Agreement 43-2009 Sde - Regulations of the Free Trade Zone Law (repealed)

This Regulation has as its objective to establish the standards and procedures for the application of the Law on Free Zones contained in Decree No. 356 dated July 19, 1976 and its amendments. CHAPTER II DEFINITIONS

For purposes of the Decree mentioned in the preceding Article and this Regulation, the following definitions are established:

• a)

  Restricted area: The territorial extension, without resident population, under fiscal control and surveillance, comprised within the limits established by the Executive Branch.

• b)

  Customs authority: The official of the Customs Service who, by reason of their position and by virtue of the competence granted, verifies the correct application of customs regulations, complies with them, and ensures compliance.

• c)

  Beneficiary: Any natural or juridical person, national or foreign, Operator, User-Operator, or User of the Free Zone, who enjoys the benefits established in the Law.

• d)

  Local purchases: Those made by enterprises benefiting from the Free Zone Regime in the local market, which upon entry into the restricted area do so without the requirement of a Single Customs Declaration (DUA), because these goods, being nationalized, have already paid the corresponding import duties and taxes.

• e)

  Operation Contract: Document executed between the Operating Company or User-Operator and the Executive Revenue Office, which contains the obligations and rights of the parties for the provision of customs surveillance and fiscal control services.

• f)

  Single Customs Declaration for Free Zones (Form DGA-01-90A): Official document without fiscal value through which all entry or exit of goods by beneficiaries of the Law shall be processed before the Customs Authority of the Zone, without intervention of a Customs Agent or Special Customs Authorized Representative.

• g)

  Commercial Enterprise Basically of Re-exportation: One that operates in the restricted area and dedicates not less than 50% of its annual sales to export or re-export, without prejudice to the provisions of Article 29 of this Regulation.

• h)

  Industrial Enterprise Basically of Exportation: One that operates in the restricted area and is dedicated to the mechanical, physical, or chemical transformation of raw materials, semi-processed products, or finished articles, dedicating not less than 95% of its annual production for commercialization abroad. In case it makes definitive imports, the provisions of Article 29 of this Regulation shall be observed. Enterprises that dedicate themselves to producing goods for which there is no domestic production may bring the entirety of their production into the national customs territory, but must pay the corresponding tariff rights and other taxes and charges that are exempted, including the municipal taxes that correspond, in compliance with the provisions contained in the currently applicable customs legislation and other laws related to the taxation of applicable direct taxes. The Executive Revenue Office (DEI) shall be responsible for ensuring faithful compliance with what is established here.

• i)

  Service Enterprise and Related or Complementary Activities: One that operates in the restricted area and whose production or activity is destined to supply productive processes of other enterprises established there or to provide services to the same.

• j)

  Enterprise of International Services by Electronic Means: Those enterprises that operate within a restricted area to offer international services of contact centers or call centers, data processing, back offices, information technologies, or any other service that can be offered electronically, using wired or wireless means.

• k)

  Exportation: The exit of goods from the restricted area destined for abroad, after having undergone a transformation process.

• l)

  Importation: The bringing of goods into the restricted area for their use or consumption, coming from abroad or the domestic market.

• m)

  Regime Administering Institution: The State Secretariat in the Offices of Industry and Commerce, through the General Directorate of Productive Sectors. p) Foreign goods: Those that enter the restricted area coming from abroad. q) National goods: Those that enter the restricted area coming from national territory. r) Operator: A natural or juridical person, national or foreign, legally constituted, who, having complied with the requirements established in the Law and this Regulation, and authorized to operate and administer a Free Zone, is established within the same. s) User-Operator: A natural or juridical person, national or foreign, legally constituted, located within the restricted area, authorized to operate, administer a Free Zone, and carry out the activities permitted by the Free Zones Law and this Regulation. t) Re-exportation: The exit of all goods from the restricted area without having undergone a transformation process and maintaining the same conditions in which they entered. u) User: Any natural or juridical person, national or foreign, legally constituted, established in a Free Zone, operated and administered by an Operating Company or User-Operator, and who dedicates themselves to carrying out the activities permitted by the Law and this Regulation. v) Free Zone: Restricted area.

Natural or juridical persons interested in coming under the Free Zones Law as Operators or User-Operators shall present a request before the State Secretariat in the Offices of Industry and Commerce through a Legal Representative, which must contain: OPERATOR: 1. Main activity to which the enterprise will dedicate itself. 2. Exact address, telephone, electronic mail, fax. 3. Amount of investment, as well as number of jobs to be generated with their respective salaries and wages. 4. Descriptive plan of the property where the project will be developed. 5. Title of property of the property where the project will be developed, or in its absence, a Lease Contract for said property, granted for a period not less than five years. 6. Photocopy of the National Tax Registry. 7. Power of Attorney granted by whoever has the legal representation of the enterprise, accompanied by a photocopy of the Public Deed evidencing that said representative has the authority to grant powers. 8. Photocopy of the Public Deed of Formation of a Mercantile Company or declaration of individual merchant, duly registered in the Registry of Social or Individual Merchants, as appropriate, and in the case of foreign companies, authorization to conduct business in Honduras, issued by the State Secretariat in the Offices of Industry and Commerce, duly registered in the Registry of Social Merchants. 9. To accredit before the State Secretariat in the Offices of Industry and Commerce a Permanent Representative of the enterprise, with broad powers to perform all civil, commercial, and labor acts that are to be executed and take effect in national territory, through power granted by Public Deed. It shall be the obligation of the Free Zones beneficiary to keep updated the information regarding changes that occur with respect to the designation of this permanent representative; failure to comply with this obligation shall give rise to the application of sanctions contained in the Law and this Regulation. Photocopies of the required documents must be presented duly authenticated. USER-OPERATOR In addition to the requirements demanded of Operator enterprises, User-Operators shall accredit the following information: 1. Products it will manufacture. 2. Markets to which it will export. 3. Activities or services it will provide. 4. Projection for three years of the foreign exchange it will generate.

Once the request for authorization as Operator or User-Operator is admitted, the General Secretary of the State Secretariat in the Offices of Industry and Commerce shall transfer the file to the General Directorate of Productive Sectors so that it issues the corresponding opinion. Subsequently, the file must be sent to the State Secretariat in the Office of Finance so that it issues the respective opinion, within a maximum period of fifteen business days. Once the aforementioned opinions have been issued, the State Secretariat in the Offices of Industry and Commerce shall issue a Resolution in accordance with law, expressing the benefits and obligations that according to the Law correspond to the applicant. Operator or User-Operator enterprises, once the Resolution authorizing them is final, must execute an Operations Contract with the Executive Revenue Office (DEI), which shall contain the obligations regarding services, mechanisms of control and supervision of the restricted area.

The rights conferred on the Operator and User-Operator are only transferable with authorization of the State Secretariat in the Offices of Industry and Commerce; in this case, the acquirer must comply with the same requirements as the titleholder, established in Article 3 of this Regulation.

The Operator or User-Operator of a Free Zone that requests authorization to exploit new Free Zones must comply with the same requirements contained in Article 3 of this Regulation, except for the documents listed in numerals 1) through 6) and 8); likewise, the Executive Revenue Office (DEI) must proceed with the review and, where appropriate, modification of the Operations Contract originally executed with the enterprise, to ensure proper verification and compliance with fiscal obligations.

For the expansion of the restricted area, in addition to the request, the new descriptive plan and the documentation that proves ownership of the land or the Lease Contract, as applicable, shall be presented. The execution of the new contract must at least coincide with the expiration date of the original contract.

The Operator or User-Operator is exempt from all liability arising from damage, losses, deterioration, or losses derived from theft, robbery, fire, or any other risk, including force majeure or fortuitous event, that goods deposited in the restricted area may suffer, except for those that are under their responsibility.

The Operations Contracts executed between the Executive Revenue Office (DEI) and the Operators or User-Operators must be in writing and shall be executed under the terms and conditions established by the Law, this Regulation, and Customs Legislation, and a photocopy of said Contract must be sent to the General Directorate of Productive Sectors.

The Operator or User-Operator shall initiate construction of the essential elements of the Zone within a period of three (3) months, counted from the date of effectiveness of the Authorization Resolution issued by the State Secretariat in the Offices of Industry and Commerce. In case of closure of operations, other than that resulting from fortuitous event or force majeure, the Operator or User-Operator, with sixty (60) days' prior notice to the closure, must notify the State Secretariat in the Offices of Industry and Commerce and State Secretariat in the Offices of Labor and Social Security, as well as the Executive Revenue Office (DEI) for the corresponding legal effects. USERS

The Operators and User-Operators of a Free Zone shall have the obligation to register in the Registry of Users of the Free Zones Regime maintained by the General Directorate of Productive Sectors the enterprises that establish themselves within the restricted area that was authorized to them. To comply with this obligation, they shall have five (5) business days counted from the date on which the respective lease contract was signed. For purposes of the Registry, the General Manager, Legal Representative, or Legal Representative of the Operator, User-Operator, or User must present to the General Directorate of Productive Sectors the respective form that the latter will provide, and must provide the information required therein, also accompanying the information contained in numerals 1), 2), and 3) and the documents referred to in numerals 6), 8), and 9) of Article 3 of this Regulation. Additionally, they must present:

• 1)

  Activity or services it will provide, products it will manufacture, and export markets as well as projection for three (3) years of the foreign exchange it will generate.

• 2)

  Authenticated photocopy of the Lease Contract executed between the Operator or User-Operator and the User of the Regime or Certificate issued by the former, through which the parties accredit that they have executed the Lease Contract.

• 3)

  In the case of User Enterprises whose commercial line is Industrial Enterprise Basically of Exportation, the start date of operations and volume of exportable production must also be indicated.

• 4)

  For electronic service enterprises, when required, the authorization of the National Telecommunications Commission (CONATEL) must be presented for those services that require such authorization.

The General Directorate of Productive Sectors, upon receiving the registration request contained in the form, together with the information and documentation previously listed, without further proceedings shall proceed to register the User, issuing the corresponding Certificate of Registration, in which the Registration Number shall be recorded. This document shall serve to accredit before any authority the condition of User of the Free Zones Regime and consequently the right to enjoy the benefits that it grants.

Users may expand their operations in other restricted areas that are under customs and fiscal control, prior to compliance with what is established in Article 11 of this regulation.

Users that carry out operations within the restricted area of handling, mixing, packaging, or any of those mentioned in Article 10 of the Law must comply with sanitation, environmental, and other applicable regulations. Otherwise, the Operator or User-Operator may order the suspension of work while the deficiencies are not corrected; in the same manner, it is obligated to make communications to the corresponding authority.

When Users for any reason cease to operate within the restricted area, the Operators or User-Operators must notify such circumstance to the General Directorate of Productive Sectors, so that it may proceed to cancel the benefits granted to said User enterprises. The notification must be made within a maximum period of ten (10) business days, counted from the day following when the cessation of operations occurred. In case that the Operators or User-Operators do not comply with what is provided in the preceding paragraph, they shall be subject to the sanctions established in the Law and this Regulation.

The Resolution or Certificate of Registration issued by the Secretariat of Industry and Commerce authorizing the administration and operations of the Free Trade Zones Regime constitutes the document that certifies that the beneficiary is exempt from the payment of fiscal and municipal taxes; consequently, in cases where the Law expressly exempts those operating under the aforementioned Regime from the payment of certain taxes, they shall not be required to process any additional authorization to enjoy those exemptions, with the exception of the authorization for local purchases exempt from the payment of Sales Tax, which must be processed before the Executive Directorate of Revenue (DEI).

The Public Registry of Operating Companies, Operating User Companies, and User Companies of Free Trade Zones is hereby created, which shall be administered by the Secretariat of State in the Offices of Industry and Commerce through the General Directorate of Productive Sectors.

The authorization resolutions shall be registered in said Registry, by means of which the enjoyment of the benefits granted by the Free Trade Zones Law is granted to Operating Companies and Operating User Companies.

In the case of User Companies, they shall be registered with the sole presentation of the documentation required in Article 11 of this Regulation, proceeding in accordance with the provisions of Article 12 thereof. The certificates issued in favor of User Companies by the General Directorate of Productive Sectors shall not have an expiration date; therefore, User Companies may not be required to present certificates periodically nor a different certificate for each procedure.

The restricted area shall be delimited by walls, fences, or any other infrastructure, which must have a height of no less than three (3) meters. The access and exit of persons, vehicles, and merchandise shall be carried out exclusively through places controlled by the Customs Authority.

The surveillance of the restricted area shall be the responsibility of the Customs Authority, in accordance with the provisions established in customs regulations, the Law, this Regulation, and to the extent applicable, the tax laws of the country. For the compliance with the provisions of the preceding paragraph, the customs authority shall maintain special surveillance and supervision at the points of access and exit of the restricted area, thereby ensuring that the merchandise, vehicles, and persons that cross them comply with the requirements and formalities established in the legal provisions referred to in the preceding paragraph, without obstructing or hindering the processes of importation, production, exportation, and re-exportation, taking into account the nature of the Zones and the objectives pursued in the Law and this Regulation. The Operator or Operating-User Company of the Free Trade Zone shall provide to the Executive Directorate of Revenue (DEI), for the operation of the customs post, material facilities such as: an office intended exclusively for that purpose, which must have access and wide visibility toward the entry and exit zones. It shall also be equipped with sanitary facilities, air conditioning or a fan, computers, photocopier, desks, filing cabinets, fax service, fixed-line telephone service restricted to domestic use, office supplies, a source of water for human consumption, and others that may be necessary for the development of its activities. The use of telephones, fax, computer, and photocopier shall be exclusive for the exercise of its functions. The violation of this provision, duly verified, shall empower the Operator or Operating-User Company to withdraw the equipment and communicate it immediately to the Executive Directorate of Revenue, so that it may proceed to apply the corresponding disciplinary measures. The Operator or Operating User Company of the Free Trade Zone must have the necessary equipment to carry out the electronic transmission of records, inquiries, and other information required by the Customs Service.

The packages consigned to the Zone must, in addition to the marks and counter-marks, be labeled with an inscription indicating the Free Trade Zone to which they are directed, in order to avoid delays in customs clearance.

For the entry or exit of merchandise from the restricted area that has been acquired with the tax benefits granted by the Law, authorization from the Customs Authority is necessary; the violation of this provision shall be sanctioned in accordance with the Tax Code, without prejudice to other applicable laws.

All merchandise consigned to natural or legal persons authorized to operate in Free Trade Zone shall be sent by the entry customs office, directly to said Zone prior to presentation of the Single Customs Declaration for Free Trade Zones (Form DGA-01-90A), which shall contain, to the extent applicable, the information established in Article 320 of the Regulations to the Central American Uniform Customs Code (RECAUCA), supported by the documents mentioned in Article 321 of the same regulations, it being understood that the option referred to in Article 88 of said regulations corresponds to the company.

The customs authority may authorize the temporary or definitive transfer of merchandise between Operating-User Companies or User Companies authorized to operate under the Regime, using the Single Customs Declaration for Free Trade Zones (Form DGA-01-90A).

For the purposes of the Law and this Regulation, when the customs authority and the Operator or Operating User Company have not been notified of the transfer or assignment of ownership of merchandise deposited in the restricted area, the User Company that appears as owner in the respective Single Customs Declaration for Free Trade Zones (Form DGA-01-90A) shall be considered the consignee thereof.

The customs authority, ex officio or at the request of the competent authority, shall practice random opening of packages within the restricted area and in the presence of the consignee of the merchandise, when the case warrants, to verify its contents.

The customs authority in a Free Trade Zone may authorize the exit of merchandise from the Zone toward the exit Customs office, by means of the Single Customs Declaration for Free Trade Zones (Form DGA-01-90A), ensuring the establishment of appropriate control mechanisms.

The importation of merchandise proceeding from the restricted area for final use or consumption in the country shall be carried out under the control of the Customs Authority at the customs post located therein, with the corresponding taxes being paid and complying with all the requirements and formalities established in the Customs Legislation.

The customs processing for the introduction into the restricted area of national or nationalized merchandise, destined for exportation or re-exportation, shall be carried out under the control of the Customs Authority at the customs post located therein, observing the requirements and formalities established in customs regulations.

Merchandise may be unloaded directly in the Zone, with the customs post acting as the port of entry. In the event that merchandise is manifested for a specific customs office, the transfer of such merchandise from the port of entry to the Zone shall be carried out by means of an authenticated copy of the cargo manifest, complying with the requirements and formalities of customs transit.

When for any reason the User has not received the original bill of lading, air waybill, or bill of carriage, as appropriate, and it has been issued to the order of the shipper or to the order of a banking institution with notification to said User, the merchandise may be introduced by the user into the restricted area prior to securing the merchandise through a bank guarantee, bond, or promissory note issued by an insurance institution. The guarantee shall be returned at the time the original documents are presented properly endorsed.

The Operating Users and Users shall make available to the Executive Directorate of Revenue (DEI) the waste or damaged goods unloaded, with or without commercial value, in order for it to order and supervise their destruction or donation to public or private charitable institutions or legally recognized educational institutions. The Executive Directorate of Revenue may authorize the definitive importation, exportation, or reexportation of damaged goods or residues with some commercial value, which shall remain subject to current tax laws.

The Customs Authority may authorize the entry or exit of merchandise to the restricted area on non-business days and hours in cases of force majeure or fortuitous event duly proven.

The Operating User or Operating User-Operator and the Customs Authority are empowered to verify the inventories of merchandise stored in the restricted area. If the verification results in merchandise not declared in the cargo manifest, the companies shall present a Single Customs Declaration (DUA) for importation to pay the corresponding taxes and duties, without prejudice to any legal actions that may be appropriate. If the verification results in merchandise declared in the cargo manifest not being stored in the restricted area, the companies shall justify such shortages with authenticated documents that allow the customs authority to accept or reject the justification. If the justification is rejected by the customs authority, the company shall pay the corresponding taxes and duties, without prejudice to any legal actions that may be appropriate. Such decision may be challenged through the remedies established in the Regulation to the Central American Unique Customs Code (RECAUCA).

The beneficiaries of the Regime shall maintain books and accounting records related to the activities they conduct and those linked to their formal tax obligations; non-compliance with these obligations shall be sanctioned in accordance with what is established in the Tax Code. Operating User-Operators and Users shall provide the customs authorities with utilization coefficients in order to establish the quantity used of raw materials and supplies based on the resulting production. The Customs Authority must verify these coefficients.

Users may grant manufacturing contracts to other natural or legal persons, national or foreign, located in the national territory. In these cases, such persons may temporarily import merchandise in the national territory from the restricted zones for use in the manufacturing process of these contracts, subject to the provisions of the customs authority.

The Secretariat of State in the Offices of Industry and Commerce, through the General Directorate of Productive Sectors and the Executive Directorate of Revenue (DEI), shall conduct joint or separate inspections of the Operators, Operating Users, and Users to verify compliance with their obligations established in the Law and this Regulation.

In the event that the Operator, Operating User, or User incurs in non-compliance with the obligations established in the Law and in this Regulation, the Secretariat of State in the Offices of Industry and Commerce shall apply the following sanctions:

• a)

  The first time, a fine equivalent to one (1) average monthly minimum wage in force.

• b)

  The second time, a fine equivalent to two (2) average monthly minimum wages in force.

• c)

  The third time, suspension of the benefits granted under the Regime for up to five (5) days.

The infractions whose sanctions are within the competence of the Executive Directorate of Revenue shall be applied in accordance with what the Tax Code provides.

The Operators, Operating User-Operators, and Users are obligated to provide to the authorities of the Secretariat of State in the Offices of Industry and Commerce and the Executive Directorate of Revenue, all information that is required of them to determine that they are complying with the obligations contained in the Tax Laws, Customs Laws, Free Zones Law, this Regulation, and the Resolution or document of incorporation into the Free Zone Regime. Every Operator company and Operating User of Free Zone shall present semiannually to the General Directorate of Productive Sectors of the Secretariat of State in the Offices of Industry and Commerce, the information relating to the entry of merchandise, exports or reexports that they carry out, as well as the number of jobs, salaries and wages, value of exports, and the activity developed within the restricted area by Operating Users or Users.

The Operators, Operating User-Operators, and Users of Free Zone shall grant their workers all benefits established in current labor legislation and shall also comply with the General Regulation of Preventive Measures for Work Accidents and Occupational Diseases issued by the Secretariat of State in the Offices of Labor and Social Security. Any labor conflict shall be resolved according to the procedures established in the Labor Code.

The contract that the Operator or Operating User-Operator enters into with the Executive Directorate of Revenue and to which reference is made in Article 4 of this Regulation shall also include the sum equivalent to the salaries, wages, and social benefits accrued by the officials and employees required to provide the corresponding services. The contracts shall be of indefinite duration and an annual review shall be conducted only on the lines subject to cost variation.

The operation fee that must be paid as a result of the contracts between the Operator or Operating User-Operator and the Executive Directorate of Revenue (DEI) shall be made in a special account created for this purpose in the Central Bank of Honduras, at the request of the General Treasury of the Republic.

The Permanent Representative of the companies shall be accredited before the Secretariat of State in the Offices of Industry and Commerce, by means of an authenticated photocopy of the Power of Attorney in which the representation is established, and who shall be notified of any act that corresponds according to the laws. In the event that the Permanent Representative ceases in his functions for any reason, the company is obligated to immediately notify the Secretariat of Industry and Commerce of the appointment of the new Permanent Representative. The Secretariat of State in the Offices of Industry and Commerce shall place at the disposal of the Secretariat of State in the Offices of Labor and Social Security and the Executive Directorate of Revenue, the information concerning what is provided in the preceding paragraph.

An Ad-Hoc Commission is hereby created as an advisory body to the Secretary of State in the Offices of Industry and Commerce, which shall act in cases not provided for in the Law and this Regulation. The Commission shall be composed of two representatives of the Secretary of State in the Offices of Industry and Commerce, who shall exercise the functions of President (Director General of Productive Sectors) and Secretary (the Legal Director). Two representatives of the Executive Revenue Directorate—Director of Customs Revenue and Chief of the Department of Special Regimes—and two representatives of the Private Sector accredited by the Honduran Council of Private Enterprise (COHEP) who shall correspond to the Honduran Association of Free Trade Zones and the Honduran Association of Maquiladores. CHAPTER VII TRANSITORY PROVISIONS

Those companies covered under other Special Regimes that wish to enjoy the benefits of the Free Trade Zone regime shall renounce the benefits of the prior regime, accrediting such circumstance by means of the presentation of a clearance certificate of solvency issued by the Executive Revenue Directorate (DEI), for compliance with their tax obligations, payment of the canon, when applicable, and for having made proper use of the benefits granted under the Special Regime from which it is intended to renounce, in accordance with the results of the review of customs operations performed.

The National Port Company (ENP) as Operator of the Free Trade Zone of Puerto Cortés and La Ceiba shall be subject to all the obligations and benefits contained in the Law and this Regulation.

Agreement No. 81-99 of June 16, 1999, containing the Regulation of the Law on Free Trade Zones, is hereby repealed.

This Agreement shall enter into force as of the date of its publication in the Official Gazette "La Gaceta". LET IT BE COMMUNICATED AND PUBLISHED. ROBERTO MICHELETTI BAIN CONSTITUTIONAL PRESIDENT OF THE REPUBLIC GABRIELA NUÑEZ DE REYES SECRETARY OF STATE IN THE OFFICE OF FINANCE SAMUEL BENJAMIN BOGRAN FUENTES SECRETARY OF STATE IN THE OFFICES OF INDUSTRY AND COMMERCE ERRATUM NOTICE Gazette No. 32,126 dated January 29, 2010 On January 26, 2010, in La Gaceta No. 32,123, Agreement Number 43-2009 from the Secretary of Industry and Commerce was published, which contains the REGULATION OF THE LAW ON FREE TRADE ZONES; and due to an involuntary error in CHAPTER II, DEFINITIONS, Article 2; the following subsections were omitted: n) Law: The Law on Free Trade Zones, Decree No. 356 dated July 19, 1976 and its amendments. o) Merchandise: It is any product, article, raw material, container, packaging, manufacture and in general any good, without any exception whatsoever and that has commercial value. MANAGEMENT