On 1 January 1993, Czechoslovakia divided into two independent states, the Czech Republic and the Slovak Republic. Both states maintain a customs union that continues most of the same trade policies of the former Czechoslovakia. All imports into the Czech Republic, except those from the Slovak Republic, are subject to an ad valorem rate of up to 80%, but with an average of 4.6%. There is also a value-added tax (VAT) of 22% for everything except necessities, such as food and pharmaceuticals, for which it is 5%. Preferential treatment is granted to developing countries. The Czech Republic has trade agreements with Bulgaria, Hungary, Poland, Romania, Slovakia, and Slovenia, which comprise the Central European Free Trade Agreement (CEFTA).