INFORMATION NOTE

FREE TRADE AGREEMENT BETWEEN CARICOM AND THE GOVERNMENT OF THE REPUBLIC OF COSTA RICA

The Caribbean Community (CARICOM) and the Government of the Republic of Costa Rica signed an agreement in 2004 to establish a free trade area between the Parties. The decision to sign this Agreement was underpinned by the Parties need to, inter alia –

Improve their existing trade relations and create opportunities for further economic development;

Create an expanded and more market for the goods produced and services supplied in or from their territories;

Promote regional integration in the Americas;

Enhance the competitiveness of their companies in world markets; and

Promote the active participation of private economic agents in the efforts at deepening and broadening the economic relations between the Parties.

*Note*

The Bahamas, Haiti and Montserrat among CARICOM Member States, are not party to this Agreement. They may each accede subject to terms and conditions agreed with the Parties.

Institutional Arrangements under the AgreementThe Institutional arrangements under this Agreement include the Joint Council, the Free Trade Coordinators, Standing Committees and working groups.

The Joint Council is responsible for supervising the implementation and administration of the Agreement. The Joint Council also instructs the Committees, Subcommittees and Working Groups identified under the Agreement, to carry out those functions assigned to each. In addition, the Joint Council supervises the functions of the Free Trade Coordinators, resolves disputes related to interpretation, execution or non-compliance of the Agreement. Another important function of the Joint Council is to keep the Agreement under periodic review and to recommend measures suitable to better achieve its objectives. The Joint Council is required to meet at least once a year, alternately in Costa Rica and in a Member State of CARICOM.

The Free Trade Coordinators under this Agreement comprise the Ministry of Foreign Trade in the case of Costa Rica, and the CARICOM Secretariat in the case of CARICOM. The primary function of the Free Trade Coordinators is to monitor the implementation of the Agreement. The Free Trade Coordinators also perform the

function of recommending to the Council, the establishment of other committees, subcommittees and working groups as they consider necessary to assist the Council. They also follow up on decisions taken by the Council, where appropriate and act on matters as mandated by the Council.

The Standing Committees established under the Agreement include the Committee on Market Access, Committee on Trade in Services and Investment, Committee on Anti-competitiveness Business Practices. Any other Committee may be established by the Council as necessary. The Committees operate under the guidance of the Council and, inter alia, monitor the implementation of the provisions of the Agreement, consider all matters relating to the subject area within its competence and create working groups or convene expert panels on topics of mutual interest relating to its subject area.

Working groups are established by the Joint Council as considered necessary to assist the Council.

Access of Goods to the MarketSome of the key provisions of the Agreement pertaining to the Access of Goods to the Market address the issue of tariffs (tariff elimination; temporary admission of goods; duty-free entry of certain commercial samples and printed advertising materials; goods re-entered after repair, renovation or improvement); Non-Tariff Measures ( import and export restrictions; Customs user fees; consular fees; marks of origin; Support, internal aid and subsidies to exports; Export competition and domestic support for agricultural goods; export taxes; safeguard measures; consultations and committee on Market Access).

TARIFFS

Tariff Elimination

With respect to tariff elimination, the Agreement provides that neither Party is to increase any existing customs duty, or adopt a new customs duty on originating goods. The Agreement also requires each Party to progressively eliminate its customs duty on originating goods, in accordance with the Tariff Elimination Schedule established in the Agreement, except as otherwise provided in the Agreement.

*Note*

The provisions preventing increase in existing customs duty and the adoption of new customs duty; and for the progressive elimination of customs duty, are subject to exceptions which may be otherwise provided in the Agreement. In this regard, any Party may maintain or increase a customs duty as authorised by the Dispute Settlement Understanding of the WTO or any other agreement under the WTO Agreement.

Goods produced in Free ZonesThe Agreement stipulates specific treatment to be accorded to goods produced in free trade zones, in that it provides that goods originating in free trade zones in the territory of a Party shall be subject to

the most favoured nation treatment (MFN) when imported into the territory of the other Party.

*Note*

Some goods produced by companies operating under Free Trade Zone Regimes are eligible for tariff elimination benefits, subject to the applicable rules of origin. These goods are:

Parts and accessories of the machines of heading No. 8471 (HS 8473.30);

Electrical resistors (including rheostats and potentiometers), other than heading resistors (HS 8533);

Printed circuits (HS 8534); Electronic integrated circuits and

microassemblies (HS 8542); and Parts (HS 8543.90).

Temporary admission of goodsUnder the Agreement there are special circumstances where each Party is required to grant temporary duty-free admission. Temporary duty-free admission is granted for –

Professional equipment necessary for the business activity, trade or profession of business persons who qualify for temporary entry;

Equipment for the press or for sound of television broadcasting and cinematographic equipment;

Goods imported for sports and goods for display or demonstration; and

Commercial samples and advertising films.

*Note*

This category of importation is permitted duty-free access regardless of the origin of the goods or whether like, directly competitive or substitutable goods are available in the importing territory.

However, where a good is temporarily admitted duty-free, and fails to satisfy the required conditions of admissions set out under the Agreement, the importing Party may impose:

Customs duty and any other charge that would be owed on entry or final importation of such good; and

Any criminal, civil or administrative sanction that the circumstances determine.

Goods Re-entered after Repair, Renovation or improvementUnder the Agreement, where a non-originating good is exported by one Party to the territory of the other for repair, renovation or improvement, on its re-entry that good shall be treated as an originating good, if the value of the non-originating materials used in the repair, renovation or improvement did not exceed sixty-five (65%) of the cost of repair, renovation or improvement. The

essential character of the good must not have been altered if this treatment is to apply.

Tariff Elimination ScheduleThe Tariff Elimination Schedule under the Agreement comprises various lists which address Special treatment for selected agricultural products; Excluded products; Products subject to tariff elimination schedules; Special list; Special treatment for heading HS 0201 and 0202; and Special treatment applicable to Oils, Fats and Soaps. The products on the various lists which comprise the Tariff Elimination Schedule are therefor subject to various kinds of tariff measures, some of which were to be eliminated over certain periods of time and by various methods.

Under the Agreement, all products not included on the various lists under the Tariff Elimination Schedule, benefit from free trade immediately upon entry into force of the Agreement.

The Less Developed Countries (LDCs) of CARICOM are not required to grant preferential treatment to originating goods from Costa Rica.

*Note*

Notwithstanding the requirement for the LDCs not to grant preferential treatment to originating goods from Costa Rica, the Agreement stipulates that, should any LDC grant preferential treatment to originating good from a country not Party to the Agreement, such treatment shall be granted immediately to Costa Rica.

Special Treatment for selected Agricultural productsThe Agreement provides that the products included in the tables under this schedule for selected agricultural products, will be subject to the

Most Favoured Nation (MFN) applied tariff during the months specified in the tables. One table sets out the treatment applied to selected agricultural products imported into CARICOM from Costa Rica; and the other deals with the treatment of selected agricultural products imported into Costa Rica from the More Developed Countries (MDCs) of CARICOM. The list of selected agricultural products on which CARIOM MDCs will apply MFN treatment on imports from Costa Rica during the months specified in the list, comprises thirty-nine (39) tariff lines; while the list on which Costa Rica will apply MFN treatment on imports from CARICOM MDCs comprises forty-four (44) tariff lines.

Excluded products

The Agreement makes provision for two lists of Excluded Products – a CARICOM list and a Costa Rica list. Goods included in these lists are excluded from Tariff Elimination, meaning that the MFN tariff will apply on these goods when imported.

Products subject to tariff elimination schedulesThe products in respect of this provision receive phased reduction of duty over a specified period. Two lists of products are provided for- one list for CARICOM and the other for Costa Rica. The provision under this arrangement requires that the MFN tariffs applicable on originating goods were to

be eliminated in four (4) equal annual stages starting on the date of entry into force of the Agreement. The MFN tariff applicable on 1 January 2003 was to be the starting point for the phased reductions. The CARICOM List on which phased reductions were to be undertaken comprises twenty-six (26) tariff lines; and the Costa Rica List covers twenty-seven (27) tariff lines.

Special List (Different preferential treatment)

The goods included in these lists – one for CARICOM and one for Costa Rica – are subject to different preferential treatment, as specified for each country. The treatment granted under this arrangement includes immediate free access, exclusion from preferential access, and phase reduction of duties. The CARICOM list which comprises forty-seven (47) tariff lines, indicates the treatment each CARICOM MDC gives to imports from Costa Rica in respect of each product on the list. The CARICOM list also shows the treatment Costa Rica provides to each CARICOM MDC in respect of the items on the CARICOM List. The Costa Rica list which covers fifty (50) tariff lines also shows the treatment both Costa Rica and CARICOM MDCs offer to the products on the list.

*Note*

The differentiated treatment given by CARICOM MDCs and Costa Rica is done on a reciprocal basis, meaning that any treatment given by one Party in respect of a particular product is given equally by the other Party on the product in question.

Special Treatment for Heading 0201 and 0202Under the provisions of the Agreement, items of Heading 0201 and 0202 (Meat of bovine Animal) from Costa Rica do not receive duty free access

into CARICOM, except where a CARICOM MDC receives permission to suspend the CARICOM Common External Tariff (CET) on the importation of such products in accordance with the provisions of the Revised Treaty of Chaguaramas. Where such permission is received the Member State is required to give Costa Rica the right of first supplier.

Special treatment applicable to Oils, Fats and SoapsThe provisions of this article provides for special treatment for oils, fats and soaps. Specifically, it requires the Parties to determine the treatment that will be granted to these products. Two separate list of products are provided for – one for CARICOM and one for Costa Rica. Both the CARICOM list and the Costa Rica list cover 61 tariff lines each, although the products are not all identical.

*Note*

The Parties had agreed that the Joint Council would have met within three months following the conclusion of internal consultations by CARICOM, to determine the treatment to be granted to these products. This situation remains undetermined. In that case, there is no preferential trade in the oils, fats and soaps which are included on the lists.

NON-TARIFF MEASURESImport and Export Restrictions

Under the Agreement, the Parties are required to eliminate all non-tariff barriers, except as provided for under the General Exceptions (Article XX) and the Security Exceptions (Article XXI) of the GATT 1994. In this regard, the Parties undertook not to apply restrictions with respect to trade under the

Agreement. Importantly, the Parties agree not to introduce any new prohibition or restriction on the importation or exportation of goods originating in the other Party.

Export Taxes

The Agreement provides that neither Party may adopt or maintain any duty, tax or charge on the export of any good to the territory of the other Party.

*Note*

An exemption is granted to Costa Rica to apply a duty, tax or other charge on the export of banana, coffee and meat.

Rules of Origin

The Agreement sets out a very detailed regime of Rules of Origin outlining the conditions to be satisfied for a good to qualify for origin treatment. The criteria to be satisfied for goods to be deemed to originate in the territory of a Party, is based on Specific Rules of Origin which have been developed under this Agreement. The Specific Rules of Origin are set out in Annex IV.03 of the Agreement. A Certificate of Origin is required to certify that a good being exported from one Party to another Party, qualifies as an originating good. Exporters are also required to make a declaration on the Certificate of Origin, indicating compliance with the prescribed Specific Rules of Origin under the Agreement.

*Note*

Each Party may require that a Certificate of Origin for a good imported into its territory is completed in the language required under its law.

Antidumping Measures, Sanitary and Phytosanitary

Measures and Technical Barriers to TradeIntegral to the regime for Trade in Goods, the Agreement makes provisions for Anti-dumping measures, Sanitary and Phytosanitary (SPS) measures ad Technical Barriers to Trade (TBT). In each of these areas the Agreement recognises the WTO Agreement as governing the rights and obligations of the Parties in respect of application of the respective measures.

Services, Investment and Temporary EntryThe provisions in respect of these areas represent a built-in Agenda under the Agreement, in that the Parties, with a view to

developing and deepening their relations under the Agreement, agreed that within two (2) years of the date of entry into force of the Agreement they would review developments relating to each of these areas and consider the need for further disciplines, as necessary.

*Note*

Further disciplines in respect of these areas are yet to be developed.

Dispute SettlementThe Agreement sets out very detailed arrangements for dealing with disputes which may arise regarding the interpretation and application of the Agreement. Consultations is the principal method provided for in the Agreement for resolution of disputes. There is also recourse to alternative methods of dispute resolution, including good offices, conciliation or mediation. Where consultations fail to yield a resolution of a particular dispute and where the Parties do not resort to one of the alternative methods of dispute resolution, the Parties can establish a panel to examine the matter.

Competition PolicyThe Agreement recognises the need for the Parties to seek to make progress towards the adoption of common provisions to prevent the benefits under the Agreement from being undermined by anticompetitive activities. A work programme in this regard had been contemplated to commence within two (2) years of the date of entry into force of the Agreement. There have been no developments to date.

Government Procurement

Under the Agreement the Parties agreed to promote greater liberalisation and greater transparency in their government procurement markets. Further consideration of this issue was contemplated within two (2) years of the date of entry into force of the Agreement. However, there have been no developments in relation to this issue.

ExceptionsThe Parties to the Agreement are allowed to take action to enforce measures in their national interest. These measures are general exceptions and security exceptions. The general exceptions are:

Those required to protect public morals;

Those for the protection of human, animal or plant life or health;

Those relating to importation or exportation of gold or silver;

Laws and regulations relating to customs enforcement, enforcement of monopolies, the protection of patents, trademarks and copyright;

Those relating to prison labour Those imposed for the protection of

national treasures or artistic, historic or archaeological value

Those relating to conservation of exhaustible natural resources

Those involving restrictions on exports of domestic materials necessary to ensure essential quantities to a domestic processing industry during periods when the domestic price of such materials is held below world price as part of a governmental stabilisation plan; and

Those essential to the acquisition or distribution of products in general or local short supply.

The Security exceptions are:

Those which do not require any Party to furnish or allow access to information which it determines to be contrary to its essential security interests;

Those which do not prevent any Party from taking actions considered necessary for protection of its essential security interest; and

Those which do not prevent any Party for taking action in pursuance of its obligations under the UN Charter for the maintenance of International Peace and Security.

Some key Market Access information!The agreement provides for free trade or preferential access for a wide range of products, excluding sensitive goods. Tariffs on 95% of products have been eliminated or phased out. Duty will continue to apply for CARICOM, on meat, dairy products, some fruits and vegetables, beer, rum and a few manufactured goods, such as paints, portland cement and cement clinkers, some paints, candles and some furniture,

Summary of CARICOM’S Trade Performance with Costa Rica (2010-2016) US$’000*

Year Imports Exports Balance2010 125,152 141,999 16,8472011 132,006 87,716 -44,2892012 147,779 9,111 -138,6682013 146,943 278,339 131,3962014 153,485 82,770 -70,7152015 145,483 77,150 -68,3332016 151,645 11,792 -139,853

Source: CARICOM Secretariat Regional Statistics Programme

*Values comprise both trade under the Agreement and trade not covered by the Agreement