Law and Regulation of the Temporary Import Regime

Establish a temporary import mechanism in order to promote exports, consisting of the suspension of payment of customs duties, consular rights, the 5% rate of administrative customs service established by Decree No. 85-84 of May 31, 1984, and any other taxes and surcharges, including the general sales tax, that result from the import of:

• a)

  Raw materials, semi-finished products, containers and other goods when the same are assembled, transformed, modified or physically incorporated into products that are exported to non-Central American countries.

• b)

  Machinery, equipment, tools, spare parts and accessories if used exclusively to assemble, transform, modify or produce articles intended for export to non-Central American countries. The goods listed in this subsection may be freely disposed of after five years have elapsed from the date of their temporary importation, with prior authorization from the Ministry of Finance and Public Credit (currently Ministry of Finance).

• c)

  Samples, instruction materials, patterns and models necessary to adjust production to the standards and designs required in the international market and for demonstration, research or instruction purposes.

The beneficiary shall assume the obligation of total payment that results from the suspension granted in accordance with the preceding Article, plus a fine equivalent to 100% of the tax debt, when goods imported under this Decree are intended for the national or Central American market.

The beneficiary commits to fulfill the following obligations:

• a)

  Provide to the Ministry of Finance and Public Credit (currently Ministry of Finance) and to the Ministry of Economy and Commerce (currently Ministry of Industry and Commerce) a sworn statement, in which shall be noted the use made of all goods imported during each semester under this temporary import mechanism, as well as information relating to the value, quantity, class or type and destination of exported goods. This statement shall be submitted in the months of July and January of each year.

• b)

  Maintain adequate records that allow for the control of goods imported and exported under this Decree.

• c)

  Begin exportable production within six months following the date on which authorization to begin operations under this mechanism or any extension thereof has been granted.

To ensure compliance with the acts provided for in this Decree and its Regulations, the beneficiary shall post a guarantee before the Ministry of Finance and Public Credit (currently Ministry of Finance), which may be constituted in the form of customs pledge, fixed or floating insurance policy and any other acceptable form. When the beneficiary violates any of the legal provisions and regulations, the Ministry of Finance and Public Credit (currently Ministry of Finance) may require that the guarantee granted be replaced by cash deposit, certified check, fidelity bond or bank guarantee with immediate convertibility.

The profits derived from exports under this Regime shall enjoy complete exemption from Income Tax for a period of ten years counted from the date of commencement of exportable production when the company meets the following requirements: a) Be an industrial enterprise, and b) The entirety of its production be exported to non-Central American countries and generate direct employment. This benefit shall not apply to foreign natural or juridical persons when the legislation of their respective countries permits them to deduct or credit taxes paid in Honduras against taxes payable in their country of origin. The aforementioned benefit shall be canceled when violation of the legal and regulatory provisions governing the temporary import mechanism is proven.

Beneficiaries of this Decree may not simultaneously avail themselves of other laws that promote exports.

The company interested in availing itself of this Regime shall submit an application before the Ministry of Economy and Commerce (currently Ministry of Industry and Commerce) which shall issue the Authorization Agreement, in which the rights and obligations of the beneficiary shall be established.

The General Customs Directorate (currently Executive Directorate of Revenue) is empowered to authorize deductions for loss, waste or damage of imported inputs, in accordance with the opinion issued by the General Directorate of Industries (currently General Directorate of Productive Sectors).

The provisions of the Law on Representatives, Distributors and Agents of National and Foreign Enterprises shall not be applicable to imports covered by this Decree.

The General Customs Directorate (currently Executive Directorate of Revenue) and the General Directorate of Industries (currently General Directorate of Productive Sectors) shall work in a coordinated manner for effective control and supervision of compliance with this Decree and its Regulations.

The Executive Power, through the Ministries of Economy and Commerce and of Finance and Public Credit (currently Ministries of Industry and Commerce and of Finance, respectively), shall regulate the application of this Decree.

This Decree shall enter into effect as of its publication in the Official Gazette "LA GACETA".

Repeal Article 6 and modify Articles 1, 2, 4, 5, 7, 8 and 9 of Decree No. 37 of December 20, 1984 (Temporary Import Regime) which shall henceforth read as follows:

Establish a temporary import mechanism in order to promote exports consisting of the suspension of payment of customs duties, consular rights, the 5% rate of administrative customs service established by Decree No. 85-84 of May 24, 1984, the general sales tax and any other taxes and surcharges that result from the import of:

• a)

  Raw materials, semi-finished products, containers, packaging and other inputs that are necessary to produce goods or services that are exported to non-Central American countries, or when the same are assembled, transformed, modified or physically incorporated into products or services that are exported to non-Central American countries.

• b)

  Machinery, equipment, molds, tools, spare parts and accessories if used exclusively to assemble, transform, modify or produce goods or services intended for export to non-Central American countries. The goods listed in this section may be freely disposed of after five years have elapsed from the date of their temporary importation, with prior authorization from the Ministry of Finance and Public Credit (currently Ministry of Finance).

• c)

  Samples, instruction materials, patterns, mannequins and models necessary to adjust the production of goods and services to the standards and designs required in the international market and for demonstration, research or instruction purposes.

When the goods and services referred to in Article 1 of this Decree are sold or transferred in any manner for consumption in the national market, or exported to Central American countries, the General Customs Directorate (currently Executive Directorate of Revenue) or the respective Customs Administration, once the infraction has been duly proven and the Resolution is final, shall communicate this to the Office of the Attorney General of the Republic, in order that it may enforce the guarantee plus payment of a fine equivalent to 100% of the tax debt.

To ensure compliance with the acts provided for in this Decree and its Regulation, the beneficiary shall render a bond before the General Customs Direction (currently Executive Revenue Direction) or the respective Customs Administration. This bond shall be rendered for each shipment or for semi-annual or annual periods of importation and may be constituted in the form of a promissory note, customs pledge, fixed or floating insurance policy or any other form acceptable to the General Customs Direction (currently Executive Revenue Direction) or the respective Customs Administration.

Grant total exemption from payment of income tax on profits arising from the export of goods to non-Central American countries, for a period of ten years counted from the date of the beginning of its exportable production, when the company meets the following requirements:

• a)

  Be an industrial or agroindustrial company.

• b)

  That it provides a minimum of 25 direct jobs.

• c)

  When it involves non-traditional products defined in accordance with the Export Promotion Law. Foreign natural or legal persons shall not enjoy this benefit when the legislation of their respective countries allows them to deduct or credit the Income Tax paid in Honduras, from taxes payable in their country of origin. The aforementioned benefit shall be canceled when an infraction of the legal and regulatory provisions governing the Temporary Importation Mechanism is proven.

The company interested in availing itself of this Regime shall submit an application before the General Direction of Industries of the Department of Economy and Commerce (currently General Direction of Productive Sectors and Department of Industry and Commerce, respectively), which shall analyze it, evaluate it and issue the corresponding opinion. Based on this opinion, the Department of Economy and Commerce (currently Department of Industry and Commerce) shall issue the authorization to operate under this Regime, in which the rights and obligations of the beneficiary shall be established, and it shall be expressly mentioned that for non-compliance therewith, the beneficiary shall be subject to the sanctions that this Decree establishes. The interested party must expressly request in its application to avail itself of this Regime, the grant of its respective Importer and/or Exporter Card.

The General Customs Direction (currently Executive Revenue Direction) is empowered to authorize deductions for shrinkage, waste or damage of goods subject to the suspension of payment referred to in Article 1 of this Decree in accordance with the opinion issued by the General Direction of Industries (currently General Direction of Productive Sectors).

The provisions of the Law of Representatives, Distributors and Agents of National and Foreign Companies shall not apply to imports covered by this Decree; nor shall they be subject to licenses, permits, registries or prior authorizations for importation or exportation issued by the Central Bank of Honduras, only to provide pertinent information to this Institution.

Add to the provisions of the Instrument in reference the following: ❖ The exports carried out under this Regime shall be exempt from payment of the export tax established in Article Ten of Decree No. 873 of December 26, 1979. ❖ The beneficiary of this Regime shall have the right to subcontract manufacturing processes with other natural or legal persons of the country, using for this purpose the goods designated in Article 1° literal a) of the Decree; being obligated to inform of all its operations to the General Direction of Industries and the General Customs Direction respectively (currently General Direction of Productive Sectors and Executive Revenue Direction). ❖ The transfer, in any manner, of goods imported under this Regime to companies operating in Free Zones or Industrial Zones for Exports shall be considered as exports to non-Central American countries, and these companies may grant the beneficiaries of the Regime contracts for production, processing or provision of services. The products and services subject to the transfer and the aforementioned contracts may not be sold in the domestic market. The beneficiaries of this Regime may sell or transfer their products or services to other companies within national territory, whether or not they are beneficiaries of this Regime, when these companies physically incorporate them or need them to complement or modify other products that are exported to non-Central American countries. Each importation of the goods referred to in Article 1 of this Decree shall be authorized by means of a temporary importation policy issued by the General Customs Direction (currently Executive Revenue Direction) or the respective Customs Administration without implying additional procedures, with the exception of the rendering of the bond; to proceed immediately with the temporary importation and corresponding customs clearance.

This Decree shall enter into force as of its publication in the Official Gazette "La Gaceta". Given in the city of Tegucigalpa, Municipality of the Central District, in the Session Hall of the National Congress, on the thirty-first day of the month of October of nineteen hundred and eighty-six. To the Executive Power. Therefore: Execute it. Tegucigalpa, M.D.C., November 3, 1986. JOSE SIMON AZCONA HOYO CONSTITUTIONAL PRESIDENT REGINALDO PANTING P. Secretary of State in the Departments of Economy and Commerce

This Regulation contains the rules and procedures for the application of Executive Decree No. 37 of December 20, nineteen hundred and eighty-four, by means of which the Temporary Importation Regime is established, approved by Decree 8/85 of the National Congress and reformed by Legislative Decree No. 190-86 of October 31, nineteen hundred and eighty-six. The Temporary Importation Regime being regulated is instituted for the purpose of promoting and diversifying the country's exports.

For the purposes of the Decrees related to the previous Article and this Regulation, the following terms and abbreviations are defined: TEMPORARY IMPORTATION REGIME OR SIMPLY "THE REGIME". The Customs Regime that allows goods to be received within the customs territory with suspension of payment of customs duties, consular rights, the five percent (5%) rate of the Customs Administrative Service, established by Decree 85/84 of May 24, nineteen hundred and eighty-four, including general sales tax and any other taxes and surcharges caused by the importation of: a) Raw materials, semi-finished products, containers, packaging and other inputs that are necessary to produce goods or services that are exported to non-Central American countries, or when they are assembled, transformed, modified or physically incorporated into products or services that are exported to non-Central American countries. b) Machinery, equipment, molds, tools, spare parts and accessories if used exclusively to assemble, transform, modify or produce goods or services destined for export to non-Central American countries. The goods listed in this literal may be freely disposed of after five years have elapsed from the date of their temporary importation, prior authorization of the Department of Treasury and Public Credit (currently Department of Finance); and c) Samples, instructions, patterns, dummies and models necessary to adjust the production of goods and services to the standards and designs required in the international market and for demonstration purposes of research or instruction, related to the purposes of the Regime. BENEFICIARY: Is the natural or legal person availing itself of the Temporary Importation Regime. RAW MATERIAL: All goods of any nature that are incorporated into the final product or service or in the respective production process, or that are subjected to transformation for the elaboration of intermediate or final goods. SEMI-FINISHED PRODUCTS: Are those goods that, being produced with raw materials, serve as intermediate elements to produce other goods or services. CONTAINERS: Are those goods whose essential use is to contain any class of product, excluding means of transport such as: Containers, frames, supports and similar items. MACHINERY AND EQUIPMENT: Are those goods that are used to produce other goods or services or to provide a service of a productive nature, which are not consumed in a single production cycle, excluding passenger vehicles and office equipment. SPARE PARTS AND ACCESSORIES: Those used in the repair and maintenance of machinery and equipment. CUSTOMS PLEDGE: Is that which without displacement of goods, which shall remain in the possession of the beneficiary, is constituted over the elements that are necessary for the operation of the company, to respond for the payment of taxes whose temporary suspension originated from the application of the Temporary Importation Regime and for the payment of other obligations derived from the same Regime, in accordance with the Decrees being regulated. SHRINKAGE: Reduction or loss in quantity that imported inputs suffer due to their own nature during transport, while they are under customs custody or in the production process. DAMAGE: Any detriment, diminishment or destruction suffered by imported goods due to causes beyond the will of the beneficiary and that does not correspond to the normal wear of such goods. WASTE: Residues without commercial value of imported inputs, derived from the production process. INDUSTRIAL COMPANY: For the purposes of the Regime is that dedicated exclusively to carrying out activities contemplated in Group 3, Manufacturing Industries of the International Standard Industrial Classification (ISIC) of all economic activities of the United Nations. AGROINDUSTRIAL COMPANY: Is that which processes raw materials of agricultural origin including surface crops, tree crops and livestock products. INPUTS: Goods or services that directly or indirectly participate in the process of assembly, transformation, modification and production of articles that are exported to non-Central American countries. TAX LIABILITY: For the purposes of the Regime, tax liability shall be understood in case of non-compliance with what is stipulated in the Decrees and in this Regulation, as formed by: The temporary suspension of payment of all that refers to Article No. 1 of Decree No. 190/86 of October 31, nineteen hundred and eighty-six, the total exemption from payment of Income Tax; fines, surcharges and other sanctions for infractions to the Regime and also those established by the Income Tax Law. SERVICES: Are those activities of a productive nature or character in which inputs intervene that, once transformed, are exported to non-Central American countries. TEMPORARY IMPORTATION POLICY: Is the statement made by the beneficiary before the respective Customs Administration, indicating the applicable tariff nomenclature, the class and quantity of merchandise and other details necessary for its identification, which when accepted by the Customs Administrator authorizes importation under the Regime. SUBCONTRACTING: The relationship that under its responsibility the beneficiary establishes with other natural or legal persons of the country for the performance of manufacturing processes with goods subject to the Regime. COMPLEMENTATION: Is the mechanism that allows the beneficiary to transfer, in any manner, goods or services imported under the Regime to other companies within national territory, whether or not they are beneficiaries of the Regime, when these companies physically incorporate them or need them to complement or modify other products that are exported to non-Central American countries. TRANSFER: Constitutes the transfer, in any manner, of goods imported under the Regime to companies operating in Free Zones or Industrial Zones for Export Processing (ZIP). AUTHORIZATION RESOLUTION: Is the administrative act issued by the Department of State in the Departments of Economy and Commerce (currently Department of State in the Departments of Industry and Commerce), by means of which a natural or legal person who meets the requirements demanded by Law and this Regulation is incorporated.

Natural or legal persons who are installed or who install themselves in the country with machinery, equipment, tools, spare parts and accessories, if used exclusively to assemble, transform or modify products or services to be exported in their entirety to non-Central American countries, or, as appropriate, to be used or physically incorporated into the same, may avail themselves of the Temporary Importation Regime.

The application to avail oneself of the Regime shall be submitted before the General Direction of Industries (currently General Direction of Productive Sectors) and shall contain basically the following information:

• a)

  Name, business name or denomination, National Tax Registry, nationality, domicile, complete address, telephone and other information about the applicant and their Legal Representative.

• b)

  Concrete indication of what is being requested.

• c)

  The machinery, equipment and tools to be used, indicating the corresponding production capacity.

• d)

  Goods and inputs requested for importation under the Regime with indication of the corresponding tariff classification and their use in the production process.

• e)

  Description of the products to be exported, indicating their volume and value, as well as the projection for a period of three (3) years, indicating the main markets to which it will export.

• f)

  Percentages of use of goods or inputs to be imported for the development of the production process; estimated percentage of shrinkage, losses and waste; description of goods that will be processed under the modalities of complementation and/or subcontracting.

• g)

  Indication of the periods in which it intends to produce and export the products with imported inputs.

• h)

  Number of workers to be employed, with an indication of an estimated annual amount of wages, salaries and social benefits for the first three (3) years of operations.

• i)

  Estimation of value added at factor cost for the first three (3) years of operations.

• j)

  Estimation of annual net foreign exchange income that will be generated by the exports made by the company for the first three (3) years of operations.

• k)

  Indication, when applicable, of national raw materials that the company will use.

• l)

  Summary of the production process.

• m)

  Express request for the grant of importer and/or exporter card.

• n)

  Any other information that, in the judgment of the General Direction of Industries (currently General Direction of Productive Sectors), is necessary to resolve what is requested.

With the application referred to in the previous Article, the following shall be submitted:

• a)

  Certification of the Public Deed or Notarial Act duly registered, which accredits its status as a legally constituted Company or Individual Merchant, as applicable, dedicated to industrial or agroindustrial activities.

• b)

  Copy of the subcontracting or complementation contracts, if applicable.

• c)

  The other documents that are required under the laws in force in the country.

Upon receipt of the application, the General Direction of Industries (currently General Direction of Productive Sectors) shall proceed to conduct its analysis, evaluation and opinion, which at a minimum shall contain an economic evaluation of the company, indicating the benefits it will bring to the country regarding the following:

• a)

  Creation of new jobs, indicating their number and composition; annual wages and salaries to be paid by the company.

• b)

  Generation of value added.

• c)

  Net foreign exchange income.

• d)

  Labor training.

Incorporation into the Regime shall be granted by means of an Authorization Resolution issued by the Department of State in the Departments of Economy and Commerce (currently Department of Industry and Commerce), which shall contain the rights and obligations of the beneficiary.

The obligations of the beneficiary are:

• a)

  Those expressly indicated in Article No. 3 of Decree No. 37 of December 20, nineteen hundred and eighty-four;

• b)

  Submit semi-annually to the Departments of Treasury and Public Credit and of Economy and Commerce (currently Department of Finance and of Industry and Commerce), in the months of January and July of each year, a sworn statement on the volume, value and use of imported goods, as well as the value, quantity, class or type and destination of exported goods or services;

• c)

  Conduct its activity in accordance with what is stipulated in its Authorization Resolution and modifications and comply with export deadlines;

• d)

  Obtain authorization from the Department of Economy and Commerce (currently Department of Industry and Commerce) for any modification of its initial plans that served as the basis for availing itself of the Regime.

• e)

  Provide the competent authorities with as much data and information as is requested to exercise surveillance and control of its operations;

• f)

  Inform the Departments of Treasury and Public Credit and of Economy and Commerce (currently Departments of Finance and of Industry and Commerce), attaching the corresponding supporting documents, about imported goods delivered to subcontractors, including their description, value, weight and volume and any other data that may be required; inform the same Departments of State about goods produced by subcontractors including their description, volume, quantity (specific unit of importation), weight and value of goods produced or any other data that may be required; finally inform, always the Departments of State indicated, about imported goods that were used through the mechanisms of complementation or transfer, including also their description, value, quantity, weight and volume or any other data that may be required. These reports shall be submitted within five (5) working days following each of those operations:

• g)

  Maintain separate accounting of operations conducted under the Regime;

• h)

  The other obligations established by the competent authorities.

In order to enjoy the benefit of exemption from Income Tax referred to in Article No. 5 of Decree No. 37 of December twentieth, nineteen hundred eighty-four, reformed by Article No. 5 of Decree No. 190/86 of October thirty-first, nineteen hundred eighty-six, the company beneficiary of the Regime shall attach to its respective Income Tax Return the following:

• a)

  Copy of the Authorization Resolution through which it is incorporated into the Regime and the benefit is granted;

• b)

  Certification from the General Customs Directorate (currently Executive Directorate of Income) by which it is accredited that the totality of its production was exported to non-Central American countries in direct form or through duly authorized complementation or transfer mechanisms;

• c)

  Certification from the General Directorate of Industries (currently General Directorate of Productive Sectors) that it complied during the fiscal period to which the Return refers with all obligations derived from the Decrees, Regulations and its respective Authorization Resolution; and,

• d)

  When it is a matter of foreign companies, certification issued by the respective Government Agency duly authenticated, accrediting that taxes paid in Honduras are not deductible from taxes to be paid in their country of origin. The General Directorate of Taxation shall make such interventions as it deems necessary for the fiscal supervision that according to the Income Tax Law are within its competence. CHAPTER VI CONSTITUTION AND MANAGEMENT OF GUARANTEES

In order to guarantee to the State the eventual payment of suspended payments referred to in Article No. 1 of Decree No. 37 of December twentieth, nineteen hundred eighty-four, modified by Decree No. 190/86 of October thirty-first, nineteen hundred eighty-six, the following procedures are established for the constitution and management of guarantees:

• 1)

  Guarantees may be constituted for each shipment or for semiannual or annual periods of importation. Said guarantee shall be constituted in favor of the State, in the form of a Promissory Note, Customs Pledge, Fixed or Floating Insurance Policy or any other form acceptable to the General Customs Directorate (currently Executive Directorate of Income) or the respective Customs Administration, prior consultation in the latter cases with the Ministry of Finance and Public Credit (currently Ministry of Finance). The amount of the same in all cases shall cover at least the total of the payments that the beneficiary must make in the event that it were not covered by the Regime.

• 2)

  If the guarantee only covers a determined importation, it shall expire at the moment it is proven that the exportation of products to non-Central American countries entails the total exit of imported inputs, taking into account the coefficients or percentages of inputs contained in said products.

• 3)

  For machinery, equipment, tools, spare parts and accessories, it shall be sufficient that these be constituted in Customs Pledge, as a guarantee provided that the same covers the total value of suspended payments, with supplementary security to be provided when the value of said payments exceeds the CIF Value of the goods.

• 4)

  No guarantee of any kind shall be required for sample items, instructional materials, patterns, mannequins and models. CHAPTER VII TREATMENT OF WASTE, SHRINKAGE AND DAMAGE

For the purpose of issuing a ruling on the loss resulting from shrinkage, waste and damage, the General Directorate of Industries (currently General Directorate of Productive Sectors) shall establish the transformation coefficients of the inputs used, taking into account basically the following:

• a)

  Coefficients declared by the applicant,

• b)

  Nature of the goods to be produced,

• c)

  Technical coefficients or percentages verified in the production processes of the company and similar ones,

• d)

  Any other means that the General Directorate of Industries (currently General Directorate of Productive Sectors) deems necessary.

The General Directorate of Industries (currently General Directorate of Productive Sectors) shall send to the General Customs Directorate (currently Executive Directorate of Income), an authorized copy of the Ruling so that it may make the corresponding discharges in the respective quantities of inputs used in the exported products. The General Customs Directorate (currently Executive Directorate of Income) shall make the verifications that may be necessary.

The beneficiary shall make available at the General Customs Directorate (currently Executive Directorate of Income) the waste or damaged goods discharged, so that it may order and supervise their destruction or donation to legally recognized Public Charitable Institutions. The General Customs Directorate (currently Executive Directorate of Income) may authorize the definitive importation of damaged goods or residues with some commercial value, which shall remain subject to the Laws of Taxation in force. CHAPTER VIII CUSTOMS CLEARANCE

In the exercise of the benefits granted by the Regime, the request for Temporary Importation shall be made before the General Customs Directorate (currently Executive Directorate of Income) or the respective Customs Administration, specifically enumerating the goods or inputs to be cleared classified according to their respective tariff heading. The General Customs Directorate (currently Executive Directorate of Income) or the respective Customs Administration shall compare such request with the corresponding Authorization Resolution that grants the beneficiary the enjoyment of the Regime and shall likewise authorize the customs clearance by means of a Temporary Importation Policy with prior verification of the scope of the guarantee with respect to the amount of suspended payments implied by said policy. Once the aforementioned Temporary Importation Policy is authorized and without requiring prior Resolution from the General Customs Directorate (currently Executive Directorate of Income), the Customs Administrator shall accept it and proceed to the respective customs clearance.

The reexportation of goods or services referred to in the Regime shall be formalized by means of a reexportation policy, which shall serve for the control, supervision and discharge of goods or inputs subject to the Regime, resulting in the corresponding return, release or adjustment of the balance in the constituted guarantee; said release or adjustment of the balance shall be in the amount equivalent to the suspended payments by the Regime that must be discharged prior to verification according to the coefficients or percentages of inputs used in the products exported to non-Central American countries.

The General Directorates of Customs (currently Executive Directorate of Income) and of Statistics and Census shall maintain an updated Register of importations and reexportations that are carried out under the Regime, and shall inform the Ministries of Finance and Public Credit and of Economy and Commerce (currently Ministries of Finance and of Industry and Commerce) with the frequency that they deem necessary. CHAPTER IX CONTROL AND SANCTIONS

The General Directorates of Customs and of Industries (currently Executive Directorate of Income and General Directorate of Productive Sectors), through their specialized offices, shall conduct interventions jointly or separately in companies covered by the Regime, in subcontracting companies and those that carry out Transfer and Complementation activities, to supervise and control compliance with the obligations of the beneficiary, established in the Decrees, this Regulation and its Authorization Resolution.

If the beneficiary fails to comply with the obligations that derive from the Regime by virtue of the creation Decrees, this Regulation or the Authorization Resolution, or improperly uses the benefits that correspond to it in accordance therewith, the Ministry of Economy and Commerce (currently Ministry of Industry and Commerce) shall cancel the Authorization Resolution, declaring the lapse of benefits and rights that had been granted or recognized to it, without prejudice to the legal sanctions that correspond.

When the Ministries of Economy and Commerce and of Finance and Public Credit (currently Ministries of Industry and Commerce and of Finance) through the competent departments, verify that goods or inputs imported under the Regime and those that are assembled, transformed, modified or produced with the same, are destined for the national or Central American market, the General Customs Directorate (currently Executive Directorate of Income) and the General Directorate of Taxation shall proceed within the framework of their respective competence, to settle the tax debt and to impose on the offender a fine equivalent to 100% of the taxes resulting from the settlement, all of which shall be notified to him so that he may proceed to its immediate payment. The beneficiary subject to said sanctions may file the corresponding legal remedies within a term of thirty (30) business days from the day following notification. When infractions are committed through subcontracting, complementation or transfer mechanisms, the beneficiary of the Regime shall always be responsible to the Public Treasury.

Being final the Resolution that orders the payment of the tax debt plus the fine referred to in the previous Article and provided that the offender does not make voluntary payment, the corresponding matter shall be communicated to the General Prosecutor's Office of the Republic so that it may proceed to enforce the granted guarantee, plus payment of the corresponding fine. CHAPTER X GENERAL PROVISIONS

The beneficiary shall notify in writing to the Ministry of Economy and Commerce (currently Ministry of Industry and Commerce) the beginning of his operations of exportable production on the same day of its start.

In case of inconvenience in the beginning of operations referred to in Article 3, section c) of Decree No. 37 of December twentieth, nineteen hundred eighty-four, the Ministry of Economy and Commerce (currently Ministry of Industry and Commerce) through written petition of the interested party and duly justified, shall grant the extension that it deems convenient.

Among the goods to be imported with suspension of rights contained in the Authorization Resolution, prior to the Ruling of the competent Administering Institution, agricultural, forestry, livestock and maritime raw materials shall not be included that are produced in the country under adequate conditions and that are used for the preparation of exportable products.

With prior authorization from the Secretariat of Treasury and Public Credit (currently Secretariat of Finance), machinery, equipment, tools, spare parts and accessories that have been imported under the Regime may be freely disposed of, paying the General Sales Tax and the rate of 5% for the customs administrative service fee, after having been used for a period of FIVE years from the date of their temporary importation, applying the first on the respective book value at the date of sale and the rate of 5% shall be applied on the CIF Value of importation.

The Resolution of Authorization to accede to the Regime may be suspended, modified or cancelled in the following cases: At the request of the interested party, by action of the Secretariat of Treasury and Public Credit (currently Secretariat of Finance) in matters of its competence and at the judgment of the Secretariat of Economy and Commerce (currently Secretariat of Industry and Commerce), in all cases for duly justified reasons.

The beneficiary company shall be obligated to inform the General Directorate of Industries (currently General Directorate of Productive Sectors) and the General Directorate of Customs (currently Executive Directorate of Income) of its operations in the following cases:

• a)

  That the beneficiary of the Regime subcontracts manufacturing processes with other natural or legal persons of the country, using goods or services imported under the protection of the Regime,

• b)

  That the beneficiary company transfers in any manner the goods imported under the protection of the Regime to companies that operate in Free Zones or Industrial Processing Zones for Exports (ZIP),

• c)

  When the beneficiaries of the Regime transfer in any manner their products or services to other companies within the national territory and these incorporate them physically or require them to complement or modify other products that are exported to non-Central American countries. In the three cases presented above, the beneficiary companies shall attach to the aforementioned report an authenticated copy of the contract signed with the company or companies with which they will carry out their activities, a detailed list of the transferred goods or services provided and, where applicable, a detailed list of the goods produced with the transferred articles.

The General Directorate of Industries (currently General Directorate of Productive Sectors) shall provide interested parties with the instructions, models and information that it deems convenient for the proper and expeditious use of the mechanisms of the Regime.

Cases not provided for in this Regulation shall be resolved in accordance with the applicable legal provisions, taking into account the spirit and objectives of the Regime.

This Agreement repeals Agreement No. 174/85 dated February twentieth of nineteen hundred eighty-five.

This Agreement shall enter into force as of its publication in the Official Gazette "LA GACETA".