I. Global trade outlook

According to the World Trade Organization - WTO, in its Press Release 862 of October 6, 2020[1],[1]the Entity now foresees a 9.2% decrease in the volume of world merchandise trade by 2020, followed by a 7.2% increase in 2021,as a result of COVID-19.

For its part, according to export information processed by the National Administrative Department of Statistics - DANE and the National Tax and Customs Directorate - DIAN, in October 2020 Colombia's exports were US$2,627.6 million FOB and presented a decrease of 21.0% in relation to October 2019, mainly due to the 42.7% drop in external sales of the group of Fuels and products of extractive industries.[2]

The data indicated on the global decrease in trade due to the current pandemic represents for the different territories a challenge of the greatest importance that requires the construction of collective, agile and innovative solutions, both conjunctural and structural, insofar as, on the one hand, the immediate effects must be counteracted, but on the other, it is necessary to think about the long-term reconstruction of the global socio-economic fabric, adopting solutions that are sustainable over time.

II. Vallejo Express Plan joins the package of measures implemented by Colombia in the area of foreign trade.

In the above context, Colombia has implemented a series of measures that have made it possible to reduce the effects of COVID-19, both in the social and economic environment.

Among the measures implemented is the issuance of Decree 1371 of October 19, 2020, which gives life to the so-called Vallejo Express Plan, through which it seeks to encourage exports of goods and services from the country.

The Special Import-Export Systems - SEIEX, known as Plan Vallejo in honor of its creator Joaquín Vallejo, emerged as part of a promotion system in 1961 aimed at freeing tariffs on imports to be used for the production of exportable goods.

The essence of the SEIEX is maintained today, allowing the users of the Vallejo Plan Programs to import raw materials, inputs, goods, capital goods and spare parts on a temporary basis, with suspension of the payment of customs duties (tariff and VAT), under the condition of incorporating the raw materials, inputs or using the goods for the production of exportable goods, inputs or use the goods and spare parts in the production of exportable goods and/or services, a condition that must be met and demonstrated within the term provided by law for each type of program, by submitting the respective report to the competent authority, today, the Ministry of Commerce, Industry and Tourism.   

By way of reference, it should be noted that according to information from the Ministry of Commerce, Industry and Tourism - MINCIT, there are currently 559 approved Plan Vallejo Programs, of which 90% correspond to raw materials, 8% to capital goods and spare parts, and 2% to services.

The companies with Vallejo Plan Programs are mainly located in Bogotá, Antioquia, Valle del Cauca, Atlántico, Cundinamarca, Bolívar, Risaralda and Caldas, and belong to the macroeconomic sector of manufacturing (68%), agro-industry (24%), mining (4%), services (2%) and moving industries (2%).     

Thus, the growth potential that the Vallejo Express Plan has in the business community makes it a real dynamizing instrument for the Colombian economy in times of COVID-19.

III. Regulatory scaffolding of the Vallejo Plan

Decree Law 444 of 1967 established the initial regulatory framework to operate the Vallejo Plan, which was subsequently strengthened through provisions such as the Foreign Trade Framework Law, Law 7 of 1991, which incorporated the services within the SEIEX to align the instrument to the new technological realities that arose with the fourth industrial revolution.

During the current year 2020, the provisions governing the SEIEX have been subject to several renewals, starting with Decree 285 of February 26, 2020, which in accordance with Decree Law 444 of 1967, constitute the current governing provisions of the Plan Vallejo Programs for goods and services.

At the level of Resolutions, there were also strategic renewals, as occurred with the issuance of Resolution 1055 of October 20, 2020, which regulates Decree 285 of 2020 and repeals Resolution 1649 of August 31, 2016, which previously established the provisions related to the Plan Vallejo Programs.

Likewise, Resolution 1054 of October 20, 2020, was issued, through which the list of tariff subheadings of capital goods and spare parts to be imported under Articles 173 literal c) and 174 of Decree Law 444 of 1967 was established, and Resolution 108 of 2017 was repealed.

Finally, under the same line, Resolution 1213 of November 30, 2020, is issued, which develops the Vallejo Express Plan contained in Decree 1371 of 2020.

IV. Benefits of the Vallejo Express Plan

The first thing to note is that the provisions of Decree 1371 of 2020 are transitory, so they will be in force for a term of 18 months, that is, until April 2022, and apply to the SEIEX Programs of i) raw materials and inputs, ii) capital goods and spare parts, and iii) services listed in Resolution 1131 of 2020.

The Vallejo Express Plan may be accessed by individuals and legal entities, business associations, consortiums and temporary unions of all economic sectors except for the energy mining sector.

Applications for the Vallejo Express Plan must be made to the Foreign Trade Directorate of the Ministry of Commerce, Industry and Tourism - MINCIT, through the Foreign Trade Single Window - VUCE, and may be either for initial programs or for approval of existing programs.

In the case of requests for initial programs, the applicant must prove the requirements established in articles 19 and 20 of Decree 285 of 2020, while in the case of requests for homologation, the applicant must only submit the request through a pre-established communication in the VUCE, to be signed by the legal representative without the need for supporting documents.

Regarding requests for homologation, it is important to point out that article 10 of Decree 1371 establishes as a requirement that the user of the Program has not been sanctioned by a duly executed act for non-compliance with its obligations during the last 3 years.

The applications will be evaluated and decided within 15 calendar days following the date of presentation of the authorization request, within which time the corresponding administrative act will be issued with the decision.

It is important to note that in those cases where the request for initial programs does not comply with the conditions and requirements of articles 19 and 20 of Decree 285, MINCIT will issue a single requirement that the applicant must respond, proving the adequate compliance with the request, under penalty of understanding the request to have been withdrawn.

Regarding compliance with export commitments, Decree 1371 also made the percentages more flexible as follows:

a. Programs of raw materials and inputs, covered by article 172 of Decree Law 444 of 1967 and article 6 of Decree 285 of 2020, acquire the export commitment of at least 60%, with which they may destine 40% to the domestic market. 

At this point it should be noted that, since they are temporary imports, the sale in the domestic market of the final goods produced with imported inputs requires their prior nationalization with the payment of the corresponding customs duties, under the terms of Decree 1165 of 2019, which summarizes the Customs Legislation in force. 

Likewise, if waste with commercial value is generated, the same procedure must be followed for its sale in the domestic environment. 

Regarding the term for the demonstration of export commitments, it will be 18 months counted from the date of authorization of release of the first import declaration in the import period, except for the agricultural sector that will have the possibility of demonstrating in up to 36 months.

b. Capital goods and spare parts programs, covered by article 173 literal c) of Decree Law 444 of 1967 and article 11 of Decree 285 of 2020, acquire the commitment to export, in physical units, at least 50% of the production increases that would be generated during the time necessary for the depreciation of 90% of the value of such goods.

c. Programs of capital goods and spare parts, covered by Article 174 of Decree Law 444 of 1967 and Article 12 of Decree 285 of 2020, the amount of the export commitment shall be equivalent to at least 1.2 times the FOB value of the import quota used in the time necessary for the depreciation of 90% of the value of such goods.

In the Programs covered by articles 173 literal c) and 174 mentioned above, the import term shall be subject to the time required by the user for the importation, assembly and start-up of the capital goods and spare parts.

d. In the case of service export programs covered by Article 4 of Law 7 of 1991 and Articles 13 and 14 of Decree 285 of 2020, the export commitment shall be, at least, the equivalent to 100% of the FOB value of the imported goods in the time required for the depreciation of 90% of the value of such goods.

In this type of programs, it is important to point out that users may access a reduction equivalent to 0.5 times the FOB value of the imported goods in the time necessary for the depreciation of 90% of the value of such goods, if they demonstrate an increase in the number of jobs they had in force as of December 2019 and that they maintain them during the term of the program. 

The import term will correspond to the time required by the user for the importation, assembly and start-up of the goods, according to the request submitted by the user.

In conclusion, we can affirm that the new Vallejo Express Plan is shown as a novel and agile instrument, consistent with the policy of dynamizing the Colombian economy in the POSCOVID-19 era, so the business community has a real opportunity to incorporate this instrument in its planning of cross-border operations 2021, which will undoubtedly generate tax optimizations and improvements in profitability.

Best regards.

Erwin

[1] https://www.wto.org/spanish/news_s/pres20_s/pr862_s.htm

[2] https://www.dane.gov.co/index.php/estadisticas-por-tema/comercio-internacional/exportaciones