Trade and Tariffs

The consumer goods sector is composed of various product groups, including the toy and furniture Uruguay Round sectoral agreements, appliances, and various recreational goods. Consumer goods accounted for 6 percent of total U.S. industrial exports to Central America in 2003, totaling $329 million. Appliances lead U.S. exports in the sector. Costa Rica is the United States’ leading Central American export market in the sector, accounting for 30 percent of total U.S. consumer goods exports to the region.

Central American tariffs on consumer goods range from 0 to 30 percent, with the average varying by country from 8.2 to 10.0. The highest tariffs generally apply to recreational vehicles and clocks.

Central America exports to the United States in this sector were about $318 million in 2003, or about 12 percent of the region’s total exports to the United States. Costa Rica is the leading exporter of the five countries, accounting for 42 percent of Central American exports in the sector.

U.S. tariffs on consumer goods range from 0 to 109 percent, with an average of 3.6 percent. Tariffs are highest on broom corn brooms. All products in this sector receive duty-free treatment under the Caribbean Basin Initiative (CBI) and Caribbean Basin Trade Partnership Act (CBTPA).

Tariff Elimination

Tariffs will be phased out according to four tariff elimination categories: immediate elimination, equal cuts over five years, equal cuts over 10 years, and non-equal cuts over 10 years. Duties on products in the last category will decrease by 2 percent for the first two years, by 8 percent for the next four years, and by 16 percent for the last four years.

Overall, 39 percent of U.S. consumer goods exports receive duty-free treatment immediately upon implementation of the agreement. Tariffs on 9 percent of exports will be eliminated over five years. Duties on the remaining 52 percent of U.S. exports will be eliminated over ten years. Only 7 percent of exports will be subject to non-linear tariff elimination. Printed matter, refrigerator/freezers, motorcycles, and wooden furniture are examples of products that will be subject to non-linear 10-year staging.

Subsectors: Furniture, Toys, Gems & Jewelry and Recreational & Sporting Goods

Furniture: seven percent of U.S. furniture exports to Central America will be duty-free immediately upon implementation of the agreement. Tariffs on another 15 percent of exports will be eliminated over five years. Duties on the remaining 78 percent of U.S. exports will be eliminated over ten years. Only 8 percent of exports will be subject to non-linear tariff elimination.

Toys: Thirty-six percent of U.S. toy exports to Central America will be duty-free immediately upon implementation of the agreement. Tariffs on 5 percent of exports will be eliminated over five years. Duties on the remaining 59 percent of U.S. exports will be eliminated over ten years. No toy exports will be subject to non-linear tariff elimination.

Gems & Jewelry: Ninety-two percent of U.S. gems and jewelry goods exports to Central America will be duty-free immediately upon implementation of the agreement. Tariffs on 1 percent of exports will be eliminated over five years. Duties on the remaining 7 percent of U.S. exports will be eliminated over ten years. No gem and jewelry exports will be subject to non-linear tariff elimination.

Recreational & Sporting Goods: Seventy percent of U.S. recreational and sporting goods exports to Central America will be duty-free immediately upon implementation of the agreement. Tariffs on 7 percent of exports will be eliminated over five years. Duties on the remaining 22 percent of U.S. exports will be eliminated over ten years. No recreational and sporting goods exports will be subject to non-linear tariff elimination.

The United States agreed to consolidate all CBI and CBTPA tariff preferences into the final tariff elimination schedules. As a result, all Central American exports of consumer goods will continue to receive duty-free treatment.

Non-Tariff Barriers

Many U.S. exporters face consular transactions – complex paperwork requirements stipulating that documents be certified in the United States at the embassy or consulate of the Central American country that will receive the goods. Consular transactions will be eliminated immediately upon implementation of the agreement.

Dealer protection laws have led to severe consequences for U.S. exporters when they terminate a contract with a dealer or distributor in Central America. The agreement requires each Central American country to amend its laws such that U.S. products cannot be denied the right of importation due to contract disputes.