USTR - 1996 National Trade Estimate-Honduras
Office of the United States Trade Representative

 

1996 National Trade Estimate-Honduras

In 1995, the United States trade deficit with Honduras was $161 million, $75 million more than that in 1994. U.S. merchandise exports to Honduras were $1.3 billion in 1995, up $269 million or 26.6 percent from those in 1994. Honduras was the United States' fiftieth largest export market in 1995. U.S. imports from Honduras totaled $1.4 billion in 1995, a 31.4 percent increase from those in 1994.

The stock of U.S. foreign direct investment in Honduras was $198 million in 1994, about seven percent less than it was in 1993. U.S. direct investment in Honduras is largely concentrated in manufacturing, finance and banking.

IMPORT POLICIES

Tariffs

Honduras is a member of the Central American Common Market (CACM), which also includes Costa Rica, El Salvador, Guatemala and Nicaragua. The CACM members are working toward the full implementation of a common external tariff (CET) which ranges between 5-20 percent for most products. However, in 1995 the members of the CACM agreed to reduce the CET to O-15 percent, but allowed each member country to determine the timing of the changes. With the exception of certain items, there are no duties for products traded among CACM members.

Sanitary and Phytosanitary Restrictions

Although all import licensing requirements have been eliminated, Honduras has resorted to a sanitary system that effectively denies market access to U.S. chicken parts. The Government of Honduras has committed formally not to use sanitary and phytosanitary standards to artificially restrict U.S. imports of chicken, rice and corn. Despite that commitment, the Honduran Government continues to restrict the issuance of sanitary and phytosanitary permits for chicken parts. The Government of Honduras has, however, discontinued its "discretionary" use of phytosanitary permits to control rice and corn imports. Importers have tested the Government of Honduras's newly liberalized import regime and the results have been encouraging, so far.

Agricultural Price Bands

Honduras implemented a price band mechanism for yellow corn, sorghum, rice and soybeans in August 1992. Similar to the price band practices of other countries in the region, the Honduran Government calculates the price band from a time series built on international prices for the prior 60 months on a given product. The fifteen highest and lowest prices are eliminated, with the remaining highs and lows establishing the price band. Imports entering with values within the defined band are assessed a 20 percent tariff. Imports entering with prices above the band are assessed lower duties, according to a predetermined schedule; those imports priced below the band are assessed a higher tariff. The U.S. Government has strongly opposed this policy, which limits access of U.S. agricultural products.

Customs Documentation and Clearance Procedures

The Government of Honduras maintains a discriminatory automobile import regime based on engine size, which imposes a steep tax on many U.S.-made vehicles, particularly four-wheel drive vehicles. In October 1994 the Honduran Congress approved legislation that made progress toward reducing discrimination based on engine size. The Government of Honduras no longer requires "consular invoicing" in accordance with its WTO commitments. The Honduran Government instructed its consulates in June of 1995 to end the practice of charging consular fees for the legalization of commercial import documents and instructed customs to no longer require consular certification.

LACK OF INTELLECTUAL PROPERTY PROTECTION

In 1995, Honduras was identified in the "special mention" category of the U.S. Government's annual Special 301 review due to a lack of effective intellectual property rights (IPR) protection. Since 1992, Honduras has been the subject of a continuing review under the Generalized System of Preferences (GSP) for deficiencies in its IPR regime. On September 1, 1993, the Honduran Congress approved comprehensive copyright, trademark and patent legislation. The U.S. Government continues to monitor the adequacy and effectiveness of IPR protection in Honduras, particularly copyright protection. In addition, substantial progress was made in 1995 toward concluding a Bilateral Intellectual Property Rights Agreement with the United States.

Copyrights

The piracy of books, sound and video recordings, compact discs, computer software, and television programs is widespread in Honduras. In 1992 the U.S. Government accepted a petition filed by the Motion Picture Export Association of America (MPEAA) under the GSP which alleged widespread video/cable television piracy estimated at $2.5 million in lost revenue per year. Although Honduras enacted a reformed copyright law in August 1993 that addressed many of the substantive concerns raised in the GSP petition, the law is inadequate in establishing effective criminal penalties for copyright infringement and contained some technical problems related to cable television piracy. Since then, significant progress has been made toward curbing cable piracy and currently 95 percent of the cable market is legal. However, the payment of royalties by local cable companies to U.S. copyright holders has been late, or in some cases, local companies have not concluded royalty contracts. In May of 1995 the Government of Honduras submitted to Congress major U.S.-backed reforms of their copyright laws designed to reduce the piracy of cable television signals. This legislation is still under consideration.

Patents

The patent law enacted in September 1993 provides full and effective patent protection for pharmaceuticals, although the patent term of seventeen years from the date of application must be extended by at least three years to meet international standards.

Trademarks

The illegitimate registration of well-known trademarks is a persistent problem in Honduras, in spite of 1993 modifications to the trademark law.

GOVERNMENT PROCUREMENT

The government procurement law (Decree No. 148.5) governs the contractual and purchasing relations of Honduran state agencies. Under this law, foreign firms are given national treatment for public bids and contractual arrangements with state agencies. In practice, U.S. firms frequently complain about the mismanagement and lack of transparency of Honduran Government bid processes. These deficiencies are particularly evident in telecommunications, pharmaceuticals and energy public tenders.

INVESTMENT BARRIERS

Any foreign investment may be rejected, based upon the presumed effect on economic activity, market stability and other factors. Establishment of banks and of life insurance companies is subject to approval by the Central Bank, in accordance with market needs; foreign ownership of other insurance companies is limited to 40 percent. Under Honduran law, special government approval must be obtained to invest in the tourism, hotel, and banking services sectors. In addition, under the 1992 investment law, special government approval must be obtained for foreign investment in the forestry, telecommunications, air transport and aquaculture industries. This law also requires majority Honduran ownership in certain areas, such as investments in commercial fishing, direct exploitation of forest resources, local transportation, and those areas benefiting directly from the national agrarian reform law. Foreign investors are prohibited from holding a majority stake in foreign exchange trading companies. Moreover, foreign owners may not hold a seat or provide direct brokerage services in either of Honduras' two stock exchanges. Furthermore, the Honduran Government prohibits the establishment of investments of less than 150,000 lempiras.

The United States and Honduras also concluded negotiations on a bilateral investment treaty (BIT), which was signed on July 1, 1995. When ratified by both the U.S. and Honduran Congresses, the BIT will address a number of inadequacies.

 
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