Trade Incentives, US Aid Could Help Spur Trade in Northern Triangle, COAC Working Group Says

A lack of trade facilitation, infrastructure and widespread corruption are three of the main challenges stymieing trade in the Northern Triangle, which could be improved with U.S. help, the Commercial Customs Operations Advisory Committee Rapid Response Subcommittee said in a report prepared for the Aug. 21 COAC meeting. The report, compiled from COAC’s Northern Triangle Working Group, issued several recommendations for improving trade, including specific adjustments Northern Triangle countries can make to their customs agencies, an enhanced foreign-trade zone in the area, training from U.S. customs officials and better trade enforcement.

The report also partly summarizes and builds off of work announced at CBP’s Trade Symposium in Chicago in July -- to improve customs agencies in Guatemala, El Salvador and Honduras (see 1907230058).

Incentives should be given to U.S. companies for trading with the Northern Triangle, the report said, by improving “opportunities particularly in textiles/apparel and agriculture trade.” The working group members suggested Congress pass a Northern Triangle Trade and Job Promotion Act that would temporarily provide reduced tariff rates and a “2 for 1 earned import allowance program” whereby certain imports using third-party yarn and fabric could enter the U.S. duty-free. Working group members also suggested introducing more “liberal rules for the use of synthetics” in apparel products to spur regional production to compete with Asia. The legislation could also “address the underutilization of [Tariff Preference Level] agricultural quotas in the region” but should not “disenfranchise U.S. or other business interests that have relied on the rules currently in place.”

The working group said there is a “lack of a regulatory framework” in the region that hinders trade, including no consistent working hours at the countries’ ports and inconsistent customs documents and licenses between countries and “in some cases from port to port within the same country.” The working group also pointed to “extensive delays” when waiting for license approvals to import items into foreign-trade zones. “Allowing local as opposed to more centralized, national decision-making further exacerbated these challenges, particularly due to paper and labor-intensive processes requiring substantial human intervention,” the report said.

The working group also “stressed the need for improvement in the foreign trade zone” process, adding there needs to be a review of current FTZ regulations. Working group members said customs staff hours were not aligned with operation hours “and regulatory policies severely hampered transfers from one FTZ to another.”

The working group said the three countries should collaborate on customs processing and port operations, which would improve trade in the region. Members suggested introducing a “Central American Single Declaration Form” and the “harmonization of licenses and permits to avoid delays and bureaucracy.” More automation in customs processes would reduce the number of face-to-face interactions, members said, which are often “subjective and inconsistent.” This can be applied to introduce more “non-intrusive inspection” at ports “where technology was available to enhance facilitation,” the report said.

Members suggested the U.S. can provide “training and engagement” to Northern Triangle countries “in a broad, national and even regional level as opposed to a more ad hoc port specific manner.” The U.S. can provide “in-country outreach” on FTZ management to align the public sector hours with the business community, the members said, also suggesting that cargo movement between FTZ should not be classified as new FTZ admissions “but rather expedited through a transfer process.”

Other challenges to trade in the area include poor infrastructure, including subpar road conditions from El Salvador to the Port of Cortes, the report said. Members said congestion clogs the Honduras-El Salvador crossings because of inconsistent work hours and the fact that passengers and cargo shipments are processed at the same crossing. Some shipments are delayed two days, members said, because port containers are not released until “the entire vessel is unloaded and reloaded with outbound containers.”

Members suggested that U.S. invest in better infrastructure for the three countries and help coordinate customs operations between Honduras and El Salvador to solve congestion issues. But members said the changes won’t have a significant impact unless there are policy changes, such as allowing containers to be released from customs as they are unloaded.

Working group members said the lack of security “was the most critical issue impeding growth and development throughout the region.” The lack of security has led to corruption and “inconsistent trade enforcement,” specifically among “counterfeiting and transshipments.”

The U.S. should perform outreach and training to limit the corruption and emphasize rules set out in the World Customs Organization’s Revised Arusha Declaration of the Customs Co-Cooperation Council Concerning Good Governance and Integrity in Customs. “This would set the tone that such efforts should be consistent with global declarations and standards for professionalism, not just the policies and laws of one particular country like the U.S,” the report said.