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Country Commercial Guides FY 2000: Bulgaria Report prepared by U.S. Embassy Sofia, released July 1999 Note*

CHAPTER VI. TRADE REGULATIONS AND STANDARDS

Bulgaria became a member of the World Trade Organization in December 1996. This will spur greater market liberalization following a transition period.

A. Trade Barriers

1. Tariff Barriers

Products imported from the European Union with a Form EUR 1 certificate are subject to reduced duties or exempt entirely in accordance with Bulgaria's European Union association agreement. This has placed some dutiable U.S. products such as soda ash at a comparative disadvantage. U.S. Government policy is to urge Bulgaria to reduce its tariffs for non-EU products to the level of the European Union's Common External Tariff.

Duties on agricultural goods and inputs and distilled spirits are of concern to U.S. exporters. Preferential treatment apply to some tobacco varieties, mainly for those imported from Argentina, Brazil, India and Zimbabwe.

2. Non-tariff Barriers

Bulgaria's non-tariff barriers are described in the annual National Trade Estimate report issued by the Office of the U.S. Trade Representative each March 31. A major concern is implementation of Bulgaria's customs regulations and policies, which are sometimes reported be cumbersome, arbitrary and inconsistent. Other major concerns are irregular implementation of Bulgaria's 1997 public procurement law and privatization procedures, and protection of U.S. intellectual property rights.

As in other countries aspiring to membership in the European Union, Bulgaria's 1998 Radio and Television Law requires a "predominant portion" of certain programming to be drawn from European-produced works and sets quotas for Bulgarian works within that portion. However, this requirement will only be applied to the extent "practicable." Foreign broadcasters transmitting into Bulgaria must have a local representative, and broadcasters are prohibited from entering into barter agreements with television program suppliers.

Other barriers include food labeling requirements, and automobile registration and pharmaceutical registration procedures.

B. Customs Regulations

Bulgaria's customs regulations are based on the 1998 Customs Act, which replaces the former 1960 Customs Act. The new Act generally corresponds to the provisions of the European Community Customs Code.

Customs valuation is based on the transaction value - the price actually paid or payable for the goods when sold for export to Bulgaria, defined in Bulgarian levs. The dutiable value is CIF, consisting of the purchase price, transportation costs, insurance charges, commissions, royalties, license fees and all other expenditures associated with the transport (e.g., loading and unloading) for delivery to the Bulgarian border.

Goods may be declared by a customs declaration, by designated simplified procedures such as a simplified customs declaration, a commercial or other document, or by entry in the records of the declarer, or by data-processing entry or other approved method. The customs authorities may carry out post-clearance examination of relevant documents or data.

The law sets out procedures concerning transit, customs warehousing, inward processing, processing under customs control, temporary import, and outward processing. The law provides for public and private bonded warehouses.

C. Tariff Rates

Bulgaria follows the Harmonized System (HS) adopted by the Customs Cooperation Council. Tariffs range between 5 percent and 40 percent on industrial products and 5 percent and 70 percent for agricultural products. The average tariffs applied to imported manufactured goods and agricultural products are 14 percent and 26 percent, respectively. Import duties are ad valorem for agricultural products; some products such as meat have minimum import duties in ECU per metric ton.

Bulgaria's tariff schedules consist of two columns of rates. The column 1 rate applies to the 118 countries that qualify for preferential duty rates. Column 2 is equivalent to Most-Favored Nation (MFN) status. Forty-two countries, including the United States, are subject to column 2. Approximately 80 percent by value of Bulgaria's total imports receive column 2 treatment.

D. Import Taxes

There are no import taxes. However, all imports are subject to a 20 percent Value Added Tax (VAT) levied at the time of import. Some commodities are also subject to excise duties.

E. Import License Requirements

The U.S. Embassy has had no complaints on record from U.S. exporters that Bulgaria's import license regime has negatively affected U.S. exports. As Bulgaria's import licensing regime is subject to frequent change, U.S. companies may wish to consult with CS Sofia for the latest list of affected products.

1. Registration

The list of goods subject to registration is changed quite often. For 1999, the list is only five commodities, including kerosene and fuel oil. In principle, the purpose of registration is to monitor the movement of some "sensitive" goods such as textiles and metals, or of food products which have been in short supply on the domestic market for a certain period: some types of meat, dairy products, sunflower and vegetable oils. These products will receive an automatic license within one day of receipt of application in the Ministry of Trade and Tourism and Ministry of Agriculture. Applicants are required to present a certificate from the court in which their incorporation was registered and a certificate of tax registration. Other substantiating documentation may be required: a contract, pro forma invoice, order, tax number, certificate of origin, and/or a certificate of quality.

2. Authorizations (Licenses)

Decree Number 307 requires that certain products must receive authorization prior to importation. This is a non-automatic licensing process. Authorization, in the form of an import license, is normally issued within two days of the Ministry's receipt of the application. Applicants are required to present certificates from the court and tax registrations as well as supporting documents (enumerated above). Imports of pharmaceuticals also require a copy of the license for wholesale trade.

Appeals following the Ministry of Trade and Tourism's denial of a license must be made in writing to the Minister of Trade and Tourism within five days after the issuance of the decision. The Minister is required to render a final opinion within five days of receipt of the appeal.

The Decree on Bulgaria's Trade Policies in 1999 provides for licensing of the import of gold, silver, platinum, opiates, nuclear materials, explosives, arms, endangered species of animals and plants, and some herbicides.

3. Import Quotas

Several decrees state that certain goods are subject to quotas where the tariff is reduced or waived completely. The sizes of the quotas are determined by calendar year. Quota allocations are distributed by the Ministry of Trade and Tourism through a tendering process or auction. No single applicant may receive a quota allocation larger than 35 percent of the total. Quota recipients may be required to place a deposit or a performance bond issued by a bank. Quota allocations are not transferable. Goods that are subject to duty-free or reduced tariff-rate-quota regimes require certified, simplified customs declarations for import, or a favorable resolution in writing from the principal ministry or department.

Currently products subject to temporarily duty free quotas are insecticides and fungicides, paper and pulp, wheat and sunflower oil. Products subject to reduced duty quotas are beef, poultry, pork, milk and dairy products, some vegetables and vegetable seeds, barley, corn, rice, canned meat, crude sugar from sugar cane, confections, and some alcoholic beverages.

In 1999, duty free import quotas apply temporarily to some additional commodity groups. The goods covered by this import preference are agricultural insecticides and herbicides. Under a separate list, engines and spare parts for agricultural machines are also covered.

F. Temporary Goods Entry Requirements

Products may be imported into Bulgaria on a temporary basis provided they are not prohibited by law. The rules on temporary imports are contained in the Regulation for Application of the Law on Customs. Article 58 allows entry of samples and products for trade exhibitions. The term of entry cannot exceed six months although a request for extension can be made. Customs duties will not be levied if a letter of guarantee from a Bulgarian organization is presented vouching for eventual return of the goods or payment of duties.

Bulgaria is a party to the Customs Convention on Carnet (ATA) for Temporary Import of Goods. Presentation of an ATA carnet, or TIR carnet, facilitates the process. An entry carnet may be obtained from a local chamber of commerce in the United States. Carnets are usually valid for 1 year and list the products to be imported on a duty-free basis. The carnet must be presented upon entry into Bulgaria. Customs will stamp the carnet thereby validating it. Upon departure, the carnet must again be presented for validation, confirming that the product is being transported out of Bulgaria. Failure to re-export the goods results in application of the duties.

The Regulations also provide for the temporary import of products and equipment. Article 15 lists 15 categories. For example, equipment for repairs, finishing, processing and testing may be imported temporarily duty-free. Any goods intended for re-export, such as textiles and apparel, may also enter duty-free. Article 51 establishes time limits from 3 months to one year for re-export. In practice, Customs requires a deposit equivalent to the assessed duties or a bank guarantee during the temporary import period.

G. Special Import/Export Requirements and Certifications

The Regulations for the Application of the Law on Customs require a certificate of origin, commercial invoice, insurance invoice, bill of lading, and packing list for all imported and exported products. In some cases additional information may be required such as receipt of payment of customs processing fees, bill of health (depending upon products), and certificate of import/export (authorization or license). Agricultural products require a certificate of quality and origin, a veterinary or phyto-sanitary certificate, and other applicable health and safety certificates.

If imports are sourced from the European Union, a movement certificate (Form EUR 1) is necessary if the products are to qualify for reduced duties (pursuant to the terms of the Association Agreement). Form EUR 2 should also be included if the shipment is valued below ECU 5,110.

Products sourced from member countries of the European Free Trade Agreement (EFTA) -- Norway, Switzerland and Iceland -- require an exporter's declaration in order to qualify for reduced tariff rates.

Upon arrival, products for human consumption should be analyzed in approved local laboratories in cooperation with local authorities. The Committee on Standards and Metrology strictly enforces Bulgarian quality standards, which do not always coincide with generally accepted international standards. Foreign certificates may or may not be considered adequate. After approval is issued, the commodities may be sold on the local market.

H. Labeling Requirements

The 1995 Law on Prices regulates labeling and marking requirements. Labels must contain the following information in Bulgarian: quality, quantity, ingredients, certification authorization number (if any), and manner of storage, transport, use or maintenance. The product must be clearly marked with the date of production, expiration date and the warranty period.

I. Prohibited Imports

Bulgaria prohibits imports of ozone-depleting products, ivory, rare birds, and other internationally banned products.

J. Warranty and Non-Warranty Repairs

When a product is sent out of Bulgaria for repairs, the value of the repaired or replacement part is dutiable.

K. Export Controls

1. Export Licensing

A limited number of goods are subject to administrative control, stemming from Bulgaria's compliance with international agreements and specific domestic legislation. Registration (automatic license) and permits (administrative license) required by some commodity groups for export are issued by the Ministry of Trade and Tourism. During 1999, permits are required for export of gold, silver, platinum, opiates, nuclear materials, explosives, arms, endangered species of animals and plants, and some herbicides. Registration of export of five commodities including kerosene and diesel oil is required. Only licensed dealers may export weapons.

Bulgaria maintains quotas on the export of textiles and apparel to Canada and the United States; permits for export in these cases are required.

2. Trade in Arms and Dual-Use Goods and Technologies

Bulgarian Customs supervises control over the export, import, re-export and transit arms and dual-use goods and technologies. Bulgarian regulations follow the EU list of dual-use goods, which integrates the control lists of the Wassenaar Arrangement, missile technology control regime, nuclear suppliers group and the Australian group, and the Wassenaar arrangements munitions list. This list includes goods and technologies in the nuclear weapon, chemical and biological warfare and missile areas.

A permit for each transaction ( import, export and re-export) and transit with dual-use goods and arms issued by the Commission for Control and Permission for Foreign Transactions in Arms and Dual-use Goods and Technologies of the Ministry of Trade and Tourism is required regardless of destination. The requirements are as follows:

Export:

Bulgarian export control authorities require a completed export permit form, import license, end-user certificate with non-re-export clause issued by the competent authorities of the country of end-user, and end-use and end-user statement for each export. The applicant is obliged to provide a certificate verifying the actual delivery of equivalent document by the end-user confirming customs clearance of goods within 3 months after the date of entry.

Re-export:

In addition to the requirements for export, a permit for re-export by the competent bodies of the state of initial supplier is required.

Import:

The applicant is obliged to submit a completed import permit form, and in case of dual-use goods, an end-use and end-user statement and delivery verification certificate after the customs clearance of goods is also required.

Transit transportation:

Transit of goods such as arms or radioactive, explosive, inflammable, oxidizing, toxic, infectious or corrosive substances, require a transit permit. A completed form shall be presented by the shipper or an authorized party to the Commission no later than 15 days before the entry of goods into Bulgaria. Transit transportation of other dual-use goods requires a transit statement, which must be presented to Customs upon entry into and exit from Bulgaria.

More information on dual use and arms export control is available from the following departments at the Ministry of Trade and Tourism:

Dual-use Goods Export Control: phone/fax: (359) (2) 987-0549 Arms Export Control: phone/fax (359) (2) 989-6794

Customs officials may make on-the-spot checks of goods being exported to ensure compliance with applicable regulations.

2. Export Taxes

There is no customs clearance fee as of January 1, 1998.

Export taxes apply to unprocessed and partially processed timber.

3. Temporary Export Bans

Bulgaria had imposed temporary export ban on some products and commodities to countries that non-members of the EU. During 1999, a limited number of commodities are banned for export in accordance with international obligations and domestic legislation. These include blood and plasma, goods received as charity, unprocessed tobacco, and land mines.

4. U.S. Exports of Sensitive Technology to Bulgaria

U.S. exporters should consult the U.S. Department of Commerce, Bureau of Export Administration, for specific export licensing requirements concerning exports of sensitive high-technology products to Bulgaria.

L. Standards

The 1964 Law on Standardization and Metrology, as amended, together with the Regulation for Implementation of the Law, sets forth the legal requirements for product standards and quality control in Bulgaria.

The Committee on Standardization and Metrology is the designated authority for developing national standards. The Committee on Standardization reports to the Council of Ministers. In certain areas, product and sector-specific standards are issued by other appointed ministries or agencies.

Bulgaria is making an effort to harmonize its national standards with international standards. Bulgaria is a participant in the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC).

The Committee on Standardization & Metrology is the competent authority for testing and certification of all products except pharmaceuticals, food and telecommunications equipment. The Committee issues approvals attesting to electrical safety and functional characteristics. The Department for Certification and Management Quality Control, within the Committee, handles all testing and certification. In addition to the application, the Department requires a Bulgarian translation as well as certificate(s) of approval from the corresponding home testing authority and a certificate identifying the testing protocol. The fee levied for the testing and certification process is 50-70,000 BGL per application. The entire testing and certification process requires at least one month. Certificates are valid for two years.

The Committee on Standardization shares responsibilities for food products with the Ministries of Agriculture and Health. The responsible authority for pharmaceuticals is the National Institute for Pharmaceutical Products in the Ministry of Health, which establishes standards and performs testing and certification and is also responsible for drug registration. Approval for any equipment interconnected to Bulgaria's telecommunications network must be obtained from the State Telecommunications Commission.

M. Free Trade Zones/Warehouses

Duty Free Trade Zones (FTZ) were established in Bulgaria in 1987 under Decree No. 2242 "On The Duty Free Zones and its Regulations for Application." The new Customs Act, whose provisions do not replace those of Decree No. 2242, renamed the six duty-free zones "free zones." The Customs Act also states that goods located in the free zones and free warehouses are not considered as being in the customs duty of Bulgaria and are not subject to customs duty. Free zones must have access control at fixed entrance and exit points. New construction within the free zones is to be undertaken in conformity with the customs authorities.

Foreign, including U.S., individuals and corporations, and Bulgarian companies with 1 percent or more foreign ownership may set up operations in a free zone. Thus foreign-owned firms have equal or better investment opportunity in the zones as compared to Bulgarian firms. There are at present six operational "free zones" in Bulgaria: Ruse and Vidin ports on the Danube, Plovdiv, Svilengrad (near the Turkish border), Dragoman (near the Yugoslav border), and Burgas port on the Black Sea. All of them are owned by joint stock companies or a state-owned company owned by the government of Bulgaria. The government provided land and infrastructure for each zone.

Plovdiv, the only inland free zone, is the most profitable, with 24 investment projects. The Burgas FTZ has the largest warehousing and automotive distribution facilities in Bulgaria, and is used by more than 100 foreign and joint venture companies including Samsung and Daewoo. Limited manufacturing is conducted in both the Plovdiv and Ruse FTZs. All forms of production and trade activities and services may take place in the free zones. Foreign goods delivered to the free zones with purpose of production, storage, processing or re-export are VAT and duty exempt. Bulgarian goods may also be stored in free zones with permission from the customs authorities. Convertible foreign currency may be used, and revenues can be transferred abroad freely without any restrictions. Administrative procedures relieve the investor's need to contact local authorities directly. Production and labor costs are low with well-trained and highly qualified labor available. All the zones are located on strategic trade rail, road and/or water trade routes.

The free trade zones in Bulgaria have attracted a number of foreign investors to undertake processing and trade activities - Hyundai Co., Daewoo Co., KIA Motors, CITCO, Schawartskopf, Henkel, Landmark Chemicals Ltd., Group Schneider, BINDL Energic Systeme GmbH.

N. Membership in Free Trade Arrangements

In March 1993, Bulgaria signed an Association Agreement with the European Union under which the EU and Bulgaria will eliminate tariffs asymmetrically over a 10-year period with the EU reducing tariffs at an accelerated rate. Agricultural concessions are applied on a reciprocal basis. The Europe Agreement also calls for the harmonization of Bulgaria's laws and institutions with those of the European Union in preparation for eventual full membership. Already, Bulgaria is making an effort to take into consideration the requirements of EU directives in drafting new legislation.

In July 1993, Bulgaria joined the European Free Trade Agreement (EFTA). The provisions of the EFTA Agreement mirror those of Bulgaria's Association Agreement with the European Union. Since then, the majority of EFTA member countries have opted to join the EU. Bulgaria joined the World Trade Organizations in December 1996 and the Central European Free Trade Agreement (CEFTA) in January 1999. A free trade agreement between Bulgaria and Turkey took effect in January 1999.

O. Customs Contact Information

U.S. companies may direct inquiries to the following:

General Customs Directorate
Director: Mr. Plamen Minev
1, Aksakov Street
1000 Sofia
Phone: (359)(2) 869222/98 591
Fax: (359)(2) 980-6897