IMPORT POLICIES

There are no legal barriers to U.S. exports of manufactured goods or bulk, non-agricultural commodities to El Salvador. Most U.S. goods face tariffs from 1 to 20 percent, with rates expected to fall further by 1999. While higher duties are applied to automobiles, alcoholic beverages, textiles and some luxury items, the Salvadoran government may roll these excepted products into its general tariff schedule as it implements the 1996-99 reductions.

STANDARDS, TESTING, LABELING, AND CERTIFICATION

Generally, standards have not been a barrier to the importation of U.S. consumer-ready food products. The Ministry of Health requires a "certificate of free sale" showing that the product has been approved by U.S. health authorities for public sale. Importers also may be required to deliver samples for laboratory testing, but this requirement has not been enforced. All imports of fresh foods, agricultural commodities and live animals must be accompanied by a sanitary certificate. Basic grains and dairy products also must have import licenses. Authorities have not enforced the Spanish labeling requirement.

Sanitary Restrictions on Poultry

In August 1992, the Ministry of Agriculture imposed arbitrary sanitary measures to restrict U.S. poultry imports. These sanitary restrictions call for zero tolerance or negative lab tests for diseases such as aviana denovirus, chicken anemia, and salmonella. These disease agents are common worldwide and are not recognized as List "A" diseases by the International Office for Epizootics. Salvadoran standards are substantially in excess of what is required in the United States and other producing countries, including Canada, Japan and the European Union. Given the ubiquitous nature of salmonella in poultry populations throughout the world, it would be difficult for any established poultry-producing country to guarantee zero tolerance or negative lab tests on meat that has not been cooked or irradiated. The Working Group of the Codex Committee on Food Hygiene (FAO/WHO 1979) concluded that no benefits would result for either public health or quality through the application of microbiological criteria for raw meats and poultry. These standards are applied in a discriminatory manner by El Salvador, since domestic production is not subject to the same requirements as imports. As a result of these restrictive measures, exports of U.S. poultry to El Salvador have virtually ceased. U.S. officials have met with Salvadoran agricultural officials since November 1992 to resolve this issue, with no success to date. Salvadoran officials have stated that the restrictions were imposed to keep U.S. poultry out of the local market and are not designed as "normal" sanitary measures. The U.S. Embassy estimates the value of lost U.S. poultry exports at $3 - $5 million per year.

Phytosanitary Restrictions on Rice

New Salvadoran phytosanitary restrictions require rice shipments to be free of the Tilletia Barclayana (T. Barclayana) fungus. There is no chemical treatment that is both practical and effective against T. Barclayana. The Government of El Salvador requires that rice shipments be accompanied by a USDA certificate stating that the rice is free of T. Barclayana. USDA cannot issue such a certificate because T. Barclayana is well established in the hemisphere and occurs in the United States, as well as in Nicaragua, Mexico, Belize, Panama, Cuba, Trinidad and Tobago, Guyana, Brazil and Venezuela. It is difficult to believe the fungus does not exist in El Salvador given its presence in neighboring countries. The Government of El Salvador failed to notify the WTO, under the Agreement on the Application of Sanitary and Phytosanitary Measures, of these restrictions and does not have a risk assessment upon which to base the new restrictions.

EXPORT SUBSIDIES

El Salvador offers a six percent rebate to exporters of non-traditional goods based on the f.o.b. value of the export, but exporters have found it very difficult to collect. Free zone operations are not eligible for the rebate but enjoy a ten-year exemption from income tax as well as duty-free import privileges.

PROTECTION OF INTELLECTUAL PROPERTY RIGHTS

El Salvador's failure to reduce or eliminate the widespread production and sale of pirated cassettes continues to be a source of concern for the United States. El Salvador was placed under Generalized System of Preferences (GSP) review in 1993 under the IPR criteria. The GSP review is still pending. El Salvador's new law protecting intellectual property rights took effect in October 1994. El Salvador remains on the Special 301 Watch List pending U.S. Government evaluation of the law's implementation. The 1994 law addresses several key areas of weakness. Patent terms are lengthened to 20 years from the application filing date and the definition of patentability has been broadened. Compulsory licensing applies only in cases of national emergency. Computer software is also protected, as are trade secrets.

Trademarks are still regulated by the Central American Convention for the Protection of Industrial Property. It is an occasional practice to license a famous trademark and then seek to profit by selling it when the legitimate owner wants to do business in El Salvador. In November 1994, El Salvador signed an amended version of the Convention, which, among other things, would address this issue. The revised Convention will take effect if it is ratified by three of the participating Central American governments.

In addition to problems with enforcement, the Salvadoran government suffers from antiquated and disorganized bureaucratic procedures for registering patents and trademarks that have caused delays of up to five years in filing registrations and adjudicating oppositions. The National Registry Office was reorganized in late 1995 in an effort to address some of these problems. The Government of El Salvador is currently engaged in negotiations with the U.S. on a bilateral IPR agreement. El Salvador is a signatory to the Geneva Phonograms, Paris industrial property, and Berne copyright conventions. It does not belong to the plant varieties (UPOV) or the Brussels Satellite conventions.

To resolve an outstanding GSP petition, the United States has pressed the Government of El Salvador to initiate investigations of cassette piracy operations, to raid those operations, publicize the raids and prosecute the parties involved. The Government of El Salvador initiated a series of raids of cassette piracy operations in late February 1996. The U.S. Government continues to monitor El Salvador's enforcement efforts against cassette piracy.

INVESTMENT BARRIERS

El Salvador generally has an open investment regime. The government officially promotes foreign investment in virtually all sectors of the economy. The foreign investment law allows unlimited remittance of net profits for most types of business and manufacturing, and up to 50 percent for commercial or service companies. Both electricity generation and distribution and telecommunications remain in the hands of government monopolies, but these are scheduled for privatization in 1996. One U.S. power company has already invested in a local generating station. The government has also allowed some preliminary private sector involvement in telecommunications. The Government of El Salvador is currently engaged in negotiations with the United States on a bilateral investment treaty.

SERVICES BARRIERS

Restrictions on foreign banks entering El Salvador have been removed. Foreign banks now face the same requirements as Salvadoran banks and can offer a full range of services. While no investor, domestic or foreign, may own more than 5 percent of a formerly state-owned bank or finance company, revisions to the 1991 Commercial Bank and Financial Institutions Law that were approved in December 1995 lift restrictions on foreign investment in other local banks and further clarify the rules for opening branches in El Salvador. Foreign insurance companies can operate in El Salvador under the same conditions as local companies. Offshore companies may write policies for risks in El Salvador and this method is widely used. The Salvadoran legal code, however, recognizes only those companies registered with the Bank Superintendency. Currently, insurance companies are regulated by the commerce code; however, the Central Bank and the Ministry of Economy are preparing legislation to regulate the operations of insurance firms and to establish a separate regulatory authority. A bill is expected to go to the legislative assembly for discussion and approval by mid-1996.