The apparel manufacturing sector in Nicaragua will lose about 33,000 jobs if the Tariff Preference Level (TPL), which will expire on December 31, 2014, is not extended, according to the Nicaraguan Association of Textile and Apparel (Anitec), reports El Nuevo Diario.
In 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. Subsequently, Nicaragua was granted a 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, according to the U.S. Department of Commerce’s Office of Textiles & Apparel (OTEXA).
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.
The non-extension or end of the TPL facility would negatively impact employment and clothing exports of Nicaragua to the US, says Anitec director Dean Garcia, who estimates that such a step would result in loss of at least 30 percent or 33,000 of the 110,000 people currently employed in the sector.
Recently, a delegation of the Nicaraguan Government and private companies traveled to Washington and requested a 10-year extension of the TPL, to enable Nicaraguan firms to continue selling apparel, which are made from raw material imported from non-CAFTA-DR countries, to US companies.
Apparel constituted 30 percent of all exports made by Nicaragua to the US last year, according the Free Zone Corporation.
The US Government is soon going to decide on legislation S. 1136, introduced by Senator Dianne Feinstein in June last year, seeking extension of the Nicaragua TPL for 10 years, through 2024.