WORLD TRADE
ORGANIZATIONWT/REG93/R/B/1
G/L/358
27 March 2000
(00-1229)
Original:  Spanish
GENERAL TREATY ON CENTRAL AMERICAN ECONOMIC INTEGRATION
Biennial Report on the Operation of the Agreement
Communication from the Parties
The following report, dated 25 May 1999, presents the information received from the
Permanent Mission of Nicaragua, also on behalf of the Member States, Costa Rica, El Salvador,
Guatemala and Honduras.  The report has been dr awn up in line with the standard format for
information on regional trade agreements (WT/REG/W/6).
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1. BACKGROUND INFORMATION ON THE AGREEMENT
The Member States of the General Treaty on Central American Economic Integration are
Costa Rica, El Salvador, Guatemala, Honduras and Ni caragua.  It entered into force in 1961 and was
subsequently amended by the Protocol to the General Treaty on Central American  Economic
Integration, known as the Guatemala Protocol, in 1993.
1. Membership and dates of signature, ratification and entry into force
The General Treaty on Central American Economic Integration was signed in 1960 by
El Salvador, Guatemala, Honduras and Nicaragua.  The instruments of ratification were deposited on
5, 8 and 26 May 1961 by Guatemala, El Salvador and Nicaragua, respectively, and on 27 April 1962by Honduras.  It came into force on 4 June 1961 for the first three States and on 27 April 1962 for
Honduras.  Costa Rica acceded on 23 June 1962 and the instrument came into force for it when its
ratification was deposited on 23 September 1963.
2. Type of agreement
The objective of the General Treaty is to establish a common market between the five
countries and with this in mind those countries have undertaken to bring a free-trade area into full
operation as well as to create a customs union in respect of their territories.
3. Scope
The General Treaty deals with trade in goods.  From the outset it established free trade for all
products originating in the Member States, with a few exceptions listed in Annex A of the General
Treaty.  Of the products in Annex A, only roasted coffee, alcoholic beverages and petroleum products
are subject to customs duties, while the rest are subject to import controls.
1  This Annex covers just a
few products which represent a very small proportion of trade.
                                                     
1 Resolution No. 24-96 (COMRIEDRE IV) of 22 of May 1996, as amended by Resolution 18-98
(COMIECO-VI) of 24 February 1998.WT/REG93/R/B/1
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4. Trade data
Data on intra- and extra-trade, according to major products and partners, will be distributed at
a later date as an addendum to this report.
II. TRADE PROVISIONS
1. Import restrictions
1.1 Duties and charges
In accordance with the provisions of Article III of the Treaty, all products originating in the
Member States are freely traded except for those included in Annex A.  The list of products not
entitled to free-trade treatment has been getting pr ogressively shorter and currently consists merely of
the following:
ANNEX A
Common Rules for all Five Countries
0901.1 Coffee, not roasted
17.01
1701.11.00
1701.91.00
1701.99.00Cane sugar, refined or unrefined
Cane
Containing added flavouring or colouring matter
Other
27.1027.1227.1327.15Petroleum products.  Exception is made for mineral solvents, included
in subitem 2710.00.1/ and asphalt, in subitem 2713.20.00, (petroleumbitumen), which are accorded free tr ade treatment between contracting
States.
Bilateral Regimes
Guatemala – El Salvador
1101.00.00 Wheat
22.072208.90.10Ethyl alcohol, denatured or undenatured
Guatemala – Honduras
0901.2 Roasted coffee
1101.00.00 Wheat
22.08 Distilled alcoholic beverages
Guatemala – Nicaragua
0901.2 Roasted coffee
1101.00.00 Wheat
Guatemala – Costa Rica, El Salvador – Nicaragua
0901.2 Roasted coffee
1101.00.00 Wheat
22.07
2208.90.10Ethyl alcohol, denatured or undenatured
El Salvador – Honduras, Costa Rica – Honduras
0901.2 Roasted coffeeWT/REG93/R/B/1
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1101.00.00 Wheat
22.07
2208.90.10Ethyl alcohol, denatured or undenatured
22.08,
Except 2208.90.10Distilled alcoholic beverages
El Salvador – Costa Rica, Nicaragua – Costa Rica
0901.2 Roasted coffee
22.07
2208.90.10Ethyl alcohol, denatured or undenatured
Honduras – Nicaragua
0901.2 Roasted coffee
22.08 Distilled alcoholic beverages
Although no timetable has been set for the remo val of these exceptions to free trade, the
Council of Ministers for Economy and Trade has been given the task of revising the list at least once a
year with this mind.
Temporary protection tariff (Arancel Temporal  de Protección - ATP) applied by Nicaragua
In order to allow Nicaragua to tackle the reconstruction, rehabilitation and strengthening of its
productive and financial capacity, the Council of Ministers adopted Resolution No. 3-93(CE-IEX),
based on Transitory Article V of the Guatemala Pr otocol, giving Nicaragua permission to apply an
ATP to 780 tariff items, subject to a timetable for phasing out this tariff by the end of the year 2000.The ATP consists of a variable surcharge levied on the imports concerned.
The ATP was established in July 1994, and applied in conjunction with a general fiscal stamp
duty of 5 per cent until July 1997, when the latter was incorporated into the former in order to
facilitate the tariff reduction process.
Since the tax was first introduced, the rates have been steadily reduced by means of 5 per cent
cuts on a six-monthly or yearly basis.  The process is due to be completed by the end of the year 2001.
The ATP was phased out for the large majority of products by January 1999, and remained only for
"fiscal goods".
2  Pursuant to Law No. 257, the Law on Fair Taxation and Trade, capital goods and
intermediate goods not produced in Central America are not included in the phasing out of tariffs and
a ATP of a rate of 5 per cent remains in place.
Duty on customs value in Costa Rica
Through Law No. 6946 in 1984, Costa Rica established a tax of 1 per cent of customs value.
This has been incorporated into tariff duties and is included in the Schedule of Concessions for CostaRica resulting from the Uruguay Round.
Customs administrative service charge in Honduras
The Government of Honduras levies a customs administrative service charge of 0.5 per cent
on finished goods only.
                                                     
2 The term "fiscal goods" covers 28 eight-digit HS lines comprising mineral water (including flavoured
waters), beer, ethyl alcohol, spirits ( aguardientes ), liqueurs, whisky, rum, gin and tobacco and tobacco products.WT/REG93/R/B/1
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1.2 Quantitative restrictions
When the General Treaty came into force a number of quantitative restrictions or quotas
between the States were included in Annex A.  Ho wever, over the years the Council of Ministers
gradually phased these out so that today they no longer exist.
1.3 Common external tariff
Through Resolution No. 13-95, dated 12 December 1995, the Council of Ministers for
Economic Integration established as an immediate obj ective of Central American tariff policy a target
of 0 per cent for raw materials and 15 per cent for finished products, with intermediate levels of 5 per
cent and 10 per cent for raw materials and inputs produced in the region. It also authorized countriesto gradually reduce the tariff at their discretion, in accordance with their particular circumstances, as
from 1 January 1996.
Shortly afterwards the Council of Ministers passed Resolution No. 26-96, dated 22 May 1996,
establishing the following general parameters for the revision of customs policy:
- Raw materials, intermediate goods and capital goods not produced domestically:
0 per cent;
- domestically produced raw materials:  5 per cent- domestically produced intermediate goods and capital goods:  10 per cent;  and- finished goods:  15 per cent.
Consequently, the Central America Tariff on 31 December 2000 will consist of 5,506 lines
with uniform tariffs, of which 50 per cent will be set at 0 per cent, 227 will be different tariffs
authorized by the Council of Ministers and 149 will be other different tariffs set at national level,
mainly targeting fiscal goods.
This situation is subject to a decision shortly to be taken by the Council of Ministers on the
decision or intention of some countries to reduce the tariff ceiling below the target of 15 per cent.
2. Export restrictions
The Central American countries do not apply export restrictions.
3. Rules of origin
The Council of Ministers for Economic Integration and Regional Development adopted the
Central American Regulations on Origin of Goods through Resolution No. 2-95 of 1 September 1995.
These regulations have subsequently been amended by Resolutions No. 20-98, 27-98 and 30-98 of the
Council.
These Regulations establish the rules for determining, declaring and certifying origin, as well
as the corresponding procedures for checking origin in trade relations between the contracting States.
The rules of origin in these Regulations are ba sed on the general principle of change in tariff
classification, which may be accompanied by other requirements established in the Regulations or theAnnex.  The Regulations establish a Technical Committee for Rules of Origin to supervise theWT/REG93/R/B/1
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application of the provisions of the Regulations and to facilitate cooperation in the administration of
the Treaty's provisions.
4. Standards
Negotiations were recently concluded on two sets of Central American regulations:  one
relating to standardization measures, metrology and authorization procedures and the other relating to
the application of sanitary and phytosanitary measures and procedures in intra-Central American
trade.  These will shortly be approved by the Council of Ministers and enter into force.
4.1 Technical barriers to trade
The Central American Regulations on standardization, metrology and authorization
procedures establish the following main aspects:
(a) No contracting party may prepare, adopt, maintain or apply standardization measures
(conformity assessment procedures, technical regulations or standards) with a view to
or the effect of creating unnecessary obstacles to trade.
(b) With regard to standardization measures, the principle of national and
most-favoured-nation treatment is guaranteed.
(c) Contracting parties are authorized to prepare, adopt, apply and maintain technical
regulations and related conformity assessment procedures which enable them to
ensure that they achieve their legitimate objectives provided this does not create
unnecessary barriers to trade.
(d) International standards are to be used as the basis for preparing or applying
standardization measures, except when these international standards do not constitute
an effective or adequate means of achieving their legitimate objectives due to
fundamental reasons related to climate, geography, technology or infrastructure, or for
scientifically proven reasons.
The regulations establish that:
(i) The contracting parties shall harmonize their respective standardization measures on
as wide a basis as possible, taking into account the guidelines provided by
international standardizing bodies.
(ii) Two or more contracting parties may sign agreements for the mutual harmonization
of their standardization measures, with a view to strengthening Central American
integration and bringing about a regional system.
(iii) Two or more contracting- parties may sign mutual recognition agreements concerning
the results of their respective conformity assessment procedures with a view tofacilitating intra-regional trade.
(iv) The agreements referred to in paragraphs (ii) and (iii) shall be open to the
participation of the other contracting parties.
(v) Each State shall accept a technical regulation adopted by another of the contracting
parties as equivalent to one of their own when, in cooperation with the other party, theWT/REG93/R/B/1
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importing party decides that the technical regulations of the exporting party coincide
sufficiently with the former's legitimate objectives.
(vi) As far as possible, each contracting party shall accept the results of any conformity
assessment procedures carried out in the territory of another contracting party,provided that, they offer a satisfactory guarantee, equivalent to that provided by the
procedures carried out by the accepting contracting party (or carried out within its
territory and the results of which it accepts), that the product or service concerned
conforms to the technical regulation or applicable standard adopted or maintained in
the territory of that contracting party.
4.2 Sanitary and phytosanitary measures
The Regulations relating to the application of sanitary and phytosanitary measures and
procedures in intra-Central American trade aim to regulate sanitary and phytosanitary which may
affect, directly or indirectly, trade between the contracting parties, and to make sure that these do not
constitute unnecessary barriers to trade, as well as to create statutory provisions for the gradual andvoluntary harmonization of sanitary and phytosanitary  measures and procedures in intra- and extra-
trade with a view to protecting human, animal or plan t life or health.  The general principles of the
Regulations are transparency, harmonization and equivalence of sanitary and phytosanitary measures
and procedures and the avoidance of arbitrary or unjustifiable discrimination.
The Regulations indicate that the contractin g parties shall seek future harmonization of
existing or new regional measures and procedures on a gradual and voluntary basis.  They shall also
seek to harmonize sanitary and phytosanitary authorization procedures, in accordance with established
WTO requirements, for those products that require them;  to harmonize procedures and requirements
for sanitary and phytosanitary registration;  and to adopt a mutually recognized system for the
authorization of professionals and institutions involved in the implementation of sanitary and
phytosanitary measures.  The Regulations also seek  mutual recognition of inspection, assessment,
approval and control procedures.
Finally the Regulations also seek to consolidate a single regional risk management policy,
including the procedures, planning and preparation of analysis which this would involve.
5. Safeguards
The Council of Ministers approved the Central American Regulations on Safeguard Measures
on 22 May 1996, through Resolution No. 19-96.  They establish authorities and procedures for the
implementation of safeguard measures on imports from third parties on the basis of the substantive
aspects of Article XIX of the GATT 1994 and the WTO Agreement on Safeguards.
6. Anti-dumping and countervailing measures
7. Subsidies and state aid
The general provisions of the Treaty on this matte r were replaced with the entry into force of
the Central American Regulations on Unfair Business Practices, approved by the Council of Ministerson 12 December 1995, through Resolution 12-95.
These Regulations were adopted with a view to developing the provisions of the Agreement
on the Application of Article VI of the General Agreement on Tariffs and Trade 1994 and the
Agreement on Subsidies and Countervailing Measures.  This constitutes an essentially proceduralWT/REG93/R/B/1
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instrument since the substantive aspects of unfair business practices are governed by the provisions of
the above Agreements.
8. Other
Convention on the Central American Tariff and Customs Regime
In 1985, the Central American countries signed the Convention on the Central American
Tariff and Customs Regime, the main aim of which was to respond to the challenge of reviving and
restructuring the process of Central American economic integration.  The regime established by the
Convention consists of the following instruments:
(a) Central American Import Tariff, contained in Annex A of the Convention;
(b) Central American Legislation on the Customs Value of Goods, contained in Annex B
of its Regulations;
(c) Uniform Central American Customs Code (CAUCA) and its Regulations
(RECAUCA);  and
(d) Decisions and other common customs and tariff provisions which derive from it.
Three amendments have been made to this Convention:
- The First Protocol, which was signed on 9 January 1992 and came into force on
27 February 1993, introduced an amendment to the Nomenclature whereby as of
1993 the Central American countries adopted the Central American Tariff System(SAC), based on the Harmonized Commodity Description and Coding System;
- the Second Protocol, which was signed on 5 November 1994 and came into force on
15 January 1997 for Costa Rica, El Salvador and Nicaragua, amends Article 23 of the
Convention allowing the Council to adopt tariffs of above 100 per cent for theproducts tariffied by the Central American countries in the Uruguay Round;
- the Third Protocol, which was signed on 12 December 1995 and came into force on
15 January 1997 for Costa Rica, El Salva dor and Nicaragua, and on 27 August 1997
in the case of Guatemala, amends Article 23 of the Convention, enabling the Councilto set 0 per cent tariffs.
In 1986, the Central American countries began to apply regional standards of customs
valuation based on the Brussels definition of valu e.  With the adoption of the WTO Agreements and
side agreements, the countries exercised their right to delay application of the Agreement on
Implementation of Article VII of GATT 1994, in ac cordance with  Article 20 of that Agreement.
With the exception of Honduras, since 1965, the Central American countries have shared a
Central American Uniform Customs Code (CAUC A) since 1965, which provides for the common
procedures applied by these countries for the various customs regimes operating in the area.
Honduras subsequently adopted the Code as amended by a Protocol adopted in 1992.  This
amendment has come into force for Costa Rica, El Salvador and Nicaragua.WT/REG93/R/B/1
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Regulations on the International Customs Transit Regime
These Regulations were approved on 5 November 1994 by the Council of Ministers in
Resolution No. 53-94.  They aim to develop provisions in order to facilitate international goods transit
within the Central American area, using a common declaration form called the Goods Declaration for
International Inland Customs Transit.
III. GENERAL PROVISIONS OF THE AGREEMENT
1. Exceptions and reservations
Pursuant to Article 57 of the Guatemala Protoc ol, the Member States may request authority to
suspend the application of particular provisions of the Protocol and its derivative and supplementary
instruments on a temporary basis when they are having a serious effect on a particular sector of theeconomy.  In such cases, the Council of Ministers shall examine the situation and either grant or deny
the request.  Should the authority be granted, th e Council of Ministers shall indicate the period of
suspension and the measures that the requesting St ate must adopt in order to overcome the abnormal
situation.
Pursuant to its Article 64, the Guatemala Protocol does not allow reservations.
2. Accession
Article 60 of the Guatemala Protocol provides for the accession or association of any State
from the Central American isthmus which has not already signed.
3. Dispute settlement procedures
In March 1999 negotiations were concluded for a Central American Treaty on Trade Dispute
Settlement which seeks to establish a legal mechanism for the settlement of trade disputes through an
open, sound and predictable procedure.
The Treaty is in accordance with WTO provisions on this matter and establishes a procedure
for the prevention and settlement of disputes relating to the application or interpretation of the
regional agreements or for cases in which one party considers a measure that is in force or planned in
another party to be incompatible with the obligations of the regional instruments or, when benefitsthat could reasonably have been expected from the application of these instruments are nullified or
impaired even in the absence of violation.
The Treaty stipulates that disputes arisin g in connection with the WTO Agreements or
conventions negotiated in accordance with the WTO may be settled using either the procedures
established in the Treaty or those established in the WTO Understanding on the Settlement of
Disputes, as the complaining party chooses.  The choice of one forum rules out the other.
4. Relationship with other trade agreements
In January 1991 the Central American countries signed the Tuxtla Gutiérrez Declaration and
the Act and Basis for an Economic Complementation Agreement with Mexico, setting forth their
intention to initiate a negotiation process with a vi ew to establishing a free-trade area.  In August 1992
the same countries signed a Multilateral Framework Agreement for a Trade Liberalization
Programme.  In the context of this latter Agreement, Costa Rica initiated and completed negotiations
for a Free Trade Treaty with Mexico, which came into force in 1995, followed by Nicaragua whoseWT/REG93/R/B/1
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Free Trade Treaty with Mexico came into force in 1998.  Currently, El Salvador, Guatemala and
Honduras are concluding negotiations for a similar treaty with Mexico.
The Central American countries also signed a Free Trade Treaty with the Dominican
Republic in November 1998.  El Salvador, Guatemala and Costa Rica have concluded negotiations forthe signing of a Protocol to this Treaty, and this instrument is currently undergoing the process of
legislative approval in these countries.  Honduras and Nicaragua have yet to sign the Protocol to the
Treaty.
The Central American countries are currently involved in negotiations to conclude a free trade
treaty with Panama.  With regard to the structure of these negotiations, the Central American
countries have negotiated jointly with each countr y on normative aspects, and individually with each
country on issues relating to market access schedules.
The Central American countries are also participating actively in negotiations for the creation
of a Free Trade Area of the Americas  (FTAA), to begin in the year 2005.
5. Institutional framework
The institutional framework for Central American integration was amended by the Protocol of
Tegucigalpa to the Charter of the Organization of Central American States (ODECA), signed in
Tegucigalpa, Honduras, on 13 December 1991, which created the Central America Integration System
(SICA).  The institutional framework for the economic integration subsystem was established by theGuatemala Protocol, signed on October 1993:
- Bodies of the subsystem:  the Council of Ministers for Economic Integration, the
Intersectorial Council of Ministers for Economic Integration, the Sectorial Council of
Economic Integration, and the Executive Committee for Economic Integration.
- Technical administrative body of the subsystem:  the Secretariat of Central American
Economic Integration (SIECA), the Secretariat of the Central American Agricultural
Council (SCA), the Secretariat of the Ce ntral American Monetary Council (SCMCA)
and the Secretariat of Central American Tourism Integration (SITCA).
- Institutions of the subsystem:  The Central American Bank for Economic Integration
(CABEI), the Central American Institute for Public Administration (ICAP) and the
Central American Institute for Industrial Technology and Research (ICAITI).
- The Advisory Committee for Economic Integration (CCIE) is also part of the
subsystem.
The Council of Ministers for Economic Integration consists of the Ministers for the Economy
and Presidents of the Central Banks of the contracting parties, who will be responsible for the
coordination, harmonization, convergence or unification of the States' economic policies.  In aresolution adopted by the 19
th Summit of Central American Presidents, dated 12 July 1997, it was
agreed that the Ministers for the Economy, representing the national economic Cabinets, would make
up the Council of Ministers for Economic Integration.WT/REG93/R/B/1
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ANNEX3
- General Treaty on Central American Economic Integration.
- Protocol of Tegucigalpa to the Charter of the Organization of Central American States.
- Protocol to the General Treaty on Central American Economic Integration – Guatemala
Protocol.
- Convention on the Central American Tariff and Customs Regime and its Protocols.
- Central American Uniform Customs Code (C AUCA), its Modifying Protocol and Regulations
(RECAUCA).
- The Central American Countries Tariff-Cutting Programme.
- Central American Regulations on the Origin of Goods.
- Central American Regulations on Unfair Trade Practices.- Central American Regulations on Safeguard Measures.- Regulations of the International Customs Transit Regime.
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3 Interested delegations may obtain copies of the relevant documentation in office 3006, in electronic or
paper form.