The following research report contains market research, analysis, statistics and business intelligence relating to research on Apparel Industry In Colombia.

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ABSTRACT
Colombia's textile and apparel industries operate with some degree of self-sufficiency, but also rely on imports of technology, machinery, non-cotton fibers and fabrics, raw materials for synthetic fibers and fabrics, and novelty items (buttons, hardware, accessories). Accounting for about two percent of Colombia's GDP, the textile and apparel industry is an important component of the domestic economy. Colombian import and customs controls on foreign textiles and apparel from Asia, Ecuador, and Panama have improved greatly. Under-invoicing, dumping, and contraband have negatively impacted the textile and apparel industries for years. Increased export promotion, opening of new markets, and governmental protective measures against foreign unfair competition are diminishing further damages to these industries.

The Colombian textile industry, which is sophisticated and mature, is dominated by about five integrated mills that command a majority share of the total textile market. There is a sizeable, growing market for cotton yarns and fibers, primarily due to emphasis on increasing exports of quality textiles and apparel. Domestic cotton fiber production is insufficient to fulfill demand, both in quality and quantity. Declining cotton output has resulted in an increased dependence upon fiber imports, which now satisfy fully sixty percent of domestic cotton requirements. The opening of the Colombian market to imports has forced Colombian textile and apparel companies to switch from offering a wide variety of products to fewer items on a larger scale.

Colombia is strategically located on the northwest corner of South America at the crossroads of the Americas, and by air is only three hours from Miami and one hour from the Caribbean islands. Colombia has an area of 1.14 million square kilometers (712.5 million square miles), with three major seaports on the Caribbean coast and one on the Pacific. The population is nearly 40 million, with 70 percent living in urban areas. The literacy rate is 87 percent.

Due to its geographic location; its regional integration, i.e., Andean Community (with Venezuela, Ecuador, and Bolivia), and the G-3 (with Mexico and Venezuela); and its long experience in the textiles sector, Colombia should is a key textile gateway to markets of the Andean Community, and should be the central focus of any regional export strategy. A. Market Overview

Since the early 1900s, Medellin has been the heart of Colombia's textile and knit products manufacturing sector, accounting for nearly fifty percent of Colombia's textiles, fabrics, fibers, and apparel production. Bogota accounts for about 35 percent of production; and the remaining 15 percent is spread among other cities. Seventy percent of Colombia's cotton product manufacturing plants are located in Medellin. The entire Colombian textile/apparel industry is improving infrastructure, quality control, and customer service.
Colombian apparel is becoming more competitive internationally, because the garment industry has access to good quality foreign fabrics and materials at competitive prices. Apparel represents about 70 percent of total textile sector exports and 3.9 percent of Colombia's US$13 billion total exports in 2000. Colombia is especially strong in the production and export of cotton casual wear for men, women, and children, underwear, and bathing suits.

Although there have been some technological advances in improving productivity by replacing human labor with high efficiency equipment (about US$500 million have been invested in new equipment and technology in the past five years), Colombia still does not have sufficient state-of-the-art equipment. To become more competitive, the textile and garment industries will require modern equipment to meet expected exportgrowth in coming years.

The opening of the Colombian economy has facilitated the importation of capital goods, intermediate goods, raw materials/inputs, and consumer goods. However, textile industrialists have viewed the opening as tough competition for the textile and apparel sectors. Between 1996 and1999, several important apparel producers and small garment manufacturers could not compete and went out of business.

Due to ongoing problems of contraband, dumping, and money-laundering, the Colombian textile and apparel industries have not grown as expected. In fact, during the 1997-1999 recession, they experienced negative growth, with little current recuperation. However, textiles, apparel, and made-ups still rank high among local manufacturing industries, with relatively strong exports to the EU, Canada, the United States, Latin America, and the Caribbean. The United States purchases about 53 percent of Colombia's apparel exports and 42 percent of textile and apparel exports combined. But, the U.S. is also a major supplier of apparel to Colombia, with a 45 percent share of Colombian imports in 2000, down from 60 percent in 1999 and 59 percent in 1998. Since illegal or contraband imports are equal to approximately 30 percent of officially recorded legal imports, actual import volume from the United States is much higher.

Colombian consumers show a preference for good quality U.S. brands and labels, fashion, styles, designs and prints. The U.S. is expected to maintain its share of the import market, while competing against imports from agreement countries, as well as low-quality textile and apparel imports from Asia and other third-country imports through Panama's free trade zone.

Market Trends

The Colombian economy is still experiencing the effects of the 1997-1999 recession, despite slight signs and public announcements of economic recovery and reduction of unemployment rates. GDP rose 2.8 percent in 2000, compared with a fall of 4.3 percent the previous year. Colombia's economic cycle seems to be at the beginning of an upturn. Consumer price inflation was 9.2 percent in 1999, 8.8 percent in 2000, and has continued its fall in 2001, approachng the target of 8.0 percent.

The Colombian government's growth target for 2001 is 3.8 percent, while other financial sources forecast real GDP growth of 3.3 percent, rising to 4.0 percent in 2002 and 4.9 percent in 2003. The private sector seems skeptical about the target growth figures for 2001, considering the actual 1.75 percent growth detected during the first quarter of 2001.

The growth of the Colombian textile and apparel industries has been slow due to the above mentioned 1997-1999 recession period. Future growth will depend on the health of the domestic economy, price trends, export growth, and the general business environment.

Growth in consumer spending and apparel demand may be influenced by the increase of young professionals in their prime earning years. Teens (a growing sector) also may have an impact on apparel spending increases, as they prefer to buy trendy and brand-name clothing, and they tend to concentrate more on comfort and function than fashion, increasing the demand for casual wear. A higher demand for casual wear has also been detected among mid- and upper-level executives (both men and women), as "casual Fridays" are being adopted in Colombia. Colombian consumers are demanding higher-quality apparel at moderate prices. The Colombian textile and apparel industry and importers of apparel must offer competitively-priced clothing and respond quickly to changes in consumer demand, both in comfort and fashion.

Internet and catalog sales in Colombia are in their initial stages. Although on-line shopping has not spread as quickly as in other countries, courier services are available for legal credit card purchases in the U.S. to be shipped to addresses in Florida and then on to Colombia. There are few restrictions for this type of purchase, as current rules permit unlimited urgent/express or courier shipments not exceeding US$1,000 in value and 20 kilograms in weight, subject to the payment of 10 percent CIF tariff and a 16 percent value-added tax assessed on the CIF-duty-paid value of merchandise.
U. S. Market Position: Several factors should be considered in assessing the internal demand for apparel of U.S. origin. Colombia's proximity to Miami, Panama (particularly the free trade zone in Colon), and the Caribbean permits Colombians easy access to a wide selection of merchandise from the U.S., Europe, and Asia. Cultural and educational ties with the U.S. are a key factor in the purchase of "U.S. made" products. A long tradition of democratic governments, and a population of nearly 40 million with a growth rate of 1.7 percent should make Colombia an attractive and stable market for U.S. business. The U.S. holds the largest share in Colombian imports, as well as direct foreign investment in Colombia.

The United States has traditionally been Colombia's main trading partner, supplying an average of 35 percent of Colombia's merchandise imports and purchasing an average of 45 percent of its exports between 1998 and 2000. Colombians are familiar with U.S. shopping malls, retail stores, and outlets. While on vacation, with their families, many select and order merchandise for their stores and boutiques in Colombia. Purchasing agents and employees from department stores and hyper-markets frequently travel to the U.S. and Europe in search of new products. Colombians are familiar with U.S. trade and fashion shows and know who the wholesalers are. Colombian consumers have shown preference for good quality U.S. styles, designs, prints, and prices.

The Textiles Sector: Local production continues to be labor-intensive and takes the largest portion of skilled labor among the manufacturing sectors in Colombia. Medellin has traditionally dominated the textile market with the largest textile mills and garment manufacturers for distribution throughout Colombia, and sizeable export quantities to Venezuela, Ecuador, Central America, the Caribbean, Western Europe, and the U.S. Most Colombian textile exports go to two Andean Community countries (Venezuela and Ecuador), as well as Peru, Brazil, and the U.S. also receive textile exports. Other important manufacturing outlets are located in Bogota, Barranquilla, and more recently, in Ibague. Small and medium-sized industries are increasing their productivity and demand for more complex equipment.

According to the National Statistics Bureau, there are approximately 500 Colombian manufacturers that produce textiles. The textiles sector contributes about 5.3 percent to Colombia's manufacturing output, and employs some 200,000 workers directly and another 600,000 indirectly, thus representing 13.3 percent of total employment in the manufacturing sector. Industry trade sources have estimated that cotton textile production represents approximately 43 percent; yarns and woven fabrics: 21 percent; knit products: 19 percent; and man-made fiber products: 8 percent. The textile industry produces annually approximately 800 million square meters of cotton, polyester, nylon, viscose and wool fabrics, as well as twill, satin, cotton poplin and polyester blends.

Cotton represents 50 percent of the textile industry's total fiber consumption. The remaining fiber usage is divided between man-made fiber (48 percent) and wool (2 percent). The percentage of man-made fiber usage in textiles has increased from 42 percent in 1995 to the current 48 percent. The growth of synthetic fiber usage has been at the expense of cotton.

End-use products supplied by major textile manufacturers include: jeans, underwear, sheets, pillowcases, bed linens, towels, trousers, slacks, dresses, skirts, women's knit tops, t-shirts, men's knit shirts, other knitwear and tops, fleece wear, children's wear, and sportswear.

TheGarment Industry: The Colombian production of apparel and made-ups is fairly unsophisticated and labor-intensive; labor represents 80 percent of production costs, with only 20 percent going to sewing and finishing machines, parts and attachments, and supplies. The apparel sector accounts for about three percent of the country's manufacturing output, and employs over 65,000 people, representing about 7 percent of the manufacturing sector's total employment.

The market comprises mostly small businesses, which tend to grow due to family needs for incremental income--a result of sparse employment opportunities, low minimum wage, inflationary pressures, and lack of government stimulus for encouraging small business development. Private cooperatives and small business groups are providing training, and resources to these family-owned companies.

The major Colombian textile mills are vertically integrated with garment production. Colombia has approximately 8,000 garment manufacturers--about half of them have between 20 and 60 machine pieces. Only a small group of these manufacturers (no more than three percent) export, their exports include men's and women's outerwear, women's intimate apparel and brassieres, children's wear, jeans, shirts and T-shirts. Many of these manufacturers operate in free trade zones with important assembly operations under "Plan Vallejo" (better known as "maquila", which are U.S. 807/807A contracts accounting for approximately 60 percent of total shipments). These "Plan Vallejo" manufacturers also offer complete packages (design and final product); the one located in the Caribbean coastal city of Barranquilla is the most active.

The top destinations for apparel exports are the United States, Venezuela, Ecuador, Germany, Peru, Brazil, Mexico and Japan. The top destinations for textile exports are the United States, Venezuela, Ecuador, Peru, and Brazil. Industry trade sources indicate that 44 percent of textile exports and 65 percent of fabric exports were made of cotton; 60 percent of apparel exports were from woven fabric, while 30 percent were made from knitted fabric.

The top exports of apparel in 2000 were non-knitted men's and boys' suits; ensembles, trousers and shorts of cotton; and suits and suit-type jackets, blazers and trousers of wool and synthetic fibers. Also, women's and girls' brassieres, girdles and panty-girdles; blouses and shirts of cotton and wool; undershirts of cotton and man-made fibers; and all handkerchiefs of cotton. Also, knitted women's and girls' briefs and panties of man-made fibers and cotton; nightdresses and pajamas of man-made fibers and cotton; negligees of man-made fibers and cotton, and slips of other textile materials; men's and boys' T-shirts of cotton and man-made fibers, underpants and briefs of cotton and man-made fibers; women's and girls' stockings of cotton and synthetic fibers, pantyhoses and tights of synthetic fibers; babies' garments and clothing accessories of cotton and synthetic fibers; and women's and girls' blouses and shirts of cotton and man-made fibers.

Distribution and Business Practices: A well-known and aggressive local representative or distributor, competitive pricing, financing, timely delivery and good technical support are all important for success in the Colombian market.

Representation and/or distribution contracts between U.S. firms and their Colombian agents/distributors must follow the provisions of the Colombian Commercial Code. The agreement must be drafted on the contracting firm's own stationery in Spanish, should be notarized by a Notary Public, and must be authenticated by a Colombian Consulate in the United States. The agent in Colombia should first register the agreement with the Ministry of Foreign Affairs and then with a local Chamber of Commerce.

Import Market

While significant progress in reducing tariff levels has been made, a 16 percent value-added tax, plus duties assessed on CIF cost, still keep the cost of most imports high. New laws have been enacted to reduce the deficit and government spending which led to increased and new taxes, added surcharges, and monetary policies that devalue the Colombian peso to make Colombian exports more competitive.

Due to internal crop and rural security problems as well as international competition, Colombia is no longer self-sufficient in cotton production. Cotton production in Colombia has fallen since the early 1990s, due to low farmer returns and growing insecurity in the countryside. Cotton output in 1999/2000 fell by one-third; a modest three percent increase in output is forecast for 2000/2001. Cotton consumption is also declining, due to the economic recession the country is still experiencing. Cotton imports are forecast to increase three percent in 2000/2001, as the economy improves; the U.S. is the dominant supplier of Colombia's cotton. Imports of yarns/fabrics have declined; cotton yarn imports alone decreased four percent in 1999. India was Colombia's largest cotton yarn supplier due to price considerations.
Statistical Data Table/ Avg. Annual Growth
Apparent Market Size Rate estimated for

following two years

(US$ millions) 1999 2000 2001 (e)

Import Market 68.5 67.4 69.4 3%
Local Production 1,037.0(e) 1,068.1(e) 1,100.2
Exports 422.6 514.2 589.0
Total Market 682.9 621.3 580.6 3%
Imports from U.S. 41.1 30.4 31.3 3%
Exchange Rates 1,873.77 2,229.18 2,599.22

Estimated Inflation Rate in 2001: 8%
Estimated Colombian Peso Devaluation Rate in 2001: 16.6% 2000's Import Market Share:
US:45%; China 12%; Italy 8%; Hong Kong 5%; Ecuador 4%; Panama 3%; Peru 3%

% % %
Principal Country of 1998 Share 1999 Share 2000 Share
Origin Imports (US$ Millions)

Unites States 44.1 59 41.1 60 30.4 45
China 3.4 5 4.1 6 8.2 12
Italy 6.6 9 5.6 8 5.8 8
Hong Kong 4.1 5 3.1 5 3.3 5
Ecuador 1.5 2 2.7 4 2.8 4
Panama 0.3 .004 0.2 .003 2.2 3
Peru 0.4 .005 0.3 .004 2.2 3

(e) estimates. All other statistics are official figures obtained in U.S. dollars.

Sources: MINCOMEX (Ministry of Foreign Trade); The World Trade Atlas; DANE (National Statistics Dept.); Publications: Estado de la Industria Textil en Colombia, and Industria Textil de Colombia, by Arturo Orozco; USDA's 2000 Cotton Annual Report; INEXMODA (Institute for Exports and Fashion); Business Monitor International; and Colombian newspaper articles.
B. Competition

Consumer spending on apparel varies according to income. Middle- and high-income families tend to buy good quality Colombian products, as well as foreign, well-known labels from the U.S. and Europe. Lower income families tend to buy low-priced Colombian apparel, and inexpensive, inferior-quality Asian and other third-country products. Many consumers still buy contraband fabrics and apparel; middle-income families buy both Colombian and foreign irregular, off-season, and used clothing (to a lesser degree now since used-clothing imports are restricted). The counterfeiting of apparel and known brand labels in Colombia has been a major problem for years, especially for Levi's jeans, which are now being produced in Colombia under a licensee agreement, both for export and for the domestic markets.
The Colombian textile industry has been dominated by:

A) large and internationally-known textile mills (five of which are integrated mills): Coltejer, Fabricato, Tejicondor, Texpinal, Vicu–a, Indulana, Fabrisedas, Bogota, Federaltex, Celtex, Fibratolima, Unica, Hilacol, Lafayette, Texmeralda, Textilia, Textrama, and Hilanderias Colombia.

B) fiber producers: Enka de Colombia.

C) garment manufacturers: Confecciones Colombia, Everfit, Hernando Trujillo, Luber, Vahler, Arturo Calle, Jhorman, and El Gran Baron.

D) other manufacturers and/or licensees of well-known labels from the U.S. and Europe: Luigi, Pierre Cardin, Guy Laroche, Yves Saint Laurent, Nautica, Guess, The Limited, Tommy Hilfiger, The Gap, Boss, Liz Claiborne, Structure, Banana Republic, Levi's, Dockers, Arrow, Van Heusen, Express, Pepe, Berkshire, Maidenform, Formfit Rogers, Triumph, Benetton, Vassarette, Peter Pan, and Victoria's Secret.
Only textile mills and garment manufacturers that have registered a moderate financial recovery this year are in the best position to invest in new equipment and technology, carry out expansion projects, and develop new products. Implementation of expansion plans will depend on the success of government regulations for reactivating the textile industry; easier access to foreign equipment, technologies, investment and financing; and controlling competing textile imports and smuggled products. Traders, importers, boutiques, department and retail stores have had slight success in introducing new labels and current fashion from both the U.S. and Europe.

The Colombian Government exercises strict import controls on unfairly competing apparel, textiles, and other made-up articles, which must conform to pre-established minimum price levels. Official minimum FOB prices have been set for the purpose of assessing the corresponding ad-valorem duties, taxes, and surcharges on textile, apparel, and yarn imports. This has been done to stop dumping and unfair foreign competition from China, Pakistan, India, Indonesia, Thailand, Vietnam, and third countries through Panama. U.S. apparel is not affected by these measures. Colombia has also restricted imports of irregulars, used clothing, and used textiles. C. End Users

Domestic consumer demand as well as the demand for credits and loans decelerated during the 1997-1999 recession. Inventories have remained high primarily because of negative internal social and economic conditions, industry recession, high unemployment (currently 19 percent), loss of purchasing power and purchasing power parity effects, and high interest rates.

Despite a decelerated internal demand, sharp increases in clothing production and consumer spending were detected during the second half of 2000 (perhaps due to end-of-year festivities), which dropped again in the first quarter of 2001. Imports in 2001 are expected to benefit from slightly higher consumer spending and decreased Colombian inflationary pressures, despite an acceleration of the Colombian peso devaluation (estimated to reach 16.6 percent by the end of 2001). Consequently, traders expect stocks to be depleted by the end of this year.
Retail sales during 1999 were lower by 3.9 percent than those of 1998, sales in 1998 were higher by 16.3 percent than those of 1997, and 1997 sales were up by 22.5 percent from the previous year. Despite the slowdown in domestic market sales in 1999 and partially in 2000, the fast evolution of hyper-markets in Colombia and strategic alliances, along with a large array of retail outlets, represent good opportunities for U.S. apparel and made-ups. Colombian garment manufacturers are receptive to imported technology, raw materials, inputs, buttons, novelty items, and hardware.

Economic recovery depends, in part, on the lowering of interest rates on credits, loans and credit card rates (currently between 38-40 percent annually) and industrial reactivation. Decreased demand has maintained low price increases on apparel and made-ups.

Sales Prospects

Best prospects, mostly of man-made fibers, include men's, boys', women's and girls' clothing, including sweaters and pullovers, swimwear, dresses, suits, ensembles, overcoats, anoraks, silk ties, shirts and blouses, T-shirts, tank tops, trousers, and shorts; and also women's and girls' lingerie including pantyhose, tights, stockings, hosiery, brassieres and panties. These are classified, as follows:

Harmonized Code Description

61.03.00.00.00 Men's or boys' suits, ensembles,
62.03.00.00.00 suit-type jackets, blazers, and trousers.

61.04.00.00.00 Women's or girls' suits, ensembles,
62.04.00.00.00 suit-type jackets, blazers, dresses,
skirts, trousers, and shorts.

61.05.00.00.00 Men's or boys' shirts
62.05.00.00.00

61.06.00.00.00 Women's or girls' shirts/blouses
62.06.00.00.00

61.08.00.00.00 Women's or girls' briefs, panties,
62.08.00.00.00 underwear

61.09.00.00.00 T-shirts, tank tops and similar

61.10.20.00.00 Sweaters and pullovers
61.10.30.00.00

61.11.20.00.00 Babies' garments and clothing accessories

61.12.31.00.00 Men's or boys' swimwear
62.11.11.00.00

62.12.00.00.00 Women's and girls' brassieres, girdles and
panty-girdles

61.12.41.00.00 Women's or girls' swimwear
62.11.12.00.00

62.15.00.00.00 Ties of silk and man-made fibers

61.15.00.00.00 Panty hose, tights, stockings, socks, and
other hosiery

62.12.00.00.00 Brassieres, girdles, corsets, and similar
articles

D. Market Access

Import Climate: Colombia has signed several multilateral and bilateral free trade agreements that affect trade. The most important of these are: a) the Andean Community (ANCOM) with Venezuela, Ecuador, and Bolivia (Peru withdrew in April 1997); b) the Latin American Integration Association (LAIA) with Argentina, Brazil, Mexico, Chile, Paraguay, Uruguay, El Salvador, Costa Rica, Guatemala, Nicaragua, Honduras and Cuba, which was later renegotiated country by country on a bilateral basis; c) the G-3 (Colombia, Mexico, and Venezuela); and d) the Colombia-Chile bilateral agreements. Full implementation will take several years, but once achieved, would give Colombia access to a free market of over 200 million people. Colombia has also requested admission to NAFTA.

Under the ANCOM agreement, the signatory countries must assign a common external tariff (CET) for imports coming from third countries and, at the same time, eliminate duties for products manufactured and traded within the region. There are four tariff levels in the CET: 5, 10, 15, and 20 percent. As these member countries grow and modernize, foreign firms may consider the expanded ANCOM market attractive enough to initiate local production for the regional market.

Due to a number of integration agreements with various countries, a complex system of tariffs are applied according to the different treaties.
The prior import-licensing requirement has been virtually eliminated. Approximately 97 percent of the 5,162 items in the Colombian Harmonized Tariff Schedule are now on the free import list (i.e., no license required). Import prices are now undergoing closer scrutiny (for duty collection purposes), as is the entry of foreign currency. U.S. dollars can be exchanged freely through banks and financial corporations.

Tariffs: Import duties are ad valorem and are assessed on the CIF value of shipments. Colombia's tariffs conform to the 5-20 percent Common External Tariff (CET) in effect for the Andean Community. Government entities are no longer exempt from import duties. Imports of apparel are classified under chapters 61 and 62 of the Colombian Harmonized Tariff Schedule and can easily be importedinto Colombia. Apparel is assessed between 15 and 20 percent import duty on CIF value, plus a 16 percent value-added tax.

Free import list: The majority of tariff categories for textiles and apparel do not require prior import license approval by the Ministry of Foreign Trade/MINCOMEX. However, customs duties and all other taxes must be paid. An import request or registration form is still required.

Prior import list: Imports of old or used clothing, closeouts, irregulars, rags, and scrap cordage of textile material wastes are subject to prior import license approval which, in practice, is not granted. Therefore, the importation of these items can be considered prohibited.

Import registration forms for textiles and apparel are valid for six months. A request for extension is complicated and is permitted only for official imports and capital goods.

Courier or express shipments: Courier or express shipments not exceeding US$1,000 in value and 20 kilograms in weight are freely imported into Colombia. These shipments are classified under HS 98.08.00.00.00, and are subject to a 10-percent CIF tariff and 16-percent value-added tax assessed on the CIF-duty-paid value of merchandise shipments. Rules apply to either air or surface courier shipments contemplated under the new Customs Code that entered into effect on July 1, 2000.
Subsidies/bounties: Export incentives include the "Plan Vallejo" (drawback) or "Maquila", "Plan Vallejo, Jr.", and the CERT (Tax Reimbursement Certificate), soft credit lines, and export credit insurance policy.

Under the "Plan Vallejo" or "Maquila", imports of raw materials, inputs, and semi-finished items, as well as machinery, equipment and parts for the production, transformation, or assembly of exportable goods are exempt from any prior import license requirement, customs duties, taxes, surcharges, or fees (provided they are later re-exported in the form of finished products). Imports under these plans should be authorized by DIAN (Internal Revenue & Customs Service) and must enter into a special arrangement with MINCOMEX which establishes the minimum local content and export percentage requirement on a case-by-case basis.

The "Vallejo, Jr." plan allows for duty-free importation of raw materials used in the production of exportable goods, as well as the replenishment of foreign-origin raw materials.

The CERT is a tax-reimbursement certificate which can be applied to taxes on income, customs duties, and certain other taxes. The amount of the CERT is calculated as a percentage of the value of the exported goods, and varies by product and country of destination. CERT values range from 2.25 percent to 6.50 percent. Exports from designated free-trade zones now qualify for the CERT program, depending on percentages of national content.

Legislation in effect encourages the establishment, operation, and maintenance of free industrial and commercial trade zones (most of which are located by seaports) so as to increase assembly operations, transformation or manufacturing of exportable goods, and bonded warehousing.

Bans/prohibitions: No tariff categories for textiles and apparel appear on the prohibited import list, except for used bags and sacks of vegetable fibers. Items previously prohibited are now permitted under license.

Certificate of Origin requirement: Only imports from countries with trade preferences are required to have certificates of origin.

Market outlook/restrictive business practices: In order to prevent dumping, unfair competition, and avoid possible damage to a rather well-developed textile industry, Colombia has restricted imports of used clothing and textiles, closeouts, irregulars, new and used rags, and scrap cordage of textile material wastes.

The Colombian government has introduced strict import controls or tariff relief (salvaguardias) to protect domestic industry against unfairly competing apparel, textiles, finished products, and othermade-up articles, particularly from Asia and Panama (about 100 textile products), which must now conform to pre-established minimum international price levels. Official minimum FOB prices have been set for the purpose of assessing the corresponding ad-valorem duties, taxes, and surcharges on textile and yarn imports.

Eleven ports of entry have been designated by the Colombian government for the entry of textiles: Barranquilla, Buenaventura, Cartagena, Bogota, Medellin, Cali, San Andres, Leticia, Bucaramanga, Cucuta (Venezuelan border), and Ipiales (Ecuadorean border). Unfortunately, robberies of trucks and their contents, particularly those coming from ports, is a severe problem.

Financing/payment: Import licenses and registration forms must include the terms of payment. These are generally between one and six months for imported products for immediate consumption, including raw materials, intermediate goods, and consumer goods. Foreign payments may be authorized in installments, but in no case can the original terms listed on the import documents be changed.

Special taxes, fees and/or surcharges: The Colombian cotton quota compliance was eliminated by the Colombian Cotton Development Institute for textile mills or manufacturers that import raw cotton and cotton yarns. Cotton import documents must indicate grade, fiber length, and title.

Most imports of consumer goods, consumer electronics, and apparel (in addition to a 15 percent estimate for freight and insurance FOB costs), are subject to a 1.2 percent surcharge on the FOB value of products for a so-called "Customs Services Fund" which was introduced recently under Article 56 of Law 633 of December 29, 2000.

VAT: A 16 percent VAT (value-added tax) is levied on the CIF duty-paid value of imports. The only exceptions are: vegetable fibers such as hemp, abaca, jute, sisal and hehquen (excluding wastes).

Language requirements on documents: Import registrations, license forms, and accompanying documents must be in Spanish.

Import procedures and documents: The following documentation is required by MINCOMEX to register imports and/or for the approval of an import application:

(1) completed import registration or license form, with a complete description of the goods including the commercial, technical, or scientific designations, marks, model, size, contents, end-use, etc., for proper identification and tariff classification;

(2) proforma invoice;

(3) catalogs, sketches, and diagrams. The request for a tariff classification decision and price lists certified by a chamber of commerce and notarized by the Colombian Consulate in the country of origin may be required for proper identification of goods and tariff classification;

(4) foreign exchange declaration, proof of payment abroad and/or valid letter of credit;

(5) establishment of a down-payment or an advance deposit for payments to be made abroad six months after the date of the bill of lading or airway bill (when required) and registration with the Central Bank (Banco de la Republica). Capital goods imports are exempted from this requirement. A thirty percent advance deposit with the Central Bank is required for loans of foreign origin or financing of imports for repayment abroad in less than five years.

Customs procedures: A new Customs Code entered into effect on July 1, 2000, which is still subject to further changes, particularly the penalties chapter. For nationalization, or customs clearance, the following documents and procedures are required:

(1) import registration or license form approved by MINCOMEX, when required;

(2) import declaration accompanied by the bill of lading or airway bill and the commercial or proforma invoice;
(3) proof of payment of import duties, value-added tax, surcharges and other fees made through commercial banks;
(4) phytosanitary, mercerization and other certificates, when required;

(5) packing list;

(6) customs valuation and inspection; and

(7) an Andean declaration of the aggregate customs value for all imports over US$5,000.
Customs procedures have been simplified significantly; fewer forms are required, as import/export procedures and customs clearance have become practically virtual. Importers are responsible for placing a correct value on imported merchandise and paying corresponding duties and fees through commercial banks. The drastic reduction in paperwork has simplified and accelerated the customs clearance process from weeks to a matter of hours. However, pilferage in customs warehouses continues to be a major problem. Certificates of conformity may be required for sensitive imports and other categories of products suspected of being imported through smuggling and/or fraud.
Warehousing charges: Imported goods stored in customs warehouses are subject to fees if an import manifest is not presented within two working days from their arrival.

Samples: Samples usually require the same documents as commercial shipments; they may be imported without an import license, registration form, or payment of import duties if they are consigned to a designated free trade zone, bonded warehouse, or imported on a temporary basis in-bond.

Prior authorization requirements: Phytosanitary clearance is required, as well as permits or proof of compliance, which is required by government entities when importing raw cotton, cotton yarns, and other vegetable fibers.

Labeling: Textile care, percentages of fiber content, and country of origin or manufacture must be listed on the labels of apparel and other textiles imported into Colombia.
Sizing/metrification: The metric system is used in Colombia. Sizes are identified both as small, medium, large, extra-large, etc., and by European size numbers.
Merchandising calendar: October, November, and December are considered the most important months for textile and apparel sales. Orders are usually placed between June and August. Merchandise should be with retailers by the end of October for end-of-year sales. Certain holidays and celebrations are also important for apparel sales: Love and Friendship Day (like Valentine's Day, but in September), Secretaries' Day, Mother's Day, Father's Day, Christmas, etc.

Financing: Most products are imported through letters of credit and/or time drafts. Soft and long-term financing is an important sales tool, especially for government imports or public tenders.

Colombian importers may freely negotiate payment terms with their suppliers, but importers must list the agreed-upon payment terms on the import documents and may not subsequently change them. Imports of consumer and intermediate goods and raw materials must be paid for within six months. All other imports are payable within the timetables set on the import/export documentation, plus a grace period of three additional months. Recently announced monetary measures may limit amounts, advance deposits, and payback timetables for direct external loans.

U.S. exporters should be alert to financial market competition and be prepared to offer soft and long-term financing after verifying the customer's credit status and the guarantees offered. Local importers usually obtain trade financing from commercial banks or credit agencies. Colombian exporters have access to credit offered by the Colombian Foreign Trade Bank (Banco de Comercio Exterior - BANCOLDEX), which replaced the former Export Promotion Fund - PROEXPO. This credit is granted at competitive commercial rates and may be requested at any stage of a foreign trade transaction (including raw material purchase, technical assistance, marketing and promotion, shipment, etc.). This credit is now being extended to Colombian importers--namely for industrial imports.

Direct Import Costs

Apparel from around the world now appears in Colombian stores. Although an increasing percentage of these products is legally imported, a significant amount comes in through contraband, which is a major problem, especially for consumer goods. Over US$5.0 billion in all kinds of products (mainly consumer goods) is estimated to enter the country illegally.

One of the causes for so much contraband is the fact that most imports of consumer goods, consumer electronics, and apparel (in addition to a 15 percent estimate for freight and insurance FOB costs), are subject to a 1.2 percent surcharge on the FOB value of goods for a so-called "Customs Services Fund" (which was introduced recently under Article 56 of Law 633 of December 29, 2000), plus a 20 percent CIF import duty and a 16 percent value-added tax (VAT) assessed on the CIF-duty-paid value of imported products. This approximate 62 percent margin over the basic FOB price of legally imported goods encourages contraband.

An Example of Apparel Landed Costs in Colombia:

Base Price 100
FOB Insurance/Freight Estimate (15%) 15
Dutiable CIF Base 115
20% CIF tariff 23
Subtotal 138
16% on CIF-Duty-Paid Value 22.08
Subtotal 160.08
1.2% FOB Customs Services Surcharge 1.20
Total Landed Cost of Apparel 161.28

U.S. exporters should note that consumers in Colombia usually end up paying an additional 80 to 120 percent over the FOB price of imports. Final retail prices usually depend on profit margins agreed on between U.S. suppliers and their Colombian representatives.

DISCLAIMER
Information in this report relies on sources including Government Publications, Opinions of industry experts and other public sources. Infomat can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. All prices subject to change without notice.

$3500 USD
For the 2008 Edition

Published: 2006 August
Market: Mens Womens Childrens
Region: Colombia
Industry: Apparel
Pages: 45
Delivery: 7-12 Business Days
SKU: infre0000292