Refund for Some CAFTA Importers
Clothing companies importing apparel from Central America might be in for a little tariff relief.
The U.S. House of Representatives passed a pension bill on July 29 that has several attachments, including one that would allow importers to get a refund on the tariffs they paid on Central American goods brought into the United States this year.
Under the Central American Free Trade Agreement, goods traded with the United States are not subject to duties or tariffs. But a glitch in the agreement occurred early this year with each Central American country entering the trade agreement on a staggered basis.
El Salvador was the first to make the necessary changes to its national laws and officially joined CAFTA on March 1. Nicaragua and Honduras followed on April 1 and Guatemala on July 1. The Dominican Republic and Costa Rica still haven’t joined.
The effect was that if you imported goods from Honduras that used, for example, thread or other input items from Costa Rica or other Central American countries that weren’t officially signed on to the trade accord, the apparel didn’t qualify for tariff-free status. The pension bill provisions allow importers to receive refunds for those tariffs.
“Importers should not have to pay these duties,” said Steve Lamar, senior vice president of the American Apparel & Footwear Association, the Arlington, Va.–based trade group representing hundreds of apparel manufacturers and retailers in the United States.
The confusing tariff rules have caused apparel imports from Central America to decline 17.3 percent during the first five months of this year compared with the same period last year.
Another provision of the pension bill includes changing the rules of origin for pocketing and lining fabrics. The pension bill will allow only U.S. or regional fabrics to be used in pockets and lining to qualify a good for duty and quota-free status.
The U.S. Senate is expected to vote on the pension bill on Aug. 4. —Deborah Belgum
