Trade and Tariffs

The transportation sector covers motor vehicles and parts, including tires. Transportation equipment accounted for 4 percent of total U.S. industrial exports to Central America in 2003, totaling $230 million. U.S. exports in the sector are lead by medium-sized autos and parts. Guatemala is the leading U.S. export market in Central America for transportation equipment, accounting for 33 percent of total U.S. transportation exports to the region.

Central American tariffs on transportation products range from 0 to 30 percent, and average from 3.9 to 7.5 percent, depending on the country. The highest tariffs in this sector apply to motor vehicles.

Central America exports to the United States in this sector were about $172 million in 2003, or about 6 percent of the region’s total exports to the United States. Honduras is the leading exporter of the five countries, accounting for 58 percent of Central American exports in the sector.

U.S. tariffs applied to the transportation sector range from 0 to 25 percent, with an average of 2.4 percent. All products in this sector are duty-free under the Caribbean Basin Initiative (CBI) and Caribbean Basin Trade Promotion Authority (CBTPA) tariff preferences.

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, 54 percent of U.S. exports will receive duty-free treatment immediately upon implementation of the agreement. Tariffs on 2 percent of exports will be eliminated over five years. Duties on the remaining 44 percent of U.S. exports will be eliminated over ten years. Forty-three percent of U.S. 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 transportation equipment 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.