CAFTA-DR: When Will Your Product Become Duty Free?
by Sue Senger
The Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR) includes seven signatories: the United States, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. The U.S. Congress approved the CAFTA-DR in July 2005, and the President signed it into law on August 2, 2005. The CAFTA-DR has been approved by the legislatures in the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua. Approval is pending in Costa Rica.
The United States is implementing the CAFTA-DR on a rolling basis as countries make sufficient progress to complete their commitments under the Agreement. The Agreement first entered into force between the United States and El Salvador on March 1, 2006. On March 31, 2006, the President issued a proclamation implementing the CAFTA-DR for Honduras and Nicaragua on April 1, 2006.
The U.S. Government continues to work with the remaining three CAFTA-DR partners to ensure timely and full implementation of the Agreement.
More than 80% of U.S. exports of consumer and industrial goods became duty free when the agreement went into force. The remaining tariffs will be phased out over a ten-year period. Duties on remaining U.S. products will be phased out over a period of up to 20 years.
To determine when your product will become duty free in a particular CAFTA-DR country, you’ll need to know the correct Harmonized System (HS) number for your product. Once you have the correct HS number, click on the Tariff Schedule listed below for the country of import to determine when and at what rate your duty is reduced.
Here are the web links for the individual country tariff schedule:
After each HS number and description, you’ll find letter that indicates your product’s “staging category.” These staging categories indicate when your product will become duty free. Except as otherwise noted in the General Notes section to each tariff schedule, the codes are generally defined as follows:
Category A: Goods (there are unique rules for textile or apparel goods) will be duty-free immediately on the date that the Agreement enters into force.
Category B: Duties will be eliminated in five equal annual stages beginning on the date the Agreement enters into force, and shall be duty-free effective January 1 of year five.
Category C: Duties will be eliminated in 10 equal annual stages beginning on the date the Agreement enters into force, and shall be duty-free effective January 1 of year 10.
Category D: Duties will be eliminated in 15 equal annual stages beginning on the date the Agreement enters into force, and shall be duty-free effective January 1 of year 15.
Category E: Duties will remain at base rates for years one through six. Duties shall be reduced by 8.25%of the base rate on January 1 of year seven and by an additional 8.25% each year thereafter through year 10. Beginning January 1 of year 11, duties shall be reduced by an additional 13.4% annually through year 15, and such goods shall be duty-free effective January 1 of year 15.
Category F: Duties will remain at base rates for years one through 10. Beginning January 1 of year 11, duties shall be reduced in 10 equal annual stages, and such goods shall be duty-free effective January 1 of year 20.
Category G: Goods already receiving duty-free treatment shall continue to receive duty-free treatment under the Free Trade Agreement.
Category H: Goods in this category will continue to receive most-favored-nation treatment.
Categories M through Y: In addition to the staging categories listed above, the Agreement has country-specific schedules that contain staging categories M through Y. These categories may be found in the General Notes of the country-specific tariff elimination schedule.
My next article will discuss how to declare that a product qualifies for reduced or no duties under CAFTA-DR.