Investing In The Netherlands

Market Entry Strategy

• The Dutch market is highly competitive - the "golden key" of customary business is courtesy, especially replying promptly to requests for price quotations and to orders.

• Dutch business executives are generally more conservative than their American counterparts; therefore, it is best to refrain from using first names until a firm relationship has been formed.

• Friendship and mutual trust are highly valued, and once trust has been earned, a productive working relationship can usually be counted upon.

• Dutch buyers appreciate quality and service and are also interested in delivery price. Care must be taken to assure that delivery dates will be met and that after-sales service will be promptly honored.

• U.S. exporters should maintain close liaison with distributors and customers to exchange information. Understanding developed through periodic personal visits is the best way to keep distributors apprised of new developments and to resolve problems quickly.

• U.S. exporters should consider warehousing in the Netherlands for speedy supply and service of their Dutch and European customers.

• A vigorous and sustained promotion is often needed to launch products because buying habits are generally strong. Products must be adapted to both technical requirements and to consumer preferences. It is not sufficient to merely label a product in conformity to national requirements for the development of the full market potential. Consumers must also be attracted to the product by label and packaging as well as ease of use.

• Most Dutch speak their minds and will not waste your time or their own if they are not interested in your product.

Using an Agent or Distributor

The Netherlands has a variety of experienced importers, sales agents, and distributors well versed in international trade. More than 7,000 U.S. companies have appointed Dutch agents and distributors in the Netherlands. Distributors who purchase for their own account and distribute throughout the country and Europe handle a large portion of the goods. Because of the size, accessibility, and competitive nature of the Dutch market, distributors usually insist on an exclusive distributorship. If the distributor is a well-qualified and experienced firm, an exclusive distributorship often yields the best results. Since the Netherlands is a compact market, foreign firms customarily have one exclusive representative for the entire country, but it is common for the representative to appoint subagents to cover certain sectors of the market if sales volume and profit margin warrant. A Dutch representative can sometimes provide an excellent starting point for exporting to other European markets. Dutch firms are adept at handling logistics, language adaptations, and inventory on behalf of American exporters. The Commercial Service can assist U.S. exporters in locating an agent, distributor, or partner in the Netherlands through its International Partner Search or Gold Key Service programs. In addition, we can provide valuable background information on Dutch firms through our International Company Profile (ICP) service. Further information can be obtained by visiting our website at www.buyusa.nl or contacting your local Export Assistance Center or the Commercial Service directly in The Hague (see contact numbers at the end of this guide).

Companies wishing to use distribution, franchising and agency arrangements need to ensure that the agreements they put into place are in accordance with EU and Member State national laws. Council Directive 86/653/EEC establishes certain minimum standards of protection for self-employed commercial agents who sell or purchase goods on behalf of their principals. In essence, the Directive establishes the rights and obligations of the principal and its agents; the agent’s remuneration; and the conclusion and termination of an agency contract, including the notice to be given and indemnity or compensation to be paid to the agent. U.S. companies particularly should be aware that the Directive states that parties may not derogate certain requirements. Accordingly, the inclusion of a clause specifying an alternate body of law to be applied in the event of a dispute will likely be ruled invalid by European courts.

The European Commission’s Directorate General for Competition enforces legislation concerned with the effects on competition in the internal market of such "vertical agreements." Most U.S. exporters are small- and medium-sized companies and are therefore exempt from the Regulations because their agreements likely would qualify as "agreements of minor importance," meaning they are considered incapable of affecting competition at the EU level but useful for cooperation between SMEs. Generally speaking, companies with fewer than 250 employees and an annual turnover of less than €50 million are considered small- and medium-sized undertakings. The EU has additionally indicated that agreements that affect less than 10 percent of a particular market are generally exempted as well (Commission Notice 2001/C 368/07).

The EU also looks to combat payment delays with Directive 2000/35/EC. This covers all commercial transactions within the EU, whether in the public or private sector, primarily dealing with the consequences of late payment. Transactions with consumers, however, do not fall within the scope of this Directive. In sum, the Directive entitles a seller who does not receive payment for goods/services within 30-60 days of the payment deadline to collect interest (at a rate of 7 percent above the European Central Bank rate) as compensation. The seller may also retain the title to goods until payment is completed and may claim full compensation for all recovery costs.

Establishing an Office

The Netherlands has a flexible legal environment that allows non-resident companies and individuals to open an office. There is no legal differentiation between local and foreign-owned companies. The office can be set up with or without a legal personality. If it has a legal personality, the entrepreneur cannot be held liable for more than the sum he contributed to the company's capital.

Most U.S. investors in the Netherlands set up a private company with limited liability (BV). The BV is commonly used for all types of business ventures. However, a public limited liability company (NV) is the usual form of business enterprise adopted when capital is to be acquired through public offerings. When incorporating a BV or an NV, the foreign investor must submit a notarial deed of incorporation, which must contain the articles of association. The incorporators of a BV must provide a minimum of 18,000 euro of the share capital. For the incorporation of an NV the amount is 45,000 euro. To complete the incorporation procedure, the founders have to register the new company in the Commercial Register at the Chamber of Commerce of the district in which its main business will be located.

Sole traders, partnerships and limited partnerships are examples of legal forms without legal personality, wherein the guiding principle is that the entrepreneur remains personally liable for the company's debts. A partnership format can be used when two or more partners wish to do business jointly and under a joint name without having to meet all the legal requirements that a BV or NV would entail.  If the foreign investor prefers not to set up a legal entity in the Netherlands, a branch might be a better option. A branch is easier and less expensive to establish than a subsidiary. However, a branch is not a separate legal entity, so branch's foreign parent is fully liable for all of its obligations.

Franchising

Approximately 450 franchise concepts operate in the Netherlands, with more than 21,400 outlets and sales of $29 billion in 2005. There are no regulations governing franchising specifically and none that limit access to the market for U.S. firms. Franchise concepts are subject to national competition regulations and fair trading laws. There is a mature network of experienced bankers, lawyers, accountants, consultants and other advisors, specialized in the field of franchising. The reasons few American franchise formulas operate in the Netherlands are generally high master franchise fees for U.S. formulas and competition from cheaper, local formulas. Successful U.S. franchise operations in the Netherlands include McDonalds, Domino’s Pizza, Pizza Hut, and ERA.

Direct Marketing

The industry spent $1.2 billion on direct marketing in 2005, making it the third largest marketing medium after television and daily newspapers. Printing, handling and distribution costs are higher in the Netherlands compared to the United States. Distribution costs contribute one third to total costs.

The most active sectors using direct marketing are retail ($119 million) and financial services ($84 million). Three-quarters of direct marketing mailings are aimed at consumers in these two sectors. For all sectors, this average is somewhat lower, with a 60-40 percent average for consumers/businesses. Direct marketers spent a total of $841 million on mailings to homes in 2004. Average production costs per piece were 52 cents; distribution costs were 20 cents. Almost 12 billion pieces were delivered in 2004. The average household receives 29 pieces weekly.

There is a wide range of EU legislation that impacts the direct marketing sector. Compliance requirements are stiffest for marketing and sales to private consumers. Companies need to focus, in particular, on the clarity and completeness of the information they provide to consumers prior to purchase, and on their approaches to collecting and using customer data. The following gives a brief overview of the most important provisions flowing from EU-wide rules on data protection, distance selling and on-line commerce. Companies are advised to consult the information available via the hyper-links, to check the relevant sections of national Country Commercial Guides, and to contact the Commercial Service at the U.S. Mission to the European Union for more specific guidance.

The EU’s general data protection Directive (95/46/EC) spells out strict rules concerning the processing of personal data. Businesses must tell consumers that they are collecting data, what they intend to use it for, and to whom it will be disclosed. Data subjects must be given the opportunity to object to the processing of their personal details and to optout of having them used for direct marketing purposes. This opt-out should be available at the time of collection and at any point thereafter. This general legislation is supplemented by specific rules set out in the "Directive on the processing of personal data and the protection of privacy in the electronic communications sector" (2002/58/EC). This requires companies to secure the prior consent of consumers before sending them marketing emails. The only exception to this opt-in provision is if the marketer has already obtained the intended recipient’s contact details in the context of a previous sale and wishes to send them information on similar products and services.

The EU's general data protection Directive provides for the free flow of personal data within the EU but also for its protection when it leaves the region’s borders. Personal data can only be transferred outside the EU if adequate protection is provided for it or if the unambiguous consent of the data subject is secured. The European Commission has decided that a handful of countries have regulatory frameworks in place that guarantee the adequate protection of data transferred to them – the United States is not one.

The Department of Commerce and the European Commission negotiated Safe Harbor to provide U.S. companies with a simple, streamlined means of complying with the adequacy requirement. It allows those U.S. companies that commit to a series of data protection principles (based on the Directive), and who publicly state that commitment by "self-certifying" on a dedicated website, to continue to receive personal data from the EU. Signing up is voluntary but the rules are binding on those who do. The ultimate means of enforcing Safe Harbor is that failure to fulfill the commitments will be actionable as an unfair and deceptive practice under Section 5 of the FTC Act or under a concurrent Department of Transportation statute for air carriers and ticket agents. While the United States as a whole does not enjoy an adequacy finding, companies that join up to the Safe Harbor scheme will.

EU based exporters or U.S. based importers of personal data can also satisfy the adequacy requirement by including data privacy clauses in the contracts they sign with each other. The Data Protection Authority in the EU country from where the data is being exported must approve these contracts. To fast track this procedure the European Commission has approved sets of model clauses for personal data transfers that can be inserted into contracts between data importers and exporters. The most recent were published at the beginning of 2005. Most transfers using contracts based on these model clauses do not require prior approval. Companies must bear in mind that the transfer of personal data to third countries is a processing operation that is subject to the general data protection Directive regardless of any Safe Harbor, contractual or consent arrangements.

The EU’s Directive on distance selling to consumers (97/7/EC) set out a number of obligations for companies doing business at a distance with consumers. It can read like a set of onerous "do’s" and "don’ts," but in many ways it represents nothing more than a customer relations good practice guide with legal effect. Direct marketers must provide clear information on the identity of themselves as well as their supplier, full details on prices including delivery costs, and the period for which an offer remains valid – all of this, of course, before a contract is concluded. Customers generally have the right to return goods without any required explanation within seven days, and retain the right to compensation for faulty goods thereafter. Similar in nature is the Doorstep Directive (85/577/EEC) which is designed to protect consumers from sales occurring outside of a normal business premises (e.g., door-todoor sales) and essentially assure the fairness of resulting contracts.

Financial services are the subject of a separate Directive that came into force in June 2002 (2002/65/EC). This piece of legislation amends three prior existing Directives and is designed to ensure that consumers are appropriately protected in respect to financial transactions taking place where the consumer and the provider are not face-to-face. In addition to prohibiting certain abusive marketing practices, the Directive establishes criteria for the presentation of contract information. Given the special nature of financial markets, specifics are also laid out for contractual withdrawal.

The e-commerce Directive (2000/31/EC) imposes certain specific requirements connected to the direct marketing business. Promotional offers must not mislead customers and the terms that must be met to qualify for them have to be easily accessible and clear. The Directive stipulates that marketing e-mails must be identified as such to the recipient and requires that companies targeting customers on-line must regularly consult national opt-out registers where they exist. When an order is placed, the service provider must acknowledge receipt quickly and by electronic means, although the Directive does not attribute any legal effect to the placing of an order or its acknowledgment. This is a matter for national law. Vendors of electronically supplied services must also collect value added tax (VAT).

Joint Ventures & Licensing

Joint venture and licensing agreements are common in the Netherlands. The privatization of state-owned companies, including telecommunication and public transport, has further stimulated the potential for U.S. firms to enter into joint venture partnerships with Dutch companies. A joint venture can take the form of, for instance, a partnership or a BV. The structuring of a joint venture is a complicated process and normally requires a specialist advisor.

Selling to the Government

Local representation is almost a requirement in order to sell to the Dutch Government. The Commercial Service has developed a database that gathers all public procurement tenders open to U.S.-based firms. The database is based on the Tenders Electronic Daily (TED), which is the online version of the Official Journal of the European Union. Tenders published in the TED include public purchases of supplies, works and services by European governments at the national and sub-central levels. Since January 1st, 1996, the United States and the European Union have been party to the Government Procurement Agreement (GPA), signed under the auspices of the WTO, which allows U.S.-based firms to bid on certain EU contracts above established thresholds. The database features all current public procurement tenders issued by all national and regional public authorities in the European Union. This database is updated weekly and is easy to use with a range of different search options, including 19 industry sectors. This tool will help U.S. companies to become more pro-active in the European public procurement market for services, supplies and works.

The EU public procurement market, including EU institutions and Member States, totals around EUR 1,600 billion per year. This market is regulated by two EU Directives which apply for contracts above certain agreed thresholds. Under the agreed thresholds, each EU Member State has developed its own procurement law, which is not regulated by the EU public procurement Directives, although the general principles of the EU Treaty regarding non-discrimination and free movement of goods apply even below the thresholds. The two EU public procurement Directives are: Directive 2004/18 on Coordination of procedures for the award of public works, services and supplies contracts, and Directive 2004/17 on Coordination of procedures of entities operating in the Utilities sector, which covers water, energy, transport and postal services. Those Directives are implemented in each EU Member State’s national procurement legislation.

Two Remedies Directives outline the procedures that EU Member States ought to put in place in case of violation of the EU public procurement law: Directive 89/665 on the “Coordination of the laws, Regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts” for the classic sectors, and Directive 92/13 for remedies in the utilities sector. Two proposals for new Directives, scheduled for 2007, are under discussion by EU institutions. First, a proposal for a new Remedies Directive, which would increase possibilities for aggrieved companies to complain in pre-contractual period, is being discussed by the EU institutions. Second, a proposal for a Directive covering defense procurement would detail which particular less sensitive armaments procurement will be covered by EU Directives and which sensitive items will be allowed to benefit from an exemption of the law.

Most tenders from European public contracting authorities for public supplies whose value is above the agreed thresholds are open to U.S.-based companies by virtue of the WTO Government Procurement Agreement (GPA). The GPA allows U.S. firms to bid on all supplies and services and some construction works contracts above thresholds contracted by EU central public contracting authorities. However, there are restrictions for U.S. suppliers in the utilities sector both in the EU Utilities Directive and in the EU coverage of the GPA. The Utilities Directive allows EU contracting authorities in these sectors to either reject non-EU bids where the proportion of goods originating in non-EU countries exceeds 50 percent of the total value of the goods constituting the tender, or are entitled to apply a 3 percent price difference to non-EU bids in order to give preference to the EU bid. These restrictions are applied when no reciprocal access for EU companies in the U.S. market is offered.

The website of the U.S. Mission to the EU also has a database of all European public procurement tenders that are open to U.S.-based firms by virtue of the GPA. This database is free of charge, contains on average 6,000 to 10,000 tenders and is updated twice per week.
For more information, please see the website of the U.S. Commercial Service at the U.S. Mission to the European Union dedicated to procurement and the market research page which contains a handful of reports on EU tendering and government procurement.

Distribution & Sales Channels

Contributing eight percent to the GDP, transportation and distribution is a core business activity in the Dutch economy. Over 400,000 people are employed in the transportation and distribution sector. The geographical position of the Netherlands makes it the gateway to Europe. This can be illustrated by the following facts: Rotterdam, the world’s third-largest port, handles about 41 percent of all sea cargo in Europe; Amsterdam Schiphol Airport is Europe’s fourth largest airport; and 27 percent of all international road transport and 50 percent of all European inland shipping is done by the Dutch. The total amount of goods handled by the Dutch transport and distribution sector amounts to 1.4 billion tons annually. Major sectors include sea cargo, inland shipping, road cargo, rail cargo, air cargo, and pipeline transportation. The introduction of products into the Dutch market is relatively uncomplicated and may be achieved using several methods. Product representation throughout the Netherlands is facilitated by the compact market and may be achieved with any of the following distribution methods to cover the entire area, depending on the expected sales volume, product support requirements, and marketing techniques. However, these methods must be applied while being mindful of the advantages a local representative would have in serving the home market:

• Establishing a sales office to serve the entire country and provide a distribution base for the rest of Europe.
• Selling through an agent or distributor whose activity may cover specified areas, the entire Benelux, or include European sales.
• Selling through established wholesalers or dealers.
• Selling directly to department stores, retail chains, retail cooperatives, consumer cooperatives, or other purchasing organizations.

Selling Factors & Techniques

EU law implemented by national legislation governs exclusivity in agency and supply agreements, purchasing contracts, and contract terms. U.S. manufacturers and exporters are generally able to appoint exclusive representatives and to determine the methods used to promote the sale of their products. Such exclusive territories are usually national in size. Sales practices that give regulatory concern are those that could give an unfair advantage to the supplier at the expense of competitors or end users. Recent legislation exempts some vertical agreements between manufacturers and their resellers, but requires the disclosure of certain types of inter-company commercial arrangements, and also gives powers of investigation and enforcement to the regulatory authorities. Success in the Dutch market requires a long-term commitment to market development and sales back up, especially if U.S. companies are to overcome the geographic handicap with respect to European competitors. Dutch importers believe that U.S. suppliers process a U.S. domestic order before taking care of an export sale, and that they are quick to bypass a local distributor to deal directly with its customer.

Electronic Commerce

The Netherlands ranks among the countries with the largest number of broadband connections and the highest Internet penetration in the European Union. According to the Economic Intelligence Unit (EIU) e-commerce readiness survey, the Netherlands ranks eighth in the world thanks to continued rollout of broadband services, internetrelated legislation and government broadband programs. In 2004, the government embarked on an action program aimed at creating a regulatory framework to stimulate and facilitate broadband development.

At the beginning of 2005, 9.1 million Dutch people spent time on the Internet. An estimated 4,7 million people have purchased products on the Internet. Dutch consumers spent an estimated $2.6 billion shopping on the Internet in 2005. In July 2003, the European Union (EU) started applying Value Added Tax (VAT) to sales by non-EU based companies of Electronically Supplied Services (ESS) to EU based non-business customers. U.S. companies that are covered by the rule change must collect and submit VAT to EU tax authorities. European Council Directive 2002/38/EC changed the EU rules for charging Value Added Tax. U.S. businesses mainly affected by this rule change are those that are U.S. based and selling ESS to EU based, non-business customers or those businesses that are EU based and selling ESS to customers outside the EU who no longer need to charge VAT on these transactions.

There are a number of compliance options for businesses. The Directive created a special scheme that simplifies registering with each Member State. The Directive allows companies to register with a single VAT authority of their choice. Companies have to charge different rates of VAT according to where their customers are based but VAT reports and returns are submitted to just one authority. The VAT authority responsible for providing the single point of registration service is then responsible for reallocating the collected revenue among the other EU VAT authorities.

Trade Promotion & Advertising

An estimated $3 billion is spent annually on advertising. In the last few years, the Dutch advertising sector has experienced substantial growth in three key areas: radio, television and direct mail advertising. Because of the relatively small size of the Dutch domestic market, companies in this sector have traditionally been active in international markets. In the Netherlands, there are over 1,300 independent advertising agencies. About 25 percent of the total Dutch market is serviced by American advertising agencies. The country is attractive for American advertising agencies due to the effective advertising concepts the Dutch are able to produce with the aid of technical tools such as graphic design and video technology. Advances in technology allow them to conduct worldwide campaigns from the Netherlands.

The Government strictly enforces laws covering gaming and lotteries as well as restrictive trade practices. Firms advertising and selling goods should obtain local advice regarding provisions of the laws and consumer acceptance of the promotional or marketing approach. Dutch firms engaged in market research provide the usual range of services, including store audits, consumer surveys, product field-testing, and attitude and motivation research. In general, if the advertising technique works well for a particular product line
in the United States and elsewhere in Europe, the Dutch market should also be receptive to the approach.

Laws against misleading advertisements differ widely from Member State to Member State within the EU. To respond to this imperfection in the Internal Market, the Commission adopted a Directive, in force since October 1986, to establish minimum and objective criteria regarding truth in advertising. The Directive was amended in October 1997 to include comparative advertising. Under the Directive, misleading advertising is defined as any "advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behavior or which for those reasons, injures or is likely to injure a competitor." Member States can authorize even more extensive protection under their national laws. Comparative advertising, subject to certain conditions, is defined as "advertising which explicitly or by implication identifies a competitor or goods or services by a competitor." Member States can, and in some cases have, restricted misleading or comparative advertising. The EU’s Television without Frontiers Directive lays down legislation on broadcasting
activities allowed within the EU. It is currently being reviewed to adapt to advances in internet, mobile phones and digital TV technologies. It partially lifts Regulations on advertising and product placement and proposes to ban advertising to children of food and drink. The new rules should be adopted in 2007.

Following the adoption of the 1999 Council Directive on the Sale of Consumer Goods and Associated Guarantees, product specifications, as laid down in advertising, are now considered as legally binding on the seller.  The EU adopted Directive 2005/29/EC concerning fair business practices in a further attempt to tighten up consumer protection rules. These new rules will outlaw several aggressive or deceptive marketing practices such as pyramid schemes, "liquidation sales" when a shop is not closing down, and artificially high prices as the basis for discounts in addition to other potentially misleading advertising practices. Certain rules on advertising to children are also set out.

The advertising of medicinal products for human use is regulated by Council Directive 2001/83/EC. Generally speaking, the advertising of medicinal products is forbidden if market authorization has not yet been granted or if the product in question is a prescription drug. Mentioning therapeutic indications where self-medication is not suitable is not permitted, nor is the distribution of free samples to the general public. The text of the advertisement should be compatible with the characteristics listed on the product label, and should encourage rational use of the product. The advertising of medicinal products destined for professionals should contain essential characteristics of the product as well as its classification. Inducements to prescribe or supply a particular medicinal product are prohibited and the supply of free samples is restricted. The Commission plans to present a new framework for information to patients on medicines in 2007. The framework would allow industry to produce non-promotional information about their medicines while complying with strictly defined rules and would be subject to an effective system of control and quality assurance.

On July 16, 2003, the Commission adopted a proposal for a Regulation on nutrition and health claims made on foods (COM 2003/424) supplementing 2000/13/EC on the labeling, presentation and advertising of foodstuffs. The proposal is expected to be adopted by the end of 2006. The proposed Regulation would set rules on the use of language such as "low fat” and "light," among others. The proposal seeks to harmonize the rules for making claims throughout the EU and establish what nutrition and health claims are allowable.

Directive 2002/46/EC establishes rules relating to the labeling of food supplements and the maximum levels of vitamins and minerals in particular. In Summer 2007, the European Commission will evaluate if items other than minerals and vitamins need to be included in this Directive.

The EU Tobacco Advertising Directive bans tobacco advertising in printed media, radio, internet and sponsorship of cross-border events or activities. Advertising in cinemas and on billboards or merchandising is allowed though these are banned in many Member States. Tobacco advertising on television has been banned in the EU since the early 1990s, and is governed by the TV Without Frontiers Directive.

Pricing

The Netherlands is an extremely competitive market with high receptivity to U.S. goods. When pricing product for sale in the Netherlands, U.S. exporters should be aware of additional costs that can reduce profit margins below those available in the United States A value-added tax or VAT of 19 percent is charged on the majority of goods sold in the Netherlands. Imported goods are also subject to customs duty. The costs of transportation, freight forwarding and customs brokerage charges will further diminish margins, as will commissions to agents and distributors. Commissions are generally higher in the Netherlands than in the United States, as are retail profit margins. As in the United States, pricing of product depends on a myriad of variables including channels of distribution, product, season, consumer receptivity, economic climate, etc. The Commercial Service can offer U.S. exporters advice on product pricing on request.

Sales Service & Customer Support

The Dutch purchase from international sources and expect well-designed, high-quality products, with efficient after-sales service. An effective servicing system should be incorporated into distribution plans. The U.S. exporter would be ill advised, after having appointed a representative firm, to provide only product literature and samples. Regular communications and visits to the representative, particularly when newly appointed, by seasoned sales personnel or company technicians can reveal information on market developments and assist in the solution of any problems. Regular submission of sales reports can be a vital link to analyzing sales results and identifying potential problems.

Conscious of the discrepancies among Member States in product labeling, language use, legal guarantee, and liability, the redress of which inevitably frustrates consumers in cross-border shopping, the EU institutions have launched a number of initiatives aimed at harmonizing national legislation. Suppliers within and outside the EU should be aware of existing and upcoming legislation affecting sales, service, and customer support.

Under the 1985 Directive on liability of defective products, amended in 1999, the producer is liable for damage caused by a defect in his product. The victim must prove the existence of the defect and a causal link between defect and injury (bodily as well as material). A reduction of liability of the manufacturer is granted in cases of negligence on the part of the victim.

The 1992 General Product Safety Directive introduces a general safety requirement at the EU level to ensure that manufacturers only place safe products on the market. It was revised in 2001 to include an obligation on the producer and distributor to notify the Commission in case of a problem with a given product, provisions for its recall, the creation of a European Product Safety Network, and a ban on exports of products to third countries that are not deemed safe in the EU.

Under the 1999 Directive on the Sale of Consumer Goods and Associated Guarantees, professional sellers are required to provide a minimum two-year warranty on all consumer goods sold to consumers (natural persons acting for purposes outside their trade, businesses or professions), as defined by the Directive. The remedies available to consumers in case of non-compliance are:

• repair of the good(s);
• replacement of the good(s);
• a price reduction; or
• rescission of the sales contract.

The Netherlands has a generally good set of legislation and regulations that protect intellectual property rights. Enforcement of antipiracy laws remains a concern to producers of software and digital media. Patents for foreign investors are granted retroactively to the date of the original filing in the home country, provided the application is made through a Dutch patent lawyer within one year of the original filing date. Patents are valid for 20 years.

The EU’s legislative framework for copyright protection consists of a series of Directives covering areas such as the legal protection of computer programs, the duration of protection of authors’ rights and neighboring rights, and the legal protection of databases. Almost all Member States have fully implemented the rules into national law; and the Commission is now focusing on ensuring that the framework is enforced accurately and consistently across the EU. The on-line copyright Directive (2001/29/EC) addresses the vexed problem of protecting rights holders in the online environment while protecting the interests of users, ISPs and hardware manufacturers. It guarantees authors’ exclusive reproduction rights with a single mandatory exception for technical copies (to allow caching), and an exhaustive list of other exceptions that individual Member States can select and include in national legislation. This list is meant to reflect different cultural and legal traditions, and includes private copying "on condition right holders receive fair compensation."

EU countries have a "first to file" approach to patent applications, as compared to the "first to invent" system followed in the United States. This makes early filing a top priority for innovative companies. Unfortunately it is not yet possible to file for a single EU-wide patent that would be administered and enforced like the Community Trademark. For the moment the most effective way for a company to secure a patent across a range of EU national markets is to use the services of the European Patent Office (EPO) in Munich. It offers a one-stop-shop that enables rights holders to get a bundle of national patents using a single application. However these national patents have to be validated, maintained and litigated separately in each Member State. EPO’s web site is http://www.european-patent-office.org/.

The EU-wide Community Trademark (CTM) can be obtained via a single language application to the Office of Harmonization in the Internal Market (OHIM) in Alicante, Spain. It lasts ten years and is renewable indefinitely. For companies looking to protect trademarks in three or more EU countries the CTM is a more cost effective option than registering separate national trademarks. On October 1, 2004, the European Commission (EC) acceded to the World Intellectual Property Organization (WIPO) Madrid Protocol. The accession of the EC to the Madrid Protocol establishes a link between the Madrid Protocol system, administered by WIPO, and the Community Trademark system, administered by OHIM. As of October 1, 2004, Community Trademark applicants and holders are allowed to apply for international protection of their trademarks through the filing of an international application under the Madrid Protocol. Conversely, holders of international registrations under the Madrid Protocol will be entitled to apply for protection of their trademarks under the Community Trademark
system.

The EU adopted a Regulation introducing a single Community system for the protection of designs in December 2001. The Regulation provides for two types of design protection, directly applicable in each EU Member State: the registered Community design and the unregistered Community design. Under the registered Community design system, holders of eligible designs can use an inexpensive procedure to register them with the EU’s Office for Harmonization in the Internal Market (OHIM), based in Alicante, Spain. They will then be granted exclusive rights to use the designs anywhere in the EU for up to twenty-five years. Unregistered Community designs that meet the Regulation’s requirements are automatically protected for three years from the date of disclosure of the design to the public.

Within the EU, the rights conferred on trademark holders are subject to the principle of "exhaustion." Exhaustion means that once trademark holders have placed their product on the market in one Member State, they lose the right to prevent the resale of that product in another EU country. This has led to an increase in the practice of so called "parallel importing" whereby goods bought in one Member State are sold in another by third parties unaffiliated to the manufacturer. Parallel trade is particularly problematic for the research-based pharmaceutical industry where drug prices vary from country to country due to national price Regulation. Community wide exhaustion is spelled out in the Directive on harmonizing trademark laws. In a paper published in 2003, the Commission indicated that it had no plans to propose changes to existing legal provisions.

Due Diligence

All companies operating in the Netherlands must register with a local Chamber of Commerce. The trade register is a source of information that is open to everyone. Information includes the name of the owner, who is authorized to sign contracts, and who is responsible for financial matters. The Commercial Service can provide valuable background information on Dutch firms through our International Company Profile (ICP) service. Further information can be obtained by visiting our website at www.buyusa.nl or contacting your local Export Assistance Center or the Commercial Service directly in The Hague (see contact numbers at the end of this guide).