The exporting and producing sectors are awaiting the implementation of the Reciprocal Trade Agreement signed between Guatemala and the United States, and are offering their opinions after Mineco announced that the Office of the United States Trade Representative (USTR) informed them that this would come into effect at the end of the current temporary tariffs.
The established tariffs are based on section 122 of the US Trade Act, which were issued for 150 days, a period that ends on July 23.
Guatemala, as a signatory country, completed its internal process in mid-March; the agreement was ratified by the President of the Republic, and notified to the U.S. The document states that it was to come into effect 30 days after the U.S. notified that it had also completed its internal procedure.
Meanwhile, the USTR informed Mineco that the document no longer needs to undergo any additional signature in that country, since it is complete with the signature of Ambassador Jamieson Greer, US trade representative, and that it will become effective upon the end of the current tariffs issued under section 122, authorities from that ministry announced.
In this regard, the president of the Guatemalan Association of Exporters (Agexport), Francisco Ralda, explained that Guatemala was awaiting the signature of the White House to finalize the internal process of the Reciprocal Trade Agreement in the United States. However, he said that he was informed—although he said not officially by Mineco—that Ambassador Greer, head of USTR, had signed it and that said official was authorized to endorse that signature.
The manager indicated that the export sector has doubts about why the agreement does not come into force immediately, despite having been endorsed with that signature from the US official, and why it should wait until the end of the period of tariffs issued under section 122.
Ralda explained, however, that the sector’s position is that, although it is not immediately effective, the agreement provides certainty.
“It brings us certainty that the agreement is signed, but there is work to continue doing with the 30% of the products that were left with a 10% tariff”, he expressed.
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In Ralda’s opinion, it is necessary to remember that the agreement goes beyond the issue of tariffs, since Guatemala also made commitments, Therefore, you must be very careful in complying with them, because the tariff benefit granted by the United States to the country depends on it.
He said that, upon learning of the agreement, they are now certain of what is included and what is not in the agreement and in the exemptions; However, they consider that it would have been better for it to come into effect immediately, since then the products that continue to pay tariffs—because they are not exempt from section 122, but they are in the agreement—could be free of that tax.
Ralda said that they have detected, together with several exporters, that for some products that have exemption in the bilateral agreement, in certain cases they are not charging tariffs although they are not exempt from the tax under section 122, which is why the doubt arose as to whether, once the agreement had been ratified by the authorities of that country, it notified its customs and the tax began to be eliminated for these products, but he expressed that they do not have official information in this regard.
Products with or without tax
The export sector insisted that some products from the vegetable, mini-vegetable and fruit sectors do not currently have an exemption and were not included in the agreement, so work must continue to eliminate this exemption. tax, which remains for around 28% of Guatemalan exports to the US.
Ralda indicated that, in the case of products such as legumes and vegetables, a 25% drop in exports was already reflected in the first quarter of the year. He added that this is a drastic decrease in that sector, which has been impacted by tariffs.
Meanwhile, Among the products exempt from tariffs, traditional products stand out, such as coffee, bananas, sugar, clothing and textiles, among others, which represent around 72%.; while there is another group that continues to pay tariffs, but would obtain exemption with the entry into force of the agreement.
Camagro
Carla Caballeros, executive director of the Chamber of Agriculture of Guatemala (Camagro), regarding the reported deadline for the agreement to come into effect, believes that it could be due to this time it will serve the United States to define or implement the measures it decides in general for different countries and products, derived from the section 301 investigations.
Section 301 of the Trade Act of 1974 is part of the legislation used by Washington to evaluate foreign practices that may harm or restrict US trade, and several aspects are currently under review. For example, in mid-March last, The USTR opened trade investigations against 60 countries, including Guatemala, considering that their policies may not effectively prevent the importation of products made with forced labor.
Asked if waiting for that deadline causes concern to the sector, Caballeros said no, since, as he explained, in practical terms the products that achieved tariff-free access with the agreement already had exemption since last year and remain exempt from the tariffs issued in February of this year under section 122.
The executive considers that the issue of implementation is related to the progress in the decisions to modify some measures to the commitments included in the agreement, which has to do with administrative agreements, ministerial agreements, approval of laws and the verification that by July the mixture of ethanol in gasoline should already be implemented.
“The important thing is that we continue to advance in what corresponds to us as a country,” he expressed.
However, he believes that a substantial change would not be expected between now and July 24, unless the country is not imposed any other tariffs on another product.
That is, when those section 122 tariffs lose validity and no others are imposed on Guatemala, the application of 10% loses effect, even though the products are not included in the agreement, he indicated.
“What we would have to see is that, if after 122 they are going to put some other measure under section 301 for those products that have 10%; the expectation would be no.”
Amcham: necessary legal clarity, predictability and communication
Separately, Waleska Sterkel de Ortiz, executive director of the Guatemalan American Chamber of Commerce (Amcham Guatemala), regarding the deadline for the agreement to come into effect, expressed that they consider it important that the process advances with legal clarity, predictability and timely communication to the private sector.
“We understand that the decision to wait for the expiration of this temporary measure responds mainly to a process of legal and operational order within the US commercial system”; however, “From a business perspective, it is essential to minimize any space of uncertainty for exporters, importers and supply chains that depend on clear rules for making commercial, logistical and investment decisions,” commented the Amcham executive.
The organization believes that This period can serve to adequately prepare the technical implementation of the agreementparticularly in customs issues, rules of origin, standardization, trade facilitation and coordination between authorities of both countries.
“The success of the agreement will depend not only on its entry into force, but also on the ability to translate its provisions into agile processes, transparent and operationally functional for companies,” he added.
Regarding the commitments made, the executive mentioned the simplification of import licenses, the recognition of international technical standards, customs facilitation, the strengthening of regional supply chains, digital trade and cooperation on economic security issues, as well as advances in intellectual property and implementation of ethanol.
Situation after the ruling in the US
After the decision of a United States International Trade Court, on May 7, suspending tariffs based on section 122the Ministry of Economy (Mineco) was consulted. In this regard, he indicated that, with the information currently available, the temporary 10% tariff imposed by the United States under section 122 of the Trade Act of 1974 remains formally in force until there is a definitive resolution or Congressional action that eliminates it.
In this regard, Agexport indicated that the suspension of the tariff applied only to the companies that presented their claim before that court.
Regarding the status of the agreement signed between both countries after such decision, Mineco reported that the agreement remains and continues subject to the implementation processes and mechanisms planned between both parties. Furthermore, (until this Wednesday, May 13) Guatemala has not been officially notified about modifications derived from the resolution issued by the United States International Trade Court, the ministry added.