What is Iquique´s Free Trade Zone?

Definition

Free Zone is a place where merchandise transactions can be made free of customs entitlements and tax. However to better understand the operations system, some basic concepts must be made clear.
A free zone may be defined as a piece of land or territory that is marked off and is near a port or airport protected  under presumption of  an extra territorial customs officer . These are the locations where the merchandise can be deposited, transformed terminated or commercialized without any restrictions. Iquique´s Free Zone is located in the northern part of Iquique with an area of 240 hectares.

The user is a natural or legal entity that has signed an agreement with Zofri Inc that gives them the right to carry out activities in Free Zone under its administration. The user companies can carry out commercial or industrial tasks. They can sell wholesale or retail.

The Warehouses are user facilities made available by administration for commercial or industrial activity development in free Zone in compliance with the regarding contract.

Exhibition and Sales Modules are commercial stores belonging to or authorized by the Administration Society. They are destined for exhibition and retail sales of merchandise exclusively owned by the assigned user.

The CIF Value (Cost, freight and Insurance) corresponds to the final cost of the merchandise that is registered upon entrance to Free Zone. This includes its price in the country of origin, freight, insurance and foreign expenses, etc.

The Sales/Module is the net public sales value according to the authorized receipt or invoice in the module.

Zofri's Logistic Center (ZLC) is a merchandise storage and distribution center owned by the administration that renders services to the users.

Relocation is an operation that consists of the physical movement of the  merchandise  from the warehouses, public courtyards, authorized facilities or Recinct owned by the user.
Transfer is defined as the trading operation among deposited merchandise users in Free Zone.

 The transfer is done in the user facilities or in the public courtyards owned by administration. The merchandise entered into free Zone changes its means of transport so it quickly exits to its customs destination.

The direct withdrawal occurs when the merchandise that enters Free Zone  exits within 24 hours to its customs destination without changing it means of transportation.

What are the requirements to acquire Zofri's user quality?

Requirements

Documents	User without Facilities	Commercial User with Facilities	Industrial User
Presentation or introductory letter	X	X	X
Zofri User Register (formulary)	X	X	X
Copy od R.U.T.	X	X	X
Company by-laws	X	X	X
Publication of the company's Registry under Chile's Official Journal	X	X	X
Company's Registration under the registar of Commerce Office	X	X	X
Copy of R.U.T. (Legal Representative Person)	X	X	X
Financial Statements	X	X	X
Certificate od banking situation	X	X	X
If the Company is S.A.:1rst. Director Meeting Act	X	X	X
Property tihes		X	X
Description of the general business plan, including investments planned, markest to cover and sell to, production and manufacturing process, financing requeriments			X
Introductory letter to the Regional Intendant. (To issue permits for industrial companies)			X

¿What are the advantages of operating through Iquique´s Free trade Zone?

Advantages

·Having a privileged geographical location it can accede to more than 300 million potential clients
·Fast connection channels with multiple market buyers
·Great business opportunities made up of more than 1,500 companies
·Turnovers in the order of more than MMU$3,000 average
·150 foreign trade  service companies (banks, customs agencies, insurers, transport, port companies, forwarders and others.
·29 years experience delivering a whole foreign trade service
·Tributary and customs exemptions
·The merchandise can remain in the area for unlimited periods of time
·Customs processing, Entrance document and merchandise recall  agility. Can be done in minutes by means of an automated  processing system that includes a control over the user's inventory.
·Zofri is a showcase to enter neighboring country markets which are our main buyers like Bolivia, Peru, Paraguay, Ecuador, Argentina, Brazil, among others.
 

Who participates in Iquique´s Free trade Zone transactions?

Who participates

Iquique´s Free Trade Zone system is mainly characterized by the group of companies that market goods and services. Also the administration whose primary task is to create the conditions and infrastructure that is necessary for the efficient operation of this market. However, there are other entities that fulfill these taxation duties such as the Internal Revenue Service, the National Customs Service and other entities like banks, insurance companies, transport companies, customs agencies, ports etc.

How does the system operate?

System

The Free Zone system operates mainly on the basis of document flow that are emitted and sent through a fiber optic net that permits the electronic transfer of data. In practice, the different transactions and operations that are possible to be done in free zone are executed in real time automatically validated by the Distant Endorsement System.
Upon entrance to Free Zone the merchandise must have Zofri's authorization documents and Customs approval. Once inside Zofri the merchandise are not affected by any type of customs entitlement or tax.

All transfers or operations that are to be made to the merchandise must be authorized by the administration through the Distant Endorsement System.
The merchandise that is to be taken out of Zofri must have a customs document drawn up according to the established legal regulations. The administration may request copies of any document to verify authorization and control when the merchandise exits Free Zone. The administration may deny the exit of the merchandise or the authorization of documents when ordered by resolution of a competent authority.

What is the origin of the merchandise that enters Free Zone?

Origin of the merchandise

The merchandise that enters Zofri comes from different origins, mainly from foreign countries, or the remaining country. The merchandise may be national or nationalized or come from Punta Arenas Free trade Zone.

Which merchandise is allowed to enter Free Zone?

Merchandises is allowed to enter

All types of merchandise are permitted to enter Free Zone excluding those that confront against morals, good manners, health, agricultural and livestock hygiene or national security. The law permits the administration to deny the storage of such harmful and dangerous merchandise.

What does the customs and tributary system of Iquique´s Free Zone consist Of?

Customs and tributary system

The transactions made inside the Recinct are subject to the customs and tributary systems which are different from the general system that is used in the rest of the country. This grants  a series of exemptions  and direct benefits  not only to the companies that reside in free Zone but also to the customers that acquire merchandise within it.

What customs system does Free Zone have?

Benefist

Free Zone's custom system grants important benefits to products that enter the Free Recinct. The merchandise can be deposited, transformed, terminated or marketed without any restrictions. While the merchandise resides in Zofri, they are treated as if in a foreign location. They are not affected by entitlements, tax, rates or other policy payments that affect  the import of goods under the country's general free trade system.

What tributary system does Free Zone have?

System tributary

The system that affects the companies that operate in Zofri, as well as the Systems administration company, have some important exemptions:

· The participating entities are exempt of First class tax (16% over the utilities 2002, 16.5% 2003 and 17% starting 2004)

· They are exempt of the added value tax payment that is done under the Free Zone system.

· They are exempt from added value tax payment for services rendered among users in Free Zone.

What benefits to companies receive when they invest in Free Zone?

Benefits

In addition, companies receive tributary exemptions when residing in distant bordering areas. These are considered:

· DFL 15 establishes a maximum 20% bonus discount  on construction, machinery and equipment investments. The limit is 8 thousand U.F yearly.

· DL 889 considers an equivalent bonus discount of 17% for the work force with maximum incomes of $147.000. Amount that will be adjusted according to the Consumer Price Index (CPI) in January 2003.

· The workers are put into zones so that the lump sum taxes can be calculated.

·  The Arica II law has measures destined to motivate private company investments in Arica and in Parinacota.

What operations can be done with the merchandise entered into Iquique´s Free Zone?

Operations into Iquique's Free Zone

The merchandise that enters Free Zone can be subject to the following acts, contracts and operations:

· Deposited personally or by third party

· Exhibited

· Packed

· Packaged

· Tagged

· Divided

· Repacked

· Marketed

Can other processes also be done?

Other processes

Other processes may only take place in Free Zones, these include: assembly, set up, completion, manufacturing or industrial transformation.

Are there any special regulations for companies wishing to reside in Alto Hospicio?

Alto Hospicio

The preferential system states that the decree law number 1055 (1975 ) will be applicable  to industrial manufacturing companies that are residing or will in the Alto Hospicio area. Industrial companies are those that develop merchandise production activities in factories, plants or warehouses. They are destined to obtain a sub product from the raw materials, parts or foreign pieces used in their elaboration.

Are there any special regulations for companies wishing to reside in the city of Arica?

Arica

The preferential system states that the decree law number 1055 (1975 ) will be applicable  to industrial manufacturing companies, under the same terms, that reside or will in Arica. The requisites demanded are the same as in Iquique. Areas and Recinct near the Arica´s port or airport, where companies carry on their activities, are authorized by the Regional Intendant. The location and limits of the areas are precisely stipulated.

What destinations does the merchandise that enters Free Zone have?

Destinations of the merchandise

It can be marketed from Free Zone to the First Region, remaining country, abroad, Punta Arenas Free Zone or within Iquique´s Free Trade Zone.

Can merchandise be marketed as retail?

Retail sales

Free Zone's custom system stipulates  wholesale and retail sale. Wholesale is carried out through the warehouses. On the other hand retail sale  is carried out through the sales and exhibition stores (Zofri Mall-Zofri Parts).

How to become An Iquique Free Zone User

Becoming a user

Any natural or legal entity, national or foreign, which wishes to develop a commercial or industrial project must be authorized by Zofri Inc to do so by means of a signed concession agreement.

Who administrates Iquique´s free Zone?

Free Zone Administration

The Chilean government has granted authorization for the administration and exploitation of the Free Zones by means of the Ministry of Treasury to the administrative societies. These societies are legal entities that must comply with the regulations stated by the Ministry of Treasury by means of contract agreed upon by national laws. In Iquique´s Free Zone the administrative society is ZOFRI Inc. The administrations main responsibilities are the security of the Recinct, to deliver and coordinate the information to the customs service and to inspect the user level's inventory. It must also develop the infrastructure and services that boost the systems operations.

What services does Zofri Inc. offer to the system users?

Services

- Merchandise Storage

The user can benefit from a large infrastructure to store the merchandise for an unlimited period of time. Zofri Inc also offers a Vehicle courtyard to store cars in general and all merchandise that due to its size and volume cannot be stored elsewhere.

- Complete Services

A specialized area offers a group of services destined to freight handling in Free Zone. The services are as follows: document processing, merchandise reception in the main zone, transport coordination, Customs clarifications and advisement, inventory administration and general coordination within Free Zone.

- Real Estate Services

Commercial or industrial companies may rent  stores, land or installations. There is a Recinct for Free Zone's user activities.

- Computing Services

This system electronically authorizes the entrance and exit merchandise documents from its own facilities. It delivers inventory control and statistical information.

-Customer Service Center

The costumer service center (CSC) was created to establish a central area for customers to receive special attention and solve  doubts and questions. It gives answers and solutions in a fast and appropriate manner. It gives system information to any person or company that is interested in acquiring Free Zone user quality. We also keep an upgraded database of the incorporated companies, so that we can respond to any question related to products or commercialized brand names. Finally, it offers support and delivers all the tools necessary so that every company that  enters Iquique´s Free Zone has a great beginning.

In what sectors or areas can commerce activities be carried out?

Commerce activities

· Zofri Mall Shopping Center

It consists of 430 retail stores where you can find a variety of brand name products. There is a food court, children's play area and a daycare for children, among other services. Zofri Mall has an average of five million visitors yearly.

· Zofiparts

These stores are destined to the sales and exhibition of spare parts and vehicle accessories.
· ZofriCars

These stores are destined to the sales and exhibition of brand new vehicles.

· Fortified Recinct

These are warehouses where the users can store and commercialize their wholesale merchandise.

· Industrial Area

Companies that develop industrial activities, as well as importers and exporters mainly use these areas

· Chacalluta Industrial Park

This Recinct is owned by Zofri Inc and is located in Arica. Companies that carry out industrial activities use it.

What types of contracts can be signed with Zofri Inc.?

Contracts

Civil Labor Contractors:

They have a two-year contract that allows them to carry out construction activities under the Free Zone System.

Garantee: 20 U.F.

Joining Fee $121.965

User without Facilities:

Those that do not have facilities within Free Zone can store their merchandise in Zofri Inc´s logistic center and in third party facilities. They can apply for a retail sales store in Zofri Mall- Zofri Parts or ZofriCars, under a two year contract.

Guarantee: 50 UF

Enrollment fee: $121.965

Commercial Users with facilities:

The users that have facilities within Zofri can operate retail sales stores in Zofri Mall- Zofri Parts or ZofriCars, under a contract extending from five to twenty five years.

Guarantee: according to each square meter.

Enrollment fee: $609.830

Industrial Users with Facilities:

An industrial activity is defined as one that obtains sub products from raw merchandise, such as parts or pieces used in its production.

What requisites must a foreign company have to become a Free Zone user?

Requirements for foreign Companies

First of all, foreign companies should be legalized in Chile.

What does Chacalluta Industrial Park consist of?

Chacalluta Industrial Park

Chacalluta Zofri is an international industry and business center with a privileged location in northern Chile. Zofri Inc, since 1994, offers national and foreign investors complete back up. Its Strategic geographical location that is 600 m from the international airport, 2 km form Peru's border and 4 km from Bolivia's highways, allows for direct access to Peru, Bolivia, Brazil and Asia. It also offers a park with an area of 130 hectares used for project development and it offers built in services for entrepreneurs, fiber optic routes  for data transfer and urbanized areas with special exemptions and benefits  for industrial development. Such as , assembly, setup, termination, manufacturing and industrial transformation.

What are the advantages and benefits of operating in Alto Hospicio?

Advantages and benefist

The preferential system (established by decree law number 1055, 1975) will be applicable in Iquique´s Free Zone to the industrial manufacturing companies residing in Alto Hospicio (Commune of Iquique). Industrial companies are those which develop a group of activities in factories, plants or warehouses that are destined for obtaining sub product merchandise (parts or pieces used to create merchandise different from the primary material).  Other processes may be carried out as long as they incorporate the national added value such as, assembly, setup, termination, manufacturing or industrial transformation.