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Honduras Rescinds Tax Exemption for Frozen Pork, Placing Imports at Disadvantage

pork-Honduras

The government of Honduras recently rescinded a number of consumption tax exemptions, with new taxes on these previously exempt products taking effect Jan. 1, 2014. It is USMEF’s understanding that the exemption for frozen pork was removed, thus applying a 15 percent value-added tax to frozen pork. The tax exemption for fresh pork, however, remains in effect.

Not surprisingly, the vast majority of frozen pork is imported while fresh pork is almost entirely domestically produced. Consequently, as a result of this new policy, imports are at a decided disadvantage compared to domestically produced pork. The policy certainly appears to be aimed at helping Honduran pork producers at the expense of foreign suppliers.

USMEF is consulting with the U.S. Embassy to gather more details about this issue and to register our concerns. In April 2013, Chad Russell, USMEF regional director for Mexico, Central America and the Dominican Republic visited Honduras to meet with officials from the U.S. Embassy and the Honduran government, as well as with local importers, to express the U.S. pork industry’s concerns about such a policy change.

Through November 2013, Honduras was the 10th largest destination for U.S. pork/pork variety meat exports in terms of both volume (20,000 mt, +11 percent from the first 11 months of 2012) and value ($46.8 million, +13 percent).

The United States currently holds more than 95 percent of the imported pork market in Honduras, but competition is expected to increase due to a new free trade agreement between Honduras and Canada. Through this FTA, which was announced in November 2013 but has not yet entered into force, Honduras will open a duty-free tariff rate quota for Canadian pork muscle cuts. In Year 1 the quota will be 1,644 mt, expanding to 2,710 mt by Year 14. The 15 percent duty rate for out-of-quota imports (which is separate from the consumption tax noted above) will be reduced by one percentage point per year, with unlimited volumes at zero duty by Year 15.