Identification and analysis of trade barriers for processed food in Mercosur and Chile Central/Eastern Europe and Russia

Transcription

1 Identification and analysis of trade barriers for processed food in Mercosur and Chile Central/Eastern Europe and Russia Country Report: Prepared for Market Access Unit, DG Trade By Bureau Européen de Recherches, Brussels (Promar CEAS International) January 2001

2 TABLE OF CONTENTS General trade policy Tariff barriers Non-tariff barriers Registration, Documentation, Customs Procedures Indirect Taxation, Levies and Charges (other than Import Duties) Import Licensing State Trading Enterprises Import Cartels Standards and other Technical Requirements Trade Defence Instruments not in Conformity with the WTO Export Restrictions Subsidies Investment related measures Direct Foreign Investment Limitations Profit Repatriation Limits Foreign Exchange Measures Tax Discrimination (Direct Taxation)...21 Bureau Européen de Recherches Poland / i

3 General trade policy Regional trade agreements and other preferential arrangements Poland is a member of the GATT/WTO and of the Central European Free Trade Association (CEFTA 1 ), and has concluded an agreement with EFTA and a Europe Agreement 2 with the EU. It has a number of bilateral agreements with other countries, including the three Baltics, Israel and Turkey (which entered into force on 1 May 2000). Although these agreements, including the EU-Poland Europe Agreement, have made a central contribution to the reorientation of Polish trade policies, in most cases these do not cover substantially all trade, particularly in agricultural and food products 3. In the context of the Europe Agreements, Poland concluded in September 2000 negotiations for further trade liberalisation in the agri-food sector, including under the so-called doublezero option which extends the concessions granted by Poland on agri-food products imported from the EU in exchange for a progressive elimination of export subsidies on EU agri-food exports to Poland. The main groups of EU exports covered by the double-zero deal are indicated in Table 1. The concessions will enter into force in Table 1 Poland: concessions to EU imports under double-zero agreement Product Zero-tariff quota, 2000/01 (in tonnes) (a) Pigmeat (b) Preserved meat Meat preparations Poultry Butter Cheese Wheat Flour Bran Cereal by-products 4000 (a) (b) quota to be increased annually by 10% over the next 3 years pending lifting of veterinary restrictions on Polish pigmeat exports to the EU CEFTA consists of the Czech Republic, Slovakia, Poland, Hungary, Slovenia, Romania and Bulgaria. Signed on 16 December 1991 and entered into force on 1 February 1994 this incorporates the trade provisions of the Interim Agreement of March The Czech-EFTA Free Trade Agreement does not cover at all trade in agricultural and food products. Bureau Européen de Recherches Poland / 1

4 Full liberalisation for imports into Poland was granted to a limited range of non-sensitive EU products (not produced in Poland) such as Mediterranean fresh and processed fruit and vegetables, fruit juices, olive oil, some spices and some types of meat products. Other ad hoc concessions in terms of EU exports to Poland were agreed within the following quotas: malt (45,000 t at an in-quota duty rate of 10%); rapeseed (32,000 t at 15% duty); sugar (32,500 t at 40% min 0.17/kg, within the framework of the Polish WTO tariff quota). Thus, the deal includes solutions for products on which Poland unilaterally raised tariffs last year (i.e. cereals, pigmeat, rapeseed, butter and sugar see below) so that export opportunities for the EU are expected to be restored to their previous levels. Negotiations concerning processed agricultural products are ongoing. Also, in July 2000, the EU opened negotiations with Poland on new reciprocal concessions for fish and fish products. On the other hand, CEFTA members were planning the introduction of full liberalisation in intra-cefta agri-food trade by January 1999 but, following the Russian crisis and trade problems in the region, these talks have come to a standstill. Poland offers GSP preferences to 45 developing countries with a lower GDP per capita than itself, and to 49 countries considered as least developed. Except for certain sensitive items, duties on agricultural imports from developing countries are set at rates equivalent to 70% of the MFN level and on industrial imports at 80% of the MFN level, while imports are duty free from least developed countries. Currently Poland is transforming its GSP system to increase its compatibility to the EU GSP scheme. Pan-European cumulation of origin: Since the beginning of 1997 new rules of origin based on the concept of pan-european cumulation have been applied in a number of Free Trade Agreements within Europe. The model of the new cumulation rules for Poland is similar in structure and substantive provisions with that of the other associated CEECs. The Origin Protocol in the EU-Poland Republic agreement has been replaced by the pan-european cumulation provisions. In all other respects, the framework of the Europe Agreement has remained unchanged. Poland Bureau Européen de Recherches Poland / 2

5 has agreed to amendments to the pan-european cumulation of origin system, which are due to enter into force on 1 January The implementation of the new origin rules has two major consequences. Firstly, semifinished products originating in any country of the system and which are further processed or assembled in any other partner country may always be considered as originating products. Secondly, originating products can be traded between any of the countries involved in the system. The introduction of European cumulation should be particularly beneficial in the case of trading of originating products in the agri-food sector. The advantages of the new system of cumulation of origin for producers and traders, both in and outside the pan-european cumulation area, are significant. Customs procedures are simplified by the fact that once a product has been given European origin there is no need for the origin to be verified again. For firms established in Europe, including foreignowned firms, this means more freedom in using input material or deciding in which country to invest their production facilities. With regard to third country materials, the new rules are generally more flexible due to the fact that they provide for a general tolerance rule as well as alternative processing rules allowing more input of third country materials. Further information on the matter has been notified by the different countries involved both to the WTO Committee on Rules of Origin and, in the context of the examination of individual agreements under GATT Article XXIV, to the WTO Committee on Regional Trade Agreements Tariff barriers Poland s average import tariff was reduced substantially since the country s reforms, and applied tariffs currently average 16.4% (MFN) on all products, 36.1% on agricultural products, 18.3% on fishery products and 10.9% on industrial products. Nonetheless, substantial tariff dispersion still exists with MFN rates ranging from 0 to 293%. There has also been criticism that Poland's tariff structure exhibits significant tariff escalation that favours domestic processors, particularly in some sectors including food and beverages. Furthermore, the existence of many different MFN rates, often involving gradation at the one-decimal-point level, as well as numerous preferential rates, complicates and reduces the transparency of the tariff structure. Bureau Européen de Recherches Poland / 3

6 Under the GATT URA, Poland carried out the tariffication process in a different manner than most other GATT members. Sensitivity of the markets for individual products and the level of tariff rate in the EU were adopted as a basis for tariffication. As a result of this process, tariffs that were presented for binding were much higher than those used at present and closer to the level of actual market protection in the EU. In fact, Poland submitted for binding the highest tariffs (ceilings) which can be used within commodity groups specified in the four-digit CN nomenclature. At the same time, in relation to all tariff items recognised as sensitive, Poland was guaranteed the right to apply Special Safeguard Provisions (SSG) allowing it to introduce, by the year 2000, additional customs duties in the event of excessive quantitative growth or decline in import prices (see below). In the food sector, rates (outside preferential tariff quotas see below) are particularly high for sensitive products, such as pigmeat (83.3%), poultrymeat (60%), processed meats (35-45%), dairy products (40-70%), biscuits and confectionery (30-35%), chocolate (37%), frozen fruit (25-30%) and canned vegetables (25-30%). In the spirits sector, the EU industry has historically complained that the preferential tariff rates were set too high for the existing quota to be utilised while rates outside the quota are prohibitively high 4. A range of preferential tariff quotas are available in Poland for imports of agricultural and food products, both under GATT/WTO commitments and, for imports from the EU, under the Europe Agreement. These include mainly farm commodities but also certain processed food, spirits, wine, citrus fruit, fruit juices, rice, sugar-containing products, and dried fruit. However, many of these quotas have been consistently and substantially underutilised. Tariff suspensions had been applied occasionally on agricultural products in short supply and on certain industrial components. Thus agri-food import quotas are occasionally increased when the domestic market faces serious deficits, such as 1 extra mn t of duty free quota for grains (wheat, maize and rye) granted for a limited period this year in view of Poland s poor output. 4 Current rates for EU spirits range from 75% to 105% with additional rates of per %volume/hl. In the case of vodka and pure spirits there is a quota of 685,200 lpa per year, imports in excess of which are subject to a 268% bound rate. Bureau Européen de Recherches Poland / 4

7 On the other hand, tariffs have frequently been raised in recent years on various products, without sufficient prior notice. Poland has used the substantial leeway provided under its WTO accession agreement to raise applied tariffs, up to bound levels, on a range of agricultural products, such as wheat, butter, sugar, rapeseed, starch, hops and pigmeat. More recently, in March 1999, there was an increase of the import duty on flavoured yoghurt i (CN code ) from 9% to 35% on the basis of Article 30 and 33 (3)(d) of the Europe Agreement (safeguard clause). Poland justified this measure by quoting the increase in import of these yoghurts from 526 t in 1996 to 30,900 t during the 10 first months of 1998 and on their average import price (0.44 zl/150 gr) compared with internal prices for the same product. Following consultations with the EU, Poland has limited the increase to a temporary period of 2 years, during which it has agreed to open a preferential tariff quota on this product (volume set on the basis of EU average exports during ). However, the quota has not opened yet. Other cases of tariff increases in 1999, have included butter (increase from 40% to 111.7%, effective from 1 October a quota of 15,000 t can still be imported under the preferential rate of 40%), sugar, wheat, pigmeat, eggs, and since 1 January 2000 malt, flour, meals and bran (Table 2). In the case of wheat and pigmeat the tariffs adopted in 1999 reached the maximum allowed by the WTO. Table 2 Poland: import duties on flour, malt and bran from 1 January 2000 New duty ( /kg) Wheat flour 0.20 Spelt 0.20 Mixed grain flour 0.17 Rye flour 0.28 Maize flour 0.28 Barley meal 0.17 Oat meal 0.20 Malt Bran 25% ad valorem The EU has complained that the increases were in breach of the Europe Agreement, but Poland s position has been that import quotas offering preferential tariffs at the old rates have also been introduced to compensate for the tariff increases. These ad hoc increases have been responsible for delays in negotiations with the EU over the double-zero Bureau Européen de Recherches Poland / 5

8 option. There has been criticism also within Poland that the government s policy of increased protection in the farm sector amid a background of severe reductions in farm output this year can lead to mounting inflation and serious shortages in some commodities (e.g. cereals, sugar). EU exporters to Poland view the recent double-zero deal on agricultural trade liberalisation (see above) as a decisive step forward to the opening of the Polish market, more so than in the case of the other CEECs, in view of the frequent increases of Polish tariff rates on EU products in the past few years Non-tariff barriers Registration, Documentation, Customs Procedures Customs clearance procedures are laid down in the new Polish Customs Code, which entered into force on 1 January 1998, and the Customs Services Act of 24 July Import documentation is compiled under a "Single Administrative Document" (SAD) and includes a customs declaration and certificate of origin. The 1998 Customs Code introduced customs valuation procedures that appear to be fully harmonised with the provisions both of the EU Customs Code and WTO rules. Perishable goods are valued for customs purposes on the basis of unit prices per 100 kg which are fixed by the Ministry of Agriculture and the Customs Code prohibits the use of minimum import values for determining custom value. The new provisions also introduce the concept of tariff ceilings, whereby (as in the EU) lower customs rates are applied on imported products if the imported quantity does not exceed a specific limit. Also, a simplified system for customs clearance has been introduced. However, many of these and other provisions (setting up a Binding Origin Information, application of an Integrated Customs Tariff) have not yet been applied in practice. Poland has undertaken to fully implement its EU-aligned customs legislation by the end of It appears, following numerous claims of EU exporters, that since January 1998 the implementation of new provisions under the Customs Code ii, which were meant to approximate the system to EU rules, has generated administrative difficulties resulting in substantial delays caused by unclear, excessive and sometimes random requests by Polish Customs, the imposition of customs fees iii (see also below), the application of no- Bureau Européen de Recherches Poland / 6

9 drawback rules and non-recoverable charges linked to certificates of origin, as well as unnecessary requests for product samples (e.g. in the beer, wine and cheese sectors 5 ). It seems further that the requests differ per Customs Office. Considerable gaps in this area have also been identified in the latest Commission Progress Report on Poland. These substantial delays, often involving quite small items in themselves, can lead to disproportionately high costs being incurred by exporters, importers or both. Polish customs authorities have been extensively criticised for having too broad discretion in their operations (and the associated high incidence of corruption), the improper enforcement of rules (which is partly due to the frequent change of rules and tariff schedules, and partly to incorrect interpretation) and lack of communication between the different customs departments and with other authorities (e.g. Ministry of Agriculture, Ministry of Trade or Ministry of Health). Recent legislation as well as proposed new legislation and other initiatives aim to deal with these problems. The 1999 Act on Customs Services includes regulations that are important for the reduction of potential corruptive acts. Also, the problem of implementation of efficient mechanisms limiting corruption is considered in the Business Strategy of Polish Customs Administration, prepared by the Central Board of Customs. According to postulations covered in the Strategy, the Customs Ethics Code will be elaborated by the end of The Code will contain rules and standards of behaviour for customs officers. The target is to decrease by 2003 the number of justified complaints against customs officers' work by 50% compared with To ensure the correct application of regulations, the Polish Customs Administration is to undertake activities to improve exchange of information between the Central Board of Customs and the regional customs offices. In this connection the Polish Customs Code has provisions regarding introduction of an explanatory document providing a single interpretation of rules. This will be incorporated in official documents published in Poland to be available for natural and legal persons as well as for customs authorities. A gentlemen s agreement was also signed at the end of September 2000 between the industry (branded products and food and drinks) and customs authorities to improve co- 5 This pauses a problem for premium priced quality products such as grand cru wines, specific quality cheeses and Bureau Européen de Recherches Poland / 7

10 operation and ensure the enforcement of the law. As a first step, this aims to produce a detailed document listing goods that are likely to be counterfeited and will serve as a manual for customs officers at border posts to compare against the goods submitted for customs clearance. A second step will be to carry out a round table with customs officers to present a package of problem issues and corrective measures to improve law enforcement and communication between customs and other services. According to the industry, two issues in particular cause systematic problems to traders: a) inconsistency in the classification of the goods (whether for registration, certification or customs purposes) which result in errors in tariffication; and b) differences in the interpretation of the law between the various customs services. The industry is therefore assisting in the work of Polish authorities, as indicated above, to produce a systematic unique interpretation of the law as a reference manual for customs and traders Indirect Taxation, Levies and Charges (other than Import Duties) A Value Added Tax (VAT) is also charged. There are three VAT rates: 0%, 7%, and 22% depending on the product. A new 3% VAT has been introduced since 4 September 2000 on unprocessed agricultural products (and there is a provision to raise this to 7% in 2002). VAT is levied on the c.i.f. value of the product plus duty plus excise tax (if applicable). It appears iv that certain products sold on the domestic market are zero-rated whereas similar imported goods attract VAT, and that some imported goods are subject to taxation while similar domestic produced goods are exempt. Although the introduction of the 3% VAT on agricultural goods has partially corrected the problem, tax differentials remain (e.g. a higher 7% rate applies on citrus products 6 ). Again, under the EU-Polish Joint Assessment of Medium-Term Economic Policy Priorities (signed on 10 February 2000), Poland has undertaken to adapt the scope of VAT rates to EU acquis requirements. The current VAT law requires every P.O.S. to print out a VAT receipt including vending machines, in contrast to EU provisions where vending machines are exempt. Food and drink companies have got a 2-year exemption from this requirement but an eventual 6 beer which in any case are only imported in small volumes. Although this represents an improvement from the highly discriminating VAT rate of 22% applied on citrus products until 31 December At the request of the Commission, Poland reduced the rate to 7%. Bureau Européen de Recherches Poland / 8

11 compliance with the law would entail fixing fiscal modules in the machines (at a cost in excess of US$ 1,000 each). Excise taxes apply on some luxury and strategic products, including alcoholic drinks (beer: zl 4.95/%alcohol/100ltr; wine: zl 89/%alcohol/100ltr; spirits: zl220/%alcohol/100ltr), salt (7-15%), certain fermented and non-alcoholic spices, bitter flavour bases with sugar and spices, and fruits/nuts with alcohol. Until recently an excise duty has also been applying on chewing gum but this has now been abolished 7. Plastic packaging (deemed as non-environment friendly) also attracts am excise tax (e.g. zl0.04 per plastic bottle of 1.5 ltr). In the alcoholic beverages sector the taxable scope has been broadened, whereby alcohol with an alcoholic content of 1.2% and beer mixed with non-alcoholic beverages, in which the alcoholic content exceeds 0.5%, have become taxable. The previous special scheme for small breweries, which was discriminating against certain imports, has been abolished. As part of the country s Accession Partnership and the EU-Polish Joint Assessment of Medium-Term Economic Policy Priorities (signed on 10 February 2000), a short-term objective is to align completely excise duty legislation as regards alcoholic beverages. There have been questions on the national treatment implications of Poland imposing excise taxes on imports while exempting local products (although, with the exception of chewing gum, this did not affect food and drink products). The EU spirits industry has complained that Poland does not currently operate a system of bonded warehouses under a duty suspension regime (EC Directive 92/12). In addition, importers may not reclaim the cost of 'destroyed' Strip Stamps while this is permitted for domestic producers (source: industry survey). Customs fees. Following the 1999 Customs Services Act, administrative fees for the performance of customs control will be eliminated progressively with a view to their complete abolition by the end of On 1 April 2000 the following customs fees were eliminated: for examination of documents required for customs declaration; for control of means of transportation; for imposing a customs bond; for confirmation of origin or 7 8 Domestically produced chewing gum was levied a tax rate of 20%, whereas imported chewing gum was levied at 25%. During the pre-accession screening exercise, Poland committed to abolish all fees by the end of Bureau Européen de Recherches Poland / 9

12 customs status of goods; and for placing goods under transit procedure at the applicant s request. On 1 January 2001 the following administrative fees will be eliminated: fees for granting permits and concessions to use a simplified procedure, an economic customs procedure, transfer of rights and obligations and exemption from an obligation to deposit a security when carrying goods under transit procedure; handling fees for carrying out customs control acts, the cancellation of a customs declaration; and additional handling fees for actions undertaken as a result of infringing the deadline for granting customs designation to goods, and removing goods from customs supervision Import Licensing Import licensing applies to some food products including dairy (butter and cream) and poultrymeat, gelatine for industrial use and alcoholic beverages. The licences are issued by application every 3 months to the Ministry of Market. EU dairy companies have complained of problems in the procedure in that there is a lack of co-operation and exchange of information between the different authorities involved (Ministry, central customs, customs officials at border posts) and there is a lack of information to companies. A licence is necessary to sell imported alcoholic products in the domestic market. This applies to all products: beer, wine and strong alcoholic beverages State Trading Enterprises A number of state-owned enterprises remain in the spirits, grain milling, meat, fruit/vegetable processing and sugar sectors. In the EU-Polish Joint Assessment of Medium Term Economic Policy Priorities of 10 February 2000, Poland has undertaken to continue the privatisation of the agricultural/food industry. In the first quarter of 2000 the Ministry of State Treasury commercialised most of the spirit industry enterprises (16 out of 21), following the resolution in July 1999 of the problem of the division of trademarks which had held back the privatisation process in the sector. The other five state enterprises will be privatised by means of direct privatisation (Art of the law on commercialisation and privatisation of state-owned enterprises). The restructuring of the sugar industry has been under discussion with two views: a) the establishment of a single national holding company to encompass the existing four holding Bureau Européen de Recherches Poland / 10

13 companies owned by the State Treasury and, b) the privatisation of the existing companies. At the end of 1998 it was decided to privatise the industry on the basis of a mix of both approaches, by pulling together sugar plants in regional groups. Consequently, work is continuing for the sale of these groups to strategic investors. At the same time a new concept is being considered for the formation of a holding Polski Cukier, which will be created out of 16 sugar plants grouped into three companies. None Import Cartels Standards and other Technical Requirements Polish regulations require imported products, including food and agricultural products, to be inspected for compliance with Polish standards. The inspection agency, Centralny Inspektorat Standardyzacji (CIS), is charged with ensuring the quality of products offered on the Polish market. Until 1998, Poland used to have its own extensive system of certification and approvals of products which was not harmonised with EU or international standards and thus did not automatically recognise international product standards and did not accept manufacturer self-certification 9. An important priority has therefore been to align Polish standards to EU norms, conformity assessment and certification/testing procedures. New legislation has recently been adopted in this context (Law of 22 July 1999 on the amendment of the Law on Testing and Certification of 3 April ; Law of 28 April 2000 on Conformity Assessment, Accreditation and amendments to certain acts 11 ). Since September 1999 (when the new Law on testing and certification was implemented) the scope of mandatory certification has been substantially reduced and currently covers no more than 10% of goods marketed in Poland. The aim is to eliminate current mandatory certification procedures by 1January New product liability and safety laws are in the process of being drafted/proposed to allow for acceptance of producer Failure to adopt such legislation has been a criticism of the latest Commission Progress Report. Journal of Laws No 70, item 776 of Journal of Laws No 43, item 489 of 25 May Bureau Européen de Recherches Poland / 11

14 declarations of adherence to EU/international quality standards as sufficient proof of product quality, as well as of certificates of conformity issued by EU certification bodies and testing laboratories and third party issuance of the "CE" mark or ISO 9000 conformity (on the basis of mutual recognition). These changes have already allowed the mutual recognition in relation to certain groups of products of manufacturer s declaration of conformity for goods produced in Poland or originating from the countries with which Poland has concluded such agreements. For cases where manufacturer s declaration of conformity is envisaged in the EU, Poland introduced so-called verification certificates issued on the basis of manufacturer s declaration of conformity (following the Ordinance of the Council of Ministers of 9 November 1999). Such simplified procedures relate only to domestic and EU manufacturers according to the 1997 Protocol on European Conformity Assessment Agreement (PECAA) and the Europe Agreement. At the moment, the Polish Centre for Testing and Certification comprises three main activities: accreditation, certification and testing. According to the Law of 28 April 2000 on conformity assessment and accreditation, as from 1 January 2001 a new independent accreditation body the Polish Centre for Accreditation (PCA) will be established. As a result a full separation of the certification and accreditation activity will take place. As already indicated, the recent adoption of framework legislation on conformity assessment, standardisation, producer liability and general product safety should pave the way for sectoral legislation in these fields. As part of the country s Accession Partnership, a medium term objective is to implement the quality control systems in the sector (HACCP), to reinforce food control administration and implement a national laboratory plan for testing facilities. To date there has been no alignment in the area of food safety. In October 2000, the EU and Poland have agreed to draw a coherent food safety strategy to speed up implementation of EU sanitary legislation in Poland. The strategy would include a clear timetable for the adoption of legislation and implementation periods and actions as foreseen, and should constitute an important step to Poland s harmonisation of food safety rules with the EU acquis. As for product certification, further efforts will need to be devoted to the adoption of the necessary secondary legislation and to the setting up of administrative structures (Commission Progress Report, November 2000). Bureau Européen de Recherches Poland / 12

15 Poland maintains strict veterinary and other SPS regulations affecting food imports, such as livestock products, vegetables, and fruit. Although it has signed several bilateral agreements concerning SPS matters since 1992, substantial problems remain in this field. Furthermore questions have been raised about the transparency of the testing and inspection procedures and the adequacy and impartiality of the relevant authorities. The EU confectionery, snack foods, spices and spirits industries have complained about the lack of transparency and clear-cut rules in food safety/hygiene related certification and/or testing procedures (source: industry survey). (SEE ALSO BARRIER FICHE) New regulations, including labelling requirements, apply to imports of genetically modified food since November Additives A number of complaints have been received by EU industry over Polish additives rules (source: industry survey): Confectionery: regulations concerning additives like sodium benzoate are not line to EU rules. Snack foods: regulations on flavours (accepted additives listed in Ministry of Health regulation of 31 March 1993) are not in line with EU Directives. This has meant that some of the existing flavours in savoury snacks marketed in the EU have to be modified before application to Poland or to obtain General Sanitary Inspector permission if product contains additives that are not in the above list. Further harmonisation to the EU acquis is currently under way in the field of food law and this will include legislation on additives and contaminants. This should overcome the problems reported by the EU industry in these fields. Bureau Européen de Recherches Poland / 13

16 Labelling According to Regulation No 402 of 15/7/94 on food labelling, consumer packs of food and drink products should have Polish language labels containing: the product composition, nutritional value, a "best before" date, the name and address of the producer, and the product weight. A number of complaints have been received by EU industry over Polish labelling rules (source: industry survey): Spirits: need to display on the label a code from the relevant Polish Quality Standard, which is meaningless to consumers and superfluous (and not in conformity with EU legislation (Directive 79/112)). Confectionery: Art 2.12 and 5.8 of Regulation No 402, require labelling of exhaustive list of additives. This is contrary to EU labelling Directive 79/112, whereby only categories of additives need to be mentioned on the label (e.g. additives'), and to Article 4.a. section 4 of the Codex Alimentarius. New legislation ('Law on Polish Language') adopted on 7 October 1999 (in force since 8 May 2000) will modify the requirements for Polish language labels of food and drink consumer packs. A series of implementing decrees (or Ministerial Orders) are currently being drafted on this and there seems to be some debate over whether the new labelling requirements should include translation of the made in mention on the pack and the country of origin (following a suggestion in favour of this interpretation by the Anti- Monopoly Committee). Other problems could arise because of the potentially broad interpretation of the law although not clear at the moment whether this will actually happen (e.g. French wine). The new Law also imposes the compulsory use of Polish language in all contractual relations with Polish partners (in addition to any other language the parties may choose), the Polish version being the official legal act. Although the exact ramifications of this will again depend on the implementing decrees which are currently being drafted, this provision does not seems to be in line with EU and international legal practices, in that if a dispute arises the Polish version will be the definitive one whereas in the EU it is the language the parties choose. The EU has called for the law to be implemented in a Bureau Européen de Recherches Poland / 14

17 flexible and sympathetic manner to avoid such problems (source: Commission Progress Report, November 2000). SEE ALSO BARRIER FICHE. Geographical indications Poland does not have a good record of enforcement of intellectual property protection, particularly at the administrative and judicial level. There is a high incidence of imported counterfeit products and there are also reports of internal illegal protection of these goods. A draft Industrial Property Law, which covers geographical indications is currently under review 12 and this will bring Polish provisions further in line with the acquis. Composed of two parts (I. Internal Regulation of Polish Patent Office and II. Modifications of Former Regulations on Trademarks/Patents Registration) the draft Law provides additional protection for geographical indications through the suspension at customs of goods bearing a counterfeit trademark or geographical indication on the basis of the issuance of a temporary order (Article 309(3)). It also introduces a national registration scheme for Polish geographical indications which is open to any organisation representing interests of the producers from a given territory or a local or autonomous administration agency. Despite the proposed legislative changes, these fail to deal with several problems in this field: a) there is no specific court where one can complain about Patent Office decisions the appeal authority seems to be the same as the registration authority; b) the Patent Office can register a trademark that is look-alike an existing one if it is in a different sector in this case manufacturers can currently appeal against such a decision only on grounds of unfair competition. Alcohol advertising ban 12 This was adopted in June 2000 but was referred by the President to the Polish Constitutional Tribunal for an examination of its constitutionality. This reference relates to one specific article concerning the reallocation of trademarks to domestic producers. The ruling of the constitutional court will therefore apply only to this article and not the legislation as a whole. Bureau Européen de Recherches Poland / 15

18 A ban exists on all alcohol advertising. However, in practice the ban is widely ignored. For instance, despite the fact that the ban covers beer with >1.5% volume, beer with lower percentages (labelled as non-alcoholic) is aggressively advertised. New legislation is currently being drafted, which proposes to ban advertising for alcoholic drinks with over 0.5% volume. In addition, the new ban would apply across all forms of advertising and would prohibit the use of tobacco/alcohol treated trade marks on any other product (e.g. use of a cigarette trademark on textiles). The proposals are so strict and controversial that they would take substantial time to be adopted. Quality promotion scheme The Ministry of Agriculture launched in 2000 a new programme of food quality promotion to encourage good practice in the Polish food industry and the production of premium quality foods ( Polish Good Food programme). The programme will encompass a traceability and product identification scheme throughout the production chain, which was so far lacking in Poland. Conforming products will be awarded a special label, provided they are manufactured with Polish ingredients and comply with EU standards and HACCP food safety principles Trade Defence Instruments not in Conformity with the WTO Under the WTO Agreement on Agriculture and upon its accession to the WTO, Poland was guaranteed the right to apply Special Safeguard Provisions (SSG) allowing it to introduce, by the year 2000, additional customs duties on agricultural products in the event of excessive quantitative growth or decline in import prices 13. In practice, the additional duties were introduced periodically on imports of cut flowers, pork, poultry, flavor, wheat grain, sugar, starch, hop cones and gelatin. The most recent list of SSG was notified to the WTO on 14 February 2000 and contains trigger prices in the context of the price-based SSG for certain products, including pigmeat, poultry, wheat flour, starches and sugar (special safeguards on these products were also applied in 1999 and 1998). No anti-dumping measures have been taken recently in this sector. 13 Law of 28 June 1995 on the Principles, Conditions, and Procedure of Imposing Additional Customs Duties on Imported Agricultural Products. Bureau Européen de Recherches Poland / 16

19 No legislation yet exists for applying countervailing duties, but such legislation in planned to be introduced in the course of None Export Restrictions Subsidies Actual domestic support levels have been lower than the Polish commitments under the GATT/WTO. Poland was the only CEEC to express its GATT commitments on domestic support in $ and is therefore shielded against the devaluation of the national currency, the zloty. Total Aggregate Measurement of Support (AMS) is limited to $3.3 bn by the year 2000, a rather comfortable ceiling considering the high level of support provided during the base reference period ( ). The current amount of support allocated to the agricultural sector for 2000 comes to Zl 3,449 bn (including EU aid). Assistance to the agricultural sector is delivered by border protection, price support, supply control measures, credit and input subsidies as well as direct outlays, including export subsidies and deficiency payments recently introduced on wheat. The main products assisted include cereals, especially wheat and rye, pigmeat, eggs, sugar, poultry and oilseeds. Poland has typically provided intervention buying to a limited range of sectors, including cereals, raw hops, bee honey, SMP and potato starch. On the other hand, the bulk of its expenditure on agriculture has typically gone to farmers pensions (amounting to 3 times the expenditure on agricultural restructuring). In April 1998, the government adopted a medium-term strategy for agriculture, which represents a first step towards the establishment of coherent structures in the sector. More recently, on 1 September 2000 it approved the Pact for Agriculture and Rural Areas which aims to set a framework for relations with the agricultural sector. The initiative involves Zl 8 bn of aid for the countryside in 2001 which is double the amount envisaged in the draft budget for that year. The programme foresees additional measures such a pension scheme and an insurance scheme co-financed by the state. Bureau Européen de Recherches Poland / 17

20 Export subsidies have traditionally been applied to a limited range of agricultural goods, which during 1998 included sugar and potato starch and during 1999 sugar, potato starch, powder milk and pigmeat. Sugar has generally been the key product to attract export subsidies. In the dairy sector, under the GATT URA, Poland may not subsidise the export of any dairy products other than SMP. Poland s WTO agricultural commitments permit it to extend export subsidies to additional products, such as animal products, meat, fruit, vegetables, rapeseed, and rapeseed oil. Poland offers certain subsidies in the industrial sector, for which food companies are also eligible. These include: A public loan scheme, which is based on a Council s of Ministers regulation of 23 November 1993, to support enterprise restructuring (through investment loans) and provide hedging (through grants) in case of liquidation. The loan is provided when it is impossible to obtain resources for these purposes from other sources. In 1997, the food industry received 0.7% of the total funds available for this purpose and the fishery industry received a further 0.2% and in 1998 both industries benefited from 1.26% of all the funds available under the programme. In both cases, this was used exclusively on grants for hedging purposes. Investment tax reduction incentives targeted at enterprises in the municipalities especially endangered with high structural unemployment (Regulation of the Council of Ministers of 24 January 1995). A scheme run by the Ministry of Finance, on the basis of the Law of 8 May 1997, to provide guarantees against bank loans for industrial companies investing in infrastructure improvements and the application of better technologies. In 1997, some 8.35% of the total funds available under the scheme were associated with loans to support infrastructure improvements in the food processing sector, and in 1998 three investments in infrastructure in the food and agricultural sector absorbed 50.2% of all the funds available under the scheme. In addition, specific subsidy schemes targeted at the agri-food processing sector are: A working capital loan scheme, run by the Ministry of Agriculture and Food Economy and the Agency for Agriculture Restructuring and Modernisation, targeted specifically Bureau Européen de Recherches Poland / 18

21 to domestic agricultural and food processing companies. The loans are meant to facilitate cash flow by supporting periodic cash shortages. Based on the Ordinance of the Council of Ministers of 21 February 1995, the scheme effectively subsidises interests rates on loans made by companies in the sector for various purposes, such as the purchase of material assets for food production applying ecological methods; storage and/or purchase of periodic powdered milk surplus, butter, hard cheeses, pork half-carcasses, and bee-honey products. An investment loan scheme for agricultural and food processing companies, run by the Agency for Agriculture Restructuring and Modernisation and 35 banks that concluded agreements with the Agency. The purpose of the scheme is to speed up the process of structural and market adjustment in the sector. Its legal basis is the Law of 29 December 1993 concerning establishment of Agency for Agriculture Restructuring and Modernisation. The scheme provides subsidies to the interests due on investment loans extended by the participating banks. In 1997 the Agency subsidised investment loans for implementation of agricultural undertakings, food processing, special agricultural production sectors and agricultural services; loans for business sectors and regions within the scope of programmes approved by the Minister of Agriculture and Food Economy; loans for undertakings generating new jobs for rural population in nonagricultural sectors in rural and rural/urban municipalities. In June 2000 the Parliament adopted a law on the conditions of admissibility and monitoring of state aid to entrepreneurs that will enter into force in January The law would contain the basic principles of the acquis in this field, providing for a basis for the systematic ex-ante control of aid projects. Finally, there are various tax incentives for special economic zones aiming to attract investors in disadvantaged regions, to which the EU has strongly opposed due to scale of the tax breaks offered. Following a new government decree in June 1999, these schemes will only remain in operation until the end of 2000 (2001 for very disadvantaged regions). However, the so-called acquired rights of investors, (c.f. tax holidays until 2017) are to be upheld, a situation which the EU considers very problematic (source: Commission Progress Report, November 2000). Bureau Européen de Recherches Poland / 19

22 1.4. Investment related measures DG Trade: Identification and analysis of trade barriers for processed food Polish accession to the OECD in 1996 accelerated changes facilitating foreign investment, including national treatment and easing capital flow restrictions. In order to create an advantageous environment for foreign investors Poland prepared in 1999 a new legal framework, the Act of 19 November 1999 on Business Activity, which replaced the former Economic Activity Act and the Law on Companies with Foreign Participation. This Act will come into force on 1 January 2001 with the exception of the articles referring to branches and representative offices of foreign companies, and articles referring to small and medium-sized enterprises, which came into force on 1 January The Act provides for the establishment of branches of foreign economic entities subject to registration in the National Court Register, with no financial guarantees or regulatory, material, or personal requirements other than those applicable to domestic enterprises. Currently, there are a number of tax-based investment incentives, eligibility for which is left to the discretion of the Ministry of Finance: Foreign investors in the food processing sector can qualify for investment relief from revenue, provided they show profits at 4% of total revenues. Companies investing over 2mn and starting activity may deduct investment expenses from their revenue in the first year and in next 3 years up to 10% of income/year. If profits derived from export are over 50% of the total revenue or an equivalent 8mn, investment expenses may be deducted up to 30% of income. Companies exporting sea products and processed fish can deduct investment expenses up to 30% of taxable revenue, provided that the export derived income constitutes at least 50% of the total income. ISO 9000 quality system implementation qualifies for tax relief of up to 30% of taxable revenue. Bureau Européen de Recherches Poland / 20

23 Direct Foreign Investment Limitations Foreign stakes in fisheries companies are capped at 49%. With the introduction of the 1999 Business Activity Act, the current requirement to obtain a special licence for trade in wholesale of imported consumer goods would be removed. None Profit Repatriation Limits None Foreign Exchange Measures None Tax Discrimination (Direct Taxation) Bureau Européen de Recherches Poland / 21

24 Other information i Commission internal database, Poland ii Commission internal database, Poland iii Commission internal database, Poland iv Commission internal database, Poland Bureau Européen de Recherches Poland / 22