WTO compliance issues. A responsible WTO Member would have withdrawn its highly trade-

distortive export restraint policies after the first definitive WTO litigation.

A new 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.

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 value-added tax (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 where China is a leading world producer or exporter, such as

products made by 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. As of March 2022, China has not made

any movement toward the adoption of international best practices.

Trade Remedies

As of December 2021, China had in place 126 antidumping (AD) measures, affecting imports from 17

countries or regions. China also had in place seven countervailing duty (CVD) measures, affecting imports

from five countries or regions. In addition, China had two AD and two CVD investigations in progress.

The greatest systemic shortcomings in China’s AD and CVD practice continue to be in the areas of

transparency and procedural fairness. Over the years, China has often utilized AD and CVD 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

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and through written comments submitted in connection with pending AD and CVD proceedings to adhere

strictly to WTO rules in the conduct of its trade remedy investigations.

China’s conduct of AD investigations continues to fall short of full commitment to the fundamental tenets

of transparency and procedural fairness embodied in the WTO’s 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 AD 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 AD practice have been raised with MOFCOM in numerous

proceedings.

A review of China’s conduct of CVD investigations makes clear that, as in the AD 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 CVD 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.

Notably, over the years, the United States has expressed serious concerns about China’s pursuit of AD and

CVD 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 AD and CVD rules and the trade remedy

provisions of China’s accession agreement. More recently, it appears that China has used arbitrary

economic and trade measures, including AD and CVD investigations, as a form of economic coercion

designed to achieve China’s political goals. Obvious examples include MOFCOM’s AD and CVD

investigations of imports of Australian barley and Australian wine.

From 2019 through 2021, China initiated a total of 23 trade remedy investigations, including 18 AD

investigations and five CVD investigations. Almost one-half of these investigations targeted products

imported from the United States. In addition, in these most 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

AD 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 CVD 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 under Article 10.1.6 of the Subsidies Agreement.

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

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use and unauthorized disclosure of regulatory data, and the need for an efficient mechanism to resolve

patent infringement disputes.

Five years ago, at the December 2014 JCCT meeting, China committed to significantly reduce time-to-

market for innovative pharmaceutical products through streamlined processes and additional funding and

personnel. Nevertheless, time-to-market for innovative pharmaceutical products in China remains a

significant concern.

In April 2017, in response to sustained U.S. engagement, China issued amended patent examination

guidelines that required patent examiners to consider supplemental test data submitted during the patent

examination process. However, as of March 2022, it appears that patent examiners in China have been

either unduly restrictive or inconsistent in implementing the amended patent examination guidelines,

resulting in rejections of supplemental data and denials of patents or invalidations of existing patents on

medicines even when counterpart patents have been granted in other countries.

China’s Food and Drug Administration (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,

the National Medical Products Administration (NMPA), issued draft Drug Registration Regulations and

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, in August

2019, China issued a revised Drug Administration Law, followed by revised Drug Registration Regulations

in January 2020. Neither measure contained an effective mechanism for early resolution of potential patent

disputes or any form of regulatory data protection.

Since 2018, volume-based procurement has presented a new market access complication for foreign

suppliers of pharmaceuticals. 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, which significantly reduced drug prices in provinces across China. According to

U.S. industry, the resulting average price reduction reported in 2019 was more than 50 percent, and generic

substitution has led to lost market share for foreign-branded drugs.

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 China’s National Intellectual Property Administration (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. Since then, the United

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States has been closely monitoring 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 been engaging China and raising

concerns about its 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.

In recent years, the United States has continued to press China’s regulatory authorities to develop sound

payment systems that adequately support research and development. The United States has also urged them

not to require foreign companies to transfer their manufacturing activities to China in order to receive

preferential benefits.

In 2019, China’s State Council launched a volume-based procurement approach for medical devices in a

few provinces and municipalities in an attempt to cut healthcare costs. China’s volume-based procurement

approach adopts the hospital procurement model that China initially imposed on the pharmaceuticals sector,

and it has since also been deployed at the national level. Volume-based procurement has yielded price cuts

of 55 to 65 percent at the provincial level for several categories of medical devices, and in more limited use

at the national level it has yielded price cuts of over 80 percent. According to U.S. industry, if the provincial

and local authorities continue to pursue volume-based procurement without significant changes, it will have

the effect of creating a low-cost, low-quality commodity market of “one size” fits all medical devices that

could lead to low-quality monopolies, to the disadvantage of innovative medical device companies, many

of which are foreign companies. U.S. industry has also expressed concerns about China’s new national

tendering process for stents, which may serve as a potential pilot for broader adoption. It views the national

tendering process being used for stents as reflecting a continued prioritization of cutting costs without

sufficient consideration of quality or clinical efficacy.

Meanwhile, the Made in China 2025 industrial plan announced by the State Council in 2015 seeks to elevate

the competitiveness of China’s domestic medical device manufacturing capacity through a series of support

policies, including targeted funds and procurement policies, with the goal of significantly increasing the

market share of domestically owned and domestically manufactured medical devices by 2025. At the same

time, certain provincial government industrial plans impose controls on imported medical devices or limit

certain procurements to only domestically manufactured medical devices, and 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 imported medical devices with fair

and equal access to China’s market.

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.

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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. 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 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.

In principle, 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.

The corporate social credit system has been tied to larger policy objectives as well. For example, in May

2021, CNIPA released the Draft Several Measures on Improper Patent Applications, which purportedly

seeks to strengthen China’s intellectual property protection by linking penalties for improper patent

applications with the social credit system.

Currently, there is no fully integrated national system for assigning comprehensive social credit scores for

companies and the social credit system remains highly fragmented, as local governments experiment with

their own pilot social credit schemes. Instead, certain central government agencies, such as CNIPA, the

Cyberspace Administration of China (CAC) and the General Administration of Customs, and subnational

government agencies maintain their own rating systems at the central and subnational levels of government,

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 September 2019, in a broad effort focused on rating financial creditworthiness, NDRC announced that

33 million companies had been included in the first batch of comprehensive public credit appraisals. These

companies were reportedly assigned one of four grades ― excellent, good, fair or poor ― depending on

their creditworthiness and whether they appeared on any government agency censure lists. NDRC has

indicated that all companies operating in China will eventually be subject to comprehensive public credit

appraisals and will receive differing levels of regulatory scrutiny depending on their grades. With a few

exceptions, the comprehensive scores are still not made public, and the formula used to calculate the

rankings is unknown. In July 2020, NDRC and the People’s Bank of China (PBOC) jointly issued the draft

Guiding Opinions for Further Standardizing the Input Scope of Public Credit Information, Penalty for Bad

Credit and Credit Repairs in Building a Long-term Mechanism for Credit Regime Construction, which

again called on government agencies to standardize procedures for evaluating credit violations and for

sharing credit information sharing between government agencies to better implement joint punishments.

In a further effort to provide a set of unified national standards, NDRC published draft guidelines in July

2021 defining data that is collectable data under China’s corporate social credit system and potential

punishments for companies and individuals with low credit scores. NDRC is also attempting to further

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clarify the procedures necessary to restore credit, such as through the Draft (Trial) Measures for

Administration of Credit Repair.

It appears that SAMR, which manages the National Credit Information Sharing Platform (NCISP), is

closely involved with coordinating these disparate censuring systems for sectors in which SAMR has

oversight, such as food and drug production, pharmaceuticals and medical devices, although NDRC

remains the lead agency coordinating Chinese data standardization nationally. The goal is for the NCISP

to serve as a single, national platform for sharing corporate social credit information throughout the Chinese

government and to enable relevant agencies to pursue joint punishment for repeat or egregious offenders.

In July 2019, SAMR issued the draft Measures for Administration of the List of Serious Violators of Trust

and Law for public comment. In this draft measure, SAMR outlines a lengthy series of circumstances that

would warrant a company being included in SAMR’s centrally managed censure list, which the draft

measure refers to as a list of companies that have committed “serious violations of law and trust.” It appears

that this censure list would include companies that have committed the types of violations that currently

warrant inclusion on individual agencies’ censure lists in addition to other types of violations of law or

trust. The censure list would set forth the name of the company and the reasons for its inclusion and would

be publicly available through the NCISP website. In the draft measure, SAMR also calls for agencies to

share the underlying information that led to a company’s being censured with each other and with industry

associations in order to facilitate joint punishment of censured companies. In the final version of this

measure, which SAMR issued in August 2021, it added specific violations related to illegal production or

sale of drugs (including vaccines) and sale and production of unregistered medical devices, among other

offenses. The updates in the final measure reflect how SAMR is evolving the corporate social credit system

to adapt to present-day regulatory enforcement challenges.

Foreign companies are concerned that the corporate social credit system will be used by the Chinese

government to pressure them to act in accordance with relevant Chinese industrial policies 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 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. For example, the executives of a company with poor corporate social credit standing may also find

that their individual social credit ratings are impacted by their employer’s corporate malfeasance. 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

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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 top 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 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 issued by sub-central governments.

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 less

common for 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. In addition, China rarely publishes certain types

of trade-related measures in the official journal, such as 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

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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, 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 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 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 subcentral 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

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 ignores this obligation.

In April 2020, for example, the United States submitted a request concerning five Chinese legal measures

covering semiconductors and fisheries subsidy programs that did not appear to have been notified to the

WTO and were not available online. Despite the obligation in its WTO accession agreement to 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.

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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 will be phased out 12 years from entry into force (2023). Tariffs

on the most sensitive products for Colombia will be phased out 15 years to 19 years from entry into force

(2026 to 2030). U.S. agricultural exporters also currently benefit from duty-free access under tariff-rate

quotas for some sensitive products. In accordance with its Agreement commitments, Colombia has ceased

applying its price band system to U.S. agricultural products. Colombia applies benchmark or reference

pricing to most apparel and footwear imports; although this does not affect customs duties for Agreement-

qualifying imports from the United States, it could increase the customs value of these products and the

corresponding duty costs for non-FTA goods.

Non-Tariff Barriers

Truck Scrappage

Colombia continues to require buyers of new trucks to pay a registration fee equivalent to 15 percent of the

value of the new truck. Buyers can avoid the fee by scrapping an old truck, which entitles them to a

scrapping certificate that waives the fee. Colombia does not place a cap on the number of available

certificates. U.S. industry has advocated that the program be temporary, capped at the current rate of 15

percent, or eliminated entirely. The United States will continue to monitor Colombia’s actions in this area.

Biologic and Biosimilar Medicines Regulations

In September 2014, Colombia issued a decree establishing a framework for marketing approval of

biological and biosimilar medicines. It established three approval pathways. The abbreviated

comparability pathway appears to be incompatible with international norms for biosimilars pathways. The

United States will continue to monitor the implementation of the decree to assess its impact on fair

competition in the Colombian market.

Customs Barriers and Trade Facilitation

On August 3, 2020, Colombia published Decree 1090 of 2020 implementing the United States–Colombia

Trade Promotion Agreement de minimis value threshold provision. Article 5.7(g) of the Agreement

generally exempts duties and taxes for express shipments valued at $200 or less. However, on September

14, 2021, Colombia passed Law 2155, which restricts de minimis treatment to goods from countries with

which Colombia has a free trade agreement that addresses a duty and tax de minimis and only if the goods

are not for commercial purposes. Colombia defines “commercial purposes” as more than six units of the

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same class. U.S. industry has raised concerns with the immediate implementation of these provisions and

sought clarity on how Colombia will track the numerical unit limits. On September 23, 2021, Colombia’s

Director of Customs clarified that the National Directorate of Tax and Customs (DIAN) will identify

shipments selectively for inspection at Colombia’s ports of entry, and that Colombia will not require

certificates of origin for shipments originating in the United States.

Colombia ratified the World Trade Organization (WTO) Trade Facilitation Agreement (TFA) on August 6,

2020.

Colombia has significantly delayed implementation of customs reforms that would allow traders to submit

electronic copies of invoices instead of physical copies. As of March 2022, these changes have yet to be

implemented, though Colombia reported it is in the process of developing an integrated electronic customs

system and expects to complete implementation within a few years. 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 TFA includes provisions on accepting customs documents in electronic

format before shipments arrive at port.

Ethanol-related Measures

Since the entry into force of the Agreement, U.S. ethanol exports to Colombia grew from zero to

approximately $121.0 million in 2020, but were approximately $88.5 million in 2021. Since late 2020,

ethanol exports to Colombia fell due to increases in U.S. ethanol prices, the devaluation of the Colombian

peso against the U.S. dollar, and a countervailing duty imposed on U.S. ethanol exports in May 2020.

Additionally, 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 ten percent to four

percent, with the stated aim of compensating for local ethanol supply shortages and higher prices. The

United States raised concerns with Colombia’s ethanol policies during the Agreement’s Standing

Committee on Agriculture in October 2021, and will continue to encourage Colombia to lift restrictions on

imports, particularly as Colombia implements measures to address ethanol supply shortfalls and price

inflation.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Maximum Sodium Limits

Following multiple bilateral and multilateral engagements with trading partners, in November 2020, the

Colombian Ministry of Health issued Resolution 2013, which established mandatory maximum sodium

content limits for 59 processed food categories and an implementation timeline beginning November 2022.

This measure also introduced a conformity certificate requirement and mandatory sodium content targets

to support Colombia’s public health objectives. U.S. stakeholders continue to express concerns about the

measure, including mandatory reformulation of products in order to comply with certificate of conformity

requirements, with much of the same information being provided through the sanitary registration process.

The United States has raised concerns with the measure in meetings of the WTO Committee on Technical

Barriers to Trade (WTO TBT Committee), and, in October 2021, in a meeting of the United States–

Colombia Trade Promotion Agreement TBT Committee, with a view toward exploring best practices and

ensuring that the measure achieves its intended goals in the least trade restrictive manner. Remaining

concerns include uncertainty regarding enforcement mechanisms for imported products, how sanctions will

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be applied for processed foods that do not comply with the mandatory sodium reduction levels, and

outstanding questions on the use of certificates of conformity to prove compliance with Resolution 2013.

Front-of-Package Labeling

Following a WTO notification and changes to an initial draft, on June 16, 2021, the Colombian Ministry of

Health issued Decree 810, a nutrition labeling regulation that requires Front-of Package Labeling (FOPL)

circular warning signs for products that exceed Colombia’s specified thresholds for salt/sodium, added

sugar, and saturated fats. A product conformity certificate is required under the regulation. The measure

also includes provisions related to fortification, nutrient content claims, nutrient comparative claims, and

nutrition facts label requirements. In April 2021, the United States and industry stakeholders commented

on the WTO-notified measure. There was significant technical exchange on this proposed technical

regulation between the United States and Colombia which resulted in acceptance of suppliers’ declaration

to meet certificate of conformity requirements. Notably, on June 18, 2021, Colombia published Law 2021,

which references Colombia’s new FOPL requirements. The United States raised implementation questions

in the October 2021 U.S.-Colombia TPA TBT Committee. Stakeholders are currently evaluating this law

to understand any new labeling requirements and Colombia’s next steps for implementation.

Good Manufacturing Practices Certificates

On February 16, 2021, the Colombian Ministry of Health issued Decree 162 to modify Decree 1686 of

2012, the regulatory framework for the production, labeling, import, and commercialization of alcoholic

beverages in Colombia. This measure establishes Good Manufacturing Practices (GMP) certificates as a

requirement for the registration of alcoholic beverages with Colombia’s food and drug regulatory authority

(INVIMA), beginning in February 2023. The United States has encouraged Colombia to continue to accept

the U.S. Department of Treasury Alcohol and Tobacco Tax and Trade Bureau (TTB) certificate of free sale

as an alternative. In August 2021, the Colombian Ministry of Health confirmed that a GMP certificate will

not be required for U.S. alcoholic beverages, and that Colombia will accept TTB certificates of free sale

with only minor edits to the language used currently.

Article 11 of Decree 3249 of 2006 requires submission of GMP certificates for the registration of both

domestic and imported dietary supplements in Colombia. Decree 3249 establishes that GMP certificates

for imported products must come from government authorities in the country of origin. Many U.S. dietary

supplement registrations are on hold, however, after the Departments of Agriculture in several U.S. states

stopped issuing GMP certificates at various times in late 2019 and 2020. INVIMA has stated that in the

absence of an authority that could issue GMP certificates, it could audit the foreign manufacturing plant

directly if the U.S. company pays for related travel costs. INVIMA has also indicated that it is planning to

modify the regulation and establish a set of minimum content requirements for the certificates rather than

require a certificate from a specific issuing authority. The United States will continue to monitor this issue.

Mobile Device Labeling Regulations

On November 7, 2019, Colombia’s Superintendency for Industry and Commerce (SIC) released External

Circular 002, which established labeling requirements that producers, suppliers, or retailers of mobile

devices must follow to indicate the cellular network (2G, 3G, 4G, etc.) that the mobile device supports.

Online retailers were required to implement this measure by December 20, 2019, and physical retailers by

May 20, 2020. Colombia did not notify the circular to the WTO under the WTO TBT Agreement and only

provided a 12-calendar-day domestic comment period. The U.S. Government expressed concerns that the

unusually large font size labeling requirements of the circular may be overly burdensome, does not take

into account the size of cell phone packaging, and encouraged several less trade restrictive alternatives,

including the cellular network capability to be publicized at point of sale, on the internet, via an e-label, or

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on the regulatory requirements information in the “settings” of the cell phone. All of these alternatives

have more exposure to the consumer than the packaging, which is often not seen until the product is already

sold. The United States sent a request to Colombia’s WTO TBT inquiry point in February 2020, followed

by a letter from the U.S. Department of State to Colombia’s SIC in March 2020, and the United States

raised concerns at the May 2020 WTO TBT Committee and the October 2021 United States–Colombia

Trade Promotion Agreement TBT Committee. The United States will continue to engage Colombia on this

issue.

Automobile Seat Belts and Safety Glass Regulations

In March 2021, Colombia notified to the WTO two draft automobile safety regulations, one for seat belts

and the other for window safety glass. U.S. industry commented on these measures to Colombia and is

concerned that the draft measures would require U.S. manufacturers of automobile seat belts and window

glass, which are manufactured to meet U.S. Federal Motor Vehicle Safety Standards (FMVSS), to also

provide a third-party compliance report issued by either a Colombian National Organization for

Accreditation recognized agency or an accredited certification body. According to industry, U.S.

manufacturers already test their products for compliance with FMVSS, making third-party certification

duplicative and adding unnecessary costs for U.S. automakers and suppliers. The draft measures also

include unique labeling requirements for both safety glass and seat belts that differ from the labeling

requirements under the United Nations Economic Commission for Europe (UNECE) 1958 Agreement and

FMVSS. According to U.S. industry, such requirements would entail difficult and expensive design

changes for both safety glass and seat belts without any evidence of additional safety benefits.

The U.S. Government has pressed the seat belts and window safety glass concerns with the Government of

Colombia during the June 2021 WTO TBT Committee meeting and the October 2021 United States–

Colombia Trade Promotion Agreement TBT Committee meeting.

Automobile Tire Requirements

In October 2021, Colombia notified its draft automobile tire safety regulations to the WTO. U.S. industry

is concerned that the draft measure requires FMVSS-compliant tires to also comply with the Economic

Commission for Europe (UNECE) 1958 Agreement regulations in relation to tires (UNECE 117). While

some tires are manufactured to meet both regulations, many do not, and the draft regulation would restrict

the import of many FMVSS-compliant tires. For tires, FMVSS provides the same level of protection as

UNECE, and thus requiring compliance with both does not appear to further a legitimate regulatory

objective. Further, according to U.S. industry, there are currently no accredited bodies or laboratories in

Colombia capable of carrying out the technical tests on tires for the Colombian certificates of conformity.

Finally, U.S. industry is also concerned the new regulation requires that FMVSS-compliant tires be

produced in the United States for acceptance in Colombia, however, U.S. origin is not a determining factor

in FMVSS compliance for tires.

Glassware Testing Requirements

In September 2021, Colombia’s Ministry of Health and Social Welfare published Resolution 1440 and

notified the regulation to the WTO. The regulation is intended to reduce or eliminate the migration of lead

and cadmium from ceramic and glass food contact materials into food by requiring that ceramic and glass

products meet certain standards and use an annual third-party certification system to verify testing of such

products. The U.S. Government expressed concern that the frequency of re-verification of testing and

factory audits go beyond the international standard for product certification and are unnecessarily

burdensome. The U.S. Government submitted comments responding to the WTO notification in June 2021

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and raised concerns bilaterally at the October 2021 United States–Colombia Trade Promotion Agreement

TBT Committee meeting.

Sanitary and Phytosanitary Barriers

Lactic Acid Limits Requirement

In August 2020, INVIMA 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 content requirements. Decree 616 was notified to the WTO Committee on Sanitary and Phytosanitary

(SPS) Measures in 2005 and again in 2012. The decree includes a lactic acid minimum, and non-

compliance could result in shipments of U.S. milk powder being detained or rejected at the port. The basis

and rationale for the measure is unclear. Codex standards for food additives only establish a maximum

limit for lactic acid, and do not have a minimum limit. The United States has expressed concerns regarding

the requirement and its potential trade impact, including at the 2020 and 2021 meetings of the United

States–Colombia Trade Promotion Agreement Standing Committee on SPS Matters. In 2021, the United

States exported $82 million in total U.S. milk powder to Colombia, with average exports for 2019 to 2021

at $82.4 million. As of March 2022, Colombia is conducting the Regulatory Impact Analysis required prior

to drafting changes to Decree 616. The United States will continue to encourage Colombia to remove

Decree 616’s minimum lactic acid content requirement and harmonize the decree’s requirements with

international standards, or provide an assessment of risk to justify the proposed minimum standard.

GOVERNMENT PROCUREMENT

The current interpretation of Colombia’s framework law for infrastructure projects (Law 80) permits

unlimited liability judgments against companies and individual company officials, which is viewed as an

unacceptable risk and deterrent for many potential investors.

Colombia is not a Party to the WTO Agreement on Government Procurement, but it has been an observer

to the WTO Committee on Government Procurement since February 1996. However, the United States–

Colombia Trade Promotion Agreement contains disciplines on government procurement.

INTELLECTUAL PROPERTY PROTECTION

Colombia remained on the Watch List in the 2021 Special 301 Report

. Colombia has not yet implemented

Internet service provider (ISP) liability limitations and notice and takedown procedures, and has not yet

acceded to the 1991 Act of the International Convention for the Protection of New Varieties of Plants.

During 2021, Colombia engaged with the United States on these outstanding United States–Colombia Trade

Promotion Agreement commitments, particularly with regard to the implementation of ISP liability

limitations as well as notice and takedown procedures.

With respect to Article 72 of Colombia’s National Development Plan, Colombia issued Decree 433 in

March 2018, as amended by Decree 710 of April 2018, to clarify that Colombia would not condition

regulatory approvals on factors other than the safety and efficacy of the underlying compound. Due to an

action challenging these decrees, the Council of State provisionally suspended them in September 2019.

Colombia is still considering how it will 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.

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SERVICES BARRIERS

Audiovisual Services

Under the Agreement, Colombia committed to reduce its domestic content requirement from 50 percent to

30 percent for free-to-air national television programming broadcast during the hours of 10:00 to 24:00 on

Saturdays, Sundays, and holidays. In 2013, Colombia enacted legislation to implement this obligation.

However, in 2013, Colombia’s Constitutional Court invalidated the legislation on procedural grounds. As

of March 2021, Colombia has not yet complied with its commitment to implement this obligation in

Colombian domestic law and regulation.

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 address this issue and will continue to monitor progress.

LABOR

The United States and Colombia continue to engage in consultations through their contact points, under

Article 17.5.5 of the United States–Colombia Trade Promotion Agreement. This engagement includes

discussing Colombia’s progress on implementing specific recommendations contained in a U.S.

Department of Labor (DOL) report. DOL’s 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, 100 percent of U.S. originating consumer and industrial goods enter Costa Rica duty free.

In addition, Costa Rica has eliminated its tariffs on substantially all U.S. agricultural products under the

CAFTA–DR. Costa Rica eliminated remaining tariffs on chicken leg quarters on January 1, 2022, and is

scheduled to eliminate remaining tariffs on certain rice and dairy products by 2025. For certain agricultural

products (rice and dairy), tariff-rate quotas (TRQs) permit duty-free access for specified quantities during

the tariff phase-out period, with the duty-free amount expanding during that period. Costa Rica’s CAFTA–

DR commitments provide for liberalizing trade in fresh potatoes and onions through continual expansion

of a TRQ, rather than by 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 is carefully tracking to ensure the timely issuance of these

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. Breakpoints for the tax rates based on alcohol content appear to result

in a lower tax rate on spirits produced locally. Furthermore, local producers 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.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

Costa Rica’s Border Integration Program seeks to enhance competitiveness by modernizing Costa Rica’s

land border crossings’ infrastructure, equipment, and systems to coordinate efficiently the control activities

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performed by border agencies. Construction on the Paso Canoas and Sabalito border crossings is expected

to start in 2022. The Foreign Trade Single Window, and the Single Investment Window, are included in

the Border Integration Program, facilitating trade and digitalizing customs procedures. The United States

continues to encourage Costa Rica to expand its use of electronic processing to further facilitate trade.

With assistance from the U.S. Government, Costa Rica has implemented non-intrusive inspections systems,

which are instrumental to reducing processing times. The Costa Rican Ministry of Finance is working

towards the effective implementation of non-intrusive technologies at all land, maritime, and air border

crossings, and has made compatibility with the National Center for Image Analysis a requirement.

Cosmetics and Dietary Supplements

Between January 22, 2016 and January 8, 2020, the Costa Rican Ministry of Health (MOH) issued three

decrees (Executive Decree No. 39471-S, Executive Decree No. 40629-S, and Executive Decree No. 42263-

S) simplifying procedures for registration of cosmetic products and low-risk foods for their

commercialization in Costa Rica. As of March 2021, the simplified procedure applies to 58 products in 31

categories. The Chamber of Cosmetics and Cleaning for Central America and the Caribbean noted that the

new simplified procedure has reduced the wait for market approval for most products from 60 days to 5

days. On November 17, 2021, the Costa Rican President signed Executive Decree 43291-S, which reduces

the registration procedures for processed foods and low-risk cosmetics from 25 days to one day.

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

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.

Product Registration

Costa Rica requires product registration for food products (e.g., dairy products), additives, raw materials,

animal feed, and pet food. Additionally, companies that want to sell their products in the market are

required to submit necessary documents to the MOH to receive approval. 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.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

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. Some stakeholders have raised concerns that Costa Rica does not follow international procedures

for testing and certification of mobile handsets and other information and communications technology

(ICT) products. Stakeholders have expressed concern that these country-specific requirements can lead to

redundant testing, particularly when products are required to undergo testing in both exporting and

importing countries.

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Sanitary and Phytosanitary Barriers

The Costa Rican Ministry of Agriculture occasionally delays the issuance of phytosanitary import permits

for sensitive products, such as rice and onions, during specific periods, such as harvest time (usually in

November to December for rice, and from April to June for onions). In addition, persistent issues remain

regarding at-border processes and market access for U.S. fresh potatoes, both table stock and chipping

potatoes. The table stock market is currently closed pending completion of a pest risk assessment. In 2021,

the United States exported approximately $1.3 million 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’s 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.

U.S. exporters continue to complain about the high cost of quarantine fumigations at Costa Rican ports of

entry. Quarantine fumigations are a remediation measure that may be needed when quarantine pests are

intercepted in shipments. On November 25, 2019, the United States reached an agreement with Costa Rica

to eliminate re-inspection of cargo after it is fumigated. The new protocol was given final approval on June

6, 2020 and has reduced the time to one or two days that exporters incur costs for cargo fumigated at port.

The U.S. Government continues to meet with the Plant Health and Customs Department to identify ways

in which the cost of fumigation may be reduced.

Costa Rica has a 2016 regulation requiring extensive questionnaires for animal product facilities that export

products to Costa Rica. Most U.S. exporting facilities find this process overly burdensome and have

complained that the questionnaire requests irrelevant and business proprietary information. While U.S.

beef, pork, and poultry facilities are exempt from the questionnaire requirement, dairy, seafood, lamb, and

egg product facilities that began exporting to Costa Rica after 2016 are subject to the regulation, and they

face delays of several months or longer when introducing new products to the 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

officials of the awarding entity certify the award to be an efficient use of public funds. As part of the

Organization for Economic Cooperation and Development (OECD) accession process, Costa Rica has

greatly reduced the total value of contracts awarded under Article 2 exceptions, even as the number of

contracts awarded with exceptions continues to increase. The Costa Rican software association, CAMTIC,

reported that in 2017 there were 56 separate instances of Article 2 ICT purchases, valued at $226 million,

while in 2020 ICT purchases totaled $7 million in 83 instances.

Private sector insurance companies and brokers have complained that Costa Rica preferentially contracts

with the state-owned insurance company, Instituto Nacional de Seguros (INS). In 2017, however, the Social

Security Administration contracted with a private insurance company. In 2021, that company still retains

the contract. This may signal an eventual trend towards more competitive insurance contracting by

government entities.

The United States will continue to monitor Costa Rica’s government procurement practices for consistency

with the CAFTA–DR disciplines on government procurement.

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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. However, 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 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 this progress, the effectiveness of these positive developments remains to be

demonstrated through enforcement and results on the ground. The IP Registry was supposed to issue its

first report on government usage of unlicensed software in early 2021, but the report has still not been

issued. 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.

SERVICES BARRIERS

Insurance Services

Private insurance companies continue to face challenges in light of the market power that the National

Insurance Institute (INS) derives from its former monopoly position. Nevertheless, the competitive

environment for those companies has gradually improved: the INS’s percentage of the insurance market

decreased from 85 percent in 2014 to 68.4 percent in July 2021. The number of companies providing

insurance in the market has remained steady at 13 since 2015.

INVESTMENT BARRIERS

Costa Rica’s regulatory environment can pose significant barriers to investment in some sectors. One

common problem, according to industry, is inconsistent action between institutions within the central

government or between institutions in the central and municipal levels of government. The resulting

inefficiency in regulatory decision-making is especially noticeable in infrastructure projects, which can

languish for years between the award of a tender and the start of construction. However, advances

undertaken as part of the OECD accession process in areas such as air transport, domestic passenger

transport, and the financial sector, will provide better conditions for investment. Costa Rica became the

38th member of the OECD on May 25, 2021.

OTHER BARRIERS

Bribery and Corruption

The CAFTA–DR contains strong public sector anti-bribery commitments and anticorruption measures in

government contracting, and U.S. firms are guaranteed a fair and transparent process to sell goods and

services to a wide range of government entities.

However, U.S. stakeholders have expressed concern that corruption in the Costa Rican Government,

including in the judiciary, continues to constrain successful investment in Costa Rica. Administrative and

judicial decision-making is widely believed to be inconsistent, nontransparent, and time-consuming. The

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“Cochinilla” bribery case arose in mid-2021, with allegations of a wide-ranging bribery scandal related to

public infrastructure projects in Costa Rica.

In March 2020, the OECD’s Working Group on Bribery conducted a Phase 2 review of Costa Rica, and

reported that Costa Rica recently strengthened its anti-bribery laws by introducing corporate criminal

liability in 2019. The available sanctions against natural and legal persons, apart from small and medium-

sized enterprises, have increased. The provision of mutual legal assistance to foreign countries has largely

been prompt and effective.

However, the OECD also reported certain concerns, including loopholes in the definition of the foreign

bribery offense and enforcement issues. The Public Prosecution Service and the Attorney General’s Office

are both involved in foreign bribery enforcement, which may duplicate efforts and jeopardize cases. Costa

Rica also needs to ensure that factors such as national economic interest do not influence the sanctioning

of foreign bribery cases. It should also improve guidance and transparency for non-trial resolutions and

collaboration agreements.

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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 2020 (latest

data available). Cote d’Ivoire’s average MFN applied tariff rate was 15.8 percent for agricultural products

and 11.5 percent for non-agricultural products in 2020 (latest data available). Cote d’Ivoire has bound 34

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.

In 2021, the Ivorian Government applied tariffs of 9 percent on milk, infant milk, and baby food, down

from 18 percent in the previous year. The Ivorian 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 (1.0 percent), community levy (0.5 percent), and statistical

charge (1.0 percent), all of which monies are used for financing WAEMU commissions and assisting

landlocked WAEMU members Niger, Burkina Faso, and Mali. Cote d’Ivoire levies an additional 1.0

percent charge on the CIF value of imports, except those destined for re-export, transit, or donations for

humanitarian purposes under international agreements.

The Ivoirian Customs sets a fixed minimum CIF price for cement of $98 per metric ton, on which a tax also

is levied.

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.

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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.

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

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 CFA 1 million (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 Ivorian 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

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. 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.

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

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and investment planning agency and think tank, occasionally serves as an executing agency in major

projects to be financed by international institutions.

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 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 Ivorian

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.

As part of good governance practices and in compliance with international standards, the National Authority

for Regulation of Public Procurement (ANRMP) in August 2020 began an audit of 200 sole-source public

tenders awarded by eight ministries from 2014 to 2017. In December 2020, ANRMP completed a similar

audit of 400 public contracts awarded under 2019 management. ANRMP had conducted a similar audit in

2014, which found that a high proportion of all government procurements were sole-sourced rather than

competitively bid. The 2014 audit further found that the sole-sourced procurements contained many

irregularities, especially with regard to documentation, including a lack of documentation altogether.

At times, the government has cancelled or changed the publicly known result of a tender without giving a

bidder a clear reason. In one instance, the government entered into commercial discussions with a U.S.

company, expressing interest in the product or service of the firm and encouraging it to develop

presentations and a work product, only to suddenly declare that the government was no longer interested,

after having obtained valuable commercial information from the firm.

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 has conducted raids to confiscate pirated CDs and DVDs. However, IP enforcement 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. However, membership in that

association 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

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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, in

law and accounting firms, and in 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, though foreign companies currently operate in all these sectors in partnership with local firms

and with government permission.

The Ivoirian investment code provides tax incentives for investments larger than $1 million, as well as land

concessions for projects. Concessionary agreements that exempt investors from tax payments require the

additional approval of the Ministry of Finance and Economy and the Ministry of Commerce and Industry.

The clearance procedure for planned investments, if the investor seeks tax breaks, is time consuming and

confusing. Even when companies have complied fully with the requirements, the Tax Office sometimes

denies tax exemptions with little explanation, giving rise to accusations of favoritism. In August 2018, the

government adopted a new investment code that prioritizes agriculture, agro-industry, health, and

hospitality, and that links some incentives to productive and sustainable investments, and the promotion of

local content – namely local job creation, subcontracting with local companies (especially small- and

medium-sized enterprises), and the opening of share capital to local investors. However, the new code

cancelled the provision of assistance to investors that suffer losses due to popular unrest.

Although the investment code provides import tariff exemptions for large investors and for imports of

industrial equipment and machinery, relief from the tariffs is often delayed due to the large number of port

and customs clearance procedures and delays in completing those procedures.

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 while the HABG’s investigations continue. Corruption, opaque business practices, and capacity

constraints on the judiciary and 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.

Export Policies

Cote d’Ivoire’s 2021-2025 National Development Plan prioritizes agro-industrial development. As a result,

the government provides incentives and support 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

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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, 100 percent of U.S. originating consumer and industrial

goods have entered the Dominican Republic duty free. Textile and apparel goods that meet the Agreement’s

rules of origin also enter the Dominican Republic duty free and quota free, creating economic opportunities

for U.S. fiber, yarn, fabric, and apparel manufacturing companies.

Also, under the CAFTA–DR, the Dominican Republic has eliminated tariffs on nearly all agricultural goods

and will eliminate tariffs on chicken leg quarters, some dairy products, and rice by 2025. Tariff-rate quotas

(TRQs) permit duty-free access during the tariff phase-out period for specified quantities of different

agricultural products.

The Dominican Republic is required under the CAFTA–DR to make TRQs available on January 1 of each

year. The Dominican Republic Ministry of Agriculture has made substantial improvements to its

administration of TRQs, and in recent years has issued them in a timely manner.

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. Locally produced ethanol is not subject to these internal taxes.

Cheese importers raised concerns about unequal treatment with regard to taxation; imported cheese is

subject to the ITBIS of 18 percent, while locally produced cheese is not. This puts importers at a

competitive disadvantage. The U.S. Government has raised this issue with the Dominican Republic, but

no resolution has been achieved. In a meeting in August 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 that would gradually bring local producers up to full payment,

but no implementation date was given. The U.S. Government will work with the DGII to seek a resolution

of this issue.

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Non-Tariff Barriers

Import Licensing

The Dominican Republic 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, industry experts reported in 2021 that the

most pressing challenge to importing those products is the need to obtain an import license from the

Ministry of Agriculture, and that the way in which the licensing process is handled can lead to inconsistent

application of the law and uneven treatment. The United States has repeatedly raised this issue, and the

Dominican Republic is working on a new system to issue import licenses for agricultural products, led by

the Ministry of Agriculture. The United States will work with the Ministry of Agriculture to ensure that

this new system responds to U.S. concerns.

The Dominican Republic maintains a ban on imports of all used vehicles more than five years old and took

an exception under the CAFTA–DR to maintain that import ban. Used vehicles less than five years old are

not subject to the same restrictions. However, since late 2011, 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 Agreement, citing technical difficulties

in demonstrating compliance with the rules of origin. The United States continues to engage with the

Dominican Republic to address complaints received from importers of used cars of U.S. manufacture.

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. Although certified mills produce U.S. steel rebar,

Dominican authorities have required imported U.S. rebar to be sampled and tested by third-party

laboratories, while 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 repeatedly engaged the Dominican Republic on this issue, raising it on the margins

of the World Trade Organization (WTO) Committee on Technical Barriers to Trade. Extensive bilateral

discussion during 2017 and 2018 yielded some progress, with the Dominican Republic reducing customs

clearance time for U.S. steel rebar. While 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,

Dominican authorities have worked with 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.

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Traceability System for Alcoholic Beverages and Cigars

On September 29, 2021, the DGII issued Regulation 07-21, in which the Dominican Government

established the Fiscal Control and Traceability System for Alcoholic Beverages and Cigars (TRAFICO).

The Dominican Republic notified the regulation to the WTO in May 2021. The traceability system aims to

individually identify each product (local or imported) through a tax stamp, from its point of origin to its

final destination. The United States continues to express concern for national treatment and requested a

two-year delay of the measure. Industry’s comments to Dominican Republic’s WTO notification noted the

following less trade restrictive alternatives, including control of bonded warehouses, stricter licensing

controls, enhanced penalties in the production and sale of illicit alcohol, and increased consumer education

about the negative impact illicit products have on health. The implementation of TRAFICO is a potential

barrier to U.S. exports of alcoholic beverages to the Dominican Republic market. Given the production

and packaging processes of the alcohol industry in the United States and the size of the Dominican Republic

market, U.S. exporters report that it is not feasible to incorporate stamps into production lines exclusively

for products destined for the Dominican Republic, and it would introduce significant additional costs and

complexities in the logistics process. Such difficulties would include the need to unpack full containers,

pallets, and boxes of products in order to directly stamp the products, which requires the use of bonded

warehouses or logistics centers for these operations.

The United States communicated some questions and concerns about the draft regulation in comments

submitted to the Dominican Republic’s TBT Enquiry Point in July 2021. The Dominican Republic

responded to the U.S. submission in October 2021, and the regulation was adopted without changes. The

regulation gives importers until December 2022 to implement the traceability system.

Sanitary and Phytosanitary Barriers

Since March 2018, 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, Food, and Health Products (DIGEMAPS), which oversees the registration process, has been

requesting 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. Importers reported in 2021 that the

functioning of the sanitary registration process remains inconsistent. Importers explained that certain

products have taken up to a year to be registered by DIGEMAPS, which often results in importers choosing

not to import the product.

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 United States has engaged with the Dominican

Republic on this issue and transparency has increased over the last few years. In a memorandum of

understanding signed by the United States and the Dominican Republic in October 2020, the Dominican

Republic 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.

The President’s office is currently reviewing this draft legislation on public procurement, which will

subsequently be submitted to the National Congress. Separately, the Directorate of Public Procurement

and U.S. technical experts have trained more than 350 government officials in preventing corruption in

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public procurement. The United States will continue to monitor the Dominican Republic’s procurement

practices for consistency with the CAFTA–DR’s disciplines on government procurement.

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

provisions on government procurement.

INTELLECTUAL PROPERTY PROTECTION

The Dominican Republic remained on the Watch List in the 2021 Special 301 Report

. The Dominican

Republic made some progress on intellectual property (IP) protection and enforcement, including on

customs enforcement and enforcement against counterfeit goods by the Special Office of the Attorney

General for Matters of Health, 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.

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. The report also noted concerns related to the right to freedom of association

and the right to organize and bargain collectively for sugar-sector workers.

OTHER BARRIERS

Bribery and Corruption

The CAFTA–DR contains strong public sector anti-bribery commitments and anticorruption measures in

government contracting.

Despite commitments by the Dominican Republic to strengthen transparency and combat government

corruption and the improvements brought by the CAFTA-DR, corruption and poor implementation of

existing laws are widely discussed as key investor grievances. Complaints include a lack of clear,

standardized rules by which to compete; a lack of enforcement of existing rules; allegations of widespread

corruption; requests for bribes, especially at the municipal level; delays in government payments; weak

intellectual property rights enforcement; bureaucratic hurdles; slow and sometimes locally biased judicial

and administrative processes; and, non-standard procedures in customs valuation and classification of

imports. There are also reports of weak land tenure laws and government expropriations without due

compensation. The public perceives administrative and judicial decision-making to be inconsistent,

opaque, and overly time-consuming.

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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) in Quito, Ecuador. The new Protocol is an update to the TIC, and is an integral part of that

Agreement. The Protocol contains 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 Protocol entered into force

August 15, 2021. The United States will continue to work with Ecuador to monitor the full implementation

of the Protocol.

IMPORT POLICIES

Since May 2017, Ecuador has sought to roll back tariff and non-tariff barriers to improve its economic

competitiveness. Ecuador has lowered tariffs on many products, particularly on intermediate goods and

electronics.

Tariffs and Taxes

Tariffs

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. This new tariff reduction complements tariff reductions

on 387 other items, which have occurred at different rates since October 2019. Sectors that benefit from

the new reduction in tariffs include agriculture, industry, technology, plastics, manufacturing, and

automotive. Ecuador still imposes a mixed tariff (composed of an ad valorem tariff and a specific tariff)

on approximately 350 products, including textiles and shoes. In some cases, the mixed tariff appears to

result in a 40 percent tariff rate, although Ecuador generally bound its tariffs at the World Trade

Organization (WTO) at 30 percent.

Ecuador’s average Most-Favored-Nation (MFN) applied tariff rate was 12.3 percent in 2019 (latest data

available). Ecuador’s average MFN applied tariff rate was 18.2 percent for agricultural products and 11.3

percent for non-agricultural products in 2019 (latest data available). Ecuador has bound 100 percent of its

tariff lines in the WTO, with an average WTO bound tariff rate of 21.7 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, to date, Ecuador has taken no steps to phase out use of the APBS. As a member of the Andean

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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.

Agricultural Products

Ecuador’s continued use of the APBS affects many U.S. agricultural exports. U.S. exports such as wheat,

barley, malt barley, and soybeans faced significantly higher total duties in 2019 than in previous years

because of a variable levy or surcharge (on top of an ad valorem tariff) that increases as world prices

decrease. As part of Comex Resolution 009-2021, 43 agricultural products received tariff reductions. Of

those, tariffs on 17 products have been reduced to zero percent, while tariffs on the other products were

reduced by 2 percentage points to 15 percentage points. The two principal U.S. exports benefitting from

this tariff reduction are soybean meal and wheat. Previously, these products benefitted from a tariff

exemption of zero percent and suspension of application of the APBS through December 31, 2024. With

the new resolution, the zero percent tariffs will remain permanent, and the APBS will be abolished for these

two products. The United States had urged this reform under the framework of the TIC since 2019.

Information and Communications Technology Products

In October 2019, Ecuador eliminated tariffs that had ranged from 10 percent to 15 percent on imports of

cellphones, computers, tablets, and laptops. Comex Resolution 009-2021 subsequently eliminated tariffs

for computers, switching devices for automatic telephony or telegraphy, satellite dishes, fiber optic cables,

cordless headset phones with microphone, 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. Mixed tariffs continue to

affect certain information and communication technology products. For instance, monitors measuring more

than 21 inches are subject to a mixed tariff of five percent and a fixed rate of $73.11 per Comex Resolution

070-2012.

Comex Resolution 021-2020 changed the tariff rate that applies to imported televisions that are over 41

inches and up to 75 inches from 20 percent ad valorem to a compound tariff of 5 percent plus $158.14.

Televisions over 75 inches are still subject to a 20 percent tariff.

Raw Materials and Industrial Capital Goods

Comex Resolution 023-2019 reduced import tariffs for intermediate goods such as machinery, raw

materials, and industrial equipment for the agriculture, fishing, construction, textile, plastics, and footwear

industries. The tariffs on these products now range from zero percent to 18.75 percent.

Comex Resolution 019-2020 established a procedure for a tariff waiver on additional capital goods and raw

materials that support productive development in the country.

Comex Resolution 007-2021 eliminated tariffs on 128 subheadings that include raw materials and inputs

and capital goods for the agricultural, fishing, and aquaculture sectors. This measure came into effect in

June 2021. With respect to the agriculture sector, the previous tariffs were between 15 percent and 19

percent on such items as tractor parts and laboratory equipment. In the fishing and aquaculture sectors,

tariffs on inputs such as air compressors and radio navigation devices for fishing vessels were 20 percent

and 25 percent. Additionally, Comex Resolution 009-2021 provided tariff reductions on 328 items that

correspond to machinery and equipment used in the agricultural industry.

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Sports Equipment

Comex Resolution 019-2019 decreased tariff rates for certain sporting goods and shoes, subject to

authorization of the Secretariat of Sports. For sports shoes, including soccer, athletic, basketball, gym,

tennis, and training shoes, the new tariff is 15 percent, a change from the previous compound tariff of 10

percent plus $6 per pair. Specialized sporting equipment, including bicycles, helmets, tennis rackets,

saddles, tennis balls, and softball and baseball equipment (excluding balls), are subject to a zero percent

tariff, down from previous tariffs ranging from 15 percent to 30 percent. To avail of these lower tariff rates,

importers must file a request with the Secretariat of Sports for each individual import entry. In addition,

Comex Resolution 009-2021 reduced the tariff from 30 percent to 10 percent for bicycles; authorization

from the Secretariat of Sports is not required to benefit from this reduced rate.

Taxes

Consumer Goods

Comex Resolutions 005-2021 and 006-2021 instituted three changes to international postal traffic and

expedited messaging or courier services, classifying shipments into six categories. The first change is the

elimination of the $42 fee in imports of “category B” packages (or “4 × 4 system”). This applies to packages

with a weight less than or equal to four kilograms and with a Free On Board (FOB) value less than or equal

to $400. This category of shipments can be used only for personal and not commercial purposes. Another

reform with respect to category B packages is that there will no longer be a limit on the number of imports

in this category per year. Previously, individuals could only import up to $1,200 in merchandise or up to

five packages a year through the 4 × 4 system.

In addition, Comex Resolution 006-2021 made changes with respect to “category C” imports. Prior to this

change, category C covered packages that did not meet the conditions of other categories and whose weight

was equal to or less than 50 kilograms or had an FOB value equal to or less to $2,000. Category C also

included spare parts for industry or transport that were urgently required. Following Resolution 006-2021,

category C now includes packages that do not meet the conditions of other categories and whose weight is

equal to or less than 100 kilograms or its FOB value is equal to or less than $5,000. Additionally, the

resolution instituted a weight limit of 200 kilograms for category C packages in the case of spare parts for

industry, medical equipment, or transport, urgently required, provided that their value does not exceed

$5,000.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

Importers must register with the National Customs Service of Ecuador (SENAE) to obtain a registration

number for all products regulated by the Ecuadorian Institute of Standards (INEN). Comex Resolution

010-2021 eliminated 1,862 tariff sub-headings from the list of products subject to pre-shipment import

control documents (DCP), yet imposed new requirements that include either INEN conformity assessment

certificates, import licenses, or National Agency for Health Regulation, Control, and Surveillance

(ARCSA) permissions, depending on the product. In addition, Comex Resolution 10-2021 delineates the

List of Products Subject to Controls Prior to Import, the List of Import Prohibited Tariff Subheadings, and

the List of Import Prohibited Products.

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Import Bans and Restrictions

The Ministry of Agriculture and Livestock (MAG) established consultative committees to make

recommendations on whether certain agricultural products should be allowed for import into Ecuador.

These committees are composed of private sector representatives and government officials. Originally

conceived as advisory bodies for recommending production and agricultural development policies,

according to stakeholders, these committees seek to block imports to provide advantages to domestic

production.

Comex Resolution 007-2020 prohibits imports of incandescent lightbulbs. Comex assigns quotas to

importers that justify the importation of incandescent lamps on technical grounds, in the ranges from 25W

to 150W. These include those intended for non-residential uses – such as industrial, agricultural, fishing

and others – and for which there exist no energy saving substitutes.

Import Licensing

Since 2013, Comex and MAG have imposed a mandatory, cumbersome process for allocating import

licenses for 55 agricultural tariff lines, including dairy, potatoes (including french fries), beef, pork,

chicken, turkey, soybean meal, beans, sorghum, and corn. Since 2015, MAG has imposed a more

burdensome framework whereby MAG’s Undersecretary of Commercialization is vested with full authority

to decide on and administer the granting of non-automatic import licenses. After consulting with the

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. While many food and agricultural products are subject to

this policy, meat and dairy products are particularly targeted. 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 as well

as an affidavit that the product is not produced locally before it will authorize imports. In the case of wheat,

corn, soybean meal, and pork, MAG requires proof of local pork purchases to assign amounts for import

licenses. The United States has engaged extensively with Ecuador on these concerns, and continues to urge

Ecuador to reform the system in light of its WTO obligations.

Lubricants

Comex Resolution 020-2020 amended Annex 1 of Comex Resolution 450-2008 by incorporating a pre-

shipment control document––the Automatic Import License for Greases and Lubricants––for Harmonized

System (HS) subheadings 2710.19 and 2710.20. The Energy and Non-Renewable Natural Resources

Regulation and Control Agency (ARCERNNR) will establish the requirements and procedures for

obtaining the import licenses and will issue the licenses. The licensing requirement stems from the

Regulation for Authorization of Activities for the Production and Marketing of Greases and Lubricants

issued pursuant to Ecuador’s hydrocarbons law on May 2017.

Tires

Comex Resolution 003-2021 amended Comex Resolution 020-2017 to now provide zero tariffs (ad valorem

and specific tax) to importers approved by the Ministry of Transportation and Public Works for automobile

or bus tires. The global quota volume of imports that may benefit from duty-free treatment corresponds to

60,000 commercial units for tires, which are distributed in 5,000 commercial units for automobile tires, and

55,000 commercial units for bus tires. This approved global quota may be used for one calendar year from

the effective date of the resolution. Access to quota volumes requires application to and approval by the

FOREIGN TRADE BARRIERS | 155

Ministry of Transportation and Public Works. Imports that exceed the assigned quota are subject to the

current ordinary tariff rate of 1 percent plus $0.63 per kilogram for automobile tires, and 1 percent plus

$0.83 per kilogram for bus tires.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Medical Devices

In June 2021, Ecuador implemented a technical regulation, which establishes a Unique Traceability Code

(CUT) for medical devices. The CUT differs from the globally harmonized Unique Device Identification

(UDI) 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 through the domestic consultation process, and to Ecuador 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.

Processed Foods Facility GMP Registration Requirements

In September 2020, Ecuador’s National Agency for Sanitary Regulation, Control, and Observation

(ARCSA), under the authority of Ecuador’s animal and plant health authority, AGROCALIDAD, notified

to the WTO Committee on Technical Barriers to Trade 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 certificate

documents by Ecuadorian consulates, 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 WTO

Committee on Technical Barriers to Trade and formally in the June 2021 meeting of the Committee.

Ecuador has not notified the final regulation to the WTO.

Sanitary and Phytosanitary Barriers

Processed Foods–Quality Compliance and Prior Authorization Requirements

Processed food products of animal origin require prior authorization from three government agencies within

MAG, including AGROCALIDAD, the Undersecretary of Commercialization, and the Undersecretary of

Agriculture Development. For meats and dairy products, a market assessment is conducted by both the

Undersecretary of Commercialization and the Undersecretary of Livestock Development, resulting in

unnecessary redundancy and delay. The United States will continue to work with Ecuadorian authorities

to explore alternatives.

Agricultural Products Quality Compliance and Prior Authorization Requirements

Ecuador maintains a lengthy and burdensome sanitary certification process, which may require several

different approvals for a single product. For over 50 food and agricultural products, Ecuador also requires

prior import authorization from MAG or the Ministry of Public Health, or both, depending on the product.

The MAG authorization requires several internal approvals including from consultative committees of

domestic producers that often block or impede import competition.

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In addition to prior authorization, Comex Resolution 019-2014 mandates that imported agricultural

products, including products of animal origin, must be accompanied by a phytosanitary or sanitary

certificate or be shipped from a plant that AGROCALIDAD has previously registered and authorized.

Establishment of Registration Requirements

AGROCALIDAD Resolution 115-2019 and Resolution 003-2016 require registration of foreign

establishments that export animals or animal products and of products to be fed or applied to animals. After

a two-year extension, this requirement came into effect for U.S. establishments on January 14, 2021.

Although Ecuador granted the United States some flexibilities on the requirements, the United States will

continue discussions with AGROCALIDAD and MAG to facilitate registration of U.S. facilities and seek

flexibilities under the current requirements.

GOVERNMENT PROCUREMENT

Government procurement in Ecuador can be cumbersome and nontransparent. Payments can often be

delayed without explanation despite provision of goods and services and proper work orders and receipts.

The lack of transparency poses a risk that procuring entities will administer a procurement to the advantage

of a preferred supplier. Ecuador’s Public Procurement Law establishes exceptions for procurements made

according to special rules established by presidential decrees, for exploration and exploitation of

hydrocarbons, for emergency situations, and for national security contracts. Article 34 of the Public

Procurement Law allows public enterprises to follow special procurement rules, provided the National

Public Procurement Service issues an open-ended authorization for purchases considered within “the nature

of the enterprise.”

In May 2020, Executive Decree 1033 was issued, which reformed the Public Procurement Regulations and

assigned the National Public Procurement Service (SERCOP) a leadership role in the implementation of a

new Unified System for the Purchase of Medicines and Strategic Goods for the Health Sector (the Unified

System). This decree provides for unifying and reorganizing the medical supply and distribution system

nationwide. The technology-based system aims to provide full traceability, transparency, and

accountability from prescription through consumption, while optimizing the distribution and storage of

medicines using a privately contracted, specialized logistics operator. Although a positive step, the

Ecuadorian pharmaceutical industry continues to report that the proposed system needs further adjustments,

including changes to ensure qualified bidders, product traceability, and realistic timelines for

implementation. While Ecuador has signaled an interest in reforming Executive Decree 1033, it has taken

no concrete action to do so. It has issued a resolution extending the implementation deadline 24 months

for the traceability component of medicines and biological products, once the technological requirements

for the public sector are operational.

Ecuador also requires that preferential treatment be given to locally produced goods, especially those

produced under the framework of the constitutionally established “social and solidarity economy,” as well

as micro and small enterprises.

Foreign bidders are required to register and submit bids for government procurement through an online

system. Foreign bidders must have a local legal representative to participate in government procurement.

To sell goods or services to Petroecuador, foreign bidders must register to become official suppliers.

Ecuador 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 2019.

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INTELLECTUAL PROPERTY PROTECTION

Ecuador remained on the Watch List in the 2021 Special 301 Report

. Enforcement of intellectual property

(IP) rights against widespread counterfeiting and piracy remains weak.

The 2016 Code of the Social Economy of Knowledge, Creativity, and Innovation (COESC), also known as

the Ingenuity Code, contains legislation covering multiple IP matters. In December 2020, Ecuador

published the final regulations implementing the COESC. U.S. stakeholders continue to note that the 2016

COESC legislation could negatively affect IP protections and foreign investment in Ecuador. Ecuador’s

National Intellectual Property Service (SENADI) continues to consider amendments to the COESC and to

review feedback from stakeholders.

The United States has engaged with Ecuador on IP issues, including with respect to revisions to the COESC

and any implementing regulations related to the COESC, and will continue its engagement through the

Special 301 process and the TIC.

SERVICES BARRIERS

Telecommunications Services

In July 2021, the Ecuadorian President signed Executive Decree 126, which reforms Ecuador’s Organic

Telecommunications Law. The Decree changes the law to cap the total regulatory obligations paid by

telecommunications services suppliers at 2.5 percent of their total revenues. The Decree does not change

Article 34 of the law, which requires telecommunications service suppliers with a market share of at least

30 percent to pay 0.5 percent of their gross revenue to the government and an additional 1 percent of their

gross revenue for each additional 5 percent market share they hold above 30 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.

Advertising

With limited exceptions, the 2013 Organic Law of Communication prohibits advertisements produced

abroad. There are exceptions for instances when the advertising is produced by Ecuadorians residing

abroad or by foreign legal entities with majority Ecuadorian shareholders.

BARRIERS TO DIGITAL TRADE

Data Localization

The Organic Law on the Protection of Personal Data went into effect in May 2021. The law allows cross-

border transfers of personal data only to countries or organizations that Ecuador has determined provide an

adequate level of protection. The law creates an autonomous Data Protection Superintendence, which will

have the authority to determine which countries have adequate levels of protection, and to implement and

enforce the law. Restrictions on the flow of data can have a significant effect on the cross-border supply

of numerous services and on the functionality embedded in intelligent goods (i.e., 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.

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INVESTMENT BARRIERS

Ecuador’s investment climate remains marked by uncertainty, owing to unpredictable and frequently

restrictive economic policies. The Ecuadorian Administration has said it intends to address these concerns.

Limits on Foreign Equity Participation

There are no limits on foreign equity participation, with the exception of foreign government participation

in a mixed company. Under Ecuadorian law, the Government of Ecuador must hold at least 51 percent of

the total outstanding voting interests in an entity that has been designated a mixed company.

Withdrawal from Bilateral Investment Treaties

On May 3, 2017, Ecuador’s National Assembly voted to terminate 12 of the country’s Bilateral Investment

Treaties (BITs), including its BIT with the United States. The move was attributed to a conflict with

Ecuador’s 2008 Constitution, which prohibits Ecuador from entering into treaties that cede sovereign

jurisdiction to international arbitration entities outside of Latin America in contractual or commercial

disputes between the Ecuadorian Government and foreign individuals or private companies. The United

States–Ecuador BIT terminated on May 18, 2018, but the sunset provisions of the Agreement protect U.S.

investors with investments predating May 18, 2018 for 10 years following the date of termination.

In July 2021, Ecuador ratified the Convention on the Settlement of Investment Disputes between States and

Nationals of Other States (ICSID Convention), despite its denunciation of the Convention and withdrawal

from the International Centre for Settlement of Investment Disputes in 2009. As a result, the ICSID

Convention entered into force for Ecuador in September 2021.

Capital Exit Tax

The Ecuadorian Administration has committed to the gradual phaseout of Ecuador’s five percent capital

exit tax (ISD) over the next four years. The Reform Law for Tax Equity in Ecuador established the ISD

tax in 2007, and it was raised from 0.5 percent to 5 percent in 2012. The Ecuadorian Government levies

the tax on any form of currency outflow in cash, debit, and credit cards, checks, and internet payment

methods. Although the ISD was designed to penalize rapid capital outflow (speculative capital), the tax

acts as an obstacle to foreign investment. The President issued Executive Decree 182 in August 2021 that

eliminated the ISD for the aviation industry as a first step to the gradual phaseout of the capital exit tax.

Other Investment Barriers

In February 2022, the Ecuadorian President introduced investment legislation to the National Assembly

that seeks to incentivize the private sector to establish economic development zone projects through tax,

tariff, and capital exit exemptions. Economic development zone investments from $250,000 to $1 million

made within the industrial, service, or logistics sectors would receive a 10-year revenue tax exemption, up

to a 10-point tax reduction after the first 10 years, and exemptions on capital exit and value-added taxes on

capital flows and imported raw materials. The legislation also would make key reforms to Ecuador’s

public-private partnership (PPP) structure by clarifying approval processes and regulations. The bill was

introduced as urgent economic reform legislation, meaning the National Assembly has 30 days to approve,

reject, or modify the bill; after 30 days, the President may pass the bill into law.

After the fall in global oil prices in mid-2014, the Ecuadorian Government began relaxing its extractive

industries regulatory framework to attract foreign investment in the petroleum and mining sectors.

Presidential Decree 449 of July 2018 allowed the Energy Ministry to issue production sharing contracts,

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with certain limitations. The government signed contracts for seven blocks under this model (Ronda

Intracampos I) in May 2019, and plans to auction additional blocks in successive rounds (Ronda

Intracampos II, Suroriente, Subandino, and one offshore). While this reform attracted exploration and

production investment, Decree 546 still prohibits the use of production-sharing contracts for fields currently

operated by Petroecuador, thereby limiting private sector participation in the bidding processes for relevant

areas of production. Through Executive Decree 95, issued in July 2021, the President called for

renegotiating oil contracts to convert them into production sharing contracts, turning state-owned

Petroecuador into a joint stock company listed on the stock market and promoting private investment

through the upcoming Intracampos II and Southeast rounds.

According to U.S. stakeholders, prohibitions on commingling (mixing of petroleum from multiple

companies in a pipeline for transport) in Ecuador’s petroleum sector limit the productive capacity of oil

companies by roughly 10 percent, inhibiting investment. In 2019, the Environment Ministry reformed

permitting regulations, but challenges remain given insufficient and untrained ministry staff tasked with

processing the permits. In September 2021, the Constitutional Court found Article 463 of the Regulation

to the Organic Code of the Environment unconstitutional because this provision on Citizen Participation

and Prior Consultation in the environmental permitting process did not provide sufficient constitutional

environmental consultation. The Ministry of the Environment, Water and Ecological Transition has

stopped issuing environmental permits for projects that have not yet reached the Citizen Participation and

Prior Consultation phase until a new regulation is established.

The 2015 Mining Law allows the state to grant mining exploitation rights to private and foreign entities,

depending on national interests. Between 2015 and 2017, the government established non-discriminatory

incentives for mining sector investments, including fiscal stability agreements, limited VAT

reimbursements, and remittance tax exceptions. However, investment in the mining sector faces legal

uncertainty because of the Ecuadorian Constitutional Court’s September 2020 ruling that allows local

referendums that seek to ban mining in areas over which the national government has regulatory authority.

The ruling, which upholds the local community’s right to self-determination, does not resolve whether that

local right to self-determination supersedes the national government’s constitutional authority to regulate

mining on a national level. As a result of the ruling, 43 mining concessions could be subject to local

referendums. After Ecuador’s National Electoral Council approved a local mining referendum on the

February 2021 ballot in Azuay province, approximately 80 percent of the province’s population voted in

favor of banning mining in the water recharge areas of the Tomebamba, Tarqui, Yanuncay, Machángara,

and Norcay rivers.

The public-private partnership (PPP) law of 2015 aims to attract investment. The law allows increased

private participation in some sectors and offers incentives, including the reduction of income tax, VAT, and

capital exit tax for investors in certain types of projects. Despite these benefits, no U.S. firms have signed

a PPP agreement with the Ecuadorian Government since passage of the law. In November 2021, the

Ecuadorian President issued an executive decree establishing an PPP Secretariat and an Interinstitutional

PPP Committee empowered to prioritize, approve, and deny PPP projects. The government also developed

draft standardized contracting agreements to be used across all ministries.

OTHER BARRIERS

Many U.S. firms and citizens have expressed concerns that corruption among government officials and the

judiciary can be a hindrance to successful investment in Ecuador. In addition, companies involved in

electronic commerce have noted that laws and regulations governing the industry are at times not clear or

do not give legal certainty to host operations in Ecuador. The Ecuadorian Administration has made

anticorruption efforts a priority. The United States–Ecuador TIC Protocol on Trade Rules and

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Transparency, which entered into force on August 15, 2021, includes an annex containing commitments on

anticorruption.

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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 2021. Egypt’s average

MFN applied tariff rate was 65.0 percent for agricultural products and 11.6 percent for non-agricultural

products in 2021. 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 September 11, 2018, Egypt raised tariffs on 5,791 products through Presidential Decree No. 419/2018.

While these tariffs are within Egypt’s WTO bound rates, they exacerbate the disadvantage many U.S.

products face in Egypt vis-à-vis European Union (EU) goods. Such EU products benefit from preferential

rates granted under the EU–Egypt Association Agreement.

Egypt maintains high tariffs on a number of critical U.S. export products. Egypt’s tariff on passenger cars

with engines with 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

tariff on alcoholic beverages for use outside the tourism sector ranges from 1,200 percent on beer to 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

Egypt’s Prime Minister issued Decree No. 412/2019 in February 2019, establishing the executive

regulations for the National Food Safety Authority (NFSA), created under Law No. 1/2017 in January 2017.

The 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.

Import Bans/Restrictions

As of 2003, Egypt has only permitted imports of whole, frozen poultry. The executive regulations to

Egypt’s Import and Export Law (Ministry of Trade and Industry Decree 770/2005) suspended the

importation of chicken limbs and offal, which acts as a de facto ban on U.S. chicken leg quarter exports to

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Egypt. The United States raised this issue at TIFA meetings in addition to during the WTO Committee on

Technical Barriers to Trade meeting. In September 2019, Egypt’s General Office of Veterinary Services

suspended all imports of poultry and poultry products.

On August 25, 2019, Egypt’s Parliament passed Law No. 151/2019 establishing the Egyptian Drug

Authority (EDA) as an independent agency under the Prime Minister’s Office responsible for the

registration, licensing, and 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 submit 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. 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

On November 14, 2020, the Egyptian President signed Egypt’s new Customs Act (Law 207/2020), which

replaced the former Customs Act (Law 66/1963) and Customs Exemption Act (Law 186/1986). The

Ministry of Finance issued the new Customs Act’s executive regulations on September 1, 2021. Egypt’s

National Single Window for Foreign Trade Facilitation (Nafeza) launched at all Egyptian ports on October

1, 2021. The Nafeza uses an advanced cargo information (ACI) platform to coordinate all shipping

information between foreign exporters and Egyptian importers. The Nafeza requires foreign exporters to

which is a blockchain provider, to facilitate the release of goods from ports in Egypt. Egyptian importers

must register on the Nafeza. U.S. businesses raised concerns about the lack of transparency and

implementation guidance on CargoX procedures. Industry also raised concerns about the Advanced Cargo

Information filing fee increase from $50 to $150 between October 1, 2021 and October 14, 2021. In July

2021, Egypt’s Ministry of Trade and Industry issued an advisory canceling consularization requirements

for certificates of origin and other documents for goods exported to Egypt. This consularization system

had required exporters to secure a stamp from Egyptian consulates on all documentation for goods exported

to Egypt at a cost of $100 to $150 per document.

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 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, and U.S. exports of these goods

have declined by 52 percent since 2015. 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. This has made it difficult to

export U.S. vehicles and parts built to comply with U.S. regulations to the Egyptian market. Egyptian law

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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.

The United States is seeking to address the decline in U.S. vehicle and automotive parts exports by

encouraging Egypt to accept U.S. emissions and safety standards for vehicles. The United States has raised

Egypt’s non-recognition of U.S. federal motor vehicle safety standards (FMVSS) in TIFA meetings, . At

the most recent TIFA meeting in 2019, Egypt indicated its willingness to consider recognition of U.S.

FMVSS. Since then, the United States and Egypt have held a number of technical consultations and

discussions, the latest in November 2021, 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. Egypt does not allow imports of goods from nonregistered entities. Registration can take

several months, adding costs and uncertainty to the export process and, over time, may discourage exports

to Egypt. The United States has raised these concerns with Egypt multiple times, including at the most

recent TIFA meeting in April 2019.

Halal Import Requirements

In August 2021, the NFSA announced in a press release that it would extend to dairy and other agricultural

products a requirement that imports must be halal certified. This requirement already exists for imports of

meat products. This new requirement was scheduled to take effect on February 28, 2022, but the extent of

its implementation remains to be seen as of March 2022. The announcement also indicated that an Egyptian

entity, IS EG Halal, would be the sole entity authorized to provide the certification. According to industry,

the announcement of the new measures and the lack of clarity and transparency regarding their application

have resulted in a disruption of U.S. dairy exports to Egypt. U.S. dairy exports to Egypt were approximately

$106.5 million in 2021. Despite repeated requests from the United States and other trading partners in the

fall of 2021, Egypt initially failed to notify these measures to the WTO. Following sustained U.S.

Government engagement, including multiple WTO TBT Inquiry Point requests for notification, and after

raising this issue at the November 2021 WTO TBT Committee meeting alongside other concerned trading

partners, Egypt notified the certification requirement for dairy products to the WTO on December 1, 2021,

and provided a 60-day comment period ending on January 29, 2022, that was subsequently extended to

February 28, 2022. Despite requests by the United States, Egypt has not yet provided substantive

information regarding the details of the measure. Significant questions remain regarding the measure’s

implementation and the scope of agricultural products covered. In addition, as of March 2022 Egypt had

not provided a notification to the WTO regarding the sole entity that is authorized to provide the

certifications. The United States is continuing to actively engage with Egypt regarding these matters.

Sanitary and Phytosanitary Barriers

In recent years, the Egyptian Government has made limited progress in taking a more scientific approach

to sanitary and phytosanitary (SPS) measures, including the NFSA’s relaxation in November 2020 of a

zero-tolerance policy for minimum residue levels of the feed additive ractopamine in beef liver products.

However, importers of U.S. agricultural commodities continue to face unwarranted barriers. Animal

products, including dairy products, face the greatest risks of rejection at port, given that Egypt does not

adopt or adhere to international standards for numerous animal-based products. Egypt also blocks the

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import of certain U.S. agricultural products based on Egypt’s claims regarding health and food safety, while

maintaining other non-tariff barriers such as halal certification.

Agricultural Biotechnology

As of March 2012, an Egyptian Ministry of Agriculture and Land Reclamation decree has suspended the

commercial cultivation of all crops developed through agricultural biotechnology. The initial suspension

followed media reports critical of agricultural biotechnology products. The absence of a biosafety legal

framework for agricultural biotechnology inhibits field trials and the commercial use of genetically

engineered crops.

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 (USDA) have

not been able to come to agreement on the results and mitigation measures of a pest risk assessment

completed by CAPQ. According to USDA’s Animal and Plant Health Inspection Service, several of the

proposed measures are not scientifically justified. Despite several rounds of bilateral technical meetings in

2019 and 2020, after which CAPQ indicated that it would consider providing market access for U.S. seed

potatoes in the 2021 season, U.S. seed potatoes remain barred from Egypt.

Garden Strawberry Plants for Planting and Date Palm Offshoots

In 2019, Egypt stopped issuing import permits for garden strawberry plants and date palm offshoots unless

the plant material is sourced from an area free of the bacterium Xylella fastidiosa. Egypt considers garden

strawberry plants and date palm offshoots to be hosts for Xylella fastidiosa, a claim not supported by

scientific literature. From 2013-2018, the United States shipped more than 2.1 million strawberry plants to

Egypt without phytosanitary objections.

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 (GPA) nor an observer to the

WTO Committee on Government Procurement.

INTELLECTUAL PROPERTY PROTECTION

Egypt remained on the Watch List in the 2021 Special 301 Report

. While Egypt has taken steps to improve

intellectual property (IP) protection and enforcement, including shutting down several illegal streaming

websites and increasing raids against outlets offering counterfeit goods, concerns remain, including the lack

of ex officio authority for customs officials to seize counterfeit and pirated goods at the border, unlicensed

broadcasts, unlawful decryption of encrypted signals, and unauthorized camcording. Deterrent-level

penalties for IP violations and additional training for enforcement officials would enhance the IP

enforcement regime in Egypt. Also, the lack of transparent and reliable systems for processing trademark

and patent applications remains an obstacle for the growth of U.S. IP exports to Egypt. The United States

has urged Egypt to address transparency concerns and to clarify its protection against the unfair commercial

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use, in addition to unauthorized disclosure, of undisclosed test or other data generated to obtain marketing

approval for pharmaceutical products.

SERVICES BARRIERS

Egypt restricts foreign equity in construction and transport services to 49 percent. In information

technology-related industries, Egypt requires that, within three years of the startup date of a venture, 60

percent of the venture’s senior executives be Egyptian citizens.

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. In addition, 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.). The ENPO imposes an additional fee of 5 Egyptian Pounds

(approximately $0.32) on private couriers and express delivery services for all shipments under 5 kilograms

(approximately 11 lbs.)

Financial Services

Foreign banks can buy shares in existing banks but are not able to secure a license to establish a new bank

in Egypt. New commercial banking licenses have not been issued to foreign banks as of 1979. Three state-

owned banks (Banque Misr, Banque du Caire, and the National Bank of Egypt) control approximately 50

percent of the banking sector’s total assets. Egypt’s Central Bank and Banking Act (Law 194/2020)

prohibits mining, issuing, trading, or promoting cryptocurrencies, or operating platforms for those purposes.

Telecommunications Services

The majority state-owned telephone company, Telecom Egypt (TE), is Egypt’s largest provider of fixed

line telecommunications services (voice and broadband), despite losing its monopoly over these services

after launching a mobile subsidiary in 2017. Private sector companies Vodaphone Egypt (40 percent owned

by TE), Orange Egypt, and Etisalat Misr comprised 92 percent of the mobile telecommunications market

in March, 2021. Egypt’s telecommunications regulator, the National Telecommunications Regulatory

Authority, enforces minimum quality of service standards and levies fines for poor service.

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 $3,200) 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 expand website blocking. 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.

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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 20 percent of the workforce.

Foreigners may act as importers for their own businesses, albeit with certain limitations on the items that

may be imported by the business.

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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, 100 percent of U.S. originating consumer and industrial goods enter El Salvador duty free.

Textile and apparel goods that meet the Agreement’s rules of origin also enter El Salvador duty free and

quota free, creating economic opportunities for U.S. fiber, yarn, fabric, and apparel manufacturing

companies.

In addition, 97 percent of U.S. agricultural product exports by product line are eligible for duty-free

treatment in El Salvador under the CAFTA–DR. El Salvador eliminated its remaining tariffs on nearly all

agricultural products on January 1, 2020, and will eliminate remaining tariffs on rice, yellow corn, and

chicken leg quarters by 2023, and on dairy products by 2025. For certain agricultural products, tariff-rate

quotas (TRQs) will permit duty-free access for specified quantities as the tariffs are eliminated, with the in-

quota amount expanding during this time. 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 is carefully tracking 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. Stakeholders have raised concerns that the

distinctions drawn between types of distilled spirit or tariff classification may result in lower tax rates on

locally produced spirits compared to imported products.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

In 2013, the Salvadoran customs authority implemented nonintrusive inspections with x-rays at border

crossings. While designed to facilitate cross-border movements, the procedures have resulted in higher

fees for exporters and importers. Salvadoran reforms enacted in 2018 reduced the timeframe to conduct

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non-intrusive inspections from 48 hours to 24 hours. The amendments also reduced the time limit for

administrative procedures to determine duties and taxes from 20 days to 12 days, with no more than 8 days

to issue a final resolution and 4 days to notify parties.

In 2018, the Legislative Assembly approved reforms to the Special Law on Customs Infractions to introduce

a five percent margin of tolerance for quality, weight, volume, or value discrepancies of imports. The

amendment also eliminates fines if the importer accepts and corrects any tax omissions.

In 2019, El Salvador relaunched the National Trade Facilitation Committee (NTFC), which produced the

first jointly-developed public-private action plan to facilitate trade. The plan contained 60 strategic

measures focused on simplifying procedures, reducing trade costs, improving road connectivity and border

infrastructure, as well as strengthening institutions. The measures were not fully implemented in 2020 due

to the COVID-19 pandemic. The NTFC subsequently revised the action plan in 2021, which now has 44

measures under implementation.

In 2018, El Salvador’s Legislative Assembly approved the country’s incorporation into the Customs Union

established by Guatemala and Honduras in 2017. On October 14, 2021, El Salvador communicated to the

NTFC its decision to proceed with Customs Union implementation. El Salvador rejoined technical level

working group discussions and resumed testing of systems interconnectivity. Industry representatives

continue urging increased coordination and integration among regional customs agencies to avoid

duplicative inspections and delays in customs clearances.

Private 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.

In 2015, El Salvador’s Legislative Assembly approved amendments to the Customs Simplification Law,

which included imposing an $18 per-shipment processing fee for incoming packages and cargo. In response

to industry concerns, in 2018, the Legislative Assembly approved an amendment to allow an “accumulated

merchandise declaration” to allow imports and exports of up to 25 samples in a single declaration and pay

$18 for a single non-intrusive inspection. Despite the modifications, during 2021, the private sector has

continued to express concerns about Salvadoran Customs’ implementation of procedures related to the

import of samples. The United States continues to monitor implementation 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. 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.

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In 2015, El Salvador issued the implementing regulation for the Act for the Promotion, Protection and

Support of Breast Feeding, which defines requirements for sanitary registration, restricts marketing and

advertising, and sets out labeling requirements for breast milk substitutes. This regulation entered into

force in 2015, without notification to the World Trade Organization (WTO), and lacks clarity as to what

information must appear on the label. In 2021, El Salvador issued a resolution that will allow companies

to continue using their trademarks for breast milk substitutes. The United States continues to monitor the

implementation of the regulation and has requested that El Salvador notify this regulation and all new

regulations to the WTO, and provide WTO Members comment periods and reasonable intervals for

implementation.

In 2020, the National Medicines Directorate (DNM) changed the procedure to register cosmetics and added

a fee for the post-registration of cosmetics and hygiene products, prompting U.S. industry to express

concerns about additional costs and burdensome procedures. In 2021, DNM simplified its internal

processes to expedite registrations. As a result, the time to register new cosmetics and hygiene products

was reduced from 17 days to 1 day, and from 14 days to 2 days to process renewals. Post-registrations

were reduced from 9 days to 1.8 days. In addition, the time to register new pharmaceuticals was reduced

from 28 days to 4 days.

Sanitary and Phytosanitary Barriers

Since 2015, 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. MAG began applying this

measure to imports in 2017. In 2018, MAG began accepting the U.S. Department of Commerce National

Oceanic and Atmospheric Administration (NOAA) Seafood Inspection Program (SIP) certificates for

grown and raised U.S. seafood. However, MAG continues to refuse acceptance of NOAA SIP certificates

for products sourced from foreign locations. The United States will continue discussions with MAG to

allow imports of all U.S. products based on broader recognition of U.S. inspection programs, rather than

requiring plant-by-plant inspection.

Extensive laboratory tests are mandatory for all new food products, even for those low-risk products that

would be permitted into other markets without testing. These testing requirements also apply to samples.

To register product samples, the Ministry of Health requires large quantities of the product for testing,

including samples of each different flavor of the same product. In 2017, the Ministry of Health notified

companies that laboratory testing must be conducted at the Ministry’s laboratory, creating a backlog in

processing new product registrations and renewals. In 2019, in response to the backlog and requests from

the private sector, the Ministry of Health issued a decree to allow testing at certified private laboratories

during vacation periods in El Salvador. The Ministry of Health has also improved its procedures to reduce

the times for testing products. 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 (USDA) 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 WTO of this requirement.

Since 2019, U.S. food and beverage exporters have periodically faced requirements for Certificates of Free

Sale, arising from Article 4.1(d) of the Central American Technical Regulation (RTCA) 67.01.31.07 on the

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sanitary registration of processed foods, which was implemented by Article 88 of the Salvadoran Health

Code. Article 88 requires that imported food and beverage products be authorized by the corresponding

health authority of the origin country. Salvadoran authorities have continued to refuse recognition of

similar documents issued by U.S. State Government agencies, such as Export Certificates and Good

Manufacturing Practice Certificates, which would also show that products are authorized to be consumed

and sold in the United States.

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.

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 provisions 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.

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 (BCR) and the Superintendence of the Financial System. The amendments took effect

September 9, 2021 with a grace period of six months for companies to comply as the BCR develops

technical norms for implementation. U.S. stakeholders have expressed 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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OTHER BARRIERS

Energy

On October 26, 2021, El Salvador’s legislature enacted the Creation Law of the Power, Hydrocarbons, and

Mines General Directorate, which will enter into force on November 8, 2022. The new General Directorate

will be responsible for dictating the national energy policy and proposing amendments to energy legislation

and by-laws, as well as implementing energy policy. In addition, the law allows the President of the state-

owned power company (CEL) to serve as the Director General of the new entity. Industry stakeholders are

concerned about the potential conflict of interest that would result from CEL making energy policy and

participating in the sector. The United States will continue to engage El Salvador on international best

practices to regulate the energy sector.

Bribery and Corruption

The CAFTA–DR contains strong public sector anti-bribery commitments and anticorruption measures in

government contracting, and U.S. firms are guaranteed a fair and transparent process to sell goods and

services to a wide range of government entities.

However, U.S. stakeholders have expressed concern that corruption in the Salvadoran Government,

including in the judiciary, continues to constrain successful investment in El Salvador. Administrative and

judicial decision-making is widely believed to be inconsistent, nontransparent, and time-consuming.

Bureaucratic requirements reportedly have at times been excessive and unnecessarily complex with

significant variation in their application and interpretation.

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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 revised downward to 15.17 percent

in August 2021, from the previous level of 17.4 percent, as a result of tariff reductions for certain raw

materials, intermediate goods, and capital goods to promote the growth of the manufacturing sector. High

tariffs continue to insulate certain sectors of the economy, such as textiles and leather, from outside

competition and limit U.S. participation in the market. 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 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 Restrictions

Ethiopia prohibits imports of used clothing, arms and ammunitions (except by the Ministry of Defense),

and used/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.

Import Licensing

Ethiopia maintains a complex import licensing regime that is administered by eight different ministries and

administrative units of the Government of Ethiopia. In addition to obtaining a license, importers must also

obtain an import registration number, an import business license, and a commercial bank permit for

currency exchange before bringing products into the country. Obtaining a commercial bank permit for

currency exchange is a burdensome process, which includes obtaining a letter of credit for the total value

of an import transaction and applying for an import permit before an order can be placed. Moreover, 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.

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Customs Barriers and Trade Facilitation

Logistics backlogs occur regularly, in part because the customs process remains paper-based and inefficient.

Further, monopolistic market conditions in multimodal transport operations and inadequate infrastructure

inhibit private sector logistics companies. Logistics costs comprise approximately 22 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 its own inefficient customs procedures. Under the

framework of a comprehensive logistics strategy, the Government of Ethiopia has slated the logistics sector

for liberalization. Ethiopia is actively seeking to develop alternative transport corridors to additional ports

in Eritrea and Somaliland, and several inland dry ports have been slated for privatization.

TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Imports of processed food products, including soybean and corn oils, and breakfast cereals made from

genetically engineered (GE) ingredients are subject to mandatory labeling requirements. Ethiopian

regulations require that GE foods carry a label with the following phrases: “genetically modified,”

“genetically modified organism,” or other comparable descriptions. Food aid shipments that may 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. Ethiopia has implemented a national SPS strategy aimed at ensuring public health and

enhancing access to international markets. With the support of development partners, the government is

building national capacities to improve food safety and animal and plant health regulatory systems. The

government is also exerting considerable effort to harmonize its national SPS standards with the African

Continental Free Trade Area and Regional Economic Communities, such as the Common Market for

Eastern and Southern Africa and the Intergovernmental Authority on Development. Furthermore, Ethiopia

is investing in its SPS infrastructure by expanding national and regional labs, quarantine stations, and

standards for quality assurance. When a national standard is not available for a specific product, Ethiopia

defers to the Codex Alimentarius standards. 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 2015, the Government of Ethiopia amended its Biosafety Proclamation (Number 896-2015) and eased

the stringent regulatory requirements for the development and commercialization of GE products. In May

2018, the Ethiopian regulatory authorities approved Bt cotton, the country’s first GE crop, for commercial

cultivation. In August 2021, Ethiopia finalized confined field trials of Bt maize and requested dossier

approval by the environmental release committee. However, industry contacts report that the approval

process for commercial imports of GE grains and oilseeds for food and feed remains overly burdensome.

GOVERNMENT PROCUREMENT

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, capacity gaps on the part of procurement agencies,

delays in decision-making, lack of public information, and the need for personal connections to effectively

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compete. At least one large U.S. company, for instance, has seen a multi-million-dollar contract with the

government abruptly modified with little explanation and no apparent due process. 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). U.S. firms have

expressed concerns 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

government agencies have been arrested for corruption as part of a broader reform effort.

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. As Ethiopia is not a WTO Member, it has no obligations under the

WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Ethiopia has not

joined other significant IP treaties. 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. The Ethiopian Intellectual Property Office 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’s investment code prohibits foreign investment in the financial service industry, including banking

and insurance, with an exception for foreign nationals of Ethiopian origin, who are allowed to invest in the

banking and insurance sectors. 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. Following the 15 percent devaluation of the Ethiopian birr in 2017, the

Ethiopian Central Bank (National Bank of Ethiopia (NBE)) increased the minimum saving interest rate

banks must offer (there is no ceiling) from 5 to 7 percent and limited the outstanding loan growth rate in

commercial banks to 16.5 percent above the previous year. This has had the effect of limiting lending to

businesses; while demand for credit growth in Ethiopia remains strong, the limits on credit supply growth

hinders the private sector. Moreover, as of November 2021, banks are instructed to immediately transfer

50 percent of their foreign exchange inflow to an NBE account for local currency conversion. This hard

currency is then used by the government to meet the strategic needs of the country, such as payments made

to service external debt and to procure petroleum, fertilizers, or pharmaceuticals.

Although reinsurance may be offered on a cross-border basis, Ethiopia requires that a proportion of each

reinsurance policy and of treaty reinsurance contracts 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

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Telecommunication Ethiopia, which plans to start service in March 2022. The government had intended

to issue a second telecommunications license at the same time to a second private operator, but rescinded

the offer after it judged the only bid it received as too low. In September 2021, the government reopened

bidding for the second license and issued a request for proposals for a 40 percent stake in state-owned

operator Ethio Telecom. As of March 2022, Ethio Telecom maintains a monopoly on wired and wireless

telecommunications services and owns and operates all cell phone towers in the country. 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 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

reserves banking, insurance, microfinance, electricity transmission and distribution, and retail and

wholesale trade to domestic investors. This law allows up to 49 percent ownership of logistics companies

by foreign firms. Foreign investors can jointly invest as minority stake holders 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 and foreign investors are required

to invest a minimum of $200,000 per project. For joint investments with a domestic partner, the investment

capital minimum was lowered in 2020 to $150,000. Despite the remaining restrictions, the 2020 Investment

Law represents progress in terms of sectors open to foreign investment. Some government tenders are open

to foreign participation, but the process is not always transparent. For joint ventures with SOEs, some

investors report informal requirements of up to 30 percent domestic content in goods or technology, or both.

All land in Ethiopia belongs to the state; there is no private land ownership and land cannot be collateralized.

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 (“old possessions”) under leasehold, and

restrict the transfer of leasehold rights.

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, and shipping industries. SOEs have considerable advantages over private firms,

such as expedited customs clearance processing. U.S. investors also complain of the lack of a level playing

field when it comes to SOEs. There are indications that SOEs receive other benefits, such as priority foreign

exchange allocation, preferences in government tenders, and marketing assistance.

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

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solicited for bribes to secure business contracts. Both U.S. and other foreign companies complained that

they were unfairly targeted for tax collection compared with local companies and presented with spurious

tax bills.

Foreign Exchange Controls

The unreliability of foreign currency supply in Ethiopia’s banks hampers the ability of all manufacturers –

including those in prioritized sectors – to import raw materials and semi-finished goods and restricts

repatriation of profits, despite laws allowing foreign company earnings repatriations. The Ethiopian Central

Bank (National Bank of Ethiopia (NBE)) administers a strict foreign currency control regime, and the local

currency (the Ethiopian birr) is not freely convertible. All imports, exports, and outgoing foreign payments

require a foreign exchange permit. Ethiopian commercial banks are licensed to issue these permits, except

for purchases of coffee. Private banks are required to manage their foreign exchange transactions and to

surrender 50 percent of their foreign exchange earnings to the NBE at the official exchange rate. The NBE

carefully monitors the foreign exchange holdings of these banks and closely manages the exchange rate.

Ethiopia signed a three-year, $2.9 billion credit agreement with the International Monetary Fund (IMF) in

December 2019 under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) programs.

The central tenet of these agreements is the harmonization of the official and black-market exchange rates.

The IMF made an initial disbursement of $308 million in 2019, but has since not disbursed any funds under

the programs. While the EFF remains in place, the ECF expired in September 2021.

Prior to 2019, the NBE implemented a five-to-six percent depreciation of the domestic currency per year,

with plans to allow depreciation of the currency once every five or six years. However, with the

introduction of the IMF program in December 2019, the NBE increased the pace of depreciation of the

official exchange rate to more than 25 percent per year. The official exchange rate depreciated by 60

percent from December 2019 to October 2021. Larger private firms, SOEs, businesses that import goods

prioritized by the government’s development plan, manufacturers in prioritized export sectors (e.g., textiles,

leather, and agro-processing), and importers of emergency food generally have priority access to foreign

exchange. In comparison, 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. On

occasion, they may be denied foreign currency.

Judiciary

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, though

Ethiopian courts will at times reject spurious litigation aimed at contesting legitimate tenders. Ethiopia

ratified the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards

(New York Convention) in 2020.

In 2021, Ethiopia reformed its Commercial Code for the first time in 60 years. The reforms were intended

to bring Ethiopia’s commercial law in line with international best practices and address concerns among

the business community. The revised law includes provisions for the establishment of a commercial court

to improve the resolution of commercial disputes. Members of the business community expressed concern

about possible delays in consistent enforcement of the new code.

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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.

U.S. exporters and investors nonetheless face persistent barriers to entering, maintaining, or expanding their

presence in certain sectors of the EU market. This report highlights some of the most significant barriers

that have endured despite repeated efforts at resolution through bilateral consultations, World Trade

Organization (WTO) committee meetings, or WTO dispute settlement. Certain barriers have been

highlighted in this report for many years.

IMPORT POLICIES

Tariffs

The EU’s average Most-Favored-Nation (MFN) applied tariff rate was 5.1 percent in 2020 (latest data

available). The EU’s average MFN applied tariff rate was 11.2 percent for agricultural products and 4.1

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

tariff lines in the WTO, with an average WTO bound tariff rate of 4.9 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, 10 percent for processed wood products, and 6.5 percent for fertilizers and plastics.

In June 2018, the EU adopted additional tariffs ranging from 10 percent to 25 percent on a range of

agricultural products, consumer products, and industrial products and materials imported from the United

States in retaliation against the U.S. decision to adjust imports of steel and aluminum articles into the United

States under Section 232 of the Trade Expansion Act of 1962, as amended. On October 31, 2021, the

United States and EU announced joint steps to re-establish historical transatlantic trade flows in steel and

aluminum and to strengthen their cooperation to address shared challenges in the steel and aluminum

sectors. As part of that partnership, the United States and the EU agreed to take a number of steps, including

the removal by the EU of the additional tariffs that it placed on certain U.S. goods in June 2018. In addition,

the United States and the EU announced their commitment to negotiate a global arrangement to address

carbon intensity and global overcapacity in the steel and aluminum industries. Finally, the United States

and the EU agreed to suspend the WTO disputes they had initiated against each other regarding the U.S.

Section 232 measures and the EU’s additional duties.

Non-Tariff Barriers

Pharmaceutical Products

The United States is monitoring potential developments related to the EU Commission public consultation

on the EU general pharmaceutical legislation, which was open from September 29, 2021 to December 21,

2021. 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: Directive 2001/83/EC on the Community code, relating to medicinal

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products for human use; and Regulation (EC) No. 726/2004, laying down Community procedures for the

authorization and supervision of medicinal products for human and veterinary use. The Commission’s

adoption of a proposal for a regulation is planned for the fourth quarter of 2022.

Member State Measures: Pharmaceutical Products

U.S. pharmaceutical stakeholders have expressed concerns regarding 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, such as therapeutic

reference pricing and price controls. Such lack of transparency and due process creates uncertainty and

unpredictability for investment in these markets. These policies have been identified in several Member

States as described below. One example is the “clawback system,” which requires pharmaceutical

companies to pay back a certain percentage of the amount spent by Member States over budgetary limits.

Stakeholders have also expressed concerns over inconsistent and lengthy time limits for pricing and

reimbursement decisions. Industry has 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 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. pharmaceuticals exports to Austria accounted for over 35 percent of U.S. goods exports to

the country in 2021. Nonetheless, U.S. pharmaceutical companies continue to express concern regarding

reimbursement pricing decisions by the statutory insurance providers association that are not transparent.

The streamlining of the statutory social insurance carrier structure from nine provincial units to one federal

entity has not yet led to changes in reimbursement policies sought by U.S. pharmaceutical companies.

Belgium: U.S. companies identified several policies affecting market access, including a turnover tax, a

crisis tax, a marketing tax, and a clawback tax. In addition, industry reports 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, however, 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 implemented incompletely and at a slow pace. The United States continues to

highlight the need for a continued dialogue with the Belgian Government to address the above as well as

meaningful opportunities for stakeholder input into pricing decisions with the aim of safeguarding the

access to the best treatment, including new innovative medicines.

Bulgaria: U.S. firms have expressed concern with Bulgaria’s Deficit Compensation Mechanism (DCM),

under which companies must refund a portion of their profits when demand for specified pharmaceutical

products exceeds the Bulgarian Government’s quarterly budget allocation for that medicine. Industry

predicts that approximately 80 percent of 2021 associated profits will return to the government under the

DCM.

Czech Republic: U.S. firms have expressed concerns about the Czech Republic’s non-transparent system

for determining pricing and reimbursement levels for pharmaceutical products, as well as lengthy approval

delays. Stakeholders have reported on improvements in the government’s meeting deadlines under the

pharmaceutical approvals process. The United States will continue to engage with companies and the

Czech Government on this issue and urge that pricing decisions be made transparently and include

meaningful stakeholder input. U.S. companies have also voiced concerns over their inability to offer

innovative medicines for rare diseases on the Czech market. A new law allowing for easier access for

orphan drugs entered into effect on January 1, 2022.

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France: Pharmaceutical industry stakeholders continue to raise concerns about the French pharmaceutical

market, including with respect to the significant tax burden on the industry and the constraints facing sales

of reimbursable medicines. 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 566 days after marketing authorization, compared to the 180 days required by EU

law. According to industry, the French pharmaceutical federation Les Enterprises du Medicament, which

includes U.S. firms, and the French Government signed an agreement in March 2021 to shorten the

reimbursement process. In addition, the French Government announced that it would reduce the length of

the delays and meet the 180-day timeline by 2022. In June 2021, the French Government also announced

a new fast-track procedure, which would simultaneously carry out both market access authorizations and

price negotiations with the pharmaceutical industry. Implementing legislation for this fast-track procedure

was adopted at the end of December 2021.

Greece: Pharmaceutical industry stakeholders face policies such as clawbacks, which create an uncertain

business environment. The Greek Government passed reform measures, including legislating an increase

in the budget for vaccines with an exemption from clawbacks and abolishing a mandatory 25 percent fee

for new pharmaceutical products entering the market. However, clawbacks continue to present an uncertain

environment. U.S. pharmaceutical companies are in contact with the Greek Government and hope to

establish a memorandum of understanding to collaborate on further structural reforms. The government

has committed to implementing reforms, including a reduction in clawbacks by 2025.

Hungary: Pharmaceutical industry stakeholders express concern that the Hungarian Government’s pricing

and reimbursement policies, which include a clawback system, 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. It can take several years before patients have

access to innovative products. Pharmaceutical industry stakeholders note the lack of opportunity to provide

input into the decision-making process. Pharmaceutical companies are allowed to deduct part of their

research and development costs in Hungary from their clawback payment obligations under an incentive

system, but only if these costs exceed certain thresholds.

Italy: U.S. healthcare companies face an unpredictable business environment in Italy, which includes

highly variable implementation of complex pricing and reimbursement policies, including a clawback

system. Pharmaceutical companies pay any clawback amount to the Italian Drug Agency (AIFA), which

is also in charge of calculating any overspending and collecting any return payments.

In addition, U.S. companies have expressed concerns as to the clawback system as it relates to public

hospital pharmaceutical purchases. Specifically, if the Italian Government overspends its allotted budget

for hospital pharmaceuticals, this system requires pharmaceutical companies to refund to the government

50 percent of the budget overrun through AIFA. According to industry, some improvements were

introduced in the 2021 Budget Law that shifted additional budget to the hospital and direct purchase

channel, but industry has noted a number of additional steps that could be taken to improve the functioning

of the system.

U.S. medical device companies have also reported uncertainty due to the Italian Government’s lack of

guidance in relation to the clawback system for hospital purchases of medical equipment.

In making price and reimbursement determinations, AIFA utilizes a system of therapeutic tenders that

requires patented medicines to compete against other patented medicines and generics. U.S. industry has

expressed concern that price appears to be the only selection criteria utilized by AIFA, rather than taking

into account such factors as quality and therapeutic efficacy. In September 2020, AIFA published draft

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guidelines on their pricing process. These draft guidelines include potentially useful elements on how AIFA

chooses medicines used in its competitive comparisons. The United States will continue to monitor this

situation.

U.S. stakeholders have also raised concerns regarding reimbursement delays for pharmaceutical products

and delayed payments for medical devices. For example, it can take 12 months for products to be included

in the Regional Registries even after the products have received marketing approval and been accepted for

reimbursement. Moreover, the average time Italian public hospitals take to pay medical device suppliers

continues to exceed the EU average as well as the maximum period permitted by EU law. Industry

continues to press the Italian Government to address these issues.

Ireland: Pharmaceutical industry stakeholders expressed concerns over the Irish Government’s cost

containment measures and delays in reimbursement decisions. Access to new drugs and medicines, some

of which are produced in Ireland, may be subject to a lengthy decision process as well as unpredictable

funding levels. Industry also notes concerns over Ireland’s price freezes on reimbursed medicines since

2016 and highlights that the Irish Pharmaceutical Healthcare Association and the Irish Government, which

allocated additional funding in its 2021 and 2022 annual budgets, are looking to put into place a new multi-

annual agreement featuring the principle of joint funding for new treatments.

Lithuania: The United States continues to engage with the Lithuanian Government regarding

pharmaceutical market access issues. Discussions between the Lithuanian Health Ministry and U.S.

stakeholders have made little progress to add innovative drugs to the Lithuanian Government’s

reimbursement list. Stakeholders remain concerned about the lack of transparency in the pricing and

reimbursement process for innovative drugs.

Poland: U.S. stakeholders have expressed concern over the lack of an opportunity for meaningful

stakeholder input into Poland’s rulemaking and tendering processes, as well as the transparency of

reimbursement rules for pharmaceutical products. Addressing these concerns would enhance business

predictability. U.S. industry reports that Poland’s pricing and reimbursement system is backlogged, taking

more than 820 days (based on the WAIT study by the European Federation of Pharmaceutical Industries

and Associations) on average from regulatory approval to patient access. Private hospital owners have

complained that the hospital network law enacted in 2017 makes it difficult to get reimbursed by the

National Health Fund for lifesaving procedures, forcing the closure of some private hospitals, particularly

in cardiology. In November 2020, a Medical Fund Act entered into force, which has the potential to bring

about major changes to Poland’s reimbursement system, including by providing financing for highly

innovative drugs and drugs of proven clinical value. In 2021, the Polish Government proposed amendments

to its Reimbursement Act. While some potential improvements appear to exist in the draft amendments,

the draft amendments also increase clawbacks above certain caps, decreasing the predictability of the

pricing and reimbursement system. The United States will continue to urge Poland to engage meaningfully

with stakeholders with respect to their concerns.

Portugal: Multiple U.S. pharmaceutical companies have expressed concern about delays in payments for

medicine from public hospitals that at times far exceed the legal 90-day payment period. In addition, the

companies face delays in approvals for the introduction of innovative products, with the average approval

taking two years. The companies linked the payment and approval delays to budgetary constraints on the

national health care system and noted they affected domestic firms as well. The United States has been

working with U.S. pharmaceutical representatives to raise these issues with the Portuguese Government.

Romania: Innovative pharmaceutical producers have identified several significant challenges in Romania

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. Numerous

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applications remain pending, severely undermining the incentives for U.S. pharmaceutical companies to

introduce newer drugs in Romania because the National Health Insurance House does not reimburse

patients for drugs that are not included on the reimbursement list. 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. Other barriers include a government policy of not considering

reimbursement applications until a new innovative medicine has been granted reimbursement in at least 14

Member States.

In 2020, the Romanian Government enacted changes to a clawback tax, which creates uncertainty for U.S.

stakeholders. In May 2020, the government revised the clawback tax and introduced caps based on

categories: a 25 percent cap for innovative medicines; a 20 percent cap for generics; and a 15 percent cap

for locally produced medicines. U.S. stakeholders welcomed the tax revision as a measure improving

predictability and patient access to medicines, but continue to raise concerns regarding a lack of

transparency.

Spain: 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: U.S. stakeholders report that processes for marketing and reimbursement approvals of new

pharmaceutical products in Slovakia lack transparency, and deadlines are sometimes missed. The

Slovakian Government created a new Health Technology Assessment Agency at the Ministry of Healthcare

in July 2021. The government has also proposed legislation to accelerate the approval and reimbursement

of innovative medicines. The United States will monitor the impact of this proposal.

Slovakia was a frequent source of pharmaceuticals that were re-exported by third parties in the private

sector to other EU markets, where they were sold at a profit, leading to shortages of certain drugs in

Slovakia. In 2017, Slovakia amended its law, allowing the Slovak State Institute for Drug Control to

monitor and ban the re-export of certain pharmaceutical products. Under the amended law, only the rights

holder or distributor can legally export categorized medicines (i.e., medications that are fully or partially

covered by health insurance) outside Slovakia.

Sweden: Pharmaceutical industry stakeholders have raised concerns about Sweden’s increasingly

challenging and non-transparent environment with regard to pricing and reimbursement. For example,

when manufacturers submit a proposed price to the Dental and Pharmaceutical Benefits Agency, the

application is often either accepted or rejected in a non-transparent fashion, with restrictive appeal options.

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, the

duties to date have not been completely repaid, and Italian customs authorities, claiming to have resolved

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the jurisdictional issues cited by the Italian Supreme Court, have begun re-issuing some of the previous

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.

Subsidies for Fruit and Vegetables

The EU Common Market Organization (CMO) provides a framework for market measures under the EU’s

Common Agricultural Policy (CAP), 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 entered into force in Poland. 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. While both foreign-owned and domestic companies are subject to the

tax, U.S. companies operating in Poland pay the majority of these taxes. This is because 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

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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.

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. This is attributable in part

to aspects of the EU’s regulatory process, including that for preparing and adopting post-legislation

“implementing and delegated acts.” These processes lack clarity and efficacy with respect to ensuring that

technical regulations, guides, or recommendations within the scope of the WTO TBT Agreement are

properly notified to the public for meaningful comment. The United States regularly raises concerns, both

in bilateral engagement and in the WTO Committee on Technical Barriers to Trade (TBT Committee),

regarding cases in which notification of certain measures that may have a significant effect on trade has not

taken place at an appropriate stage, or at all. EU notifications often take place at a procedural stage when

it is too late to revise the measure to take into consideration any concerns, including substantive or scientific,

raised by other WTO Members.

For example, under the EU’s regulatory processes for Registration, Evaluation, Authorization, and

Restriction of Chemicals (REACH) and Classification, Labeling, and Packaging (CLP), proposed

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restrictions on chemicals and their use in products are typically notified to the WTO only after scientific

review committees have convened and the Commission’s domestic consultations are concluded. This

prevents affected parties from providing additional scientific or technical data for the optimal consumer

and producer outcome. In other cases, measures are simply not notified at all, as was the case with a series

of country of origin labeling (COOL) measures. The EU may also make significant changes to a proposed

regulation without re-notification. In the case of the EU Regulation on Eco-Design Requirements for

Electronic Displays, substantive changes were made to the draft regulation after the public consultation

period and WTO notification, meaning that stakeholders did not have an opportunity to comment on those

changes. 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 that may have a significant effect

on trade could reduce the emergence of technical barriers to trade by ensuring that the EU takes into

consideration significant concerns before it finalizes measures.

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, which is aimed at making Europe

“the first carbon neutral continent by 2050.” The United States is closely monitoring: the “Fit for 55”

legislative proposals, which are components of the Green Deal, presented in July 2021; the “Sustainable

EU Food System Initiative” launched in September 2021’ and, a legislative proposal presented in November

2021 to address deforestation and forest degradation associated with agricultural commodity production

and trade. In 2021, the United States tracked these proposals, including to assess whether any proposed

labeling or certification measures have the potential to be more trade-restrictive than necessary to fulfill a

legitimate objective, but as of March 2022 has not yet raised them in the WTO TBT Committee. Sanitary

and phytosanitary (SPS) concerns with the European Green Deal are discussed later in this chapter.

Under the Circular Economy Action Plan, the EU notified to the WTO TBT Committee and set into force

the Single Use Plastic Directive (EU 2019/904), which bans certain plastic products intended to be used

just once or for a short period of time. However, the accompanying guidance document, which contained

critical additional information for the implementation of the Directive, was delayed and not published until

June 2021. The guidelines determined that some bio-based polymers should be included under the scope

of the Directive (thereby effectively banning them from the EU market), while some should be exempted.

The United States has sought to understand why this distinction was made in the guidelines and raised this

issue with the EU in November 2021.

European Standardization and Conformity Assessment Procedures

The EU’s approach to standards-related measures, including its conformity assessment framework, and its

efforts to encourage governments around the world to adopt its approach, including European regional

standards, creates a challenging environment for U.S. 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 (or third

country) regulatory requirements. U.S. producers and exporters thus face additional burdens in accessing

the EU market not faced by domestic producers in the EU or by EU exporters when accessing the U.S.

market.

EU product requirements in a variety of sectors (e.g., toys, machinery, medical devices) are regulated under

measures following the New Legislative Framework (NLF). Under the NLF, EU legislation sets out the

“essential requirements” that products must meet to be placed in the EU market and benefit from free

movement within the EU. Only products that conform to harmonized ENs under the NLF are presumed to

be in conformity with the essential requirements. Moreover, a harmonized EN must be adopted at the

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national level by a Member State and any conflicting national standard withdrawn. Harmonized ENs can

only be developed through the 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). Products conforming to these harmonized ENs can bear

what is known as a “CE mark” and can be sold throughout the EU.

While the NLF does not explicitly prohibit other standards from being used to meet the EU’s essential

requirements, it can preclude the use of other standards, including international standards. Attempting to

demonstrate that use of an alternative standard fulfills the EU essential requirements instead of using a

harmonized EN can be prohibitively costly, involve additional conformity assessment requirements, and

comes with uncertainty for manufacturers and exporters. For example, if a manufacturer chooses not to use

a harmonized EN, it needs to assemble a more extensive technical file through a costly and burdensome

process because the alternative standard cannot be granted a presumption of conformity with the essential

requirements or applied directives. This process must be repeated each time a similar new product is

introduced to the market. Even if a manufacturer assembles such a file, there is no certainty that Member

State authorities will treat the product as conforming to the EU’s essential requirements. As a result, U.S.

producers often feel compelled to use the relevant harmonized EN developed by the ESOs for the products

they seek to sell on the EU market. This is the case even where U.S. products produced according to

relevant international standards provide similar or higher levels of safety and performance.

CEN and CENELEC technical committees, which draft harmonized ENs, 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. Accordingly, when a U.S. producer uses a harmonized

EN, it is typically using a standard that has been developed through a process in which it had no meaningful

direct or representational opportunity to participate or provide technical input. This has a pronounced

impact on SMEs and other companies that do not have a European presence. The opportunity for U.S.

stakeholders to influence the technical content of EU legislation setting out essential requirements (i.e.,

technical regulations) is also limited. This is because when the EU notifies proposed legislation containing

essential requirements to the WTO, it does not identify the specific CEN or CENELEC standards for which

the presumption of compliance will be given. Furthermore, the EU only notifies legislation after the

Commission has transmitted it to the Council and Parliament and is no longer in a position to revise the

legislation in light of comments received. Consequently, U.S. stakeholders often do not have the

opportunity to comment on critical technical elements of proposed technical regulations and conformity

assessment procedures contained in EU legislation, or on the standards that may be used to fulfill that

legislation’s essential requirements. In other words, they are precluded from participating in the

development of requirements in addition to the means by which those requirements will be fulfilled.

The Vienna and Frankfurt Agreements, which establish technical cooperation between CEN and the

International Organisation for Standardisation (ISO) and between the CENELEC and the International

Electrotechnical Commission (IEC), respectively, allow for the fast-track adoption of CEN and CENELEC

standards by ISO/IEC. This approach limits opportunities for non-European stakeholders to contribute to

the development of the standards at an early stage.

Finally, CJEU rulings, such as in James Elliot Construction (C-613/14), have led to increased EU

Commission engagement in the oversight of standards development processes and to the development of

non-standard technical specifications. In particular, the ruling in James Elliot Construction led to the legal

conclusion that harmonized ENs are part of EU law. U.S. industry has begun noting concerns of a

subsequent deviation from reliance on international and European standards in favor of non-standard

technical solutions, including technical specifications and codes of conduct. There is also a decreased

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availability of international or European standards that may be predictably relied on to demonstrate

conformity with a piece of legislation’s essential requirements. A delay in standardization is also typical.

As for conformity assessment, the United States 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. Under

the EU system, an accreditation certificate from one Member State accreditation body suffices throughout

the EU. The regulation further specifies that national accreditation bodies shall operate as public, not-for-

profit entities. This regulation effectively bars the use of trade-facilitative international accreditation

schemes and precludes U.S.-domiciled accreditation bodies from offering their services in the EU with

respect to any mandatory third-party conformity assessment requirements.

Decision 768/2008 sets out requirements that any mandatory third-party conformity assessment falling

within the NLF be performed by a “Notified Body” and permits only bodies “established under national

law” to become Notified Bodies. In practice, the EU interprets “established under national law” as a

requirement that any entity seeking designation as a Notified Body must be established in the EU and, in

particular, in the Member State from which it is seeking such designation. This interpretation denies U.S.-

domiciled conformity assessment bodies the opportunity to certify products for the EU market outside of

existing mutual recognition agreements, and raises significant market access concerns for U.S. producers,

whose products have been tested or certified by conformity assessment bodies located outside the EU. The

EU conformity assessment approach adds increased time to market, increases costs for manufacturers, and

requires U.S. testing and certification bodies to establish operations in the EU to remain competitive.

The EU also promotes the adoption of harmonized ENs by its trading partners and often requires the

withdrawal of non-EU standards as a condition of providing assistance to or affiliation with other countries,

which can give EU manufacturers commercial advantages in those markets. Where the withdrawn

standards are international standards that U.S. producers use, which may be of equal or superior quality to

the ENs that replaced them, U.S. producers must choose between the cost of redesigning or reconfiguring

their products to meet the European standards, undergoing additional processes to show they meet

requirements, or exiting the market completely. Further, EU trade policy seeks to narrow the definition of

what is considered an international standard within the meaning of the WTO TBT Agreement. For instance,

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 ISO and the IEC). Furthermore, this attempt to reinterpret which

standards should be deemed international under the WTO TBT Agreement is contrary to relevant decisions

of the TBT Committee, which recognizes that standards developed by organizations domiciled in any WTO

country can be deemed international, provided they are developed in accordance with relevant WTO

principles.

Regulation of Emerging Technology

The EU is seeking to regulate aspects 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 revision of the Machinery Directive and a draft regulation proposed in

April 2021 setting out harmonized rules on artificial intelligence (AI), commonly referred to as the “AI

Act” (both notified to the WTO in November 2021), as well as the development of standards under the

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finalized Cybersecurity Act (Regulation 2019/881), seeking to ensure that the EU applies a consistent

approach to regulation and encourages the usage of global, industry-driven standards rather than regional

standards. The United States also has concerns with conformity assessment processes and the ability for

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 revision of the Machinery Directive with the EU in

November 2021 and plans to raise concerns about both the Machinery Directive and the AI Act again in

2022. The United States has responded with comments to both WTO notifications. For more information,

see the discussion of the Artificial Intelligence Act in the Barriers to Digital Trade and Electronic

Commerce section of this report.

Revision of the Radio Equipment Directive

The EU notified to the WTO its proposal to revise what is commonly known as the Radio Equipment

Directive in December 2021. The proposal in its current form requires manufacturers to conform to a

specific technical design – the USB Type C charger, for mobile devices, tablets, and other electronic

devices. Private sector stakeholders argue that by prescribing one specific design codified into the revised

Directive, as opposed to specifying product performance characteristics, the proposed regulation will inhibit

innovation, affect generational compatibility across devices, and ultimately hinder progress toward more

efficient, sustainable, and interoperable charging equipment. Use of relevant international standards, which

are regularly updated, on the other hand, can provide for interoperability across generations of USB

technologies and address these other key goals. The United States raised this issue bilaterally with the EU

in 2022 and also submitted a response to the EU’s notification.

Chemicals: Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH)

The EU regulation concerning the production, marketing, and use of chemicals as substances and in

products, known as REACH, entered into force on June 1, 2007. REACH imposes extensive registration,

testing, and data requirements on chemicals manufactured in or imported into the EU in quantities greater

than one metric ton. REACH contains provisions permitting the Commission to limit or ban the sale of

certain substances and their uses in products on the EU market. It also contains provisions allowing the

Commission to require manufacturers or users of certain hazardous chemicals to obtain authorizations for

those chemicals. Furthermore, enterprises active in virtually every industrial and manufacturing sector need

to have awareness of REACH because their products could contain chemicals that may be subject to its

registration requirements when placed on the EU market, depending on the sum of the volumes of chemicals

in their products and the articles of which the product is comprised, and each chemical registrant must

account for the uses of that chemical in the products it places or intends to place on the EU market. REACH

also requires exporters of any article that contains a “Substance of Very High Concern” (SVHC) in an

amount exceeding 0.1 percent weight-by-weight of said article to notify their supply chain recipients of the

presence of these substances and provide relevant information to allow for the safe use of the article.

The United States agrees that it is important to regulate chemicals to ensure environmental and health safety.

The United States is concerned, however, that the overall premise of REACH is precautionary and hazard-

based, as opposed to risk and science-based. However, stakeholders have raised concerns that as part of

the registration process under REACH, they must provide data that is not directly relevant to the specific

hazards and proposed uses of a registered substance. Additionally, there appears to be inconsistent and

insufficiently transparent application of REACH across Member States, which can result in requirements

that are more onerous for U.S. exporters than they are for EU businesses. The United States and many

other WTO Members continue to raise concerns regarding various aspects of REACH at WTO TBT

Committee meetings, particularly in light of their impact on small businesses. WTO Members remain

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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 problems producers

have in understanding and complying with REACH’s extensive registration, labeling, and safety data

information requirements. In 2021, the United States raised concerns bilaterally about the risk management

measures proposed by the European Chemicals Agency (ECHA) to the Commission for a REACH Annex

XV Restriction for “intentionally-added microplastics” based on concerns about the risk assessment

processes.

Substances of Concern in Products Database

Under the revised Directive 2018/851/EU of the European Union and of the Council of May 2018,

amending Directive 2008/98/EC on waste, the ECHA was tasked with establishing a database for suppliers

to input information about hazardous substances in materials and products. ECHA had originally planned

to roll out the draft Substances of Concern in Products (SCIP) database in January 2020 for companies to

begin testing and data entry one year ahead of the January 2021 final implementation deadline. ECHA

missed this deadline and did not formally launch the SCIP database in its final form until October 2020.

The information required in the database goes beyond the scope of Article 33.1 of REACH, raising the

number of mandatory information categories from two under REACH to seven for the SCIP database.

These requirements and the 10-month delay of the SCIP database release raised concerns about potential

negative impacts on U.S. industry and adverse trade impacts, given that companies only had approximately

10 weeks to reconfigure existing internal data exchange systems between manufacturers and suppliers to

comply with the deadline. Despite multiple requests by various stakeholders to postpone for a year the

implementation of the new requirements, the Commission proceeded with the January 2021

implementation. The United States raised concerns about implementation of the SCIP database bilaterally

in February 2021.

Substances of Very High Concern

The United States continues to raise concerns with the EU on the lack of public notice and comment

associated with the process by which substances are screened for the SVHC Candidate List (CL) and then,

after further review, restricted or banned as SVHCs. Member States take the lead on identifying substances

for the CL via the preparation of a Risk Management Option Analysis (RMOA). The RMOA process

evaluates the potential hazards of a substance, its uses, and means of managing any identified risks. The

problem for U.S. exporters is that more than one Member State may prepare a substance RMOA, and these

RMOAs are not always consistent in approach or do not always utilize a public consultation process to

receive comments. Once a substance is on the CL, companies manufacturing or importing more than one

ton of the substance annually must declare the substance to the EU. Companies are also required to provide

safety data sheets to their customers and, as of January 5, 2021, articles and products containing CL

substances above a 0.1 percent weight-by-weight concentration are subject to additional registration and

reporting requirements through the SCIP database. The requirements are set out in the EU’s Waste

Framework Directive and the database is managed by ECHA. The United States continues to monitor the

SVHC candidate list status of certain siloxanes.

Chemicals: Classification, Labeling and Packaging Regulation (CLP)

The CLP operates in tandem with REACH, providing for the harmonization of the classifications of

REACH substance registrations. CLP requires chemical manufacturers, importers, and downstream users

of CLP-classified substances and mixtures to appropriately manage, label, and communicate risk

management measures for any potentially hazardous chemicals used in their articles and products. U.S.

stakeholders note that the process to determine CLP classifications often seems arbitrary, since the EU only

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provides six weeks public comment on its classifications, even when the classification proposed by the EU

differs significantly from the classifications used by industry in their REACH registrations.

The United States is concerned that because the CLP is hazard-based, as opposed to risk-based, it may

result in product restrictions and labels that are unnecessarily disruptive to trade. The labeling requirements

require products to carry a carcinogen label, even when a company can show that there is no risk of exposure

to the chemical in the product. The United States is also concerned that the EU only notifies the

classifications to the WTO once ECHA’s scientific reviews are largely completed, calling into question

whether comments provided at this stage can be meaningfully taken into account. Further, the EU in the

14th adaptation of the CLP admitted that it had not yet even scientifically assessed whether the cobalt

residue in metal compounds is a health hazard but intended to go forward with the classification, despite

the resulting restrictions on products.

The classification of titanium dioxide offers another example of the challenges for U.S. companies with

regard to the CLP’s hazard-based approach. The CLP classifies some titanium dioxide particles (less than

10 micrometers) as a carcinogen when inhaled. This automatically restricted the use of titanium dioxide in

products and required a carcinogen label, even when there was no demonstrated risk of inhalation. Industry

has flagged for the U.S. Government that broad hazard labeling requirements for consumer products, which

do not have a scientific basis, dilute the effectiveness of warning labels for products that pose genuine safety

risks.

Chemicals Strategy for Sustainability

On October 14, 2020, the Commission released its Chemical Strategy for Sustainability (CSS) to reform

the EU’s chemicals legislation over the coming years, including a review of REACH, CLP, and other

sectoral legislation regulating chemicals. The proposed changes are broad and would include, among other

things: (1) the introduction of new hazard classes and labeling requirements under the CLP (e.g., for

endocrine disruptors, as well as for persistent, mobile, or bio-accumulative substances); (2) a shift to

assessing and prohibiting groups of chemicals as opposed to individual substances; (3) only allowing the

use of toxic chemicals when they have an “essential use” application (criteria yet to be defined); and (4)

developing criteria for “safe and sustainable by design” chemicals in an effort to spur innovation. Notably,

the CSS specifically seeks to ban all but essential perfluorooctanoic acid (PFOA) and per- and

polyfluoroalkyl (PFAS) substances. In general, the proposed changes will result in a more restrictive

approach to chemicals the EU considers to be harmful (based on an assessment of potential hazard as

opposed to risks) and an increase in information requirements for products sold in the EU. The parallel

introduction of new rules under the Digital Services Act will also have implications for how U.S. chemical

exporters can sell their products to the EU market online.

While in general some of the proposed changes could have a positive effect to the extent they would

introduce more transparent data requirements and stricter enforcement (including online sales by non-

reputable sellers from outside the EU), U.S. industry is concerned that the CSS could burden businesses

with requirements that might not be necessary for consumer safety.

The Commission has also indicated its intention to simplify the chemicals authorization process by adopting

a “one substance, one assessment” approach. For U.S. companies, though the details remain unclear, this

approach could be a positive change from the current situation in which one substance may be covered by

multiple regulations and authorities, each requiring a different authorization process. The initial public

consultation for the revision of the CLP regulation took place in fall 2021, and the Commission’s legislative

proposal is expected to be put forward during the second quarter of 2022. The revision of the REACH

regulation is expected to follow closely behind. The United States continues to monitor developments in

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this area and ensure that U.S. companies are informed of the ongoing discussions. The United States raised

the CSS with the EU over the course of 2021.

French Circular Economy Law

In February 2020, France enacted Law No. 2020-105 (Regarding a Circular Economy and the Fight Against

Waste). The law is an implementing measure of the EU Directive 2019/904 “on the reduction of the impact

of certain plastic products in the environment,” which was notified to the WTO in February 2020. However,

certain articles of France’s law have not been notified to the WTO TBT Committee, including Article 17

that would create new requirements to place a France-specific recycling logo (Triman mark) on the

packaging of all household products, textiles and shoes, furniture, tires, and paper products when these

products may end up in household waste streams. In addition, in November 2020, a Ministerial Decree set

out a fine for the use of recycling logos other than the Triman mark, including the “Green Dot” label, which

is widely used (and in some cases obligatory) in other EU Member States, thereby making it difficult for

business to include both symbols when exporting their goods to multiple markets. While the French fine

on the Green Dot has been suspended pending ongoing litigation, Article 17 mandating the use of the

Triman mark went into effect on January 1, 2022, raising concerns regarding France’s transparency

obligations under the WTO TBT Agreement as the measure has not yet been notified as of March 2022.

This measure will likely have costly trade implications for companies present in the EU market, who will

have to redesign packaging to meet a requirement that does not exist elsewhere in the EU market. The

United States has raised concerns about the proposal’s trade impact with the EU and with France.

U.S. industry has additional concerns about Articles 77 and 80 of Law No. 2020-105, which, respectively:

(1) prohibit fresh fruits and vegetables from being sold in plastic packages at retail unless specifically

exempted; and (2) prohibit labels affixed directly to fresh fruits and vegetables unless they are fully

biodegradable in a home composting environment.

Finally, in July 2021, France issued a decree setting minimum quotas for the proportion of reused packaging

placed on the French market annually between 2022-2027. The minimum reuse quota covers glass, cans,

and cases and refers to all packaging, whether produced in France or imported. France submitted its

unnumbered draft decree to the EU internal Technical Regulation Information System database in July

2021.

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 January 2019, the Commission recognized the U.S. Soybean Sustainability Assurance Protocol (SSAP)

as a voluntary scheme under RED. This allowed soybean oil made from SSAP-certified soybeans to be

used as feedstock for biodiesel production in the EU. However, the EU has reopened consideration of the

RED program as part of the European Green Deal, so long-term benefits of the SSAP could be affected by

future modifications to RED.

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 introduces sustainability requirements for forestry biomass (wood

pellets). The United States exported approximately $287 million in wood pellets to the EU in 2021. The

United States continues to actively monitor certain unresolved issues regarding the impact of RED II’s

complex sustainability criteria for biomass on U.S. exports of sustainable wood pellets.

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RED II requires Member States to prepare 10-year National Energy and Climate Plans (NECP) for 2021 to

2030 that outline how they will meet the new 2030 targets for renewable energy and for energy efficiency.

On July 14, 2021, the Commission published a draft amendment to RED II that proposes to revise the

sustainability criteria for forestry biomass. Depending on the final text that the EU adopts, the revised

directive could impede hundreds of millions of dollars of biomass exports to the EU. The United States

continues to monitor developments and evaluate the potential impact on U.S. exports.

Member State Sustainability Criteria

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.

Glyphosate

Glyphosate, an herbicide used in plant protection products, is currently approved in the EU until December

15, 2022. Four Member States (France, Hungary, the Netherlands, and Sweden) were appointed to act

jointly as rapporteurs for the assessment of the next application for renewal of the approval for use of

glyphosate in herbicides. These Member States formed the Assessment Group on Glyphosate (AGG). The

normal review process usually involves one Rapporteur Member State (RMS) and one Co-RMS, and the

process typically takes three years to complete.

A group of companies known as the Glyphosate Renewal Group submitted an application to renew approval

of glyphosate in December 2019. The AGG completed its Renewal Assessment Report (RAR) on June 15,

2021 (updated on August 10, 2021). The European Food Safety Authority (EFSA) launched parallel public

consultations with the ECHA on the RAR on September 23, 2021, which closed on November 22, 2021.

All contributions will be considered by the Member State competent authorities, EFSA, and ECHA as the

scientific assessment progresses. The AGG’s conclusions are expected to be submitted to Member States

for a vote by the end of 2022 or beginning of 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 are beginning to ban glyphosate or have banned it 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 maximum residue limits (MRLs), as all

pesticide MRLs are determined at the EU level.

Austria: After two unsuccessful attempts to ban glyphosate and its products, the Austrian Parliament

adopted a partial ban in 2021, which entered into force on June 5, 2021. The amendment to the Austrian

Pesticide Law bans the use of glyphosate in “sensitive” areas, 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 of glyphosate, 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 the use of glyphosate for most of its

uses, “as long as replacement is available.” Since a law regulating the use of phytopharmaceutical products

entered into force in 2017, local governments have not been allowed to use glyphosate in public green areas

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(parks, forests, streets, etc.). As of July 2022, this ban will apply to all places, private or public. To

encourage farmers to phase out glyphosate-based products, the French Government in October 2021

announced a tax credit of €2,500 (approximately $3,030) for farmers who declare in 2021 or 2022 that they

no longer use glyphosate.

France is also encouraging a phase-out of glyphosate at the EU level and is a member of the AGG, the EU

evaluation team for glyphosate license renewal.

Luxembourg: In January 2020, the Luxembourg Government withdrew the authorization for glyphosate,

thereby banning it from use in the country. The ban was introduced gradually in 2020 with a full ban of

glyphosate by December 31, 2020. With this decision, Luxembourg became the first EU country to ban

glyphosate.

Medical Devices & 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. Delays in implementation for the

MDR until May 2021, and for the certain classes of IVDR products until May 2022, offered some relief to

producers of medical devices and in vitro diagnostics, but several challenges remain, including an inability

to provide in-person audits due to the COVID-19 pandemic. In addition, the shortage of notified bodies is

particularly problematic for manufacturers of medical devices seeking compliance. The United States

engaged the EU in 2021 through the WTO 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.

Furthermore, many of the standards for both medical devices and in vitro diagnostics referenced in the

Commission’s mandate to CEN/CENELEC are based on European standards instead of relevant

international standards. This divergence will require producers to comply with a different set of standards

to access the European market, requiring duplicative efforts and additional burdens on manufacturers

without discernable improvements to health or safety. Accordingly, the European standards present a risk

of creating additional barriers to trade.

The Commission also adopted the European Medical Device Nomenclature (EMDN). EMDN is based on

the Italian “Classificazione nazionale e internazionali” (CND), 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 70 national medical device regulators. The United States remains highly

concerned that the EU’s adoption of EMDN is undermining the interoperability of UDI systems for tracking

and reporting purposes and 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.

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In June 2010, U.S. stakeholders submitted applications to be able to use traditional terms in connection with

products sold within the EU. In 2012, the EU approved the applications for use of two terms, “cream” and

“classic,” but has not taken action on other terms. The United States has repeatedly raised this issue in the

WTO TBT Committee and the WTO Committee on Trade in Goods and has pursued bilateral discussions,

including in 2021. Beyond approving the two terms, the EU has not taken any visible steps to address U.S.

concerns and for the past nine years has consistently refused to provide a timeline for review of the

applications submitted by U.S. industry.

Distilled Spirits Aging Requirements

The EU requires that for a product to be labeled “whiskey” (or “whisky”), it must be aged a minimum of

three years. The EU considers this a quality requirement. U.S. whiskey products that are aged for a shorter

period cannot be marketed as “whiskey” in the EU market or other markets that have adopted EU standards,

such as Israel and Russia. With a long history of quality whiskey production, the United States views a

mandatory three-year aging requirement for whiskey as unwarranted. Recent advances in barrel technology

enable U.S. micro-distillers to reduce the aging time for whiskey while producing a quality product. The

United States will continue to urge the EU and other trading partners to end whiskey aging requirements

that are restricting U.S. exports of whiskey from being labeled as such.

Certification of Animal Welfare

The EU requires animal welfare statements on official sanitary certificates. The U.S. position is that official

sanitary and phytosanitary certificates—the purpose of which is broadly limited to prevent harm to human,

animal, or plant life or health from diseases, pests, or contaminants—should only include statements related

to animal, plant, or human health, such as those recommended by Codex Alimentarius Commission

(Codex), the World Animal Health Organization (OIE), and the International Plant Protection Convention,

or those that have scientific justification. The EU’s certification requirements do not appear to advance any

food safety or animal health objectives. As part of the Farm to Fork (F2F) Strategy announced in May

2020, the EU Commission published an animal welfare fitness check roadmap, which should result in

additional animal welfare legislative initiatives in 2023, including for enhanced labeling.

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 above in the Technical Barriers to Trade section, the EU

Commission published its 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, antimicrobial use in livestock, and change land use in agriculture by

transitioning farmland into organic production or taking other farmland out of production. The EU has

stated it will seek to “obtain ambitious commitments from third countries in key areas,” which suggests that

the EU may try 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 must be based on

“scientifically-sound ex-ante impact assessments.” As of March 2022, a legislative proposal on the F2F

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Strategy has yet to be published. However, as noted above in the Technical Barriers to Trade section, the

EU published several related initiatives in 2021, including the “Fit for 55” legislative proposals presented

in July 2021 and the inception impact assessment for the “Sustainable EU Food System Initiative” launched

in September 2021. 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.

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 have established an MRL for the safe trade in products produced with ractopamine. The Codex

MRL was established following scientific study by the Food and Agriculture Organization of the United

Nations/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 Sanitary and Phytosanitary (SPS)

Agreement. Following the failure by the EU to implement the recommendations of the WTO DSB to bring

itself into compliance with its WTO obligations, the United States was granted authorization by the WTO

in 1999 to suspend concessions. Accordingly, the United States levied ad valorem tariffs of 100 percent

on imports of certain EU products. The value of the suspended concessions, $116.8 million, reflected the

damage that the hormone ban caused to U.S. beef sales to the EU.

In September 2009, the United States and the Commission signed a Memorandum of Understanding, which

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

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 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 will have 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. The United States continues to engage the EU regarding the unscientific ban on

meat and animal products produced using hormones, beta agonists, and other growth promotants.

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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, which

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 justify or

enforce these restrictions. The official implementation date for (EU) 2019/6 was January 28, 2022. That

said, as of March 2022, the EU has yet to finalize the legislation necessary to implement the regulation,

which raises significant questions regarding the potential impacts 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, which

clarified the legal mechanism for verification of compliance with Article 118. In October 2021, the EU

published Commission Delegated Regulation (EU) 2021/1760, which fixed the criteria used to establish the

list of antibiotics exclusively preserved for human medicine. On March 1, 2022, the European Medicines

Agency (EMA) published the draft list of antimicrobials that will be reserved for human medicine. The

Commission will use the EMA advice to inform the final list to be published in an implementing act.

Additionally, the Commission is also expected to publish a draft Delegated Regulation, which 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 in the United States.

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 of 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

2021, the EU issued 12 approvals and 6 renewals for GE crops, compared to 1 approval in 2020. While

these new authorizations were welcomed, the EU’s average approval time for new GE crops in 2021 was

approximately 5 and a half years. 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).

As of March 2022, the United States is tracking approximately 49 agricultural biotechnology product

applications (including renewals) submitted to the EU, with respect to corn, soybean, rapeseed, and cotton.

Of those applications, 41 are under scientific review by the EFSA and 8 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 (PAFF) also delay the

EU from taking decisions on GE approvals, by requiring products to go through an additional assessment

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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 of 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.

More broadly, in 2021 the EU announced next steps in its policy approach for innovative products of

biotechnology created using genome editing. On April 29, 2021, the Commission published a study that

determined that the regulations implemented under EU Directive 2001/18/EC (commonly referred to as the

“GMO Directive”) are not necessarily “fit for purpose” for plants produced through certain genome editing

techniques. The Commission subsequently launched an inception impact assessment in September 2021,

which outlined plans for a policy initiative and formal public consultations to consider the regulatory status

of these products in the second quarter of 2022. Both of these activities were conducted after the European

Council requested that the Commission develop a legislative proposal, in order to address a 2018 ruling by

the CJEU that genome-edited crops are subject to the EU’s GMO Directive. It remains to be seen whether

the Commission’s proposed policy approaches for genome-edited products will address or further

exacerbate the existing barriers facing the trade of older agricultural biotechnology products.

Member State Measures

Agriculture Biotechnology Cultivation Opt-Out

In March 2015, the EU adopted a directive that allows 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, the Member States had until October 2015 to request to be excluded 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. These decisions have not led to a change in the field, because

none of the five Member States (the Czech Republic, Portugal, Romania, Slovakia, and Spain) that grew

GE corn opted-out. However, as of 2021, commercial cultivation of GE corn is only occurring in Portugal

and Spain.

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

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.

Austria: The Austrian Government implemented EU Directive 2015/412 by enacting Austria’s 2015

Biotech Cultivation Framework Law, which establishes a common legal basis for all Austrian provinces to

ban the cultivation of GE crops. In addition, the Austrian Government has used the geographical scope

exclusion to ban cultivation of EU approved agricultural biotechnology crops in Austria.

Bulgaria: Bulgaria’s entire territory is excluded from the geographical scope of agricultural biotechnology

applications. In 2015, Bulgaria decided to ban the cultivation of MON810, seven varieties of corn, soybeans

40-3-2, and carnation Moonshadow 1. The ban also extended to field research.

Croatia: Croatia adopted legislation in 2015 to implement EU Directive 2015/412.

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Greece: Greece does not have a coexistence policy and maintains a de facto ban on both the cultivation

and importation of GE products. In Greece, there are no GE plants or crops under development. Greece

has maintained a de facto ban on GE products since April 2005, when it implemented a “safeguard clause”

prohibiting the field release of MON810. Greece is in the process of adopting new legislation that will

incorporate EU Directive 2015/412 to officially implement the cultivation opt-out clause. The draft

legislation passed the public comment period in 2016 and is still awaiting governmental action.

Italy: Italy does not commercially cultivate any GE crops, even for GE seed production. Since 2013, Italy

has banned the cultivation of GE crops despite two EFSA rulings stating no new scientific evidence has

been presented to support Italy using the safeguard clause. Since 2015, Italy has opted out of cultivating

EU authorized crops under EU Directive 2015/412.

Poland: The Feed Act of 22 July 2006 (OJ 2006 No. 144, item 1045) includes a prohibition on the

manufacture, marketing, and use of GE feed and GE crops intended for feed use. These provisions have

never been enforced and have been postponed several times since 2006. The Polish Parliament postponed

the prohibition in December 2020, for an additional two years until January 1, 2023.

Slovakia: Since 2017, Slovakia has issued annual notices stating that no GE plants were cultivated in a

given year. In April 2021, the Slovakian Parliament adopted an amendment to the Act on the Use of Genetic

Technology and Genetically Modified Organisms, which transposed EU Directive (2015/412). There is no

outright restriction or ban on the cultivation of GE crops in place.

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. U.S. exports of beef,

pork, and poultry to the EU have been significantly impacted, 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 the U.S. Department of Agriculture (USDA), after establishing their safety on the

basis of scientific evidence.

In 1997, the EU began blocking imports of U.S. products that had been processed with PRTs, which have

been safely used by U.S. meat producers for decades. After many years of consideration and delay, in May

2008 the Commission prepared a proposal to authorize the use of the four PRTs during the processing of

poultry but imposed unscientific highly trade-restrictive conditions with respect to their use. Member States

rejected the Commission’s proposal in December 2008.

In June 2013, the USDA submitted an application dossier for the approval of peroxyacetic acid (PAA) as a

PRT for poultry. In March 2014, EFSA published a favorable scientific opinion on the safety and efficacy

of PAA solutions for reduction of pathogens on poultry carcasses and meat. After a long period of inaction,

the Commission eventually put forward the authorization of PAA as one part of a three-pronged strategy to

mitigate campylobacter in poultry. It later withdrew the proposal from the relevant PAFF Standing

Committee agenda in December 2015, citing lack of evidence of PAA’s efficacy against campylobacter.

The Commission has no plans to put forward the proposal for approval at the PAFF Standing Committee

at this time.

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

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safety of the use of acetic acid and lactic acid in pork processing. To date, 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 the United States 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 are limiting 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 increasingly adding costs and

burden to the movement of exports in Europe, 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 are signed by June 15, 2022. 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 repeated 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 of titanium dioxide in food

On October 13, 2021, the EU notified the WTO Committee on Sanitary and Phytosanitary Measures (WTO

SPS Committee) of its intent to ban the use of titanium dioxide (E171) in food for humans and for animals

in the EU. Titanium dioxide is a permitted color additive exempt from batch certification in the United

States for use in foods, drugs, cosmetics, and medical devices. It is widely used and considered safe in

multiple other countries, as well as under Codex guidelines. The EU’s proposed regulation to remove

titanium dioxide from its list of permitted food additives is based on findings in an EFSA opinion issued in

May 2021. The draft regulation, which provides for a six-month transition period, is expected to be adopted

in early 2022 and to enter into force by summer 2022. Per the Commission’s mandate, in September 2021,

the EMA concluded an impact assessment that found it is not feasible to remove titanium dioxide from use

in medicines at this time. While the EU’s notification includes a waiver (three years) for titanium dioxide

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use in human and veterinary medicines to prevent shortages in the EU market of essential medicines,

stakeholders remain concerned that the EU has not extended the phase-out window for use of titanium

dioxide for other products. The Commission has tasked the EMA with reviewing the situation by April

2024.

Somatic Cell Count

Somatic cell count (SCC) refers to the number of white blood cells in milk. The count is used as a measure

of milk quality and an indicator of overall udder health. Since April 1, 2012, the EU has required imports

of dairy products that require EU health certificates to also comply with EU SCC requirements.

Specifically, the EU requires certification to establish that the SCC does not exceed 400,000 cells per

milliliter, a threshold that is significantly lower than the U.S. requirement for Grade A milk of 750,000 cells

per milliliter. The EU certification requirement does not appear to have scientific justification and increases

the cost of compliance for U.S. producers. Thus, the certification necessary to meet the EU requirement is

more burdensome than necessary, requiring farm-level sampling and a Certificate of Conformance. The

United States continues to engage the EU regarding the SCC requirement in the appropriate technical

working groups.

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 (categories 1 and 2 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.

Tallow exported to the EU must meet criteria that do not appear to be scientifically justified and

significantly exceed the recommendations of the OIE. 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 this tallow contain no more than a maximum level of insoluble impurities consistent with

international recommendations. Specifically, tallow with less than 0.15 percent insoluble impurities does

not pose any risk of bovine spongiform encephalopathy (BSE). Tallow under these specifications should

be allowed for import without any animal health-related requirements according to the OIE’s international

and scientifically based recommendation.

Used cooking oil (UCO) is used for the production of biodiesel. Individual Member States implement

national measures for the importation of UCO. However, the EU in 2016 circulated a draft regulation to

harmonize requirements EU-wide. The draft requirements appear to follow the EU’s non-science-based

approach regarding importation of tallow and would curtail U.S. exports of UCO to the EU. The United

States provided feedback in writing to the EU on its proposed measure and continues to encourage the EU

to eliminate unjustified restrictions on imports of UCO.

Live Cattle

Live cattle from the United States are not authorized to be exported to the EU, or transited through the EU

on route to third countries, due to EU certification requirements for several bovine diseases. Although the

USDA’s Animal Plant Health and Inspection Services (APHIS) successfully resolved issues related to

bovine leucosis and bluetongue in 2003, the EU subsequently established certification requirements for

BSE that precluded U.S. exports. Since then, the EU model certificate has been amended to align the EU

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BSE requirements with the standards and recommendations of the OIE. Although the United States can

now meet the BSE certification requirements, U.S. exporters remain blocked because the United States and

EU have not agreed on the conditions and format for the export certificate. APHIS continues to work with

the EU to resolve the remaining import health conditions and agree on a mutually acceptable certificate

through the U.S.–EU Animal Health Technical Working Group.

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. 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 OIE as having negligible risk, the source cattle

for U.S. ruminant origin animal byproduct exports may not necessarily come from negligible risk countries.

The SRM requirement thus unnecessarily impedes U.S. exports of ruminant origin animal byproducts and

would potentially limit the market for ovine/caprine meat 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” requirement for all U.S. commodities. Consistent with the recommendations

of OIE, 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 exposure.

For such products, the EU is not required to perform a risk assessment. Rather, the EU discontinues

authorization for a particular product at the time of re-approval, as has already happened for some

substances. The EU has also declared new products 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, a “hazard-based approach.” The United States is concerned that increasing numbers of safe

and widely used substances will not be reapproved or have reasonable import tolerances set for their use

due to these arbitrary cutoff 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.

In June 2016, the Commission presented two draft legal acts outlining scientific criteria to identify EDs in

agricultural products, one falling under the Biocidal Products legislation and the second under the Plant

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Protection Products legislation. In the draft legal acts, the Commission proposes to use the WHO definition

of endocrine disruptors and include examination of all available information in order to base decisions on

weight of evidence. However, the proposal does not specifically state that it will include consideration of

other hazard characterizations such as potency, severity, and reversibility in these examinations. Without

such considerations, the EU may potentially block substances regardless of the actual level of risk to human

health.

In April 2018, following a series of revisions for the proposed criteria and the insertion and removal of a

procedure for derogations allowing usage of substances falling under them, the Commission published

Regulation 2018/605, identifying endocrine-disrupting properties under Regulation 1107/2009 on plant

protection products in the Official Journal. Since November 2018, the criteria to identify endocrine

disruptors have applied to all ongoing and future evaluations of active substances used in plant protection

products. The biocidal products criteria were adopted earlier and have applied since June 2018.

In June 2018, the ECHA and the EFSA published a technical guidance document to implement the criteria.

The scope of trade effects of this regulation 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. However, it is still unclear

whether the EU will adjust Regulation 396/2005 to further align 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 to levels that are not commercially viable. According

to 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 a

risk assessment, would have serious adverse effects on agricultural productivity and global markets.

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GOVERNMENT PROCUREMENT

Government procurement is governed by the EU public procurement directives. In 2014, the European

Parliament approved revised directives addressing general public procurement and procurement in the

utilities sector. The Parliament also approved a new directive on concessions contracts. Member States

were required to transpose the new directives into national legislation by April 2016.

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. Subsidiaries of U.S.

companies may bid on all public procurement contracts covered by the EU directives.

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.

In July 2019, the EU published guidance to public buyers in Member States on participation of third country

(non-GPA or non-trade agreement partners) bidders in the EU procurement market, aimed at reinforcing

the importance of reducing predatory low-priced bids. This guidance does not change the access that U.S.

companies have to the EU under the GPA. However, the guidance provides neither a definition of what

constitutes an abnormally low bid, nor a method to conduct the evaluation. While a public buyer must give

the third country bidder an opportunity to explain and justify a low-priced bid, Member States are free to

set up national rules and methods to implement this process.

The EU’s lack of country-of-origin data for winning bids makes it difficult to assess the level of U.S. and

non-EU participation. The most recent report, commissioned by the EU in 2011, noted that only 1.6 percent

of total Member State procurement contracts were awarded to firms operating and bidding from another

Member State or a non-EU country, demonstrating that in practice the value of direct cross-border

procurement awards even among Member States was very small. The same study said that U.S. firms not

established in the EU received just 0.016 percent of total EU direct cross-border procurement awards.

International Procurement Instrument

The Commission published a revised proposal for an International Procurement Instrument (IPI) in 2016.

The proposal, which is, as of March 2022, being considered by the EU Parliament, Council, and

Commission in trilogue negotiations, would enable 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. Under the current Commission

proposal, WTO GPA and free trade agreement parties are not exempt. Therefore, procurement not covered

by the WTO GPA that U.S. suppliers have had access to may be affected. The IPI is at a critical stage in

its development, with the European Parliament having provided numerous proposed amendments. The

United States understands that procurement from non-market economies is the principal target; however,

U.S. goods, services, and suppliers could fall within the proposal’s scope depending on the revisions. The

United States raised this issue bilaterally with EU counterparts in 2020 and 2021.

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 seeking to participate in procurement

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in Bulgaria, Croatia, the Czech Republic, France, Greece, Hungary, Italy, Lithuania, Romania, Slovakia,

and Slovenia have all voiced concerns over a lack of transparency, including with respect to overly narrow

definitions of tenders, language and documentation barriers, and implicit biases in favor of local vendors

and state-owned enterprises. The Commission’s 2014 EU Anti-Corruption Report concluded that Member

State public procurement is one of the areas most vulnerable to corruption. 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 EU Member State

company, thus impacting the participation of competitive U.S. firms.

France: France continues to maintain ownership shares in several major defense contractors (10.9 percent

of Airbus, formerly EADS, shares through its holding company SOGEPA (Societe de Gestion de

Participations Aeronautiques)); 11.2 percent of Safran shares; 62.3 percent of the Naval Group; and 25.7

percent of Thalès shares). It is generally difficult for non-EU firms to participate in French defense

procurement, and even when the competition is among EU suppliers, French companies are often selected

as prime contractors.

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.

Italy: U.S. firms continue to cite widespread corruption in procurement, especially at the local level. In

2018, dissatisfied with the efficacy of anticorruption measures passed in 2012 and 2015, the Italian

Parliament approved legislation to strengthen efforts against public sector corruption. In May 2021, in a

key step to unlocking EU pandemic recovery funds, the Italian Government approved a decree accelerating

and simplifying bureaucratic procedures for public works, in addition to establishing a governance and

accountability structure for the administration of EU pandemic recovery funds. To increase transparency,

the decree sets out criteria the government must use to award contracts. These criteria include qualitative

aspects of competing offers, in addition to cost. The decree also simplifies the processes for conducting

environmental impact assessment and for approving renewable energy projects.

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: In the past, U.S. firms reported disappointment that “lowest cost” was the main criterion Polish

officials used to award contracts. Polish officials often overlooked other important factors in bid evaluation,

such as quality, company reputation, and prior experience in product and service delivery. A long-awaited

change came in October 2019, when the Polish President signed the new Public Procurement Law (PPL).

This law departs from the price criterion and allows a more collaborative approach between the government

agency and the bidders, and rewards innovation. The law, which entered into force in 2021, aims to

strengthen the position of contractors and subcontractors by increasing competition, simplifying

procurement procedures, and making appeals against a contracting authority’s decision easier. Because the

PPL was only recently implemented, its impact and effectiveness are still to be determined.

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Defense companies operating in Poland have indicated that the Ministry of Defense may use statutory

exclusions to bypass tendering procedures in signing contracts, and that it sometimes requests significant

offsets and technology transfers primarily associated with large-scale acquisitions.

Slovakia: Stakeholders, including U.S. companies, report that “lowest cost” continues to be the main

criterion used in awarding most government procurements in Slovakia, despite EU legislation allowing for

aspects other than cost to be taken into consideration. The 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

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.

Slovenia: U.S. firms report short timeframes for bid preparation, tendering documentation that is difficult

to understand, 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.

INTELLECTUAL PROPERTY PROTECTION

As part of its Digital Single Market (DSM) Strategy, the Commission in September 2016, issued a proposed

Directive on Copyright in the Digital Single Market (Copyright Directive), with the stated goal of

addressing legal uncertainty for both right holders and users with regard to certain uses of copyright-

protected works and other subject matter in the digital environment. The Copyright Directive was published

in April 2019, and Member States were required to transpose it by June 7, 2021. Only four Member States

have implemented the Directive by the deadline. The Commission requested an explanation from the

remaining 23 Member States by September 26, 2021, and the Commission is analyzing the answers from

Member States before starting more formal infringement procedures. 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 the equities of U.S. stakeholders.

The Commission is exploring the possibility of a directive or other legislative instrument in response to the

CJEU judgment in Recorded Artists Actors Performers, C-265/19. The CJEU held that all performers,

regardless of nationality, are entitled to equitable remuneration. Some Member States would like to modify

the EU acquis in response to the CJEU’s judgment so that U.S. performers are excluded from the right to a

single equitable remuneration, shared with phonogram producers, when a phonogram is published for

commercial purposes, or a reproduction of such phonogram is used for broadcasting by wireless means or

for any communication to the public.

The United States is closely monitoring the Commission’s Digital Services Act (DSA) proposal, which is

a legislative initiative intended to regulate certain online services, including rules for how content is shared

online. Some U.S. stakeholders have expressed concern that the DSA’s adoption of the framework for

limitations of liability from the E-Commerce Directive (2000/31/EC) could include modifications to

eligibility threshold and conditions that adversely impact intellectual property rights, in particular copyright

and trademarks. U.S. stakeholders have raised concerns that the EU Council’s version of the DSA proposal

could weaken the current liability regime and have a detrimental impact on the existing standards and

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practices for addressing illegal content and activities, including online infringement of copyright and related

rights.

The Commission’s Digital Markets Act proposal includes requirements for large providers (“gatekeepers”)

of certain online services to share their data with their European competitors. These rules could force some

U.S. companies to give free access to databases in which they have heavily invested and to reveal their

trade secrets. Furthermore, the Commission is reviewing the possibility of reopening the Directive on Trade

Secrets and the Directive on Databases.

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 limit use in the EU market to only certain EU

producers, and the use of any term that even “evokes” a GI is also blocked. However, despite this level of

protection afforded to products sold within the EU, some producers in Member States still produce products

that are protected as GIs in other Member States and then export these products outside the EU, such as

feta made in Denmark and France. The EU has also granted GI protection to the cheese names danbo and

havarti, widely traded cheeses which 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, with often only

limited due process requirements to safeguard existing producers, rights 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.

In October 2020, the Commission published an inception impact assessment on the revision of the GI

system for agricultural products, foodstuffs, and wines and spirit drinks. As part of the review, the

Commission aims to streamline the GIs application process for European farmers and cooperatives through

modified registration and enforcement procedures.

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

intellectual property (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 and by its push for the introduction of a system of sui

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generis protection of non-agriculture products. 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 World Intellectual

Property Organization (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 EU approved amendments to its patent term restoration mechanism, Supplemental

Protection Certificates (SPC) (Regulation EC 469/2009). The amendments alter the exclusive rights

conferred via an SPC through the introduction of an export and stockpiling waiver, thereby allowing the

manufacture of pharmaceutical products, including generic pharmaceuticals and biosimilars, in the EU for

the exclusive purpose of export to third countries as well as for stockpiling during the last six months of the

validity of the SPC for the EU market. These amendments entered into force in July 2019. The U.S.

pharmaceutical industry has expressed concerns as to the possible ramifications of the SPC manufacturing

waiver, particularly the possibility of the diversion of pharmaceuticals produced pursuant to the waiver

either within the EU or in foreign markets. The United States is closely monitoring this matter.

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 Parliament adopted legislation in 2019 meant

to strengthen protections and implement the EU Trade Secrets Directive, but criminal penalty legislation is

still pending. A local industry association, which also represents U.S. audio-visual copyright holders, raised

concerns that the draft implementing legislation for the EU Directive on Copyright includes additional

obligations for rights holders, such as limitations to company takeovers or provisions that weaken the ability

of rights holders to control access to their works.

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

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. Bulgaria

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previously agreed to adopt this technique of reviewing random samples of content from online sites, instead

of reviewing all of the content, to determine whether infringement is occurring.

France: The French Government is increasing its efforts to combat online piracy. A law on the regulation

and protection of public access to cultural works in the digital era approved on September 29, 2021,

established the Regulatory Authority for Audiovisual and Digital Communication (ARCOM) capable of

regulating websites and audiovisual and digital communications. The law also introduced a fast-track

remedy to prevent the illegal broadcast of sporting events.

The French Government issued an order in December 2020, transposing into French law the EU Directive

on Audiovisual Media Services and the EU Directive on Copyright. This implementing legislation requires

financial contributions from French and U.S. platforms for the production of EU and French television and

movies based on their revenues in France. The government also issued an order on May 12, 2021, enforcing

in France the EU Directive on Copyright, which holds content-sharing platforms liable for the unauthorized

communication of copyrighted content. The United States will continue to monitor ways this legislation

may impact U.S. stakeholders.

Germany: Germany implemented the EU Directive on Copyright in 2021. It introduced an ancillary

potentially copyright-protected content, including the development of pre-flagging mechanisms through

which users can mark individual uploads as legitimate and obligations to take down “obviously falsely

marked content.” The United States will monitor the ways implementation may impact U.S. stakeholders.

Germany also amended its patent law in June 2021. The amended law provides that infringement of a

patent does not always entitle the right holder to injunctive relief in cases of disproportionate hardship for

the defendant or third parties.

Greece: In 2020, Greece was removed from the Watch List in the 2021 Special 301 Report

as a result of

its progress in addressing concerns regarding IP protection and enforcement and in light of its steps to

address the widespread use of unlicensed software in the public sector. Specifically, Greece allocated

significant funds and made a subsequent award to purchase software licenses, which had been a long-

standing concern of rights holders. Moreover, Greece made progress in online enforcement and introduced

legislation to impose fines on those possessing counterfeit products. The removal and continued steps to

improve protection of IP appear to have spurred U.S. investment in Greece, particularly in the technology

sector. The United States will continue to monitor Greece’s enforcement efforts.

Poland: Stakeholders continue to identify copyright piracy online as a significant concern in Poland and

noted inconsistent enforcement on the part of regional police forces and backlogs in the Polish courts. In

July 2020, Poland amended the Code of Civil Procedure, introducing a new category of court cases called

“Proceedings in Matters of Intellectual Property” and establishing five regional courts and two courts of

appeal specializing in the protection of intellectual property. The specialized courts were created to

adjudicate cases of copyright, industrial property rights, unfair competition, and certain categories of

personal rights.

In May 2019, Poland initiated a legal challenge against parts of the EU Copyright Directive, a case which

is still pending before the CJEU.

Romania: Romania remained on the Watch List in the 2021 Special 301 Report

. Positive steps include the

passing in July 2020 of legislation to implement the EU Trademark Directive and corresponding

amendments to the national trademark law. However, online piracy remains a serious concern. Some

notorious online pirate sites are reportedly hosted or registered in Romania. Criminal IP enforcement

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remains generally inadequate, with questions arising regarding Romania’s commitment to resolute

enforcement, reflected in a lack of meaningful sanctions. Low penalties for IP violations impede

investigations and do not offer any meaningful deterrent to further IP crimes. Romania lacks an effective

and timely mechanism for right holders to submit takedown requests against online markets and hosting

platforms for infringing material. Adequate resources, including additional training for law enforcement

and funding for prosecutors, are also needed to enhance enforcement quality.

Spain: Recent enforcement raids, including joint operations with the U.S. Department of Homeland

Security, have targeted the manufacturing and distribution of counterfeit toys, games, and auto parts, as

well as a crime syndicate alleged to have laundered funds through textile businesses. However, online

piracy, illegal camcording, and counterfeit sales remain a concern. The Spanish Government set up an

inter-ministerial and intragovernmental task force to address the issue of counterfeit sales in physical

markets in December 2019. Spain was removed from USTR’s Notorious Markets List in 2020.

Spain transposed the EU Directive on Copyright in November 2021. The United States will continue to

monitor whether these changes improve IP protection and enforcement in Spain.

Sweden: Illegal streaming activities remain a threat to the movie, television, and live sports telecast

industries in Sweden. However, legal sales of music and film have increased in recent years, in part because

of enforcement efforts from right holders, as well as from the government, and increased awareness of the

importance of IP to Sweden’s economy and culture. Enforcement efforts by the Swedish Government have

also shown positive results, and right holders report that court cases to enforce their rights are successful in

the vast majority of cases. The Swedish Government published and submitted for comment draft

implementing legislation to the EU Directive on Copyright, with a proposed entry into force of July 2022.

SERVICES BARRIERS

Telecommunications

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. However, as of September 2021, only nine Member States had fully transposed

the EECC into their national laws. Regulation of the telecommunications sector is also addressed by the e-

Privacy Directive, the Telecoms Single Market Regulation, the Roaming Regulation, and the Radio

Spectrum Decision. Each Member State has its own independent national regulatory authority for the

telecommunications sector. The Body of European Regulators for Electronic Communications consists of

the heads of these independent regulators and provides advice to the Commission regarding measures

affecting telecommunications.

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 Commission has stated that the proposed

regulation will align rules for telecommunications services in the EU with the General Data Protection

Regulation (GDPR) and cover the confidentiality of business-to-business communication and

communication between individuals. While it would remove existing inconsistencies among Member State

rules, the proposed regulation also would expand regulatory coverage intended for traditional

telecommunications services providers to over-the-top Internet-enabled services. It also would apply

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extraterritorially, including in circumstances where processing is conducted outside the EU in connection

with services provided within the EU. U.S. suppliers have expressed concerns that, although the proposed

regulation is supposed to align the specific rules for telecommunications services with the GDPR, it actually

may 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 Council announced that

it had finalized its version, clearing the way for trilogue negotiations to begin. Those negotiations

proceeded slowly throughout 2021, but are expected to conclude in 2022.

International Termination Rates

In December 2020, the Commission adopted a Delegated Regulation under Article 75 of the EECC, setting

the maximum rates that a telecommunications operator may charge for fixed and mobile voice call

termination in the EU at €0.07 cent/min (approximately $0.08 cents) for fixed and €0.2 cent/min

(approximately $0.24 cents) for mobile. The Delegated Regulation includes a one-year transition period

for fixed termination services with the final rate taking effect in 2022 and a three-year transition period for

mobile termination services with the final rate taking effect in 2024. In addition, Articles 75(2) and 75(3)

of the EECC require the Commission to review the Delegated Regulation every five years.

The WTO Telecommunications Reference Paper, which relates to the General Agreement on Trade in

Services, includes disciplines designed to ensure that the charge for terminating a call on a network of a

major supplier is cost‐oriented. The United States will monitor the implementation of Article 75 of the

EECC by the EU and its Member States to ensure that the rates charged by telecommunications operators

in the EU for termination services provided to U.S. telecommunications operators are cost-oriented and that

Member States do not allow for differentiation of termination rates on the basis of the national origin of the

call in a manner that adversely affects U.S. telecommunications operators.

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. 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, as discussed below. 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.

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Member State Measures

Several Member States maintain measures that hinder the free flow of some programming or film

exhibitions. A summary of some of the more significant restrictive national practices follows.

France: France continues to apply the AVMSD and other content laws in a restrictive manner 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 prime-time restrictions pose a significant barrier to U.S. programs in the French market. 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 CSA 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. While they are

in theatrical release, feature films may not be shown or advertised on television. France also maintains a

four-month waiting period between the date a movie exits the cinema and the date when it can be shown

on video-on-demand.

The French Government issued an order in December 2020, transposing the AVMDS into French law. This

implementing legislation requires video-on-demand subscription services such as Netflix, Amazon Prime

Video, and Disney+ to contribute at least 20 percent of revenues in France to the production of European

and French movies and television fiction.

Italy: The Italian Broadcasting Law, which implements EU regulations, provides that the majority of

television programming time (excluding sports, news, game shows, and advertisements) be EU-origin

content. Quotas for Italian language content aired between 6:00 p.m. and 11:00 p.m. were introduced in

2020. On November 4, 2021, the Italian Government passed a decree transposing the AVMSD. Under

Italian law, mandatory quotas that require video-streaming platforms such as Netflix and Amazon Prime to

spend a percentage of their net revenue on Italian and European produced content will progressively

increase from 17 percent in 2022 to 20 percent 2024.

Hungary: In September 2020, modifications to Hungary’s media law entered into force. The modifications,

in part, implement the AVMSD. The law requires that half of the television broadcasters’ content providing

services within Hungary be of EU-origin and one-third of Hungarian origin. Radio broadcasters must

dedicate at least 35 percent of their music broadcasts to music composed by Hungarians.

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

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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.

Portugal: Television broadcasters must dedicate at least 50 percent of airtime to programming originally

produced in the Portuguese language, with at least half of this produced in Portugal. Music radio

broadcasters must dedicate between 25 percent to 40 percent of programming time to music produced in

Portuguese or in traditional Portuguese genres, with at least 60 percent of this produced by EU citizens.

In November 2020, when it enacted the 2018 AVMSD amendments into national law, the Portuguese

Government imposed a new one percent annual fee on relevant income from on-demand or streaming

platforms. The fees collected under this measure are to be transferred to the Institute of Cinema and

Audiovisual, whose main mission is to support Portuguese language productions in Europe and abroad. If

it is not possible to determine the relevant income of an on-demand or streaming platform, the annual fee

will be €1 million (approximately $1.1 million). The legislation passed in 2021 and entered into force in

January 2022.

Slovakia: The Slovak Act on Broadcasting and Retransmission requires that the majority of television

programing time (excluding sports, news, game shows, and advertisements) be for EU-origin content and

requires a minimum 10 percent airtime allocation (15 percent in the case of public broadcasters) for EU-

origin content created by independent producers. Private radio stations must allocate at least 25 percent of

airtime per month to Slovak music and state-run radio at least 35 percent. In addition, at least 20 percent

of the Slovak songs must be new production (i.e., recorded within the past five years). Similarly, quotas

on European and independent production exist for private TV channels and are imposable on private radio

stations, per special request. Quotas on the maximum time allocated to paid advertisement are also in place

for private and public radio and TV channels.

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 2010, the Autonomous Community of Catalonia passed the Catalan Cinema Law, legislation that requires

distributors to include the regional Catalan language in any print of any movie released in Catalonia that

had been dubbed or subtitled in Spanish (but not any film distributed in Spanish). The law also requires

exhibitors to exhibit such movies dubbed in Catalan on 50 percent of the screens on which they are showing.

In 2012, the Commission ruled that the law discriminated against European films and must be amended.

Additionally, the Spanish constitutional court ruled in July 2017 that the law was disproportionate and

reduced the requirements of movies to be dubbed in Catalan to 25 percent. As of November 2021, a revised

Catalan Cinema Law had not yet reached the Council of Ministers, nor had it been brought before the CJEU.

Although the Catalan Cinema Law technically came into force in January 2011, the Catalan regional

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parliament has not yet approved a regulation to implement the law. In the absence of the regulation, the

regional government and major movie studios in 2012 signed an agreement to dub 20 films in Catalan

annually, in addition to 20 independent films, with dubbing financed by the regional government.

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.

Video-on-demand services in Spain must reserve 30 percent of their catalogs for European works (half of

these in an official language of Spain) and contribute 5 percent of their turnover to the funding of

audiovisual content. In November 2020, the Spanish Government proposed legislation that would expand

this tax on earnings to streaming services not domiciled in the country, but the proposal has not been

approved. The revenues would finance EU content, including at least 70 percent by independent producers

and 40 percent of independent productions in Spain’s official languages.

Legal Services

Austria, Belgium, Bulgaria, Croatia, Cyprus, Greece, Hungary, Latvia, Lithuania, Malta, and Slovakia

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 State face more burdensome procedures to obtain authorization in another Member State than

would a similarly situated lawyer holding EU citizenship.

Member State Measures

Bulgaria: The Bulgarian Bar Act allows law firms registered in the EU to practice in Bulgaria under their

original name after they register with the local bar association. However, at least one of the law firm’s

partners has to be registered both in Bulgaria and in another Member State if the local partnership is to use

an internationally recognized name.

Hungary: U.S. lawyers may provide legal services only under a “cooperation agreement” with a Hungarian

law firm and may only provide information to their clients on U.S. or international law.

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. This interpretation has hampered movement of experienced

professionals and inhibited Member States from participating in the growing movement toward mutual

recognition in this profession. 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.

Member State Measures

Hungary: Foreign investors must have a Hungarian partner in order to establish accounting companies.

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Retailing Services

Member State Measures

EU nationality is required for operation of a pharmacy in Austria, France, Greece, and Hungary.

Hungary: In 2018, the Hungarian Government passed a law that requires mandatory tax audits for any

company with total revenue of more than $220 million that has not reported an after-tax profit for two

consecutive years, which mainly affects large retail chains. A 2018 modification of the law on construction

permits, which requires investors to obtain a construction permit and government approval before

converting any building into a retail shop exceeding 400 square meters or remodeling an existing retail unit,

also affects large retail chains. Industry representatives have argued that these new laws that distinguish

based on revenue and physical size, unfairly advantage domestic retailers competing with non-Hungarian

firms because such firms tend to be larger.

In 2020, the Hungarian Parliament passed a law imposing a progressive special tax on retail companies

with annual revenues above $2 million. According to the Finance Ministry, online multinational companies

and Internet shops are also subject to this tax. The tax rate on net sales for companies with annual revenues

between $2 million and $76 million is 0.1 percent; between $76 million and $254 million, 0.4 percent; and,

for revenues above $254 million, 2.5 percent.

Poland: Retailers have expressed concerns about tax measures directed at companies operating in retail

sectors. In July 2016, Poland adopted a new tax on companies engaged in the retail sale of goods that would

impose progressively higher rates of taxation based on a company’s turnover. In June 2017, the

Commission ruled that the measure breached EU rules on state aid by unduly favoring certain companies

over others, and Poland subsequently suspended implementation of the tax. In March 2021, the CJEU ruled

that the retail sales tax does not violate EU law. The tax is now in effect.

Romania: In July 2016, Romania passed a law requiring large supermarkets to source from the local supply

chain at least 51 percent of the total volume of their merchandise in meat, eggs, fruits, vegetables, honey,

dairy products, and baked goods. This law applies to high-volume supermarkets with more than €2 million

(approximately $2.3 million) in annual sales, affecting all major chains. The law also bans food retailers

from charging suppliers for any services, including on-site marketing services, thereby preventing

producers from influencing how stores market or display their products and injecting greater

unpredictability into the business environment. The Commission notified Romania of possible

infringement proceedings in 2017 due to the law’s requirements, particularly the “51 percent” rule. In 2020,

Romania altered the law and introduced “direct partnership” between commercial retailers and agricultural

cooperatives, agricultural producer associations, and agricultural producers and distributors, via 12-month

commercial contracts. Romania’s Ministry of Agriculture will draft subsequent legislation to establish the

terms of these direct partnerships.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Data Localization

The GDPR took effect in May 2018. 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 (SCCs) or binding corporate rules.

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 intelligent goods (i.e., smart devices),

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among other effects. Because 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 granted the United States a partial adequacy decision limited to companies

participating in the EU-U.S. Privacy Shield Framework. In July 2020, however, the CJEU issued a

judgment in the Schrems II litigation that invalidated the Commission’s decision. Although the CJEU’s

judgment upheld the overall validity of SCCs, it nonetheless imposed an affirmative obligation on entities

using SCCs “to verify, on a case-by-case basis ... whether the law of the third country of destination ensures

adequate protection, under EU law, of personal data transferred pursuant to standard data production clauses

…” On June 4, 2021, the Commission published the final version of new text for SCCs. As of September

27, 2021, companies entering into new data transfer agreements were required to use the new SCCs text,

and by December 27, 2022, all existing transfer agreements utilizing the old SCCs text must be updated or

they will no longer be valid. On June 21, 2021, the European Data Protection Board (EDPB) issued the

final version of its “Recommendation 01/2020 on measures that supplement transfer tools to ensure

compliance with the EU level of protection of personal data.” In January and February 2022, multiple

European Data Protection Authorities issued rulings that certain websites transferring analytics data to the

United States were in breach of the GDPR, based on the Schrems II judgment. On March 25, 2022, the

United States and EU announced that they have agreed in principle on a new Trans-Atlantic 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 European Union.

Interactive Computer Services

The Commission has adopted a new strategy for the digital economy, titled “A Europe fit for a digital age.”

EU leaders have also promoted “technological sovereignty” or “digital sovereignty” as a policy objective,

which, while it remains an ambiguous concept, appears to focus largely on the desire to boost the capacity

of Europe’s domestic industry. As part of this approach, the EU has put forward a broad range of proposals,

including regulations on industrial policy, competition, artificial intelligence, and platform liability, in

addition to certification schemes. Based upon the public statements of some key EU officials, there is

concern among U.S. industry that the Commission’s proposals could target large U.S. service suppliers and

hamper their ability to provide Internet-based services in the EU.

Digital Services Act (DSA)

In December 2020, the Commission published its proposal for a “Regulation … on the Single Market for

Digital Services (Digital Services Act).” The EU Parliament, Council, and Commission are in trilogue

negotiations to reach provisional agreement on the DSA. EU officials have indicated a desire to conclude

the legislative process for the DSA in 2022. As proposed by the Commission, the DSA provides the

Commission with new authority to regulate the business practices of certain large digital services suppliers.

The DSA would provide 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 would

also provide the Commission with the power to adopt “delegated acts” for portions of the DSA, which

provides the Commission with expansive authority to adopt additional regulation.

The DSA defines as a “Very Large Online Platform” (VLOP) any online platform with “average monthly

active recipients of the service” in the EU equal to or higher than 45 million (the EU will adjust this number

in the future to ensure it corresponds to 10 percent of the EU population). The DSA would impose

additional obligations on 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 would have to consider how its content

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moderation systems, recommendation systems, and systems for displaying advertisements, influence these

risks and enact mitigation measures for any systemic risks. A newly created European Board for Digital

Services (EBDS) and the Commission will publish an annual report on the systemic risks reported by

VLOPs and best practices for mitigation of those risks. The DSA would require VLOPs to subject

themselves to an independent, annual audit of their compliance with the DSA and to take any necessary

measures to address any deficiencies identified in such audits. The DSA would impose additional

obligations on VLOPs for their recommendation systems and display of advertising.

The proposed DSA would incorporate the existing provisions on the liability of providers of intermediary

services in the EU E-Commerce Directive (2000/31/EC) and would provide for additional harmonization

of notice and take-down procedures across Member States. The DSA would also impose numerous

obligations on providers of intermediary services, including hosting services and online platforms.

Digital Markets Act (DMA)

In December 2020, the Commission published its proposal for a “Regulation … on contestable and fair

markets in the digital sector (Digital Markets Act).” In March 2022, the EU Parliament, Council, and

Commission reached a provisional agreement on the DMA. EU officials have indicated a desire to conclude

the EU legislative process for the DMA in 2022. The European Parliament and Council must still approve

formally the final version of the DMA. As proposed by the Commission, the DMA would provide the

Commission with new authority to regulate the business practices of certain large digital services suppliers.

The DMA would provide the Commission with the authority to impose fines not exceeding 10 percent of

the total annual turnover of an intermediary service provider. The DMA would also provide the

Commission with the power to adopt “delegated acts” for portions of the DMA, thereby providing the

Commission with expansive authority to adopt additional regulation.

The DMA would apply 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 would provide the Commission with authority to add new

services to the list of “core platform services.” The Commission would have broad authority to determine

that any provider of one or more core platforms services is a “gatekeeper,” but 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. Once a provider has been designated as a “gatekeeper,” the provider would 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 would give 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. Under the proposal, 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.

Regulation on Preventing the Dissemination of Terrorist Content Online

The Regulation on addressing the dissemination of terrorist content online was finalized in May 2021, and

will go into effect on June 7, 2022. The new rules impose a one-hour deadline for platforms to remove

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content following an order from national authorities and require platforms to take proactive measures to

ensure that the platforms are not misused for the dissemination of terrorist content online. U.S. companies

have expressed concerns with the one-hour deadline and penalties of up to four percent of a company’s

global revenues.

Austria: In January 2020, Austrian legislation to combat online hate speech went into effect. The law

requires online social media platforms with more than 100,000 users in Austria and annual revenue of at

least €500 million (approximately $560 million) in Austria to establish a department with a streamlined

process for managing complaints regarding hate speech. The law allows individuals to sue in court to

compel platforms to delete content ruled to be hate speech. Online platforms that are “directly linked to

journalistic activity” and other online information services such as Wikipedia are exempt from the new law.

Online retail services are also exempt.

France: On August 25, 2021, France’s “Upholding Republican Principles” law went into effect. The law

requires social media platforms to remove harmful content within a specified timeframe. The law also

includes a provision that prohibits divulging on the Internet any personally identifiable information that

endangers another person physically, psychologically, or materially. This new offense is punishable by up

to three years in prison and a fine of €45,000 (approximately $54,600). If the targeted individual is a public

servant, the punishment is more severe—up to five years in prison and a fine of €75,000 (approximately

$91,000).

Germany: In January 2018, the Act to Improve the Enforcement of Rights in Social Networks (NetzDG)

went into effect. The NetzDG mandates that social network providers with more than two million users

block or remove “obviously illegal” content within 24 hours after notification and any other illegal content

within 7 days of notification and provides for fines as high as €50 million (approximately $57 million) for

non-compliance. In April 2021, NetzDG was amended to require, as of February 2022, social network

providers to report, in the case of certain severe offenses, information regarding content on their site and its

creators to the Federal Criminal Office. In June 2021, another amendment to the law added a requirement

that social network providers supply users with a “user-friendly” mechanism for reporting complaints, as

well as stronger protection of users against unauthorized deletion of their posts.

Digital Services Taxation (DST)

The United States and EU Member States are among the 137 member jurisdictions to have joined the

October 8, 2021, OECD/G20 “Statement on a Two-Pillar Solution to Address the Tax Challenges Arising

from the Digitalization of the Economy.” On October 21, 2021, the United States, Austria, France, Italy,

Spain, and the United Kingdom 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, DST liability that accrues to Austria, France, Italy, Spain, and

the United Kingdom 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

United Kingdom and committed not to take further trade actions against these countries with respect to their

existing DSTs 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, 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.

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Cybersecurity Standards and Certification

ENISA

In April 2019, the EU adopted the Cybersecurity Act, which tasked the EU Agency for Network and

Information Security (ENISA) with developing voluntary EU-wide cybersecurity certification schemes for

ICT products, services, and processes, setting assurance levels of “basic,” “substantial,” and “high.”

Currently, the Stakeholder Cybersecurity Certification Group (SCCG) and European Cybersecurity

Certification Group (ECCG)—consisting of Member States authorities—are responsible for advising and

assisting the Commission and ENISA on these cybersecurity certification schemes. They are currently

working on a voluntary scheme for all kinds of cloud services (i.e., IaaS, PaaS, SaaS, and other cloud

services) that would cover three assurance levels (basic, substantial, and high) and include transparency

requirements such as providing information about the location of data processing and storage. Although

the schemes are voluntary, U.S. stakeholders are concerned that the result could be a de facto mandatory

certification requirement, which may adversely impact U.S. market access depending on the requirements

for certifications once finalized. Furthermore, the Commission has said it will assess by December 31,

2023, whether some schemes should become mandatory.

NIS 2.0

In December 2020, the Commission published its proposal for a directive to introduce new measures for a

common level of cybersecurity across the EU. The proposal seeks to impose regulatory requirements on

all entities involved in the global domain name system resolution chain, potentially subjecting U.S.

Government entities to certain requirements, audits, on-site inspections, and other enforcement measures

that the Member States implement.

France: In May 2021, the French Government adopted a National Cloud Strategy requiring all government

agencies to select only from vendors that have a French cybersecurity certification, which requires data

storage in France or in the EU. U.S. companies have expressed concern that U.S. cloud services suppliers

will be precluded from providing these services to the French Government. There are also concerns that in

the future the French private sector would adopt the certification requirement, which could further hamper

U.S. cloud service providers from providing services in the French market.

Italy: In September 2021, the Italian Government adopted a cloud strategy that requires the storage and

processing of encryption keys in Italy. This requirement will apply to any certified commercial cloud

service provider that is being used to host critical data and services for either local or central government

entities.

Artificial Intelligence Act

As discussed above in the Technical Barriers to Trade section of this report, in April 2021, the Commission

published a draft regulation for setting out harmonized rules on artificial intelligence (AI), commonly

referred to as the “AI Act.” The overall goal of the AI Act is to foster an environment that protects people’s

safety and fundamental rights. Under the Commission’s proposal, AI deemed to be high-risk would have

to comply with requirements related to a range of issues, including data governance, human oversight,

transparency, recordkeeping, and security. The Commission has identified a number of AI applications as

high-risk, including biometric identification, credit scoring, management of critical infrastructure, access

to education, job recruitment, essential private and public services, and law enforcement that may interfere

with people’s fundamental rights. High-risk AI systems would also have to undergo conformity assessment

before being placed in the EU market. Under the EU’s New Legislative Framework, testing results from

third-country testing bodies may be admissible only in instances in which a government-to-government

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agreement between the EU and a third country exists. U.S. stakeholders have expressed concerns that these

requirements may create bottlenecks in the approval process.

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.

While Bulgaria generally affords national treatment to foreign investors, more investors continue to cite

general problems with corruption, rule of law, frequently changing legislation, and weak law enforcement.

Stakeholders continue to express concerns about the non-payment of contractual obligations as an

investment deterrent.

In 2021, due largely to the unsuccessful attempts to form a government following two general elections,

the Bulgarian Government did not follow through on its sporadic threats to renegotiate the long-term power

purchase agreements of two large U.S. investors in the Bulgarian energy sector. The government has cited

the Commission’s state aid regulations as justification for potentially withholding compensation the

companies were contractually promised when they made their initial investments, which came before

Bulgaria acceded to the EU. The Commission has not formally ruled on the issue but wishes to have the

matter resolved. The United States has engaged extensively on the issue, and the Bulgarian Government

recently has indicated its commitment to resolving the dispute.

Croatia: U.S. companies doing business in Croatia complain that their operations are negatively affected

by inefficient and unpredictable judicial processes. Disputes between U.S. investors and Croatian partners

or government authorities can take years to resolve. U.S. investors have reported that local government

officials who take action against their assets in violation of court orders are rarely, if ever, penalized. They

similarly complain that foreign investors are harmed by local corruption, alleging judicial bias in favor of

local parties who have relationships with judges and judicial employees. While investors of all nationalities

(including Croatians) cite judicial inefficiency and corruption as common obstacles to doing business in

Croatia, U.S. investors have cited concerns that non-local litigants do not enjoy impartial access to the

courts, creating a further barrier to investment.

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. Non-EU residents or legal entities may bid on specific construction projects

but only after obtaining a special license from the Cypriot Council of Ministers.

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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. Non-EU

entities cannot invest directly in private tertiary education institutions, although they can do so indirectly

by investing through subsidiaries based in Cyprus or elsewhere in the EU. 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.

Greece: Greek authorities consider local content and export performance criteria when evaluating

applications for tax and investment incentives, although such criteria are not prerequisites for approving

investments.

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 and a decree, requiring that foreign investments be

reported to the Minister for Innovation and Technology in 23 strategic sectors, including transportation,

healthcare, energy, tourism, defense, finance, and information technology. In 2021, legislation determining

what is in the state interest expanded further to include higher education institutions, publishing, film, video,

television production, sound recording publishing, programming, broadcasting, and telecommunications.

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. Additionally, companies in strategic

sectors needed to report to the government by the end of December 2021 if there was a capital increase in

the company, a change in ownership, a bond, or a decision to transform or split. This legislation, as applied

to investments, was initially in effect until December 2020, but has been extended numerous times and will

be in force until December 31, 2022.

Italy: Some U.S. companies claim their investment plans have been hampered by Italy’s unpredictable tax

regime, multi-layered bureaucracy, and time-consuming legal and regulatory procedures. Tax rules in Italy

change frequently and are interpreted inconsistently. Tax disputes are resolved slowly, and initial findings

are frequently reversed, which reduces certainty and increases compliance costs. U.S. companies report

long delays in receiving VAT refunds.

U.S. oil and gas companies have argued that, in applying for necessary exploration and drilling permits

from the Italian Government and local authorities, they have faced delays longer than needed to determine

whether the requirements for such permits have been met. Similarly, U.S. telecommunications interests

complained about the difficulty of getting licenses for their satellites and questioned if the Italian

Government’s aim was to advantage domestic competitors. A U.S. private investment fund also

complained about the Ministry of Economic Development not moving forward with issuing concessions

for gaming licenses because of legal and bureaucratic hurdles.

Latvia: The judicial system in Latvia can present significant challenges to investors. Insolvency

proceedings continue to present serious problems. Cases often take several years to resolve, and there have

been reports of large-scale abuse by both insolvency administrators and bad-faith creditors who have

manipulated the proceedings to seize control of assets and companies and to extract unwarranted

settlements and fees. U.S. stakeholders also continue to voice serious concerns about the duration of civil

cases, while the nature and opacity of judicial rulings have led some investors to question the fairness and

impartiality of some judges. In 2021, Latvia created an Economic Affairs Court aimed at efficiently

handling complex commercial disputes and criminal cases of corruption, money laundering, and

sophisticated financial crime.

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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: The Wind Turbine Act, enacted in 2016, reflected tensions between the desire to promote

investment in renewable energy, and concerns over placement of wind turbines close to residential

buildings. One provision prohibited building a wind turbine at a distance of less than 10 times its height

from a residential building. In July 2020, the Polish Ministry of Economic Development and Technology

took steps to amend the 2016 Wind Turbine Act with draft regulations which, under certain conditions,

would allow municipalities to reduce the distance between a wind turbine and a residential building to no

less than 500 meters. The proposed amendments have undergone public consultations and the bill is

expected to be adopted by Poland’s Council of Ministers and sent to the Polish Parliament for approval in

the second quarter of 2022.

Since 2017, the Polish tax system has undergone many changes with the aim of increasing budget revenues

and compliance. More aggressive tax auditing and collection in some cases has led to delays in re-approval

of transfer pricing arrangements, changes in categorization of goods for purposes of using bonded

warehouses, possible incorrect collection of excise tax, and unclear guidance on application of the U.S.

double taxation treaty for stock options. In addition, an exit tax on both individual and corporate assets

may adversely affect foreign investors. On July 26, 2021, the Polish Government announced draft

legislation implementing broad tax reforms. The changes affect several areas of taxation including

corporate income tax, personal income tax, and VAT. These tax reforms are expected to enter into force at

the beginning of 2022, further complicating the Polish tax system.

The Polish Government has expressed a desire to increase the percentage of domestic ownership in some

industries such as banking and retail, which have large holdings by foreign companies, and has employed

sectoral taxes to advance this aim. Stakeholders have alleged that two new laws in the healthcare sector

discriminate against foreign firms, namely a hospital reform law favoring large public hospitals for public

reimbursement contracts and a law introduced in 2017 aimed at restricting ownership of pharmacies to

licensed pharmacists in an effort to force out pharmacy chains.

Romania: Uncertainty and a lack of predictability in legal, fiscal, and regulatory systems pose a continuing

impediment to foreign investment in Romania. The perception of corruption, expected changes to fiscal

policies, lack of infrastructure, and a lack of predictability in political priorities remain the largest

impediments to foreign investment in Romania.

Changing political priorities and a lack of capacity have led to persistent underinvestment in infrastructure,

which is well below EU standards. Many companies report experiencing long delays in receiving VAT

refunds to which they are legally entitled and allege that deadlines stipulated by law for the processing and

payment of refunds often are not respected.

Slovenia: Weak corporate governance and a lack of transparency, particularly with respect to state-owned

enterprises, continue to present significant challenges for investors in Slovenia. Potential U.S. investors

have reported that opaque decision-making processes in the government’s privatization program have

discouraged investment.

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. The law forbids

majority ownership by non-EU residents of a Slovenian-flagged maritime vessel unless the operator is a

Slovenian or other EU national.

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SUBSIDIES

Various financial transactions and equity arrangements throughout the EU raise questions as to 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

After 15 years of litigation, in October 2019, the WTO authorized the United States to take $7.5 billion in

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 U.S.-EU cooperative framework suspended the tariffs related to this dispute for

five years. The United States and the EU also agreed to clear principles, 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 parties that may harm our large civil aircraft industries. The United States and the UK established a

working group to address these issues on an ongoing basis.

Over many years, France, Germany, Spain, and the United Kingdom (as well as, to a much lesser extent,

Belgium) have provided subsidies to their Airbus-affiliated 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) of all Airbus aircraft models and have provided

other forms of support, including equity infusions, debt forgiveness, debt rollovers, marketing assistance,

and research and development funding, in addition to political and economic pressure on purchasing

governments. The cooperative framework indicates the EU’s intent to provide any future funding of this

type 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.

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 to ensure that it does not confer

any non-market advantage.

Government Support for Airbus Supplier

Member State Measures

Belgium: The Belgian federal government coordinates with Belgium’s three regional governments on the

funding of non-recurring costs to be financed by Belgian manufacturers in order to be able to supply parts

to Airbus. In this context, the Belgian Government decided in 2000 to set aside a budget of €195 million

(approximately $236 million) for Belgian industrial participation in the A380 program and in 2008, a budget

of €150 million (approximately $206 million) for Belgian industrial participation in the A350 XWB

program. Belgium has always stated that these were refundable advances, partially covering nonrecurring

costs in accordance with EU regulations. Both in 2006 and in 2009, the Commission initially disputed that

view, but later acquiesced. Only industrial research or experimental development projects linked to the

A350 XWB and A380 programs can be (partially) financed through reimbursable loans in accordance with

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EU regulations. The average intervention for the A380 program, which ended in 2019, was 47 percent and

for the A350 XWB program, 54 percent. Belgium did not consider these interventions as grants but

reimbursable advances based on sales forecasts for each aircraft, ostensibly risk-sharing between the related

companies and the Belgian Government. Statistics indicate that the total reimbursement level is more than

60 percent of the total sum of state interventions for all the Airbus programs, excluding the more recent

ones (A380, A350 XWB, and A400M), where production started relatively recently. This level is also

influenced by elements outside the control of the Belgian authorities (e.g., Airbus stopped the production

of A340 much earlier than initially planned and in 2019 announced that it will shut down the production of

the A380 in 2021).

Eurostat, the Commission’s statistical unit, notified the Belgian Government in 2014 that these amounts

should not be considered as reimbursable advances but subsidies, because they were never totally

reimbursed. Beginning in 2016, Belgian federal and regional governments were supposed to include the

Airbus interventions as subsidies in their budgets, but the Belgian Government did not do so between 2016

and 2021. However, in March 2022, the Belgian Government confirmed that it now classifies its Airbus

interventions as subsidies.

For the A350 XWB and A380 programs, the price distortion resulting from Belgian subcontractors is

estimated to be a minimum of €370 million (approximately $448 million). For the A400M program, the

Belgian federal government in 2016 agreed on a €45 million (approximately $54 million) grant for the 2017

to 2020 period.

France: In addition to the seed investment that the French Government provided for the development of

the A380 and A350 XWB aircraft, France provides assistance in the form of reimbursable advances for the

development by French manufacturers of products such as airplanes, aircraft engines, helicopters, and

onboard equipment. In February 2013, the French Government confirmed €1.4 billion (approximately $1.7

billion) in reimbursable advances for the A350 over the period 2009–2017 and a similar scheme for the

helicopter X6 to be built by Airbus Helicopter. The French Government’s 2022 budget includes €108

million (approximately $125.6 million) in reimbursable advances for aeronautical/aviation products, up

from €92 million (approximately $107 million) in the 2021 budget. Since 2018, France has not announced

appropriations for new programs in support of research and development.

In July 2008, Airbus, the parastatal Caisse des Dépôts et Consignations, and the Safran Group announced

the launch of the Aerofund II equity fund, capitalized with €75 million (approximately $90 million) destined

for the French aeronautical sector. The equity fund’s objective is to support the development of small and

medium-sized subcontractors that supply the aeronautical sector. Then in 2013, the Aerofund III equity

fund was launched with a fundraising target of €300 million (approximately $363 million) and an objective

of becoming the leading aerospace industry investment fund in Europe. At the end of December 2020,

assets under management of this fund amounted to nearly €750 million (approximately $872 million).

The next iteration of the Aerofund was born out of the COVID-19 crisis, which struck the world’s aviation

industry particularly hard. Since summer of 2020, the private equity investor Ace Management has

managed Ace Aero Partenaires, a fund to support and strengthen the aeronautics industry. The fund aims

to reach a size of at least €1 billion (approximately $1.1 billion). This reflects the will of the industry’s

major players, with the support of the French Government, to support the transformation and consolidation

of the aviation supply chain. Airbus, Safran, Dassault, and Thales have jointly committed a total of €200

million (approximately $231 million) to this fund. The French Government has confirmed its investment

of €200 million (approximately $231 million), of which €50 million (approximately $57.7 million) is from

Bpifrance, a French public investment bank.

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Germany: Between 2010 and 2015, the German Government provided Airbus with a €1.1 billion

(approximately $1.3 billion) loan package for the new A350 XWB wide-body jet. The loan runs until 2031

and covers deliveries of 1,500 aircraft. In addition to the A350 XWB loan package, Airbus also received a

€942 million (approximately $1.14 billion) loan for the development of the A380 in 2002. Airbus shut

down the production of the A380 in 2021. Airbus also receives funds from the German Government’s

aeronautics research program for a number of projects.

Hungary: Following the Hungarian Ministry of Defense’s procurement of 36 Airbus helicopters (20

H145M and 16 H225M) in 2018 and 2019 for about €500 million (approximately $606 million), Airbus

agreed to establish a new helicopter spare parts manufacturing site and training center in Hungary in a joint

venture with the Hungarian Government, which will have a 30 percent stake. The local government

provided 49 million Hungarian forints (approximately $160,000) in support of the venture. The site will

be under the joint ownership of Airbus and the Hungarian Government. Production is expected to start in

2022.

Portugal: In December 2019, the Portuguese Government authorized a €10.6 million (approximately $12.8

million) non-reimbursable loan under COMPETE 2020 to Stelia Aerospace, a wholly owned subsidiary of

Airbus, for the construction of a 20,000 square meter facility for the production of fuselages. Similar

support may be offered to other aerospace companies such as Embraer, which has operations in Portugal.

Spain: In April 2018, the Spanish Government reauthorized the Ministry of Economy, Industry, and

Competitiveness (now the Ministry of Economic Affairs and Digital Transformation) to grant a refundable

advance to Airbus of €12.7 million (approximately $15.3 million) for Spain’s continued participation in the

development program for the A350 XWB aircraft. The subsidy was eliminated via an agreement between

Airbus and the Spanish government in July 2020 to comply with Spain’s WTO obligations. Airbus is

expected to benefit from Next Generation EU funds, but details on the extent of assistance are still being

finalized.

OTHER BARRIERS

EU Imports of Hydrofluorocarbons

The EU Fluorinated Greenhouse Gas Regulation No. 517/2014 (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 announced that it is developing a proposal to revise the F-Gas Rule by April

2022, presenting the possibility of more severe reductions relative to current 2030 targets. U.S. stakeholders

have expressed concern that insufficient oversight and enforcement of the F-Gas Rule allows for

widespread import of HFCs that exceed and are not accounted for under the EU’s quota system. These

imports negatively affect U.S. exporters of environmentally friendly alternative refrigerants and undermine

stated EU F-Gas Rule environmental objectives.

EU HFC imports that exceed or are not accounted for in the EU quota system may enter the EU in several

ways. Companies may import HFCs above and beyond their quota provided they are intended for re-export

and use outside of the EU. In some cases, HFC imports are identified and reported upon entry, but they are

either imported by a company that is not an EU quota holder or the company is importing HFCs in excess

of its quota allowance. The United States and stakeholders are concerned that some HFCs labeled for re-

export from the EU ultimately end up in the EU market. The United States and stakeholders are also

concerned that HFCs are trafficked without the knowledge of customs officials, either hidden or falsely

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declared on customs forms, or they are imported unaccounted for when already integrated in equipment

containing HFCs.

An analysis of public HFC trade flow data commissioned by the European Fluorocarbon Technical

Committee concludes that the volume of HFCs placed on the EU market in 2018 as a result of insufficient

oversight and enforcement of the F-Gas Rule could be as high as 33 percent of the legally allowed quota.

These HFC imports undermine the demand for and sale of environmentally friendly alternative refrigerants,

of which U.S. industry is a significant global supplier.

EU Carbon Border Adjustment Mechanism (CBAM)

The United States is tracking the development of the EU CBAM proposal and has engaged with the

Commission over the course of 2021 to seek to ensure that the CBAM would consider regulatory and other

non-price mechanisms for reducing carbon emissions. The EU released its proposal for a regulation in July

2021, and the final regulation is expected to apply starting on January 1, 2023. The proposed regulation

includes considerations of how imports will be handled, establishes a central administrator for CBAM

management, and outlines how emissions values will be assigned, verified, and determined. The United

States will continue to monitor the EU CBAM proposal.

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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 2020 (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 2020 (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 can raise tariffs on those products to any rate at any time,

which creates uncertainty for importers and exporters.

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.

Taxes

Imports are subject to a variety of fees and charges in addition to tariffs. In addition, like all ECOWAS

countries, Ghana imposes a 0.5 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.

Under the Ghana Export-Import Bank Act, 2017, Ghana imposes a 0.75 percent levy on all non-petroleum

products imported in commercial quantities. This levy replaced the Export Development and Agricultural

Investment Fund levy of 0.5 percent. Effective through 2024, Ghana imposes a special levy of 2 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 on certain imported items, such as rice, poultry, printed materials, and electricity, a 12.5

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 charges on

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 to 35 percent from between 5 percent and 20 percent on some specified

vehicles such as passenger cars, sport utility vehicles (SUVs), and light commercial vehicles. The increase

is part of Ghana’s Automotive Development Policy aimed at attracting international companies to assemble

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vehicles in Ghana. The increased import duty was scheduled to take effect in November 2020, but has been

delayed because of opposition by used vehicle importers.

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 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.

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.

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 and increased costs. 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 deterioration of products, resulting

in significant losses for importers of perishable goods.

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.

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Imported vehicles are subject to a customs examination fee of one percent. The GRA Customs Division

uses a price list to determine the value of imported used vehicles in order to determine the examination fee.

Ghana also uses the price list in establishing the customs value of imported vehicles to calculate duties. In

April 2019, the Ghanaian Government announced a reduction in the reference values used for valuation by

30 percent on the “home delivery values” for all vehicles. Imported used vehicles more than 10 years old

incur an additional charge ranging from 2.5 percent to 50 percent of the cost, insurance, and freight (CIF)

value.

Ghana ratified the WTO Trade Facilitation Agreement (TFA) in January 2017. Ghana has yet to submit

transparency notifications related to: (1) the operation of the single window; and (2) the use of customs

brokers. Those notifications were due to the WTO on July 22, 2021, according to Ghana’s self-designated

implementation schedule.

Ghana has not yet notified its customs valuation legislation to the WTO, nor has it 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

Ghana develops its own standards for most products under the auspices of the Ghana Standards Authority

(GSA). The GSA has over 2,700 national standards on, inter alia, building materials, food and agricultural

products, household products, electrical goods, and pharmaceuticals. 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 the ports in Ghana to Bureau Veritas and Intertek

to verify the conformity of HRGs in the country of export. 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 in Ghana. 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. Classifying

these imports as high risk has provided Ghana a pretext to require the unnecessary additional step of in-

country testing.

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.

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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 2021, the

United States exported $272 million in new and used automobiles and vehicle parts to Ghana, representing

28 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,

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.

Sanitary and Phytosanitary Barriers

To address human health risks, 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.

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 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. In a positive

example of accountability, 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. A separate investigation into

allegations of corruption, which was referred by the Ghanaian President to the Office of the Special

Prosecutor, is ongoing as of March 2022.

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

In 2016, Ghana launched its national intellectual property (IP) policy and strategy in an effort to create a

welcoming environment for innovation and investment. Government officials periodically inspect import

shipments and conduct raids on physical markets for counterfeit and pirated goods. However, concerns

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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

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 concerning 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 amount of minimum

capital within Ghana; and, (3) must maintain a board of directors (five-person minimum) with at least three

members residing in Ghana.

Telecommunications Services

Ghana has required a minimum rate of $0.19 per minute for terminating international calls into Ghana since

2009, which is significantly higher than the prior average rate. The 2009 rate increase correlated with a

decrease in call volume from the United States to Ghana and a decrease in U.S. termination payments to

carriers in Ghana.

INVESTMENT BARRIERS

All foreign investment projects must be registered with the Ghana Investment Promotion Center.

Registration is designed to be completed within five business days, but often takes significantly longer.

Foreign investments are also subject to the following minimum capital requirements: $200,000 for joint

ventures with a Ghanaian partner; $500,000 for enterprises wholly owned by non-Ghanaians; and $1 million

for trading companies (firms that buy or sell imported goods or services) that are wholly owned by non-

Ghanaian entities. Trading companies are also required to employ at least 20 “skilled” Ghanaian nationals;

the term “skilled” is not defined in the relevant law.

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

(excluding soccer pools); 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.

At times, foreign investors experience difficulties and delays in securing required work visas for their non-

Ghanaian employees. The process for obtaining such required visas can be unpredictable and take several

months from application to delivery.

Obtaining access to land may also be challenging for foreign investors. Foreigners are allowed to enter into

long-term leases of up to 50 years, and the lease may be bought, sold, or renewed for consecutive terms. In

December 2020, Ghana passed the Land Act, 2020 (Act 1036), which revises, harmonizes, and consolidates

laws on land to ensure sustainable land administration and management. The law changed the interests that

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Ghanaian nationals may acquire in land, from freehold to long-term leases. Ghanaian nationals are not

subject to the 50-year limit that applies to foreigners. The new law allows businesses with 40 percent or

less foreign ownership to acquire land. While the new law seeks to protect current or future landowners,

Ghana’s complex land tenure system still makes establishing clear title on real estate difficult.

Foreign investors in Ghana may also encounter a politicized business community and a lack of transparency

in certain government operations. Entrenched local interests can derail or delay new entrants. The political

leanings of the Ghanaian partners of foreign investors are often subject to government scrutiny. Corruption

among government and business figures also remains a concern. Ghana’s anticorruption laws provide

Ghanaian law enforcement and judicial bodies robust legal powers to fight corruption in the country, but

these laws are not enforced consistently.

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). In 2019, the

criminal penalty for non-compliance with the regulation on mining or promoting mining without a license,

and the buying or selling of minerals without a license, was increased from a maximum prison sentence of

five years, to a minimum of 15 years for a Ghanaian and 20 years for a non-Ghanaian, with a maximum

sentence of 25 years. The change was intended to discourage unlicensed small-scale mining. 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, 2006 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 five percent interest. 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 or

burdensome. These regulations also require mandatory local equity participation for all suppliers and

contractors. The Minister of Energy must 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

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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 revenues, range from $70,000 to $150,000, compared

to fees of between $5,000 and $30,000 for local companies.

Local Content and Participation Requirements

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/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.

There are specific provisions in the 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. Effective January 1, 2019, security services have a 100 percent local content mandate. Under

the Classification of New Services Under the Minerals and Mining (Support Services) Regulations, 2012

(L.I. 2174), Ghana restricts to Ghanaians only 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.

OTHER BARRIERS

Export Ban

Since 2013, Ghana’s Ferrous Scrap Metals (Prohibition of Export) Regulations have banned the exportation

of ferrous scrap metals in order to protect the local steel industry.

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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

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, 100 percent of U.S. originating consumer and industrial goods enter Guatemala duty free.

Textile and apparel goods that meet the Agreement’s rules of origin also enter Guatemala duty free and

quota free.

In addition, nearly all U.S. agricultural exports enter Guatemala duty free under the CAFTA–DR.

Guatemala will eliminate its remaining tariffs on rice by 2023 and 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 products, tariff-rate quotas (TRQs) permit duty-free access for specified quantities during

the tariff phase-out period, with the duty-free amount expanding during that period. Guatemala will

liberalize trade in white corn through continual expansion of a TRQ, rather than by 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 is

carefully tracking to ensure the timely issuance of these permits.

Non-Tariff Barriers

Customs Barriers and Trade Facilitation

Guatemala notified its customs valuation legislation to the World Trade Organization (WTO) in 2005, and

has responded to the WTO Checklist of Issues that describes how the Customs Valuation Agreement is

being implemented.

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 can detain the imported product for 20 or

more days. Appeals involve a lengthy, opaque process that has lasted as long as four years. The U.S.

Government engaged with Guatemala on this issue during 2020 and 2021.

U.S. companies have also reported that Guatemalan customs authorities have challenged the validity of

claims of origin based on, among other things, differing interpretations of a product’s tariff classification

based on outdated tariff schedules. On December 28, 2020, the Government of Guatemala updated and

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established a single internal tariff schedule to simplify and facilitate SAT’s application of preferential tariffs

under the CAFTA–DR. The U.S. Government is monitoring to see if the harmonization of tariff codes will

address tariff reclassification issues.

SAT’s consistent rejection of origin certifications has negatively affected imports of U.S. goods. In cases

of rejected claims, SAT previously failed to identify in writing the basis of its decisions and only allowed

importers to make one correction to the certification of origin per entry. In April 2019, SAT issued a

memorandum instructing customs officials on how to correctly apply the certification of origin rules under

the CAFTA–DR, which appears to have addressed this specific concern. According to SAT’s instructions,

if a certification of origin is rejected, SAT must issue a written explanation of the reasons for the rejection.

The instructions also clarify that importers can resubmit corrected documents, but only within 15 days.

However, the 15-day limit prevents corrections from being made during post importation audits, resulting

in fines and fees for even minor problems.

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 WTO 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 several months. In addition, processed

meat and products require import permits from both the Ministry of Agriculture, Livestock, and Feed

(MAGA), and MSPAS.

Sanitary and Phytosanitary Barriers

Guatemala published an official list of quarantine pests in November 2016. Fumigated consignments,

which pose no or very low risk, may be denied entry due to the presence of quarantine pests without

consideration of additional or alternate treatments that would allow the product to safely enter Guatemala.

This has resulted in unjustified and expensive mitigation measures affecting U.S. products. In addition,

U.S. companies have raised concerns that the Intraregional Organization for Plant and Animal Health

(OIRSA), which has been delegated the responsibility for both the quarantine inspection and fumigation

services by MAGA, often breaks the cold chain of frozen containers to inspect for pests and requires

fumigations for pests that are already dead and therefore pose no risk. U.S. industry is concerned that when

treatments are required, products are unloaded, and the cold chain is broken, and the result is additional

fees and damage to the cargo. The United States raised this issue during the 2019 meeting of the CAFTA–

DR Committee on Sanitary and Phytosanitary Matters, asking MAGA for improved and more transparent

protocols at ports. MAGA improved quarantine protocols during 2021, including eliminating inspection of

frozen containers for pests. The U.S. Government continues to engage with MAGA to ensure transparency.

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SUBSIDIES

Export Subsidies

In February 2016, the Guatemalan Congress amended the Law for the Promotion and Development of

Export Activities and Drawback to replace an earlier tax incentive program. The tax exemptions under the

2016 amendments have a narrower scope, applying only to apparel and textile companies, as well as to

information and communication technology service providers, such as call centers and business process

outsourcing operations.

GOVERNMENT PROCUREMENT

Government institutions are required to use the online government procurement system,

GUATECOMPRAS, to track Government of Guatemala procurement processes since March 2004.

GUATECOMPRAS has improved the efficiency and transparency of government tendering processes.

Foreign suppliers must appoint a national representative to represent the interest of the company in

Guatemala.

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 2021 Special 301 Report

. Although intellectual property (IP)

protection appears to have improved slightly in 2021, 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 is a significant concern. Other concerns include the sale

of counterfeit pharmaceuticals and government use of unlicensed software. Cable signal piracy remains a

problem and some major cable providers have discontinued contracts with distributors that illegally

rebroadcasted U.S. television programming. 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 copyright piracy and commercial-scale sales of counterfeit goods. The United States

will continue to 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

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business and investment disputes through Guatemala’s judicial system is extremely time-consuming, and

civil cases can take many years to resolve.

Delays and uncertainty in obtaining licenses from relevant Guatemalan authorities for exploration and

operation in extractive industries inhibit current and potential investment by U.S. firms.

LABOR

The U.S. labor enforcement case brought against Guatemala under Article 16.2.1(a) of the CAFTA-DR 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 strong public sector anti-bribery commitments and anticorruption measures in

government contracting, and U.S. firms are guaranteed a fair and transparent process to sell goods and

services to a wide range of government entities.

However, U.S. stakeholders have expressed concerns that corruption in the Guatemalan Government,

including in the judiciary, continues to constrain successful investment in Guatemala.

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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, 100 percent of U.S. consumer and industrial goods enter Honduras duty free. Textile and

apparel goods that meet the Agreement’s rules of origin also enter Honduras duty free and quota free,

creating opportunities for U.S. fiber, yarn, fabric, and apparel manufacturers.

In addition, most U.S. agricultural exports enter Honduras duty free. Honduras will eliminate its remaining

tariffs on nearly all U.S. agricultural products by 2025. Honduras will eliminate tariffs on rice and chicken

leg quarters by 2023, and on dairy products by 2025. For certain products, tariff-rate quotas (TRQs) permit

some 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 is carefully tracking 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, the pork ribs are considered basic necessities

and are exempt from sales tax. In September 2020, the Honduras Customs Administration (HCA) requested

assistance from the U.S. Department of Agriculture to train officials to address the issue of cut classification

discrepancies. The United States Meat Export Federation trained more than 300 Government of Honduras

customs officials on pork and beef cut classification and nomenclature as of November 2021. While the

number of sales tax assessment cases for pork ribs has decreased since September 2020, the issue still

persists. The HCA is currently drafting an amendment to the law, which would eliminate this disparate

treatment based on the language of product description.

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

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pound for live hogs is higher than the price of imported pork meat. Importers forced to purchase Honduran

live hogs also face costs for slaughtering and processing – costs they do not face in connection with

imported pork meat. The quantity of live hogs that each importer must purchase has been based on the

volume of pork that the importer brings into Honduras. Local content requirements may disadvantage U.S.

exports of pork to Honduras and importers are concerned that the Honduran Government may pressure

them to increase local purchases.

Customs Barriers and Trade Facilitation

In July 2016, Honduras ratified the World Trade Organization (WTO) Trade Facilitation Agreement (TFA).

Current compliance priorities under the TFA are making operational the National Trade Facilitation

Committee (NTFC) and institutionalizing an Authorized Economic Operator (AEO) scheme. The NTFC

has a critical role in trade facilitation and business competitiveness, including objectives to identify and

address regulatory and procedural bottlenecks in the trade process, encourage interagency coordination,

and provide directives on major trade facilitation issues. The NTFC issued a work plan for 2020 with

indicators and milestones for its first year of operation. However, inefficient agency coordination and

publication of information piecemeal across ministerial websites reduce the efficacy and transparency of

the regulatory process in Honduras.

In July 2020, Honduras’ tax administration (Aduanas) requested technical support from the U.S. Agency

for International Development (USAID) to establish an AEO program. After developing a proposal for

design and rollout, Aduanas formally launched its AEO program in January 2021, and has already certified

its first company as AEO-compliant. USAID will continue to support expanding the AEO program to other

logistical chain firms (customs and logistics brokers) as well as work to establish an inter-institutional

agreement among Government of Honduras border control authorities to validate and recognize the trade

benefits provided by AEO compliance. Private sector firms throughout the value chain can then opt to

certify, and operators will enjoy expedited or immediate clearance of goods and other trade advantages that

reduce transport costs and times.

SANITARY AND PHYTOSANITARY BARRIERS TO TRADE

Sanitary Authorization for Import Raw Materials and Additives for Food

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 new import requirement is redundant to the existing import permit mandated by SENASA,

the Honduran equivalent to the U.S. Food and Drug Administration, for cuts of meat that match ARSA’s

definition of raw materials for food consumption. Honduras originally notified this regulatory requirement

to the WTO in April 2019. The U.S. Government continues to engage with ARSA to facilitate trade.

SUBSIDIES

Under the CAFTA–DR, Honduras may not adopt new duty waivers or expand existing duty waivers that

are conditioned on the fulfillment of a performance requirement (e.g., the export of a given level or

percentage of goods). However, Honduras may maintain pre-existing duty waiver measures for such time

as it remains an Annex VII “developing country” for the purposes of the WTO Agreement on Subsidies

and Countervailing Measures. 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.

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GOVERNMENT PROCUREMENT

Honduras 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 provisions on

government procurement.

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.

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.

Although Honduras is open to foreign investment with limited restrictions and performance requirements,

companies have experienced long waiting periods for regulatory and legislative approvals. Efforts are

underway to streamline administrative procedures through the Government’s Transformation Unit.

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. 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.

OTHER BARRIERS

Bribery and Corruption

The CAFTA–DR contains strong public sector anti-bribery commitments and anticorruption measures in

government contracting, and U.S. firms are guaranteed a fair and transparent process to sell goods and

services to a wide range of government entities.

However, many U.S. stakeholders have expressed concerns that corruption in the government, including in

the judiciary, continues to constrain investment in Honduras. Administrative and judicial decision-making

is inconsistent, nontransparent, and time-consuming, and corruption reportedly remains a problem in

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government procurement, the issuance of government permits, and the regulatory system in general. The

telecommunications, health, and energy sectors are particularly problematic, as are real estate transactions,

especially land title transfers. Several U.S. real estate investors have raised concerns about the difficulty

of enforcing land titles.

Honduras has undertaken several efforts to address corruption in the past, including pursuing indictments

against current and former government officials; partnering with the Organization of American States to

create the independent Mission to Support the Fight against Corruption and Impunity in Honduras (though

Honduras failed to renew its mandate in January 2020); signing international transparency initiatives, such

as the Construction Sector Transparency Initiative; and dedicating resources to bolster existing

commitments under initiatives such as the Open Government Partnership and the Extractive Industry

Transparency Initiative. After the entry into force of a new penal code in 2020, courts have reopened

several corruption cases, and delayed some in progress to retroactively apply some comparatively lenient

provisions of the new law. In 2021, the U.S. Department of State named several current and former

government officials to public corruption lists such as the Corrupt and Undemocratic Actors (“353”) List.

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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 legal matters. Hong Kong is a separate and founding member of both the World Trade Organization

and the Asia-Pacific Economic Cooperation.

On June 30, 2020, 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, including

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, China’s autonomy, the U.S. President issued Executive Order 13936, reflecting a U.S.

determination that Hong Kong is no longer sufficiently autonomous to justify differential treatment in

relation to China, 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. Among other actions, this

directive led to the termination of reciprocal shipping income tax exemption treatments and a requirement

that goods produced in Hong Kong and imported into the United States be marked to indicate that their

origin is “China,” rather than “Hong Kong.”

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 Madrid Protocol in Hong Kong. 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

for a three-month public consultation period starting in November 2021. Once the public consultation period

is completed, the bill will be published in the government gazette before being introduced to the Legislative

Council for consideration.

While the Customs and Excise Department of Hong Kong investigates IP crimes and routinely seizes IP-

infringing products arriving from China and elsewhere, U.S. stakeholders report that counterfeit

pharmaceuticals, luxury goods, and other infringing products continue to enter Hong Kong in significant

quantities. 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 United States Trade Representative and the

Indian Minister of Commerce and Industry met in New Delhi, India for the twelfth TPF Ministerial in

November 2021.

IMPORT POLICIES

The United States has actively sought bilateral and multilateral opportunities to remove obstacles to India’s

market. Nevertheless, U.S. exporters continue to encounter significant tariff and non-tariff barriers that

impede imports of U.S. goods and services into India. While the Government of India has pursued ongoing

economic reform efforts, it also continues to promote programs such as “Make in India” (2014) and “Self-

Reliant India” (Atmanirbhar Bharat – May 2020) that seek to increase India’s self-sufficiency by promoting

domestic industry and reducing reliance on foreign suppliers and imported goods.

Tariffs and Taxes

Tariffs

India’s average Most-Favored-Nation (MFN) applied tariff rate was 15 percent in 2020 (latest data

available), which was the highest of any major world economy, with an average applied tariff rate of 11.9

percent for non-agricultural goods and 34 percent for agricultural tariff lines. India’s tariff regime is also

characterized by large disparities between the World Trade Organization (WTO) bound rates and MFN

applied rates. India has bound 74.3 percent of its tariff lines in the WTO, with an average bound tariff rate

of 50.8 percent. 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 percent. While India has bound all agricultural tariffs

in the WTO, nearly 30 percent of India’s non-agricultural tariffs remain unbound.

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. India also operates several complicated duty drawback, duty exemption, and duty

remission schemes for imports.

While India’s applied tariff rates for certain agricultural products are lower, the rates still present a

significant barrier to trade in agricultural goods and processed foods (e.g., poultry, potatoes, citrus, almonds,

apples, grapes, canned peaches, chocolate, cookies, frozen french fries, and other prepared foods used in

fast-food restaurants).

Given the large disparity between 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 on approximately

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70 product categories, including those covering key U.S. exports in the agricultural, information and

communications technology, medical devices, paper products, chemicals, and automotive parts sectors,

without any notice or public consultation process. 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.

Since 2014, the Indian Government led by the Prime Minister has promoted the “Make in India” campaign,

a drive to build the country’s manufacturing capacity in part by cutting barriers to foreign investment and

introducing regulatory reforms. As part of the campaign, India raised duties in multiple sectors, especially

focusing on two broad groups of products to encourage domestic production: 1) an assortment of labor-

intensive products; and 2) electronics and communication devices, including mobile phones, televisions,

and associated parts and components.

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 items, 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

articles under Section 232 of the Trade Expansion Act of 1962, as amended. 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 proceeding is ongoing.

Taxes

Prior to the introduction of the Goods and Services Tax (GST) system in July 2017, India maintained a

complex and opaque system of taxes, excise duties, and other charges. Imports were subject to state-level

value-added or sales taxes, the Central Sales Tax, and various local taxes and charges. The GST simplified

the tax regime by unifying India into a single market and improving the ease of doing business. The GST

is made up of three main taxes: the Central GST is a fee collected by the central government for sales in

all states; the State GST is a fee collected by each state for sales within a state; and the Integrated GST

(IGST) is a fee collected by the central government for sales between states and on imported goods. IGST

on imports is assessed on the sum of the customs value of the goods and the customs duties assessed on

those goods, thereby amplifying the effect of customs tariff rate increases.

Under the new system, goods and services are taxed under four basic rates: 5 percent, 12 percent, 18

percent, and 28 percent. Some items such as bread, fresh fruits and vegetables, and certain dairy products

have been exempted from the GST but are subject to certain preexisting taxes. While implementation

challenges remain, India’s GST council meets regularly to adjust GST rates and provide clarifications and

revisions to GST policy.

In 2018 India implemented a 10 percent social welfare surcharge on imports, which is assessed on the value

of other duties (not on the customs value of the imported product). Certain products are exempted from the

surcharge pursuant to official customs notifications. A landing fee of one percent is included in the

valuation of all imported products unless exempted through separate notification.

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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., livestock products and certain chemicals); and “canalized” items (e.g., some

pharmaceuticals and corn under a tariff-rate quota) importable only by government trading monopolies and

subject to cabinet approval regarding import timing and quantity.

While the official website of the Directorate General of Foreign Trade (DGFT) under the Ministry of

Commerce and Industry (MOCI) maintains a list of restricted items, India often fails to observe other

transparency requirements, such as the publication of timing and quantity restrictions in the Gazette of India

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. In August 2017, India imposed import quotas on pigeon peas, black matpe beans (Urd or

Vigna radiate), mung beans (Moong or Vigna mungo), and moong and urad lentils. In April 2018, the

Indian Government extended these quantitative restrictions to include peas. India’s MOCI again notified

quantitative restrictions for the Indian fiscal year 2020/2021 of 150,000 metric tons (MT) for peas and mung

beans as well as 400,000 MT for black matpe and pigeon peas. Imports of peas are restricted to the port of

Kolkata and are subject to a minimum import price. While India removed a number of the import quotas

for pulse crops in May 2021 to calm fears of food price inflation, it is not clear if the removal of the import

restrictions is temporary or permanent.

India also subjects boric acid imports to stringent restrictions, 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 requires 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 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

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

that excessive details are required in the license application, quantity limitations are set on specific part

numbers, 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.

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Customs Barriers and Trade Facilitation

In addition to being announced with the annual budget, India’s tariff rates 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, rendering India’s customs system

complex to decipher 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 will 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 under India’s applied tariff rates. U.S. companies have also faced extensive investigations

related to their use of certain valuation methodologies when importing computer equipment. Companies

have also reported being subject to excessive searches and seizures of imports.

Through Notification No. 91/2017-Customs (N.T.) of 2017, India amended Rule 10(2) of Customs

Valuation (Determination of Value of Imported Goods) Rules, 2007, to allow for the actual cost of

transportation and insurance to be included when determining the customs value of imported products.

However, India continues to allow for the use of costs that appear fictitious in cases where the actual cost

of transportation or insurance is not ascertainable. For example, if Indian customs officials determine they

cannot ascertain transportation costs, a cost of a 20 percent Free On Board (FOB) value will be used as the

cost of transportation in determining the total customs value of the imported product for the purpose of

assessing tariffs. The United States continues to raise questions about these practices in the WTO

Committee on Customs Valuation.

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 2017, the 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 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 technological innovation and have a dissuasive effect on

U.S. companies’ willingness to serve the market. Four devices––cardiac stents, drug eluting stents,

condoms, and intra-uterine devices––remain included in the National List of Essential Medicines, which

provides India’s Department of Pharmaceuticals and NPPA the authority to implement price ceilings. For

certain medical devices other than coronary stents and knee implants, India has applied a trade margin

rationalization approach to price controls, which caps margins throughout the supply chain to reduce patient

costs while also allowing for technological differentiation.

Ethanol Import Restrictions

In 2018, the Indian Government released the National Policy on Biofuels 2018, in which it set a target of

20 percent blending of ethanol with gasoline and a target of 5 percent blending with biodiesel by 2030. In

2020, the average ethanol blending rate in gasoline was pegged at 5 percent, up from 4.5 percent in 2019.

Furthermore, in January 2021, India advanced the timeline of its blending targets to have 10 percent

blending by 2022 and to reach 20 percent blending by 2025. However, according to Oil Ministry officials,

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India’s average ethanol blending rate stood at just 8.1 percent for the supply year (December 2020 to

November 2021).

Despite these targets, 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 (Harmonised System) 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.

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 to the WTO 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

mandates 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 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 and cost of the labeling requirements and offered an alternative solution to meet the

requirements. While the date of implementation has been postponed until April 15, 2022, as of March

2022, the Ministry of Chemicals and Fertilizers has not modified the QCO. U.S. industry has expressed

potential difficulties complying with the QCO in its form as of March 2022.

Toys – Quality Control Order

In February 2020, India notified the Toys (Quality Control) Order to the WTO, and the MOCI announced

that the order would take effect in September 2020. India subsequently postponed the implementation date

until January 1, 2021. The transition period did not provide sufficient time for U.S. manufacturers to meet

the QCO requirements given the disruptions in global trade and manufacturing due to the COVID-19

pandemic. The QCO required toys to conform to Indian Standard IS 9873 (based on the ISO toy standard)

and IS 15644, and bear the Standard Mark under a license from the Bureau of Indian Standards (BIS),

among other requirements including factory inspections and numerous new fees. Although some domestic

factory inspections started in 2021, U.S. industry reported that foreign manufacturers continued to lack

certification because of a backlog from pandemic-related travel restrictions preventing Indian officials from

conducting factory inspections. Until factory inspections are conducted and Indian authority provide

certification, U.S. toy manufacturers will continue to be unable to comply with the QCO and therefore

cannot export toys to India. The United States raised concerns with the toys QCO through the WTO TBT

Committee in 2020 and 2021.

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Cosmetics – Registration Requirements

In November 2018, India’s Ministry of Health and Family Welfare invited comments on a draft of its new

Cosmetics Rules. U.S. stakeholders provided comments encouraging a risk-based regulatory framework

that would align with good regulatory practices for cosmetics safety and with international standards. These

comments were not addressed in the final version of the Cosmetics Rules adopted in 2020.

Verification of U.S. Country of Origin Certificates

In July 2020, the Food and Safety Standards Authority of India (FSSAI) placed temporary holds on

consignments of a wide range of U.S. food and agricultural products, including almonds and apples,

questioning the validity of the Country of Origin (COO) certificates accompanying those products. FSSAI

has been considering whether to accept COO certificates from U.S. chambers of commerce and which

documents issued by freight forwarders and shippers will be recognized. The lack of clarity has placed a

significant portion of U.S. agricultural exports at risk of being prevented from entering the Indian market.

Beginning August 2021, FSSAI began scrutinizing COO certificates on alcoholic beverage consignments

from the United States, which has resulted in increased exporter uncertainty.

Labeling Requirements

In October 2020, FSSAI notified to the WTO an amendment to the Food Safety and Standards (Packaging

and Labeling) Regulations, which modifies labeling requirements for packaged foods containing

sweeteners. The amendment would require warning labels for various kinds of sweeteners. The United

States submitted comments through the WTO TBT Committee on the amendment and continues to monitor

India’s plans for finalizing the amendment.

Food Safety Standards (Alcoholic Beverages) Amendment Regulations, 2019

In July 2019, FSSAI published its Food Safety Standards (Alcoholic Beverages) Amendment Regulations,

and notified the amendments to the WTO. The amendments revised FSSAI’s 2018 mandatory alcoholic

beverage standards, which took effect in April 2019. In June 2020, FSSAI issued a directive to

operationalize certain provisions of the standards, including the addition of non-alcoholic beer as a separate

product category and permitting the use of new colors and additives in distilled spirits. FSSAI has not

clarified the timeline for enforcement of its amended regulations. While FSSAI addressed several of the

issues that the United States raised with India, several 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, Rye, 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

submitted comments through the WTO TBT Committee on the proposed changes in January 2021.

Organic Certification Changes

In 2020, FSSAI detained at least two U.S. organic shipments at port, asserting the shipments could not be

marketed as organic in India without an equivalency agreement between the Agricultural and Processed

Food Products Export Development Authority (APEDA) and the U.S. Department of Agriculture (USDA)

National Organic Program (NOP) despite previous import approvals by APEDA. On January 11, 2021,

USDA NOP terminated its organic recognition agreement with India following APEDA’s failure to address

compliance concerns for organic exports to the United States.

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Livestock Genetics

The Department of Animal Husbandry, Dairying, and Fisheries (DAHDF) imposes restrictions on imports

of livestock genetics and establishes quality standards that result in long delays and add additional burdens

for foreign producers. The procedure for obtaining import permission generally takes a minimum of four

months but can take longer. Importation of animal genetics requires a No Objection Certificate (NOC)

from the state government, import permission from the DGFT, and an import permit from the DAHDF.

However, domestic producers of animal genetics are not required to obtain a NOC.

Dairy Products

India imposes onerous requirements on dairy imports. India requires that 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. To address India’s religious and cultural

concerns, in 2015 and again in 2018, the United States proposed labeling solutions to allow for consumer

choice between dairy products derived from animals that have consumed feeds with ruminant protein and

those derived from animals that have not consumed such feeds. India rejected the proposals. This

requirement, along with high tariff rates, continues to prevent 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. It is still unclear whether India has sufficient lab capacity to fully implement

the testing criteria. In May 2021, India’s Telecommunication Engineering Center (TEC) proposed new

implementing procedures for the MTCTE scheme, which aims to expand the scope of the MTCTE scheme

to include “applicable information and communication technologies (ICT) equipment” and “related ICT

equipment.” The scope was further expanded in September 2021 to include 46 additional product

categories.

U.S. industry remains concerned with the in-country testing and certification requirements as well as the

overlapping nature of the expanded MTCTE scheme and its impact on products already regulated under

other Indian regulatory measures, such as the Ministry of Electronics and Information Technology’s

Compulsory Registration Order. The United States, bilaterally through the TPF and 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 (ILAC) accredited labs; and to adopt the

use of the Common Criteria Recognition Arrangement (CCRA).

The United States continues to raise concerns that U.S. electronics and information and communications

technology manufacturers have expressed regarding the Ministry of Electronics and Information

Technology’s (MEITY) Compulsory Registration Order (CRO). The CRO prescribes safety standards and

in-country testing requirements for electronic and information and communications technology goods. The

policy, which took effect in January 2014, mandates that manufacturers register their products and have

them certified by laboratories accredited by the Bureau of Indian Standards (BIS), even if the products have

already been certified by accredited international laboratories. In 2017, India increased the coverage of the

CRO to 44 product categories, and in 2020 expanded the list to cover an additional 12 products. U.S.

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industry reports that MEITY plans to continue to expand the CRO coverage. U.S. stakeholders have raised

concerns regarding product registration due to delays in providing registration guidance and resources, such

as Test Report Formats, and in launching BIS portals necessary for registrations following the

announcement of each new expansion of the CRO. U.S. industry has also cited the following as continued

issues: the 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 domestic testing requirement is particularly burdensome for Highly Specialized Equipment (HSE),

including servers, storage devices, printing machines, and information and communications technology

products that are installed, operated, and maintained by professionals who are trained to manage the

product’s inherent safety risks. These products pose little risk to the general public or consumers. U.S.

companies have incurred significant expenses providing testing samples within limited time frames. The

samples are also often destroyed during the safety testing process in Indian laboratories. Indian laboratories

have also indicated that they do not have the capacity to test some products that require industrial power

supply, exceed household or office voltage, or are very large in size and weight. Moreover, U.S. exporters

are forced to leave their products in these laboratories for extended and undefined periods of time. The

United States has recommended that the Government of India exclude HSE from the scope of the

requirements, recognize internationally accredited labs, harmonize labeling requirements with global

practices, harmonize the validity period of test reports and certification, and eliminate re-testing

requirements. The United States raised this issue bilaterally, including during technical exchanges through

the TPF, and multilaterally in the WTO TBT Committee in 2019, 2020, and 2021.

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 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 strawberries, shrimp feed, and pet food, among

others, into the Indian market.

FSSAI Order on Non-Genetically Modified and Genetically Modified-Free Certificates

In August 2020, FSSAI released an order requiring a non-Genetically Modified (non-GM) origin and

“Genetically Modified free” (GM free) certificate from the competent authority in the exporting country to

be included with imported food shipments that contain any of 24 listed products, effective March 1, 2021.

The listed products include grains, oilseeds, fruits, and vegetable products, regardless of whether genetically

engineered varieties of those crops are in commercial production and/or are being exported to India. India

has not provided any scientific or risk-based justification for the requirement. According to FSSAI, the

order is to ensure that only non-GM products are imported, pending new testing protocols and forthcoming

regulations in genetically engineered (GE) food products. On October 12, 2020, FSSAI clarified that its

order was applicable to only food crops listed in its earlier order and would not apply to processed food

products in general. U.S. apples exports to India, valued at approximately $22.5 million in 2021, were the

primary export initially affected by the restriction, facing a de facto ban. On February 24, 2021, FSSAI

published further clarification of acceptable certification options. These include: (i) non-GM origin and

GM-free attestation on the phytosanitary or health certificate for each consignment, provided that all

required information and declaration specified in FSSAI’s order of August 21, 2020, are included, or (ii)

non-GM origin and GM-free certificate issued by an authorized regional (i.e., state level) government

authority of the exporting country in the specified format. The United States and several other countries

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have pressed India to rescind the requirement in comments submitted to the WTO TBT Committee and will

continue to engage the Indian Government, including FSSAI, on the order.

Foods Derived from Biotechnology Crops

Biotechnology products or products containing an ingredient derived from 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. While the FSSAI began drafting regulations in 2018, it has not

proposed or implemented new regulations on GE foods. India’s biotechnology approval processes are also

slow, opaque, subject to political influences, and for the last several years, essentially non-functional. For

example, GEAC’s progress toward approving a public sector, domestically developed GE mustard plant

variety for commercial cultivation was further delayed pending additional government review and the

Indian Government has yet to decide whether to allow its sale. Consequently, soybean oil and canola oil

derived from GE soybeans and canola remain the only biotechnology food or agricultural products currently

approved for import into the Indian market. Certain cotton varieties represent the only GE crop approved

for commercial cultivation in India. The slow and uncertain approval process continues to hamper product

registrations needed to facilitate trade in biotechnology products. In addition, India’s labeling requirements

for packages containing GE foods remains unclear.

Poultry

In 2012, the United States commenced WTO dispute settlement proceedings against India due to India

maintaining import prohibitions on various agricultural products from the United States, including poultry

and poultry products, ostensibly due to concerns regarding avian influenza. In 2014, the WTO panel issued

its report finding in favor of the United States. The Appellate Body affirmed these findings, concluding

that India’s restrictions: 1) are not based on international standards or a risk assessment that takes into

account available scientific evidence; 2) arbitrarily discriminate against U.S. products; 3) are more trade

restrictive than necessary; and, 4) fail to recognize the concept of disease-free areas and are not adapted to

the characteristics of the areas from which products originate and to which they are destined. 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 are ongoing.

In March 2018, the United States and India agreed to veterinary export certificates for the shipment to India

of U.S. poultry and poultry products. In 2019 and 2020, the United States and India on several occasions

postponed both the issuance of the arbitrator’s decision while the parties discussed potential resolution of

the dispute. The United States continues to monitor market access issues related to poultry, such as

unnecessary testing requirements.

Distillers’ Dried Grains with Solubles

India’s regulatory requirements on distiller’s dried grains with solubles (DDGS) remain unclear. During

the past few years, 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 that are not living, and therefore

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,

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including DDGS. The Sub Committee submitted recommendations for approval to the GEAC in November

2019. As of March 2022, GEAC has not officially confirmed that it will not regulate DDGS as living

modified organisms.

In addition, unclear jurisdiction for the approval process for DDGS continues to complicate the process.

For example, in December 2019, 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, FSSAI had not regulated the manufacture, import, or

distribution of either commercial animal feeds or feed ingredients in India. In August 2021, the Government

of India approved the import of 1.2 million metric tons of soybean meal derived from biotechnology

soybean varieties – a non-living modified organism product that was previously disallowed – which may

establish a precedent for DDGS imports.

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 result in blocked U.S. grain and pulse imports.

Bilateral discussions to resolve these issues, including at the senior official level, have achieved little

success to date.

India, without prior notification, changed its inspection policy and practices for weed seeds, resulting in a

rejection of a U.S. lentil shipment on October 18, 2019, for the presence of two weed seeds that were not

previously on India’s published quarantine pest list of 31 weed seeds. On October 25, 2019, India published

in the Gazette of India an updated quarantine pest list that included an additional 26 quarantine weed seeds,

bringing the total number of quarantined pests to 57. Although the shipments were eventually released,

this change delayed the distribution of over 200 U.S. containers of lentils at the ports of Chennai and

Tuticorin, and uncertainty remains if additional changes might be implemented with no advance notice in

the future.

In addition, India requires methyl bromide (MB) fumigation at the port of origin as a condition for the

import of pulses. This type of fumigation is not permitted in the United States, and the United States

requested that India permit entry of U.S. peas and pulses subject to inspection and fumigation at the port of

arrival. India has granted a series of extensions allowing MB fumigation on arrival, but has offered no

permanent solution. In April 2018, however, the Government of India 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.

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. Multiple procurement rules, guidelines, and procedures

issued by multiple bodies have resulted in problems with transparency, accountability, competition, and

efficiency in public procurement. India also provides preferences to Indian micro, small, and medium-

sized enterprises and to state-owned enterprises. Moreover, 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.

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In September 2020, the Indian Ministry of Defense announced the final Defense Acquisition Procedures

(DAP) 2020, which replaced the Defense Procurement Procedure of 2016 and will be effective from

October 1, 2020, until September 30, 2025. Under the DAP 2020, acquisition categories of “Buy (Indian),”

“Buy (Indian – Indigenously Designed Developed and Manufactured)” (also referred to as “Buy (Indian-

IDDM)”), and “Buy and Make (Indian)” have an indigenous content requirement.

India’s National Manufacturing Policy calls for increased use of local content requirements in government

procurement in certain sectors (e.g., information communications technology and clean energy). Consistent

with this approach, India issued the Preferential Market Access notification, which requires government

entities to meet their needs for electronic products in part by purchasing domestically manufactured goods.

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” and cannot

participate in government tenders. The Order has constrained U.S. industry’s ability to participate in central

government tenders and procurements.

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 (approximately $1.35 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 of local content irrespective of the purchase value.

The Ministry of Power also reserved 86 products for local procurement through a similar order published

on September 17, 2020.

In April 2020, the 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 2021 Special 301 Report

to concerns over weak intellectual

property (IP) protection and enforcement. The 2021 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.

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Developments over the past year include India’s continued efforts to reduce delays and backlogs in the

examination of patent and trademark applications, promote IP awareness and commercialization throughout

India through the Cell for IPR Promotion and Management, and improve IP enforcement, particularly at

the state level. However, state-level IP enforcement remains inconsistent throughout India, with some states

conducting enforcement actions and others falling short in this regard.

In the field of copyright, procedural hurdles, cumbersome policies, and ineffective enforcement remain

concerns. In February 2019, Parliament delayed passing the Cinematograph (Amendment) Bill, 2019,

which would criminalize illicit camcording of films. The bill still awaits approval by Parliament. The

expansive 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 and complicated the

market for music licensing. In 2021, India abolished the Intellectual Property Appellate Board and

transferred its duties to courts. This development has created uncertainty regarding how certain IP royalties

will be set, collected, and distributed.

In 2019, the Department for Promotion of Industry and Internal Trade proposed draft Copyright

Amendment Rules that would broaden the scope of statutory licensing to encompass not only radio and

television broadcasting but also online broadcasting, despite a high court ruling earlier in 2019 that held

that statutory broadcast licensing does not include online broadcasts. If implemented to cover interactive

transmissions, the Amendment Rules would have severe implications for Internet content-related right

holders. This issue was discussed during the TPF. The United States is monitoring India’s next steps on

amending the Copyright Act.

In the field of patents, several factors negatively affect stakeholders’ perception of India’s overall IP regime,

investment climate, and innovation goals. Patent applications continue to face expensive and time

consuming pre- and post-grant oppositions and excessive reporting requirements. In October 2020, India

issued a revised “Statement of Working of Patents” (Form 27). While some stakeholders have welcomed

the revised version of Form 27, concerns remain with respect to whether Indian authorities will treat as

confidential sensitive business information that parties are required to disclose on Form 27. Concerns also

remain that the potential threat of patent revocations, lack of presumption of patent validity, and the narrow

patentability criteria under the India 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 India Patents Act and its impacts. In terms of progress in patent examination,

India issued a revised Manual of Patent Office Practice and Procedure in November 2019 that requires

patent examiners to look to the World Intellectual Property Organization’s Centralized Access to Search

and Examination system and Digital Access Service to find prior art and other information filed by patent

applicants in other jurisdictions.

India currently lacks an effective system for protecting against unfair commercial use as well as

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

pharmaceutical and agricultural products. The U.S. Government and stakeholders have also raised concerns

with respect to allegedly infringing pharmaceuticals being marketed without advance notice or opportunity

for parties to resolve their IP disputes.

U.S. and Indian companies have expressed interest in eliminating gaps in India’s trade secrets regime, such

as through the adoption of legislation that specifically addresses the protection of trade secrets. In 2016,

India’s National Intellectual Property Rights (IPR) Policy called for trade secrets to serve as an “important

area of study for future policy development,” but India appears to have not yet prioritized this work.

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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. Foreign participation in professional services is

significantly restricted, and is prohibited entirely in the case of legal services. 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

U.S. companies have reported that India’s satellite programming downlinking policy is overly burdensome.

India requires foreign programmers to establish a registered office in India or designate a local agent.

Programmers must also prove that they have a net worth of 50 million rupees (approximately $676,000) in

order to downlink one content channel and prove an additional 25 million rupees (approximately $338,000)

of net worth for each additional channel.

The Telecommunications Regulatory Authority of India’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 that 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. Despite these

modifications, the local content requirements remain prohibitive for certain retailers with highly specialized

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 warehouses); (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.

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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

stores in India. This narrow exception limits the ability of many electronic commerce service suppliers to

serve the Indian market.

Indian state governments have periodically challenged the activity of direct selling (i.e., the marketing and

selling of products to consumers away from fixed locations) as a violation of the Prize Chits and Money

Circulation Schemes (Banning) Act of 1978 (Prize Chits Act), thereby creating uncertainty for companies

operating in this sector. Enforcement of the Prize Chits Act is reserved to the states, which have adopted

varying implementation guidelines and taken unexpected enforcement actions, including the arrest of the

chief operating officer of a direct-selling company, on the basis of the ambiguous provisions of the Act. 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 distinguishing

legitimate direct selling from activities that violate the Prize Chits Act. However, in 2021, the 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 will lead Indian states to equate legitimate

direct selling companies with pyramid schemes and may open stakeholders up to legal challenges.

Education Services

Foreign suppliers of higher education services continue to face a number of barriers in India, including:

limitations on establishing independent campuses and issuing degrees; a requirement that representatives

of Indian states sit on university governing boards; quotas limiting enrollment; caps on tuition and fees;

policies that create potential for double taxation; difficulties repatriating salaries and income from research;

limitations on employing foreign faculty; and lack of autonomy in designing curriculum.

The Government of India approved a new National Education Policy (NEP) on July 29, 2020, to replace

the three-decade-old National Education Policy of 1986. The NEP 2020 is meant to provide an overarching

vision and comprehensive framework for both school and higher education across India. The NEP contains

a provision stating that institutions from among the top universities in the world will be permitted to operate

and set up campuses in India, and that a separate legislative framework will be put in place to provide these

institutions with more autonomy in regulatory and governance matters. The NEP proposes to ensure a level

playing field for public and private players, and it proposes a new regulator that would replace several

existing regulatory bodies and have authority to regulate, set standards for, and accredit higher education

institutions. The NEP will come into effect once implementing laws and regulations are enacted, but those

actions remained pending as of March 2022.

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

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expand is hindered by non-transparent limitations established by the Indian Government on branch office

expansion.

Foreign banks also face restrictions on direct investment in Indian private banks. Unlike domestic banks,

foreign banks are not authorized to own more than five percent of an Indian private bank without approval

by the Reserve Bank of India (RBI). Total foreign ownership of any private bank from all sources (foreign

direct investment, foreign portfolio investors, and non-resident Indians) cannot exceed 74 percent.

In 2020, the RBI issued a notification that limits the ability of banks to offer current accounts to customers

who have either cash credit or overdraft facilities from the banking system. Foreign banks operating in

India have expressed concerns that the measure will adversely affect their ability to conduct business not

only with current accounts but also in related areas such as trade finance. While the RBI’s stated goal is to

improve financial transparency and reduce the scope for fraud and bad loans, U.S. and other foreign banks

are concerned that the rule will disadvantage them, as domestic banks issue a vast majority of credit and

loans to Indian customers. U.S. banks noted this shift could incentivize customers to migrate their working

capital accounts to India’s public sector banks and adversely affect their ability to conduct business not

only with current accounts but also in related areas such as trade finance.

Insurance Services

In March 2021, the Government of 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. The law requires that a majority of Board

members be Indian residents, and, if an insurer is incorporated or domiciled outside of India, requires that

assets be held in an Indian trust with trustees resident in India. This also applies to an 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 August 2021, the Indian Government passed the General Insurance Business (Nationalization)

Amendment Bill, 2021, providing for greater private sector participation in public sector insurance

companies. The law removes the provision which, with respect to the General Insurance Corporation of

India and its four subsidiary insurance companies, required at least 51 percent of shares to be held by the

central government. The law also stipulates that part-time directors shall be held liable only for those acts

that were committed with their knowledge and were attributable through board processes, and where their

consent or connivance was involved or where they did not act diligently.

In 2015, the Insurance Regulatory and Development Authority of India (IRDAI) issued a revision to its

regulations governing the provision of reinsurance services in India. The regulations now 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. In 2018, IRDAI reaffirmed

that the state-owned General Insurance Corporation of India maintained the right of first refusal for all

reinsurance contracts.

The United States has raised 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 of the market (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.  Domestic firms were exempt from the cap. NPCI stated that the policy

would insulate the UPI system against systemic collapse should one of the market leaders experience a

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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 that would use a domestic proprietary QR code standard which could disadvantage foreign

suppliers.

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.

Architecture Services

Although Indian companies continue to demand high-quality U.S. designs for new buildings and

infrastructure development, foreign architecture firms find it difficult to do business in India due to the legal

environment. Court cases against foreign design firms seeking to perform work in India and harassment of

their potential clients have created uncertainty and business losses for U.S. providers of architectural and

related services.

Telecommunications Services

Barriers to Entry

In October 2021, the Government of India began allowing FDI of up to 100 percent in the

telecommunications section, removing the previous 49 percent cap, and allows such investments to flow

through the automatic route that does not require additional government clearances. However, India’s one-

time licensing fee for telecommunications providers – at approximately $500,000 for a service-specific

license or approximately $2.7 million for an all-India Universal License – serves as a barrier to market entry

for smaller companies.

Remote Access Policy

Global telecommunications operators have made significant investments in India’s network infrastructure.

However, telecommunications operators face significant challenges in their ability to remotely access their

networks due to a requirement to obtain pre-approval for each remote access site. Delays of as much as a

year in gaining such approval leave operators unable to remotely configure and operate their networks,

hampering network security and undermining services suppliers’ ability to operate networks efficiently.

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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. Foreign satellite operators are thus 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.

India also imposes onerous licensing requirements on foreign satellite-based personal communications

services. Licenses require high application fees and bank guarantees as well as prohibitively expensive

capitalization requirements. Further, licensees must construct local ground station facilities before offering

service. In addition, the use of any kind of satellite phone in India requires a license and the use of foreign

satellite phones in Indian waters is prohibited entirely. Together, these requirements make it economically

unfeasible for many foreign satellite communications providers to offer services in India.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Data Localization

India has proposed and promulgated several data localization requirements that would serve as significant

barriers to digital trade between the United States and India. These requirements, if implemented, would

raise costs for service suppliers that store and process personal information outside India by forcing the

construction or use of unnecessary, redundant local data centers in India. The requirements could serve as

market access barriers, especially for smaller firms.

Electronic Payment Services

In 2018, the 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 that the requirement to store payments data

locally also applied to banks operating in India. Requiring local storage of all payment information was a

disadvantage for foreign firms, which are more likely to be dependent on globally distributed data storage

and information security systems. Furthermore, a domestic data storage requirement hampers the ability

of service suppliers to detect fraud and ensure the security of their global networks. In 2021, the RBI

asserted that certain U.S. electronic payment service suppliers may not be in compliance with the data

localization requirements, and banned issuance of new cards for these suppliers. The United States is

monitoring the situation as discussions continue between the RBI and these U.S. electronic payment service

suppliers.

Personal Data Protection Bill

In 2019, the Personal Data Protection Bill (PDPB), 2019 was introduced in India’s Parliament. The bill

would require firms to store a copy of all “sensitive” and “critical” personal information related to Indian

persons on servers located in India. The bill would also impose onerous conditions on the cross-border

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transfer of “sensitive” personal information, requiring “explicit consent” by the owner of the data.

“Critical” personal information – a yet-to-be-defined category – could not be transferred outside of India

under any circumstances. Further, in the absence of standalone trade secret legislation, there is little

recourse for firms in the event of misappropriation of their sensitive information. These provisions would

undermine the ability of foreign firms to supply many services to Indian consumers on a cross-border basis

and would not increase the protection of personal information. A joint parliamentary committee evaluating

the PDPB submitted its recommendations to the government on November 22 and an updated bill may be

presented during a 2022 session of Parliament. The updated draft PDPB is expected to divide

responsibilities between the central government and states to enforce the law, create a Data Protection

Authority (DPA), and rely on the courts to resolve disputes rather than create a separate administrative

mechanism. U.S. firms remain concerned that the new bill will negatively affect firms’ ability to transfer

data across borders, the authority of the DPA remains unclear, and the bill may require sharing of certain

categories of non-personal data. The joint parliamentary committee recommended that the PDPB

incorporate non-personal data into the legislation, covering both personal and non-personal data.

Non-Personal Data

In July 2020, a report on Non-Personal Data Governance Framework was released by the Committee of

Experts constituted by MEITY. After incorporating stakeholders’ input, the report was revised and released

in December 2020, for an additional round of public, industry, and other stakeholders’ comments. The

proposed Framework would impose burdensome requirements on domestic and foreign firms, including

requests for mandatory data sharing, administrative obligations, and extending consent obligations to

anonymized data. Additionally, these mandatory data sharing requirements may affect copyrighted content,

patent, and trade secret protection.

MEITY established a Working Group on Cloud Computing tasked with formulating a framework for

promoting and enabling cloud services in India and examining the cybersecurity and privacy aspects of

cloud computing.

Electronic Commerce Policy

India is currently developing a new electronic commerce policy, early drafts of which have contemplated

broad-based data localization requirements and restrictions on cross-border data flows; expanded grounds

for forced transfer of business sensitive information, trade secret information, and other intellectual property

and proprietary source code; and preferential treatment for domestic digital products. The United States

has strongly encouraged India to reconsider this draft policy.

Technology

Cloud computing service suppliers face several barriers when providing services in India. Service providers

are prohibited from purchasing dual-use equipment needed to run networks, and are unable to own and

manage a network to cross-connect data centers and connect directly to an Internet Exchange Point. These

restrictions affect the ability of cloud services to effectively manage their own networks.

Internet Services

India’s central, state, and local governments regularly shut down Internet services in response to local unrest

or in order to suppress certain digital content and services. Observers tallied 41 shutdowns in 2021, 129

shutdowns in 2020, and 106 in 2019. Jammu and Kashmir experienced a 213-day Internet shutdown

starting in August 2019, which was one of the longest Internet shutdowns by a democracy. Such

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shutdowns––even if temporary––undermine the value of Internet-based services to their customers and

impose costs on local firms that depend on these services for their business.

In February 2021, the Government of India published new regulations, the Information Technology

(Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (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. These Rules require compliance by “significant” social media

intermediaries and platforms with five million registered users or more, which includes a number of U.S.

firms. The Rules impose a number of requirements that are either troubling or burdensome for U.S. firms.

For example, the Rules impose personal criminal liability on individual employees. The Rules also include

an obligation to identify the first originator of information, a requirement to appoint a local compliance

officer, imposition of and impractical compliance deadlines and take-down protocols. In 2021, U.S. firms

have been subject to an increasing number of takedown requests for content and user accounts related to

issues of domestic concern.

Digital 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. The 2020 and 2021 changes were enacted without prior notification or an opportunity

for public comment. Technology firms raised concerns that the definitions of “e-commerce operator” and

“e-commerce supply or services” are broad in scope and are likely to cover many digital transactions,

including the sale of data. Neither the original levy nor the 2020 expansion applies to firms that are

established in India.

In June 2020, the Office of the U.S. Trade Representative (USTR) initiated a Section 301 investigation into

India’s two percent equalization levy or digital services tax. In January 2021, USTR issued findings that

India’s digital services tax, 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 Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the

Digitalisation of the Economy. On November 24, 2021, the United States and India issued 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 U.S. 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 an OECD/G20

Two-Pillar Solution as pertaining to DSTs, India’s agreement as reflected in the November 24 statements,

and associated measures.

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INVESTMENT BARRIERS

Local Content Requirements

In 2010, India initiated the Jawaharlal Nehru National Solar Mission (JNNSM), which currently aims to

bring 100,000 megawatts of solar-based power generation online by 2022, as well as to promote solar

module manufacturing in India. Under the JNNSM, India imposes certain local content requirements

(LCRs) for solar cells and modules, and requires participating solar power developers to use solar cells and

modules made in India in order to enter long-term power supply contracts and receive other benefits from

the Indian Government.

The United States challenged the LCRs through the WTO dispute settlement system. In February 2016, a

WTO panel found the LCRs inconsistent with India’s WTO commitments. These findings were upheld by

the Appellate Body in September 2016, and the DSB adopted the Appellate Body and panel reports in

October 2016. In 2017, the United States requested authorization from the DSB to suspend concessions on

the grounds that India had failed to comply with the DSB recommendations within the “reasonable period

of time” to which the parties had agreed (December 14, 2017). The U.S. request was referred to arbitration.

In 2018, India requested the establishment of a compliance panel, asserting that it had complied with the

DSB recommendations. The arbitration and compliance panel proceedings are ongoing.

SUBSIDIES

Export Subsidies

India’s Foreign Trade Policy (FTP) 2015-2020, announced in 2015, is primarily focused on increasing

India’s exports of goods and services to raise India’s share of world exports from 2 percent to 3.5 percent.

The FTP consolidated many of India’s existing export subsidies and other incentives into two main export

incentive schemes: the Merchandise Exports from India Scheme (MEIS), and the Service Exports Incentive

Scheme (SEIS). Under MEIS, exports of notified goods and products to notified markets, as listed in

Appendix 3B of the Handbook of Procedures, are granted freely transferable duty credit scrips on realized

FOB value of exports in free foreign exchange at specified rates. These range from 2 percent to 5 percent,

with temporary increases as high as 20 percent. MEIS provides export subsidies for a wide range of

agricultural and other goods, including certain dairy products which also receive export subsidy support

through state governments. Service suppliers of notified services as per Appendix 3E are eligible for freely

transferable duty credit scrip at five percent of net foreign exchange earned. In addition, there are various

other duty exemptions and remission schemes, such as the Advanced Authorization scheme, the Duty Free

Import Authorization scheme, the Deemed Exports scheme, the Export Promotion Capital Goods (EPCG)

scheme, and the Export Oriented Unit (EOU) scheme (which includes the Electronics Hardware

Technology Park scheme, Software Technology Park scheme, and Bio-Technology Park scheme).

India also maintains several export subsidy programs, including exemptions from taxes, for certain export-

oriented enterprises and for exporters in special economic zones. Numerous sectors (e.g., textiles and

apparel, steel, paper, rubber, toys, leather goods, and wood products) receive various forms of subsidies,

including exemptions from customs duties and internal taxes. India not only continues to offer subsidies

to its textiles and apparel sector in order to promote exports, but has also extended or expanded such

programs and implemented new export subsidy programs. As a result, the Indian textiles sector remains a

beneficiary of many export promotion measures.

Upon graduation from Annex VII(b) of the WTO Agreement on Subsidies and Countervailing Measures in

2017, India was required to eliminate all export subsidies. In 2018, the United States commenced WTO

dispute settlement proceedings against India concerning India’s continued export subsidy schemes. On

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October 31, 2019, the panel found that five Indian export subsidy programs provided prohibited subsidies

that were inconsistent with India’s WTO obligations. The Indian programs found to be inconsistent were

the MEIS, the EOU scheme, the Special Economic Zones scheme, the EPCG scheme, and a duty-free

imports for exporters program. India appealed the panel report in November 2019.

India has begun to phase out the MEIS program, under which reportedly no new benefits could be claimed

starting on January 1, 2021. The MEIS program is being replaced with the Remission of Duties and Taxes

on Export Product (RoDTEP) program, for which India has not published implementing measures as of the

date of this report but has stated that benefits would be available for exports made on or after January 1,

2021. RoDTEP is modeled after the Rebate on State and Local Taxes and Levies (RoSCTL) scheme, which

is currently operated by the Ministry of Textiles and is limited to apparel sector exports. Like MEIS,

RoDTEP benefits are expected to be available for a broad range of products, and press reports suggest that

RoDTEP will surpass MEIS in terms of revenue forgone by India.

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) scheme, 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. In addition, the Indian

Government procures pulses and oilseeds when market prices fall below the MSP. India’s announcement

of MSPs can have the effect of providing a subsidy to the entire crop by distort market prices and 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.

In May 2018, the United States submitted the first-ever counter-notification (CN) to the WTO Committee

on Agriculture highlighting, based on publicly available information, India’s underreporting of its market

price support (MPS) for rice and wheat for marketing years 2010/2011 to 2013/2014. The CN estimated

MPS well above India’s de minimis WTO commitment of 10 percent of the total value of production.

Subsequently, in November 2018, the United States submitted a CN on India’s MPS for cotton covering

marketing years 2010/2011 to 2016/2017, estimating MPS for cotton in various years ranging between 53

percent and 81 percent – well above India’s WTO commitment of 10 percent of the total value of

production. In February 2019, the United States submitted a CN on India’s MPS for five pulses: chickpeas,

pigeon peas, black matpe, mung beans, and lentils.

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. India uses export subsidies to reduce

stocks, and it has permitted exports of certain agricultural commodities from government public-

stockholding reserves at below the government’s costs. In September 2021, the Indian Government cleared

$244 million in subsidies to sugar mills for exporting 6 million metric tons of sugar for marketing year

2020/2021 (the Indian marketing year is October 1 through September 30) under the Maximum Admissible

Export Quota (MAEQ) program. The total budgetary outlay for sugar exports under MAEQ in marketing

year 2020/2021 was $474 million. The current MAEQ policy subsidizes sugar exports up to six million

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tons. Between July 2021 and September 2021, India exported close to one million tons without the export

subsidy.

OTHER BARRIERS

Export Duties

India applies export duties on numerous raw materials used in the production of metals, in particular steel

and aluminum. These include a 30 percent duty on exports of iron ore and concentrate with iron content

above 58 percent, a 15 percent duty on exports of aluminum ore, and a 30 percent duty on exports of

chromium ore. These various duties, along with other export measures, provide cost advantages to India’s

domestic metals producers, while distorting international markets for key raw materials used in steel and

aluminum production.

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 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 United States continues to raise

concerns regarding uniform notice and comment procedures with the Government of India, both 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 2019 (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 2019 (latest data available). Indonesia has bound 96.3 percent of

its tariff lines in the World Trade Organization (WTO), with an average WTO bound tariff rate of 37.1

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 is applying tariffs in excess of its WTO bound rates for

certain categories of information and communications technology (ICT) products. Since at least 2020,

Indonesia appears to be applying a 10 percent duty for certain categories of the tariff subheading 8517.62

which includes switching and routing equipment, and a 5 percent duty on computer servers under tariff

subheading 8471.50. Stakeholders assert that Indonesia’s tariffs not only impose an unfair financial burden

on foreign firms, but they also limit access for Indonesian consumers and firms to critical ICT products

needed to support Indonesia’s digital infrastructure growth goals.

Taxes

U.S. companies continue to express concerns that 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.

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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.

Luxury goods, imported or locally produced, may be subject to a luxury tax of up to 200 percent. As of

January 2022, 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, 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. Excise tax rates are 150 percent

on spirits and 90 percent on wine.

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 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, which aims to synthesize all import-related regulations, and

serve as an “umbrella” regulation for the management of Indonesia’s import policies.

Indonesia is reportedly drafting a presidential regulation to enact a “commodity balance” policy that would

replace the current import permit process for certain products. Although information is still forthcoming,

the commodity balance policy could impose new quantitative restrictions by making the issuance of import

licenses subject to an Indonesian Government assessment of supply and demand for a commodity.

Indonesia is expected to implement this commodity balance policy for five commodities (sugar, rice, fish,

meat, and salt) in 2022, and could expand implementation to other commodities in 2023. The Coordinating

Ministry for Economic Affairs (CMEA) has noted that it could expand the commodity balance policy to

apply beyond agricultural and fishery products. Stakeholders have expressed concern regarding the

CMEA’s lack of consultation with market participants on this policy.

Under MOT Regulation 82/2012 (last amended by MOT Regulation 41/2016) and Minister of Industry

(MOI) Regulation 108/2012, Indonesia imposes 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

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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,

most recently through the issuance of Minister of Agriculture (MOA) Regulation 2/2020. Under this

regulation, 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. This regulation also

extends the validity of horticultural product import licenses for 60 days into the following calendar year.

Nevertheless, Indonesia continues to subject imports, including all horticultural products, to its import

licensing regime.

In 2020, Indonesia enacted the “Job Creation Omnibus” (Law 11/2020), which amends import licensing

provisions contained in the Food Law, Animal Husbandry Law, Farmer Protection and Empowerment Law,

and the Horticulture Law. 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. Businesses continue to await

implementing regulations for further detail on how these changes will be implemented. A Constitutional

Court ruling on November 25, 2021, found that the passing 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.

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 as including manufacturing, raw ingredients, research and

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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 (JKN) 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 even when imported versions have equivalent

efficacy and safety at competitive prices.

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.

Import Bans and Restrictions

Indonesia imposes restrictions on feed corn imports, limiting the right to import to the state-owned

procurement body, the Bureau of Logistics (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.

Other feed millers are obligated to use locally produced feed corn but have expressed concern that they are

unable to obtain feed corn in quantities sufficient to maintain the poultry industry’s growth.

Indonesia also tightly controls and regulates imports of sugar and other food commodities, including

through seasonal bans and annual quantity limits based on domestic production and consumption forecasts.

Sugar refineries are permitted to import raw sugar based on fixed 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 utilize refined domestic sugar. These import restrictions increase the

price of sugar (and other commodities) across the domestic economy.

Under Minister of Marine Affairs and Fisheries (MMAF) Regulation 19/2020, Indonesia prohibits the

import of 81 fish species that it deems contain “toxins, parasites and/or endanger human life.”

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

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. Sarinah, a state-owned enterprise (SOE), is one

of the largest.

Product Testing

BPOM sets out requirements for testing of heavy metals in cosmetics in its 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 and

adds unnecessary costs. 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.

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State Trading

BULOG 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 and 7/2020, 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 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 28/2020 requires pre-shipment verification by designated companies (known in Indonesia

as “surveyors”) for a broad range of products (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. Further, as of March 2022, Indonesia had yet to notify

the WTO of these measures pursuant to the WTO Agreement on Preshipment 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 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 Government Regulation (GR) 28/2021. The measure includes

requirements governing conformity assessment to Indonesian national standards (“SNI”) for a wide variety

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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 amid ongoing travel restrictions due to the

COVID-19 pandemic and increasing costs for U.S. industry. 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 comment periods as

recommended by the WTO Technical Barriers to Trade Committee (WTO TBT Committee). MORA

Regulation 26/2019 sets out a transition period whereby halal requirements will go into force for food and

beverage products by October 2024, and between 2026 and 2034 for other product categories. 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.

Indonesia has previously indicated the need for a bilateral mutual recognition agreement (MRA) for halal

certification. This is currently not possible for the United States as there is no U.S. Government halal

certification or accreditation body. The United States has asked for further clarity from the Government of

Indonesia about the bilateral MRA process. In the interim, BPJPH has indicated that it will provide

temporary recognition for foreign certifiers, including all U.S. halal certifying bodies. These temporary

certificates are valid for one year from issuance. The United States continues to raise concerns with the

implementing regulations for Law 33/2014 at the WTO TBT Committee and bilaterally.

Sanitary and Phytosanitary Barriers

Meat and Rendered Products

Indonesia requires each U.S. meat and rendering establishment seeking to export to Indonesia to complete

an extensive questionnaire that includes proprietary information, and that the U.S. establishment must also

be inspected by Indonesian inspectors. The process lacks transparency, and no new plants have been

approved in recent years. The United States has raised concerns about this approval system with Indonesia,

including at the WTO Committee on Sanitary and Phytosanitary Measures (WTO SPS Committee) and

bilaterally, and will continue to raise concerns.

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 dairy and eggs, to Indonesia to complete a pre‐

registration process with MOA. The law allows imports of these products only from facilities that

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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 Government Regulation 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

also 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.

Horticulture

MOA Regulation 55/2016 establishes requirements for countries wishing to export “fresh food of plant

origin” to Indonesia. The regulation requires that Indonesia recognize either the food safety system of the

exporting country or a registered food safety testing laboratory serving that country’s exporters. In 2020,

Indonesia granted a three-year recognition of the U.S. food safety system, valid until January 2024.

Fisheries

MMAF Regulation 11/2019 requires completion of a health certificate for all fisheries products imported

into Indonesia after February 1, 2021. The health certificate must follow MMAF's guidelines and failure

to follow these will result in the product’s detainment. The United States is seeking clarity on these

measures from MMAF.

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 micro-, small-, and medium-sized enterprises 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.

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 2021 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 on the 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 also 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

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 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 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.

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

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

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.

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Indonesian customs has since relaxed the requirement by allowing a phone number to be used in lieu of a

NPWP on the manifest. However, the Customs Directorate has 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. In addition, a single foreign investor may hold a majority stake in an Indonesian bank if the investor

has obtained that ownership stake by acquiring and merging two banks with capital of less than Indonesia

rupiah (IDR) 1 trillion (approximately $70 million) prior to the merger. OJK Regulation No. 12/2021,

issued in August 2021, increased the foreign equity cap for commercial banks to 99 percent. 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.

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 requires data localization. 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

mandates data localization. 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 for 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.

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 March 2022, BI has 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 BI’s QR code policymaking process excluded foreign

companies which could stymie the development of cashless payment systems.

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

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payment companies, went into effect July 1, 2021. 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 impact investment

returns 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 eliminated caps on foreign ownership in and location restrictions for

general hospitals, private specialist clinics, dental clinics, and specialized nursing services. Nevertheless,

sectoral regulations remain in place requiring foreign hospitals to have a minimum number of inpatient

beds that is higher than the minimum number of inpatient beds required for domestic hospitals. Regulations

also remain in place that 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 micro, small, and medium business.

Insurance Services

The 2014 Insurance Law requires all insurance companies to incorporate locally and limits foreign

investment in domestic insurance companies to the acquisition of publicly traded shares. Private equity

purchases of company stock are not allowed. Under Government Regulation 14/2018 (GR 14), as amended

by Government Regulation 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 and requires exempted

companies to inject new capital at their current equity ratios.

OJK Regulation 14/2015 and OJK Circular Letter 31/2015 requires 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. In June 2020, OJK issued

Regulation 39/2020, which provides for the phased elimination of these domestic cessions requirements for

purchase of reinsurance from companies domiciled in a country with whom Indonesia has a bilateral

agreement.

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.

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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.

Transport

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 permitted for foreign ships to operate: 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 and will be valid for six months. A foreign ship with

more than a two-year contract will be required to be nationalized. However, recently enacted Government

Regulation 31/2021 does not appear to address utilization of foreign vessels for the above-mentioned

activities.

Construction, Architecture, and Engineering

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.

Franchising and Retail Distribution

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 Indonesian micro-, small-, and medium-

sized enterprises (MSMEs) products and requires business owners with more than 150 stores to franchise

their business.

Telecommunications Services

Indonesia has issued a number of measures that make it difficult to import cellular and Wi-Fi equipped

products. Under MOT Regulation 82/2012 (as amended by MOT Regulation 41/2016) importers of cell

phones, handheld computers, and tablets are not permitted to sell directly to retailers or consumers.

Additionally, importers are required to become a “registered importer” and must confirm that they are

working with at least three distributors and provide evidence of contributions to the development of the

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domestic device industry or cooperation with domestic manufacturing, design, or research firms in order to

qualify for a MOT import license.

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. Companies seeking to import 4G-LTE 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, threatening to limit the ability of foreign producers to sell these devices

in Indonesia. MOT Regulation 41/2016 also requires companies applying for an import license to submit

product identification numbers and a certificate from the Ministry of Communications and Information

Technology (MCIT). 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 Government Regulation 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,

such that all financial services data can be transferred and stored outside of Indonesia.

GR 71 also requires public and private sector electronic system operators to register their electronic systems

with MCIT and requires private sector electronic system operators to facilitate “supervision” by government

agencies, including by granting access to electronic systems and data for monitoring and law enforcement

purposes. In 2020, MCIT issued an implementing regulation for GR 71, Regulation 5/2020, which requires

private sector electronic system operators, including those providing services on a cross-border basis, to

to their registration, can be subject to blocking by MCIT. Failure to comply with government takedown

orders for a potentially broad category of “prohibited electronic information” can also result in blocking.

In 2021, MCIT issued Regulation 10/2021, which postpones the registration deadline to within six months

of Indonesia’s new registration system for electronic system operators becoming fully operational. As of

January 2022, it remains unclear when this registration system will become operational.

Digital Products

In 2018, the MOF issued Regulation 17/2018, which establishes five HS lines at the eight-digit level (with

import duty rates currently set at zero percent) for software and other digital products transmitted

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electronically, including applications, software, video, and audio. Despite zero tariffs, companies have

expressed concern over the potential administrative burden of this new regulation, including potential

customs documentation or reporting requirements. MOF has indicated that any data reporting under this

system will be voluntary. Imposition of any duties on digital products under this regulation would raise

serious concerns regarding Indonesia’s longstanding WTO commitment, renewed on a multilateral basis in

December 2019, not to impose duties on electronic transmissions. In addition, using a tariff schedule for

the application of such duties on non-physical products raises fundamental questions and challenges related

to the harmonized tariff system, the role of customs authorities in the digital space, and the determination

of country of origin for electronic transmissions.

Digital Services Tax

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. 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 joined the international tax

consensus reached by the Organization for Economic Cooperation and Development (OECD) in October

2021.

Internet Services

Indonesia has issued measures intended to regulate the electronic commerce sector. In 2019, Indonesia

issued Government Regulation (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. MOT Regulation

50/2020 establishes requirements for electronic commerce business activities, including requiring

electronic commerce actors to obtain business licenses, promote local products, and provide regular reports

to the Indonesia Statistics Agency. 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 establishes that all business sectors are

open for investment unless stipulated otherwise. Defense-related investment remains under the sole

purview of the central government. The new investment policy establishes four types of investment

categorization: (1) priority investment sectors that are eligible for government incentives; (2) sectors

reserved for micro-, small-, and medium-sized enterprises and cooperatives who partner with foreign

investors; (3) sectors that are open with certain requirements (i.e., with caps on foreign ownership or special

permit requirements); and, (4) sectors that are fully open to foreign investment. Although hundreds of

sectors that were previously closed or subject to foreign ownership caps are in theory open to 100 percent

foreign investment, in practice, technical and sectoral regulations may stipulate different or conflicting

requirements.

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Energy and Mining

Over the past decade, the Indonesian government has introduced regulatory changes to increase government

control and local content in the energy and mining sectors. The regulatory changes have raised costs for

foreign businesses and raised questions about the sanctity of contracts already in force between private

companies and the Indonesian government.

In the oil and gas sector, Government Regulation 79/2010 (as amended by Government Regulation

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. Presidential Regulation 35/2004,

which regulates contractor activities in the upstream oil and gas sector, requires contractors to “prioritize”

the use of domestic services, including energy-related services, in addition to domestic technologies and

engineering and design capabilities. Foreign companies have noted that these local preference policies

severely undermine their ability to operate in the Indonesian market. Ministerial Regulation 12/2020

permits contractors the flexibility to choose between a production sharing contract or a gross split,

whichever proves more amenable to companies.

Indonesia’s oil and gas regulator, SKK Migas, 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. Under these rules, goods and services supplied by companies without majority

Indonesian shareholding cannot qualify as local content, which may put foreign energy service companies

at a disadvantage compared to majority Indonesian-owned companies. In addition, Minister of Energy and

Mineral Resources (MEMR) Regulation 31/2013 limits the amount of time expatriates may work in

Indonesia’s oil and gas sector to 4 years and prohibits expatriates from working past the age of 55.

Indonesia’s 2009 Mining Law and its implementing regulations impose onerous requirements on companies

doing business in the mining sector, including local content requirements, domestic sale requirements, and

a requirement to process raw materials in Indonesia prior to export. This law also created a system for

granting mining concessions based on licenses. As mining licenses are subject to future regulatory

requirements, permitting, and tax changes, they provide significantly less certainty than “contracts of work”

(i.e., private business contracts with the Indonesian government). Additionally, foreign companies that

obtain mining licenses must divest 51 percent of their holdings to Indonesian ownership over a 10-year

period. In May 2020, the Indonesian Government passed Law 3/2020, amending the 2009 Mining Law.

The new law returns licensing authority for mining activities to the central government (previously

delegated to provincial authorities); however, it leaves in place most restrictions of the 2009 law.

In the power generation sector, MOI Regulation 54/2012 imposes varying levels of local content

requirements with respect to goods and services used in power plants, including steam, hydroelectric,

geothermal, gas, and solar plants, and in the transmission and distribution network. The local content

requirements for solar power plants were tightened as a result of MOI Regulations 4/2017 and 5/2017,

which require 60 percent local content in solar modules and 100 percent in services. MEMR Regulation

19/2016 further mandates that the Indonesian state-owned transmission and distribution company, PLN,

prioritize the use of domestic goods and services and meet a minimum standard of local content for solar

(photovoltaic) power plant development, in accordance with existing MOI regulations.

As part of the government’s effort to stabilize Indonesia’s currency (the rupiah), Government Regulation

1/2019 mandates that companies engaging in natural resources exports place their foreign exchange

proceeds in a designated account in a bank located in Indonesia and restricts the use of these proceeds to

five categories: (1) payment of export duties and other levies within the export sector; (2) loans; (3) imports;

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(4) profits or dividends; and, (5) other purposes as regulated under Article 8 of the 2007 Investment Law.

This includes proceeds from exports of mining, plantation, forestry, and fisheries.

Medical Devices and Pharmaceuticals

Presidential Regulation 10/2021 allows 100 percent foreign ownership for manufacturing and distribution

of raw pharmaceutical materials and finished pharmaceutical products, as well as medical devices.

However, retail pharmaceutical business and class A health equipment are reserved for 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, patient access,

and foreign direct investment despite the positive changes made by Presidential Regulation 10/2021.

In June 2021, Indonesia removed 79 medical device categories, covering approximately 5,460 imported

products, from the government procurement electronic catalogues in order to require the use of locally

manufactured products in the public health care system. U.S. industry requested the Indonesian

Government allow a sufficient grace period to assure that there will be no disruption in product supply and

patient access to safe and high-quality medical devices. In response, Indonesia offered only limited

exceptions to mitigate possible disruptions. U.S. industry has expressed concern that additional categories

of imported medical devices will be removed from government procurement electronic catalogues in 2022.

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 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 Eximbank 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

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bauxite. Under Government Regulation 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. 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.

In the oil and gas sector, MEMR 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. Indonesia has stated

its intentions to expand its use of local content requirements by increasing existing mandated local content

levels and by creating new local content requirements in hopes to grow its own manufacturing sector. The

United States continues to press Indonesia to remove these local content and investment requirements,

which may worsen Indonesia’s investment environment and discourage potential U.S. investors.

In the mobile technology sector, MCIT Regulation 27/2015 requires all 4G-LTE enabled devices to contain

30 percent local content and all 4G-LTE base stations to contain 40 percent local content. MOI Regulation

29/2017 provides a formula for calculating “local content.” MCIT Circular Letter 518/2017 clarifies that

MCIT Regulation 27/2015 applies only to base stations, cell phones, tablets, laptops, and Wi-Fi modems.

In the telecommunications sector, MCIT Regulations 7/2009 and 19/2011 require 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. According to industry, the new regulation allows finished textile products

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to be exported to Indonesia again, 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.

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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 two parties completed negotiation and

implementation of a successor ATAP in 2004. Originally scheduled to last through December 31, 2008,

the 2004 ATAP granted improved access for select U.S. agricultural products. The 2004 ATAP has been

extended 14 times, most recently through December 31, 2022, 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 committed to start phasing out offsets in 2020 and to eliminate offsets entirely

after 15 years from the entry into force of the revised GPA in Israel.

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 and/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 reports Israel is home to online advertisement networks that

are used by pirate websites to generate revenue. RevenueHits, which is listed in the

2021 Review of

Notorious Markets for Counterfeiting and Piracy, is one such network. Industry has also 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 cross-border data flows and privacy protection.

INVESTMENT BARRIERS

Israel established a centralized investment-screening (approval) mechanism for certain inbound foreign

investments in October 2019. Investments in regulated industries (e.g., banking and insurance) require approval

by the relevant regulator. Investments in certain sectors may require a government license.

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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 that, among other provisions: prohibit the application of customs duties or other

discriminatory measures to digital products; ensure the unimpeded cross-border transfer of information;

prohibit the mandatory use of local computing facilities; and, provide limitations on civil, non-intellectual-

property-rights liability for Internet platforms with respect to third-party content.

The United States continues to engage closely with the Japanese Government to urge removal of 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. The United States and Japan

meet regularly to review the implementation and functioning of the two agreements, and to address

outstanding issues.

IMPORT POLICIES

Tariffs

Japan’s average Most-Favored-Nation (MFN) applied tariff rate was 4.4 percent in 2020 (latest data

available). Japan’s average MFN applied tariff rate was 15.8 percent for agricultural products and 2.5

percent for non-agricultural products in 2020 (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 $14.3 billion in 2021, 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, fruit juices, pet food, table grapes, frozen

blueberries, sugar, chocolate, and sweetened cocoa powder.

Fish and Seafood

Total U.S. fish and seafood exports to Japan in 2021 were valued at approximately $689 million. However,

tariffs of 3.5 percent to 10 percent on several fish and seafood products, such as pollock, herring, salmon,

whiting, cod, and fish oil, remain an impediment to U.S. exports, as well as for 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. Japan has reduced tariffs, increased import quota volumes, and eased the administrative

burdens associated with those quotas. However, 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 is expensive and

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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.

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 percent on certain footwear imported from the United States. In

particular, 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 $39) per pair, whichever is higher. These tariffs can more than double the cost of imports

and negatively affect market access for U.S.-made and U.S.-branded 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.

Beef Safeguard

In March 2021, Japan imposed a safeguard on U.S. beef exports, under which U.S. beef exports temporarily

do not benefit from preferential treatment under the USJTA. Japan’s imposition of the safeguard activated

the consultation mechanism under the USJTA side letter on safeguards, which provides for Japan and the

United States to negotiate a higher safeguard trigger quantity with a view to concluding negotiations within

90 days. On March 24, 2022, the United States and Japan announced that they had reached an agreement

in principle to increase the USJTA beef safeguard trigger level. Both governments will continue to work

to finalize the text of the agreement reflecting the new trigger level and complete their respective domestic

procedures.

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 (mt) (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 identified as U.S. rice.

In recent years SBS tenders have not filled due to the non-market-based markup applied to imports of U.S.

rice. Industry reports that Japan’s 2020/21 SBS tenders were not fully successful, largely because of high

markup levels that made imported rice less competitive. MAFF tendered for 215,015 mt of whole kernel

rice, against which only 34,273 mt of bids were received, and 27,459 mt were awarded. Japan continues

to assert that the markup is set using supply and demand figures and world pricing, but has not changed the

markup since 2018. Although U.S. rice exports make up only about four percent of all rice consumed in

Japan, industry research shows that Japanese consumers might buy more high-quality U.S. rice were it

readily available. 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.

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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 “mark-up.” The United

States continues to monitor carefully the operation of Japan’s 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 $1.15 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.

Ethanol

Japan does not directly blend ethanol in gasoline. To meet Japan’s annual transport biofuels target (500

million liters of crude oil equivalent), Japanese refineries primarily blend gasoline with ethyl tertiary-butyl

ether (ETBE) to reduce greenhouse gas emissions in the transportation sector. ETBE is an oxygenated

gasoline additive, which is manufactured by combining isobutylene with ethanol. Japan limits its use of

U.S. corn-based ethanol and ETBE through restrictions on feedstock type. The United States urges Japan

to directly blend ethanol in gasoline, eliminate any cap on corn-derived ethanol, and increase its annual

biofuels target.

Customs Barriers and Trade Facilitation

The United States has encouraged Japan to raise the de minimis threshold below which it will not assess

duties, from a current level of ¥10,000 (approximately $90) to a level closer to the $800 U.S. de minimis

threshold. This would U.S. shipments move more quickly across the Japanese border. 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 and private 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 below.)

U.S. companies have reported that it is unclear whether Japan permits the deduction of marketing expenses

paid by non-resident importers (businesses located outside of Japan that ship goods to customers in Japan

and assume responsibility for customs clearance and other import-related requirements) when they declare

the customs value of their imports using the deduction method, in which the declaration value is calculated

by deducting domestic costs from the sales price. The lack of clarity complicates declaration procedure

and imposes unnecessary burdens on importers.

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TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Labeling Requirements

In 2017, the Japanese Consumer Affairs Agency amended Japan’s Food Labeling Standards to expand

country of origin labeling requirements to include the main ingredients by weight in processed foods

manufactured in Japan, with a transition period for compliance until March 31, 2022. For example, a

Japanese manufacturer of soy sauce would have to identify on the label the country of origin of the soybeans

used in its production. While the expanded requirements do not apply to imported processed foods, they

have the potential to adversely affect U.S. exports of food ingredients because processed food manufactured

in Japan may be produced with imported commodities. In such cases, Japanese processed food

manufacturers may avoid using ingredients from multiple origins to minimize labeling burdens.

Furthermore, the amendment may result in incorrect food labeling because Japanese processed food

manufacturers may indicate an “intended” or historical source of ingredients when an ingredient is not

actually sourced from that country. The United States will consult with relevant producers in 2022 to

determine whether the new labeling requirements are having a negative impact on trade.

Sanitary and Phytosanitary Barriers

Food Safety

Pre- and Post-Harvest Fungicides

Japan classifies fungicides applied pre-harvest as pesticides and classifies fungicides applied post‐harvest

as food additives. Japan’s requirement that post-harvest fungicides be classified as food additives does not

have a significant impact on domestic producers, as Japanese farmers do not generally apply fungicides

after harvest. The United States remains concerned that Japan requires products treated with a post-harvest

fungicide to be labeled at the point of sale with a list of fungicides used because these post-harvest

fungicides are classified as food additives, whereas pre-harvest fungicides are not. This may disadvantage

U.S. products by giving consumers the impression that competing Japanese products have not been treated

with fungicides.

Maximum Residue Limits

Japan has made significant progress in establishing science-based pesticide maximum residue limits

(MRLs), and its permanent establishment of numerous MRLs has resulted in fewer disruptions in trade.

However, the lengthy review process to register new, safe pesticides and establish science-based MRLs

significantly delays the ability of U.S. growers to use newer crop-protection products on exports to Japan.

Japan’s procedures for enforcement of MRLs result in uncertainty for shippers, including those who have

never violated Japan’s standards. After a single pesticide MRL violation, Japan imposes enhanced

surveillance of all imports of the product on which the MRL violation was detected from that particular

exporting country. If a second violation is found 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. The United States continues to work with Japan to address concerns related to MRL

enforcement.

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Plant Health

In September 2019, the United States and Japan developed and agreed on a phytosanitary framework that

addresses many market access requests for the agriculture industry in each country. In November 2021,

the United States and Japan agreed to updates to this framework.

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. The United States and

Japan remain engaged 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 eliminate costly pest-mitigation requirements for U.S. exporters. The United States and Japan

continue to engage on this request.

Stone Fruit

Japan granted market access for U.S.-grown Japanese plum varieties in August 2021. Japan now allows

U.S.-grown European plums and U.S.-grown Japanese plums to be imported into Japan under an audit

program. The United States and Japan will continue to engage on phytosanitary topics related to U.S. stone

fruit, including the removal of costly fumigation requirements for U.S. exporters.

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. Japan has also made commitments to the United

States under bilateral agreements. U.S. companies in several sectors have flagged that Japanese

Government entities sometimes use technical specifications to exclude U.S. products and services. The

United States has expressed these concerns to Japan as they have arisen and will continue to engage with

Japanese officials to ensure all procurements covered under these agreements are conducted consistent with

Japan’s procurement obligations.

INTELLECTUAL PROPERTY PROTECTION

Japan generally provides strong intellectual property (IP) protection and enforcement, although a number

of concerns remain.

In May 2021, Japan amended its Copyright Act to create 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. It is unclear whether the presumption

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includes interactive transmissions, such as Internet transmissions, which could raise concerns under

prevailing international copyright norms, including those found in the World Intellectual Property

Organization Copyright Treaty. Other concerns include whether the presumption only covers simultaneous

transmissions limited geographically to Japan and what are the conditions that determine when, how, and

in what form a right holder can manifest a “different intention” or “separate indication of intent” that is

sufficient to rebut the presumption. The new law took effect on January 1, 2022.

In addition, the United States has urged Japan to adopt measures to protect against piracy in the digital

environment. In June 2020, amendments to the Copyright Act expanded the scope of illegal downloads

covered by the Act, which was previously limited to copyrighted music and videos, to include all

copyrighted material, including manga (comics), books, news articles, and illustrations. The revised Act

also regulates “leech websites” (link sites) that use hyperlinks to download torrent files of pirated materials.

The ban on illegal downloading took effect on January 1, 2021.

Enforcement

In May 2021, Japan amended its Trademark Act to address concerns over Japan’s personal use exemption

for imported goods, which was 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 imported in this manner are subject to

seizure. The amendment will come into force in April 2022. The United States will monitor

implementation and enforcement of the amendment to determine whether it provides a comprehensive

solution to the increase in the import of counterfeit goods into Japan. The United States had previously

urged Japan via written comments to disallow the use of the personal use exemption for items received by

mail and to limit the quantity of items and number of times an individual can apply the exemption.

Industry has raised concerns about Japan’s mechanism for early resolution of potential pharmaceutical

patent disputes. An effective mechanism for the early resolution of such disputes promotes transparency

and predictability for stakeholders and the public.

Geographical Indications

Japan’s MAFF has oversight over geographical indications (GIs) for agricultural, forestry, and fishery

products. The Ministry of Finance’s National Tax Agency (NTA) oversees the GI protection system for

wine, spirits, and other alcoholic beverages. MAFF’s GI protection system came into effect in 2015 based

on the Act on Protection of the Names of Specified Agricultural, Forestry and Fishery Products and

Foodstuffs (GI Act). The 2015 Notice on Establishing Indication Standards Concerning Geographical

Indications for Liquor (NTA Notice No. 19) established the NTA’s GI protection system. Japan’s

Administrative Complaint Review Act and the Administrative Case Litigation Law set forth the procedures

and statute of limitations for objections to a decision to protect a term. In 2018, the Diet revised the GI Act

to limit the continued use of protected terms by third parties to a period of up to seven years.

Japanese and foreign products are eligible for GI protection in Japan. Through domestic registration, Japan

has designated GI protection for 108 agricultural, forestry, and fishery products and 21 alcoholic beverages,

including one foreign product. Japan also has recognized numerous GIs pursuant to international

agreements, and the United States continues to have concerns with respect to exchanges of lists of terms

pursuant to international agreements that receive 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 EU and other trading partners with respect to GIs. The United States urges

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Japan to refrain from measures that would unfairly limit market access for U.S. products and to ensure

consistency with core transparency and due process principles, in particular with respect to the protection

of existing trademarks, the safeguarding of the use of common names, and the effective operation of

objection and cancellation procedures. The United States continues to work with Japan to improve IP

protection and enforcement in specific areas through bilateral consultations and cooperation, as well as in

multilateral and regional fora.

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). In Japan, insurance products, including JP Insurance products, are sold widely in Japan

Post offices and JP Bank branches. According to JP Holdings, as of March 2021, approximately 63 percent

of JP Holdings’ shares were owned by the Japanese Ministry of Finance (MOF). However, the MOF sold

approximately 27 percent of JP Holdings at the end of October 2021, reducing the government ownership

of JP Holdings to a little over one third, which is the minimum amount stipulated in Japan’s Postal

Privatization Law. JP Holdings owns approximately 89 percent of JP Bank as of March 2021. In May

2021, JP Holdings announced it would sell additional JP Insurance stock, which JP Insurance itself bought,

reducing JP Holdings’ equity ownership of JP Insurance to 49.9 percent.

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 Express Mail Service (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 Ministry of Internal Affairs and Communications (MIC),

whereas private express delivery companies are subject to rules imposed by various ministries including

MOF, the Ministry of Health, Labor, and Welfare (MHLW), MAFF, and the Ministry of Land,

Infrastructure, Transport and Tourism (MLIT). This complicates compliance.

The United States continues to urge Japan to level the playing field by equalizing customs procedures and

requirements as well as prohibiting the subsidization of Japan Post Co.’s international express service with

revenue from non-competitive (monopoly) postal services.

The United States also continues to urge Japan to ensure that the postal reform process, including

implementation of revisions to the Postal Privatization Law, is fully transparent, including by providing full

and meaningful use of public comment procedures and opportunities for interested parties to express views

to government officials and advisory bodies before decisions are made. Timely and accurate disclosure of

financial statements and related notes is a key element in the postal reform process, as is the continued

public release of meeting agendas, meeting minutes, and other relevant documents.

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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 $414.8 billion in 2020 (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. The United States continues to place a high priority on ensuring that

the Japanese Government’s regulatory framework fosters an open and competitive insurance market.

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.

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 the 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

2016, Japan revised a ministerial ordinance to raise the per-customer deposit cap of JP Bank from ¥10

million (approximately $91,000) to ¥13 million (approximately $118,500) and to raise the per-policyholder

insurance coverage cap of JP Insurance from ¥13 million to ¥20 million (approximately $182,200). In

April 2019, Japan raised the per-customer deposit cap to ¥26 million (approximately $236,900). The United

States continues to monitor these increases, which do not require legislative changes to be enacted, in order

to ensure a level playing field.

Japan continues to honor the statement by the former Deputy Prime Minister in 2013 that it will refrain

from approving new or modified cancer insurance or stand-alone medical products of JP Insurance until it

determines that equivalent conditions of competition with private sector insurance suppliers have been

established and that JP Insurance has a properly functioning business management system in place.

Concerns related to the condition of JP Insurance’s business management re-emerged during 2019

following findings by Japan’s Financial Services Agency (FSA) of illegal and deceptive sales of JP

Insurance products. JP Insurance fully resumed sales of insurance products from April 1, 2021, after a

three-month mandatory suspension followed by a voluntary suspension.

The revised 2012 Postal Privatization Law stipulates that the stock sale of JP Holdings, JP Bank, and JP

Insurance should be conducted “as soon as possible,” but there is no specific deadline. A separate “Law to

Secure Funds for Reconstruction,” passed in 2011, earmarks proceeds from the JP Holdings stock sale

conducted through the end of Japan’s FY2022 (March 31, 2023) for Tohoku earthquake reconstruction.

Given the delay in the JP Group’s subsequent stock sale, the Diet passed a revision to the latter law in June

2020, extending the deadline for directing proceeds toward reconstruction until the end of FY2027 (March

31, 2028). The Postal Privatization Law states that after JP Holdings reduces its share of JP Insurance to

under 50 percent, JP Insurance will be able to engage in new businesses on a “notification basis” instead of

the current “application and approval basis,” while “giving special consideration not to hamper fair

competition with other insurance companies.” According to a June 9, 2021 JP Holdings press release, the

company notified the MIC Minister on that same day that it had reduced its share below this threshold and

that, pursuant to the Postal Privatization Law, JP Insurance will only be required to notify the Prime

Minister and the MIC Minister regarding new businesses.

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Insurance Cooperatives

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 the 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.

Bank Sales of Insurance

Banks are an important distribution channel for the sale of insurance products in Japan. In 2007, Japan

fully liberalized the range of insurance products eligible for sale through banks. However, limits remain

on the sales of some products, different rules exist for the treatment of customer data in some cases, and

sales restrictions on insurance are applied to certain categories of customers (for example, customers who

work for small or medium-sized corporate borrowers). The United States continues to call on Japan to

conduct, in the near term, a fact-based and transparent review of the bank sales channel that includes

meaningful opportunities for input from interested stakeholders and considers global best practices to

further enhance policyholder protection and improve consumer choice.

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. In May 2020, the Diet passed an amendment to the “Act of Special

Measures concerning the Handling of Legal Services by Foreign Lawyers,” or “Gaiben Law,” which: (1)

reduces the requirement for post-admission practice of home country law from two years to one year; (2)

permits foreign lawyers to establish branch offices jointly with Japanese lawyers, provided they establish a

legal professional corporation; and, (3) broadens the scope of representation for international arbitration

and mediation to allow foreign attorneys to participate in matters involving foreign clients, laws, and

jurisdictions. Some of these revisions will take up to three years to be fully implemented, and stakeholders

continue to cite procedural hurdles. The United States continues to urge Japan to further liberalize the legal

services market.

Educational Services

The United States continues to urge Japan to tax foreign universities operating in Japan in a manner

comparable to Japanese universities and that allows foreign universities to continue providing their unique

contributions to Japan’s educational environment. 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 means foreign satellite universities are also excluded from participation in Japanese

Government grant programs that promote international exchange and provide financial support for students

wishing to study abroad.

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Telecommunications Services

The United States continues to focus on ensuring fair market opportunities for emerging technologies and

business models in Japan, ensuring a regulatory framework appropriate for addressing converged and

Internet-enabled services, and maintaining competitive safeguards on dominant carriers.

Dominant Carrier Regulation

The Nippon Telegraph and Telephone Corporation (NTT), established as a state monopoly in 1952,

privatized in 1985, and broken into several subsidiaries in 1999 to encourage competition, continues to be

the dominant player in Japan’s telecommunications market. NTT East and NTT West, providing fiber-to-

the-home and other services, hold a 65.2 percent share of fixed-line broadband subscribers in the fiber

optical cable infrastructure segment. NTT DoCoMo is Japan’s largest mobile carrier with over 84 million

subscribers and a 42.6 percent market share.

In December 2019, MIC eased rules to allow joint procurement among subsidiaries of the NTT group. The

change was viewed as part of a Japanese Government strategy to boost the global competitiveness of

Japan’s telecommunications leader but prompted concern among other domestic stakeholders. NTT fully

absorbed NTT DoCoMo in December 2020 through a ¥4.3 trillion (approximately $40 billion) stock

purchase and aims to integrate DoCoMo with affiliate NTT Communications, which provides cloud

services and data centers, to further consolidate services.

Spectrum Allocation

Unlike most advanced economies, Japan does not use auctions to allocate spectrum for commercial mobile

services. Allocation is at the discretion of MIC, based on consultation with the Radio Regulatory Council

and consideration of plans submitted by the operators. The factors that MIC uses to evaluate applications

have raised questions about the fairness of the allocation process.

Several current spectrum allocations create bands unique to Japan that prevent U.S. company technologies

from functioning in Japan. For example, U.S. automakers have long expressed concern about Japan’s

spectrum allocation for vehicle communication devices, which does not align with prevailing practice

globally. Foreign automakers must alter these vehicle devices to sell cars in Japan, which is a significant

non-tariff barrier.

Handset Pricing

In 2019, the Diet passed an amendment to the Telecommunications Business Act (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 Japanese 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 is particularly problematic. If 24 months have passed since the last

procurement of a device, a carrier/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 manufacturers, who tend to produce an abundance

of cheaper, limited-life devices, and harm foreign companies, including U.S. manufacturers, who create

higher-quality devices that retain their functionality and value over time. The United States continues to

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push for rules that will enable a level playing field for device manufacturers, increase customer choice,

encourage innovation, and allow retailers to have greater control over their businesses.

Technical Standards Compliance Certification

Imported radio devices must receive MIC’s “giteki” certification, 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, burdensome, and costly. U.S. Federal Communications

Commission (FCC) 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.

Renewable Energy Services

U.S. companies attempting to sell renewable energy in Japan have reported being denied grid access

because the grid is “full.” Despite revisions to the Electricity Business Act implemented in April 2020 that

required the legal unbundling of the transmission and distribution business from the power generation and

retail business, legacy 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. Japan’s

technical and safety standards do not always reflect international standards, and complicated codes and

slow approval processes for new energy technology benefit incumbents.

In addition, U.S. businesses seeking to procure power have advocated for virtual power purchase

agreements (VPPA)—the ability to purchase renewable energy directly from retailers and eliminating the

requirement for suppliers to obtain an electricity retail business license—widely used by corporate buyers

in the United States to meet voluntary emissions reduction goals. The Ministry of Economy, Trade and

Industry (METI) has resisted VPPAs due to the potential impact on the 600 to 700 “middleman” retailers

established since Japan’s electricity market liberalization.

METI enforces the laws and regulations that apply to renewable energy in Japan and regularly reviews and

revises related rules to account for market factors. In September 2020, METI proposed new changes to the

feed-in tariff (FIT) mechanism that obliges electricity retailers to purchase electricity generated from

biomass, geothermal, and wind renewable energy sources at fixed prices for certain periods determined by

METI. The changes will lower prices accepted under the FIT scheme unless companies meet certain

conditions, including a deadline for previously approved FIT projects to become operational. In response

to public comments and U.S. engagement, METI announced in November 2020 its intention to extend

deadlines for projects that have experienced environmental review delays. In addition, METI is finalizing

the details of a new “feed-in premium” (FIP) scheme that will be phased in starting in early 2022 as an

eventual replacement for the existing FIT mechanism. Under the new FIP mechanism, certain renewable

generators are eligible to sell power into the spot market at a premium to the wholesale price, rather than

receive a fixed price per kilowatt-hour under the current FIT system. The United States will continue to

monitor these developments.

Air Transport Services

In response to the COVID-19 pandemic, Japan implemented caps on international airline arrivals. As of

March 2022, the cap was 7,000 passengers per day, though at points over the past year it was much lower.

While the arrival quotas are evenly split among domestic and foreign carriers, as of March 2022, each

foreign carrier must abide by a per-flight cap of 120 passengers per flight, and a weekly average cap of no

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more than 100 passengers per flight. Domestic carriers have a weekly passenger cap. This discrepancy

gives domestic carriers an advantage because it allows them to sell more seats on high-demand flights and

consolidate a greater number of passengers onto each plane. Foreign airlines are working with the Japanese

Government on a new system to allocate passengers based on demand, and the United States is engaged

with Japan on resolving this issue.

BARRIERS TO DIGITAL TRADE

Privacy Regulation

The Act on the Protection of Personal Information (APPI) is Japan’s principal data protection legislation,

and all private enterprises handling the personal information of individuals in Japan are required to conform

to this law. In 2019, Japan and the EU mutually recognized each other’s data protection laws as providing

an adequate level of protection of personal data, allowing personal data to flow freely between the two

jurisdictions. As part of the agreement, Japan put in place additional requirements regarding EU data,

including supplementary rules restricting the transfer of EU data from Japan to a third country, including

to the United States. The APPI was amended to better align with the EU’s General Data Protection

Regulation and was further strengthened by amendments that the Diet passed in June 2020.

The Personal Information Protection Commission (PPC) was established in 2016 as Japan’s centralized

data protection authority with enforcement powers backed by penal sanctions. Despite this authority, U.S.

industry has expressed concern that other Japanese agencies have created parallel data privacy and

protection rules that encroach on PPC’s jurisdiction, complicating compliance.

Digital Platform Regulation

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. companies have expressed concern that they are being subjected to additional regulations and scrutiny

that do not apply to most Japanese conglomerates, some of which operate in similar sectors.

In May 2020, the Diet passed a new law developed by the DMCH on “Improving Transparency and Fairness

of Specified Digital Platforms,” which obliges certain platform operators to improve transparency,

including with regard to the terms and conditions of use in their platform. The Transparency Act’s

provisions state that it will 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”. U.S. companies have raised concerns that the Japanese Government’s broad discretion

under the law could lead to selective enforcement. The Japanese Government’s practices to date suggest

that before a company is designated under the law, the Japan Fair Trade Commission (JFTC) will conduct

a fact-finding analysis, the results of which will establish factual predicates to support a company’s

designation under the Transparency Act. Further, METI advises that “[t]he regulations under the Act should

be applied to all digital platform providers regardless of domestic or overseas original of the business.”

This approach is similar to other jurisdictions that have adopted an ex ante approach to regulating

competition in dynamic digital markets. The law also raises concern because it includes a requirement that

companies explain how their search rankings are determined, which if not carefully implemented and

enforced could have the unintended consequence of facilitating the artificial manipulation of rankings to

the detriment of consumers.

Japan initially used this law, which went into effect in February 2021, to designate major online shopping

mall operators and application stores (including the Japanese company Rakuten, as well as the Japanese

subsidiaries of Amazon, Google, Yahoo, and Apple) as “specified digital platform providers,” thereby

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applying the law’s regulations to these entities. In April 2022, a second tranche of designations targeting

platforms intermediating digital advertising is expected to come into effect, following 2021 DMCH

recommendations to bring this digital business into the scope of the law and a similarly-timed JFTC market

study report citing Google’s market position in digital advertising. The DMCH also has announced its

intent to study mobile operating systems for possible regulation under the digital platform transparency law

in 2022. The United States has been engaging with Japan regarding these and other concerns and will

continue to monitor implementation of the legislation.

The JFTC, Japan’s competition enforcement agency, has been similarly interested in digital markets and

has instituted new or amended guidelines to address issues unique to digital platforms. In 2019, the JFTC

released guidelines on applying the Antimonopoly Act (AMA) to transactions between digital platform

operators and consumers, charting new territory for regulating the digital market in Japan. In its “Guidelines

Concerning Abuse of a Superior Bargaining Position in Transactions between Digital Platform Owners and

Consumers that Provide Personal Information, etc.” (ASBP Platform Guidelines), the JFTC asserts that

platform companies are in “a superior bargaining position” (a provision under the AMA) 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 in the

final guidelines of practices that would or would not constitute ASBP.

U.S. stakeholders have also noted concerns with amendments to Japan’s Telecommunications Business Act

(TBA), which the Diet passed in June 2020 and were put into effect April 2021. U.S. and foreign

telecommunications services operators in Japan, including over-the-top (OTT) and cloud-based services,

are now subject to regulation under the TBA. Businesses that intermediate communications with users in

Japan, even if the service is supplied on a cross-border basis, 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. Such

requirements could be particularly burdensome for foreign small and medium-sized enterprises (SMEs).

Of particular concern is compliance with the TBA’s “secrecy of communications” (SoC) provision, which,

when extended to digital OTT 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 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. Given the vast range of OTT services, U.S. industry says that SoC compliance will be challenging

without recognition of blanket consent and exceptions for machine-to-machine and human-to-machine

communications, and could potentially limit their ability to offer certain services in Japan. 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, a particular concern, as

the regulator has sought to justify the measure based on the argument that Japanese consumers have a lower

tolerance for service problems than others.

The United States will continue to monitor these developments and encourage transparency and multi-

stakeholder engagement in the process.

INVESTMENT BARRIERS

Japan continues to have the lowest inward foreign direct investment (FDI) as a proportion of total output

of any major Organization for Economic Cooperation and Development (OECD) country. According to

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OECD statistics, the inward FDI stock at the end of 2020 (latest data available) was the equivalent of only

4.7 percent of Japan’s GDP. Inward foreign merger and acquisition (M&A) activity, which accounts for a

large portion of FDI in other OECD countries, also lags in Japan.

While Japan recognizes the importance of FDI to revitalizing the country’s economy, its performance in

implementing domestic regulatory reforms to encourage a sustained increase in FDI has been uneven. In

June 2013, the Japanese Government announced its goal of doubling Japan’s inward 2012 year-end FDI

stock to ¥35 trillion (approximately $318 billion) by 2020, and it confirmed this commitment in its 2018

growth strategy. According to OECD statistics, Japan’s inward FDI stock was approximately $232.3 billion

in 2020 (latest data available), an increase of 3.8 percent over the previous year.

A variety of factors deter inbound M&A in Japan, including attitudes toward outside investors, unfinished

corporate governance reforms, cross-shareholdings, aspects of Japan’s commercial law regime, and a

relative lack of financial transparency and disclosure. (For further information, see the Other Barriers

section below.)

SUBSIDIES

Wood Products and Building Materials

Japan maintains numerous support programs at the national, prefectural, and municipal levels that may

favor domestic wood products over imports. The Competitiveness Enhancement Program for Plywood,

Sawn Wood and Laminated Timber was continued in the 2019 MAFF supplemental budget, making

approximately $340 million available to support up to 50 percent of the expense of building projects to

enhance domestic forestry production and logistics systems. The program also subsidizes Japan

Agricultural Standard structural lumber, which appears to provide de facto support for domestic production.

Japan has allocated approximately $1.1 billion each year under the Forest Management Project to support

thinning and selective logging operations. Since 2019, 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 $550 million). The

United States is monitoring the disbursement of these funds and other support programs.

Dairy Support Program

In 2021, Japan extended a dairy support program that incentivizes its dairy processors to replace imported

butter and milk powders with Japanese-produced products by paying the price differential. In 2021 U.S.

exports of milk powder and butter to Japan totaled approximately $8.3 million. The United States will

continue to monitor how Japan implements its dairy support programs.

ANTICOMPETITIVE PRACTICES

Improving Anti-Monopoly Act Compliance and Deterrence

Japan’s Anti-Monopoly Act (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 AMA’s leniency system, under which enterprises that provide

information about their participation in restraint of trade can receive full or partial immunity from

surcharges, was revised in June 2019 and put into effect on December 25, 2020. The new system grants

the JFTC greater discretion in determining fines (surcharges) levied against violators of the AMA based on

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the degree of companies’ voluntary cooperation with JFTC investigators. 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, in particular the implementation of its prohibition against “abuse of

superior bargaining position” (ASBP) and related administrative guidance. Stakeholders assert that vague

and ambiguous standards for liability in this area provide the JFTC with broad enforcement discretion and

may make good faith efforts to comply with the AMA difficult. This concern has intensified with the

release of the ASBP Platform Guidelines in 2019, extending application of ASBP to transactions between

digital platform operators and consumers. Stakeholders have called for further clarification of each of the

forms of abuse listed in the ASBP Platform Guidelines to minimize the substantial uncertainty for

companies and users. (For further information, see the section on Digital Platform Regulation above.)

Recognition of 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 (gaikokuho jimu bengoshi)) is not protected, as a result of Japanese limitations

on the practice of law in Japan. The rules further protect communications only for the documents that are

carefully segregated from other 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 are accorded a significant role in the

development of regulations and policies in Japan. U.S. companies have raised concerns with a lack of

transparency into the decision-making processes and operations of these groups. For example, even when

meetings are open to the public, companies report that meetings are sometimes announced with extremely

short notice of less than two days. In other cases, meetings are public, but the materials being discussed

are not, making it difficult or impossible to understand the topics. The United States continues to urge

Japan 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 that ample and meaningful opportunities

are provided for all interested parties, as appropriate, to participate in, and directly provide input to, these

councils and groups.

Public Comment Procedure

Many U.S. companies remain concerned about inadequate implementation of the public comment

procedure by Japanese ministries and agencies. In some cases, comment periods appear to be unnecessarily

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short, or occur at the same time as national holidays. In other cases, comments do 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.

Commercial Law

The United States continues to urge Japan to identify and eliminate impediments to cross-border M&A,

ensure the availability of reasonable and clear incentives for many such transactions, and take measures to

ensure that shareholder interests are adequately protected when Japanese companies adopt anti-takeover

measures or engage in cross-shareholding arrangements. The United States continues to urge Japan to

further improve its commercial law and corporate governance systems to promote efficient business

practices, capital markets development, and shareholder rights in accordance with international standards.

Areas ripe for improvement include facilitating and encouraging active and appropriate proxy voting and

strengthening protection of minority shareholders by clarifying fiduciary duties of directors and controlling

shareholders.

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 certain issues relating to non-acceptance of U.S. Federal Motor Vehicle Safety

Standards certification; unique standards and testing protocols; unique spectrum allocation for short-range

vehicle communications systems; an insufficient level of transparency, including the lack of opportunities

for input by interested persons throughout the process of developing regulations; and hindrances to the

development of distribution and service networks. Electric vehicle regulation poses an additional concern

for U.S. automakers, as Japan aims to transition to 100 percent electric vehicles sold in Japan by 2035. For

example, Japan provides a purchase subsidy of up to ¥600,000 (approximately $5,500) for traditional

battery electric vehicles. However, fuel cell electric vehicles, which are primarily produced by Japanese

companies, receive a much higher subsidy than battery electric vehicles, up to ¥2.5 million (approximately

$22,800), depending on the size of the vehicle. These barriers, together with other past and current policies

and practices, have had the long-term effect of excluding and disadvantaging U.S. manufacturers in the

Japanese market.

Medical Devices and Pharmaceuticals

Japan is the third largest pharmaceutical and medical devices market in the world and a critical export

destination for U.S. pharmaceuticals and medical devices. According to MHLW’s Annual Pharmaceutical

Production Statistics, the Japanese market for prescription and nonprescription pharmaceuticals in 2020

(latest data available) totaled $107 billion. The U.S. market share of pharmaceuticals in Japan is estimated

at approximately 20 percent, including local production by U.S. firms and compounds licensed to Japanese

manufacturers. MHLW figures show that the Japanese market for medical devices in 2020 totaled $26

billion. The U.S. market share of medical devices is estimated at 60 percent, including production in Japan

by U.S. companies.

Over a decade ago, the Japanese Government started increasing the appeal of Japan’s pharmaceutical and

medical device markets by reducing regulatory approval timelines and by improving the predictability of

the reimbursement pricing system. However, in recent years, Japan has frequently proposed reimbursement

adjustments, increasing the unpredictability of the system.

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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, such as the number of local clinical trials and local product launches by the company

submitting the application, 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.

In addition to failing to address concerns regarding the PMP criteria, in 2020, in the absence of prior public

notification and opportunity for comment, MHLW expanded drug repricing for indication changes to allow,

for example, price adjustments based on comparisons with products that are not considered to be

pharmacologically similar under Japanese law. U.S. industry is concerned about the abrupt and non-

transparent nature of this rule change.

Traditionally, Japan had a biennial reimbursement pricing system. However, the initiation of “off-year”

price revisions for reimbursement of drugs under Japan’s National Health Insurance system, which was

approved in 2016 but implemented starting in April 2021, has caused concern. The initial policy called for

drug price surveys to be carried out every year on all products and for reimbursement price revisions to be

implemented based on their results, covering only products with significant price discrepancies (gaps

between reimbursement prices and market prices). The April 2021 off-year price revision, however,

covered a larger-than-expected range of products. U.S. industry expressed concerns about the lack of

predictability and transparency for this price revision and its implications for future off-year price revisions.

U.S. stakeholders are additionally concerned that Japan’s implementation of the Health Technology

Assessment (HTA) will create significant uncertainty about prices for advanced medical devices and

innovative pharmaceuticals, given limited, meaningful opportunities for stakeholder input.

The U.S. medical device sector has concerns about Japanese regulators’ practice of grouping together

innovative and less-advanced medical devices in the same “functional categories,” which are a key

determinant of reimbursement prices for these products. U.S. industry is concerned that the variation in

product functionality within these categories has become more pronounced in recent years, which

disadvantages more innovative devices that often come from U.S. companies. U.S. industry is also

concerned that these and other reimbursement practices in Japan may negatively impact incentives for

medical device innovation. Additionally, the U.S. medical device industry has long requested stability and

predictability in MLHW’s pricing and reimbursement decision-making processes.

U.S. stakeholders have expressed strong concerns about a lack of transparency and stakeholder consultation

in the development of all of these pricing reform initiatives. Japan’s annual economic and fiscal policy

blueprint (honebuto) in 2021 spelled out for the first time the need to “secure transparency and

predictability” in the drug pricing system. The United States continues to urge Japan to implement

predictable and stable reimbursement policies that reward innovation; to solicit and consider the input of

all stakeholders, including U.S. stakeholders, when developing any measures related to these 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 move towards international harmonization of its

regulations in clinical development, multiregional clinical trials, and risk management.

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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 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.

Japan’s Consumer Affairs Agency 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 FOSHU’s costly and

time-consuming approval process and FNFC’s standards and specifications, which limit the range of

nutritional ingredients such as vitamins and minerals that can qualify for FNFC. Vitamin and mineral

products designated under the FNFC system are excluded from the FFC system. U.S. industry remains

concerned that the regulations on health food and dietary supplements are not in line with global best

practices, and advocates for science-based risk assessments, alignment of classification and labeling

systems, cost-benefit analyses, and opportunities for stakeholder consultation in regulation development.

Personal Care Products and Quasi-Drugs

According to the Cosmetic Importers Association of Japan, Japan’s imports of personal care and cosmetics

products were valued at approximately $3.1 billion in 2021, making Japan one of the top five importers for

the global industry. These data also show that, with $414 million in exports in 2021, the United States is

consistently among the top five personal care and cosmetics exporters to Japan, representing 13 percent of

all imports.

Delays in updates to market authorization requirements for “quasi-drugs,” which include cosmetics

products that are generally classified as over-the-counter drugs in the United States, as well as delays in the

adoption of an online system, are among the barriers to the continued growth of U.S. exports. Although

there have been some improvements in processing time, Japan has not adopted a monograph system,

intended to expedite the registration of products as quasi-drugs under Japan’s Pharmaceutical and Medical

Devices Act. As a result, products that contain active ingredients that are approved for specific uses in

Japan, such as in anti-dandruff shampoos and skin care, may require six months to receive market approval.

MHLW has committed to work with industry players and local prefectural governments to develop a

monograph system, known as “Quasi-Drug Additives Spec Codex” (besshi kikakushu), 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 MHLW and local governments, similar to the

system used by the U.S. Food and Drug Administration.

As a pilot to assist MHLW in moving towards formalizing a monograph system, U.S. and local industries

worked with MHLW to develop product approval guidance for medicated hair products in May 2014 and

for anti-bacterial soaps in May 2018. U.S. industry is calling on MHLW to develop similar standards for

other quasi-drug cosmetics and consider how it might expand the use of permitted claims, so long as they

can be substantiated. The United States will continue to monitor these and other developments, including

the development of an online system for registration.

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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. Over the past five years, Jordan has increased special taxes on certain

goods. In July 2018, Jordan doubled to 20 percent a 10 percent tax on carbonated drinks that was imposed

just 17 months prior, and then decreased the rate to 15 percent. The United States continues to work with

Jordan to promote transparency and predictability by encouraging consultations with the private sector.

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. stakeholders 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

continues to engage with Jordanian authorities to address this issue.

Jordan requires that importers of commercial goods be registered traders or commercial entities. The

Ministry of Industry, Trade, and Supply 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 three 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. These notifications

were due on February 22, 2017, according to Jordan’s self-designated implementation schedule.

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TECHNICAL BARRIERS TO TRADE

Application of International Standards

In general, Jordan recognizes and accepts international standards and specifications utilized by U.S

producers. However, Jordan’s signing of a twinning program

with the European Union (EU) on standards

in February 2018 may create obstacles to U.S. exporters in product areas where standards developed by

U.S.-domiciled standards organizations differ from those of the EU. For example, Jordan follows EU

standards for energy efficiency and labeling under the Jordan Standards and Metrology Organization

(JSMO) technical regulations 2089 and 2090. While the Ministry of Industry, Trade, and Supply maintains

that exporters of U.S.-origin products can provide documentation that the products meet Jordanian energy

efficiency standards, Jordanian importers generally find it simpler to import U.S.-origin products from

Europe, where they have been labeled according to EU standards, rather than directly from the United

States.

Genetically Engineered Food Requirements

In 2018, the Jordan Food and Drug Administration (JFDA) implemented a rule that restricts the sale and

distribution of food products labeled as containing genetically engineered (GE) ingredients. In April 2020,

Jordan issued “Instructions for Handling Food and Food Products Originating from Genetically Modified

Substances Produced by Modern Biotechnology for 2018,” that was based on Article 8.B of the Food Law

No. 30/2015 and Article 7.K of the Law of Food and Drug General Administration No. 41/2008. This new

regulation addressed U.S. concerns. Under the regulation, Jordan: (1) accepts the importation of products

labeled as containing GE ingredients as long as the product is produced and consumed in the country of

origin; (2) accepts the importation of such products based on the country of origin’s risk assessment system

provided the products are registered in advance with JFDA; (3) establishes the labeling threshold for GE

ingredient declaration at five percent; and (4) bans restrictions on the import of GE foods and food products.

The United States will continue to monitor and engage with Jordan to ensure that the implementation of

this regulation does not pose market access challenges for products labeled as containing GE ingredients.

Corn Import Sampling Procedures

Jordan’s poor sampling techniques have resulted in the rejection of shipments of U.S.-origin corn, according

to U.S. stakeholders. Jordan’s Ministry of Agriculture does not publish a foreign matter requirement or

provide sampling technique guidance for customs on grain. 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 $22 million in

2021. 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 for more than eight years.

In February 2019, the Jordanian Cabinet passed the Government Procurement Bylaw No. 28, which grants

priority to a domestic bid over a foreign bid if the bids are equivalent in terms of requirements,

Twinning is an EU technical assistance program that provides support for the implementation and enforcement of EU standards.

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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.

Jordan’s Ministry of Industry and Trade (MIT) is the sole purchaser of wheat from international suppliers

through a competitive tendering process by the local representatives of international companies. Bidders

compete to offer the most competitive price within the MIT-defined quality and grading specifications.

MIT often dismisses bids when offered prices exceed prevailing average market prices, and markets bread

flour at subsidized prices, accounting for nearly 90 percent of the country’s total national wheat

consumption.

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 2021 Notorious Markets List

for supplying Spider-branded piracy devices through online and physical

stores across the Middle East, North Africa, and Europe. 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.

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 United States 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, while requirements to contract with

local service suppliers can disrupt the business of foreign firms that operate on a global basis.

SUBSIDIES

Jordan abolished its export subsidy scheme effective January 2019, when the new Income Tax Law Number

38 went into effect. In November 2019, however, Jordan announced a stimulus package to spur the

economy and attract investment, which grants the industrial sector a number of incentives, including

reduced electricity tariffs and a direct cash payment to exporting industries. In response to U.S. concerns,

and pursuant to instructions from the Prime Minister, Jordan terminated the new incentive scheme in

December 2021 and installed an alternative stimulus in January 2022 in consultation with the private sector.

In 2018, Jordan reformed its public bread subsidy program as a targeted assistance program that sets bread

prices. Through this program, Jordanian officials manage domestic and imported wheat purchases.

OTHER BARRIERS

Export Policies

Jordan imposes a $50 per ton tax on exports of steel scrap, discouraging its exportation.

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KENYA

IMPORT POLICIES

Tariffs and Taxes

Tariffs

Kenya’s average Most-Favored-Nation (MFN) applied tariff rate was 13.5 percent in 2020 (latest data

available). Kenya’s average MFN applied tariff rate was 20.3 percent for agricultural products and 12.3

percent for non-agricultural products in 2020 (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 Eastern African Community (EAC) Customs Union’s Common External Tariff (CET),

which includes three tariff bands: (1) zero percent duty for raw materials and inputs; (2) 10 percent duty

for processed or manufactured inputs; and, (3) 25 percent duty for finished products. For products and

commodities deemed sensitive, Kenya applies ad valorem rates above 25 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. For some products and commodities, tariffs

vary among the five EAC Member States. In June 2021, the EAC granted Kenya a new one-year exception

from the rice CET, reducing the applied import tariff rate to 35 percent or $200 per metric ton (whichever

is higher) due to Kenya’s status as a net importer.

When deemed necessary, the Kenyan Government has temporarily waived agricultural tariffs to stabilize

prices when domestic agricultural prices exceeded certain levels. However, 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 subsequently imposed on spare parts and

accessories to solar equipment have had a negative impact on the business operations of off-grid solar

companies. Though Kenya has not uniformly applied the duties, some stakeholders have voiced concern

that this amendment does not adequately define the term “spare parts and accessories.”

Taxes

The Value Added Tax (VAT) Act, adopted in 2013, 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 over the last several years 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.

In 2018, the Kenya Revenue Authority (KRA) 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

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of raw materials used in tanneries. In 2018, the KRA also imposed an eight percent VAT on fuel products

including petrol, diesel, jet fuel, and kerosene. 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.

Kenya requires all importers to pay a 3.5 percent import declaration fee based on the customs value of the

imported goods. The 2020 Finance Act increased and changed the basis for the import declaration fee on

goods imported under the EAC’s Duty Remission Scheme, a program that provides exemption on inputs

used to manufacture exported goods. The fee changed from KES 10,000 (approximately $92.60) per

shipment to 1.5 percent of the customs value of the goods in the shipment.

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.

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.

Import Bans

Kenya has maintained a ban on genetically engineered (GE) food and feed imports since November 2012.

Kenya’s GE ban has blocked both U.S. Government food aid and U.S. agricultural exports derived from

agricultural biotechnology. The restriction affects U.S. exports of processed and unprocessed foods and

feed ingredients, such as soy, corn, and distiller dried grains with solubles. The GE import ban also affects

trans-shipment; as a result, U.S. Government food aid shipments of GE commodities destined for inland

East African countries, which would ordinarily enter through the Port of Mombasa, must be diverted to

other ports or reformulated with non-GE commodities.

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. U.S.

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industry has also expressed frustration with inadequate de minimis relief from customs duties and taxes for

express shipments. Kenya’s customs law appears to reward customs officers for aiding in the seizure of

goods up to the value of the imports that have been seized.

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.

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

Kenya is in the process of commercializing Bt cotton, and research continues on other genetically

engineered (GE) crops. In September 2017, Kenya approved open field trials for GE cotton (MON 15985)

and derived varieties, and for GE corn developed for drought tolerance and insect resistance under the

Water Efficient Maize for Africa project. While political bottlenecks have slowed the process for

dissemination and use of GE corn, the national performance trials for GE cotton are complete. In December

2019, Kenya approved the first commercial cultivation of Bt cotton beginning in March 2020, as well as

import of Bt cottonseeds. In August 2020, the Bt cotton open field trials commenced in western Kenya.

Kenya’s commercialization of GE Gypsophila flower (baby’s breath) intended for export, including to the

United States, is stalled due to concerns that it could potentially jeopardize Kenya’s market access to the

European Union. In June 2021, Kenya became the first country in the world to greenlight the environmental

release of GE cassava, which will now need to complete National Performance Trials and be registered as

a new variety before full commercial release. Following the completion of research field trials, Bt corn is

poised to advance to Kenya’s Cabinet for exemption from the GE ban and possible final approval in 2022.

Kenya’s research trials of bio-fortified sorghum, bacteria wilt-resistant bananas, and virus-resistant sweet

potato have stalled due to lack of funding. However, Kenya continues to maintain the ban of GE food and

feed imports introduced in November 2012.

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The U.S. Government continues to engage the Kenyan Government and stakeholders to support the

adoption of GE and other emerging technologies.

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, beyond those previously agreed by the two agencies. Technical work is

ongoing.

Meat, Milk, and Poultry Products

Although Kenya accepts standardized sanitary certifications for meat, dairy, and poultry products, 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, 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

In January 2020, Kenya and the United States reached an agreement resolving Kenya’s concerns about flag

smug fungus, which resulted in an approved certification protocol, enabling the importation of U.S. Pacific

Northwest wheat for the first time since 2006.

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. Kenya’s aflatoxin limit is lower than the U.S. Department of Health and Human Services

Food and Drug Administration action level of 20 ppb. 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.

Kenya also restricts popcorn imports to a six percent maximum moisture requirement. The U.S. limit is

12.5 percent to 15 percent.

Kenya does not permit whole pea imports due to concerns about the Pseudomonas pisi fungus but permits

the import of split peas. Kenya also prohibits bean imports from the United States due to the occurrence of

Corynebacterium flaccumfasciens bacteria in some parts of the country. Kenya also prohibits lentils from

the United States due to the risk of darnel weed; although, this weed already exists in Kenya.

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 Public Procurement and Asset Disposal Act (PPADA) of 2016 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 $455,000), 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.

The PPADA calls for at least 30 percent of government procurement contracts to go to firms owned by

women, youth, and persons with disabilities. The PPADA further reserves 20 percent of county-level

procurements for residents of that county. 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.

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 Statute Law (Miscellaneous Amendments) Act of 2018, which entered into force in January 2019,

includes amendments that improve the protection and enforcement of intellectual property (IP) by updating

Kenya’s copyright and trademark legislation, including by enabling the recordation of trademarks with

customs authorities. However, concerns related to the widespread availability of counterfeit and pirated

goods remain. Stakeholders also have raised concerns regarding the widespread distribution of copyright

infringing content online and have identified opportunities for increased collaboration with Internet service

providers to expeditiously remove or disable access to such content on their networks.

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). These restrictions prevent U.S. insurers from fully accessing the Kenyan market. Although

regulatory approval can be sought, Kenya generally prohibits cross-border Difference-in-Conditions and

Difference-in-Limits insurance trade, 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 20 percent ownership and control

by Kenyan persons within four 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.

Other Services

The 2016 Private Security Regulations Act restricts foreign participation in the private security sector by

requiring that at least 25 percent of shares in private security firms be held by Kenyans.

BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Data Localization Requirements

Kenya’s 2019 Data Protection Act (DPA) includes unclear and potentially restrictive 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. Such conditions may

prove burdensome for firms that supply services on a cross-border basis or depend on data processing

systems located abroad. 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 Office of the Data Protection Commissioner has not published the

implementing regulations for the DPA.

Internet Services

The 2018 Computer Misuse and Cybercrimes Act (CMCA) includes provisions that could limit online

access to information and curtail the creation of user-generated content, potentially limiting the ability of

some service providers to operate profitably in Kenya. Under the CMCA, service providers can be held

liable for the publication of content deemed factually incorrect. Kenya has yet to publish the implementing

regulations companies are required to comply with under the CMCA’s cybersecurity measures.

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 providing ICT services must have at least 30 percent Kenyan ownership as well as preferences

and incentives for Kenyan-owned ICT manufacturers.

The 2015 EAC Electronic Transactions Act provides some liability protection for intermediaries of non-

IP-protected content created by third parties; however, it fails to include any counter-notice procedures for

a third party to challenge a content takedown request and removes legal protections if the intermediary

profits from the content. Lack of a counter-notice provision exposes internet intermediaries to business

process disruptions from potentially frivolous takedown notices. Removing legal protection for

intermediaries that profit from the content could remove an entire class of intermediaries from the scope of

liability protections and could result in a general obligation on these intermediaries to monitor internet

traffic.

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Digital 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 not expressed support for the OECD/G20 Inclusive Framework’s October 8, 2021 Statement

that commits participating governments to provide for the removal of unilateral DSTs for all companies.

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. The 2010 Kenya Insurance Act restricts

foreign capital investment to two thirds, with no single person controlling more than 25 percent of an

insurer’s capital. Additionally, since 2015, Kenya has imposed regulations requiring that Kenyans own at

least 15 percent of the share capital of derivatives exchanges. The Nairobi Securities Exchange does not

have foreign ownership restrictions and listed companies can be 100 percent foreign owned.

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.

The 2011 National Construction Authority Act (NCAA) imposes local content restrictions on “foreign

contractors,” defined as companies incorporated outside Kenya or with more than 50 percent ownership by

non-Kenyan citizens. The NCAA also contains provisions requiring foreign contractors to hire from the

local labor market, unless the National Construction Authority determines the necessary technical skills are

unavailable locally. In addition, the NCAA requires foreign contractors enter into subcontracts or joint

ventures assuring that at least 30 percent of the contract work is done by local firms.

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.

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.

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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 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.

OTHER BARRIERS

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.

In January 2020, Kenya began an anticorruption campaign led by the Ethics and Anticorruption

Commission and the Office of the Director of Public Prosecution. While this campaign has resulted in

some convictions, none of them involved high-profile individuals.

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

To discourage vandalism of infrastructure and encourage domestic manufacturing that uses scrap metal, the

2014 Scrap Metal Act restricts the export of any form of scrap metal without authorization from the Ministry

of Industry, Trade, and Cooperatives (MoITC). A 20 percent export levy on the approved export of copper

waste and scrap metal encourages local smelting, enhances the value of local copper waste, and discourages

the black-market export of copper cables and wires. 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. These modifications and amendments entered into force on

January 1, 2019, and include improvements to remove a range of regulatory and non-tariff barriers,

including doubling from 25,000 to 50,000 the number of U.S.-origin vehicles per manufacturer per year

that may be imported and sold in Korea that meet U.S. safety standards. Progress also was made on

outstanding issues relating to the implementation of KORUS, including agreement by Korea to follow

certain globally accepted customs-related principles and to establish a working group to address issues

related to origin verification. 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. To increase the competitiveness of the domestic agricultural and

livestock industries, in 2018 Korea voluntarily announced duty-free Most-Favored-Nation (MFN) TRQs

for the feed grain complex, made up of 18 commodities including corn, soymeal, barley, and oats.

Origin Verification

The United States has worked closely with Korea to resolve issues surrounding onerous verifications by

the Korea Customs Service (KCS) for claims of preferential tariff treatment under KORUS and to ensure

that U.S. exporters and producers receive the benefits provided for under KORUS. In the context of the

2018 KORUS amendment discussions, Korea agreed to specific systemic changes to its origin verification

procedures. These commitments, confirmed through an exchange of letters, were accompanied by

agreement to establish a new KORUS Rules of Origin Verification Working Group as an ongoing forum to

address traders’ concerns. USTR continues to hold discussions with the Ministry of Trade, Industry and

Energy (MOTIE) and KCS to ensure U.S. exporters do not face unreasonable verification challenges. In

addition, U.S. Customs and Border Protection and KCS meet regularly to share best practices, exchange

views on verification processes, and better align Korean and U.S. customs procedures.

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TECHNICAL BARRIERS TO TRADE / SANITARY AND PHYTOSANITARY BARRIERS

Technical Barriers to Trade

Chemicals

The revised Act on the Registration and Evaluation of Chemicals (AREC, also known colloquially as K-

REACH) entered into force on January 1, 2019. The amended AREC aims to register all chemical

substances, manufactured in or imported to Korea in amounts exceeding one ton in annual volume, with

the Ministry of Environment (MOE) by 2030, with a first deadline at the end of 2021 for substances with

an annual volume over 1,000 tons. All new substances manufactured in amounts below 100 kg only require

a notification to the MOE. The United States has raised a number of concerns on the amended act with

regard to: the lack of implementation guidance, the insufficient time for companies to implement the

requirements, and the AREC’s insufficient protection for confidential business information shared by

compliant companies. In addition, companies have raised concerns that the selection process for testing

existing chemicals is not transparent, and may in effect require companies to act inconsistently with the

principle of minimizing animal testing. The MOE made further changes in April 2021 to the Presidential

Decree that narrowed application of low volume exemptions by requiring registration of compounds

exceeding 1,000 kg imported country-wide on an aggregate basis.

The revised Korean Occupational Health and Safety Act (K-OSHA) took effect in January 2021. The

amended act requires chemical substance manufacturers and importers to submit material safety data sheets

to the Ministry of Employment and Labor (MOEL). Chemical firms have expressed concern that the K-

OSHA’s strict reporting requirements risk exposing confidential business information. Companies that

wish to protect confidential business information must submit approvals for non-disclosure to the MOEL.

The request, if approved, is valid for five years. The United States will monitor the implementation of the

amendments.

The Korea Persistent Organic Pollutants Control Act, as amended in September 2020, prohibits the

manufacture, import, and use of perfluorooctanoic acid and its salts. Korea has not clarified when the new

restrictions will take effect, or how the relevant products will be tested and the component chemicals

measured. Under these circumstances, industry has raised serious concerns that firms cannot adequately

prepare for compliance with the law. The United States will monitor the implementation of the

amendments.

The Chemical Control Act (K-CCA) aims to regulate the market access, distribution, handling and disposal

of chemicals. In 2018, MOE proposed an amendment to the K-CCA that would require disclosure of the

full composition of chemical mixtures by importers and manufacturers in line with its new “Universal

Chemical Tracking System.” However, U.S. exporters contend that full composition disclosure fails to

protect confidential business information, and that compliance in declaring the contents of third-party

supplied materials would be difficult. If U.S. exporters cannot fulfill the requirements, they may cease

exporting these substances to Korea. The proposed amendment has not yet been adopted, however. The

United States continues to urge Korean ministries to adopt international standards to support a risk-based

approach to regulations, and will continue to engage Korean authorities if implementation progresses.

Packaging Materials and Labeling Regulations

In December 2018, Korea issued the Act on the Promotion of Saving and Recycling of Resources

(Recycling Act). The Recycling Act focuses on consumer products packaging and requires packaging

evaluation, gradation, and labeling with respect to recyclability. In January 2019, MOE issued the draft

Package Recycle Classification Regulation, which specifies the criteria used to evaluate and label

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packaging materials and methods. The regulation requires a wide range of products to have packaging

labeled as “difficult” or “easy” to recycle. The regulation did not include guidance on the labeling

requirements and industry is concerned that using stickers containing the Korea-specific information over

the existing packaging (rather than different packaging for Korea) will not be allowed. Korea subsequently

notified the draft regulation to the WTO. The United States submitted comments to the WTO Committee

on Technical Barriers to Trade (WTO TBT Committee) in November 2019 and raised the issue in the WTO

TBT Committee meetings in 2021. The United States also raised the issue in the KORUS TBT Committee

meetings in 2019 and 2021. In response to comments submitted by U.S. industry, Korea modified the draft

regulation to address many of the concerns raised by stakeholders. The U.S. Government will continue to

monitor this issue.

U.S. firms remain concerned about the lack of clarity relating to the calculation method for packaging space

ratios used by Korean Government authorities. Moreover, amendments to the Recycling Act proposed 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. The United States continues

to seek clarifications about these rules.

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 crop varieties is onerous and protracted

due to inefficiencies that 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 private industry have provided ideas on how to improve the process and developed pilot projects to test

a streamlined process for biotechnology 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 MOTIE and other relevant agencies throughout 2020 and 2021 and will continue to engage

with Korea on improving its approval process for agricultural biotechnology.

In May 2021, Korea 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.

Poultry

In early 2017, Korea’s Ministry of Food and Drug Safety (MFDS) detected semicarbazide (SEM) residues

in a shipment of U.S. poultry products, followed by additional detections in subsequent shipments, resulting

in the delisting of multiple establishments from which the products were exported. Although the presence

of SEM can be an indicator of the presence of nitrofurazone, a veterinary drug that is banned in both the

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United States and Korea, the U.S. Department of Agriculture’s Food Safety and Inspection Service

maintains that SEM is a poor indicator for the use of nitrofurazone. Work is ongoing to determine the cause

of the SEM residues.

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. 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 more than a decade later. 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 $2.4 billion in beef to Korea, making Korea the largest

export market for U.S. beef by value and second largest by volume in 2021.

Horticultural Products

Several U.S. market access requests remain pending with Korea’s Ministry of Agriculture, Food and Rural

Affairs’ (MAFRA) Animal and Plant Quarantine Agency. 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 stone fruits. The United States requested that MAFRA 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 a meeting of the KORUS Sanitary and Phytosanitary

Measures (SPS) Committee in December 2020 and at a bilateral plant health technical meeting in October

2021. The United States will continue to press Korea to allow imports of these fruits from the United States.

Maximum Residue Limits

MFDS has been shifting to a new positive list system (PLS) for agrochemical residues and veterinary drugs.

Under the new system, Korea will no longer allow imports of food containing agrochemical residues unless

the substance has been approved for the commodity in question, and a maximum residue limit (MRL) has

been established. Korea began a phased implementation of the PLS for tropical fruits, oilseeds, and tree

nuts in December 2016, and for all other plant products in January 2019.

Korea requires the establishment of new import tolerances for agrochemicals that were previously permitted

but not officially registered for use in Korea, as well as for new substances that do not have any MRLs in

Korea. To minimize disruption to trade, Korea delayed the full elimination of existing MRLs for

agrochemicals not registered for use in Korea until the end of 2021. As of January 2022, Korea’s temporary

MRLs have been cancelled and 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 also plans to introduce a PLS for meat, poultry, and other animal products. Like the PLS for

agrochemical residues, Korea will begin a phased implementation of the PLS for veterinary drugs starting

in January 2022. First, Korea will lower 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 categories of products, 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.

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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 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.

Under the GPA, Korea applies a very high threshold for procurement of construction services by sub-central

government entities and government enterprises (SDR 15,000,000 or approximately $21.3 million). This

threshold is three times higher than the threshold applied by the United States for similar entities. However,

for central government procurements of construction services, Korea and the United States apply equivalent

thresholds (SDR 5,000,000 or approximately $7.1 million).

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” entities, again leaving foreign-

based and multinational firms out of the government procurement process.

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 Communications

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, however, requires

network equipment procured by government agencies to undergo additional verification in Korea by

government authorities, even if the products received CCRA certification outside Korea. Korea’s National

Intelligence Service (NIS), which leads this process, has managed the verification process in a non-

transparent fashion, without soliciting public comment, and has broadened these requirements beyond areas

of national security to apply to any government entity, including schools, local governments, libraries, and

museums. U.S. stakeholders have raised concerns that Korea is also expanding the scope of these

requirements (including additional verification) to products not normally considered security products, such

as routers, switches, and Internet Protocol private branch exchange devices (IP-PBX).

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 certifies encryption

modules based only on the Korean-developed ARIA and SEED encryption algorithms (which, although

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recognized as ISO standards, are in practice primarily used in Korea), rather than the internationally

standardized Advanced Encryption Standard algorithm in widespread use worldwide. Some U.S. suppliers

have not been able to sell virtual private network and firewall systems to Korean public sector agencies due

to this restriction. 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

Though Korea passed the Cloud Computing Promotion Act (Cloud Act) in 2015, significant barriers still

exist to the adoption of public cloud services. In 2016, the Korea Internet and Security Agency created a

Cloud Security Assurance Program (CSAP) governing public sector cloud service procurement. The CSAP

is a key barrier for U.S. cloud service providers (CSPs) in the Korean public sector market, as U.S. firms

are unable to meet some components of the certification program without creating a separate Korea-unique

product, including segregating facilities for exclusive use for government-owned customers. It appears

unprecedented among developed countries, which, apart from national security applications, have generally

embraced a “multi-tenant” architecture, allowing both commercial and public sector customers to share the

same computing resources, subject to robust access controls.

Korea’s onerous CSAP requirements have created conditions that limit U.S. CSP’s ability to participate in

Korea’s public cloud market, encompassing all central and local government ministries, affiliated public

institutions, and educational institutions (from primary schools to universities). 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. The National Assembly is considering a proposed amendment to the 2015 Cloud Act, submitted

in July 2021, which would elevate the CSAP from an administrative guideline into a legal requirement.

The United States will continue to engage with Korea to align Korea’s 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 addition, in January 2021, amendments to the Copyright Act were introduced in the National Assembly.

Stakeholders have expressed concerns over the amendments, including in the areas 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. As of October 2021, Korea’s Copyright Act amendments remain under review by

the standing committee for Culture, Sports and Tourism. However, the Unfair Competition Prevention and

Trade Secret Protection Act was amended in November 2021 to incorporate a form of portrait rights. The

United States continues to engage with Korea on these copyright-related amendments and urge Korea to

ensure that interested stakeholders have meaningful opportunities to provide input.

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SERVICES BARRIERS

Audiovisual Services

In Korea, foreign programs may not exceed 20 percent of terrestrial television or radio broadcast time or

50 percent of cable or satellite broadcast time in either the first half or second half of the year. Within those

overall quotas, Korea further limits broadcast time for foreign films to 75 percent of all films for terrestrial

broadcasts and 80 percent for cable and satellite broadcasts. Foreign animation is limited to 55 percent of

all animation content for terrestrial broadcast and 70 percent of all animation content for cable and satellite

broadcasts. Foreign-produced popular music is limited to 40 percent of all broadcast music content.

Another six-month quota limits content from any one country to 80 percent of the total quota available to

foreign films, animation, or music. KORUS protects against quota increases in the allocation to domestic

content and ensures that new platforms, such as online video and streaming music, are not subject to these

legacy limits. Notwithstanding this commitment, 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.

In addition, in the summer of 2021 various legislators introduced bills in the National Assembly seeking to

oblige content providers to pay Internet service providers “network usage fees.” Such legislation, if

enacted, would raise concerns under Korea’s international trade obligations. The United States will

continue to monitor Korea’s legislative efforts in this regard.

Korea also maintains a screen quota for domestic films shown in theaters, requiring local movie screens to

show domestic films at least 73 days per year.

The Broadcasting Act contains restrictions on voiceovers (dubbing) and local advertising for channels

retransmitting foreign content. These prohibitions continue to be of concern to U.S. stakeholders as they

diminish the value of such channels in the Korean market.

Financial Services and Insurance Services

To implement its commitments related to the transfer of information under KORUS and the Korea–

European Union Free Trade Agreement, Korea adopted regulations in 2013 governing the outsourcing of

data and information technology (IT) facilities to allow financial institutions located in Korea to transfer

data to affiliates outside Korea and to allow affiliates outside Korea to perform certain data processing and

other functions. In June 2015, the Financial Services Commission (FSC) revised its regulations to:

eliminate the approval process for the outsourcing of IT facilities; lift restrictions on third-party outsourcing

or re-outsourcing; establish a broader application of ex post facto reporting requirements to process

consumer or corporate transaction data; and abolish the Financial Supervisory Service security review in

the application process.

U.S. companies continue to express concern over substantial consent requirements, such as consent for both

the specific data being transferred and the specific purpose for the transfer. These requirements have been

particularly challenging for the reinsurance industry. The United States continued in 2021 to urge Korea

to resolve this issue. The FSC has informed the U.S. Government that the FSC has changed its

interpretation of relevant rules such that U.S. reinsurance companies now can send personal data of primary

insurance policy holders for purposes of data processing and underwriting without additional consent. The

U.S. Government will continue to monitor Korea’s overall implementation of its FTA commitments in

financial services, including with respect to the transfer of data.

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Responding to industry requests, the FSC announced the Plan for the Expansion of Cloud Usage in the

Financial Sector in July 2018. The FSC amended the Regulation on Supervision of Electronic Finance and

Data Protection Standards for Cloud Computing Services in December 2018, which went into effect on

January 1, 2019. The regulation expands the scope of cloud usage in the financial sector, provides

procedures and safety standards, and clarifies legal requirements between financial companies and cloud

service providers. However, U.S. industry has expressed concerns that implementation of this measure

favors local cloud service providers and thus limits opportunities for U.S. cloud service suppliers and data

processing firms seeking to offer such services on a cross-border basis, and reduces flexibility of foreign

financial services companies. The United States will continue to engage with Korea on these issues.

Facilities Localization

Korea maintains localization requirements on facilities with respect to payment gateway services,

preventing suppliers from leveraging investments in facilities located outside Korea. While ostensibly

designed to ensure payment data remains in Korea for privacy purposes, such a requirement does not

necessarily enhance privacy protection and is at odds with evolving technologies and services, which

increasingly rely on globalized networks.

Under the Regulation on Supervision of Credit-Specialized Financial Business, electronic commerce firms

operating on a cross-border basis have been prevented from either selling in Korean won or storing domestic

consumers’ credit card information unless they have registered in Korea as a Payment Gateway (PG)

supplier or use a local PG company service for won-denominated transactions. In the absence of a PG

registration (which requires firms to develop Korea-specific payment systems and customer interfaces, and

to have a local presence in Korea), foreign electronic commerce sites can only process dollar-denominated

transactions for which customers enter their credit card information anew each time, which puts them at a

competitive disadvantage as compared to local merchants.

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 jointly cases 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, buts 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 the firms composing the joint venture to 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.

Telecommunications Services

Korea prohibits foreign satellite service providers from selling services (e.g., transmission capacity) directly

to end-users without going through a company established in Korea. Given existing investment restrictions,

this prohibition significantly restricts the ability of foreign satellite service suppliers to compete in the

Korean market. The United States will continue to raise this issue with Korea.

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BARRIERS TO DIGITAL TRADE AND ELECTRONIC COMMERCE

Data Localization Requirements

Cross-Border Transfer of Data

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 data, exporting such data requires a

license. To date, Korea has never approved a license to export cartographic or other location-based data,

despite numerous applications by foreign suppliers. U.S. stakeholders have reported that Korean officials,

citing security concerns, are linking such approval to a separate issue: a requirement to blur certain

integrated satellite imagery of Korea, which is readily viewable on other global mapping sites based outside

Korea. Korean officials have expressed an interest in limiting the global availability of high-resolution

commercial satellite imagery of Korea but have no ready means of enforcing such a policy, since most

imagery is produced and distributed from outside Korea. It is unclear how limiting such availability through

specific services (e.g., online mapping) of a particular supplier addresses the general concern, since high-

resolution imagery, including for Korea, is widely available as a stand-alone commercial product (and is

often available free of charge), and offered by over a dozen different suppliers. The United States is

sensitive to Korea’s national security concerns, but believes that Korea’s restriction on exporting location-

based data is a separate issue and will continue to consult with Korea on addressing this market access

barrier in the mapping service market.

The 2011 Personal Information Protection Act imposed stringent requirements on service providers seeking

to transfer customers’ personal data outside Korea. The law requires data exporters to provide customers

with extensive information about the data transfer, including the destination of the data, any third party’s

planned use for the data, and the duration of retention. Less stringent requirements apply to data transfers

to third parties within Korea. These restrictions pose barriers to the cross-border provision of Internet-

based services that depend on data storage and processing services, provided by a company directly or

through third parties, and effectively privilege Korean over foreign suppliers in any data-intensive sector

without materially contributing to privacy protection.

In April 2016, Korea amended its IT Network Use and Protection Act, which imposes stringent protections

on the personal data collected and handled by telecommunications and online service providers. The

amendments impose significant penalties for violating data protection requirements, including heavy fines

for telecommunications and online service providers that transfer personal data across borders without

consent. Failure to obtain consent results in a fine of up to three percent of the revenue related to the

transfer.

In September 2021, the Personal Information Protection Commission submitted a proposed amendment of

the Personal Information Protection Act to the National Assembly to increase the fines to three percent of

the total global revenue. The proposed amendment would also grant the Personal Information Protection

Committee the authority to suspend a company’s cross border data transfers in the case of a significant

violation, about which U.S. stakeholders have raised concerns. The United States continues to engage with

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Korea on the proposed amendment and urge Korea to ensure that interested stakeholders have meaningful

opportunities to provide input.

Interactive Computer Services

In May 2020, Korea’s National Assembly amended the Telecommunications Business Act to require large

content providers to ensure network stability and to appoint local representatives. Industry has voiced

concerns that this stability provision obligates content providers to guarantee quality of service on networks

they do not control. As of March 2022, several bills introduced in the National Assembly would require

foreign content providers to 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. The United States will continue to monitor Korea’s legislative efforts in this regard.

In September 2021, Korea became the first country in the world to pass legislation, through an amendment

to the Telecommunications Business Act, requiring mobile application marketplaces to permit users to

make in-application purchases through payment platforms not controlled by the marketplace itself. The

Korea Communications Commission published a draft Presidential Decree in November 2021 providing

definitions and other specific implementation and enforcement measures for the law and provided a 40-day

public comment period.

As of October 2021, Korea’s National Assembly introduced several bills to strengthen local agent

requirements for foreign information and communication technology (ICT) firms operating in Korea. The

bills seek to designate the Korean offices of foreign ICT firms as the local agents representing their

headquarters. Foreign firms generally prefer to set up limited liability companies to avoid the Korea’s

criminal liability laws that hold CEOs personally liable for all actions of their company and associated

infractions.

INVESTMENT BARRIERS

U.S. investors have raised concerns about possible discrimination and lack of transparency in investment-

related regulatory decisions in Korea, including decisions by tax authorities and verbal interventions by

financial authorities.

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.

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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 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.

In December 2020, the National Assembly passed revisions to the Monopoly Regulation and Fair Trade

Act (MRFTA),which entered into force in December 2021. The revision (among other changes) expands

the rights of affected parties to view or copy data related to 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.

U.S. companies have also raised concerns that Korean regulatory authorities use their enforcement powers

to boost sales for Korean companies at the expense of U.S. competitors, especially in the competitive mobile

phone market.

OTHER BARRIERS

Motor Vehicles

Increased access to Korea’s automotive market for U.S. automakers remains a key priority for the United

States. As one of the outcomes related to the 2018 KORUS amendment negotiations, Korea committed to

complete the harmonization of its emission requirements and testing standards for gasoline engine vehicles

with EPA requirements and standards, thereby allowing vehicles exported to Korea to comply with Korea’s

fuel emission standards using the same tests they conduct to show compliance in the United States. U.S.

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automobile exports to Korea increased by over 420 percent from 2012 to 2021, from approximately $617

million in 2012 to approximately $3.2 billion in 2021.

In February 2021, Korea adopted final regulations for the next tranche of its carbon dioxide emissions and

Corporate Average Fuel Economy (CO

/CAFE) targets, which cover the years 2021 to 2030. U.S.-owned

automobile manufacturers have voiced concerns that the divergence between Korea’s CO

/CAFE

regulations and the corresponding U.S. regulations could create compliance challenges for them. U.S. firms

have also raised concerns over the inability of some electrical vehicle producers to participate in Korea’s

zero-emission vehicle credit trading schemes.

Industry has also raised concerns about the Emission Related Components modifications and enforcement

actions taken against vehicle manufacturers by Korean regulatory bodies. Under Korea’s Clean Air

Conservation Act, vehicle manufacturers and importers are required to obtain MOE modification

certifications or prepare modification reports even for insignificant changes. The automobile industry has

expressed concern about ambiguity between certification and reporting. Automakers also have noted that

violations with respect to imports could be subject to criminal investigation by Korea’s customs authorities,

which lack authority to investigate domestically manufactured vehicles. Automobile importers have called

for MOE to revise the regulations to eliminate these trade barriers.

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 United States continues to urge Korea to ensure that pharmaceutical reimbursement is conducted in a

fair, transparent, and nondiscriminatory manner that recognizes the value of innovation. Nevertheless, the

U.S. pharmaceutical and medical device industries continue to report concerns regarding a lack of

transparency and predictability in Korea’s pricing and reimbursement policies, as well as in Korea’s

underlying methodology for determining reimbursement rates.

In 2016, Korea enacted provisions for pharmaceutical companies to apply for “premium pricing” for

innovative products, although stakeholders raised concerns that the criteria for the program provided more

favorable treatment to domestic pharmaceutical companies. As one of the outcomes of the 2018 KORUS

amendment negotiations, Korea agreed to revise the program to remove the problematic criteria. Although

amendments made in December 2018 did remove these criteria, the revisions to the program’s criteria by

the Ministry of Health and Welfare also substantially narrowed the program’s scope in a manner that may

dramatically limit the ability of any company, foreign or domestic, to qualify for premium pricing.

Stakeholders in the U.S. medical devices sector also have concerns about Korea’s pricing and

reimbursement system, including regarding insufficient transparency, a lack of meaningful input into

product valuation decisions, reimbursement decisions that do not appropriately value innovation, and delays

in market approval. 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 country-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 products (100 percent). U.S. beverage producers report

that the current tax structure for carbonated drinks, which also applies to sugar-free carbonated beverages,

fails to address public health concerns and also disadvantages U.S. products. Sugary juices, many of which

are manufactured domestically within GCC countries, remain exempt from the tax. Kuwait introduced

legislation to implement the excise taxes in the National Assembly in 2018, where it remains under debate

as of March 2022.

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, to ensure that imports are compliant with various laws and

regulations. Importers must be citizens of Kuwait, or be Kuwaiti-based brokers, and are required to register

with the Ministry of Commerce and Industry. Import license applications must include a standard

application form, a certificate from the chamber of commerce, copies of invoices, and certificates of origin

(if necessary). There are no fees associated with the application. If approved, licenses are valid for one

year.

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All imported meat requires a health certificate issued by the country of export and a halal food certificate

issued by an approved Islamic center in that country. Meat products are routinely tested upon importation

into Kuwait.

Customs Barriers and Trade Facilitation

Kuwait notified its customs valuation legislation to the 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 (TFA) 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.