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.
On June 11, 2013, Senator Dianne Feinstein (D-CA) introduced legislation (S. 1136) to extend the Nicaragua TPL for 10 years, through 2024.
The TPL is an important benefit for United States Fashion Industry Association (USFIA) members and also has helped create new business for U.S. textile mills. USFIA, formerly the United States Association of Importers of Textiles & Apparel (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.
On March 14, 2013, USA-ITA (now USFIA) joined an industry letter to the Congressional trade leadership, urging them to take action to extend the CAFTA duty-free benefits available through the Nicaragua TPL, which expires at the end of 2014. We will continue to be active on this issue to ensure that the Nicaragua TPL is extended.
On June 18, 2013, USA-ITA (now USFIA) joined other apparel and retail associations in sending a letter to Senator Dianne Feinstein (D-CA) supporting renewal of the Nicaragua TPL.