WORLD TRADE
ORGANIZATIONG/SCM/Q3/COL/23
24 October 2003
(03-5618)
Committee on Subsidies
and Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement on
Subsidies and Countervailing Measures
Responses to Questions Posed by Ecuador1
The following communication, dated 23 October 2003, has been received from the Permanent
Mission of Colombia.
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Attached are the responses from the Colombian authorities to the questions posed by Ecuador
last Thursday and circulated last Friday as document G/SCM/Q3/COL/22.
                                                     
1 G/SCM/Q3/COL/22.G/SCM/Q3/COL/23
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A. SPECIAL IMPORT -EXPORT SYSTEM FOR CAPITAL GOODS AND SPARE PARTS (SIEX)
Colombia's 2002 notification regarding SIEX (document G/SCM/N/95/COL) makes no
reference to the fact that the Colombian subsidization programme also provides for the
deferred payment, over a period of five years, of the value-added tax (VAT) generated byimports of capital goods and spare parts and components intended for or used in the
installation, expansion or relocation of the relevant production units to be used in the
production of export goods, as stated in the notification made by Colombia for the years 1998,
1999 and 2000 (document G/SCM/N/60/COL).
Q1. Could Colombia explain what measures it is taking, independently of Resolution No.
011, with regard to the dismantling of subsidies granted under SIEX, particularly those relatingto the deferred payment of VAT for a period of five years?
Response
By means of Resolution 11 of 2003, Colombia is phasing out all the components of the SIEX
programme, including the deferred payment of VAT.  There is therefore no need for measures in
addition to those contained in this Resolution.
Q2. Could Colombia explain in more detail, a nd provide statistical data on, the amount of
the benefit which Colombian exporters are recei ving from the five-year deferment of the
payment of value-added tax, as this information is missing from the notification for 2002,
document G/SCM/N/95/COL?
Response
Deferral of payment of VAT ceased to constitute an export subsidy because of the evolution
of the exchange rate, the lowering of inflation, changes in the conditions of access to financial
resources in Colombia and the fact that VAT is paid when SIEX ends for the exporter concerned, at
the representative market exchange rate on that day (Articles 88 and 89 of Decree 2685 of 1999).
Therefore, the exporter's outlay in nominal pesos at th e time VAT is paid is higher than the value, in
nominal pesos, of VAT at the time of import, so there is ultimately no benefit within the meaning of
the SCM Agreement.
That is why Colombia, in its notification of 30 June 2003, did not include information
regarding deferred payment of VAT in the "statistics  on the impact of the programme".  Moreover, as
indicated in the notifications presented, Colombia does not have any statistical information in this
respect.
Q3. Could Colombia explain the second articl e of Resolution No. 011, which empowers the
competent authorities to give annual approval to existing programmes or programme
modifications applicable to capital goods and spare parts, up to the annual value of the subsidy
notified by Colombia for 2000 to the Committee on Subsidies and Countervailing Measures?
Response
Decision G/SCM/94 states that Colombia commits itself "not to modify the programme at any
time so as to make it more favourable, including as to the scope, coverage and intensity of benefits,than it was as at 1 September 2001, as specified in the full notification of the programme that
accompanied the request for extension".  The second article of Resolution 011 of 2003 guarantees thatG/SCM/Q3/COL/23
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there will be no increase in the subsidies granted in excess of the amount indicated therein and goes
beyond the "standstill" commitment and the procedures laid down in document G/SCM/39.
Q4. Is it to be understood that the provision contained in the second article of Resolution No.
011 also covers the deferred payment, for up to fi ve years, of the value-added tax on imports of
capital goods, spare parts and components?
Response
Yes.  See response to Q1.
Section 8 of Colombia's notification fo r 2002 (document G/SCM/N/95/COL) states that
subsidies under the SIEX programme shall remain in force until 31 December 2006, in
accordance with paragraph 10(i) of the Committe e's Decision (document G/SCM/94).  However,
without prejudice to Colombia's rights under th e aforementioned decision, what the latter says
is that the transition period for the elim ination of the export subsidies shall not be extended
beyond 2006, provided that the Committee, in it s review, verifies compliance with the phasing-
out commitments accepted by Colombia and wi th the purposes and conditions set out in
paragraphs 1(d) and 1(e) of the Procedures for Extensions (document G/SCM/39).
Q5. Could Colombia explain what subsequent measures it will take to phase out the SIEX in
accordance with the commitments undertaken in document G/SCM/94?
Response
It is not necessary to take subsequent measures, since Resolution 011, in prohibiting the
authorization of new programmes, ensures the conformity of Colombian legislation with thecommitments undertaken by Colombia in Decision G/SCM/94.
Resolution 011 provides for exceptions to the conditions laid down in the first and second
articles of the Resolution with regard to applications under the SIEX involving final export goods in
the services sector.
Q6. Could Colombia provide details of what good s are included in the services sector and of
the considerations justifying the exclusion of such goods from the Committee's Decision
contained in document G/SCM/94?
Response
There are no disciplines regarding subsidies on the export of services.  Therefore, such
subsidies are not prohibited and are excluded from the commitments undertaken by Colombia in
Decision G/SCM/94.  The goods for the supply of export services to which the above question refers
are those included in Article 6 of Decree 2331 of 2001 (attached).
B. FREE -ZONE REGIME (ZF)
Section 4 of the notification submitted by Colombia for the year 2002 (document
G/SCM/N/99/COL) refers to a resolution, No. 1001, amending the free-zone regime.
Q7. Could Colombia provide the text of the above-mentioned resolution and explain to what
extent, if at all, and without reference to th e draft decree, the resolution conforms with the
provisions of document G/SCM/93 of 17 December 2002?G/SCM/Q3/COL/23
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Response
Resolution 1001 of 2002 regulates Article 2 of Decree 918 of 2001.  This Resolution
establishes the applicable technical criteria for including the investments made by user-operators in
the free zones in the investment and development plans.  Moreover, the Resolution applies to the freezone operators and not to exporters.
The text of Resolution 1001 of 2002 is attached.
Section 5 of Colombia's notification fo r 2002 (document G/SCM/N/99/COL) lists among
other subsidies the non-application of the remittance tax on earnings from industrial activities
carried out in free zones, a subsidy which is also included in the notification submitted by
Colombia for the years 1998, 1999 a nd 2000 (document G/SCM/N/60/COL).
Q8. Could Colombia explain for what reason  the draft Presidential Decree contains no
measures for the phasing out of the subsidies granted under the free-zone (ZF) regime in
relation to the non-application of the remittan ce tax on earnings from industrial activities
carried out in free zones?
Response
The new draft law, as attached, includes th e phasing out of the non-application of the
remittance tax on earnings from industrial activities carried out in free zones.
Q9. Could Colombia provide details and statistical data on the amount of the benefit which
Colombian exporters are receiving from the non- application of the remittance tax on earnings
from industrial activities carried out in free zo nes, as this information is missing from the
notification for 2002, document G/SCM/N/99/COL?
Response
Colombia does not have this kind of statistics.
Section 8 of Colombia's notification fo r the year 2002 (document G/SCM/N/99/COL)
states that subsidies under the free-zone (ZF) regime shall remain in force until 31 December
2006, in accordance with paragraph 10 of the Committee's Decision (document G/SCM/93).
However, without prejudice to Colombia's righ ts under the above-mentioned Decision, what the
latter says is that the transition period for the elimination of the export subsidies shall not be
extended  beyond 2006, provided that the Committee, in  its review, verifies compliance with the
phasing-out commitments accepted by Colombia and with the purposes and conditions set out
in paragraphs 1(d) and 1(e) of the Procedures for Extensions (document G/SCM/39).  In this
connection, Colombia has merely submitted a dr aft Presidential Decree for the reform of its
legislation on free zones.
Q10. Could Colombia explain why, having failed to comply with the time-limits established in
paragraph 10 of the Committee Decision (document G/SCM/93), which provides for the
obligation to reform the relevant legislation by 30 June 2003, it prejudges the Committee'sDecision regarding possible extension of the transition period for the elimination of subsidies
under the free-zone (ZF) regime until 31 December  2006, as is clear from the draft Presidential
Decree submitted?G/SCM/Q3/COL/23
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Response
Paragraph 10 of the Committee Decision (document G/SCM/93) does not establish "the
obligation to reform the relevant legislation by 30 June 2003".  This paragraph establishes the
obligation to "undertake" the reform by that date.
In accordance with paragraph 10(i) of Decision G/SCM/93, Colombia undertook the reform
of its legislation on free zones before 30 June 2003.  This led to the draft decree "Partially amending
Decree 2233 of 1996" and the preparation of the draft law "On the adoption of measures to secure
compliance with the commitments undertaken within the framework of the WTO" (attached).
Colombia reiterates its commitment to eliminat e export subsidies in conformity with the
commitments undertaken in Decision G/SCM/94.G/SCM/Q3/COL/23
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ANNEXES
Article 6 of Decree No. 2331 of 2001 (Official Journal 44,608)
Article 6.  Capital goods and spare parts.  Under the special import-export system for
services, capital goods and spare parts of the subheadings listed below may be imported for
authorized services export projects:
8402190000 8403100000 8404100000 8404200000 8413701100 8413701900 8414100000
8414590000 8414802300 8416202000 8416203000 8416300000 8417200000 8418610000
8419509000 8419899900 8451100000 8451290000 8451300000 8471100000 84713000008471410000 8471490000 8471500000 8471601000 8471602000 8471609000 8471700000
8471800000 8471900000 8502131000 8517302000 8525201000 8525300000 8525101000
8802400000 8803100000 8803200000 8803300000 8803900000 9018110000 9018120000
9018130000 9018190000 9018901000 9021500000 9022120000 9022140000 9022190000
9022900000 9024100000 9024800000 9025111000 9025119090 9025191100 90251990009025803000 9025804900 9027 the whole of heading 9030, the whole of heading 9402901000.
Paragraph.  Subheading 9027909000 is not included in heading 9027 and subheadings 9030901000
and 9030909000 are not included in heading 9030.
Article 2 of Decree No. 918 (Official Journal 44,433)
Evaluation and follow-up .  The Ministry of Foreign Trade shall periodically evaluate
compliance with the investment and development plans presented by users-operators together with the
application for the declaration of a free zone, particularly with respect to infrastructure, control
systems and promotion and marketing programmes.
If as a result of the evaluation provided for in the preceding paragraph, it is determined that
the initial investment commitments do not reflect the needs of the free zones to enable them to comply
with the objectives and commitments assumed, the Ministry of Foreign Trade may review the
investment and development plans or the leases entered into with the user-operators, as the case may
be, and by mutual agreement with them, determine modifications to adapt them to requirements in
respect of infrastructure, control systems and promotion and marketing programmes.
Such review shall take into account investments made in the free zones that were not included
in the initial investment and development plans, with a view to their being considered under those
plans in the event that they meet the criteria esta blished for that purpose by the Ministry of Foreign
Trade.
Paragraph .  Recommendations for the modification of leases or initial investment and
development plans presented by contractors shall in all cases be submitted to the Committee on
Customs, Tariffs and Foreign Trade for consideration and subsequently to the Higher Council for
Foreign Trade, for opinion.
Where the opinion is favourable and it is therefore necessary to modify the leases or initial
investment and development plans presented by contractors, the size of the investments originally
planned and the contractual balance shall be maintained.G/SCM/Q3/COL/23
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Resolution 1001 of 2002 (Official Journal 44,900 )
Establishing the applicable technical criteria for investments made by user-operators in the
free zones and not included in the initial investment and development plans to be considered in the
review of such plans.
The Minister of Foreign Trade
In exercise of her legal powers, particularly those conferred under Decree 918 of 2001, and
CONSIDERING:
That Article 5(3) of Decree 2233 of 1996 requires that a zonal development plan be attached
to an application for the declaration of a free zone.
That as stipulated in Article 2 of Decree 918 of 22 May 2001, the Ministry of Foreign Trade
shall periodically evaluate compliance with the investment and development plans presented by user-
operators together with the application for the declaration of a free zone and if, as a result of theevaluation, it finds that the initial investment commitments do not reflect the needs of the free zones
to enable them to comply with the objectiv es and commitments assumed, it may review the
investment and development plans or the leases entered into with the user-operators, as the case may
be, and by mutual agreement with them, determine modifications to adapt them to requirements in
respect of infrastructure, control systems and promotion and marketing programmes.
That Article 2 of Decree 918 of 22 May 2001 also provides that such review shall take into
account investments made in the free zones that we re not included in the initial investment and
development plans, with a view to their being considered under those plans if they meet the criteria
established for that purpose by the Ministry of Foreign Trade.
That it is therefore necessary to establish technical criteria for recognition of the investments
made in free zones that have not been included in the initial investment and development plans.
RESOLVES:Article 1 – General Principles .  For the purposes of Article 2 of Decree 918 of 22 May 2001,
the Ministry of Foreign Trade may consider investments made in the free zones and not included in
the initial investment and development plans presented by the user-operators to have been made in
compliance with those plans, provided the investments are in one of the following areas:
1. Investments in infrastructure. Where the construction, adaptation and repair of fixed assets in
free zones is involved, provided they have served to maintain or increase the value of the
fixed assets located in the zone, preventing their physical deterioration or loss of monetary
value due to use or the passage of time. Direct labour, through wages and outsourcing
contracts, shall not be included for the purposes of legal recognition.
2. Security and control systems. Where the purpose  of the investment is to implement, improve
or expand security systems or mechanisms to ensure control over the movement of goods into
and out of the free zone and, in general, to ensure compliance with the customs regime and
proper application of the free regime.
3. Investments in promotion and marketing programmes. Where the purpose of the investment is
to maintain and promote exports, with the goal of domestic and international positioning and
greater access and use of free zones for foreign trade activities.G/SCM/Q3/COL/23
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4. Improvement or expansion of services. Where the purpose of the investment is to improve,
expand or create and implement the services referred to in Article 14(7) of Decree 2233 of
1996, amended by Article 9 of Decree 918 of 2001, or services expressly authorized in
advance by the Ministry of Foreign Trade.
Article 2.  Investment Accounting Support.  For the investments mentioned in Article 1 of this
Resolution to be recognized, the user-operator shall present a list of the investments made and
recorded, duly certified by a chartered accountant and by the competent tax auditor, together with a
certificate signed by the legal representative, st ating that the investments do not conform to the
applicable investment and development plan.  The accounting aids, in physical and magnetic form,
and other documents that the Ministry of Foreign Trade requests in each case, duly certified and
approved by the user-operator's accountant and tax auditor, shall also be attached.
Article 3.  Technical Committee . The determination as to which investments can be
recognized under this Resolution shall be made by a technical committee composed of the Director
General of Foreign Trade, the Deputy Director of  Promotion Instruments and the Director of Export
Promotion and Culture.
The principles to be taken into account in determining recognition include reasonableness,
consistency, continuity and necessity. Where the technical committee deems it necessary, it will
require further information, other aids or explan ations from the user-operator, relating to the
investments for which recognition in the investment and development plan is requested.
Article 4.  Recognition of Investments .  Once the necessary analysis has been carried out, the
Ministry of Foreign Trade shall notify the user-operator in person of the decision determining which
investments have been recognized and certified to comply with its investment and development plan,
indicating the value determined for each of them.
For free zones that operate on property owned by the Nation – Ministry of Foreign Trade,
investments recognized under this Resolution shall be taken into account in determining the extent of
compliance with the commitments made by the user-operator under the lease.
Article 5.  Entry into Force .  This Resolution shall come into force on the day it is published.
For publication and implementation.
Done at Bogotá, D.C., on 11 July 2002.The Minister of Foreign Trade,Angela María Orozco Gómez.G/SCM/Q3/COL/23
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EXPLANATORY MEMORANDUM ON THE DRAFT LAW ON THE ADOPTION
OF MEASURES TO SECURE COMPLIANCE WITH COMMITMENTS
UNDERTAKEN WITHIN THE FRAMEWORK OF THE WTO
By virtue of Law No. 170 of 15 December 1994, the Honourable Congress of the Republic
approved the Agreement Establishing the World Trade Organization (WTO).
One of the multilateral agreements annexed to the WTO Agreement is the Agreement on
Subsidies and Countervailing Measures, which prohibits the granting of export subsidies, particularly
under the free zone regime.
Notwithstanding that prohibition, under the provisions on Special and Differential Treatment
for developing countries contained in the Agreement, a grace period of eight years from the entry into
force of the WTO Treaty was granted for the disman tling of such subsidies.  That period expired on
1 January 2003.
Under the Agreement, developing countries were given the possibility of requesting an
extension upon expiry of the transition period.  By  virtue of a Decision of 17 December 2002, the
WTO Committee on Subsidies and Countervailing Measures granted Colombia an extension of the
transition period.
The extension was granted to Colombia subject to the elimination of the export subsidies by
31 December 2006 at the latest.
The extension granted by the Committee on Subsidies and Countervailing Measures was
couched in the following terms:
"Colombia will ensure the conformity of its laws and regulations with its commitments under
this decision.  The transition period for the elimination of the export subsidies as described in
paragraph 9 shall not, in any case, be extended beyond 2006, including the final two-year
period provided for in the last sentence of Article 27.4 of the SCM Agreement."
Consequently, Colombia is obliged to dismantle the prohibited export subsidies under the free
zone regime, consisting of exemptions from the income and remittance tax granted to industrial users
of goods, by 31 December 2006 at the latest.
The honourable Members of Congress,
ALBERTO CARRASQUILLA BARRERA
MINISTER OF FINANCE AND PUBLIC CREDIT
JORGE HUMBERTO BOTERO
MINISTER OF TRADE, INDUSTRY AND TOURISMG/SCM/Q3/COL/23
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DRAFT LAW No.
(On the adoption of measures to se cure compliance with the commitments
undertaken within the framework of the WTO)
THE CONGRESS OF THE REPUBLIC
DECREES:
Article 1.   Pursuant to the commitments on elimination of export subsidies made by
Colombia to the World Trade Organization, the exemption from income tax and supplementary taxes
and from the remittance tax on earnings from sales to foreign markets, granted to industrial users ofgoods in the free zones, shall remain in force until 31 December 2006.
Article 2.   This law shall enter into force from the date of its promulgation and revokes any
contrary provisions.
FOR PUBLICATION AND IMPLEMENTATION
The Honourable Members of Congress,
ALBERTO CARRASQUILLA BARRERA
Minister of Finance and Public Credit
JORGE HUMBERTO BOTERO
Minister of Trade, Industry and Tourism
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