RESTRICTEDWORLD TRADE
ORGANIZATIONWT/ACC/HRV/45
19 January 1999
(99-0157)
Working Party on the
Accession of CroatiaOriginal:  English
ACCESSION OF CROATIA
Additional Questions and Replies to the
Memorandum on the Foreign Trade Régime (L/7466)
The following additional questions and replies to the Memorandum on the Foreign Trade
Régime have been received from the Republic of Croatia.
_______________
Table of Contents
Page Question
II. ECONOMY AND FOREIGN TRADE1 Economy(b) Main directions of ongoing economic policies
Pricing Policy 1 1(i) Privatization 3 2
(c) Current economic situation 4 32. Basic Features of Foreign Trade of the Republic of Croatia(c) Foreign debt of the Republic of Croatia 5 4
III. INSTRUMENTS AND MEASURES OF THE FOREIGN
TRADE SYSTEM OF THE REPUBLIC OF CROATIA 65
2. Evolution of Customs Tariff Nomenclature(b) Customs Tariff Nomenclature 6 6-8(c) Import charges and fees 7 9-11(d) Taxation regime 8 12-14(f) Non-tariff measures Applied to Imports and Exports of Goods 11 15(g) Customs valuation 12 16(h) Rules of origin 13 17(j) Standards and Certification 14 18
Sanitary and Phytosanitary Measures 20 19
(o)(m)(n) Safeguards, Anti-dumping and Countervailing Measures 23 20
3. Export Regulations 24 22
IV. OTHER POLICIES AFFECTING FOREIGN TRADE
1 Intellectual Property Protection 25 23-262. Agricultural Policy 26 28-34
Agricultural Support Policies 29 35Agricultural Export Subsidies 30 36-40
6. Government Procurement 32 419. Subsidy Policy 33 42-4310. TRIMS 33 4411. Services 34 45-50
V. INSTITUTIONAL BASE FOR TRADE AND ECONOMICWT/ACC/HRV/45
Page ii
RELATIONS WITH THIRD COUNTRIES
1 Bilateral or Plurilateral Agreements Relating to Foreign
Trade in Goods and Trade in Services 38 51
2. Customs Unions and Free Trade Areas 38 52-55WT/ACC/HRV/45
Page 1
II. ECONOMY AND FOREIGN TRADE
1. Economy
(b) Main Directions of Ongoing Economic Policies
- Pricing Policy
Question 1.
In its response to question 1 of WT/ACC/HRV/39, Croatia report s on its current authority to
apply price controls and other price requirements on goods and services. Noting that in general,
"companies determine prices of goods and services freely, without any interference of
government authorities into that process", Cr oatia identifies the "the Law on Exceptional
Measures of price Controls" of 27 June 1997 as granting authority to establish price ceilings,
specific price levels, and prior reporting of price changes under certain conditions. Current
requirements are limited to prior reporting of price changes on goods and services solely or
substantially supplied by several legal entities owned by the Republic of Croatia and on a fewother basic consumer products. These requirements are applied to engine gasoline, diesel fuels,
heating oil, primary gasoline, asphalt bitumen, jet fuel, liquid oil gas, natural gas, electricity,
radio and television license fees, domestic ra ilway transportation of passengers and goods,
maritime/coastal transportation of passengers and goods, standard letters and postcards,
telephone charges for domestic calls, telephone charges, road tolls, bridge tolls and tunnel tolls,official forms, the use, content and form of wh ich are regulated by laws and. other regulations,
logs for veneer and barking, logs for planks, roundwood for railroad sleepers, thin roundwood,
other roundwood, panel wood, services for l oading, unloading and transporting timber:
assortments, fresh milk, fertilizers, telephone ca lls, standardized letters and postcards in the
domestic mail system, wheat flour and bread type 850 .
Please list, by HS number or service sector and subcategory, the goods and services whose
prices are regulated by the government.
Croatia states that the current price regulations are not applied to imports and exports.
Does the Law on Exceptional Measures of Price Controls include the authority to apply price
controls or reporting requirements on prices of imports and exports?
We seek inclusion of an appropriate description of Croatia’s price regulation authority and its
application in the draft Working Party report.
We seek a commitment from Croatia in the Working Party report of the following:
- that most prices for goods and services are determined without Government
guidance or control and a listing in the Working Party report of any such controls
now in place, by HS number;
- that in the application of state guidance or control of these prices and for any that
are introduced or re-introduced in the futu re, Croatia will apply such measures in a
WTO-consistent fashion, and take account of the interests of exporting WTO
members as provided for in Article III:9 of the GATT 1994; andWT/ACC/HRV/45
Page 2
- that the list of goods and services subject to state price controls will be published in
the official journal, including any chan ges from the list provided of current
requirements in place.
Reply:
The Law on Exceptional Measures of Price Controls, itself does not include a specific article
or provision regarding price control of imported or exported goods. But the bylaw regulation, which,according to Article 6 of this Law is adopted by the Government of Croatia, excludes the possibility
to apply price controls or reporting requirements on prices of imports and exports.
In the draft Working Party report, Croatia will include the following description of Croatia s
price regulation
"In the Republic of Croatia, companies determine prices freely, without any government
interference. The Law on Exceptional Measures of Price controls regulates the system of
price control as a mechanism which could be implemented only in exceptional cases inorder to prevent negative effects of price changes of basic goods and services that have a
direct impact on cost of living or in order to prevent monopolistic pricing, if those
objectives could not be achieved by other economic policy measures.
In the above mentioned exceptional situations, the Government, upon the proposal of
Ministry of Economy, could implement direct price control either by fixing maximumprices, ordering price reduction to a certain level, or by requiring economic entities to
report changes in prices prior to the application. Government Regulations determined
goods and services subject to these measures. All regulations regarding price control
measures are published in the "Narodne novine", the official journal of the Republic of
Croatia. Those price control measures could be applied until the reasons for theirintroduction are eliminated. After the introduction of those measures the Government is
obliged to take appropriate policy measures in order to eliminate the reasons for direct
price control.
The only direct price control measure in force is the reporting changes in prices prior to
the application. The legal entities owned by the Republic of Croatia or public utilities -the national oil company, the national electricity industry, the national broadcasting
company, the national railways, the national forestry exploitation company, the national
railways, the national maritime carrier, Official Gazette publisher, the national road and
construction company and national postal system and telecommunications companies are
obliged to report changes in prices of certain goods and services to the Ministry ofEconomy 15 days in advance. The goods and services concerned are: petrolEuropean
Unionm products; natural gas; electric energy; radio and television subscription;
transportation of passengers and freight by local rail or maritime line traffic; standard
letters and postcards telephone impulse in domestic mail system and telephone
subscription; road, bridge and tunnel toll s; official forms; roundwood logs; cubic wood
and services of loading and transportation of wood sorting.
Besides the above mentioned companies and products, the Croatian producers of fresh
milk, fertilisers, wheat flour and bread type 850 are also obliged to report changes in
prices 15 days to the application.
The Ministry of Economy could object within the period of 15 days, i.e. from the date the
prices were reported until their application. After the analysis of the reasons for price
increase or decrease, the Ministry can request the company to reconsider the proposedWT/ACC/HRV/45
Page 3
price. The Law provided for penalties amounting to HRK 5,000–20,000 (approximately
US$800–3,000) for companies changing prices against the objections of the Ministry, and
the Government could order the prices to the original level. A company objecting to such
administrative action could institute proceedings and request compensation for the
damage incurred.
The obligatory price reporting in advance does not apply to imported products and to
products destined to export.
Local administrative bodies are responsible for price control of local public utilities, i.e.
central heating, water supply, sewage and other sanitary services, distribution of gas,
public transport, etc. However, the Government could prescribe direct price control
measures for above-mentioned services in order to prevent market disturbance or
monopoly behaviour if local administrative bodies did not take action."
Croatia is ready to undertake following commitmen ts in the Working Party  report, regarding
pricing policy:
- the most prices for goods and services are determined without Government guidance or
control. In the Working Party report are listed goods and services for which  such control
is now in place, by HS number ;
- in the application of state guidance or control of these prices and for any that are
introduced or re-introduced in the future, Croatia will apply such measures in a WTO
consistent fashion, and take account of the interests of exporting WTO members as
provided for in Article III:9 of the GATT 1994;
- the list of goods and services subject to State price controls will be published in the
official journal, including any changes from the list provided of current requirements inplace.
(i) Privatization
Question 2.
We appreciate the information provided to date on Croatia's privatization efforts.  We would
appreciate an update on the status of current Government privatization activities, and anoverview of plans concerning (a) privatization of the Government’s holdings in manufacturing
and service enterprise’s, and (b) ownership chan ges for firms and enterprises termed "socially
owned", the form of public ownership under the former Socialist Federal Republic of
Yugoslavia.  Please provide a chart outlining progress achieved to date in Croatia's
privatization program.
Reply:
With regard to the remaining privatization of public utilities and large state-owned
enterprises, it is expected that the process should  begin in the course of 1999. Each company shall be
privatized in accordance with a special law that will be adopted by the Croatian Parliament. First
companies to be partially privatized are the Croatian Telecom, INA - Oil and Gas Corporation, the
Croatian Electricity Company and three state-owned banks.WT/ACC/HRV/45
Page 4
(c) Current economic situation
Question 3.
In response to question 8 in HRV/39 Croatia repor ts that the process of improving border and
customs control with Bosnia was delayed due to war operations on the bo th sides of the border
that only changed in 1997. Croatia also reported that since 24 March 1995, it has had an
agreement on economic cooperation with the Government of the Republic of Bosnia andHerzegovina and the Government of the Federati on of Bosnia and Herzegovina providing; that
all goods (industrial and agricultural) originating in the Republic of Croatia and the Federation
of Bosnia and Herzegovina. are excluded from customs tariffs, and only 1 per cent of customs
registration is levied. Talks among the parties in April 1998 initiated work "on building a
proper border regime." Croatia states that it ha s established an agreement on border crossing
points categorization with Bosnia on 25 May 1993, establishing obligations for adequate customs
arrangements on both sides of Croatian-Bosnian border. It further states that a new CustomsLaw slated for enactment in early 1999 will harmonize Croatian border practices with
European Union regulations. Croatia stated that it has proposed negotiations on concluding a
Free Trade Agreement which will be valid for substantially all trade of products originating
from the Republic of Croatia and the whole territory of Bosnia and Herzegovina in line with
similar FTAs among CEFTA countries and among these countries and the European Union
We commend Croatia for its recognition that its current customs control with the Federation of
Bosnia and Herzegovina is inadequate and incons istent with WTO provisions, and, its intention
to enforce WTO provisions and the terms of its accession package within its customs territory.
Please report on any taxes, tariffs, customs charge s, or other fees or charges applied to imports
from the Federation of Bosnia and Herzegovin a other than the 1 percent customs fee. Please
indicate to what extent such measures are applied to imports (a) from the rest of Bosnia, and (b)
other countries.
Please report on what non-tariff controIs are applied to imports from the Federation of Bosnia
and Herzegovina and indicate to what extent such  measures are applied to imports (a) from the
rest of Bosnia, and (b) other countries.
What WTO provisions does Croatia intend to invoke to justify its preferential tariff and
customs regime with a portion of another country, i.e., Federation of Bosnia and Herzegovina?
Please report on the specific steps taken to da te (a) to pursue a WTO-consistent FTA with the
entirety of Bosnia and (b) to regularize the cu rrent WTO-inconsistent customs regime in place.
We urge Croatia to rectify its current WTO-inconsistent customs arrangement with the Bosnian
Federation and strictly define its customs territory vis-a-vis the Republic. of Bosnia.
Croatia's inability to do so will bring into question its ability to enforce WTO Agreements, e.g.,
in the area of taxes, charges, nontariff requirements, IPR protection and MFN application of
standards and sanitary requirements. It also brings into question the value of MFN
commitments undertaken in market access negotiations.WT/ACC/HRV/45
Page 5
Reply:
The Agreement on Economic Cooperation between the Government of the Republic of
Croatia and the Governments of the Republic and Federation of Bosnia and Herzegovina was
negotiated at the beginning of the year 1995 and signed on 24 March 1995. At that time, Bosnia and
Herzegovina was not organized under the Dayton Peace Agreement provisions, which means that in
1995 there were two customs territories in Bosnia and Herzegovina (Federation and Republic Srpska).Having in mind special relations envisaged between the Republic of Croatia and the Federation of
Bosnia and Herzegovina in the Washington Agreement (signed on 18 March 1994), the Croatian
Government opted for a Free Trade Agreement with the Federal customs territory in Bosnia and
Herzegovina, which was endorsed by the signature of the Government of the Republic of Bosnia and
Herzegovina as well.
New political developments arising from the Dayton Peace Agreement signed in
December 1995, which also introduced a single customs territory of Bosnia and Herzegovina with twocustoms administrations, underscored the necessity of changing the scope of the Agreement on
Economic Cooperation. Therefore, on 28 May 1998, Croatian Government passed a decision on a
draft Trade Agreement to be negotiated and signed with the Council of Ministers of the Bosnia and
Herzegovina, introducing a free trade arrangemen t with the whole territory of Bosnia and
Herzegovina. Preparations of elections in Bosnia and Herzegovina in September 1998, delayed thenegotiations on proposed Free Trade Agreement to start with the outgoing Council of Ministers of
Bosnia and Herzegovina. The Government of the Republic of Croatia is committed to engage in those
negotiations and to sign the Free Trade Agreement valid for the whole territory of Bosnia and
Herzegovina as soon as the Council of Ministers of Bosnia and Herzegovina expresses its readiness
for the beginning of negotiations. The Croatian dr aft of the new Free Trade Agreement, which has
been presented to the Council of Ministers of Bosnia and Herzegovina, envisages completely free
trade in industrial goods (without 1 per cent customs fee) and exchange of concessions in trade in
agricultural goods, thus bringing the provisions of that Agreement in line with the WTO rules and
disciplines.
2. Basic Features of Foreign Trade of the Republic of Croatia
(c) Foreign debt of the Republic of Croatia
Question 4.
Please report on results of the three World Bank lo ans referred to in the response to question 19
of WT/ACC/HRV/39 concerning the reform the pension system, fostering private enterprise,
and reconstructing Croatian infrastructure.
Reply:
An updated list of IBRD, EBRD and CEF (Council of Europe) Public Project Loans in
Croatia is available in the Secretariat for consultation.  (WT/ACC/HRV/45/Add.1)WT/ACC/HRV/45
Page 6
III. INSTRUMENTS AND MEASURES OF THE FOREIGN TRADE SYSTEM OF THE 
REPUBLIC OF CROATIA
Question 5.
Will Croatia confirm that the former state mo nopoly in foreign trade in Croatia has been
abolished and that no restrictions exist on the right of foreign and domestic individuals and
enterprises to import and export goods and serv ices within Croatia's customs territory except as
provided for in WTO Agreements?
Will Croatia confirm that individuals and firms are not restricted in their ability to import or
export based on their registered scope of busine ss and the criteria for registration of companies
in Croatia are generally applicable and published in the official journal?
Concerning the revised legislation listed in WT/ACC/HRV/17/Rev1:  We appreciate Croatia's
strong efforts since the January 1998 Working Party to develop its legislative agenda for
bringing its trade regime into WTO conformity.  Pl ease provide the texts of the listed laws and
regulations as soon as possible, in draft if possible, to allow for Working Party review and
comment at the earliest possible point, to ensu re that completion of Croatia's accession process
is not delayed.
Reply:
Croatia reconfirms that the former state monopoly in foreign trade in Croatia has been
abolished and that there are no restrictions on the right of foreign and domestic individuals and
enterprises to import and export goods and services within Croatia's customs territory except as
provided for in WTO Agreements.
Croatia also confirms that individuals and firms are not restricted in their ability to import or
export based on their registered scope of business and the criteria for registration of companies inCroatia are generally applicable and published in the official journal of Croatia.
2. Evolution of Customs Tariff Regulation
(b) Customs Tariff Nomenclature
Question 6.
It is unclear how and under what circumstances the negotiated ad valorem  equivalents would be
converted into specific bindings.
Who would be responsible for converting into specific bindings? When would the conversation
be made? On what basis would such conversation be made (on the basis of prices originally
agreed for the negotiations, prices applying wh en the conversions are made, or some other
prices)?
Reply:
In the cases where the maximum ad valorem  equivalent (MAX) exists, calculation of custom
duty will be as follows:WT/ACC/HRV/45
Page 7
Firstly, amount of custom duty will be established ( ad valorem  and specific duty or only
specific duty) in currency in which the calculation is made. Secondly, ad valorem  equivalent will be
calculated in relation to a concrete price of imported commodity.
In the case that these ad valorem  equivalent is higher that established maximum, the
maximum level of duty would be applied. It means that the lower custom duty would be charged than
originally calculated.
In the case that this ad valorem  equivalent is lower than the established maximum no
correction will be made. Namely, lower level of custom duty than the maximum would be applied.
The institution in charge for procedures of custom duty calculations is the Customs
Directorate.
Question 7.
Could any bilateral negotiation be reopened if either or both of the parties disagreed with any of
the proposed conversions?
Reply:
Custom calculation would be based on a regular procedure and concrete import prices. The
procedure mentioned in the previous answer is transparent and guarantees that a duty more favorable
for importers would be applied.
Question 8.
Can Croatia confirm that in its Schedule it will  bind at zero all other duties and charges of a
kind covered by article II:I(B) of GATT 1994.
Reply:
Croatia confirms that it will bind in its Schedule all other duties and charges at zero.
(c) Import Charges and Fees
Question 9.
Please list products by HS tariff numbers that are subject to taxes and "administrative" charges
for environmental purposes
Reply:
In Article 1 of the Law on Administrative Taxes (Official Gazette No. 8/96 and 131/97), tariff
number 103 Administrative tax on imports of waste is stipulated in the amount of 20.000 kunas.
Determination and classification of waste is determined in the Law on Waste
(WT/ACC/HRV/45/Add.1), according to the relevant conventions (Basel Convention). The
administrative tax is levied on imports of hazardous waste - list is available in the Secretariat for
consultation. (WT/ACC/HRV/45/Add.1), Annex VIII, List A of the Basel Convention. This tax is notlevied on every importation but when the license is issued by the State Directorate for Environment.
The license is valid for a year or even longer, regardless of the quantity of waste and the number of
imports i.e. depends on the contract concluded between the Croatian importer and the foreign
supplier.WT/ACC/HRV/45
Page 8
Question 10.
Please explain how the 1 per cent customs evidence fee applied to imports from the Former
Yugoslav Republic of Macedonia and the Bosnian Federation are consistent with the provisions
of Article VIII?
Reply:
In respect to the Free Trade Agreement in force between Croatia and the Former Yugoslav
Republic of Macedonia, we would like to point out that Croatia applies a 1 per cent customs duty to
imports of the Former Yugoslav Republic of Macedonia and not a 1 per cent customs evidence fee
(Art. 3 par.2 of the Agreement). Croatian exports to the Former Yugoslav Republic of Macedonia are
on the other hand charged with a 1 per cent customs evidence fee (Art. 3 par. 2 of the Agreement), in
accordance with the existing Former Yugoslav Republic of the Former Yugoslav Republic of
Macedonia legislation. Therefore, it is our opinion that the Croatian treatment of the Former Yugoslav
Republic of Macedonia imports is in compliance with Article VIII of the GATT.
With regard to the "customs evidence fee" applied by the Former Yugoslav Republic of
Macedonia and applied under the Agreement on Economic Cooperation between Croatia and the
Federation of Bosnia and Herzegovina, one should take into account that Bosnia and Herzegovina and
the Former Yugoslav Republic of Macedonia are not WTO members and that the legislation in these
countries is not in compliance with the WTO provisions. The Agreement between Croatia and theFederation of Bosnia and Herzegovina was concluded in 1995, before the Dayton Agreement and
before the adoption of the Croatian Customs Tariff Law which abolished all charges and fees other
than ordinary customs duty. This "customs evidence fee" is actually an administrative fee for costs
beard by customs authorities, although it is expressed in a percentage rather than in a fixed amount.
However, Croatia is aware that such provisions contained in these two Agreements are not in
compliance with Article XXIV of the GATT. Therefore, Croatia undertakes a commitment in its
Protocol of Accession to initiate the revision of these Agreements in order to bring them in
compliance with Article XXIV. In addition, we would like to reiterate that Croatia would begin
negotiations on concluding a Free Trade Agreement which will be valid for substantially all trade of
products originating from the Republic of Croatia and the whole territory of Bosnia and Herzegovinain line with similar FTA's among European countries.
Question 11.
Please list all customs fees charged on imports and exports and any limitations on them
Reply:
There are no other customs fees charges on imports or exports in Croatia, other than the 1 per
cent one mentioned above with the Federation of Bosnia and Herzegovina and the Former Yugoslav
Republic of Macedonia.
(d) Taxation Regime
Question 12.
Please confirm that taxes can be levied at the municipal and county level and indicate the rates
of the local "consumption" tax.WT/ACC/HRV/45
Page 9
Reply:
We would like to point out that according to the Law on Funding Units of Local Government
and Administration, local units have the right to collect and not prescribe or levy taxes.
The misunderstanding is due to the misuse of the word "levying" in our answer to question 2
of WT/ACC/HRV/39/Add. 2. Namely, the above entioned Law adopted by the Croatian Parliament in
1993 stipulates who should pay local taxes, what is the base for taxation and the Law stipulates themaximum level of the local or municipal taxes.
In the case of the local and municipal consumption tax, according to the Article 32 of the
Law, legal or natural persons providing catering services (par.1) pay consumption tax. The base for
taxation is the retail price of the beverage sold in restaurants, bars, etc (par. 2).
Article 33 of the Law stipulates that the actual tax rate can amount only up to 3 per cent of the
retail price of the beverage. Therefore, the city or municipality has the possibility to decide whether to
collect a full 3 per cent consumption rate or to set it at a level below 3 per cent.
Question 13.
Can Croatia please provide a status report on the passage of legislation to eliminate the
discriminatory rates of excise applied to tobacco and tobacco products and alcohol, equalising
the rates of excise on imported goods and domestically produced goods?  In paragraph 47 of the
draft Working Party report, Croatia indicated that it would be considering abolishingsurveillance licenses this year. Can Croatia provide any details on the status of such
consideration?
Reply:
The Law Amending the Law on Excise Taxes on Alcoholic Beverages is adopted in the
Croatian Parliament in October 1998 (published in Official Gazette no.141/98). According to theLaw, excise taxes on Alcoholic Beverages, domestic and imported are equal and amount to 40,00
HRK per litre of absolute alcohol. The Law Amending the law on Excise Taxes on tobacco and
tobacco products had passed the first readings in Croatian Parliament and will be prepared for second
reading very soon. Before sending to the Parliament, the Draft Law will be submitted to the Working
Party for review and comments.
Excise taxes in Republic of Croatia are applied to the following products: coffee (non-roasted
and roasted), coffee husks and skins, coffee substitutes containing coffee, non-alcoholic beverages,
beer (alcoholic and non-alcoholic), new and used automobiles (Exceeding 55 kW), tobacco and
tobacco products, motorcycles (exceeding 6 kW), vessels (exceeding 8 meters in length), aircraft for
private usage and for oil derivatives. Laws regulating excise duties for products mentioned above areavailable in the Secretariat for consultation.  (WT/ACC/HRV/45/Add.1)
Croatia’s excise tax regulation will be brought into full conformity with Article II and III of
the GATT prior to accession to the WTO, establishing equal taxes for imported and domestic
products.
Question 14.
We commend Croatia for its recent legislation addressing WTO-inconsistencies in its
application of domestic taxes to imports.
Is the excise tax described in the response to question 12 in WT/ACC/HRV/39 on used
automobiles applied only to imports, or is it collected upon each, resale of a used auto withinWT/ACC/HRV/45
Page 10
Croatia? What are the excise tax rates applied to motorcycles, vessels (exceeding 8 meters in
length) and aircraft's for private usage?
Please report on the progress of draft legislatio n on excise taxation on alcoholic beverages,
tobacco and tobacco products. Please report on the structure and level of taxation proposed for
these products in the new legislation.
Are there any other items in Croatia to which excise taxes are applied'?Do the VAT tax exemptions for certain services (e.g., medical and educational services) apply to
foreign service suppliers under all four modes of delivery as well?
Croatia should ensure that the domestic taxes on  imports from all sources are consistent with
WTO obligations, in particular Articles II and III of the GATT prior to accession.
Reply:
In accordance with the Law on Excise Duties on Automobiles and other Motor Vehicles,
Vessels and Aircraft, taxpayers of the excise duty on automobiles, other motor vehicles, vessels andaircraft are importers and producers of those products. As it is the case with other laws stipulating the
payment of excise duties, the excise duty is paid when the product is distributed for the first time at
the Croatian market, any further resale is charged VAT only and not with excise duties.
The excise tax rates applied to motorcycles, vessels and aircraft for private usage are the
following:
1. Motorcycles
engine power in kW
more than not exceeding excise tax in kunas
6 20 2.000,00
20 55 4.000,00
55 75 7.000,00
75 10.000,00
3. Vessel   3.1. Without cabin
length in meters
more than not exceeding excise tax in kunas
8 12 6.000,00
12 15 12.000,00
15 24.000,00
3.2. with cabin
length in meters
more than not exceeding excise tax in kunas
8 12 15.000,00
12 15 45.000,00
15 90.000,00
4. Aircraft for private usage
number of seats
more than not exceeding excise tax in kunas
1 4 7.000,00
5 12 35.000,00
13 50 75.000,00
50 150.000,00WT/ACC/HRV/45
Page 11
The Law Amending the Law on Excise Taxes on Alcoholic Beverages is adopted in the
Croatian Parliament in October 1998 (published in Official Gazette no.141/98). According to the
Law, excise taxes on alcoholic beverages, domestic and imported are equal and amount to 40,00 HRK
per litre of absolute alcohol. The Law Amending the law on Excise Taxes on tobacco and tobacco
products had passed the first readings in Croatian Parliament and will be prepared for second reading
very soon. Before sending to the Parliament, the Draft Law will be submitted to the Working Party forreview and comments.
Excise taxes in Republic of Croatia are applied to the following products: coffee (non-roasted
and roasted), coffee husks and skins, coffee substitutes containing coffee, non-alcoholic beverages,
beer (alcoholic and non-alcoholic), new and used automobiles (Exceeding 55 kW), tobacco and
tobacco products, motorcycles (exceeding 6 kW), vessels (exceeding 8 meters in length), aircraft for
private usage and for oil derivatives. Laws regulating excise duties for products mentioned above are
available in the Secretariat for consultation.  (WT/ACC/HRV/45/Add.1)
The VAT tax exemptions for certain services (med ical services, dentist and similar, if those
services are provided as private practice), medical services in health institutions, services and goods
delivered by pre-school, elementary school, secondary and social case institutions) apply in equal way
to the domestic and foreign service suppliers under all four modes of delivery.
Croatia’s excise tax regulation will be brought into full conformity with Article II and III of
the GATT prior to accession to the WTO, establishing equal taxes for imported and domestic
products.
(f) Non-Tariff Measures Applied to  Imports and Exports of Goods
Question 15.
The responses to questions 14-15 of HRV/39 report that Croatia abolished all import quotas and
other quantitative import restrictions and that it is in the process of revising its quantitative
export controls in conformity with WTO provisions.  Please list any existing quantitative import
restrictions and the WTO provision justifying its application.  Please list the remaining
quantitative export restrictions by HS item number and outline Croatia’s plans for revising
these restrictions this November, as ou tlined in the response to question 15.
Croatia states in the response to question 14 that it will change the provisions of the Law on
Trade to conform to WTO obligations vis-a-vis quantitative restrictions.  Please provide the
draft of any such changes in the Working Party for review.  Does Croatia intend to implement
these revisions prior to accession?
Reply:
The Government of the Republic of Croatia abolished all quantitative import restrictions in
July 1996 after adopting the Customs Tariff Law.
The Government of the Republic of Croatia passed the Decision on 8 October 1998 to remove
the remaining part of the export quotas as of 1 January 1999.
According to the Law Amending the Law on Trade Croatia will abolish the existing
provisions of Article 40, which enabled the Government to introduce quantitative import restrictions
for protection of infant industries.WT/ACC/HRV/45
Page 12
Croatia undertakes a commitment to take recourse to quantitative import restrictions only in
situations envisaged in the Article XII of GATT and according to the WTO Agreement on
Safeguards.
The Law Amending the Law on Trade passed the first reading in the Croatian Parliament and
is in the process of preparation for the second reading. The Draft Law is available in the Secretariat
for consultation..  (WT/ACC/HRV/45/Add.1)
Croatia intends to implement these revisions prior to the accession to the WTO.
(g) Customs Valuation
Question 16.
In response to question 16 of WT/ACC/HRV/ 39, Croatia acknowledges that its current
valuation regime is inconsistent with the provisions of the WTO Agreement, and indicates that
legislation to bring its regime into conformit y, with the Agreement will be forwarded to the
Parliament for adoption "in early fall 1998". Croatia further reports that the legislation isexpected to enter into force in the beginning of  1999, but has not supplied draft material for the
review of the Working Party.
Since Croatia must fully implement the Agreemen t on Customs Valuation prior to accession we
suggest that the Working Party be given the oppo rtunity to review the legislation prior to its
finalization, in order to help Croatia ensu re that all outstanding issues are resolved.
We suggest that Croatia address, inter alia, the foll owing issues in its effort to reform its current
regime:
- incorporate in the law the provisions of Decision 4.1. of the Committee on Customs
Valuation concerning the "Valuation of Carrier Media Bearing Software for Data
Processing Equipment" and the "Decision on the Treatment of Interest Charges inthe Customs Value of Imported Goods''
- address the provisions of Articles 9-12 of the Agreement covering currency
conversion, confidentiality, the ri ght of appeal and transparency
- incorporate in the law the text of "Inter pretative Notes to the Valuation Agreement"
which are considered an integral part of WTO obligations in this area; and
- ensure that all of the prohibited forms of val uation are explicitly listed in the text of
the new law.
We commend Croatia for its efforts to fully implement the WTO Customs Valuation Agreement
upon accession and we look forward to reviewing the text of the legislation proposed at the
earliest opportunity
Reply:
Croatia has submitted during the Fourth Session of the Working Party held in Geneva on
16 October 1998, a Draft text of the Customs valua tion part of the new Customs Law. As you would
be able to see from that draft version, the new Customs Law will be in conformity with Article VII of
the GATT and the Agreement on Implementation of the Article VII of the GATT 1994.WT/ACC/HRV/45
Page 13
The Decision 3.1 of the Committee on Customs Valuation, which concerns treatment of
interest charges in the customs value of imported g oods, has been incorporated in the Art. 39 par. 1 c
of the draft Customs Law.
The Decision 4.1 concerning valuation of carrier media  bearing software for data processing
equipment is incorporated in Article 43 of the draft Law.
The provisions of Articles 9-12 of the Agreement covering currency conversion,
confidentiality, the right of appeal and transparency are also incorporated.
Following the questions and comments raised at the Working Party, especially one member,
we have included articles 11 and 12 of the Agreement in an updated version of the Draft Law, which
is attached to this document.
In the attached updated version of the draft new Croatian Customs Law:
- Article 9 of the Valuation Agreement is incorporated in the Article 47 of the Law;
- Article 10 of the Valuation Agreement is incorporated in the Article 45 of the Law;
- Article 11 paragraph 1 of the Valuation Agreement is incorporated in the Article 44,
paragraph 5 of the Law;
- Article 11 paragraph 2 of the Valuation Agreement is incorporated in the Article 44,
paragraph 5 of the Law;
- Article 11 paragraph 3 of the Valuation Agreement is incorporated in the Article 44,
paragraph 5 of the Law;
- Article 12 of the Valuation Agreement is incorporated in the Article 44, paragraph 6 of
the Law;
The text of the "Interpretative Notes to the Va luation Agreement" will be incorporated in the
text of a Regulation, which will be adopted following the entry into force of the new Customs Law.This regulation will lay further detailed conditions  and procedures for determining customs valuation.
The prohibited forms of valuation are explicitly listed in the Article 37 of the submitted draft
new Customs Law.
(h) Rules of origin
Question 17.As provided in the response to question 17 of WT/ACC/HRV/39, please explain the details and
answer previous questions concerning Croatia's regulations on preferential and non-
preferential rules of origin contained in  new regulations stated for enactment in
September 1998.  Please provide the English transl ation of the regulations to the Working Party
for review.WT/ACC/HRV/45
Page 14
Reply:
According to the relevant provisions of the Law on Trade, the basic principles of the rules of
origin comply with the relevant WTO provisions. The ru les of origin will be explained in detail in the
new regulation, which is under preparation. The Government postponed the adoption of those
regulations because it expected that WCO and WTO would harmonise their opinions on those issues
and that the Croatian Government would be able to built-in the new arrangements adopted on the
international level.
The English translation of the regulations concer ning rules of origin will be submitted to the
Working Party for review and comments as soon as it will be adopted by Croatian Government, not
later than March 1999.
(j) Standards and Certification
Question 18.
We are pleased that Croatia intends to implement the transparency and other procedural
requirements of the WTO Agreements on Technical Barriers to Trade and Sanitary and
Phytosanitary Measures and to apply the substant ive provisions from the date of accession, as
provided for in WT/ACC/HRV/38.
In particular, we are pleased to see in WT/ACC/HRV/37 that legislation enabling the creation of
a TBT and SPS inquiry point will be enacted by the end of the year. This is an important step
forward in establishing a WTO-consistent standards regime in Croatia, and we look forward to
reviewing this legislation once it has been submitted to the WTO.
Following are specific aspects of Croatia's current regime that we believe need to be addressed
to fully implement the TBT Agreement:
- identification of the Govern ment authority responsible for notifications, publications
and other internal procedures to ensure transparency obligations are met on an
ongoing basis:
- identification of the publication where noti ces of ``proposed technical regulations
and conformity assessment procedures'' will appear;
- enactment of law or regulation to ensure regulatory authorities allow a seasonable
period of time between final publication of a "technical regulation and conformity
assessment procedure" and its entry into force so that suppliers can adapt
- development and application of technical regulations and conformity assessment
procedures and the establishment of the legal and administrative underpinnings to
ensure ongoing compliance with provisions of the TBT Agreement
At the next meeting, Croatia should provide a spec ific action plan checklist for the application
of the provision of both the TBT and the SPS Agreements, focusing on the requirements in both
agreements regarding transparency, publication for prior comment of measures, due process
and right of appeal, and the use of sound science and equivalent methods of conformity
assessment.WT/ACC/HRV/45
Page 15
- Regarding Technical Barriers to Trade:
We remain concerned, however, with Croatia's continued reliance on mandatory quality control
and certification requirements for agricultural and food products, and fear that the application
of Croatia's quality control requirement on imports constitutes a WTO-inconsistent barrier to
imports.
The system currently in place needs to be substantially revised, not only to address the issue of
discrimination under Article IIl of the GATT, but also to meet the requirements of the TBT and
SPS Agreements. We would encourage Croatia to look at reducing the regulatory burden
placed on imported products and to employ grea ter use of post-market surveillance as a method
of ensuring food safety and quality standards.
In WT/ACC/HRV/39, concerning the confusion caused by separate legislation on quality
controls for domestic and imported products, Croatia states that it will propose to the
Parliament to regulate all quality control me asures in one comprehensive law valid for all
products, regardless of origin.
- We welcome such a move, and would tike to know the status of this proposed legislation.
- Will similar legislation be proposed for SPS measures, which also seem to regulate domestic
products separately from imports?
- Please provide additional detail on how "quality control" operates vis-a-vis the
requirements of the TBT and SPS agreements. Please specify whether these controls are
standards or sanitary requirements.
- Please clarify the response to question 5 of WT/ACC/HRV/39/Add.2 which implies that
there are no domestic regulations for the coll ection of specific fees for quality control
inspection of domestic goods.
- Please list the fees charged for quality control inspection for imports and exports. Please
indicate how these fees are consistent with (a) the national treatment provisions of
Article III of the GATT and (b) with the provisions on fees applied to imports of Article
VIII of the GATT.
- Please describe how the import quality control process works in practice for goods such as
gasoline, liquefied gas, petrol, paraffin, dies el fuels, jet fuels, antifreeze and oils. In
particular, are certificates issued on repeat shipments without repeating preliminary tests?
The identical responses to questions 19 and 25 concerning the unification of Croatia's law on
quality control are encouraging, but do not address the fundamental issue of application of the
requirements to imports in a manner no less favorable than to similar domestic goods.  Thecurrent system is demonstrably burdensome to impo rts and is applied, if at all, in manner more
convenient .for domestic goods that for imports.
- Does Croatia have current law or regulation applying quality requirements to domestic
goods? Please report the text of the provisions that state that requirement.
- Please provide further information on how the new legislation will eliminate this
discrimination, e.g., at what point of sale will such requirements be applied to imports and
domestic goods? If application at the point of retail sale is acceptable for domestic goods,why not for imports?WT/ACC/HRV/45
Page 16
We understand that the Croatian Ministry of Health requires repeated batch testing of
pharmaceuticals, which are not required for domestic producers. This procedural
discrimination adds costs to imports.  How are pharmaceuticals dealt with in the current
approval process? What kinds of control processes are present for pharmaceuticals?
We note that pharmaceuticals are not listed in quality control list. Can Croatia confirm that
pharmaceuticals are not subject to quality control requirements?
- Regarding Sanitary and Phytosanitary Measures:
Having thoroughly reviewed Croatia's documentation, it is still not clear that Croatia's SPS
regime is in full conformity with WTO rules.  It  would be useful for Croatia to provide a clear
presentation of how SPS measures are developed and implemented with specific reference to the
SPS Agreement concepts of harmonization, equivalency, risk assessment, adoption to regional
conditions and transparency (publication of regulations, enquiry points etc).  For this
information to be effective, we would recommend that Croatia consult the basic SPS notificationformat used by other acceding countries.
The response to question 26 in HRV/39 is inadequa te. Please respond to the original question:
- In the reply to question 74 of WT/ACC/HRV/30, Croatia notes that a number of
agricultural products are subject to quality control standards. We are a bit confused as to
whether these quality standards are actual SPS regulations or just consumer preferences.Some of the products included on the list are processed products and we do not understand
why these products are subject to SPS testing (i.e. mustard. biscuits, pasta, soup, baking
powder, condiments, margarine, and mayonnaise).
- Please explain the public policy objective of each of these measures and specifically whether
they are intended to address known risks to public health or safety. Additionally. Pleaseexplain exactly what type of testing is required. It would be helpful to provide a step-by-
step account of the entire testing process and an  assessment of how long this process should
take.
Reply:
While addmitting certain inconsistencies in the currently applied quality and SPS control, the
Republic of Croatia would like to concentrate on the future steps to be taken in order to address the
issue of non-discrimination under Article III of the GATT, and meeting the requirements of the TBT
and SPS Agreements in proposing, adopting and applying technial regulations and standards, and
performing quality and SPS control. Therefore, we request the Working Party to consider the
following commitments check-list of the Croatian TBT and SPS application, which is a detaileddesign of the system which will be fully in place at the time of Croatia’s accession to the WTO,
although in its major part it is already applied:
1. The implementation of the requirements of the TBT and SPS Agreements in the Republic of
Croatia will be incorporated in laws and regulations which will be in force prior to the accession to
the WTO. The following laws and regulations w ill be valid for regulating TBT and SPS issues:
- Law on Standardisation (already in force)
- Law on State Inspectorates in Economy and Labour Area (to be passed by May, 1999)
- Law on Health Safety and Health Control of Foodstuffs and Goods of Personal Usage
(already in force)
- Law on Veterinary (already in Force)WT/ACC/HRV/45
Page 17
- Law on Plant Protection (already in force)
- Law on PharmacEuropean Unionticals and Medical Products (already in force)
- Regulation on implementing TBT and SPS Agreements (to be issued by May, 1999)
- Regulation on Methods and Procedures of Quality Control (to be issued by May, 1999)
- Regulation on the List of Items Subject to Quality Control (to be issued by May, 1999)
- Regulation on Bearing of Costs of Quality Control (to be issued by May, 1999)
- Technical regulations on quality and health requirements for each particular product
subject to quality and SPS control (already in place for all products currently subject to
quality and SPS control)
- Regulation on Phytosanitary Inspection of Plants and Control of Plant Protection Products
in the National Cross-Boundary Transportation (already in force)
2. In order to ensure a full conformity of the procedure of preparing, adopting and applying new
technical regulations and standards with the provisions of the TBT and SPS Agreements, theGovernment of Croatia shall undertake to examine all existing regulations and  complete them with
new provisions. The procedure shall enable all new technical regulations and standards to be issued in
accordance with TBT and SPS provisions. A checklist of points which are includuded in existing
regulations or will be included in the new regula tions on implementing the provisions of the TBT and
SPS Agreements, shall address the following points:
(a) Products imported from other WTO Member countries shall be accorded treatment
not less favourable than that accorded to Croatian domestic products, in respect of technical
regulations and standards;
(b) There will be no discriminatory treatment in respect of technical regulations and
standards as between different WTO Member countries.
(c) The Government of Croatia shall ensure that technical regulations and standards are
not  prepared, adopted and applied in a manner as to cause an unnecessary obstacle to trade.
All technical regulations and standards shall be prepared and adopted on the basis of scientific
information and evidence and shall be based on international standards. Competent authority
for issuing non-mandatory and mandatory standards is the State Office for Standardisationand Metrology, and competent Ministries are in charge of  issuing technical regulations on
quality and health requirements, depending on their competence for each particular product.
Before issuing new technical regulations and st andards, competent authorities shall examine
whether any existing international standard can be used. Only if the regulatory authorities
believe that the international standards would be  ineffective or inappropriate in Croatia due to
climatic, geographical, or technological factors, a decision will be taken to prepare a new
technical regulation or national standard. In that case, regulatory authority shall publish a
notice in the Official Gazette of the State Office for Standardisation and Metrology of a draft
technical regulation or standard and supply a copy of the draft to the WTO Secretariat. Upon
request, copies of draft technical regulations or standards will be provided to other WTO
Members. Regulatory authority will allow all interested parties a time of 90 days to submitt
comments on draft technical regulations or standards. The comments received will be dulyconsidered and parties making comments will be informed if their comments could not be
accepted. The final technical regulation or standard will be published in the Official Gazette
of the Republic of Croatia and copies will be submitted to the WTO Secretariat. They will
become applicable three months after their publication in the official gazette.WT/ACC/HRV/45
Page 18
(d) Competent authorities shall follow a similar procedure for conformity assessment
procedures in order to ensure that foreign suppliers are not put in a disadvantageous situations
when obtaining cerificates of positive assurance of conformity, especially by granting national
treatment in procedural matters, chargeable fees and samples selection.
(e) The Government of Croatia shall encourage the regulatory and control authorities to
accept the results of the inspection and tests carried out by competent certifying bodies in theexporting countries, according to bilateral agreem ents on mutual recognition of certificates of
conformity assurance that are to be signed with other countries.
(f) Preparation, adoption and application of technical regulations and standards for SPS
control shall be exercised in a similar manner, with differences allowed under SPS Agreement
in terms of deviations from MFN clause and international standards, taking into account
economic factors in risk assessment, and adopting SPS measures on a provisional basis, as a
precautionary step in cases where there is imminent risk of the spread of diseases, but thescientific evidence is insufficient. With regard to sanitary measures, Croatia actively
participates in the activities of the FAO/WHO Codex Alimentarius Commission and
International Office of Epizootics. Sanitary measures in force in Croatia will be based on the
standards, guidelines and recommendations of these two organisations, as well as on the
regulations, decisions or directives in force in the European Union. Phytosanitary measureswill be based and harmonised with the plant protection regulations and recommendations of
the International Plant Protection Convention and the European and Mediterranean Plant
Protection Organisation. The process of harmonisation of Croatian phytosanitary regulations
with the international standards, measures and procedures will be completed by May, 1999.
Croatia is expected to formaly join the International Plant Protection Convention byFebruary, 1999.
(g) The State Office for Standardisation and Metrology shall periodically examine
technical regulations and standards to determine if their continued application is necessary.
(h) Quality and SPS controls will be exercised by comparing actual characteristics of the
domestic and imported products determined to be subject to either quality or SPS control withthe characteristics required under technical regulations prescribing either quality or health
requirements for each particular product. If a regulation prescribing a standard of a particular
product enlisted for quality or SPS control is passed by the State Office for Standardisation
and Metrology, such otherwise non-mandatory standard will become a mandatory one, as a
criteria for quality or SPS control. For products determined for quality and SPS control forwhich no standard is passed, competent Ministry will issue a technical regulation prescribing
quality or health requirements, as a criteria for quality or SPS control of those products. In
this checklist, the term "technical regulati on" covers standards whith which compliance is
mandatory, as well as regulations prescribing mandatory quality or health requirements. The
term "standard" is used for voluntary standards.
4. An Enquiry Point for TBT and SPS is established in the Republic of Croatia and it will be
functional as of 1 March 1999 at the State Office for Standardisation and Metrology. The EnquiryPoint will be able to answer all enquiries and provide the relevant documents on standards, technical
regulations, and quality and SPS control procedures.
5. There are five inspectorates in the Republic of Croatia in charge of quality and SPS control:
State Inspectorate (for quality control), Sanitary Inspectorate (for health control of goods of general
usage), Veterinary Inspectorate (for health control of foodstuffs of animal origin), PhyitosanitaryInspectorate (for plant health control), and PharmacEuropean Uniontical inspectorate (for qualityWT/ACC/HRV/45
Page 19
control of pharmaceuticals). The Government of Croatia will consider a possibility of further
rationalisation of inspectorates’ operational structure.
6. In order to achieve a proper level of efficiency in meeting the objectives of public health and
customer’s protection, quality and SPS controls will be performed as a two-tiered exercise – before
and after entering of the slated products in the market distribution. Quality control will be performed
on products encompassed in the list of products subject to quality control, issued by the Chief StateInspector and in accordance to control methods and procedure prescribed by the Chief State Inspector.
Quality control of imported products will be performed at the customs clearance houses, before the
customs clearance, and at the market points of retail sale. Quality control of domestic products will be
performed at the production sites, and at the market points of retail sale.
7. Sanitary control is performed on products encompassed in the lists of products subject to
sanitary controls, as prescribed by the Law on Health Safety and Health Control of Foodstuffs and
Goods of Personal Usage, and in accordance to control methods and procedures prescribed by thatLaw. Sanitary control of imported products is performed at the customs clearance houses, before the
customs clearance, and at the market points of retail sale. Sanitary control of domestic products is
performed at the production sites, and at the market points of retail sale.
8. The rational for quality control is protection of customer’s rights, and the public policy
objective of SPS control is addressing risks to public health. In that regard, for example, a processedproduct slated for control (fruit juice) will be examin ed by a Sanitary Inspector who will be assessing
public health impacts of its ingredients (by applying regulations prescribed in accordance with the
SPS Agreement), and by a State Inspector, who will be assessing conformity of the declared
ingredients with the actual ingredient structure, as well as comparing actual product characteristics
with prescribed quality, packaging and labeling re quirements (by applying regulations prescribed in
accordance with the TBT Agreement) in order to address customer preferences and customer
protection issues. In cases where sampling is needed, inspectors take samples that are to be sent to the
authorised laboratories for required analyses. The sh ipment is released to the importers or producers
warehouse untill analyses is completed, usually not longer than 3 to 4 days. For technical products
(electrical or mechanical appliances) there is no need of sampling, but the inspectors recogniseatestation and certificates issued by an authorised domestic or foreign institutions.
9. Quality control of certain standardised products, like fuels, will continue to be performed in a
way that certificates are issued on repeat shipments of the same producer without repeating
preliminary test.
10. Quality control of pharmaceuticals is performed in accordance with the special Law on
PharmacEuropean Unionticals and Medical Products. Therefore, pharmaceuticals are not listed in the
general quality control list. PharmacEuropean Uniontical Inspection of the Ministry of Health is in
charge of quality control of domestic and imported pharmaceuticals. Every batch of domestically
produced and imported pharmacEuropean Uniontials is subject to repeated batch testing by the
PharmacEuropean Uniontical Inspection. Quality control of all pharmaceuticals will be performed on
regular, special, extraordinary and retail sales basis.
11. The fees charges for quality control and SPS control inspections of domestic products and
imported products will be charged at the same level.WT/ACC/HRV/45
Page 20
Sanitary and Phytosanitary Measures
Question 19.
Croatia's SPS standards system is expected to be in compliance with SPS agreement by the time
of accession to the WTO. It is a positive development that Croatia is no longer seeking a
transition period to implement the SPS agreement.
We would appreciate advice of legislative or regulatory arrangements which are still to be put
in place in this regard.
Reply:
(a) Phytosanitary Measures
Since 1994 Croatia is member of the European and Mediterranean Plant Protection
Organization and participates in its activities.
The Croatian Government proposed to the Parliament to join the International Plant
Protection Convention. It is expected that this procedure will be finished at the latest by the end of1998.
(b) Harmonization of phytosanitary measures
The legislative base in the field of plant protection is the Law on Plant Protection ("The
Official Gazette" 10/94 and 19/94). It came into force in February 1994. Its provisions are based on
IPPC requirements and harmonized with international recommendations.
The regulation based on the Law on Plant Protection: The Regulation on Phytosanitary
Inspection of Plants and Control of Plant Protection Products in the National Cross-Boundary
Transportation ("The Official Gazette" 12/95 and 96/95) has been in the process of revision. The main
goal is its harmonization with the international standards, measures, and procedures and to meet the
requirements of SPS Agreement. Our plan is to finish its revision and harmonization during spring of1999.
Croatia regularly sends reports to its principal international plant protection organization -
EPPO on all issues concerning the plant protection, and will include IPPC and WTO with the date of
joining to them.
In aiming to meet international standards in organizational structure the plant protection
administration within the Ministry of Agriculture and Forestry is also in the process of reorganization.
With regard to the phytosanitary measures, Croatia would be able to fully apply the
Agreement on Sanitary and Phytosanitary Measures by the end of 1999.
The following table contains a list of regulated articles that are subject to phytosanitary
measures:WT/ACC/HRV/45
Page 21
Tariff Number Plants and Plant Product Description
06.01 - 06.04 Living trees and other plants, bulbs, roots and similar, cutted flowers and
ornamental leaves
07.01 - 07.14 Edible vegetables and certain root and tubers fresh or dried (excluded
frozen and conserved)
08.01 - 08.14 Edible fruits and nuts, peel of citrus fruit or melons fresh or dried
(excluded  frozen, conserved, boiled)
09.01 - 09.10 Coffee unroasted, tea, mate and spices -  unpacked and unprocessed
10.01 - 10.08 Cereals
11.01 - 11.06 Products of milling industry - excluded malt, starch, inulin and gluten
12.01 - 12.14 Oil seeds and fruits, miscellaneous grains, seeds and fruits, industrial and
medicinal plants, straw and fodder
14.01 - 14.04 Vegetable planting materials, vegetable products not elsewhere specified
or included
18.01 - 18.02 Cocoa beans, whole or broken, unroasted
23.00 - 23.09 Residues and waste from the food industries, prepared animal fodder
24.01 Unmanufactured tobacco, tobacco refuse
27.03 Peat (including peat litter)
31.01 Vegetable fertilizers, fertilizer produced by the mixing of animal and
vegetable products
38.08 Insecticides, rodenticides, fungicides, herbicides, anti-sprouting products
and plant-growth regulators, disinfectants and similar products, put up informs or packing for retail sale
44.01- 44.18 Wood and wood products - excluded wood chemically or heat treated
45.01 Natural cork, raw or simply prepared, waste cork, crushed, granulated or
ground cork
50.01 Silk - worm cocoons suitable for reeling
50.03 Silk waste (including cocoons unsuitable for reeling, yarn waste and
garnetted stock)
52.01 - 52.02 Cotton, not carded or combed, cotton waste
53.01 Flax raw or processed but not spun, tow and waste  (including yarn
waste and garnetted stock)
53.02 True hemp, raw or processed but not spun, taw and waste of true hemp
53.03 Jute and other bast, raw or processed but not spun, tow and waste of
these fibres
53.04 Sisal and other textile fibres of the genus Agave  raw or processed but
not spun
(c) Risk Assessment
The national organization in the field of plant protection is the National Institute for Plant
Protection in Agriculture and Forestry. Among many of activities in the plant protection field
(systematic survey and monitoring of harmful organisms, phytosanitary supervision of seed andpropagating material, diagnostics, testing, information and advisory activities...) the Institute is
responsible for activities in assessment of risk of plant pests (both quarantine and non-quarantine). At
the same time, activities of the expert from the Institute and their recommendations provide the
framework for managing phytosanitary measures and issuing of regulations.WT/ACC/HRV/45
Page 22
(d) Enquiry points
Croatian Government nominated the State Office for Standardization and Metrology from the
date of 10 October 1998 to serve as an enquiry point responsible for the provisions of answers as well
as for the provision of relevant documents regarding the SPS Agreement and TBT Agreement.
(e) Sanitary Measures
The representative of the Republic of Croatia participates in the activities of the FAO/WHO
Codex Alimentarius Commission (F AO/WHO - CAC) and International Office of Epizootics (IOE).
Sanitary measures in force in Croatia are based on the standards, guidelines or recommendations by
these two organizations, as well as on the regulations, decisions or directives in force in the European
Union. According to the general or specific requirements of the FAO/WHO -CAC and IOE, Croatia
reports to the above mentioned organization on sanitary measures that have been implemented,
monthly, annually or when it is necessary.
The above mentioned means that the methods of analyzing the risks associated with the
importation of animals, animal products, animal genetic material and foodstuffs used are in
accordance with the relevant models developed by the IOE. If such models does not exist the Ministry
of Agriculture and Forestry, working together wi th the Croatian Veterinary Institute as well as
Veterinary Faculty, will determine the measures to be applied for achieving the appropriate level of
sanitary protection form a certain risk; taking into account available scientific evidence as well asother relevant data in accordance with the provisions of the SPS Agreement.
The Sanitary measures implemented are covered by the Veterinary Law; The Law on
Veterinary Drugs and Veterinary-Medical Products; Act on the Safety and Sanitary Inspection of
Foodstuffs and Articles for General Use.
Croatian requirements i.e. veterinary sanitary conditions for import of live animals as well as
animal products in Croatia are in accordance with IOE recommendations. Imported products are
accompanied by certificates issued by the veterinary authorities of the exporting country in
accordance with Croatian requirements which are the part of the, so called, import licenses issued by
the Ministry of Agriculture and Forestry – Veterinary Directorate.
The products subjected to the Sanitary Measures applied by Croatia as well as related
regulations are presented in the Table below:
Tariff
No.Product description Measure
01 Live animals; animal products Veterinary regulations
Health regulations
02 Meat and edible meat offal Veterinary regulations
Health regulations
03 Fish, crustaceans, molluscs and other aquatic
invertebratesVeterinary regulations
Health regulations
04 Dairy products, honey, eggs Veterinary regulations
Health regulations
05 Products of animal origin Veterinary regulations
Health regulations
15 Animal fats, prepared edible fats, animal waxes Veterinary regulations
Health regulations
16 Preparations of meat, fish, crustaceans, molluscs or Veterinary regulationsWT/ACC/HRV/45
Page 23
Tariff
No.Product description Measure
other aquatic invertebrates Health regulations
21 Miscellaneous edible preparations Veterinary regulations
Health regulations
23 Chemical Residues Veterinary regulations
Health regulations
Animal feed Veterinary regulations
Livestock  regulations
Veterinary legislation is in the process of revision in order to be harmonized with the
European Community requirements. A part of the relevant veterinary legislation has already been
harmonized.
With reference to transparency, all adopted regulations related to the sanitary measures are
published in the Official Gazette of the Republic of Croatia (Narodne Novine), and prior to their
adoption it is submitted for comments and discussion to the different professional and scientific
bodies as well as involved institutions.
In order to improve standards of control, inspection and approval procedures according to the
SPS Agreement, veterinary inspectors are regularly trained.
(o, m, n) Safeguards, Anti-dumping and Countervailing Measures
Question 20.
Croatia states in its responses in WT/ACC/HRV/19/Add2 that it will introduce "detailed
regulations" for the application of safeguard, antidumping and countervailing measures by the
end of 1998.
The regulations/legislation authorizing Croatia's  use of trade remedies on imports should be
submitted to the Working Party for review a nd comment. Working Party review should take
place prior to completion of Croatia's accession, to ensure the conformity of the legislation with
WTO Agreement.
Reply:
The Law Amending the Law on Trade amended t hose provisions of the Law on Trade which
stipulate the application of safeguard, antidumping and countervailing measures in order to harmonise
them with the WTO relevant provisions. At the same time, those provisions are amended in the way to
incorporate fully the basic and key provisions of the WTO Agreements into the Croatian legislation
granting the conformity of the Croatian legislation with those Agreements. After the Croatian
Parliament adopts this Law, the Croatian Government shall issue relevant regulations that determinedetails of procedure and other technical issues concerning the application of the above-mentioned
measures in compliance with the WTO Agreements.
Croatia undertakes the commitment not to use safeguard, antidumping and countervailing
measures before adopting the Law amending the Law on Trade and relevant regulations.WT/ACC/HRV/45
Page 24
Question 21.
In paragraph 66, Croatia is reported as stating that "import duty was not charged on imports
destined for the production of goods to be exported and which remained under customs control,
provided that such importation was reported in advance". We are concerned about the use of
the word " destined" in this passage. Doese it have the same meaning as the world "used" in
note 61 to annex II of the Agreement on subsid ies and countervailing measures? If the meaning
is broader than "used" and covers for exampl e capital goods, it could cover goods that would
make this measures a prohibited subsidy under Article 3.1 (A) of the Agreement on subsidies
and countervailing measures.
Reply:
The word "destined" paragraph 66 has the same meaning as the word "used".
3. Export Regulations
Export restrictionsQuestion 22.
Croatia has undertaken to abolish their remain ing export quota, which are inconsistent with
article XI of GATT 1994 (Which require that no quantitative restrictions on exports shall be
maintained). croatia has reported that it is in the process of implementing this but it is not clear
whether this has been completed.  Has this been done? If not, when will this occur?
Croatia says that after accession "other WTO-consistent trade policy measures " will be used to
ensure supplies of essential raw materials. This is an acceptable commitment . However we
would be interested to know what type of trade policy measures will be used for that purpose,
and what products will fall into the category of "essential raw materials".
Reply:
The Government of the Republic of Croatia abolished all quantitative import restrictions in
July 1996 following the adoption of the Customs Tariff Law.
The Government of the Republic of Croatia passed the Decision on 8 October 1998 to abolish
the remaining part of the export quotas as of 1 January 1999.
Croatia undertakes a commitment to take recourse to quantitative import and export
restrictions only in situations envisaged in the Article XI and XII of GATT and according to the WTO
Agreement on Safeguards.
The Law Amending the Law on Trade passed the first reading in the Croatian Parliament and
is in the process of preparation for the second reading. The Draft Law is available in the Secretariat
for consultation.  (WT/ACC/HRV/45/Add.1)
Croatia intends to implement these revisions prior to the accession to the WTO.
Under "other WTO-consistent trade policy measures", which will be used in exceptional cases
in order to ensure supplies of essential raw materials, we consider export duties.WT/ACC/HRV/45
Page 25
For raw skin products Croatia intends to apply export duties to ensure supply of raw material
to the processing industry.
IV. OTHER POLICIES AFFECTING FOREIGN TRADE
1. Intellectual Property Protection
Question 23.
Has the Croatian Copyright Law currently in force already been amended in accordance with
the information provided in the answer to question 114 in document WT/ACC/HRV/30 as well
as in the answer to question 16 in document WT/ACC/HRV/39/Add.1.
Reply:
The draft amended Copyright Law, which would ensure the compliance of the Croatian
Copyright Law currently in force with the provisions  of the TRIPS Agreement, would be passed to the
Croatian Government by the end of December 1998.  Consequently the Law would be sent in the
parliamentary procedure in January 1999 and will enter into force by 30 June 1999.
Question 24.
Article 31 of the Law Amending the Copyrigh t Law describes that the Amending Law is
applicable to phonograms lawfully fixed twenty years before the coming into force the said Law
(reply to question 16 in document WT/ACC/HRV/39/Add.1). Please clarify the reasoning behind
the timeframe of twenty years in the case of phonograms against the background that theRepublic of Croatia should provide full retroactive protection to works, phonograms and
performances from other WTO Members (required by Articles 9.1, 14.6 and 70.2 of the TRIPS
Agreement, each of which incorporate by reference or rely upon Article 18 of the Berne
Convention).
Reply:
According to the Article 39 of the Amending Copyright Law, which will be soon
communicated to the WTO Secretariat, the Law shall apply to those phonograms and performances
the first fixation of which was carried out up to a fifty years period, counting from the beginning of
the calendar year in which the Amending Copyright Law will enter into force (1999).
Question 25.
Concerning question 17, please clarify the competence of the Croatian chamber of Commerce,
which seems to decide the conditions for the protection of wines. If so, please explain what kind
of conditions are decided.
Reply:
Due to the ongoing legislative work in this area, we are not able to give an immediate
response. A comprehensive answer to this question will be provided not later than by
15 January 1999.WT/ACC/HRV/45
Page 26
Question 26.
Furthermore, please clarify the relationship in case of a conflict between trademark and a
geographical indication for wines and spirits. Article 23.2 of the TRIPS Agreement foresees that
the registration of the trademark for wines/spirits, which contains or consists of a geographical
identifying wine/spirits, shall be refused or invali dated with respect to such wines or spirits not
having this origin.
Reply:
The new draft Trademark Law, which is in fi nal stage of preparation, will be communicated
soon to the WTO Secretariat and the Working Party for consultation and comments.  Article 5 of the
draft Law contains provisions that comply with the Article 23.2 of the TRIPS Agreement.
Question 27.
We appreciate Croatia's statement in WT/ACC/H RV/38 that it intends to enact legislation
necessary to implement the TRIPS agreement by June 1999.  Please provide a chart citingCroatia's laws and regulations that implement the provision of the TRIPS Agreement.
We seek Croatia's full implementation of the TRIPS Agreement prior to its date of accession.
Reply:
Please refer to the chart enclosed, which contains the schedule for the implementation of the
provisions of the TRIPS Agreement in the relevant Croatian laws and regulations. Croatia, therefore,reiterates it readiness to fully implement the TRIPS Agreement by 30 June 1999.
2. Agricultural Policy
Question 28.
Based on a thorough review of the materials Cr oatia has submitted to the WTO Secretariat over
the course of the accession process, we have seen a number of significant improvements inCroatia’s agricultural and trade regime. It is evident that Croatia has made great strides in
removing or phasing out the use of WTO-inconsistent measures (such as quantitative
restrictions, import bans, variable levies, etc.), and we commend these steps.  However, there
are still a few outstanding issues relating to th e trade and subsidy regime for agricultural and
food products, which require further clarification.
After reviewing Croatia's documentation, it remains unclear if seasonal tariffs are currently
being applied. In earlier documentation (HRV/30) , Croatia notes that, with the development of
compound tariff rates in 1996, specific duties were established for a substantial amount of
products at HRK 0 per quantity measure. For a certain number of products, the specific
component remains at HRK 0/kg, while the rest have an upper limit for the specific duty. Inresponse to q.4 in WT/ACC/HRV/39/Add2 Croatia again states that seasonal tariffs are not
contained in its current tariff regime, but are established as part of its initial offer on market
access. However, Croatia then goes on to note that a list of products for which seasonal duties
are currently applied is attached
Does Croatia currently apply seasonal tariffs? To what WTO document is this list of products
attached?WT/ACC/HRV/45
Page 27
Reply:
Croatia does not apply seasonal tariffs. However, for some agricultural products Croatia
applies compound customs duties, which consist of ad valorem  duty and specific duty. The number of
products to which specific duty will be applied in  future has been reduced, as it is evident in the
Croatian Consolidated Offer submitted to the WTO Secretariat in the beginning of December 1998.
(WT/ACC/SPEC/HRV/3/Rev.2)
Question 29.
Could Croatia confirm how it intends to address seasonal duties in its market access schedules
and applied tariff rates after accession?
Reply:
Compound duties (not seasonal duties) will be applied only for certain fruits and vegetables
for which seasons are defined in the Croatian Consolidated Offer submitted to the WTO Secretariat in
the beginning of December 1998. (WT/ACC/SPEC/ HRV/3/Rev.2)
Question 30.
We would appreciate a clearer understanding of when (or if) these tariffs are applied, the list of
products covered by seasonal tariffs, and the le gislation that introduced any currently applied
seasonal tariffs.
Reply:
Please refer to the previous answer.
Question 31.
Croatia has provided detailed information concerning the Law on State Commodity Reserves,
which appears to us to provide for both public stockholding and commodity intervention
functions.  Although Croatia explains that the Directorate for Commodity Reserves makes
purchases on a commercial basis (through a tender system), it is also noted that the Directorate
can export products purchased through interven tion in the domestic market (by government
decision only).
- Under what circumstances does the Government decide to instruct the Directorate to
export these products?
- What is the system for exporting products?
- In terms of intervention purchases, at wh at prices does the Directorate purchase
commodities from domestic producers? Are guaranteed prices (as established annually in
the Official Gazette) used for these purchases?
We need clear answers to these questions, to determine whether or not the Directorate for
Commodity Reserves is a state trading enterp rise in the context of GATT Article XVII.
Moreover, the nature of these purchases is important in evaluating Croatia's domestic support
tables (ACC/4).WT/ACC/HRV/45
Page 28
Reply:
The Government of the Republic of Croatia ma y adopt a Decision on exports of products that
are held with the Directorate for Commodity Reserves and which are purchased through intervention
in the domestic market at guaranteed prices only if there are indicators and estimations that those are
surplus products which exceed the needs of domestic market. Following the Decision of the
Government, the Directorate for Commodity Reserves is obliged to sell those products thoroughtender system announcing the sale of a product intended for exports, for all interested exporters under
equal conditions. Tender and the procedure of selection are carried out according to the Law on
Procurement of Goods and Services and Sub-contracting.
If guaranteed prices are prescribed for certain products (wheat, sugar beet, soya, sunflower,
rape and tobacco leaves), the Directorate for Commodity Reserves uses guaranteed prices for the
purchases of those products, the remaining products that are strategic commodity reserves are
purchased at market prices.
Question 32.
We note that Croatia is now requesting a transiti on period for an undefined period to set its
aggregate measurement of support (AMS) at a level of 15 percent higher than its AMS would be
if worked out under the requirement s of the Agreement on agriculture.
It is unclear whether at the end of transition period Croatia is proposing that the AMS
commitment would revert to the average for the 1995-97 base period, and whether reduction
commitments would then be undertaken or whether Croatia is proposing that it final
commitment would be that rate without any reduction commitments. Can Croatia please
clarify.
We note that Croatia has indicated that its AM S for an earlier period is higher than for the
most recent period of 1995-97 which Croatia is using as a base period. Will Croatia consider
using a slightly earlier base period if that would mean that Croatia dropped its current
transition request?
Reply:
Croatia will establish aggregate measure of  support (AMS) for period 1996-1998. It means
that Croatia will revise the current document in a way that the data for 1995 will be excluded and the
data for 1998 will be included.
Due to very specific situation (described in earlier documents) Croatia would seek binding its
AMS at level of 15 percent higher than in period 1996-1998, without any reduction commitments
during five years from the date of accession.
Question 33.
We also require more information from Croatia on what is actually being requested including
the length of the transition period sought. What happens at the end of the transition period, and
further information on the sort of support Croatia envisages providing to the their agriculture
industry. We note that Croatia has indicated that it has introduced several new types of
agricultural subsidies in 1998, which they indicate would also affect the level of AMS.WT/ACC/HRV/45
Page 29
Reply:
The new agricultural support policy is in the process of adoption in the Parliament and final
proposal of new measures depends on approval of the State budget for 1999.
After approval of state budget for 1999 (expected by the end of December) Croatia will adopt
a new system of support measures.
It is certain that the share of measures, which are in line with Annex 2 of Agreement on
Agriculture, will be increased in the budget while the share of price support measures will be
decreased. In the framework of the new system, Croatia will also introduce area payments and
investment aids for vineyards and orchards.
Regarding agricultural industry Croatia confirms that it will not apply any kind of subsidy.
Regarding the AMS in period after transition of five years, Croatia confirms its readiness to take over
all common obligations of all the member countries that will be agreed in the new multilateral round
of negotiations.
Croatia will promptly inform The Secretariat of WTO about any changes in support measures.
Question 34.
We would also be interested in information on the total value of agricultural production for
non-product specific support and the value of production for each product that receives
support.
Reply:
Croatia will submit information on the total value of agricultural production.
- Agricultural Support Policies
Question 35.
In WT/ACC/SPEC/HRV/6, Croatia is quoted as stating that it is reforming its system of
agricultural subsidies in a manner consistent with  the Agreement on Agriculture.  As Croatia
develops its agricultural support policy, we woul d encourage the use of measures consistent with
Annex 2 to the Agreement, otherwise known as "green box" measures, which are less trade
distorting and have no expenditure limitations.  As Croatia develops new agricultural support
policies, it would be useful for the accession negotiations to receive information on the types ofpolicies introduced, and the level of expenditures.
Reply:
New agricultural support policy is in the proce ss of adoption in the Parliament and the final
proposal of new measures is closely related to th e State budget for 1999, whose adoption is expected
by the end of December 1998.
After the approval of the state budget for 1999, Croatia will adopt a new system of support
measures.WT/ACC/HRV/45
Page 30
It is certain that the measures, which are in line with Annex 2 of Agreement on Agriculture,
will increase their share in total support as well as the measures by which price support will be
decreased. In the framework of the new system, Croatia will also introduce area payments and
investment aids for vineyards and orchards.
Croatia will promptly inform the WTO Secretariat about changes in its system of agricultural
support.
- Agricultural Export Subsidies
Question 36.
Our understanding is that Croatia has not used export subsidies as defined in Article 9 of the
Agreement on Agriculture, and does not intend to use such subsidies in the future  We seek a
commitment from Croatia that it will undertake to bind export subsidies at zero in its
agricultural country schedule.
Reply:
The Republic of Croatia has already committed to bind export subsidies at zero in document
WT/ACC/SPEC/HRV/1/REV.2. and will do the same in its agricultural schedule. Additionally, the
same commitment will be undertaken in the text of Croatia's Protocol of accession.
Support Table DS:1 - Green Box
Question 37.Under (k) Regional assistance programs, the program refers to island vineyards.   require
clarification as to the nature of the program, as it has previously been referred to us support for
production on islands, which suggests that th is may not be Green box support, but rather
production linked support.
Reply:
Croatia has 1,185 islands of which 66 islands are inhabited. Due to comparative advantages
grape and olive production on islands are the most important agricultural activities. The soil and
climate conditions ensure the quality that can be easily recognized. The most of vines produced on
islands have the label of famous vines with protected geographical origin.
Grape, vine production and tourism were the major source of income for most of the
population on islands. The process of depopulation started at the end of the last century. The number
of permanent inhabitants on islands decreased for more than 40 percent from the beginning of the
century, while in the same time total number of i nhabitants in Croatia increased for more than 50
percent.
Since 1991 the war and war damages additionally disrupted the overall economic situation on
the islands. The decrease of tourist visits was especially noticeable on islands. For example, in 1988
there were registered 15,4 million tourist nights on islands and in 1991 only 1.4 million. At the same
time, the share of tourist nights on islands in total tourist nights was decreased from 23 per ent in 1988
to 14 percent in 1991.
All this problems have caused a higher ra te of unemployment and lower GDP growth on
islands than in the other parts of Croatia.WT/ACC/HRV/45
Page 31
Vineyards in Croatia
hectares
1945. 1990. 1997. 1997/45.
103,000 68,000 53,000 48.6
Vineyards on Croatian Islands
hectares
1970. 1990. 1990/70.
7,406 4,548 38.6
The government response to these problems has been a program with following measures:
Type of measure Unit Kuna
New vineyards on islands (for the first three years) kn/ha/year 6,000
Vineyards on islands kn/ha 4,000
Grape vines-rooted kn/piece 1.00
For the special state care region on islands and peninsula Pelješac government introduced area
payments and investment aids for vineyards.
The general goal and purpose of the subsidy is to promote vinegrowing on islands and to
engage the main part of population on islands in this production.
In the process of preparing is a new Law on Islands which should stop the process of
depopulation on the islands. This is the beginning of a regional approach and application of structural
measures for development of this part of country.
Support Table DS:4 - Total AMS
Question 38.
Croatia should provide a Table DS:4 with the average for the period 1995-97 for each of its
product and non-product specific support so th at it can be seen which products Croatia is
claiming AMS commitment for.  Can such a table be provided?
Reply:
Croatia will provide tables for the period 1996-1998.
Support Table DS:5 - Market Price Support
Question 39.
We note that the applied administered prices fo r all products listed for 1995, with the exception
of tobacco, and for sugarbeet, sunflower, soyb eans, oilrape and milk in 1996, have increased in
the latest version of the table.  We would be interested in the reasons for this change.WT/ACC/HRV/45
Page 32
Reply:
In previous tables Croatia included guarantee prices for standard quality of sugarbeet, oilrape,
sunflower and soybean. On the basis of final analyses it was concluded that the quality of this
products in mentioned period was higher than standa rd quality prescribed by Decision on guarantee
prices. Therefore, in revised tables the prices of those products were set on slightly higher level.
In previous tables administered price for milk was based on 3,2 percent milk fat while in
revised tables it is set on the standard of 3,6 percent milk fat.
The calculation has determined some minor changes in the total amount of market price
support.
Question 40.
We note that there have also been changes in 1995 for the amount of eligible production, with
an increase for sunflower and oilrape, and a de crease for milk, and would be interested in the
reasons for these changes.
Reply:
Eligible production in the tables previously submitted was based on official data of the
Central Bureau of Statistics instead on quantities for which financial incentives were paid.
The most correct data source is Ministry of Agriculture and Forestry (MAF). Since 1995
MAF registers detail records about the quantities of eligible production, which receive budgetarysupport.
Decrease in milk quantities is a result of quantities converting. In practice, financial
incentives were based on 3.2 percent of fat contents. In revised tables however calculation is made on
3.6 percent milk fat content.
6. Government Procurement
Question 41.
We appreciate Croatia's recent efforts to reform its Government Procurement laws and to
address requests that Croatia negotiates access ion to the Government Procurement Agreement
after accession. We will provide specific commen ts on the new legislation for written, response
prior to the next Working Party session.
Regarding Croatia's statement in WT/ACC/HRV/ 43, we believe that Croatia should become
acquainted with the Agreement on Government Procurement prior to accession to the WTO,
and should be prepared to initiate negotiations for accession to the GPA with the submission of
an entity list at the time of accession, with a view to completing the negotiations with 12 months
from that time.
Reply:
The Government of Croatia is ready to undertake the following commitment regarding the
Government Procurement Agreement:WT/ACC/HRV/45
Page 33
"The Government of Croatia shall officially apply for an observer status to the Agreement
on Government Procurement by 30 May 1999. That would enable Croatia to get more
acquainted with practical aspects of the Agreement’s discipline and determine an
adequate coverage and staging.
Based on the observer status experience, the Government of Croatia shall initiate
negotiations for membership in the Agreement on Government Procurement uponaccession by tabling an entity offer at that time. If the results of the negotiations are
satisfactory to Croatia and other parties to  to the Agreement, Croatia will complete
negotiations for membership in the Agreement by 31 December 2001".
9. Subsidy Policy
Question 42.
For transparency purposes, please provide deta iled information on subsidies and any other
form of direct and indirect government support to industry and state-aid (including credit andother government guarantees) and production-related support in agriculture. We would
appreciate a description of a program, amounts paid or projected, objectives of the program
and criteria on which state-aid and subsidies are based. The information is to cover 1997 and
projections for 1998.
Reply:
The list of subsidies and other forms of government support to industry and agriculture in
1997 and 1998 is available in the Secretariat for consultation..  (WT/ACC/HRV/45/Add.1)
Question 43.
Will Croatia confirm that it does not maintain subsidies which meet the definition of a
prohibited subsidy, within the meaning of Article 3 of the Agreement on Subsidies andCountervailing Measures?
Reply:
Croatia confirms that it does not maintain subsidies, which meet the definition of prohibited
subsidies, within the meaning of Article 3 of the Agreement on Subsidies and Countervailing
Measures.
10. TRIMS
Question 44.
Will Croatia confirm that it does not maintain an y measures that are not in conformity with the
Agreement on Trade-Related Investment Measures?
Reply:
Croatia confirms that it does not maintain any measures that are not in conformity with the
Agreement on Trade-Related Investment MeasuresWT/ACC/HRV/45
Page 34
11. Services
Question 45.
In the area of movement of natural persons is Croatia prepared to accept to issue short-term
labor permits (e.g. three months, six months) and to simplify procedures concerning the issue of
such permits?
Reply:
Work permits are issued in accordance with the Law on Employment of Foreign Persons, and
following a procedure set therein. The Law does not make any difference between work permits
according to their validity (short-term, long-term). The law stipulates that work permits are issued
with the validity of up to two years or according to the terms of employment contracts if valid for a
shorter period and which are renewable. Therefore we are not in a position to accept commitments
which differ from the provisions of the existing Law.
(a) MFN exemptions
Question 46.
We note Croatia’s concerns on the current geographical situation , and the fear of having
transporters pass throught Croatia without permits and an adequate regulatory system. We
would suggest that these concerns do not constitute grounds for an MNF exemption, given that
article XIV specifically states that nothing in the agreement "shall be construed to prevent any
member from taking any action which its consideres necessary for the protection of its essential
security interests". Cross border traffic can still be regulated and controlled without
maintaining an MFN exemption, and we would ask Croatia to reconsider this restriction.
Reply:
With regard to the reasons behind scheduling the MFN exemption on road passenger and
freight transportation in the draft Croatian Offer on trade in services, we would like to point that the
rationale is the same as for the vast majority of other European WTO members, which have scheduled
the same provision.
The need for exemption is linked to the region commercial characteristics of the road
transport services, which is regulated through bilateral or plurilateral agreements on road transport.Such agreements reserve or limit the supply of road transport services and specify operating
conditions, including transit permits quotas and/or preferential road taxes of transport services into, in
across and out of the territories of the parties concerned.
Therefore, such an MFN exemption is of essentially commercial nature and is related to the
issue of competitiveness on the European road passenger and freight transport market. Notmaintaining such an exemption would result in a situa tion of opening Croatian market to a full foreign
competition, whereas Croatian carriers would virtually have no access to other countries markets
regulated through national and international licensing regimes.
Additionally, given the fact that the existence of such a road transport system is a commercial
and not a security interest issue, it is, therefore, not subject to provisions of the GATS Article XIV.
This assessment is in conformity with the opinion of the WTO Secretariat, which has been consulted
on the matter. Consequently, we would not be in a position to abolish the MFN exemption on roadtransport from our Schedule of specific commitments.WT/ACC/HRV/45
Page 35
Question 47.
Please explain the rationale for the prop osed MFN exemption on Transport Services
Reply:
With regard to the reasons behind scheduling of the MFN exemption on road passenger and
freight transportation in the draft Croatian offer on trade in services, we would like to point that the
rationale is the same as for all other European WTO members, which have scheduled the sameprovision. The need for exemption is linked to the region commercial characteristics of the road
transport services, which is regulated through bilateral or plurilateral agreements on road transport.
Such agreements reserve or limit the supply of road transport services and specify operating
conditions, including transit permits quotas and/or preferential road taxes of transport services into, in
across and out of the territories of the parties concerned.
(b) Legal Services
Question 48.We welcome Croatia's commitment to allow foreign parties to participate in international, home
and third country law, and that legal consultancies may be established by foreign persons,
employing Croatian lawyers. However, the citizenship requirement is a significant barrier to the
full provision of legal services by foreign lawyers and firms.  We would urge Croatia to
reconsider this restriction.  Domestic sensitivit ies are cited as the reasons for maintaining this
restriction . Could Croatia outline what these sensitivities are?
Reply:
With respect to legal services, we would like to point out that the citizenship requirement for
membership in the Bar Council of Croatia and consequently to practice Croatian law (through
establishing a law firm), is not required for legal consultancy on foreign and international law(through consultancy firms), but only for legal procedures relating to the Croatian Law.
Having in mind that such a requirement reflects many sensitivities in the Croatian market, we
would like to mention some of them:
Croatia has an enormous surplus of graduates from Law faculties which are not able to find
an employment in the law practising sector. Only in Zagreb there are more than one thousandregistered lawyers and a significant number of unregistered unemployed lawyers.
Additionally, having in mind that the diploma from Croatian Law Faculties is not
internationnaly recognized (apart from a very few countries) and that Croatian Lawyers cannot
practise law abroad, opening of Croatian market to  foreign lawyers would put Croatian lawyers in an
unequal position even in the domestic market, thus adding to a double discrimination both at homeand abroad.
We would also like to point out that the same requirement exists in the vast majority of the
WTO member States.WT/ACC/HRV/45
Page 36
(c) Insurance services
Question 49.
We welcome Croatia’s response to our query on the Cross-Border supply of insurance services,
and are interested in the outcome of its consideration of this.  We would be grateful for
clarification on what Croatia means when it says it will not liberalise insurance services until it
accedes to the WTO.  Would it be possible fo r Croatia to make a commitment which took effect
on its accession, or some time after this?
Reply:
We would like to recall that Croatia has already undertaken important commitments in
amending its current Insurance Law, thus enabling for establishing branches and allowing cross-
border supply of reinsurance and retrocession as from the date of its accession to the WTO.
We would also like to stress that the Croatian insurance industry is in many respects an infant
one. Due to such a situation the Government should give a chance and possiblility for the domesticindustry to develop.
Having in mind the negative impacts of the global financial crisis on the competitiveness of
the Croatian transition economy, in particular with regard to attracting of foreign direct investment,
the opening of the Croatian insurance market would have as a consequence a capital outflow rather
than an inflow.
That would be caused by the fact that there would be no reason to invest in an insurance
industry in a country where insurance contracts can be done with no limitations from the territory of
another member.
It is realistic to argue that the Croatian insurance industry could, based on FDI, increase its
competitiveness only in a limited geographic area  where its direct competition originates.
Consequently, full opening to direct foreign comp etition, particularly with regard to direct life
and non-life insurance on cross-border basis, would put it in unequal position with insurance
industries from negbhouring countries whose national markets are not fully liberalised as yet.
Therefore, Croatia is not in a position to fully liberalise the whole sector.
- Branch offices
Question 50.
We seek further clarification on Croatia’s reply to our query on the rights and obligations of
branch offices being those vested in the parent companies which founded them.  Are the
requirements for establishing a branch more onerous than those for establishing a
representative office?WT/ACC/HRV/45
Page 37
Reply:
Branch Offices
According to the Croatian Company Law, a branch office serves the purpose of carrying out
business activities of a company or an individual merchant outside the place of their registered office.
A branch office is not a separate legal entity. Consequently, its rights and obligations are vested in the
parent  company and not in the branch office. The same legal policy is also applied to branch officesof domestic and foreign persons.
The setting up of a branch office (or a subsidiary) is a precondition that must be fulfilled for a
foreign person to commence carrying out its business activity in croatia. A branch office may be set
up by first applying for its registration with the appropriate registration court. Such applications must
be accopmanied by the following documents: (i) excerpt from the home court register of the founder
or, if his registered office is in a country not having such register, a valid document on its
establishment, publicly certified in accordance with the laws of his home country, indicating the legalform of the founder and the moment of its establishment; (ii) a decision of the founder on setting up of
the branch office, (iii) a copy of the foundation statement, articles of association or memorandum of
assocition of the founder, certified in accordance with the laws of the country in which the founder
has its registered office; (iv) a certified abbreviated last annual balance sheet of the founder.
The founder of a branch office must designate a person(s) who shall be authorized to
represent the branch office in Croatia. The residence of such persons must be in Croatia.
A foreign person may have several branch offices in Croatia. In this case, it must designate
which of them is the principal one. The founder must in every branch office designate a person (s)
authorized to represent him. Branch offices must keep business books in accordance with Croatian
regulations.
The founder decides on termination of a branch office in accordance with his own rules.
Representative Offices
This form is the simplest way for foreign co mpanies to be present in Croatia. However,  the
form has one drawback regarding the scope of its activities. A representative office may be active
only for investigating the local market, advertisin g and marketing. Unlike a branch office, a founder
of a representative office may not use it for carrying out his regular business activities.
The allowed scope of activities is regulated by the Law on Trade.
Before opening a representative office, a foreign person must register it in the Register of
Representative Offices, which is kept by the Ministry of the Economy. The procedure for opening and
registration of representative offices is contained in the Decree on conditions for Establishment andOperation of Foreign Representative Offices in the Republic of Croatia (Official Gazette from 24
January 1997), which was adopted upon the Law on Trade.
The procedure for opening a representative office, is rather simple. In order to obtain a
registration, the following data have to be given in the application letter:
- name and seat of the foreign principal (the founder)
- seat of the representative office in CroatiaWT/ACC/HRV/45
Page 38
- description of the activities of the representive office
- name and address and personal data of the responsible person in the office
- decision on appointment of a person to be resposible for the work of the office. The
decision must be made by an uathorized persons of the founder and the Ministry requires
proof that the person is authorized to make the nomination.
- except from the foreign registry fof the founder showing the authority of the signatories
of relevant docoments
- decision of the founder on establishment of the office made by the an authorized organ of
the founder
- proof that the administrative tax has been paid.
V. INSTITUTIONAL BASE FOR TRADE AND ECONOMIC RELATIONS WITH 
THIRD COUNTRIES
1. Bilateral or Plurilateral Agreements Relating to Foreign Trade in Goods and Trade in 
Services
Question 51.
We appreciate the commitment of Croatia contained in WT/ACC/HRV/42 that it will adhere to
the WTO Agreement on Trade in Civil Aircraft from the date of accession.
2. Customs Unions and Free Trade AreasQuestion 52.
In WT/ACC/HRV/31 and 35, Croatia provides the texts of its FTAs with Slovenia and the
Former Yugoslav Republic of Macedonia.  Please  explain how the 1 percent customs evidence
fee applied to imports from the Former Yugoslav Republic of Macedonia is consistent with the
provisions of Article XXlV, i.e. that duties should be eliminated on substantially all trade?[Note: If Croatia claim that this is a custom s fee, please note the inconsistency of an ad valorem
fee with Article VlII of the GATT. End Note)
Reply:
As already explained in the answer on page 6 according to the Free Trade Agreement in force
between Croatia and the Former Yugoslav Republic of Macedonia, Croatia applies a 1 per centcustoms duty to imports of the Former Yugoslav Republic of Macedonia and not a 1 per cent customs
evidence fee (Art. 3 par.2 of the Agreement). Croa tian exports to the Former Yugoslav Republic of
Macedonia are on the other hand charged with a 1 per cent customs evidence fee (Art. 3 par. 2 of the
Agreement), in accordance to the existing the Former Yugoslav Republic of Macedonia legislation.
Therefore, it is our opinion that the Croatian treatment of the Former Yugoslav Republic ofMacedonia imports is in compliance with Article VIII of the GATT.
However, Croatia is aware that these provisions of its Free Trade Agreement with the Former
Yugoslav Republic of Macedonia are not in full  compliance with Article XXIV of the GATT.
Therefore, Croatia will undertake a commitment in its Protocol of Accession to initiate the revision of
this Agreement in order to bring it in compliance with Article XXIV.WT/ACC/HRV/45
Page 39
Question 53.
Please indicate when Croatia intends to exte nd its partial free trade agreements with Slovenia
and the Former Yugoslav Republic of Macedonia to agricultural trade with these countries?
Reply:
These two Free Trade Agreements do also cover agricultural trade with Slovenia and the
Former Yugoslav Republic of Macedonia. Preferential market access is given on the basis ofconcessions for agricultural products under tariff rate quotas.
Question 54.
Are these the only such arrangements in place for Croatia? Are any additional such
arrangements contemplated within the next two years?
Reply:
As already explained Croatia has concluded up to date FTA's with Slovenia, the Former
Yugoslav Republic of Macedonia and the Federation of Bosnia and Herzegovina.
Croatia intends to extend the coverage of this latter Agreement to the whole of Bosnia and
Herzegovina.
A long-term goal of the Croatia’s trade policy is becoming an active participant in the
European economic integration processes. Therefore, Croatia will seek to conclude bilateral FTA's
with other CEFTA countries and to join the CEFTA, as well as to sign an Association Agreementwith the EUROPEAN UNION.
Question 55.
We seek a commitment from Croatia that it will observe the provisions of the WTO including
Article XXlV of the GATT 1994 and Article V of the GATS in these and other trade
agreements, that the Agreement noted in HRV/35 will be notified to the Committee on Regional
Trade Agreements for Review no later than up on Croatia's accession to the WTO, and that
Croatia will ensure that WTO provisions for noti fications, consultation, and other requirements
concerning preferential trading systems, free trade areas, and customs unions of which Croatia
is a member are met from the date of accession.
Reply:
Croatia is ready to undertake a commitment confirming that we will observe the provisions of
the WTO, including Article XXlV of the GATT 1994 and Article V of the GATS in the above
mentioned and other trade agreements.
We also confirm that the Agreement noted in HRV/35 will be notified to the Committee on
Regional Trade Agreements for Review no later than upon Croatia's accession to the WTO.
Additionally, Croatia undertakes a commitment that WTO provisions concerning
notifications, consultation, and other requirements concerning preferential trading systems, free trade
areas, and customs unions of which Croatia is or will be member shall be met from the date of its
accession to the WTO.
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