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Considerations on strategic sectors in the Free Trade Zone Regime.
[/vc_column_text][us_separator][vc_column_text]In order to apply to the Free Trade Zone Regime (RZF) in Costa Rica, a processing company must be classified or immersed within a so-called strategic sector, or operate outside the Greater Metropolitan Area. In practice, the "Agreement defining strategic sectors pursuant to section a) of article 21 bis of the Free Trade Zone Regime Law and its amendments" has served for many years as the regulatory basis for clarifying which said strategic sectors are. This, even though the Decree creating the Special Commission for the Definition of Strategic Sectors, which in turn created the Agreement in question, was repealed in 2018. To this day, it has not been uncommon to see the Executive Branch's discretion activated due to the relative ambiguity when applying the content of this Agreement to specific cases. And it is not surprising to see how investors and their advisors have misinterpreted and mishandled their attempts to include and interpret their activities under a strategic sector. Section 21 bis of the Free Trade Zone Regime Law, in short, states that beneficiary companies under the processing company category must meet various requirements, including that the project be executed within a strategic sector for the country's development, or that it be established outside the Greater Metropolitan Area. Regarding these strategic sectors, we have the following: 1) Projects in which the company covered by the RZF employs at least 200 workers on average annually; 2) Projects in which the company covered by the RZF is located in one of the following industries: I. Advanced electronics, II. Advanced electrical components, III. Medical devices, equipment, implants and supplies and their highly specialized packaging or containers, IV. Automotive, V. High-precision machined parts and components, VI. Aerospace and aeronautics, VII. Pharmaceutical industry and biotechnology, VIII. Energy, IX. Automation and flexible manufacturing systems, X. Advanced materials. 3) Projects in which the company covered by the RZF allocates at least the equivalent of 0.5% of its sales to research and development expenses in its local operation, 4) Projects in which the company covered by the RZF has at least one of the following certifications for its local operation: I. ISO 14001 (14004) or equivalent, II. LEED or equivalent. In practice, the analysis of any of the above areas can become ambiguous, and in many cases, as stated, a certain discretion of the Executive Branch comes into play when analyzing the convenience and adaptability of a specific investor's project to the aforementioned strategic sectors. It is important to mention that compliance with only one strategic sector is enough for a processing company to opt for the RZF; However, they must also meet other legal and regulatory requirements, such as minimum investment and employment levels. Also, in practice, it is common to find the majority of processing companies under the RZF within one of the assumptions of the aforementioned section 2. However, with the imminent evolution of trade, science, and technology, it will not be strange to see a boom in processing companies in the future under industries and areas such as aerospace and aeronautics, energy, and research and development, and the Executive Branch must be prepared to take on the challenge.
Written by:
[/vc_column_text][us_person image=”8836″ name=”Carlos Cartín” role=”Asociado” link=”url:http%3A%2F%2Flexincorp.com%2Fequipo_costarica%2Fcarlos-cartin%2F|title:Carlos%20Cart%C3%ADn||” layout=”cards” img_size=”full”][/us_person][/vc_column][/vc_row]
