The stock of U.S. foreign direct investment in Costa Rica was $584 million in 1994, an increase of 51.6 percent over that in 1993. U.S. direct investment in Costa Rica is concentrated in manufacturing and services.

IMPORT POLICIES

Tariffs and Other Import Charges

Costa Rica is a member of the Central American Common Market (CACM), which also includes Guatemala, El Salvador, Honduras, and Nicaragua. With the exception of certain items, notably agricultural, there are no duties for products traded among CACM members. The CACM has a common external tariff (CET) which ranges from 5-20 percent for most products. However, in 1995 the members of the CACM agreed to reduce the CET to 0-15 percent, but allowed each member country to determine the timing of the changes. The Costa Rican Government has announced the following tentative timetable for implementing the changes; actual implementation will depend on progress in reducing the fiscal deficit and meeting targets under the IMF Standby Program:

Date			Product Tariff
	Capital Raw	Finished Goods	Materials Goods

1995		5		5		20
Jan. 1996	3		5		20
July 1996	3		3		20
Dec. 1996	3		3		18
1997		2		2		17
1998		1		1		16
1999		0		0		15

Quantitative Restrictions and Import Licensing

The Costa Rican legislative assembly approved legislation implementing the Uruguay Round Agreements in December 1994. The law, published on December 27, 1994, eliminates quantitative restrictions and requirements for import licenses and permits, including for the following: pork and related by-products, poultry, seeds, rice, wheat, corn (white and yellow), beans, tobacco, sugar, sugar cane, and related products, dairy products, and coffee. The import permits in many cases were replaced by tariffs as negotiated in the context of the Uruguay Round. Further market opening to U.S. agricultural imports is hindered by lack of private sector import experience and the Costa Rican Government's concern that prices of certain staple goods, such as wheat, may increase as restrictions are removed.

Customs Procedures

Costa Rican customs procedures have long been complex and bureaucratic. However, the 1995 passage of a new general customs law formalized reforms aimed at streamlining customs procedures. Much of the necessary processing is now accomplished electronically and "one-stop import and export windows" have significantly reduced the time required for customs processing.

STANDARDS, TESTING, LABELING AND CERTIFICATION

Costa Rican law requires the exclusive use of the metric system, but tacitly accepts U.S. and European commercial and product standards. However, a "system of standards" has not been well implemented in Costa Rica due to a lack of adequate laboratory equipment and funds. The U.S. Department of Commerce's National Institute of Standards and Technology (NIST) held a seminar in Costa Rica in July 1994. In some isolated cases, Costa Rican and U.S. companies in Costa Rica are using the International Standards Organization (ISO) designation in their promotional campaigns. According to the Costa Rican Technical Standards Institute (Instituto de Normas Tecnicas de Costa Rica - INTECO), only four local companies to date have obtained ISO 9000 certification: Baxter, Conducen, Trimport, and Hulestecnicos. Two other companies are expected to obtain ISO 9000 certification in the near future. There are no general requirements in Costa Rica for marking the origin of goods or for labeling of general merchandise. However, special labeling requirements apply to shipments of food products, pharmaceuticals, fertilizers, pesticides, hormones, veterinary preparations, vaccines, poisonous substances, and mouthwashes. Costa Rican food-labeling law requires that all imported food products contain labeling in Spanish with the following specifications: product name, list of ingredients in quantitative order (nutritional, name and address of importer, expiration or best-if-used-by dates, and weight). Although expiration dates are required on all food products, Costa Rican importers are of mixed opinion when discussing their utility. The Ministry of Economy and Industry's Department of Procedures and Labeling is trying to make all such paperwork less burdensome for importers.

Phytosanitary (USDA/APHIS) or zoosanitary (USDA/FSIS) certificates are required for imports of bulk grain, fresh horticultural products or fresh/frozen meats. Most processed food products (canned, boxed, precooked) do not require phytosanitary or zoosanitary certificates, but exporters should check with their importers on the latest requirements. Pharmaceutical samples for promotional purposes may be dispensed only to doctors, dentists, and veterinarians; these samples may not be sold and may only be distributed by

accredited doctors. Packages of fertilizers must bear the authorization number of the Directorate General for Agriculture and Livestock and its "seal of guarantee," in addition to certain other information. Import licenses are not required for most products. However, pharmaceuticals, drugs, cosmetics, chemical products (solvents and precursor chemicals), require an import permit (to include registration) from the Costa Rican Ministry of Health. Food products that are new-to-market require a registration and phytosanitary and animal health certification are required by the Agriculture Ministry's Sanidad Vegetal Division. These permits must be obtained by the Costa Rican importer. Import permits from the Ministry of Health are valid for five years. Arms and munitions require a license from the Costa Rican Ministry of Security.

GOVERNMENT PROCUREMENT

The Costa Rican Government procurement system is based on the recently reformed Costa Rican Finance Administration Law. Government entities purchase or acquire their goods and services through public and private tenders which are published in the official register (la Gaceta) and major newspapers. Foreign companies may appoint a representative through power of attorney for a specific tender. This representative can be a Costa Rican citizen or alien. A general power of attorney can also be given to a person or company to represent the foreign company in various tenders for a certain period of time. The local representative should be able to translate tender documents from Spanish into English and assist in preparing bid offers in Spanish. Some large projects (mainly construction projects) may call for the presence of the U.S. company officials in Costa Rica in order to assess first-hand the requirements and ensure a viable offer to the Costa Rican Government entity. It is important to have a strong joint partner or representative when competing for government contracts.

EXPORT SUBSIDIES

The GOCR assists domestic export activities primarily by providing a fund for export-financing in the Central Bank. Once an exporting company is deemed eligible, a credit line is established to meet its needs for one year. The credit line is made available through a commercial bank, and can be used for importing raw materials, machinery, parts and equipment. Export documents are discounted and guaranteed by the bank. The Export Promotion Law (No.5162 of December 22, 1972), which provides for incentives such as tax credit certificates for up to 15 percent of the value of exports, is being phased out. The benefits are only granted to existing companies and are due to end within two years. Export contracts granting 12-year tax holidays (Law 6955 of March 2, 1984) and consolidating the drawback system (tax-free) have been severely restricted by recent tax legislation.

LACK OF INTELLECTUAL PROPERTY PROTECTION

Copyrights

Costa Rican copyright law is generally adequate, but is not uniformly enforced. The regime was revised in 1994 and now provides specific protection for computer software. Although piracy of satellite transmissions by the domestic cable television industry has largely been curtailed, the Costa Rican hotel industry continues to engage in satellite signal piracy. Piracy of video recording and computer software is also widespread, although progress has been made in eliminating such practices. According to one private sector assessment, video piracy has recently been reduced from virtually 100 percent to about 90 percent. In a landmark decision in January 1996, a video club operator was sentenced to one-year imprisonment for duplicating and renting videos without the authorization of the copyright owners.

Patents

Costa Rican patent law is deficient in several key areas. The term of patent coverage is a non-extendable 12-year term from the date of grant. In the case of products deemed to be in the "public interest," such as pharmaceuticals, chemicals and agricultural chemicals, fertilizers, and beverage/food products, the term of protection is only one year from date of grant. The current patent regime also has unacceptably broad compulsory licensing provisions. The Government of Costa Rica recently proposed legislation to enhance patent protection as required by the Uruguay Round TRIPs Agreement, following the five-year transition period allowed developing countries.

Trademarks

Counterfeiting of well-known marks is widespread, and there is some illegitimate registration of trademarks. Legal recourse to limit these practices is available, but may require protracted and costly litigation. In 1994 Costa Rica participated in the negotiation of, and ultimately signed, a Central American Convention for the Protection of Trademarks. Until the time of its entry into force, the existing Costa Rican regime will be inadequate.

SERVICES BARRIERS

Costa Rican law prohibits private sector monopolies not established by law and any act deemed to endanger or restrict the freedom of trade, agriculture or industry (Art. 46 of the constitution). However, there are state monopolies for most insurance, telecommunications, large electricity- generating plants and electricity distribution, commercial bank checking and savings accounts (see below), petroleum fuels distribution to the retail level, alcoholic beverages production, and railroad transportation. In addition, there are serious restrictions on the participation of foreign companies in private sector activities such as customs handling, medical services and other professions requiring Costa Rican registration and long-term residency. A financial reform law enacted in 1995 will eliminate (in October 1996) the monopoly of state-owned banks on checking and savings accounts and access to the central bank's rediscount window. However, the law requires private banks (domestic and foreign) -- without a corresponding requirement on state-owned banks -- to lend a portion of their short-term assets to state-owned banks and/or to open several branches in relatively less-developed areas of the country in order to qualify for new features of the law.

INVESTMENT BARRIERS

Unresolved cases of expropriation of U.S.-owned investments or properties are a persistent problem. The U.S. Government continues to press the Costa Rican Government to provide prompt, adequate and effective relief to affected U.S. owners and investors. An additional deficiency of the Costa Rican regime is the maintenance of sectoral restrictions from private investment (both domestic and foreign), most prominently in the areas of energy, telecommunications, insurance, and petroleum (except for retailing). In October 1994 the 1974 law limiting ownership of newspaper, radio and television stations was repealed on the grounds that it was discriminatory, and therefore unconstitutional. The U.S. Government continues efforts to conclude a bilateral investment treaty (BIT) with Costa Rica which would address these and other inadequacies.

OTHER BARRIERS

On January 9, 1995, USTR initiated a section 301 investigation of Costa Rica's implementation of the banana framework agreement (BFA) with the EU. On January 10, 1996, USTR determined that Costa Rica's policies, acts and practices were unreasonable or discriminatory and a burden or restriction on U.S. commerce. Taking into account the positive steps Costa Rica 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.