FE514 A Primer on Exporting to Haiti1 Christina D. Storz, Timothy G. Taylor, and Gary F. Fairchild2 1. This is EDIS document FE514, a publication of the Department of Food and Resource Economics, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, FL. Published February 2005. Please visit the EDIS website at http://edis.ifas.ufl.edu. 2. Christina D. Storz, Research Assistant; Timothy G. Taylor, Professor; and Gary F. Fairchild, Professor, Department of Food and Resource Economics, Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, FL. The Institute of Food and Agricultural Sciences is an equal opportunity/affirmative action employer authorized to provide research, educational information and other services only to individuals and institutions that function without regard to race, color, sex, age, handicap, or national origin. For information on obtaining other extension publications, contact your county Cooperative Extension Service office. Florida Cooperative Extension Service/Institute of Food and Agricultural Sciences/University of Florida/Christine Taylor Waddill, Dean. Introduction Every year the U.S. Department of State publishes extensive Country Commercial Guides for a large number of countries. These guides provide a great deal of information useful to individuals interested in developing export markets either through direct exports or through direct foreign investment. This paper provides an abridged version of the Country Commercial Guide for Haiti as well as supplemental information of direct relevance to agribusiness firms. It is hoped that the information in this report provides a useful starting point for individuals interested in exploring export or investment opportunities in Haiti. Note: County Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact Stat-USA by telephone (1-800) STAT-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at http://www.stat-usa.gov, http://www.state.gov, and http://www.mac.doc.gov. They can also be ordered as a hard copy or on diskette from the National Technical Information Service (NTIS) by telephone (1-800) 553-NTIS. American exporters seeking general export information/assistance and country-specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by telephone (1-800) USA-TRADE; or by fax (202) 482-4473. Economic and Political Overview Located just 600 miles southeast of the coast of Florida, Haiti is the poorest country in the Western Hemisphere and is the only country in the hemisphere to be classified by the United Nations as a Least Developed Country. Haiti's poor economic performance reflects political instability, inappropriate economic policies, pervasive corruption and inefficiency in the public sector, and lack of investment in physical and human capital. The developmental challenges facing Haiti remain daunting. Haiti's physical infrastructure is poor (e.g., roads are inadequate and deteriorating), and basic services (e.g., power, water, and telecommunications) are frequently unavailable. Haiti's economic underdevelopment is mirrored in its political system. The sharp divisions between rich and poor, rural and urban, and the formal and informal economies complicate a solution to Haiti's problems. Although the international community has been very active in helping Haiti address these issues since 1994, there has been no net improvement in the
A Primer on Exporting to Haiti 2 political crisis or in most socioeconomic indicators, and these problems remain persistent obstacles to Haiti's development. The United States is Haiti's most important commercial partner, supplying approximately 75% of Haiti's total imports and absorbing as much as 90% of its total exports. Still, doing business in Haiti is challenging. Bureaucratic procedures are cumbersome and time-consuming. Decision-making is centralized; provincial officials and mid-level officials in the capital are rarely empowered to make decisions that have an important impact on business enterprises. It is often difficult to determine who the decision-makers are on any given issue, or what the rationale or legal basis is, in certain decisions. Those who seek to establish a business in Haiti should be prepared for significant bureaucratic and infrastructure challenges, accompanied by substantially higher start-up costs than may be the case in other markets. Haiti is a low-wage producer, but because of infrastructure and governance shortcomings, may or may not be a low-cost producer. The U.S. Embassy strongly urges U.S. firms contemplating any new business venture in Haiti to consult with the Embassy's Economic Section. Haiti's economy has experienced an almost unbroken economic decline since 1986, with real per capita gross domestic product falling at an average rate of 2.1% per year between 1991 and 2001. Haiti's poor economic performance reflected political instability, pervasive corruption and inefficiency in the public sector, and lack of investment in physical and human capital. Haiti's formal economy, which is driven by foreign trade, suffered a major setback from a cutoff of trade and investment during the 1991-1994 period. Exports declined from US$202 million in 1991 to US$57 million in 1994, and total imports fell from US$449 million to US$141 million. Investment also fell dramatically, from 11% of GDP (Gross Domestic Product) in 1991 to 1.7% in 1994, damaging the country's already weak economic infrastructure and industrial production. The embargo had a devastating effect on Haiti's agricultural sector. Cultivation for domestic consumption declined. Both the internal and the export sectors were left decapitalized. This opened up opportunities to supply food and agricultural inputs (e.g., seeds, fertilizer, machinery, etc.) as well as joint venture possibilities in agricultural exports (e.g., mangoes and coffee). Although in decline, agriculture still employs about two-thirds of the labor force and contributes one third of the GDP. With the exception of mangoes (Haiti is the fourth largest exporter to the U.S. market) and essential oils, agricultural decline has affected almost all products, including domestic crops and export commodities. Agriculture is characterized by: low investment and maintenance; limited access to credit; poor management of irrigation systems; over-exploitation of land owing to population pressure; deforestation in an already fragile natural environment; and lack of adaptive variety selection and research, and farming on small plots using primitive implements. Approximately 700,000 small agricultural producers supply 60% of the food consumed in Haiti. The Haitian state during the last 25 years has invested without success in the sugar, edible oil, essential oils, and flour industries. The U.S. Agency for International Development (USAID) is active in assisting Haiti with its agricultural programs. The U.S. Department of Agriculture has worked closely with the organization of mango producers, and inspects the treatment facilities to permit the export of fruit to the United States. Marketing U.S. Products and Services There are a number of factors that should be considered in exporting products to Haiti. This section provides a brief overview of many critical factors that must be considered. Distribution / Sales Channels The market prospects for imports of manufactured products is relatively good, since Haiti's manufacturing capacity is focused primarily on textiles and apparel for the export market. American companies have several options for entering the Haitian marketplace, including direct exporting, franchising, licensing, and wholesaling. The most common method involves the use of an official representative or distributor, as the Haitian
A Primer on Exporting to Haiti 3 commercial code does not allow foreigners to engage in wholesale or retail business without first obtaining a professional license. Most foreign firms are represented by agents in Port-au-Prince, who then distribute products throughout the country. The main focus of the commercial code is to protect Haitian citizens who work as agents and distributors for foreign companies. Agents / Distributors: Finding a Partner Many firms do business in Haiti through an agent, a relationship subject to Haitian law. The two parties are free to negotiate a contractual agreement, with the agents usually appointed specific tasks and duties. Agents are almost always compensated on a commission basis, as opposed to a salary system or other compensation packages. Arrangements used between the parties are established at their own discretion and do not have to be supervised or approved by the Haitian Government. Finding a partner in Haiti is possible through a number of channels, including business/industry associations in the country. The U.S. Embassy in Port-au-Prince can help U.S. exporters find agents and distributors through the following services: The International Potential Partner Search (IPS) Program: Provides a report listing up to five qualified potential overseas agents, distributors, manufacturers' representatives, joint venture partners, licensees, franchisees, or strategic partners. Commercial Section Port-au-Prince will conduct a search for suitable partners and prepare a list of companies expressing an interest in a U.S. company's products, services, or licenses, or expressing an interest in otherwise partnering with the IPS ordering company. The price of this service is US$600 per IPS, per category of business partner, with a delivery time of 15 business days after receipt of the requested documentation and payment of the service fee. The Gold Key Package: Provides a survey of potential representatives or customers based on the client's requirements and pre-screened meetings with four to six prime prospects. CS Port-au-Prince will also arrange hotel reservations, hotel airport pickup, and bilingual interpreter services. The price for this service is US$500.00 for the first day and US$400.00 for each additional day. Four to six weeks advance scheduling is required. Direct Marketing Direct marketing and electronic commerce (e-commerce) is a slow but growing sector in Haiti. The Haitian postal system has greatly improved in the last couple of years. Growing interest in e-commerce has spurred the establishment of several new companies (e.g., Mail&More) and expanded the market for others (e.g., Lynx Air and Haiti Messager). Haiti's principal cellular companies (Comcel and Haitel) have been highly successful and have helped expand interest in wireless internet services. Consumer interest in Haiti's new telecommunications environment has resulted in the expansion of services by TELECO (the state-owned telephony utility), which now offers cellular as well as internet service. Haiti has also benefited from several new internet service providers and additional ISPs now providing wireless connection service. The e-commerce revolution is not confined to mail delivery services and telephone and internet service providers. New companies are investing in local e-commerce infrastructure to expand marketing efforts. Franchising Franchising does exist in Haiti, but at this time there are no specific regulatory laws. The Commercial Service conducted a Franchising Readiness Seminar in Port-au-Prince in March of 2000. The seminar served to introduce more than 100 Haitian business participants to the commercial opportunities available through franchising with U.S. companies. Product Pricing There is no set pricing structure in Haiti. The cost of products sold in Haiti reflects high operating and transaction costs. Haiti has the highest port fees in the Western Hemisphere as well as various import taxes and duties that apply to all imported products. These high transaction costs add approximately 35% to the final selling price of a product.
A Primer on Exporting to Haiti 4 Agribusiness Industry Prospects Haiti's food crops sector has been hindered by widespread exodus from the countryside and the lack of agricultural capitalization. Many basic agricultural products are imported because Haiti does not produce enough food to meet market demand. Rice, dried beans, poultry and wheat are always good prospects. In 2002, US$155.2 million of agricultural products from the United States were exported to Haiti, a small increase of 1% compared to the 2001 figure (US$153.5 million). Based on data for 2003, it was estimated that U.S. exports of agricultural products could reach US $137/6 million, an 11 % decrease compared to the 2002 figure (US$155.2 million). The U.S. Department of Agriculture has authorized US$35 million in credit guarantees to countries in the Western Caribbean Region (specifically Haiti and Jamaica) under the Commodity Credit Corporation's Export Credit Guarantee Program (known as GSM-102). Twenty agricultural commodities are accredited under the GSM-102 authorization. Included on this list are all of the most important food imports to Haiti, such as rice, vegetable oil, and poultry, wheat and wheat flour, and solid wood products (the leading non-food agricultural import to Haiti). For more information on USDA's GSM-102 program, interested companies should contact the U.S. Department of Agriculture, Foreign Agriculture Service's Information Division in Washington, D.C. (telephone 202-720-7115). Cereals nCereal grains are very important to the Haitian diet. Rice is the main staple food in Haiti. The United States is especially competitive in medium quality (10%to 20% broken) milled rice as well as in the best quality deluxe pack (2% broken). The total amount of rice imported from the United States in 2002 was US$64.7 million, a 44% decrease compared to the US$100 million imported in 2000. Rice exports to Haiti reached only US$6 million, for the first two months of 2003. American exports of milled rice are usually in 50-kilogram bags, which are repackaged locally into smaller 2.2 kilogram bags (5-pound bags). Miscellaneous Food Preparations Processed food is the second largest dollar value of U.S. agricultural exports to Haiti. nIn 2003, the total value of prepared foods exported to Haiti was expected to reach US$31.5 million. In 2002, the United States exported approximately US$31.0 million of food preparations to Haiti, a 27% decrease compared to the 2001 figure. Oils This sector is the third largest dollar value of U.S. agricultural exports to Haiti. Oil is largely used in the preparation of all Haitian dishes. Most oils imported in Haiti are packed in large containers, which are then transferred to smaller bottles by Haitian importers. Local sales preference is for oil sold in 8to 10-ounce bottles. According to the data for the first two months of 2003, U.S. oil imports were expected to reach US$16 million for the year, an increase of 13%compared to the 2002 figure (US$14.8 million). Some oils, such as olive oil, are imported from Spain, Italy, and Portugal. Poultry The United States is the major supplier of chickens to the Haitian market. The high increase in U.S. poultry imports is due to the closing of many Haitian poultry farms because of sick chickens and the high price of chicken feed. American chicken exports were projected to reach US$20 million in 2003. Edible Vegetables / Roots / Tubers This sector includes dry beans, which are part of the Haitian national meal. This sector also includes some vegetables and roots. Between 2001 and 2003, there was a 1.7% decrease in the imports of edible vegetables. Milling Products Milling products, especially wheat and flour, are main components of the Haitian diet. American products are one of the leading U.S. exports to Haiti, with steady statistics for past years. Haiti does not produce enough flour to satisfy local demand. The
A Primer on Exporting to Haiti 5 local production of ordinary flour is approximately 160,000 tons per year. Trade Regulations and Standards Trade Barriers Import tariffs charged under Haitian law are enumerated in subsequent sections of this paper. Perhaps the only significant non-tariff barrier confronting U.S. exporters relates to the cost of shipping goods through Haiti's state-owned international seaports. The largest international port in Haiti is located in Port-au-Prince, which reportedly has the highest user fees in the Western Hemisphere. This facility is on the list of public enterprises slated to be privatized by the government. A reduction in port user fees will probably not occur until the physical infrastructure is upgraded and internal management is improved. Customs Valuation All imported commodities are subject to payment of Customs duties and other taxes. The value of imported goods, either FOB or CIF, is converted into Haitian gourdes, at the prevailing daily rate, prior to the application of duties and taxes. All duties and taxes are payable to the Haitian Customs Administration. Any cargo vessel (sea, air, or land) coming to Haiti, loaded or unloaded, should present to Customs on arrival a bill of lading with four originals signed by the captain. Customs valuation is based on: the cost of the goods, original invoice from the country of origin, insurance cost, and freight cost. The Haitian government has recently taken some positive steps toward lowering their overall Customs tariff rates. Tariff rates are levied on the FOB or CIF value of the goods at the port of entry. In March of 1995, a law was enacted providing for the temporary lowering of duties on goods imported into Haiti. Such duties range from 0% to 15% CIF (previously 0% to 40%). Tariffs on major imports include sugar (3%) and cement (3%). Draft legislation has been prepared, following an agreement with international financial institutions that, once enacted, will further reduce tariffs on all products to one of three applicable levels: 0%, 5%, or 10%. In 1987, Haitian Customs regulations were updated. Since then, several decrees have been enacted to lower all custom duties on a temporary basis. The last decree was in 1995, which modified the level of Customs duties on virtually all products. However, the Haitian government has still not issued any new Customs regulations to supercede the existing 1987 code. In terms of the basic regulations governing the import and export of commodities, listed below is a summary of documentation that is required by the Haitian government:n Standards The Haitian government has indicated its desire to implement a regime of trade, safety, and security standards. At present, the Haitian government has only an extremely limited ability to monitor and enforce standards in trade and commerce. Labeling Requirements Specific marks or labels are not required, except for food and pharmaceutical products. Labels on processed food products should indicate ingredients in order of predominance, name and address of manufacturer, and expiration date of food. Temporary Entry Provisions A 0.25% unique rate is applied to goods entering under diplomatic concessions and for those that are on temporary entry. Import Controls Import documentation includes: The bill of lading signed by the captain or his delegate. The original invoice for the goods. The bill of lading must include: The name of the vessel (sea freight); the identification number (airfreight). The name of the shipping company.
A Primer on Exporting to Haiti 6 The port of origin. The port of destination. The complete manifest of the cargo and the volume on which the freight calculation was based. The nature of the merchandise (not necessary if the merchandise is in bulk). The Haitian government does not require any license for importing most goods, except for firearms and pharmaceutical products. Importers of pharmaceutical products should request an import permit from the Ministry of Commerce and Industry. Pharmaceutical products are also subject to a sanitary registration, which is required by the Ministry of Public Health, and is applicable to all pharmaceutical products being imported into Haiti. Import of agricultural products must have an authorization from the government. The Ministry of Commerce and Industry has not updated its list of prohibited products since 1962. There are no fewer that five fees and taxes levied on commodities imported to Haiti. Those applicable to agricultural commodities include: Verification Fee: 4% of FOB value of imports. Acompte Tax: a newly established tax. A deposit of 2% on CIF value of imported goods and deductible from the income tax. CIF Fee: Importers, who are current on payment of income tax, pay 1% on CIF value of imported goods. Export Controls For exports of agricultural products and some textile products, the documentation requested by Customs includes the export permit from the Ministry of Commerce. American exporters seeking information on Haitian tariffs and Customs administration should first contact the U.S. Embassy (telephone 011-509-222-0200; fax: 011-509-223-9038). Free Trade Zones / Warehouses Haiti does not presently have any duty-free enterprise zones or free ports. Legislation has been drafted to create enterprise zones, duty-free zones, and a one-stop office for foreign investors to obtain Customs clearances and to expedite other necessary paperwork. There is a draft of free trade zone legislation before the Parliament, which would create several free zones throughout the country. Membership in Free Trade Agreements Haiti acceded to the Caribbean Community (CARICOM) on July 1, 2002. Haiti negotiated a 10-year period as a "Least Developed Country" to fully integrate into CARICOM. Haiti's parliament must vote to ratify this membership. In addition, Haiti benefits from three preferential trade programs and may soon become eligible for a fourth as follows: Caribbean Basin Initiative (CBI): Approximately 3,500 Haitian export products are eligible for duty-free entry into the United States under the CBI. However, prepared or canned tuna, sugar, molasses, syrup, beef, and spirits are excluded. Caribbean Basin Trade Partnership Act (CBTPA): On October 2, 2000, Haiti was designated as a beneficiary of the Caribbean Basin Trade Partnership Act (CBTPA), which is designed to provide greater duty-free access to U.S. markets for Caribbean and Central American nations, as a means of illustrating the importance of trade in fostering peace abroad and prosperity in the United States. The CBTPA expands on the current CBI program by allowing duty-free and quota-free treatment for imports of certain apparel from the region, and by extending NAFTA-equivalent tariff treatment to a number of other products previously excluded from the CBI program. The Lome Convention Trade Advantages: On December 15, 1989, Haiti signed the fourth Agreement on Common Preferences (ACP)/EEC Lom Convention under which products originating from Haiti and more than 68 ACP countries are exempt from import duties or equivalent taxes on entry to the European Union.
A Primer on Exporting to Haiti 7 Certain agricultural products (e.g., rum, bananas, and sugar) are subject to import quotas. The Haiti Economic Recovery Opportunity (HERO) Bill: Currently introduced in both houses of Congress, the HERO bill would permit duty-free imports to the United States, up to a certain quota, of apparel assembled in Haiti from materials sourced in countries also enjoying duty-free access to the U.S. apparel or textile market. As of July of 2003, the bill had 12 sponsors in the Senate and 28 in the House. Investment Climate in Brief Haiti's openness to foreign investment is codified in its laws, and the government has stated that it is interested in attracting foreign investment. However, this commitment to investment has not been followed by streamlined procedures, transparency, or established and clear rules that would facilitate foreign investment. Moreover, Haiti's commitment to modernizing commercial laws, investment, banking, and tax codes has not produced many results, and lack of enforcement along with a general climate of insecurity and impunity are major issues discouraging investment. In November of 2002, the government passed a new Investment Law (Code d'Investissement) that removed fiscal and legal discrimination against foreign investors. The code aims to facilitate, liberalize, and stimulate private investment in Haiti through offering benefits to enterprises in agriculture, craft making, national industry, tourism, and other special sectors. The Haitian government has created an Inter-ministerial Investment Commission (CII), comprised of representatives from the Ministries of Tourism, Economy and Finances, and Commerce and Industry, to monitor the eligibility and respect of the present code and to establish agencies or other entities that can facilitate investment. All business sales, transfers, mergers, and partnerships that fall under the code must be authorized by the CII. The Ministry of Commerce also drafted legislation to establish an Office de Facilitation or a one-stop investment promotional office, whereby potential investors could work with one office to streamline the bureaucratic process. This office is still not operating due to budgetary constraints. Haiti does not have economic or industrial strategies with discriminatory effects on foreign investors. Import and export policies are non-discriminatory and are not based on nationality. There are no restrictions or controls on foreign payments or other fund transfer transactions. Foreign exchange is freely and readily available. Banks and exchange houses are free to set their own exchange rates. The 1987 Constitution allows expropriation only for public use or land reform, and requires an advance payment of just compensation as determined by an expert. The government is currently implementing a policy regarding the use of arable land that may ultimately involve expropriation with proper compensation of agricultural properties currently in private hands. The agrarian reform project has been controversial among Haitian and U.S. property owners alike. The Embassy has received several complaints from individuals who claim to not have been compensated for the loss of their property. These cases are complicated by the unreliability of land records and surveys in Haiti. There are several ongoing private disputes between U.S. and Haitian entities. Americans seeking resolution of these disputes are often hindered by Haiti's slow, inefficient, and antiquated legal system. While considerable international assistance has been directed toward rendering the police and judicial systems more credible and effective, serious structural weaknesses remain.
A Primer on Exporting to Haiti 8 Foreign investors are permitted to own 100% of a company or subsidiary. As a Haitian entity, such companies enjoy all rights and privileges provided under the law. Haitian law protects copyrights, inventions, patent rights, industrial designs and models, special manufacturer's marks, trademarks, and business names. The law penalizes persons or enterprises involved in infringement, fraud, or unfair competition. Weak enforcement mechanisms, inefficient courts, and judges' poor knowledge of commercial law significantly dilute the effectiveness of statutory protections. Real property interests are handicapped by the lack of a comprehensive civil register. Bona fide property titles are often non-existent. If they do exist, they are often in conflict with other titles for the same property. Giving or accepting a bribe is a criminal act punishable by one to three years imprisonment. This penalty has seldom, if ever, been applied on its own, although bribery charges are often tacked onto other charges pressed against foreign defendants. Haiti signed mutual investment protection treaties or conventions with the United States (1953, 1983), France (1973, 1984), Germany (1975) and Canada (1980). The U.S. Senate has not ratified the treaty signed by the United States and Haiti in 1983. OPIC offers insurance and financing programs for U.S. investments in Haiti, and offers an on-lending facility through Citibank. Haiti has an abundance of unskilled labor. With an effective adult illiteracy rate of at least 50%, Haiti's workforce is largely concentrated in agriculture, light manufacturing, and unskilled service sectors. Business Customs Travel Advisory and Visas Visitors are required to have a valid passport. Visitors from the United States may not require a visa, depending on their length of stay and/or onward passage being assured. An airport tax of US$30.00 plus US$5.00 is requested from foreigners leaving the country. The U.S. Department of State's Office of Citizens Services can provide updated travel information on Haiti at (202) 647-5225. Medical facilities are limited, particularly in areas outside the capital (Port-au-Prince). Doctors and hospitals often expect immediate cash payment for health care services. American medical insurance is not always valid or accepted outside the United States and should be confirmed with your insurance provider before leaving the United States. The Medicare/Medicaid program does not provide for payment of medical services outside the United States. Street crime in Haiti poses a moderately high risk for visitors. Visitors to Haiti should remain vigilant, as there have been reports of armed robberies, kidnappings, and car-jackings. Other incidents involve pickpockets, purse-snatchers and street scam artists. Passports, wallets, jewelry, and other valuables are subject to theft. The loss or theft abroad of an U.S. passport should be reported immediately to local police and to the nearest U.S. Embassy or Consulate. Individuals considering a visit to Haiti should consult the U.S. Department of State's website at http://travel.state.gov/haiti.html to obtain more detailed information on security risks Business Infrastructure Haitians are open to working with foreign investors and are particularly well disposed towards U.S. businessmen. Most businessmen speak English fluently. Appointments with Haitian businessmen should be made in advance. Invitations to restaurants are appreciated and business is usually discussed in restaurants and hotels as much as in offices.
A Primer on Exporting to Haiti 9 Useful Web Sites HAITI: US Embassy http://usembassy.state.gov/haiti Republic of Haiti http://www.haiti.org UNITED STATES: USDA Foreign Agricultural Service http://www.fas.usda.gov US Export Programs Guide http://infoserv2.ita.doc.gov/ticwebsite/tic.nsf/ AF34FA880278BDD5825690D00656C6F/ F69FDCF72B7713B58525691900746F18?Open Document Internet Guide to Trade Leads http://infoserv2.ita.doc/gov/ticwebsite/tic.nsf/ 504ca249c786e20f85256284006da7ab/ ef7db94aef24919885266470049c1cd?OpenDocu ment US Trade Finance Resources http://infoserv2.ita.doc.gov/ticwebsite/tic.nsf/ AF34FA880278BDD5825690D00656C6F/ F69FDCF72B7713B58525691900746F18?Open Document Basic Guide to Exporting http://www.unzco.com/basicguide/index.html HEMISPHERIC: Hemispheric Guide on Customs Procedures http://alca-ftaa.iadb.org/hgcp_eng.htm Hemispheric Trade and Tariff Database http://alca-ftaa.iadb.org/eng/ngmadb_e.htm