Post sanction trade in Yugoslavia

Yugoslavia, once more, has become interesting for foreign investments and international trade activities. Selma Mujezinovic, a commercial lawyer at law firm Clyde doo Belgrade, explains further.

Eight years of international sanctions, and political, trade, economic and cultural isolation of the Federal Republic of Yugoslavia have taken their toll on the whole of Yugoslav society at large, sparing no one. Then, the upheaval of October 5, 2000 caused changes in both the national and international status of the country.

Today, a year later, it is apparent that despite all the hardships endured in the past eight years a surprisingly vital and sophisticated social and economic structure has, against all odds, survived. This same vitality has created a legal environment that enabled both the federal and republic governments to react swiftly and in a timely manner to the changes that occurred in October 2000.

Perhaps some of the best examples of how the federal government responded to the requirements of both national and international markets and international economic relations are the changes and amendments which have entered into Yugoslavian international trade law, the law on foreign exchange, the customs law, the law on duty rates and all the bylaws, rules and regulations relevant to these matters.

Two in one

The Federal Republic of Yugoslavia consists of two republics, the Republic of Serbia and the Republic of Montenegro. The constitution of the Federal Republic of Yugoslavia defines the terms of reference of the Federal Republic of Yugoslavia, and the constitutions of the two member republics define the terms of reference of those two republics.

Through its federal authorities, the Federal Republic of Yugoslavia determines policy, passes and implements federal laws and other regulations, and provides constitutional and judicial protection, particularly in the following fields:

a) Freedoms, rights and the duties of citizens.

b) The unified market, for example the legal status of companies and other economic entities; monetary, banking, foreign exchange, foreign trade and customs systems; systems of foreign credit relations, and the basis of the tax system.

c) Foreign relations, including relations with international economic and financial institutions, the status of foreign citizens and foreign legal entities in Yugoslavia, supervision of import and export of goods and services, and passenger traffic with foreign countries, for example.

In accordance with its terms of reference, the federal government passed two federal laws at the end of 2000, both which represent the first phase of particular reforms in the field of foreign economic relations.

The Law on Changes and Amendments to the Federal Law on Foreign Exchange came into effect on December 30, 2000, speaking in broad terms, provides for the following:

a) It is now possible and legal to calculate contract prices in Yugoslav dinars, but basing such prices on foreign currency or the value of gold exchange rates, thus guarding contracting parties against inflation.

b) Advance payment is now allowed for all goods and services being imported, under conditions set out by the National Bank of Yugoslavia; goods or services which have been paid for in advance must imported within of 60 days from the date of the advance payment.

The federal government has been empowered to propose a method of registering foreign trade contracts in order to provide efficient control since it is no longer mandatory to register foreign trade contracts with the National Bank of Yugoslavia.

Domestic banks registered for conducting banking operations banking operations abroad are now allowed to provide local firms with foreign currency loans in order for them to make payments for the import of equipment and spare parts. Provisions allowing for foreign currency loans for import of raw materials for export oriented production have been once again introduced.

The national agency of the National Bank of Yugoslavia, together with other commercial banks, has been empowered to buy, exchange and sell foreign currency.

The second law that came into effect on January 1, 2001 is the Law on Changes and Amendments to the Law on International Trade.

Its most pronounced characteristic is administrative deregulation. This means that companies which conduct foreign trade activities no longer have to be entered separately into a register held with the federal ministry of foreign economic relations and do not have to pay high taxes for annual re- registration. Furthermore, they are no longer obliged to deposit the amount of Dm10,000 with the designated commercial bank in order to carry out foreign trade operations. No provisions exist for the mandatory registration of foreign trade contracts with the National Bank of Yugoslavia, but rather companies are obliged to maintain a control register of their own, in which the particular details of each contract are entered.

Bearing on quotas and licences

The second phase of reforms in foreign economic relations is marked by another package of laws, which were passed in May this year. The Law on Changes and Amendments to the International Trade Law provides for one of the most important changes in relation to export and import quotas, and licences. Imports of goods and services are now conducted without quotas and licences, and only exports of certain domestic goods fall under the regime of quotas. This means that the import of goods and services has been completely liberalised and that customs is the only control measure imposed by the state on domestic products. This will result in fairer competition on the domestic market and better supply of goods to the domestic market. The federal ministry is empowered to order that domestic goods are to be on an export quotas regime – they are mostly agricultural products.

The import of hazardous waste materials is strictly prohibited.

The second part of this package is the customs laws and bylaws, rules and regulations that propose new customs rates. There are now six customs rates: 1%, 5%, 10%, 15%, 20% and 30%. All goods imported into the Yugoslav market fall under one of the aforementioned rates since, as already said, the only control mechanism with regard to the domestic market is customs rates.

London-based international law firm Clyde & Co entered into an association with two Yugoslav partners and in September the joint-venture firm Clyde doo, Belgrade was incorporated.