MORE ON FREE TRADE AGREEMENT TLC
The Free Trade Agreement (TLC) with the United States is the most important topic on financial matters in the Dominican Republic. Its importance lies in the structural changes that it could produce, such as reduction of tariff bariers, not volumes,
and duties. Other probable changes might affect the legal structure, particularly Law number 20-00 on Industrial Property, regarding the time granted for patent protection and information disclosure, and Law 173 ton the protection of import agents.
A corollary of these changes would be (in connection with the two laws above mentioned) that the domestic pharmaceutical industry would be totally unprotected against the possibility of a massive incursion of foreign markets with medicines priced apparently higher than those made in this country. With respect to legislation 173, its derogation would imply in theory the entry to the Dominican Republic of products and trademarks from any region, wich would affect the local industry.
The agreement has been criticized mostly by those who believe that it would not be advantegeous for this country which (according to the view point of this group) already had preferential tariffs for export volumes to the United States, not for individual items, as are currently being negociated. For those who share this opinion, a change of government might result in stagnation for the agreement, because the new government will not have the support of the Dominican Congress.
Nevertheless, the agreement seems to be a done deal, and this country should proceed to submit its letter of intent before March of this year, with a schedule of those products and items that would be the subject of customs liberalization. However, statements made by Ms. Sonia Guzmán, the Chief of the negociating team of the Dominican Republic, seem to indicate that the tariff structure will be affected within a range of 60% to 80%. This will undoubtedly represent a sacrifice in terms of government income and will probably be compensated by amending the Tax Code. According to the information received, the labor aspect of the agreement and intellectual property were left pending for the round in Washington.

THE AGREEMENT MADE WITH IMF INVOLVE CHANGES IN THE TAX SRUCTURE.

The Dominican Republic breached the first agreement made with the IMF when it bought the energy companies Union Fenosa, Edenorte and Edesur, which resulted in a huge financial deficit for the government, because it had to apply large sums to such purchases.
Under the new agreement concluded with the IMF the government is commited to strengthening its tax controls and its receipts structure, and to work on preventing tax evasion, as well as to curb monetary emissions in order to control, among other things, the increase in the rate of exchange of foreign currency. The government should als refor the energy sector in order to recuperate the energy distribution companies and stabilize the system. This will result, no doubt, in higher electricity bills, which are already too high.
In 2004, the government should implement financial policies equivalent to 205% of the Gross Domestic Product; increase taxes in 0.5%, and reduce its expenses by 2%. The projections for the external account is that there should be a surplus with a financing need of more than US$1,000,000.00.

PURPOSES OF THE AGREEMENT

To ensure the reduction of the public sector debt in order to arrive at 40% of the GDP in 2008, through strong financial growth and the sale of public assets (real estate, mines, shares of stock and securities in the Central Bank) equivalent to 6% of the GDP.
To reduce public deficit to 3.75% in 2004, and to further another reduction of 1.8% of the GDP in 2005, after the tax reform becomes effective.
To eliminate tax exemptions to the ITBIS (tax on the transfer of goods an services) and other Income Tax exemptions, and to review tax rates including ITBIS and Selective Consumption Tax.
To stablish an independent tax authority for customs and for internal revenue.
To criminalize tax evasion.
To prepare a reform proposal by the end of March, to be submitted to Congress before July, in close consultation with the IMF. This should focus on extending the internal revenue tax base, revising the rates, eliminating distortions, and compensating for tariff reductions.

After learning of such objectives, some risk analysis entities have concluded that the Dominican Republic will not offer an appropriate enviroment for investing until after this coming May, when presidencial elections will be held. British corporation Fitch estimated that the political problem weakens the conditions for investing in the Dominican Republic. According to these analysts, at a time like this, disbursements of loans by international credit institutions may be delayed. According to this company, a change in the financial conditions of the Dominican Republic will depend to a great extent on the execution, without further interruptions, of the agreement with the IMF.

TLC. Free access of 99% of its market to the Dominican Republic.

Pressure continues.
Us team of negotiator kept their pressure on Dominican team which persist in maintaining its list of protection.
San Juan Puerto Rico.
United States reaffirmed yesterday its interest in closing, as soon as possible, the agenda of free commerce with Dominican Republic.
In just two days of accommodations has offered to his Dominican partners free access to 99% of its market, 10% more of what has been given in the Cuenca del Caribe agreement. It just leaves out of the agreement 17 lines of shoes, two of canning Atun, and peanuts.
It is the most generous offer that has been made by the United States to any Country, remarked the chief leader of the negotiation team of Dominican Republic, Sonia Guzman. Although the letter of Dominican Republic continues to be a sort of secret, Guzman pointed out that the United States cannot pretend that the Dominican Republic will open its market in the same proportion. Acknowledges the need of protection.
The supposed list of priorities of the United States of access to the market circulated unofficially. Nevertheless, Mr. Jesus de los Santos and Osmar Benitez, coordinator and negotiator respectively, of access to Agriculture market and Sanitary measures denied the status of official of the document and that the same is the matrix of the accommodations.
Is going to be today when the negotiators will start to work with the list of product that will enter as a part of the free commerce with the private sector. A hard task, considering that the Country has approximately 10,000.00 items. Guzman denied the rumors of pressure on her to eliminate duties for the products within technical rectification.
For more details on TLC, go to www.fgasoc.com.do, www.dominican-realestate.com.do.

Contents of this issue:
Intellectual Property
Due diligence

INTELLECTUAL PROPERTY
Don´t forget that the forthcoming agreement, TLC, may bring lots of changes in our legalsystemm. For instance Legislation 173 for protection of agents of foreign corporation is likely to disappear. Are you prepared? So you really understand the implications and insights of these changes? Be one step ahead and protect your trademark and tradenames.
In the Dominican Republic as signatory of the most important International conventions related with intellectual property, we have a very good and advance legislation of Industrial Property. Legislation 20-00. Legislation 20-00 protects inventions utility models, patents trademark and tradenames. Legislation 65-00 protects copyright, and legislation 126-02 protects electronic commerce. For more on this topics go to trademark-registration.com.do.

TRADEMARK

Legislation 20-00 protects distintive names designed to distinguish goods and services provided by the owner of the mark, it can be a distintive word, term, or a sign and its objective is to protect them from other similar products. According to article 72 of Act 20-00 a trademark can be "words, made-up names, names, pseudonyms, commercial slogans, letters, numbers, monograms, invented words, pictures, labels, shields, prints, vgnettes, ornamental borders, lines and bands, combinations and arrangements of colors and three dimensional forms. In addition trademarks may consits of the form, presentation or shape of products or their containers or packaging, or the means or places of selling the products or services to which they apply." Go to trademark-registration.com.do

COPYRIGHT
Protect original work of authorship such as art, motion picture, literary works, computer programs, musical compositions. This kind of works are protected from piracy by Law 65-00 and the Executive Power 362-01.

PATENTS
Is an ownership right that grants a monopoly for the use and develpment of an invention or discovers new services, devices, new uses, or methods to manufacture products. The rights over the patents are alsocoveredd by legislation 20-00.

Fees and costs
Registration of a tradename......US$400.00
Registration of a trademark.......US$400.00
Additional class of mark.............US$275.00
Objections to registration..........US$750.00
Sales on license of trademark....US$300.00
Investigation of Availability........US$125 or 75 each class.
Slogans and short phrases........US$700.00
Copyrights.................................US$650.00
Renovation of marks..................US$325.00


DUE DILIGENCE

This term does not have a one-to-one equivalent in Spanish, and is found in our civil code neither implicitly nor as a concept. However, in every type of transaction, it is quite common in legal practice to grant, especially to buyers, a period of time to get prepared, to conduct certain proceedings or investigations regarding such matter and the legal instruments that will support it.

We may say then, that due diligence is a period for "carrying out", for making, as we say in French law, as a positive obligation, such effort (diligence) as is needed for a certain deal or operation to be taken to fruition or to be formalized.

As regards real-estate investments, we often find ourselves in need of carrying out various undertakings, proceedings or investigations in order to accomplish a sale with proper assurance. In most cases, such term is implicit and is found within the time provided to perform the final sale contract when there has been a previous promise of sale, with or without earnest money deposit or handsel.

A practical discussion would be: A) the validity of the causes containing a due diligence period or the validity of the contract itself; B) what happens with the obligations contained in the agreement pending due diligence? C) Are such obligations really dependent on due diligence, or in other words, is there no obligation, transaction or legal instrument without due diligence? At first sight it appears that in the event of annulment of the clause by means of which the need to act with due diligence was agreed or contracted, the covenant, legal act (contract), and the business formalized by the same would become null and void. However, in practice this is not so simple, because on one hand such period or actions constitute a warranty for the buyer, but at the same time are often prejudicial to the buyer whose operation would be (at least in common practice) subordinate to such proceedings.

First of all, it should be noted that most provisions regarding sales in our legislation are not a matter of public order. A classic example is that of the guaranties given to buyers. In accordance with our Civil Code, a buyer may stipulate in a contract that he/she is buying without warranties. Due diligence being a derivate of such warranties, nothing seems to object to its validity in the Dominican Republic.

Secondly, for over fifty years the legal tendency has been (particularly in the area of business law) to eliminate formalism. In our country, the value of legal practice is unquestionable even when, due to highly criticizable decisions, our Supreme Court of Justice and some lower courts have denied the effectiveness of consent, favoring instead the formalism of the rules of evidence.

Due diligence is then a necessary reality in real-estate; it may be freely agreed to by the parties. The substance (the "fond," as we say in French law) of the clause allows limiting the extent of the parties' obligations. In most sales, due diligence is not only a set of obligations, but it also includes a truly suspensive term. This may be stipulated in the contents of a letter of intent to sell or a promise of sale. In practice, the former has the same effect as the latter, but it comprises fewer elements and involves a written contract.

Our personal view is that due diligence, just as in other legislations, should be considered as a period of total freedom for the parties to rescind the sale or to include in it other elements and warranties. It is advisable to establish clearly that neither of the parties will be obligated to buy or sell until the termination of the period of due diligence. Some common due-diligence tasks are: obtaining a certification of liens and encumbrances, inspecting improvements or having them inspected by an engineer, etc.

It is appropriate to ask then whether a due-diligence clause would be annullable by the provision of the Civil Code which states that a promise of sale agreed to with or without earnest money has the same effect as a sale. Since it appears that such legal provision is not of a public-order nature, a negative answer is imperative.