USTR - 1996 National Trade Estimate-Dominican Republic
Office of the United States Trade Representative


1996 National Trade Estimate-Dominican Republic

In 1995, the United States trade deficit with the Dominican Republic was $381 million, $87 million greater than that in 1994. U.S. merchandise exports to the Dominican Republic were $3 billion, up $218 or 7.8 percent from 1994. The Dominican Republic was the United States' thirty-second largest export market in the world and seventh largest export market in Latin America in 1995. U.S. imports from the Dominican Republic totaled $3.4 billion in 1995, an increase of 9.8 percent from 1994.

The stock of U.S. foreign direct investment in the Dominican Republic was $1.2 billion in 1994, 14 percent greater than in 1993. U.S. direct investment in the Dominican Republic is concentrated largely in manufacturing, wholesale and finance.


Tariffs on most products fall within a 5 to 35 percent range. However, the Government of the Dominican Republic (GODR) imposes a 5 to 80 percent selective consumption tax on "nonessential" imports such as home appliances, alcohol, perfumes, jewelry, automobiles and auto parts. U.S. producers of many other products may face an additional de facto trade barrier in the form of a highly-discretionary customs valuation system. In addition, import licenses have been required for some agricultural items, such as fruit juice.

The Dominican government continues to require importers to obtain a consular invoice and "legalization" of documents with attendant fees and delays from a Dominican Consulate in the United States. Bringing goods through Dominican Customs can be a slow and arduous process.


Arbitrary customs clearance procedures sometimes hold up merchandise for lengthy periods. U.S. agricultural exports are sometimes subject to arbitrarily-enforced and non-scientifically-based phytosanitary measures. The GODR generally accepts U.S. certifications and standards.


Government procurement is often conducted without the benefit of open bidding. The processes by which contractors and/or suppliers are chosen are generally opaque. Foreign firms without local agents are at a severe disadvantage. The need for U.S. firms to conform to the Foreign Corrupt Practices Act can hinder access to the selection process for government contracts. There is no explicit "Buy Dominican" policy.


The Dominican Republic does not have aggressive export-promotion schemes other than the exemptionsgiven to firms in the free trade zones. A tax rebate scheme designed to encourage exports is considered a

failure and is usually avoided by exporters. The government agency charged with export promotion (CEDOPEX) is considered ineffective by most business people.


Although Dominican law provides for the protection of intellectual property rights, enforcement is weak and government agencies charged with administering the law are not given sufficient resources to effectively enforce Dominican IPR law.


The piracy of computer software, video and audio tapes, and compact disc technologies continues with little enforcement action by the Dominican government. A 1993 U.S. Government review of the Dominican Republic's trade preferences under the Generalized System of Preferences (GSP), based on a petition from the Motion Picture Export Association of America claiming widespread cable television piracy, was terminated in 1994 when the Dominican Government took steps to address U.S. concerns. Larger cable television companies now generally pay fees and royalties, although smaller systems may still be pirating signals and programs.


Existing law provides for broad exclusions of subject matter from patentability, and include onerous local working requirements. Dominican patent protection law continues to be inadequate with respect to the term of protection. Piracy is widespread.


Trademark enforcement is inadequate, particularly in the area of well-known apparel and athletic shoe brands, which are counterfeited and sold on the local market.


Until recently, foreign participation in the financial services sector was restricted by law. The new foreign investment law, and a new financial-monetary code now before the Dominican Congress, allow foreign involvement. However, the practical impact of these changes is not clear. New restrictions of an informal nature which serve to protect Dominican banks may arise. There is no secondary securities market in the Dominican Republic so questions of brokerage services and securities underwriting, trading, etc., do not arise.


New Foreign Investment Law

The new law passed in December 1995 is designed to remove old barriers to investment and to provide equal access for foreign investors to all sectors of the economy except toxic waste disposal, public health and environment, and defense, which require express authorization from the Office of the President. Foreigners may register investments of cash, trademarks, or technology in new or existing companies or real estate (with some limitations).

Investors may remit the full amount of capital and capital gains as well as fees for technology transfer and royalties from previously-registered contracts. The law grants a five-year term for the gradual repatriation of non-remitted accumulated profits resulting from application of the old law. Foreigners may represent their products directly without need for a local agent. However, licensors must compensate licensees for the termination of any representation contracts.

Investors no longer need the authorization of the Foreign Investment Directorate to invest but must register any investment with the Central bank within 90 days.


The Dominican Republic levies a a value-added eight percent Tax on the Transfer of Industrialized Goods and Services (ITBIS). The ITBIS expressly taxes "the importation of industrial goods." Very few imported goods and very broad categories of domestic goods are exempted from the ITBIS. Services appear to be equally taxed. For imports, the tax is levied on the c.i.f. value plus all customs duties and internal taxes on imports. For domestic goods, the tax base is the sales price price plus related costs such as transportation. The discrimination against imported products under the ITBIS effectively increases the protection afforded to many domestic industries. Exports are exempt from the ITBIS. Exporters can either deduct or receive reimbursement for the taxes they pay on the transfer of goods related to their production activities.

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