Useful Links

American Chamber of Commerce

Romanian Chamber of Commerce

C O U N T R Y   C O M M E R C I A L   G U I D E
F O R
R O M A N I A
F I S C A L   Y E A R   2 0 0 3
July 2002
- Page 3 -

5. LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT

Best Prospects for Non-Agricultural Goods and Services

Rank: 1
TELECOMMUNICATIONS EQUIPMENT
ITA Industry Code: TEL

Narrative

During 2002-2004, the Romanian telecommunications equipment sector is expected to continue its dynamic growth. Major procurements will be related to the following projects:

Rank: 2
ELECTRICAL POWER SYSTEMS
ITA Industry Code: ELP

Narrative

Over the next ten years, total investment in the sector is expected to amount to $12-15 billion. Investments will target the completion of the second unit of Cernavoda nuclear plant ($350 million), the completion of 21 hydropower plants ($1.3 billion), the privatization of electricity distribution ($1 billion), and the rehabilitation of thermal power plants and of power transmission and communication systems ($231 million).

Hidroelectrica, which is responsible for hydropower production, groups hydropower plants within 10 geographic subsidiaries, each with an average production of 14,000-15,000 MWh per year. Hydropower plants where construction works have reached a completion ratio of at least 70% will be a priority over 2002-2003. The other plants (with completion levels of 20-50%) will be either privatized, or included in joint-stock companies with private partners. According to official estimates, around $1.6 billion is necessary to add approximately 900 MWh of hydropower capacity.

Electrica is responsible for power distribution. The privatization of the eight Electrica subsidiaries is a business estimated at more than $1 billion. Two branches, Banat and Dobrogea, with a total average value of about $227 million, will be put up for sale in the second half of 2002. The Romanian Government aims at having the entire electric distribution system privatized by 2004.

There is ongoing work funded by the World Bank, with contributions from EBRD, USAID, and PHARE, on the privatization of power plants owned by Termoelectrica, which is responsible for thermal power generation. It is estimated that 8,000 MW of Romania's thermal electric capacity will need to be replaced or rehabilitated by 2010.

Transelectrica, the electricity transmission and dispatching company, has received loans from EBRD, EIB, and EC-PHARE for a project designed to improve the reliability of the power transmission and communications systems and to provide the necessary metering facilities to support the development of a competitive power market. The project (estimated cost: $231 million) will require the procurement of the following goods and services: rehabilitation and installation of optical fiber; upgrading of telecommunications terminal equipment; supply and installation of OffGrid communication links with major power stations; supply and installation of the metering system for the wholesale electricity market, including Current-Transformer, Voltage-Transformer, and Remote-Terminal-Unit facilities; hardware and software for the market operator; and consulting.

Data Table

Rank: 3
RAILROAD EQUIPMENT
ITA Industry Code: RRE

Narrative

The Romanian railroad network consists of 22,000 km. of lines, of which half are core and half are lighter density secondary lines. The National Railroad Company (SNCFR) has started a restructuring and modernization program that benefits from substantial loans granted by EBRD, EIB, the Japanese Bank for International Cooperation (JBIC), and the World Bank. This massive funding will assist with the integration of the pan-European corridors IV and IX into the European railroad network. World Bank loans are predominantly programmed for track rehabilitation, track measurement equipment, and software and telecommunications systems to improve operations. JBIC granted $100 million to a project to upgrade 65 Diesel engines belonging to SNCFR over the next three years. The Romanian Government declared General Motors the winner of the tender for this project, subject to JBIC approval.

SNCFR's modernization programs offer attractive trade and investment opportunities for U.S. suppliers of railroad equipment. There is a growing presence of U.S. firms in the Romanian railroad sector. General Electric has offices in Romania; the Electro-Motive Division of General Motors is in negotiations with the Romanian government to acquire Electroputere, the largest Romanian producer of railway and urban vehicles. Trinity Industries purchased former railroad workshop facilities and turned them into freight car rebuilding/overhaul shops. They also purchased a separate workshop to build new cars. Timken is in Romania in the freight car roller bearing business. At least one U.S. architectural-engineering firm, Louis Berger International, has been doing construction management work for the railways for some time. The Seneca Group has been working with SNCFR on restructuring and on equipment feasibility assessment.

Data Table

Rank: 4
PHARMACEUTICALS AND DRUGS
ITA Industry Code: DRG

Narrative

The Romanian market for pharmaceuticals is expanding steadily, with imports accounting for about 60 percent of pharmaceuticals used in the country.

The Romanian pharmaceutical industry has well-trained specialists and large capacity, but, because of scarce funds for imports of equipment and raw materials, production has decreased dramatically over the last several years. The industry is currently looking for foreign investors.

In spite of heavy competition from Western European companies, U.S. manufacturers of pharmaceuticals have a relatively strong position on the Romanian market. Their share of this market is expected to grow because U.S. products are well-received by the population. Several major U.S. companies have representatives and distributors in Romania, including Eli Lilly, Pfizer, Merck, Bristol-Meyers Squib, and Pharmacia-Upjohn.

There is growing need for new products and innovative therapy for cardiovascular and respiratory diseases, oncology and hematology. For the next 3 years, OTC drugs, prescription medicine, and hospital products have the best sales prospects.

Data Table

Rank: 5
COMPUTER SOFTWARE
ITA Industry Code: CSF

Narrative

This sector's growth potential over the next three years (about 22 percent annually) will definitely favor U.S. exports. About 75 percent of all foreign software products in Romania are American, with Microsoft and Oracle leading the import market. This market is expected to grow significantly in conjunction with the implementation of 3G technology and of several government-supported IT projects. Among the latter, the most important are the development of information systems for the local and national public administration, the implementation of an integrated information system for the National House of Health Insurance, and the implementation of a large number of e-government and e-commerce projects. A significant amount of software is produced, and much of it exported, by Romania's more than 2,000 software development companies.

Data Table

Narrative

Imports cover about 55 percent of the Romanian computer hardware market, and come mainly from such traditional U.S. suppliers as IBM, Compaq, Hewlett-Packard, and Cisco. One of the most important customers of companies in this sector is the Romanian government, which is implementing some of the largest IT programs in the country (integrated system for tax collection, integrated system for the National House of Health Insurance, etc.) Projections for 2002-2004 estimate that the market will grow by an average of 12 percent annually. Recent initiatives of the Romanian government may, however, stimulate faster growth, especially in the field of personal computers. The launch, in late 2001, of a five-year multi-million project to supply 2,500 thousand schools and high schools with IT laboratories permitting access to internet will generate a surge in the PC market. Major U.S. computer hardware firms in Romania are prepared to play an active role in helping the government implement this project.

Best prospects include: personal computers, network interfaces and other communication interfaces, as well as multimedia equipment.

Data Table

Rank: 7
MEDICAL EQUIPMENT
ITA Industry Code: MED

Narrative

U.S. exports cover about 35% of the Romanian import market for medical equipment. U.S. companies with a significant share of the market include General Electric, Hewlett Packard, Beckman Coulter, Stryker, ATL, Medtronic, Helena Laboratories, Diasonics, Control X, Gendex, Baxter, Denver Instruments, Bard Instruments, Accuson Corp., Johnson & Johnson, Space Lab, Bennett, Datascope, Steris, and 3M. Major competition to U.S. companies comes from German, Austrian, and Italian firms. To counter Western European competition, U.S. companies might consider establishing joint ventures and making direct investment, particularly by the acquisition of hospitals, health centers, clinics, or medical equipment factories that are slated for privatization.

Priorities for procurement of medical equipment include: electro medical equipment, diagnostic equipment, endoscopy, urology, laparoscopy and laser surgical equipment, medical lasers for skin therapy, orthopedics surgery equipment, dentistry equipment and microscopes for surgery and laboratory use.

Major procurement orders that are expected to be placed over the next 6-18 months include: equipment for the Bucharest Floreasca Emergency Hospital ($25.0 million); equipment and supplies for the Bucharest Fundeni hospital (about $28.0 million); equipment for the Aeronautical Medical and Training Center in Bucharest (about $7.0 million); medical equipment for the Eye-Treatment Hospital in Bucharest ($20-25 million); medical equipment for the Network of Laboratories for Preventive Medicine (about 30-35 million Euros); medical equipment for the National Program of Urology ($15-20 million), and equipment for the National Program of Digestive Endoscopy $10-15 million).

SOYBEANS

Narrative

Romania is a net importer of soybeans and soybean meal. In 2001 imports reached 96,000 Metric tons, of which 32,000 MTs were imported from the United States. In 2002, due to extreme drought, soybean domestic production is expected to amount to only 60,000 MTs, which will lead to an increase in imports. It is estimated that imports of U.S. soybeans and soymeal will reach 40,000 MTs. This trend will likely continue in the next decade, as Romania's livestock herds are expected to grow markedly after nearly ten years of decline.

Data Table

Back to Table of Contents

6. TRADE REGULATIONS, CUSTOMS, AND STANDARDS

Trade Barriers, including Tariffs, Non-Tariff Barriers, and Import Taxes

The Romanian market is open, requiring no special conditions for access or operation. Romania is a signatory to the conventions on Preferential Trade among Developing Countries ("The 16") and Generalized System of Trade Preferences among Developing Countries. It adopted an 8-digit customs tariff code in March 1993. This code is similar to the International Harmonised System of Combined Nomenclature.

A potential obstacle for U.S. exporters is the preferential tariff treatment for European competitors. The free trade arrangements with the EU, EFTA, and CEFTA result in customs duty discrimination against many U.S. products, sometimes by as much as 30%.

Tariffs are particularly high for such items as cigarettes, furs, carpets, vehicles, photographic equipment and supplies, bicycles, TV sets and sound and video registration equipment. Duties applied to industrial equipment are generally about 15 percent ad valorem.

Exemptions from customs duties apply to exported goods, transiting goods, merchandise in customs warehouses (during the storage period), and goods imported and exported in the draw-back system.

Imported goods can be replaced/repaired during the warranty period. Damaged goods can be exported and re-imported under import duty exemptions. To benefit from the exemption upon the re-import of the goods, the replacement/repairs should be performed within the warranty period and the re-imported goods should have the same tariff classification and same technical characteristics as the exported ones.

In case the intention is to replace/repair the goods and the warranty clause has expired, then the re-importation is only partially exempted (i.e. the customs value is represented by the value of repairs).

The new VAT law, effective June 1, 2002, contains some significant changes from previous legislation; so does the new Profit Tax Law, effective July 1, 2002. In each case, some incentives have been abolished. These include:

VAT incentives that used to be provided for operations in Free Trade Zones are now limited to a number of transactions, with the only advantage that these transactions are now VAT-exempted with credit.

New provisions of the VAT and profit tax laws include:

Customs Valuation

An important objective during the transition to a market economy was the protection of Romanian companies from goods being dumped or subsidized. Accordingly, in 1992 Romania introduced anti-dumping duties for goods imported at very low or dumping prices and countervailing duties for goods which have received subsidies. Safeguard measures can also be implemented to assist domestic producers adversely affected by imports. Safeguard measures may consist of additional customs duties or quantitative restrictions (quotas).

In Romania, customs duties are ad valorem duties. The customs value of imported goods is based on: a) the external price of the transaction, converted into lei at the market exchange rate; and b) charges not included in the price of goods, such as freight, handling and insurance on external routes.

If documentation concerning the value of imported goods is not available, the specific World Trade Organization (WTO) provisions will apply; import prices usually charged for such goods or similar items could be then used as the basis for valuation. Romania values goods on the basis of the WTO Valuation Code (i.e. Article VII of GATT). As stated above, for most items customs valuation is based on the contract value (i.e. transaction value). Customs duties must be paid at the time the goods are imported into Romania.

Exporters complain that customs valuation tends to be inconsistent and arbitrary. For the main Romanian Customs contact, see Chapter 11.

Import Licenses

Import licenses are required for such products as pharmaceuticals, chemicals, and toiletries. Also, sanitary and safety standards as well as special approvals for wastes and residues, toxic substances, explosives and firearms are in force.

Export controls

Exports of goods and services are not subject to customs duties or VAT. For the majority of goods, no export license is required. Authorizations are, however, required for exports of fuels, unfinished wood products, metallurgical products, ferrous and non-ferrous waste. The Department of Foreign Trade issues non-automatic export licenses on a case-by-case basis.

The National Agency for the Control of Strategic Exports and Prohibition of Chemical Weapons (ANCESIAC) is the authority responsible for the implementation of the procedures for exports of conventional arms and related technology. Exports of strategic goods can only be authorized by ANCESIAC. The license may be individual or general. A general license may be issued based on the goods' level of sensitivity and the ultimate consignee of the goods. Along with the application for an export license, the exporter must submit an import certificate (certified by the authorized body in his country) or any other document issued by the importer/end-user certifying that the goods are to be used in his country and for the stated purpose. After the goods have arrived at their destination, but no later than four months after their arrival, the exporter has to obtain from his foreign partner a delivery verification certificate or any other equivalent document proving that the goods have arrived at their stated final destination. The exporter has to present the mentioned document to the ANCESIAC.

Romanian companies wishing to export weaponry can negotiate with their foreign partners the sale agreement without any prior notification to ANCESIAC, but cannot have the export license issued without a valid Import Certificate or a similar document submitted to ANCESIAC.

An export license issued can be cancelled if there are any violations of export control regulations, as well as when the original conditions for which the license was issued are changed.

Import/Export Documentation

Regular import documentation is required by the Customs Office depending on each specific import/export operation. Generally, the consignments must be accompanied by the invoice, by specific lists describing the goods in detail (if needed), by international transport documents and by documents of origin (if applicable).

Additional documentation (e.g. corporate documents/by-laws of the Romanian importing entity, customs forms, such as: statement of value, customs declaration, etc.) should be presented by the importing entity at the customs office of destination where the clearance formalities are completed. Depending on the type of customs regime (e.g. bonded warehousing, temporary admission, temporary leasing), relevant contracts between the parties should also be presented for clearance purposes. Also, specific documents are required to introduce guns, ammunition, drugs, and products that are potentially dangerous to the environment.

Temporary Goods Entry

In accordance with EU customs regulations, Romania applies inward processing relief operations. The inward processing relief operates either through a "duty suspension" or a "duty draw back" method. As a general rule, under the "duty suspension" method the importer should not pay duty at importation and will become liable to duty if the importer later places any products onto the Romanian market. Under this structure the importer will only guarantee the import duties through a bank letter of guarantee.

Goods brought temporarily into Romania for repair and re-export are placed under the inward processing regime.

The "duty drawback" system permits a refund of import duties previously paid at the time that the goods in question are exported from Romania after having been transformed, processed or repaired or after having been incorporated into products being exported. This is a complex regime that can discriminate against products and raw materials not sourced and exported within the EU, EFTA and CEFTA zones.

Labeling, Marking Requirements

Labeling and marking requirements for goods imported into Romania follow rules and regulations similar to those in other developed jurisdictions.

Prohibited Imports

Prohibited imports include products such as firearms, ammunition, illegal drugs and other similar items that can affect national security, public health or good morals.

Standards (ISO 9000 usage)

Romanian standards of quality and safety are under the jurisdiction of the Romanian Association for Standardization (ASRO). Generally, they match ISO and Western European Standards. International quality control standards such as ISO 9000 have been incorporated in Romania's national standardization system.

Although the ISO standards are not compulsory by law for individual companies, buyers increasingly require suppliers to prove the quality of their products and services by the certification of the quality control system they practice.

Free Trade Zones/Warehouses

Currently, there are six FTZs: Sulina (located at the mouth of the Danube); Constanta-Sud Agigea (located close to the port of Constanta, at the entrance to the Black Sea-Danube Canal); Galati (located about 100 km from the Danube mouth); Braila (located 30 km up the Danube from Galati); Curtici-Arad (located about 30 km from the cross border with Hungary); and Giurgiu (located on the Danube, 60 km south of Bucharest)

The administration of each FTZ is responsible for all activities performed within the zone. FTZs are under the authority of the Ministry of Public Works, Transportation and Housing.

According to the new VAT law, effective June 1, 2002, VAT-exempted operations within the free trade zone are:

Membership in Free Trade Arrangements

Romania is a founding member of the World Trade Organization, has ratified most codes of the Tokyo Round, and has been an active participant in the Uruguay Round.

On February 1, 1993, Romania signed an Association Agreement with the European Union (EU), the very first step in Romania's long-term plans for European integration. In December 1999, it opened EU accession negotiations. As of July 2002, 12 of 31 chapters had been closed.

Romania is also an associate member of the European Free Trade Association (EFTA) and of the Central European Free Trade Association (CEFTA).