...
14.184. Companies operating under the Inward Processing Regime can import raw materials, machinery and equipment, with full suspension of customs duties and import taxes such as tariffs, VAT, excise taxes and an ad valorem tax assessed at a 1% tax rate (when applicable). However, all imported raw materials and products must be later re-exported within a limited time frame that may vary depending on the type of product being imported. Nonetheless, prior to re-exportation, all imported products must be subject to a transformation, reconstruction, assembling or reparation process, or must be incorporated into the machinery or equipment being used as part of the on-going business of the company. It is worth noting that this regime has been losing importance over the years in relative magnitude to exports (10.2% in 1997 to 1.3% in 2015).
14.186185. To implement the BPM6 recommendations required a joint effort between the balance of payments and national accounts rebase project teams in the BCCR, the following actions and outcomes were observed:
- Identify companies that perform manufacturing services. This activity required extensive fieldwork consisting of visiting all enterprises in the free zones (which altogether represent more than 85% of free zone exports) and identifying and enlisting those enterprises which are undertaking these manufacturing services.
- From this work, 21 enterprises were identified: 14 manufacture of electronics equipment and machinery; 2 manufacture of clothing; and 5 other manufacture industries.
- The following questionnaire was then sent to these enterprises:
- Further fieldwork corroborates if these enterprises really do undertake manufacturing services consistent with national accounts and balance of payments methodology.
- A full data assessment was then undertaken for each enterprise taking into account their responses to the questionnaire, their business data collected in other BCCR surveys and their foreign trade data (as accessed from Customs records). Of the companies identified as providers of manufacturing services, the full data assessment highlighted the following aspects.
- Inconsistencies between the value of imports and exports of goods, mainly due to transfer pricing, thus, for several years some enterprises' imports exceed their exports.
- In the accounting period the local processor does not use the entire stock of raw material received on consignment, leading to unwanted changes in inventories.
- The financial statements report revenue transformation services so not raw material costs.
- Some enterprises reported high net profits. This result is not usual for cost centres and affects the level of operating surplus.
- Estimating the manufacturing service fee charged by enterprises. These enterprises must produce annual financial statements, which are mandatory to deliver to PROCOMER. The BCCR has access to these reports and the data included reveals manufacturing service fees.
- As per BPM6 methodology, the gross flows (i.e. the imports and exports sent without a change in ownership) namely the raw inputs sent for processing and the final goods should be removed from the balance of payments 'goods' item (and recorded as a supplementary item in the international trade in services account). In Costa Rica, such as other countries, the main source of foreign trade statistics are customs declarations, the BCCR identified for each enterprise those tariff headings for exclusion from imports and exports corresponding to the foreign trade flows without change of ownership.
14.187186. In conclusion, given that Costa Rica is a small country with relatively few companies, the approach taken to use extensive fieldwork based around the free trade zones to identify and analyse the enterprises involved, while demanding in terms of data and staff time, was seen as the best approach. The final result is the BCCR compile 'Manufacturing services on physical inputs owned by others' through surveying directly the enterprises involved in this activity. This data is then further adjusted using the annual reports of these enterprises as part of them being located in a Special Trade Regimes and thus required to file annual financial statements with PROCOMER (allowing the identification of the annual revenue from service transformation). Additionally, Customs records are used to identify and cross reference the gross flows.
...