USTR will impose phased Section 301 tariffs up to 15% on non‑CAFTA‑DR Nicaraguan imports starting 2026, stacking on existing duties.

REGULATORY BRIEFING – USTR SECTION 301 ACTION ON NICARAGUA

1. What changed

• USTR has completed a Section 301 investigation into Nicaragua’s acts, policies, and practices related to labor rights, human rights, fundamental freedoms, and the rule of law.
• USTR determined these practices are “unreasonable” and “burden or restrict U.S. commerce” under Section 301(b) of the Trade Act of 1974.
• As the chosen remedy, USTR will impose an additional ad valorem tariff on all imported Nicaraguan goods that are NOT originating under the Dominican Republic–Central America–United States Free Trade Agreement (CAFTA‑DR).
• The tariff is country‑wide (all HTS headings) but limited by origin rule: it applies only to Nicaraguan goods that fail CAFTA‑DR originating criteria.
• USTR will issue a separate implementation notice under Section 305(a) specifying operational details (e.g., Section 301 HTS subheading, any exclusions, and administrative instructions).

2. Affected products

Scope by origin and agreement status

• Covered: All goods that are:
• Classified as products of Nicaragua under U.S. origin rules; AND
• Do NOT qualify as “originating” under CAFTA‑DR rules of origin.
• Not covered by this new 301 duty: Goods that qualify as originating under CAFTA‑DR (i.e., meet CAFTA‑DR ROO and claim CAFTA‑DR preference).

Scope by HTS

• The action is not limited to specific HTS codes or sectors; it applies to “all imported Nicaraguan goods that are not originating under CAFTA‑DR.”
• This means all HTS chapters are potentially affected, including but not limited to:
• Textiles and apparel (e.g., HTS Chapters 61–63)
• Agricultural products (e.g., coffee, beef, rice, cacao, cassava, horticultural products – Chapters 2, 9, 10, 18, 20)
• Cigars and tobacco (Chapter 24)
• Furniture (Chapter 94)
• Medical devices and industrial goods (various chapters, e.g., 90, 84, 85)
• Seafood (Chapter 3)

Examples of likely impacted trade flows (if non‑originating under CAFTA‑DR):

• Apparel assembled in Nicaragua from non‑qualifying third‑country fabrics or yarns that do not meet CAFTA‑DR yarn‑forward rules.
• Nicaraguan cigars using non‑originating inputs that fail CAFTA‑DR ROO.
• Agricultural exports (e.g., coffee, beef, rice) that do not claim or do not qualify for CAFTA‑DR originating status.

Because the measure is origin‑ and agreement‑based, the key determinant is whether the product can legitimately claim CAFTA‑DR originating status, not the HTS code itself.

3. Rate changes

New Section 301 duty rates (additional ad valorem duty on top of normal tariffs):

• 0% on January 1, 2026
• 10% on January 1, 2027
• 15% on January 1, 2028

Application rule:

• The Federal Register notice specifies that the tariff increases in 2026, 2027, and 2028 apply to products “entered for consumption, or withdrawn from warehouse for consumption, on or after January 1 of the corresponding year.”

Stacking with existing duties:

• USTR explicitly states that “any tariff would stack with others such as the existing 18 percent Reciprocal Tariff.”
• Practical effect for a non‑CAFTA‑DR Nicaraguan good:
• Example (hypothetical): MFN base duty 5% + 18% Reciprocal Tariff + new Section 301 duty.
• Entries on/after Jan 1, 2026: 5% + 18% + 0% = 23%
• Entries on/after Jan 1, 2027: 5% + 18% + 10% = 33%
• Entries on/after Jan 1, 2028: 5% + 18% + 15% = 38%

Potential future changes:

• USTR notes that if Nicaragua shows “a lack of progress” in addressing the identified issues, “this timeline and these rates may be modified.”
• Importers should treat the 10% (2027) and 15% (2028) rates as current policy but monitor for possible acceleration, escalation, or additional measures.

4. Key dates and timelines

• December 10, 2024: USTR initiated the Section 301 investigation on Nicaragua.
• January 16, 2025: Public hearing held; over 160 comments and rebuttals received.
• October 20, 2025: USTR issued the Section 301 Investigation Report and determined Nicaragua’s practices are actionable under Section 301(b)(1).
• October 23, 2025: Federal Register notice (90 FR 48511) published with proposed actions and request for comments.
• November 19, 2025: Deadline for public comments on proposed actions; USTR received 2,006 written comments.
• December 10, 2025: Notice of Action (Federal Register notice) issued, confirming the chosen remedy (phased tariff on non‑CAFTA‑DR Nicaraguan goods).

Implementation dates for the new Section 301 duty:

• January 1, 2026: New Section 301 duty line created but rate set at 0%.
• January 1, 2027: Rate increases to 10%.
• January 1, 2028: Rate increases to 15%.

• Future: USTR will issue a separate implementation notice under Section 305(a) (19 U.S.C. 2415(a)(1)) with operational details (e.g., specific HTS subheading(s) for the 301 duty, instructions to CBP, any product‑ or sector‑specific clarifications).

No explicit sunset/expiration date is provided; the measure is open‑ended and subject to modification based on Nicaragua’s behavior and U.S. policy decisions.

5. Required actions for importers, brokers, and compliance teams

A. Origin and CAFTA‑DR eligibility review

• Immediately identify all current and planned imports of Nicaraguan‑origin goods (by supplier, plant, and HTS code).
• For each Nicaraguan product, determine:
• Whether it currently claims CAFTA‑DR preference; and
• Whether it actually qualifies as “originating” under CAFTA‑DR rules of origin.
• Actions:
• Obtain and review CAFTA‑DR origin documentation (certifications, bills of materials, production records) from Nicaraguan suppliers.
• Conduct a rules‑of‑origin analysis (e.g., yarn‑forward for textiles, regional value content where applicable) to confirm eligibility.
• Where CAFTA‑DR eligibility is marginal or unsupported, assume the new Section 301 duty will apply and plan accordingly.

B. Tariff impact modeling and pricing

• Model landed cost impacts for 2027 and 2028 for all non‑CAFTA‑DR Nicaraguan imports:
• 2026: No incremental 301 cost, but use this year to prepare.
• 2027: Add 10% ad valorem on customs value.
• 2028: Add 15% ad valorem on customs value.
• Incorporate stacking with existing duties (MFN, 18% Reciprocal Tariff, AD/CVD if any) to determine total effective duty rate.
• Use this analysis to:
• Renegotiate pricing with Nicaraguan suppliers.
• Adjust customer pricing and contracts in the U.S. market.
• Decide whether to shift sourcing to other CAFTA‑DR countries or non‑Nicaraguan origins.

C. Supply chain and sourcing strategy

• For sectors heavily reliant on Nicaragua (e.g., apparel, cigars, certain agricultural products, furniture, medical devices):
• Evaluate feasibility and timing of shifting production to other CAFTA‑DR partners (e.g., Honduras, El Salvador, Guatemala, Costa Rica, Dominican Republic) to maintain regional cumulation benefits.
• Consider restructuring production so that Nicaraguan operations qualify as CAFTA‑DR originating (e.g., adjusting input sourcing to meet ROO).
• Use the two‑year phase‑in (2026 at 0%, 2027 at 10%, 2028 at 15%) as a transition window to implement sourcing changes.

D. Customs and systems configuration

• Once USTR issues the Section 305 implementation notice and CBP publishes guidance:
• Update internal classification and duty‑calculation systems (ERP, broker systems) to add the new Section 301 duty line for Nicaraguan, non‑CAFTA‑DR goods.
• Ensure brokers are instructed to:
• Correctly declare CAFTA‑DR claims where valid; and
• Apply the Section 301 duty to Nicaraguan goods that do not qualify as originating.
• Prepare for potential post‑summary corrections and audits:
• Maintain robust documentation supporting CAFTA‑DR claims to avoid misapplication of the 301 duty.
• Where CAFTA‑DR is not claimed, ensure that entries reflect the correct additional duty rate by year.

E. Contracting and risk allocation

• Review and, where possible, amend contracts with Nicaraguan suppliers and U.S. customers to address:
• Responsibility for additional duties (who bears the cost of the new Section 301 duty and any related increases).
• Price adjustment mechanisms tied to changes in U.S. tariff policy.
• Termination or re‑sourcing rights if tariffs exceed certain thresholds.

F. Monitoring and advocacy

• Monitor for:
• The forthcoming Section 305 implementation notice from USTR.
• Any subsequent USTR or CBP guidance that clarifies scope, exclusions, or administrative procedures.
• Potential escalation (higher rates, CAFTA‑DR benefit suspensions) if U.S. policy hardens.
• Consider participation in any future comment processes or reviews to seek:
• Sector‑specific relief or exclusions.
• Clarifications on treatment of particular supply‑chain configurations.

6. References and source documents

Primary USTR and Federal Register documents

• USTR Press Release: “USTR Section 301 Action on Nicaragua’s Acts, Policies, and Practices Relating to Labor Rights, Human Rights and Fundamental Freedoms, and the Rule of Law” (2025).
• Federal Register – Notice of Action (Nicaragua Section 301):
• PDF: https://ustr.gov/sites/default/files/files/Press/Releases/2025/Nicaragua%20Section%20301%20Notice%20of%20Action%20FRN%2012-10-2025%20Signed.pdf
• Section 301 Investigation Report on Nicaragua:
• PDF: https://ustr.gov/sites/default/files/files/Press/Releases/2025/Nicaragua%20Section%20301%20Report_0.pdf

Background and related references

• Initiation of Section 301 Investigation (Nicaragua) – 89 FR 101088 (Dec. 13, 2024).
• USTR October 23, 2025 Federal Register notice (90 FR 48511) – proposed actions and request for comments.
• U.S. Department of State – 2024 and 2025 Investment Climate Statements: Nicaragua.
• U.S. Department of Labor – 2023 and 2024 Findings on the Worst Forms of Child Labor (Nicaragua sections).
• U.S. Department of State – 2024 Trafficking in Persons Report: Nicaragua.

Compliance teams should use the above documents, especially the Notice of Action and forthcoming Section 305 implementation notice, as the authoritative basis for programming systems, updating procedures, and advising business stakeholders on the phased Section 301 tariffs on Nicaraguan imports.