CAFTA-DR & Nicaragua TPL
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Issue Summary
On August 5, 2004, the United States signed the Dominican Republic-Central America Free Trade Agreement (CAFTA-DR), which includes Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. According to USTR, CAFTA-DR is the first Free Trade Agreement between the United States and a group of smaller, developing economies and creates new economic opportunities and market access, especially in the textile and apparel industries.
According to the U.S. Department of Commerce Office of Textiles & Apparel (OTEXA), Nicaragua was granted a Tariff Preference Level (TPL) that allows apparel made of certain cotton and man-made fiber to enter the U.S. duty free under CAFTA-DR if it’s assembled in Nicaragua, regardless of the origin of the fabrics. The TPL is limited to 100 million square meter equivalent units (SME) per year. The TPL will expire on December 31, 2014.
In addition, the TPL contains a “unique provision for woven trousers (categories 347/348 and 647/648),” says OTEXA. Nicaraguan trouser producers must use matching amounts of U.S. and foreign fabrics to make the trousers, and the fabrics must be matched one-for-one, and the amount of trousers that can be imported to the United States is capped.
USA-ITA Position
The TPL is an important benefit for USA-ITA members and also has helped create new business for U.S. textile mills. USA-ITA supports the extension of the Nicaragua TPL as soon as possible. Extension will encourage companies to continue to source in Nicaragua and build the Western Hemisphere supply chain.