In 2004, when the Dominican Republic joined and the free trade agreement known as CAFTA it was renamed CAFTA-DR. The free trade agreement is among the following: Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the United States. Finally. The CAFTA-DR entered into force for the Dominican Republic on March 1, 2007.

The CAFTA-DR free trade agreement should improve business dealings in Dominican Republic.

The following infomation is from the Office of the United States Trade Representative – CAFTA Policy Brief – February 2005

Free Trade With Central America and the Dominican Republic
Highlights of the CAFTA…

New Opportunities for U.S. Workers and Manufacturers: Eighty percent of U.S. exports of consumer and industrial goods will become duty-free in Central American and the Dominican Republic immediately, with remaining tariffs phased out over 10 years. Key U.S. export sectors will benefit from immediate duty elimination, such as information technology products, agricultural and construction equipment, paper products, pharmaceuticals, and medical and scientific equipment. Tariffs on U.S. autos and auto parts will be phased out within 5 years. Countries not presently in the WTO Information Technology Agreement will join.

Expanded Markets for U.S. Farmers and Ranchers: More than half of current U.S. farm exports to Central America and the Dominican Republic will become duty-free immediately, including high-quality cuts of beef, soybeans, cotton, wheat, many fruits and vegetables, and processed food products. Tariffs on most U.S. farm products will be phased out within 15 years, with all tariffs eliminated in 20 years. Important U.S. sectors will benefit, including corn, beef, pork, poultry, rice, dry beans, dairy, and vegetable oil. The U.S. will work with Central America and the Dominican Republic to resolve sanitary and phytosanitary barriers to agricultural trade, especially problems in food inspection procedures for meat and poultry.

Sugar – A Teaspoon A Week: In the first year, additional sugar market access for Central America and the Dominican Republic will amount to about 1.2 percent of U.S. sugar production, growing to 1.7 percent in year 15. This equals about one day’s U.S. production, or approximately one teaspoon of sugar per week per adult American. Sugar imports have declined by about one-third since the mid-nineties. CAFTA would not come close to returning U.S. imports to those levels. There is no change in the high above-quota U.S. tariff on sugar, and imports under CAFTA will have no effect on the U.S. sugar programs.

Textiles and Apparel – Uniting to Compete with Asia: Garment factories in Central America and the Dominican Republic are collectively the second-largest world buyer of U.S. yarn and fabric. Apparel made in these facilities will be duty-free and quota-free under the Agreement if they use U.S. or regional fabric and yarn, thereby supporting U.S. fabric/yarn exports and jobs. This is critical, because with the recent expiration of global quotas on textiles/apparel, CAFTA positions regional garment-makers – and their U.S. suppliers of fabric and yarn – to better compete with Asia. The agreement’s benefits for textiles and apparel will be retroactive to January 1, 2004. CAFTA also contains cumulation provisions, which will allow woven apparel from the region to contain a capped amount of Mexican and Canadian inputs.

Haiti: The Administration will work with the Congress to enable Haiti to continue to be eligible to receive Caribbean Basin Trade Preference Act (CBTPA) for apparel containing inputs from the Dominican Republic.

Access to Services: Central America and the Dominican Republic will accord substantial market access across the entire services regime, offering new access in sectors such as telecommunications, express delivery, computer and related services, tourism, energy, transport, construction and engineering, financial services, insurance, audio/visual and entertainment, professional, environmental, and other sectors. Central American countries and the Dominican Republic have agreed to change “dealer protection regimes” and loosen restrictions that lock U.S. firms into exclusive or inefficient distributor arrangements.

A Trade Agreement for the Digital Age: State-of-the-art protections and non-discriminatory treatment are provided for digital products such as U.S. software, music, text, and videos. Protections for U.S. patents, trademarks and trade secrets are strengthened.

Strong Protections for Worker Rights: CAFTA goes far beyond previous FTAs in addressing worker rights issues. The Administration developed a three-part strategy that will ensure effective enforcement of domestic labor laws, establish a cooperative program to improve labor laws and enforcement, and build the capacity of Central America and the Dominican Republic to monitor and enforce labor rights.

An Innovative Environment Chapter: Central America and the Dominican Republic will participate in a robust and unique public submissions process to ensure that views of civil society are appropriately considered. The agreement requires effective enforcement of environmental laws and is complemented by an Environmental Cooperation Agreement.

Strong Protections for U.S. Investors: The agreement establishes a secure, predictable legal framework for U.S. investors in Central America and the Dominican Republic, and contains a commitment to develop an appellate mechanism for investor-state disputes.

Open and Fair Government Procurement: Provides ground-breaking anti-corruption measures in government contracting. U.S. firms are guaranteed a fair and transparent process to sell goods and services to a wide range of government entities.

Increased Transparency: The agreement’s dispute settlement mechanisms call for open public hearings, public access to documents, and the opportunity for third parties to submit views. Transparency in customs operations will aid express delivery shipments and will require more open and public processes for customs rulings and administration. Agreement also contains strong antibribery commitments, including criminalization of bribery.

U.S.- CAFTA-DR Free Trade Agreement
Frequently Asked Questions: www.export.gov

What is your opinion of the CAFTA-DR Free Trade Agreement?

Back in 2007 when I visited the Dominican Republic for the first time I started sending emails to one of the best Attorney’s on the island with lots of legal questions. One of the questions I asked Attorney Fabio J. Guzman was about the laws and how to form a Dominican corporation!

Attorney Guzman replied to my email and said that a minimum of seven stockholders is required. So I wondered who I would want named as a partial owner of my Sosua real estate! Attorney Fabio Guzman went on to say that law firms generally provide nominees when shareholders are less than seven.

Here is a direct quote from the email that Attorney Guzman sent to me back in 2007.

“These nominees would transfer their shares to the real stockholder after the company is formed. The founding members subscribe the articles of incorporation, prepare a list of shareholders and declare before a Notary Public that the shares have been subscribed and paid for by the shareholders. After the documents are approved at a meeting of shareholders, and certain publicity formalities are fulfilled (filing of copies of the corporate documents at the appropriate mercantile registry), the corporation is officially formed. Shareholders must sign the documentation described above personally or through a representative with the appropriate power-of-attorney.”

Attorney Guzman also mentioned that all stockholders must be registered in the Dominican Republic, unless the share certificates are issued to the bearer. If shares are requested in bearer form, the attorney may require that clients provide the following:

• Copy of their passport’s picture page
• Reference letter from a bank in his or her country of residence
• Reference letter from an attorney in his or her country of residence
• Letter from the local Police.

The following information is required to start the Dominican incorporation process:

• Name of Dominican corporation
• Particulars (full name, nationality, occupation, marital status, address, and passport numbers) of the founding shareholders
• Capital of corporation
• Purpose of the corporation

When I asked about costs Attorney Guzman said that incorporation costs depend on the capitalization of the company. The costs range from US$1400 for a standard RD$100,000 pesos corporation to US$10,500 for a corporation with a RD$10,000,000 social capital. Legal fees in the Dominican Republic are subject to a 16% service tax. Remember, these figures were quoted back in 2007!

If you’re wondering how long this all takes I asked that question to Attorney Guzman as well and he said the time required for incorporation depends on the name chosen. If you choose a shelf numbered Dominican company, you will be in control within a week. If, on the other hand, you choose a particular name for the Dominican Corporation, the incorporation time will depend on the availability of the name which could take months. However, you can close your real estate transaction in the new corporate name before the incorporation process is completed.

I was very appreciative of Fabio Guzman taking the time to go into such detail about forming a Dominican corporation. If you have any questions for Attorney Guzman I’m sure he can offer 2010 updates to the law and help you to understand any additional information or the procedure to form a Dominican Republic company.

If there is anything you do not understand or wish to be clarified, please contact Attorney Fabio J. Guzman by email at: Fabio@DRLawyer.com or visit his website at www.DRLawyer.com.

If you would like to comment on this post please use the reply box below…what’s your experience with Dominican corporations?

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