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Amid the coronavirus pandemic, there was a significant increase in the volume of global online sales and commerce. To address the opportunities that have arisen from these developments, Central America needs Customs reforms that will impose a regulatory framework on such sales. In addition to this, Central American governments must undertake further actions in the region to finalize the form and terms of a functioning Customs Union in support of moves to accommodate more online commerce.

What is required are the reforms to the Central American Uniform Customs Code (CAUCC) and its accompanying regulations. The competent authorities of each country are currently discussing these changes. Moreover, they aim to introduce technology to the process to facilitate trade further.

Meanwhile, the Central American logistics sector is experiencing the need to have an adequate legal infrastructure to regulate electronic commerce and provide certainty, given the growth in online sales registered in 2020 and 2021. In addition, the conditions resulting from the pandemic caused electronic commerce to expand by double digits.

Central America Customs reforms are being negotiated

Werner Ovalle, the Customs General Director of the Superintendence of Tax Administration (SAT) of Guatemala, has recently communicated that he and his counterparts have already concluded the negotiation of changes in the CAUCC rules and regulations. The document is currently being examined by the Council of Ministers of Central America ( COMIECO ) for review and any additional changes that need to be made. It is expected that the document will be finalized and approved by the end of the first quarter of 2022.

Ovalle stated that documents containing the Uniform Customs Code and its accompanying regulations are being worked on simultaneously. This is because they are closely linked. However, as of this writing, there are already diagnoses of the main findings and potential solutions to existing barriers to greater electronic commerce in the region.

The importance of clear rules of commerce

According to Ovalle, the effort to put Central America Customs reforms into place is essential because intra-regional trade is increasingly more complex, and the economies in the region are experiencing a growing requirement for expanded commercial exchange.

However, it has been noted that Customs in some countries involved in the Union operate using different computer platforms. This means that there are problems with information exchange. However, the Secretariat for Central American Economic Integration uses a regional node, for which there is a Central American digital trade platform project (PDCC) underway.

Foreign trade consultant for the World Bank Group, Álvaro Sarmiento Matute,  asserts that the foundations for implementing the PDCC are already in place. It will function as the regional backbone that will allow for the improvement and simplification of commercial exchange processes between the participating countries. Completing the digital trade platform will be one of the significant steps toward accelerating the pace of eCommerce in Central America.

“All border measures that don’t necessarily require million-dollar investments mean savings in time and costs associated with border crossings. These are important gains for trade facilitation,” he pointed out.

Regional Customs Union format

Werner Ovalle declared that El Salvador could join the Customs Union between Guatemala and Honduras during the year’s first half. It is envisaged that the entire region will be trading under the same regional format during the next five years.

Double-Digit Growth

For Jorge Gómez, president of the Logistics Guild, a part of the Guatemalan Chamber of Industry (CIG), having the appropriate legislation to establish the criteria needed to speed up and facilitate trade is necessary for Customs purposes and international taxation issues. This is especially true for electronic commerce.

He recalled that several proposals are being considered by the different parties involved in Central American trade to regulate other mechanisms. The goal is to implement features that can provide greater certainty to electronic commerce transactions in Central America. Sales of this type increased by 22% in 2020 and 2021 compared to eCommerce sales registered in 2019. Therefore, the successful completion of Central America Customs reforms is all the more important, considering that this number is expected to grow considerably in the immediate future.