The Basics of the Serbian Law on Foreign Trade Transactions
November 21, 2017 by Nebojša Stanković
Foreign trade transactions are important for every single country in the world. In Serbia, the Law on Foreign Trade Transactions is quite detailed and includes the most important regulations regarding the foreign trade process.
Let’s take a look at some of the most important things that this law oversees.
What is considered a Foreign Trade Transaction?
According to the Law on Foreign Trade Transactions, Foreign Trade includes any type of turnover of goods and services to foreign countries, as well as any direct investment in a Business Company. The law is reciprocal, therefore, an investment by a domestic individual in a foreign country or investment by a foreign individual in the domestic country is considered a foreign trade transaction.
An exception is foreign trading with arms and military equipment, which is regulated by additional laws beside this one. Therefore, any type of investment or turnover made between a domestic company or individual, and a foreign company and individual is considered a foreign trade transaction.
Any type of investment made in a business company by a foreign individual or legal entity is considered as foreign trade. This includes creating a new company, opening of a branch or investing in an already existing company.
Also, any type of investment in a country’s infrastructure, presenting projects such as buildings and other types of constructions, engineer work, and other types of work and services on structures are considered as foreign trade. The same applies to the foreign investor in domestic territory, as well as for domestic investors in foreign territories.
Export is perceived as any type of sending, extraction, or delivery of goods from Serbia to a foreign territory, including customs territory, in accordance with customs regulations of the Republic of Serbia.
Import, on the contrary, is entry, delivery or conveyance of goods from a foreign territory, or foreign customs territory to the territory of Republic of Serbia.
Merchandise transit is defined as transport of goods through customs territory of Republic of Serbia in accordance with customs policies of Republic of Serbia.
Now let’s move onto how the whole foreign trade transactions are regulated.
How is it regulated?
The Law on Foreign Trade Transactions is regulated by several different factors. It functions in accordance with the rules of the World Trade Organisation, as well with the rules of the European Union. The whole process is supervised by the Agency for Foreign Investments and Promotion of Export.
This is important because different types of merchandise being exported also undergo the rules of the World Trade Organisation and the European Union.
Furthermore, a domestic investor is someone who has a business registered in the Republic of Serbia, has its citizenship, is registered on a local address (has not been registered to live on a foreign address for a period longer than a year).That person can either be a legal entity or an individual.
On the other hand, anyone who does not fulfill the abovementioned conditions is considered a foreign investor. This is how the law perceives the performer of foreign trade.
In order to import or export, it is necessary to acquire a permit. When all of the documentation is prepared, the legal entity needs to file a request to the Ministry of Trade, Tourism and Telecommunications.
Usually, the request is automatically approved (if the right documentation is sent), however, there are exceptions when the request is denied, and process is moved from automatic to manual status, as the exporter, or importer has to take more actions in order to successfully acquire the permit.
Limitations and good conditions
All laws and regulations created by a country include limitations and good conditions to ensure that everyone gets a fair treatment.
For example, both domestic and foreign individuals face limitations under the Law on Foreign Trade Transaction. Individuals cannot import or export huge quantities of goods that end up in business trade later on. However, the limitation allows for the individual to import and export goods that are going to be for their private use.
On the other hand, foreign investors who want to establish companies in Serbia have a lot of benefits. The Law on Foreign Trade Transaction incorporates what is known as Treatment of the Most Favoured Nation. This means that for every foreign trade made, the Republic of Serbia can provide special exceptions that make the whole process much easier to complete, helping save time in the whole process.
These special conditions can be applied to both export and import processes, which is quite inviting to foreign investors, as they can quickly handle the import/export process without meeting any legal drawback, such as long wait times for documentation. Furthermore, this means that the imported goods will receive equal treatment to the local goods.
But, the Law on Foreign Trade Transactions includes more limitations, with the goal of keeping the balance in the country. A good example is the limitation on quantity of the goods being imported or exported. There are two primary reasons why this limitation is sometimes used.
- Shortage of goods – Quantitative limitations are usually enforced by the government, for a short period of time due to problems that export or import can cause.
A massive export can lead to a shortage of goods, creating an unstable local market. Furthermore, a massive import of already existing goods can create an abundance of merchandise in the local territory, lowering the price, and profit of the local businesses.
To prevent all this, the government carefully uses quantitative limitations. It serves to protect the local economy.
- Health and biodiversity protection – As regulated by the Law on Foreign Trade Transactions, the second reason for quantitative limitations enforcements includes protection of public morale, protection of life and human health, protection of biodiversity (animals and plants), following the rules of the World Trade Organisation. This covers a lot of aspects of fair trade and the government is in complete control over these regulations and can intervene if necessary.
It is clear that the law is compatible with the world-wide standards and that foreign investors have a lot of flexibility with the range of investments they are planning to make.