Includes the barriers (tariff and non-tariff) that U.S. companies face when exporting to this country.
Under the CAFTA-DR Free Trade Agreement, 100 percent of U.S. consumer and industrial goods and more than half of U.S. agricultural products should enter Nicaragua duty free. CAFTA-DR also calls on member countries to establish rules to ensure customs transparency, predictability, and efficiency. In practice, however, the Nicaraguan government has imposed multiple barriers to trade.
Through arbitrary and unjustified customs procedures, the DGA caused delays and increased costs for U.S. exporters of virtually all products. Businesses report paperwork needed to process shipments languishes in DGA offices for more than one month and that some shipments are held for months with no justification. Other issues include arbitrary and unjustified denials of import permits for products. Logistics providers began reporting in August 2018 that DGA conducted additional inspections on more than 80 percent of all incoming shipments, up from the previous practice of 20 percent. Starting in 2019, multiple companies reported that DGA had questioned the country of origin of imported products. DGA requested additional information to confirm the origin and asked U.S. companies for proprietary information, including recipes and lists of ingredients. The Nicaraguan government also prevented the import of goods for political reasons, such as shipments of paper and ink for independent daily La Prensa in 2020. Businesses that refuse to pay fines face further delays, storage costs, and threats that DGA will remove preferential treatment for all future shipments. Companies report they had little hope of a fair resolution of their formal complaints and preferred to pay minor fines to avoid bureaucratic delays.
The Nicaraguan government’s arbitrary use of taxes, fees, and fines also serves as a barrier to trade. Businesses and nongovernmental organizations report DGA regularly subjects shipments of commercial and donated goods to arbitrary, higher valuations that increase the amount of taxes to be paid at the border. They also report DGA officials regularly assess exorbitant fines for minor administrative discrepancies, which by Nicaraguan regulation should only be subject to a small administrative fine. In some instances, businesses report that DGA attempted to levy fines up to triple the amount of the value of the shipment itself. DGA has also sought to levy retroactive tariffs and new additional fines equal to the amount of those retroactive tariffs. The Nicaraguan government levies a selective consumption tax (ISC) on many items (described in greater detail in Selling U.S. Products and Services). The ISC is based on the actual sales price of the product and applies to both imported and domestic goods. However, DGA is now charging the ISC for imported goods at the border and basing the tax value on a predicted sales price. Businesses report the fabricated valuation is equal to triple the combination of the good’s cost, insurance, and freight. For domestic goods, the ISC is imposed at the actual point of sale. In the current political climate, the U.S. Embassy has a very limited ability to seek resolution from the Nicaraguan government in response to reported complaints from U.S. businesses.