Includes information on average tariff rates and types that U.S. firms should be aware of when exporting to the market.
As of January 1, 2015, 100% of U.S. consumer and industrial goods enter the CAFTA-DR countries duty free (for goods that meet the country of origin requirements). Approximately 80% of these products entered duty-free when CAFTA-DR first entered into force in 2006. The remaining 20% of consumer and industrial goods were on a 5- or 10-year phased tariff reduction schedule.
CAFTA-DR provides preferential treatment for products that meet the CAFTA-DR origin rule. The Agreement allows the Salvadoran and U.S. Governments to conduct an Origin Verification Process when there is doubt regarding product origin. U.S. exporters and local importers are required to keep documentation proving origin for a period of five years.
Under CAFTA-DR, more than half of U.S. agricultural exports now enter El Salvador duty-free. In 2006, El Salvador began a process to eliminate its remaining tariffs on nearly all agricultural products within 15 years (18 years for rice and chicken leg quarters and 20 years for dairy products). For some agricultural products, TRQs will permit immediate duty-free access for specified quantities during the tariff phase-out period. El Salvador will liberalize trade in white corn, for example, through expansion of a TQR, rather than by tariff reductions.
The Agreement also requires transparency and efficiency in administering customs procedures, including the CAFTA-DR rules of origin. El Salvador has committed to ensuring greater procedural certainty and fairness, and all parties agreed to share information to combat the illegal transshipment of goods.
According to CAFTA-DR chapter 20, “in case of disputes, the Parties shall at all times endeavor to agree on the interpretation and application of the Agreement and shall make every attempt through cooperation and consultations to arrive at a mutually satisfactory resolution of any matter that might affect its operation.”
“Any Party may request in writing consultations with any other Party with respect to any actual or proposed measure or any other matter that it considers might affect the operation of the Agreement.”
The consulting Party may request another consulting Party to make available personnel of its government agencies or other regulatory bodies who have expertise in the matter subject to consultations.
If the Parties fail to resolve a matter through consultations, they “may also request in writing a meeting of the Commission, where consultations have been held pursuant to Article 16.6 (Cooperative Labor Consultations), Article 17.10 (Collaborative Environmental Consultations), or Article 7.8 (Committee on Technical Barriers to Trade)” of CAFTA-DR. The Commission shall consist of the cabinet-level representatives of the consulting Parties.
For countries with which El Salvador does not have a bilateral trade agreement, most of El Salvador’s tariffs do not exceed the maximum common external tariff of 15% established by the Central American Common Market (CACM) treaty, of which it is a signatory. However, there are several exceptions. Tariffs on new and used finished clothing are generally 25%, while tariffs on fabrics are 20% or more. Motor vehicles are generally assessed a duty of 25-30%. Agricultural products face the highest tariffs. Some dairy, rice, pork, and poultry products are assessed a 40% duty. Alcoholic beverages are subject to a 20% to 40% duty, as well as domestic taxes that include a specific tax based on alcohol content and an 8% ad valorem tax. In addition, all goods and services in El Salvador, regardless of origin, are charged a value-added tax (VAT) of 13%.
In November 2015, a “Special Contribution for Citizen’s Security” of 5% was imposed on the telecommunication industry. This contribution applies to all telecom devices, software, and hardware imported into El Salvador. Although in 2018, the Constitutional Court agreed to consider five challenges arguing that the 5% tax is unconstitutional as it represents double taxation ; the Court has not yet ruled and the contribution is due to expire in November 2020, unless renewed by the Assembly.El Salvador’s tariff schedule (for other trading partners)
Alternative Dispute Resolution
“Each Party shall, to the maximum extent possible, encourage and facilitate the use of arbitration and other means of alternative dispute resolution for the settlement of international commercial disputes between private parties in the free trade area; to this end, each Party shall provide appropriate procedures to ensure observance of agreements to arbitrate and for the recognition and enforcement of arbitral awards in such disputes.”
“The Commission may establish an Advisory Committee on Private Commercial Disputes comprising persons with expertise or experience in the resolution of private international commercial disputes.”