Agreement 489-2017 SEFIN - Regulations for Nationalization of Merchandise Produced in Free Trade Zones

This Decree shall enter into force as of the day of its publication in the Official Journal "La Gaceta". Given in the city of Tegucigalpa, municipality of the Central District, in the Session Hall of the National Congress, on the eighth day of the month of August of two thousand seventeen. ANTONIO CÉSAR RIVERA CALLEJAS PRESIDENT MARIO ALONSO PÉREZ LÓPEZ SECRETARY JOSÉ TOMÁS ZAMBRANO MOLINA SECRETARY Therefore: Let it be published. Ministry of Finance AGREEMENT No. 489-2017 Tegucigalpa, M.D.C., July 10, 2017 THE SECRETARY OF STATE IN THE MINISTRY OF FINANCE WHEREAS: The Constitution of the Republic in Article 351 establishes that the tax system shall be governed by the principles of legality, proportionality, generality and equity, in accordance with the economic capacity of the taxpayer. WHEREAS: Article 247 of the Constitution of the Republic establishes that the Secretaries of State are collaborators of the President of the Republic in the guidance, coordination, direction and supervision of the organs and entities of the national public administration, in the area of their competence. WHEREAS: By means of Decree Number 356 dated July 19, 1976, published in the Official Journal La Gaceta on July 21, 1976, the Free Trade Zones Law was issued, which was reformed by Decree 131-98 dated May 20, 1998 published in the Official Journal La Gaceta on May 20, 1998. WHEREAS: By means of Agreement No. 43-2009 dated December 21, 2009 published in the Official Journal La Gaceta on January 26, 2010, the President issued the Regulations of the Free Trade Zones Law in order to regulate the application of the Free Trade Zones Law, however it does not contain provisions related to the nationalization of merchandise manufactured or in any way processed in a Free Trade Zone. WHEREAS: By means of Decree 124-2013 published in the Official Journal La Gaceta on June 25, 2013, Article 31 of the Law on Efficiency in Revenue and Public Expenditure contained in Decree 113-2011 dated June 24, 2011 and published in the Official Journal La Gaceta on July 8, 2011 was reformed, establishing that companies benefiting from special tax regimes created by Law as incentives to exports may carry out activities destined for sale in the national market of all or part of their production, except in the case of basically re-export commercial enterprises, which may only destine to the national market up to fifty percent (50%) of their sales, for which reason it is necessary to regulate nationalization in Free Trade Zones. WHEREAS: In accordance with Numeral 15) of Article 29 of the Public Administration Law and its Reforms, the Secretary of State in the Ministry of Finance is competent for everything concerning the formulation, coordination, execution and evaluation of policies related to Public Finance, for which reason it must ensure the correct application of the legal norms related to the functioning of the Honduran Tax System. WHEREAS: In accordance with Article 60 of the Regulations on Organization, Functioning and Competence of the Executive Power contained in Executive Decree PCM-008-97 reformed by Decree PCM-35-2015 published in the Official Journal La Gaceta on June 26, 2015, it is within the competence of the Secretary of State in the Ministry of Finance through the General Directorate of Tax Policy to define, follow up and evaluate tax policy, in order to achieve a sustainable fiscal policy in benefit of Honduran society. WHEREAS: In accordance with Article 245, numeral 11 of the Constitution of the Republic, the President of the Republic, by himself or through the Council of Secretaries of State, has in his charge the General Administration of the State, with the authority to issue Agreements, Decrees and enact Regulations and Resolutions in accordance with the Law. WHEREAS: Article 9 of Decree No. 170-2016 published in the Official Journal La Gaceta on December 28, 2016, containing the Tax Code, establishes that the President of the Republic, through the Secretary of State in the Ministry of Finance (SEFIN), is empowered to issue general administrative acts called Regulations, in the scope of tax and customs policy competence and all those powers that by provision of the Constitution of the Republic and by Law correspond to him, by himself or through the aforementioned Secretary of State. WHEREAS: Article 36 numeral 8 of the General Law of Public Administration establishes that among the Attributes of the Secretaries of State are to issue Agreements and Resolutions on matters within their competence and those delegated to them by the President of the Republic, and to ensure their execution. THEREFORE: In use of the faculties conferred upon it by Article 245 in its numerals 1) and 11), 247, 255 and 351 of the Constitution of the Republic; 88, 320 and 321 of the Regulations of the Central American Uniform Customs Code (RECAUCA); Articles 9 Numeral 1) of the Tax Code; Free Trade Zones Law and its reforms; Article 31 of the Law on Efficiency in Revenue and Public Expenditure and its reforms and interpretations; Articles 29 Numeral 15), 36 Numeral 8), 116, 118 and 119 of the General Law of Public Administration and its reforms; Articles 24, 25, 26, 33, 41 and 72 of the Administrative Procedure Law and its reforms and Article 60 of the Regulations on Organization, Functioning and Competence of the Executive Power and its reforms and the Regulations of the Free Trade Zones Law and its reforms. IT IS AGREED: To approve the following: REGULATIONS FOR THE NATIONALIZATION OF MERCHANDISE PRODUCED UNDER THE FREE TRADE ZONE REGIME TITLE I OF OBJECT AND DEFINITIONS ARTICLE 1. The purpose of these regulations is to establish the norms and procedures applicable to the nationalization of merchandise manufactured under the free trade zone regime within the national territory. ARTICLE 2. For the purposes of these regulations, the following definitions are established: RESTRICTED AREA:

• 1)

  It is the territorial extension, without resident population, under control and fiscal surveillance, comprised within the limits established by the Executive Power. CUSTOMS AUTHORITY:

• 2)

  The official of the Customs Service who, by reason of his office and by virtue of the competence granted, verifies the correct application of customs regulations, complies with it and enforces it. BENEFICIARY:

• 3)

  It is every natural or legal person, national or foreign, Operator or User Operator of the Free Trade Zone, who enjoys the benefits established in the Law. DEFINITIVE IMPORT REGIME:

• 4)

  It is the Customs Regime that permits the entry of merchandise from abroad for use and final consumption in the Customs Territory. NATIONALIZATION:

• 5)

  It refers to the admission of merchandise produced, manufactured or transformed in the Free Trade Zone that are admitted into the national territory for their use or consumption prior to payment of corresponding duties. SARAH:

• 6)

  Automated System of Honduran Customs Revenue. SENASA:

• 7)

  National Service of Agri-food Health and Safety. SERNAM:

• 8)

  Secretary of State in the Departments of Natural Resources, Energy, Environment and Mining. SESAL:

• 9)

  Secretary of State in the Department of Public Health. FREE TRADE ZONE:

• 10)

  Restricted area that forms part of the country's territory, whose limits are supervised by Customs, situated outside the customs territory, in which merchandise is admitted without prior payment of import or export duties and other internal taxes, being subject to special control. TITLE II OF THE NATIONALIZATION PROCEDURE ARTICLE 3. Companies benefiting from the Free Trade Zones regime, created by Decree 356-76 and its reforms, as incentives to exports may carry out activities destined for sale in the national market of all or part of their production, except in the case of basically re-export commercial enterprises, which may only destine to the national market up to fifty percent (50%) of their sales, with the importer being required to pay the respective duties in accordance with the tax regime in force as of the date of acceptance of the Single Customs Declaration, being the responsibility of the Customs Authority to verify what is declared in accordance with the application of risk analysis or others. The importer shall also be subject to payment of Income Tax including other internal duties as applicable. ARTICLE 4. Merchandise that is to be destined to the definitive import regime shall be subject to the control of the Customs Authority at the customs post located in the Free Trade Zone where the company that requires the nationalization of merchandise operates, complying with all the requirements and formalities established in the applicable customs legislation in force. ARTICLE 5. Tax-obligated beneficiaries of the Free Trade Zones regime that require the nationalization of merchandise for use or final consumption in the national market shall request authorization from the Customs Administration through the Special Regimes Section to determine the area for receipt, custody, appraisal and dispatch of merchandise, which must be located within the restricted area of the free trade zone where the applicant operates. ARTICLE 6. Merchandise that is destined to the definitive import regime shall be subject to the control of the Customs Authority at the customs post located in the Free Trade Zone where the company that requires the nationalization of merchandise operates, complying with all the requirements and formalities established in the applicable customs legislation in force. ARTICLE 7. For purposes of transparency and facilitation of customs control, the tax-obligated beneficiary that requires nationalization services, jointly with the Special Regimes Section of the Customs Administration, must define the area for receipt, custody, appraisal and dispatch of merchandise that will be submitted to the definitive import regime. The area designated for this customs operation must meet, at a minimum, the following requirements: It must be physically delimited; 1. It must be a roofed area; 2. It must have a single and restricted access; and, 3. It must have adequate security for the 4. preservation of merchandise. ARTICLE 8. Once the area is defined and complies with the minimum requirements contained in the previous Article, the Special Regimes Section of the Deputy Directorate of Customs Revenue must issue an official communication containing the corresponding authorization within a period of ten (10) business days as a maximum term, counted from the date of completion of verification of compliance with the minimum requirements. ARTICLE 9. Tax-obligated beneficiaries that wish to have at the customs post an Appraiser and Dispatch Officer for the perfection of the definitive import dispatch process and to determine the value of the duties occasioned by nationalization shall request it from the Customs Administration so that it proceeds with the appointment and inclusion of said post in the Operations Contract. ARTICLE 10. For companies that do not request the permanent service of an Appraiser and Dispatch Officer, the importer shall carry out the customs dispatch process at the Customs office of the jurisdiction under which the Free Trade Zone is found, in accordance with the normal procedure for the importation of merchandise. ARTICLE 11. Merchandise that has been subject to transformation and whose product is subject to nationalization, such as medicines, food for humans or animals or similar products, that by their nature must be inspected by SERNAM, SENASA or SESAL must have the authorization from these authorities, as applicable, prior to the Customs Authority authorizing the definitive import. The importer must incur the expenses entailed by the inspection and authorizations required by the aforementioned institutions, which must provide personnel dedicated to carry out this work. ARTICLE 12. The Customs Authority shall approve the nationalization of merchandise when the customs declaration is properly registered and paid in SARAH. Prior to the request for assignment of selectivity channel made by the customs agent of the importer, the merchandise must be located in the authorized area for its review. When merchandise subject to review for the nationalization process has a unit volume that makes mobilization difficult, the review process shall be carried out at the place where the merchandise is located. ARTICLE 13. When the Appraiser and Dispatch Officer authorizes the release of merchandise, the Sub-administrator of the Free Trade Zone must confirm in SARAH the actual departure of the merchandise, this being the process that concludes the cycle of the declaration. ARTICLE 14. The importer that wishes to avail itself of the application of tariff preferences on goods subject to this nationalization procedure must previously request, at the beginning of the import for nationalization process, a resolution from the Secretary of State in the Department of Economic Development, in which it indicates that the goods produced by the tax-obligated beneficiary of the Free Trade Zone regime may avail themselves of the benefits of tariff preferences established in the Free Trade Agreements subscribed and ratified by the State of Honduras, of which the importer wishes to make use.

The customs agent that provides dispatch services to the importer for the nationalization of merchandise under this Regulation shall comply with the obligation to pay one thousand Lempiras (L 1,000.00) annually for each customs post where he exercises his activities, in application of what is established in Article 178 of Decree 212-87 containing the Customs Law. TITLE III FINAL PROVISIONS

The Customs Administration shall issue the procedures and technical criteria necessary for the application of this Regulation.

The Customs Administration must exercise the necessary controls to verify compliance with this Regulation.

The regulatory norms that oppose the provisions contained in this Regulation are repealed.

This Regulation shall enter into force as of the date of its publication in the Official Journal "La Gaceta". COMMUNICATE AND PUBLISH JORGE RAMÓN HERNÁNDEZ ALCERRO Secretary of State General Coordinator of Government By delegation of the President of the Republic Executive Agreement No. 031-2015 Published in the Official Journal "La Gaceta" on November 25, 2015 WILFREDO RAFAEL CERRATO RODRÍGUEZ Secretary of State in the Ministry of Finance