Trade and Tariffs

The Agreement on Trade in Civil Aircraft defines the aerospace sector. Aerospace products accounted for almost 2 percent of total U.S. industrial exports to Central America in 2003, totaling $110 million. Aircraft parts and engines dominate U.S. exports in this sector. El Salvador is the United States’ leading Central American export market in the sector, accounting for 55 percent of total U.S. aerospace exports to the region.

Central American tariffs on aerospace products range from 0 to 6 percent, with the average varying by country from 1.4 to 2.4 percent. The highest tariffs in this sector apply to smaller aircraft, parachutes, and gliders.

Central America exports to the United States in this sector were about $2 million in 2003, or less than 1 percent of the region’s total exports to the United States. Honduras is the leading exporter of the five countries, accounting for 95 percent of Central American exports in the sector.

The United States, as a party to the Agreement on Trade in Civil Aircraft, applies duty-free treatment on an MFN basis to these products.

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.

One hundred percent of U.S. aerospace exports, including high value products such as small aircraft and radio equipment will receive duty-free treatment immediately upon implementation of the agreement.

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.