The Netherlands

THE NETHERLANDS - Europe’s Gateway

The Netherlands is commemorating the establishment 400 years ago of the Dutch East India Company. The results of that historic joint venture by a number of Amsterdam merchants were far reaching. The world embarked on an unprecedented expansion of trade and the Netherlands became what it remains: Europe’s gateway. Of course, the days are long gone when the Dutch prospered by hauling tea from China, pepper from the Moluccas and coffee from South America, selling those commodities all over Europe. But once in a while we are reminded of that distant past, as when Starbucks decided this year to locate its European coffee roasting facility and headquarters in Amsterdam, still a major center of the world’s coffee trade.

Four hundred years of trading between Europe and the rest of the world have not failed to leave their mark on Dutch society. There are few places on the European continent where, as in the Netherlands, virtually everyone speaks English and where many can throw in a number of other languages for good measure. More importantly, perhaps, there is no other place in Europe where the ability to make deals across borders and meet the needs of customers in the bewildering mixture of cultures and languages that defines Europe and the world at large is a matter of national survival. Or where a well-educated and motivated workforce is more able and eager to find innovative and flexible responses to ever-changing market conditions and trends in international business.

That is why the Netherlands is an ideal strategic location from which to penetrate markets throughout Europe. The European Union, with a total population exceeding
375 million, contains the largest consumer and industrial base in the world. The Netherlands is not only a founding member of that Union, but is also in the forefront of its drive to rapidly evolve into a single, pan-European market, symbolized by the euro, its single currency. To the Netherlands, that is a matter of national urgency. We have never had the comfort of living on an island, or being shielded from the rest of Europe by high mountains.

Therefore, the more level the playing field, the better we can compete.

More than 7,000 foreign companies from around the globe have taken advantage of Europe’s gateway by establishing operations there. If you would consider joining them, we at the Netherlands Foreign Investment Agency are here in the US to help you realize your goals. We look forward to working with you.

Robert Schipper Executive Director NFIA/

An Ideal Location

About 7,000 foreign companies have taken advantage of the Netherlands as an ideal location from which to penetrate markets throughout the world. The Netherlands, commonly known as Holland, has the distinction of being the most densely populated country in Europe. Slightly larger than the state of Maryland in the United States it has a population of 16 million people living in an area of 25,937 square miles (41,500 square kilometers).

Amsterdam, the country’s largest city and its capital, is the financial and cultural center, and home to Schiphol International Airport. A 30- minute drive south takes you to the Hague, where the seat of government is located. The city of Rotterdam, home to the world’s largest port, is another 20-minute drive due south.

Commercial and industrial centers such as London, Paris, Brussels, Frankfurt and Hamburg, as well as the Ruhr Valley, are all within a few hours drive from Amsterdam, making this area almost three times more densely populated than New York City. Using its European gateway status, the Netherlands is an ideal location for so-called value added logistics activities. More and more companies have discovered the advantages of the Netherlands, not just as a distribution hub, but also as a place where distribution can efficiently and effectively be combined with numerous manufacturing and service operations, such as final assembly, testing, packaging, and after-sales services. This postponed manufacturing allows companies to efficiently customize products to European demands and be more responsive to the needs of their European customers, providing a winning combination of tailor- made products and an optimal level of service.

Politics, Government

The Netherlands, a constitutional monarchy, maintains one of the most stable political and social environments in the world. The reigning sovereign is Queen Beatrix. Political power is derived from a democratic parliamentary system based on a written constitution that safeguards individual liberties. Executive power is exercised by the prime minister and his cabinet. Legislative power is exercised by Parliament. The upper house (Senate of the States General) consists of 75 members who are elected to four-year terms by the 12 provincial legislatures. The lower house (House of Representatives of the States General) consists of 150 members who are also elected to four-year terms. The provinces are administered by a directly elected provincial council, a provincial executive and a Queen’s Commissioner. The administration of each municipality consists of a directly elected municipal council, a municipal executive (mayor and aldermen) and a mayor.

Economy and Trade

Global ranking models indicate that the Netherlands is an excellent place to do business. The country is praised for its strategic location within Europe, its skilled, multilingual workforce and its sound macro-economic environment.

The Netherlands has a broadly based solid economy which remains strong; its gross domestic product ranks among the top 14 in the world (EIU); it is the world’s ninth-largest exporting country (WTO); and its unemployment rate is only about one-third of that in neighboring countries such as Germany, France and Belgium.

The success of the Netherlands’ economy is credited in part to the government’s consensus- oriented political style, which has become known around the world as the “Polder Model”. Structural reforms enacted since the 1980s have led to a strong, internationally oriented economy, fostered by a tradition of intense negotiations between trade unions, the business community and the government.

International Trade

The international orientation of the Dutch has made the Netherlands one of the most open economies in the world. Foreign trade has been the driving force of the Dutch economy for centuries, and this experience and expertise continues to have a positive impact on the European Union. Consisting of just a little over 4 percent of the total EU population, the Netherlands accounts for 9.4percent of total EU exports.

In addition, exports of goods and services account for more than 60 percent of the Dutch gross domestic product and imports amount to that percentage as well. Dutch exports to EU and other European countries average 86 percent ($13.6 billion) of total exports.

For many years the Dutch economy has consistently succeeded in generating trade surpluses. The macro-economic profile of the Netherlands shows a world merchandise export market share of 3.3 percent (WTO).

The European Market

The European Union, made up of 15 countries and with a population of 375 million, accounts for about 60 percent of the world’s trade. The union has a unique, treaty-based, institutional framework that defines and manages economic and political cooperation. The main objectives are:

to promote economic and social progress (the single market — ensuring the free movement of goods, people, capital, and services — was established in 1993; the single currency, the euro, was launched in 1999 and its use begun in January 2002),
assert the identity of the European Union on the international scene (through European humanitarian aid to non- EU countries, common foreign and security policy, and action in international crises), introduce European citizenship (which does not replace national citizenship but complements it and confers a number of civil and politic rights on European citizens),
and develop an area of freedom, security and justice (linked to the operation of the internal market and more particularly the freedom of movement of persons).

Furthermore, there are an additional 330 million people living in Eastern Europe, a region that is rapidly increasing in economic strength and consumer affluence. In short, a physical presence in the Netherlands provides companies with easy access to over
700 million potential consumers in 38 countries, a ripe and lucrative market that offers large growth potential for foreign investors.

Industrial Climate

More than two-thirds of the Netherlands’ gross domestic product is fueled by the service industry, the largest sector, including components such as banking, insurance and transportation services.

The wide variety of public and private services available are consistently of a high quality. Sophisticated services that handle goods, money and information flows are important location factors not only for headquarters and offices
(such as support units), R&D laboratories and communications facilities, but for manufacturing and distribution activities as well.

The Netherlands has developed some strong clusters in technology-related industries such as biotechnology, fine chemicals, food, pharmaceuticals, electronics, telematics, computer products, medical technology, new materials and printing.

Education and technology — good schooling and training, research and development — also make the Netherlands highly suitable as a location for sophisticated, “high end” manufacturing. The industrial structure offers ample possibilities in subcontracting and ensures the supply of semi-manufactured goods and components in various fields.

The life sciences industry is a growth market in Europe. The Netherlands has established itself as one of Europe’s premier centers for life sciences in R&D as well as in manufacturing, particularly in the fields of human and veterinary health care, food and agricultural products, and fine chemicals.

The chemical industry, contributing about 18 percent of total industrial output, is the second most important industrial sector in the Netherlands.

It is characterized by a very strong position in base chemicals, including raw materials such as ethylene, propylene, ammonia, benzene, methanol, chlorine, and bulk intermediates.

European Distribution Centers

Many multinational companies have established centralized European distribution centers. Since the unification of the European market, many smaller- and medium-sized companies have followed suit. All together, nearly a thousand Asian and American companies have established EDCs, - many of them in the Netherlands.

The removal of barriers to the cross-border movement of goods within the expanding European single market, together with the growing interest in integrating the supply chain on a global scale, are the prime drivers for re-engineering European logistics. Almost half of the American companies in Europe have one or more European distribution centers serving the European market.

Easy Access

From a Netherlands EDC, companies have quick and easy access to the most important European markets.

The Netherlands has two main ports, the port of Rotterdam and the port of Amsterdam, Schiphol. The two are extremely close together. The port of Rotterdam is one of the world’s largest, while Schiphol is the fourth largest European airport and has connections to all economic centers of Europe. Schiphol is also an important stop on the new European high-speed train TGV network.

In addition, the Netherlands has an integrated road, railway and water network.

Easy access by air and sea allows fast and reliable transportation to all parts of the region. The Dutch transport sector is highly developed and consists of approximately
11,000 companies. Dutch companies perform 30 percent of all border-crossing road haulage in Europe.

Logistics Services

The Dutch logistics service industry, meanwhile, is highly developed and growing. Due to the arrival of American companies, many logistics service providers adapted their service package to new requirements. New service links include: assembling, testing, quality control, repairing, labeling, and packaging.

Cooperative Customs

Dutch customs authorities have a reputation for being cooperative and innovative
(ICT). They make use of all the possibilities provided by the EU customs rules in order to facilitate a free flow of goods.

Flexible Labor

The use of flexible contracts and temporary labor are very popular in the Netherlands. Many employers prefer flexible contracts, because these contracts allow them to manage changes in workload more easily and increase responsiveness to peak times. The flexibility includes: standby contracts, temporary workers, labor pools, and multilingualism. In Europe, an effective distribution system requires the use of at least three or four major languages.

Low Costs

Finally, one-time investment costs and operational costs are often low in the Netherlands compared to surrounding countries.

Value Added Logistics

Centralized European distribution is not the final phase in optimizing the logistics of American companies in Europe.

An increasing number of companies are using Value- Added Logistics. VAL combines logistics and industrial activities in an international gateway to create country-specific and/or customer-specific variations of generic products. With VAL, country-specific or customer- specific products can be delivered rapidly without the usual high costs and risk of keeping them in stock. This makes it possible to respond quickly to changing market requirements. In almost onethird of the EDCs in the Netherlands, VAL activities are performed.

Rotterdam

Rotterdam, located on the North Sea and extending over an area of 24.6 miles (40 kilometers) from the center of the city to the North Sea, is one of the world’s most important junctions in the traffic of goods, handling more than
300 million tons every year. This huge flow results in advantages of scale for both carriers and shippers.

About 500 shipping lines use Rotterdam as a home port or port of call, running regular services to about 1,000 ports. Rotterdam is Europe’s most important port for oil and chemicals, containers, iron ore, coal, and food and metals. Goods can leave the port by river, rail, road, pipeline, or sea.

Distriparks

Distribution parks, or distriparks, have been created at Rotterdam and are popular with companies wanting to establish European distribution centers.

“The distripark concept has been developed as a consequence of logical and logistical thinking,” says Victor Timmermans, the port’s manager of business development. “There is a demand for efficiently laidout areas for distribution activities close to the larger container terminals with good immediate hinterland connections.”

Distripark Eemhaven — the first in a series — is focused on distribution in the Netherlands and the rest of the Benelux, whereas Distripark Maasvlakte is expressly meant for European distribution.

“The Distripark concept is a resounding success,” says Timmermans, who is trying to ensure that Distripark Maasvlakte reaches occupancy at the same pace as Distripark Eemhaven and Botlek. Timmermans is looking especially at American shippers and logistic service providers that want to set up an European distribution center. The Netherlands is home to an average of 57 percent of the American EDCs and 20 percent of those are located in the Rotterdam port area. They operate either independently or are run by a logistic service provider.

Constant Development

Roads, bridges, tunnels, production plants, and terminals in the Rotterdam port and industrial complex are continually improved and expanded. Billion dollar projects such as new chemical plants for the American company Lyondell and its German partner Bayer and the automated container terminals of ECT have drawn much attention. Interforest Terminals Over three million tons of wood and wood products, paper and paper products, and cellulose are shipped in Rotterdam every year. A major player in this sector is Interforest Terminal Rotterdam (ITR). ITR is to expand its terminal in the Eemhaven area, and it will become the European hub for paper products from the Swedish parent company SCA Transforest.

All-Weather Steel

Terminal SSAB Tunnplat (Sweden) has concluded a contract with Gevelco Transport Group to develop a logistic center for the European distribution of high-strength steel products.

Agriparc

Rotterdam has fitted out an area where, grains, seeds, cattle feed, vegetable oils and fats, and other agricultural products are stored and shipped, as well as processed or treated. This way, the port of Rotterdam attracts new cargo flows and activities in the agricultural sector.

For more information, contact: Port of Rotterdam Mr. Michel Heeneman, 18 West 140 Butterfield Road, 15th floor Oakbrook Terrace, IL 60181 Tel 630 613 7010 Fax 630 613 7001 e-mail; chicagodesk@portofrotterdam. com

Business/ Corporate Law

The Netherlands is well known for its open economy. It is in favor of international trade without national or regional barriers, and it welcomes foreign investments.

An indispensable feature of Dutch legislation is, among other things, that company law does not differentiate between Dutch nationals and foreigners. And companies created under foreign law are free to operate in the Netherlands: they can be party to a contract, they can participate in partnerships and they can establish a legal entity. Also, there are usually no objections to the employment of skilled foreign managers or specialist staff in the Netherlands.

One way for a foreign company to carry out activities in the Netherlands, or in Europe with the Netherlands as its base, is in a joint venture with a Dutch party - which can take the form of a partnership or a BV. Another possibility is to merge with or acquire another company.

The selection of a potential joint venture partner and the structuring of a joint venture is a very complicated process. Contacting an adviser in the Netherlands is recommended.

The introduction of products into the Dutch market may be achieved using sales agents and distributors and can often provide a good starting point in exporting to the Netherlands.

Tax Climate

For centuries, the Netherlands has been a nation of traders. To ensure that this tradition endures, the Dutch government has created a competitive tax regime that stimulates entrepreneurship and foreign investment. While corporate tax rates are in line with European neighbors, numerous tax features make it attractive for foreign companies to locate operations in the Netherlands. In comparison with other European Union countries, the Netherlands is known for its very competitive “tax climate” resulting from its far-reaching tax treaty network, its system of bonded warehouses, and advance tax rulings.

The principal taxes in the Netherlands are corporate and personal taxes on income
(including wage withholding tax) and value-added tax.

Tax Act 2002

At the start of the New Year, an overall Tax Act including new legistative regulations may be implemented. In 2001 there was a major revision of the Income Tax Act. In
2002 several new Corporate Income Tax Act amendments were implemented that:

Lowered the rate of the corporate income tax from 35 percent to 34.5 percent.
Amended the participation exemption.
Included new rules for hybrid loans.
Codified the at-arm’slength principle.

Finance

The Dutch financial infrastructure is broad and strong. The financial markets are efficient, highly developed and sophisticated. The size and scope of the Dutch financial services sector are reflected in the high level of ancillary services with an international focus. Legal and tax advisers in the Netherlands specialize in national and international business.

The guilder used to be, with the German mark, the strongest currency of the European monetary system. This position was based on an historically low rate of inflation and a high degree of monetary stability. Interest rates in the Netherlands have traditionally been among the lowest of the EU.

The performance of Dutch capital markets and the quality of the Dutch financial services are ranked high in the EU. This is based upon economic efficiency, rather than state subsidies or other discriminatory pricing mechanisms. Liberalization and deregulation are the driving forces behind the global market. Electronic transfers systems are already widely used by Dutch financial institutions.

The Dutch financial services sector has long been of international scope and is perfectly capable of satisfying complex needs. Most major Dutch banks and insurance companies have world-wide branch networks to follow and serve clients abroad.

Customs

The Netherlands has a remarkably flexible customs system, which offers a number of advantages.

A decentralized system of temporary storage, bonded warehouses, and free warehouses are available throughout the country. It is possible to transfer goods to the European Union and store them without duties and Value Added Tax (VAT) becoming due at import date. The system is flexible, allowing any warehouse in the country to be declared a customs- bonded warehouse, given certain requirements.
Dutch customs has a reputation for being cooperative and flexible with respect to the acceptance of simplified customs procedures, which streamline the validation of documents and replace red tape and customs checks with administrative control.
The Netherlands makes use of all the possibilities the EU customs system offers to avoid unnecessary payments of customs duties and VAT at import.
In contrast to most other EU member states, the Netherlands has implemented a specific provision with respect to the deferment of VAT at import.
In the Netherlands an important duty-saving opportunity exists in the “first sale for export” provision.
Dutch customs officials make use of computerized clearance systems that speed up the flow of cargo. Due to unified and standardized documentation, costly delays are eliminated and approval time is minimized.

The wide range of procedures offered makes it easy to distribute goods from the Netherlands to other EU and non-EU countries alike.

As of July 1, 2001, significant changes have taken place in the EU customs provisions with economic impact. These changes are a result of the implementation of the socalled “Megadocument” (a EU Regulation). The recent changes in legislation may have great consequences for companies.

Based on EU regulations, simplification of customs procedures has made possible as authorized consignees, authorized consignors, local clearance procedure for imports and exports.

Hit the Ground Running - Pied-à-Terre service

The Netherlands Chamber of Commerce provides a comprehensive range of products and services that help US companies successfully enter the Dutch market. It is often essential that you operate from a Dutch location by means of a branch office or a subsidiary. Time differences and cost factors make communicating with your existing and potential clients difficult and expensive.

The Chamber of Commerce offers American companies a foothold on the Chamber’s premises giving the company a fast start with little cost and low risk. This “Pied-à-Terre service” is designed for firms that wish to make a flying start, do not yet have sufficient experience in the Dutch market, or simply do not need a full time office in the Netherlands. Using the Chamber’s services and advanced communications equipment keeps personnel and overhead costs at a reasonable level; eliminates the hiring of secretaries and receptionists and the incurrence of expensive capital outlays.

The Chamber offers a very strategic location in the Netherlands. The Holland Trade House, Bezuidenhoutseweg in The Hague is a prestigious business address, located in the neighbourhood of all ministries, giving your company the successful image it deserves.

The Hague is only half an hour from Amsterdam and the presence of the growing airport Schiphol. It is also half an hour from Rotterdam, Europe’s most important port and dock. In fact, 60% of U.S. exports to Europe pass through Rotterdam.

The completion of the Betuwe Line in 2005, a railway freight line that will extend from Rotterdam to the German border, will further reinforce Holland’s leading position as distributor for Europe.

If you would like to know more about what we can do for you, give us a call in New York at 212-265-6460, ask for Jair, or in Chicago at 312-938-9050 ask for Jaap.