In 1995, the U.S. trade surplus with Nicaragua was valued at $12 million, or $7 million less than in 1994. U.S. merchandise exports to Nicaragua were $250 million, up 35 percent from 1994. Nicaragua was the United States' eight-first largest export market in 1995. U.S. imports from Nicaragua totaled $238 million in 1995, a $71 million increase over imports in 1994.

IMPORT POLICIES

Tariffs

Nicaragua is a member of the Central American Common Market (CACM), which also includes Costa Rica, Guatemala, El Salvador, and Honduras. 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 0-15 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.

The Government of Nicaragua also imposes a variety of import fees, including a temporary protection tariff (ATF) of 5 to 10 percent on about 900 items, a specific consumption tax (DAJ) of approximately 15 percent on 750 items, a 5 percent stamp tax (ITF), and a 15 percent value added tax (VAT). As a result of a tax reform law passed in 1995, effective January 1, 1996, the combined total import fee percentage of the ATP, DAJ and ITF taxes should not exceed 35 percent.

Agricultural Price Bands

Nicaragua implemented a price band mechanism for yellow corn, sorghum, rice and soybeans in 1992. Similar to the price band practices of other countries in the region, the Nicaraguan government calculates the price band from a time series based 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 basic tariff plus the surcharge should not exceed 45 percent of the international c.i.f. price of a determined period. Additionally, the basic tariff minus the discount should not be lower than 5 percent of the international c.i.f. price. The U.S. Government has strongly opposed this policy, which limits access of U.S. agricultural products.

LACK OF INTELLECTUAL PROPERTY PROTECTION

Nicaragua made substantial progress in 1995 toward concluding a Bilateral Intellectual Property Rights Agreement with the United States that would go beyond the protection levels afforded under the WTO TRIPs agreement.

Copyrights

Piracy of video recordings, unauthorized video broadcast, and piracy of U.S. satellite signals by the local cable television operators is widespread. The current law does not explicitly protect computer software, which contributes to endemic piracy.

Patents

The current law is inadequate with respect to short term of protection and broad exclusions of subject matter from patentability. A new draft patent law was prepared by the executive branch of the Nicaraguan Government and submitted to the National Assembly, but is not yet under active consideration.

Trademarks

The current law provides inadequate protection of the rights of trademark holders, especially well- known marks. However, in November 1994 the Central American Convention for the Protection of Industrial Property, of which Nicaragua is a signatory, was revised. The Convention has been signed by the Nicaraguan executive branch, but has not yet been ratified by the National Assembly. Upon entry into force, the Convention is intended to ensure compatibility with the Paris Convention and Uruguay Round TRIPs provisions.

INVESTMENT BARRIERS

Sandinista-era cases of expropriation of U.S. citizen-owned investments or properties is a continuing problem. Although the Chamorro government has said resolution of these cases is a priority, resolution of cases has been slow. The U.S. Government continues to press the Nicaraguan Government to provide prompt, adequate and effective relief to affected U.S. owners and investors.

In order to receive the benefit of the 1991 Foreign Investment Law -- which provides guaranteed repatriation of profits and repatriation of original capital three years after the initial investment -- investments must be approved by an interagency foreign investment committee. These approvals can be time-consuming and contain criteria -- e.g., approval by the government's environmental agency -- which lack clear definition. Investments may be made without foreign investment committee approval, but such investments do not enjoy repatriation guarantees.

In July 1995, the Governments of Nicaragua and the United States concluded a Bilateral Investment Treaty (BIT) which was designed to improve the investment climate by recognizing intellectual property rights, and by guaranteeing the repatriation of capital and compensation for damages. As of January 1996, neither country's legislative branch had ratified the BIT.