In 1995 the U.S. trade surplus with Colombia was $873 million, or $25 million
less than it was in 1994. U.S. merchandise exports to Colombia in 1995 were
$4.63 billion, up 14 percent from 1994. Colombia was the United States'
twenty-fifth largest export market in 1995. U.S. imports from Colombia totaled
$3.76 billion in 1995, up 18.4 percent from 1994.
The stock of U.S. foreign direct investment was $3.4 billion in 1994, 12
percent greater than in 1993. The United States is the largest foreign investor
in Colombia. U.S. direct investment in Colombia is concentrated largely in
manufacturing, petroleum, and finance.
Under an economic liberalization plan known as "apertura" (opening), Colombia
has substantially reduced tariffs, eliminated almost all import licensing
requirements, simplified import and export procedures, established a free market
exchange regime (with some conditions), created transparent and more liberal
foreign investment rules, and opened up nearly all sectors of the economy for
foreign investment. However, the agricultural sector has been a general
exception to this opening.
Colombia's average tariff rate is about 12 percent ad valorem. As a result of
the Uruguay Round, however, Colombia bound most of its rates at 35 to 40
percent. Most products also are subject to a 16 percent value- added tax, up
from 14 percent as the result of a tax reform measure passed by Congress in
December 1995. This tax applies to domestically-produced goods as well as
imports. While not an import tariff, it has a great impact on the entire
Colombia and its Andean Pact partners established a common external tariff
(CET), which took effect on February 1, 1995. The CET has a four-tier structure,
with levels of 5, 10, 15, and 20 percent for most products. In accordance with
the Andean Pact CET, Colombia harmonized its four-tier tariff schedule with
Venezuela and Ecuador, with some exceptions taken by each country. (Bolivia
retains its two-tier tariff structure of 5 and 10 percent, and Peru, its
structure of 15 and 20 percent).
Colombia also adopted a harmonized automotive policy with Venezuela and
Ecuador -- which entered into effect on January 1, 1995 -- establishing common
external tariff rates of 35 percent for passenger vehicles, 15 percent for mass
transit and cargo vehicles, and three percent for kits. The policy includes
regional content requirements.
In recent years Colombia has negotiated trade arrangements with other Latin
American and Caribbean countries. Colombia already has a partial free trade
agreement with Chile and a comprehensive free trade agreement with Mexico and
Venezuela, known as the G-3 Agreement, took effect January 1, 1995. All of
Colombia's bilateral and regional trade agreements are based on Latin
American Integration Association (ALADI) regulations and procedures. Agreements
such as those negotiated with Cuba, Panama, Central America, and CARICOM have
either been ineffective or have not been fully implemented.
Colombia now requires import licenses on less than two percent of products,
including weapons and other products related to defense and "precursor"
chemicals that may be used in refining cocaine. The majority of "used" goods,
such as machinery, used cars, tires, and clothing, are prohibited from import
and those that are allowed are subject to prior licensing. In addition, prior to
importation into Colombia, all importers must apply to the Colombian Trade
Institute (INCOMEX) for a registration form called the "Registro de
While much import liberalization has occurred in recent years, the
agriculture sector remains protected. Decree 2439 of November 2, 1994 requires
the Ministry of Agriculture to approve import licenses for many agricultural
items such as wheat, poultry meat, malting barley, corn, rice, sorghum, wheat
flour, oilseeds and their products, soybeans, soybean meal, and soybean oil.
Private importers are more likely to have their import licenses approved if they
also buy domestically-produced wheat, sorghum, palm oil or malting barley. This
import licensing regime is clearly discretionary and thus is not consistent with
Colombia's obligations under Article 4:2 of the WTO Agreement on Agriculture --
although the Government of Colombia (GOC) claims to have a five-year phase-out
period for the licensing regime from its July 1994 notification to GATT 1947. If
the import licensing requirement for the products indicated above were
eliminated, it is estimated that U.S. annual exports would increase by $10
Thirteen basic agricultural commodities -- powdered milk, wheat, malting
barley, yellow and white corn, crude palm and soybean oils, white rice,
soybeans, white and raw sugars, chicken pieces and pork meat -- and an
additional 120 commodities that are considered substitutes or related products
are subject to a variable import tariff "price band" system. Imported wheat is
also subject to minimum import prices as determined by the GOC. There are at
this time no reliable figures showing how much U.S. exports would increase if
the price band system were eliminated.
Since July 1993, the Colombian Foreign Trade Institute (INCOMEX) has required
a "previous" import license for chicken parts. Under this system, the GOC has
approved import licenses only when the GOC has determined such imports will not
adversely affect Colombian chicken producers. Throughout 1994 and to date,
import licenses to import U.S. chicken parts have been regularly denied. If the
import licensing requirement for chicken parts is eliminated, it is estimated
that U.S. annual exports would increase by approximately $10 million.
Valuation of imported merchandise, previously the responsibility of the
Customs Service, can now ostensibly be done by importers who self-value, assess,
and pay duties and other taxes at commercial banks. Customs clearance processes
in many instances can be performed fairly rapidly. However, according to U.S.
industry, Colombia's pre-shipment inspection of imported equipment is required
to be done by an independent testing agency, a procedure which results in
unnecessary delays. Through a series of resolutions dating to November 1994, the
GOC has created a pre-shipment inspection (PSI) mechanism using private PSI
companies. Upon acceding to the WTO Agreement on Preshipment Inspection, the
GOC took measures to allow PSI companies to perform certain direct functions
under the control of the National Tax and Customs Directorate (DIAN).
Implementation of the PSI program, originally scheduled for April 1995, has been
postponed several times. As of February 1, 1996, PSI companies began to
mandatorily pre-clear all goods defined as "sensitive" by the GOC.
An October 1993 government procurement and contracting law, Law 80, provides
equal treatment to foreign companies on a reciprocal basis and eliminates the 20
percent surcharge previously added to foreign bids. In implementing Law 80, the
GOC has instituted a burdensome requirement that companies without local
headquarters must certify reciprocity in government procurement in their home
country. In June 1995 the U.S. Embassy began issuing certificates of
reciprocity, which has proven to be successful in meeting this requirement. Law
80 does not apply to contracts for the exploration and exploitation of renewable
or non-renewable natural resources, their commercialization, and those
activities performed by state companies involved in these sectors; nor does it
apply to contracts for telecommunications, radio, television, and long distance
telephone services. These contracts are governed by other laws. Colombia is not
a signatory to the WTO Agreement on Government Procurement.
U.S. providers of telecommunications services have encountered difficulties
in bidding on contracts. The bidding process suffers from a lack of transparency
and other irregularities. One U.S. company lost bids on contracts worth over
$100 million amid allegations of illicit payments made by competitors. Other
U.S. companies have found themselves unable to enter the bidding process owing
to their unwillingness to offer financial incentives. In another case, a U.S.
company has been judged the best contestant technically, legally, and
financially by two different evaluating boards, but the final decision has
repeatedly been delayed without explanation.
As a result of "apertura" and commitments made by the GOC to the U.S.
Government in the context of acceding to the GATT Subsidies Code, Colombia
agreed to phase out any export subsidies inconsistent with the previous
Subsidies Code. This process will continue under the new WTO Agreement on
Subsidies and Countervailing Measures. Colombia's Tax Rebate Certificate Program
(CERT) contains a subsidy component; the GOC has committed to eliminating the
subsidy and creating an equitable drawback system, but has not yet done so. The
GOC also has notified the WTO of its "Special Machinery Import-Export System"
and "Free Zones" as constituting export subsidies.
The GOC still provides export subsidies to flower exports to third countries.
The negative impact of these subsidies on U.S. flower exports to the same
markets is estimated at below $10 million.
LACK OF INTELLECTUAL PROPERTY PROTECTION
Despite significant improvement in recent years in the area of intellectual
property rights (IPR), Colombia does not yet provide adequate and effective
protection. As a result of its laws and practices -- especially its inadequate
enforcement -- Colombia has been on the "watch list" under the Special 301
provision of the 1988 Trade Act every year since 1991. The United States
continues to discuss intellectual property rights issues with Colombia and
remains interested in negotiating an agreement on intellectual property rights
protection. Colombia, which is a WTO member, has ratified its Uruguay Round
implementing legislation, but has not fully implemented the provisions of the
WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPs).
Patents and Trademarks
In late 1993 the Andean Pact passed two Decisions on the protection of
patents and trademarks and of plant varieties. These Decisions took effect in
Colombia on January 1, 1994. The Decisions are comprehensive and offer a
significant improvement over previous standards of protection for intellectual
property in the Andean Pact countries. For example, they provide a 20-year term
of protection for patents, reversal of the burden of proof in cases of alleged
patent infringement, and allow each member of the Andean Pact to improve its own
respective patent law. The portions of the decision covering protection of trade
secrets and new plant varieties are generally consistent with world-class
standards for protecting intellectual property rights.
However, these Decisions remain deficient with respect to patents and
trademarks. The deficiencies include compulsory licensing provisions, working
requirements, restrictions on biotechnology inventions, denial of pharmaceutical
patent protection for patented products listed on the World Health
Organization's Model List of Essential Drugs, lack of transitional ("pipeline")
protection, and lack of protection from parallel imports. The Decisions also
fail to address provisions for enforcing intellectual property rights
Legislation passed December 28, 1994 to ratify the Paris Convention for the
Protection of Industrial Property has encountered legal problems before
Colombia's Constitutional Court. Nonetheless, the GOC expects to be able to
become a full member by July 1, 1996.
The Colombian Government has made progress enforcing patent and trademark
regulations. The agency in charge of patents and trademarks -- the
Superintendency of Commerce and Industry -- has been undergoing a modernization
process since 1992, resulting in more effective management. The trademark
backlog from previous years has been cleared up, and new trademark and patent
applications are now processed immediately. However, some 27,000 contentious
cases are still pending.
Colombia has a modern copyright law, Law 44, promulgated in early 1993. The
law extends protection for computer software to 50 years and defines computer
software as copyrightable subject matter, but does not classify it as a literary
work. Colombia belongs to both the Berne and the Universal Copyright
In addition, in late 1993, the Andean Pact passed a Decision on copyright
protection that establishes a generally effective and Berne-consistent system.
This Decision took effect in Colombia as of January 1, 1994. However, it fails
to address procedures for enforcing intellectual property rights.
The GOC has increased efforts to reduce video and audio piracy. Colombia's
1993 copyright law significantly increased penalties for copyright infringement,
specifically empowering the Attorney General's office to combat piracy. As a
result, record levels of seizures of pirated material took place in 1994.
However, U.S. industry estimates that video cassette piracy continues to
represent 60 percent of the video market and that more than 50 illegal
duplication laboratories are operating in Colombia. Unauthorized parallel
importation of U.S. videos continues to be a significant problem. Satellite
signal and cable television losses due to piracy were estimated at $30 million
in 1994 and $33 million in 1995, continuing to be a problem.
According to U.S. industry, Colombia maintains a policy of promoting
unbranded pharmaceuticals at the expense of multinational companies. Law 100
establishes that the Colombian population will be covered by either Social
Security or Health Promoting Entities (EPS) and that pharmaceutical products
will be supplied based on a list of only 307 generic substances. If enforced,
Law 100 would bring about the disappearance of the brand name pharmaceutical
market in Colombia.
Colombia maintains barriers in a number of service areas, including
audiovisual, franchising, data processing, and professional services. Content
quotas on television broadcasts are applied at varying levels throughout the
day. Colombia allows only 20 percent equity participation in advertising
services. In addition, a minimum of 50 percent of any TV commercial for public
broadcast network programming must be produced locally.
Colombia denies market access to foreign marine insurers and for the
provision of legal advice by foreign lawyers and law firms. Foreign law firms
are not permitted a commercial presence in Colombia unless the firm is headed by
a Colombian attorney. Colombia requires a commercial presence to sell all
insurance except international travel or reinsurance. Colombia permits 100
percent foreign ownership of insurance subsidiaries, but the establishment of
branch offices of foreign insurance companies is not allowed.
Colombia also restricts the movement of personnel in several professional
areas, such as architecture, engineering, law, and construction. Firms with more
than ten employees can employ no more than 20 percent of specialists and 10
percent of unskilled laborers who are foreign nationals. In 1991 Colombia
promulgated Resolution 51, which permits 100 percent foreign ownership in
financial services, although the use of foreign personnel in the financial
services sector remains limited to administrators, legal representatives, and
technicians. For a full discussion of treatment of U.S. banking and securities
firms, see the Department of Treasury's 1994 National Treatment
Cargo reserve requirements have been eliminated. However, the Ministry of
Foreign Trade reserves the right to impose restrictions on foreign vessels whose
nations impose reserve requirements on Colombian vessels.
Investment screening has been largely eliminated and the mechanisms that
still exist are generally routine and non- discriminatory. Legislation grants
national treatment to foreign direct investors and permits 100 percent foreign
ownership in virtually all sectors of the Colombian economy. However, in 1994,
in an effort to curb money laundering, the Government prohibited foreign direct
investors from obtaining ownership in real estate not connected with other
All foreign investment in petroleum exploration and development in Colombia
must be carried out by an association contract between the foreign investor and
ECOPETROL, the state oil company. Generally favorable to foreign investors, the
terms of the association contract have undergone changes in 1994 and 1995, which
represent an improvement over the terms in effect since 1989 but are still not
as attractive as the original terms introduced in 1976. The 1995 changes opened
previously-reserved areas to foreign development and allowed for extensions of
the length of association contracts during the last five years of the contract.
These changes are not expected to make petroleum investment significantly more
Although the Government opened small operating fields of less than 40 million
barrels to foreign investment in 1995, it has not taken steps to make them more
profitable to investors. The GOC has been imposing a "war" tax of approximately
one dollar per barrel on foreign oil companies, which acts as an economic
disincentive; according to a tax reform law adopted in December 1995, the war
tax is being phased out on a two-tier schedule where for certain fields, the tax
requirement expires December 31, 1997, and for others, it is gradually reduced
until its elimination on December 31, 2000. The "war" tax is not imposed on new
fields discovered after January 1, 1995.
STANDARDS, TESTING AND CERTIFICATION
The Colombian Foreign Trade Institute (INCOMEX) mandates compliance with
specific technical standards for a variety of products. The particular
specifications are established by the Colombian Institute of Standards
(ICONTEC). Under Decree 300 of 1995, a certificate of conformity with Colombian
standards is required prior to the importation of any good regulated by a
standard. Inconsistencies in the application and enforcement of standards
sometimes lead to problems for U.S. exporters. Two ICONTEC decrees require
testing of cookware products to verify conformity with standards, but no testing
facilities exist in Colombia, leading to different requirements for domestic as
opposed to imported products. A lack of transparency also causes problems.
U.S. exporters have been attempting since November 1992 to introduce Bourbon
and Tennessee Whiskey into Colombia. The superior alcohol levels of these U.S.
products exceeds the maximum level permitted by Colombian National Institute of
Health regulations for alcoholic beverages. Although the Colombian Institute of
Standards has agreed to adopt a definition for bourbon based on the U.S.
standard, the new standard has yet to be published, and U.S. companies are still
unable to export their products to Colombia. The dollar amount of potential
imports lost is not known.
Specific marks or labels are required only for pharmaceutical and food
products. Labels on food or pharmaceutical products must indicate the name of
the product, ingredients, name and address of the manufacturer, expiration date,
and the total content. Pharmaceutical products must also bear a label, in
Spanish, stating "sale under prescription," the generic name of the product, the
net weight or quantity of active ingredients, the product's license number, the
lot control number, and the product's expiration date.
Local content requirements exist in the automotive assembly sector as
outlined in Decree 2642 of December 1993. This decree requires the following
local content: passenger vehicle carrying up to 16 persons and cargo vehicles up
to 10,000 pounds, 30 percent; all other vehicles, 15 percent.
On January 9, 1995, USTR initiated a section 301 investigation of Colombia's
implementation of the banana framework agreement (BFA) with the EU. On January
10, 1996, USTR determined that Colombia's policies, acts and practices were
unreasonable or discriminatory and a burden or restriction on U.S. commerce.
Taking into account the positive steps Colombia had taken in revising its
internal banana regime and its willingness to cooperate with the United States
in reforming the EU regime, USTR decided that the appropriate "action" was to
implement a process aimed at addressing the outstanding issues, while stressing
that additional "action" may still be taken.
According to U.S. industry, Colombia applies a tax of 24 percent on income
from sales of computer software. When combined with a remittance tax of nearly
10 percent on royalties, Colombia asses an aggregate tax of greater than 30
percent on foreign licensors.
Television Local Content Quotas
As part of the demonopolization of Colombia's government-owned television
network, Colombia passed the Television Broadcast Law, Law No. 182/95, effective
January 1995, which increases protection for all copyrighted programming by
regulating satellite dishes, and permits private television broadcasters to
compete with the government-owned broadcaster. It permits foreign direct
investment in the Colombian motion picture industry, but limits foreign
investment to 15 percent of the total capital of local TV production companies.
The law increases restrictions on foreign content, including a complicated,
burdensome system of subquotas for different hours of the day. The Colombian law
requires broadcasters to transmit 70 percent locally-produced programming during
prime time and a range of 0 to 40 percent during other times on national and
future zonal television, and 50 percent locally-produced programming on regional
channels and local stations. Retransmission of national TV productions are
calculated to fill only part of the national content requirement, using the
following formula: first retransmission -- one half of the broadcast time;
second retransmission -- one third of the broadcast time; and third
retransmission -- one fourth of the broadcast time.
The law includes burdensome restrictions on foreign investment mandating
reciprocity requirements and requirements that foreign investors be actively
engaged in television operations in their country of origin. Foreign investment
also must involve an implicit transfer of technology. Colombia's
quasi-independent National Television Commission has the authority to reduce
these restrictions, but has not taken action in this area. The Foreign Trade
Ministry has expressed an interest in having the WTO address the issue.
Unnecessary Restrictive Application of Phytosanitary Standards
In 1995 a few oriental fruit flies (bactrocara dorsalis) were
trapped in non-production areas in California and Florida. Colombian authorities
have reacted by requiring as of January 25, 1996 that all fresh fruit and
vegetables originating from California and Florida to be fumigated at the port
of entry with methyl bromide. USDA/APHIS does not consider the detections of the
oriental fruit fly in non-production areas in California or Florida to be a
threat to Colombian agriculture. If the fumigation requirement for fresh fruit
and vegetables is maintained, it is estimated that most U.S. exports, valued at
$1.3 million, will be lost as a result of the added cost and damage caused to
the fruit by methyl bromide treatment.
According to U.S. industry, Colombian requirements for sanitary registrations
to bring new products on the market is excessively long, taking six to eight