Traditional policies on trade and economic incentives directed agricultural and manufacturing production toward import-substitution until the end of the 1980's.
Today, Panama's, nominal tariff duties are the lowest in the region. Panama averages 9% in tariffs rates.
The country has also made significant progress in eliminating quantitative restrictions. From 1991 to 1996, the Government of Panama enacted a trade liberalization program, with the following initial objectives:
- To reduce the ceiling on import tariffs to 40 percent for industrial products and 50 percent for agro-industrial products.
- To eliminate all specific import tariff rates
- To eliminate quantitative, import restrictions for agricultural products and replace them with tariff quota protection.
The Government accomplished these objectives and went further by setting an import tariff ceiling of 15%, effective on January 1, 1998. Some exemptions exist for agricultural products and a few other products such as automobiles.
Panama is a full member of the World Trade Organization, (WTO). However, our import duty structure is significantly lower than the one negotiated for WTO accession.
WTO had reported, in its web page, that Panama grants at least MFN treatment to all its trading partners. As at mid 2007, the country had three free-trade agreements (FTAs) in force with the following countries: Chinese Taipei, El Salvador, and Singapore. “It participates in more limited preferential agreements with six other partners. Panama has also finalized the negotiation of new FTAs with Chile, Honduras, and the United States, and is negotiating FTAs with Costa Rica, Guatemala, and Nicaragua. The entry into force of the agreement with the United States is likely to have a particularly important institutional and economic impact on Panama”.
Also, the country has notified the WTO that it grants export subsidies through three programmes: “Export Processing Zones (ZPE), the Tax Credit Certificate (CAT), and the Official National Industry Registry (ROIN). The ZPE regime grants tax exemptions to companies that fulfil a minimum local-value-added requirement; no date has been set for its elimination. The CAT offers tax credits to exporting companies that produce non-traditional products; although the CAT has been formally abolished, benefits will continue to be paid until 2010. The ROIN exempts companies that export all their production from import duties, income tax, and other domestic taxes; the ROIN was to be phased out in late 2005 but its termination was postponed following the SCM Committee's decision to extend the deadline for the elimination of subsidies notified under Article 27.4 of the SCM Agreement”.
Panama assesses import duties on an “ad valorem” basis. The ad valorem system uses the declared C.I.F. value as the basis for import duty calculations and in some cases utilizes historical price information as a reference.
In addition to the duty, all imports into Panama are subject to a 5 percent transfer or value tax (ITBM) levied on the C.I.F. value, plus import duty, and other handling charges. Pharmaceutical, foods and school supplies are exempt from the ITBM tax.
In 1995, Panama changed it international trade classification system from the Customs Cooperation Council Nomenclature (CCCN) and Brussels Tariff Nomenclature (BTN) to the Harmonized System (HS).
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