VZCZCXYZ0002
RR RUEHWEB

DE RUEHBO #3894/01 3382133
ZNR UUUUU ZZH
R 042132Z DEC 09
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 1416
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHBO/AMEMBASSY BOGOTA

UNCLAS BOGOTA 003894 
 
SIPDIS 
USTR/GBLUE AND BHARMAN 
WHA/AND BMONTANEZ 
WHA/EPSC 
EEB/TPP/BTA GSARRANO 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD CO
SUBJECT: COLOMBIA: 2010 NTE SUBMISSION 
 
REF: STATE 105824 
 
¶1. Per reftel, following is Embassy Bogota's submission for the 
2010 National Trade Estimate Report, which has been e-mailed to 
USTR, WHA/AND, WHA/EPSC and EEB/TPP/BTA. 
 
TRADE PROMOTION AGREEMENT 
 
------------------------- 
 
 
 
¶2. The United States-Colombia Trade Promotion Agreement (CTPA) was 
signed on November 22, 2006.  Colombia's Congress approved the CTPA 
and a protocol of amendment in 2007.  Colombia's Constitutional 
Court completed its review in July, 2008 and concluded that the 
Agreement conforms to Colombia's Constitution.  In April 2008, the 
United States submitted to the U.S. Congress legislation that would 
approve the CTPA.  The U.S. Congress did not act on the legislation 
primarily due to concerns regarding violence against trade 
unionists in Colombia.  The Obama Administration has indicated that 
it will promptly, but responsibly, address the issues surrounding 
the CTPA. 
 
 
 
¶3. The CTPA is a comprehensive free trade agreement. When the CTPA 
enters into force, Colombia will immediately eliminate most of its 
tariffs on U.S. exports, with all remaining tariffs phased out over 
defined time periods.  The CTPA also includes important disciplines 
relating to:  customs administration and trade facilitation, 
technical barriers to trade, government procurement, investment, 
telecommunications, electronic commerce, intellectual property 
rights, and labor and environmental protection.  Under the CTPA, 
U.S. firms will have better access to Colombia's services sector 
than other World Trade Organization (WTO) Members have under the 
General Agreement on Trade in Services (GATS).  All service sectors 
are covered under the CTPA except where Colombia has made specific 
exceptions. 
 
 
 
IMPORT POLICIES 
 
--------------- 
 
 
 
Tariffs: 
 
 
 
¶4. Since the 1990s, Colombia has reduced customs duties and 
eliminated many nontariff barriers.  Most duties have been 
consolidated into three tariff levels: 0 percent to 5 percent on 
capital goods, industrial goods, and raw materials not produced in 
Colombia; 10 percent on manufactured goods, with some exceptions; 
and 15 percent to 20 percent on consumer and "sensitive" goods. 
Exceptions include: automobiles, which are subject to a 35 percent 
tariff; beef and rice, subject to an 80 percent duty, milk and 
cream, subject to a 98 percent tariff (until 2010); and whey, which 
is currently levied a 94 percent import duty. Other agricultural 
products fall under a variable "price band" import duty system 
established by Decision 371 of the Andean Community of Nations 
(CAN). 
 
 
 
¶5. The price band system includes 13 product groups and covers 154 
tariff lines, which, depending on world commodity prices, can 
result in duties exceeding 100 percent for important U.S. exports 
to Colombia, including corn, wheat, rice, soybeans, pork, poultry 
parts, cheeses, and powdered milk.  The price band system has been 
suspended for milk powder and rice, and was reactivated for white 
corn (Decree 671 of 2009) after a temporary suspension.  The price 
band system also negatively affects U.S. access to Colombian 
markets for products such as dry pet food, which contains corn.  By 
contrast, processed food imports from Chile and countries bound by 
commitments under the CAN (Peru, Ecuador, and Bolivia) enter duty 
free. 
 
 
 
¶6. When the CTPA enters into force, Colombia will immediately 
eliminate its price band system on trade with the United States. 
 
 
This, coupled with a preference clause included in the CTPA, will 
help U.S. exports compete more effectively in Colombia's market. 
Over half of the value of current U.S. agricultural exports to 
Colombia will enter duty free upon entry into force of the CTPA, 
including high-quality beef, a variety of poultry products, 
soybeans and soybean meal, cotton, wheat, whey, and most 
horticultural and processed food products.  U.S. agricultural 
exporters also will benefit from duty free access through 
tariff-rate quotas (TRQs) on corn, rice, poultry parts, and dairy 
products. 
 
 
 
¶7. Over 80 percent of U.S. exports of consumer and industrial 
products to Colombia will become duty free immediately upon 
implementation of the CTPA, with remaining tariffs phased out over 
10 years.  Colombia agreed to join the WTO Information Technology 
Agreement, removing tariffs and addressing nontariff barriers to 
information technology products. 
 
 
 
Nontariff Measures: 
 
 
 
¶8. Nontariff barriers include discretionary import licensing, which 
has been used to restrict imports of milk powder (Resolution 2551 
of 2002) and poultry parts (Resolution 001 of 1991).  The CTPA 
contains provisions that should address this issue.  The Colombian 
government maintains tariff-rate quotas for rice, soybeans, yellow 
corn, white corn, and cotton (Decree 430 of 2004) and requires that 
importers purchase local production in order to import under the 
tariff-rate quota.  Under the CTPA, the government of Colombia 
committed to ensuring that access to a TRQ in-quota quantity will 
not be conditioned on the purchase of domestic production. 
 
 
 
¶9. Based on CAN Decision 331, Colombia does not permit the 
importation of used clothing.  Importers of used and remanufactured 
goods may apply for licenses to bring products into Colombia under 
limited circumstances (Resolution 001 of 1995).  Industry reports 
that in practice authorities do not grant such licenses, resulting 
in the effective prohibition of these imports.  Decree 4725 of 2005 
prohibits the importation of used or refurbished medical equipment 
that is older than five years, thereby limiting market access for 
high-quality remanufactured products, such as imaging equipment. 
Under the CTPA, Colombia affirmed that it would not adopt or 
maintain prohibitions or restrictions on trade in remanufactured 
goods and that certain existing prohibitions on trade in used goods 
would not apply to remanufactured goods.  This will provide 
significant new export and investment opportunities for firms 
involved in remanufactured products such as machinery, computers, 
cellular phones, and other devices. 
 
 
 
¶10.    Colombia assesses a consumption tax on alcoholic beverages 
through a system of specific rates per degree (percentage point) of 
alcohol strength (Law 788 of 2002, Chap. V).  Arbitrary breakpoints 
have the effect of applying a lower tax rate to domestically 
produced spirits and therefore create a barrier for imported 
distilled spirits.  Under the CTPA, Colombia committed to eliminate 
the breakpoints for imports of distilled spirits within four years 
of entry into force of the agreement.  Additionally, Colombia 
committed to eliminate practices that have restricted the ability 
of U.S. distilled spirits companies to conduct business in 
Colombia. 
 
 
 
STANDARDS, TESTING, LABELING, AND CERTIFICATION 
 
--------------------------------------------- -- 
 
 
 
¶11.    Colombia maintains standards-related measures in the 
following areas, which constitute significant barriers to U.S. 
exports: 
 
 
 
Measures Concerning Motorcycles and Helmets: 
 
¶12.    Colombia requires that a large percentage -- 20 percent -- 
of imported motorcycles be tested.  Colombia does not have the 
facilities to test large motorcycles. 
 
 
 
¶13.    Current motorcycle helmet standards act as barriers for the 
import of American helmets.  Lower quality helmets often have 
testing requirements "waived," as no labs exist for required helmet 
testing.  Despite the fact that U.S. helmets often comply with 
higher standards than those of Colombia, there is no mechanism in 
place that allows them to be certified. 
 
 
 
Sanitary and Phytosanitary (SPS) Measures: 
 
 
 
¶14.    Colombia maintains SPS measures in the following areas, 
which constitute significant barriers to U.S. exports: 
 
 
 
Poultry: 
 
 
 
¶15.    In 2006, the United States and Colombia formalized their 
recognition of the equivalence of the U.S. meat and poultry 
inspection systems, and reached agreement on the specific contents 
of U.S. sanitary certificates accompanying U.S. poultry and poultry 
products exported to Colombia.  However, the Ministry of 
Agriculture through its sanitary and phytosanitary regulatory 
agency, the Colombian Agricultural Institute (ICA), has imposed 
separate import requirements that do not follow the recommendations 
of the World Organization for Animal Health (OIE)  and have 
adversely affected U.S. exports of cooked poultry meat, poultry 
meal, and egg products. 
 
 
 
¶16.    The GOC issued law 1255 of November 28, 2008, as a legal 
framework for preserving Colombia's poultry industry sanitary 
conditions.  This legislation deals mainly with the local 
conditions for poultry production and distribution, but Article 17 
bans imports of poultry products from countries with non-reportable 
outbreaks of Avian Influenza (AI) and Newcastle disease.  It also 
stipulates a risk assessment to be undertaken by ICA before a 
resolution is issued to allow resumption of poultry product 
imports.  It is unclear how ICA will conduct the risk assessment 
and what the approximate date will be for the import ban to be 
lifted. 
 
 
 
¶17.    Colombia also prohibits poultry imports originating from the 
states of Arkansas, Minnesota, Idaho and Oregon.  Requests for 
additional technical information on the outbreaks have been used as 
an excuse for a delay in lifting the ban. 
 
 
 
Salmonella: 
 
 
 
¶18.    The National Institute of Medicine and Food Supervision 
(INVIMA) has stated that a policy to replace the current 
zero-tolerance approach for Salmonella is being developed.  While 
the new policy may be an acceptable stop-gap solution, the goal 
remains a no-salmonella-testing policy for imports of raw poultry 
meat.  In early 2009, INVIMA agreed upon a mechanism with local 
importers of mechanically deboned meat, which has avoided import 
disruptions for the product up to this point. 
 
 
 
Live Cattle: 
 
¶19.    Since 2003, the USG has been discussing with the Colombian 
animal health authorities how to re-establish imports of live 
bovines.  Colombia has argued its obligation to follow CAN rules to 
lift the restrictions on imports of live cattle, which has resulted 
in delays on a country-led decision.  The CAN Secretariat General 
must change current rules to allow the issuance of a resolution 
establishing the sanitary conditions for those imports.  Canada has 
already reached an agreement with Colombia on live cattle imports. 
 
 
 
 
Live Hogs: 
 
 
 
¶20.    The U.S. and Colombia continue efforts to establish sanitary 
conditions for imports of live hogs.  Some technical aspects remain 
to be resolved before Colombia opens its market to U.S. live hogs 
for breeding. 
 
 
 
Pet Food: 
 
 
 
¶21.    No pet food may contain any bovine ingredients other than 
materials legally imported from a country recognized as free of 
Bovine Spongiform Encephalopathy (BSE).  U.S. officials continue to 
engage Colombian authorities in pursuit of science-based import 
requirements with respect to such trade. 
 
 
 
GOVERNMENT PROCUREMENT 
 
---------------------- 
 
 
 
¶22.    Under the CTPA, Colombia agreed to provide U.S. goods, 
services, and suppliers with national treatment. U.S. firms will 
have access to procurement by Colombia's ministries and 
departments, legislature, courts, and first-tier sub-central 
entities, as well as a number of Colombia's government enterprises, 
including its oil company.  Currently, U.S. companies are required 
to have a local partner in order to qualify for government 
procurements.  Once the CTPA enters into force, Colombia will not 
be able to apply to CTPA-covered procurements Law 816 of 2003, 
which mandates preferential treatment to bids that provide 
Colombian goods or services.  Colombia is not a signatory to the 
WTO Agreement on Government Procurement. 
 
 
 
EXPORT SUBSIDIES 
 
---------------- 
 
 
 
¶23.    In a 2008 effort to ease the impact of an appreciating peso, 
the Colombian government issued tax rebate certificates (known as 
"CERTs"), to exporters in certain sectors.  The value of the CERT 
is worth 4 percent of total exports of designated goods.    There 
were no new CERT emissions in 2009, as of November. 
 
 
 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
 
--------------------------------------------- 
 
 
 
¶24.    Colombian agencies that administer IPR - the Superintendent 
of Industry and Commerce (SIC), the Colombian Agricultural 
Institute (ICA), the Ministry of Social Protection, and the 
Ministry of Justice - are historically understaffed and 
underfunded.  Extensive backlogs exist in the granting of patents, 
copyrights, and trademarks.  The patent regime in Colombia provides 
for a 20 year protection period for patents and 10 year term for 
industrial designs; protection is also provided for new plant 
varieties.  U.S. pharmaceutical and biotechnology companies are 
 
concerned with the limited scope of patentable subject matter, 
specifically with respect to improvements. 
 
 
 
¶25.    The CTPA provides for improved standards for the protection 
and enforcement of a broad range of IPR, which are consistent with 
both U.S. and international standards of protection and 
enforcement.  Such improvements include state-of-the-art 
protections for digital products, such as U.S. software, music, 
text, and videos; stronger protection for U.S. patents, trademarks, 
and test data, including an electronic system for the registration 
and maintenance of trademarks; and further deterrence of piracy and 
counterfeiting, including by criminalizing end-user piracy. 
 
 
 
Enforcement: 
 
 
 
 
¶26.    Enforcement of IPR has been slow and weak.  Certain 
infractions are considered criminal offenses and perpetrators can 
be sentenced to prison and/or fined, but judges rarely impose those 
penalties.  The Colombian government has made a concerted effort in 
recent years to enforce its intellectual property laws. 
Coordination between the Colombian government and the private 
sector is good, resulting in greater enforcement activities, such 
as raids and arrests.  Despite these improvements, intellectual 
property industry representatives report that the level of 
intellectual property enforcement is still a major concern, 
particularly with regard to the rulings by judges. 
 
 
 
SERVICES BARRIERS 
 
----------------- 
 
 
 
¶27.    Implementation of the CTPA will require Colombia to accord 
substantial market access across its entire services regime, 
subject to a limited number of exceptions.  Some restrictions, such 
as economic needs tests and residency requirements, still remain in 
sectors such as accounting, tourism, legal services, insurance, 
distribution services, advertising, and data processing. 
 
 
 
Legal Services: 
 
 
 
¶28.    Foreign law firms can operate in Colombia only by forming a 
joint venture with a Colombian law firm and operating under the 
licenses of the Colombian lawyers in the firm (Decree 196 of 1971). 
 
 
 
 
Financial Services: 
 
 
 
¶29.    Colombia permits 100 percent foreign ownership of insurance 
firm subsidiaries.  It does not, however, allow foreign insurance 
companies to establish local branch offices, except for 'general 
interest' reasons (Decree 663of 1993).  Insurance companies must 
maintain a commercial presence to sell policies other than those 
for international travel or reinsurance.  Colombia prohibits the 
sale of maritime insurance by foreign companies. 
 
 
 
¶30.    Colombian legislation permits 100 percent foreign ownership 
in financial institutions.  Foreign banks must establish a 
subsidiary to operate in Colombia (Decree 663of 1993). 
 
 
 
¶31.    When the CTPA enters into force, Colombia will phase in 
further liberalization in financial services, such as allowing 
branching by banks and insurance companies and allowing the 
cross-border supply of international maritime shipping and 
 
commercial aviation insurance within four years of entry into force 
of the Agreement.  Under the Agreement, mutual funds and pension 
funds will be allowed to seek advice from portfolio managers in the 
United States. 
 
 
 
Transportation: 
 
 
 
¶32.    Trans-border transportation services are restricted in 
Colombia.  Land cargo transportation must be provided by Colombian 
citizens or legal residents with commercial presence in the country 
and licensed by the Ministry of Transportation (Law 336 of 1996). 
Colombian law permits international companies to provide cabotage 
services (i.e., transport between two points within Colombian 
territory) "only when there is no national capacity to provide the 
service."  Under the terms of the CTPA, Colombia committed to allow 
100 percent foreign ownership of land cargo transportation 
enterprises in Colombia. 
 
 
 
Telecommunications: 
 
 
 
¶33.    Colombia currently permits 100 percent foreign ownership of 
telecommunications providers, and U.S. companies can obtain the 
right to interconnect with Colombian dominant suppliers' fixed 
networks at nondiscriminatory and cost-based rates.  When the CTPA 
enters into force, U.S. firms will be able to lease lines from 
Colombian telecommunications networks on nondiscriminatory terms 
and re-sell most telecommunications services of Colombian suppliers 
to build a customer base. 
 
 
 
¶34.    One trade association has complained that the creation of a 
"convergent license" category (Decree 2870 of 2007 and Resolution 
2478 of 2007) has resulted in the imposition of licensing 
conditions that are burdensome for some carriers (particularly 
smaller carriers) because they require accounting separation, the 
posting of a performance bond, and - in the case of long distance 
service suppliers - a modification of the company's legal entity. 
 
 
 
¶35.    The recently passed Postal Services Law allows the Colombian 
government to cross-subsidize the state-owned postal company, which 
could give it an unfair competitive advantage over U.S. express 
courier service companies. 
 
 
 
INVESTMENT BARRIERS 
 
------------------- 
 
 
 
¶36.    Foreign investment in Colombia is granted national 
treatment, and 100 percent foreign ownership is permitted in most 
sectors.  Exceptions exist for national security (Decree 356 of 
1994), broadcasting, (Law 680 of 2001) and the disposal of 
hazardous waste (Decree 2080 of 2000). 
 
 
 
¶37.    Colombia agreed to strong protections for U.S. investors in 
the CTPA.  When it enters into force, the Agreement will establish 
a stable legal framework for U.S. investors operating in Colombia. 
All forms of investment will be protected under the CTPA.  U.S. 
investors will enjoy in almost all circumstances the right to 
establish, acquire, and operate investments in Colombia on an equal 
footing with local investors. The CTPA's investor protections will 
also be backed by a transparent, binding investor-state arbitration 
mechanism. 
 
 
 
¶38.    In certain cases, the Government of Colombia does not allow 
arbitration clauses in contracts, to which it is a party. 
Enforcement of arbitration judgments against the Colombian 
 
 
government, as well as municipal and departmental governments, is 
very difficult. 
BROWNFIELD